China Shenhua rises 20% on first profit growth in 4 years

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China’s largest coal producer China Shenhua Energy rose as much as 20 per cent after reporting its first annual profit growth since 2012 as the price of coal rebounded last year following government output cuts.

Net profit for the 12 months to December rose 41.1 per cent to Rmb24.9bn ($3.6bn), from Rmb17.6bn in 2015, the company said. The company expects increase in net profit for January to March 2017 to reach or exceed 50 per cent.

China’s top planning agency, the National Development and Reform Commission plans to cut 150m tonnes of coal mining capacity this year. It said it would leave the timing and size of the cuts to local governments as long as prices remain stable, however, the body did not give specify price targets.

China Shenhua said the sales volume of coal rose 6.6 per cent to 394.9m tonnes in 2016. The price of a futures contract for one tonne of thermal coal on China’s Zhengzhou Commodity Exchange rose nearly 63 per cent last year to just over Rmb500.

Company chairman Zhang Yuzhou said production cuts had addressed the imbalance between demand and supply to support a rebound in the market price of coal.

Zhang in his outlook for 2017 said:

The Company will proactively implement the policy of excess capacity elimination, optimise the production units and raise the production volume of the type of coal with good quality and high economic efficiency based on the relationship between supply and demand.

Hong Kong-listed shares in the company rose as much as 20.2 per cent in Monday morning trading to HK$19.78 to its highest intraday level since June 2015. The benchmark Hang Seng China Enterprises index was up 0.1 per cent.

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