Datong Coal Profit More Than Triples on Price, Demand

By Winnie Zhu and Wang Ying

Aug. 24 (Bloomberg) -- Datong Coal Industry Co., China's second-biggest producer of the fuel by capacity, said first- half profit more than tripled because of record prices and higher demand.

Net income climbed to 741.9 million yuan ($109 million), or 0.89 yuan a share, from 244.4 million yuan, or 0.29 yuan a share, a year earlier, Datong Coal said in a statement to the Shanghai stock exchange.

Producers of the fuel have benefited from a rise in prices as the government closes small mines to cut pollution and supplies decrease. Coal prices at Qinhuangdao, a benchmark for China, reached a record $168 a metric ton on Aug. 8. Datong Coal, based in Shanxi, also gained from a cut in corporate tax to 25 percent from 33 percent this year.

Production rose 12 percent to 10.7 million tons in the first half, while sales increased 72 percent to 3.99 billion yuan, the coal producer said.

To expand its capacity, Datong Coal will transfer a stake worth 2.5 billion yuan to its parent Datong Coal Mine Group in exchange for a coal mine and processing plant, the company said on Aug. 11. The Yanzishan mine has an annual capacity of 4.8 million tons and exploitable reserves of 168.4 million tons.

China, which uses coal for about 80 percent of its power generation, has capped the price of the fuel at the June 19 level until the end of the year to help power utilities cope with rising coal costs and ease a nationwide electricity crisis.

Insufficient coal supplies due to the clampdown on small, unsafe mines forced the closure of almost 3 percent of the nation's coal-fired power plants last month, the State Grid Corp. of China said. The country is grappling with its sixth year of power shortages.

Datong Coal shares fell 52 percent this year in Shanghai compared with a 55 percent slump in the benchmark CSI 300 Index. The stock closed at 15.29 yuan on Aug. 22.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net;