The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or inreliance upon the whole or any part of the contents of this announcement.
兗州煤業股份有限公司
YANZHOU COAL MINING COMPANY LIMITED
(a joint stock limited company incorporated in the People’s Republic of China with limited liability)
(Stock Code: 1171) Document in pdf format: click here
ANNUAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER, 2007
The Company is pleased to announce the operating results of the Group for the year ended 31st December, 2007:
DEFINITIONS
In this announcement, unless the context requires otherwise, the following expressions have the following meaning:
“Yanzhou Coal”, “Company” or “the Company” means Yanzhou Coal Mining Company Limited, a joint stock limited company incorporated in the PRC and the H Shares, the ADSs and A Shares of which are listed on the Hong Kong Stock Exchange, New York Stock Exchange Inc. and the Shanghai Stock Exchange, respectively;
“Group” or “the Group” means the Company and its subsidiaries;
“Yankuang Group”, “the Controlling Shareholder”, or “Parent Company” means Yankuang Corporation Group Limited, a company with limited liability established in 1996
“Yulin Neng Hua” means Yanzhou Coal Yulin Neng Hua Company Limited, a company with limited liability incorporated under the laws of the PRC in 2004 and a 97% non-wholly owned subsidiary of the Company, mainly undertaking the construction and operation of 0.6 million tonnes of methanol project;
“Yushuwan Coal Mine Company” means Shaanxi Yushuwan Coal Mine Company Limited
“Heze Neng Hua” meansYanmei Heze Neng Hua Company Limited, a company with limited liability incorporated under the laws of the PRC in 2004 and a 96.67% non-wholly owned subsidiary of the Company, mainly undertaking the development of Juye coal field in Shandong province； '
"Shanxi Neng Hua” means Yanzhou Coal Shanxi Neng Hua Company Limited, a company with limited liability incorporated under the laws of the PRC in 2002 and a wholly-owned subsidiary of the Company, mainly undertaking the management of the projects invested in Shanxi province by the Company；
“Tianchi Energy” means Shanxi Heshun Tianchi Energy Company Limited, a company with limited liability incorporated under the laws of the PRC in 1999 and a 81.31% non-wholly owned subsidiary of Shanxi Neng Hua, mainly undertaking the production and operation of Tianchi coal mine
“Tianhao Chemicals” means Shanxi Tianhao Chemicals Company Limited, a joint stock company ncorporated under the laws of the PRC in 2002 and a 99.85% non-wholly owned subsidiary of Shanxi Neng Hua, mainly undertaking the construction and operation of the 0.1 million tonnes methanol project;
“Yancoal Australia Pty” means Yancoal Australia Pty Limited, a company with limited liability incorporated under the laws of Australia in 2004 and a wholly-owned subsidiary of the Company, mainly undertaking the management of the projects invested in Australia by the Company;
“Austar Company” means Austar Coal Mine Pty Limited, a company with limited liability incorporated under the laws of Australia in 2004 and a wholly-owned subsidiary of Yancoal Australia Pty Limited, mainly undertaking the construction and operation of Austar coal mine;
“Railway Assets” means the railway asset specifically used for transportation of coal for the Company;
“Hong Kong Stock Exchange” means The Stock Exchange of Hong Kong Limited;
“Hong Kong Listing Rules” means The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as revised from time to time);
“H Shares” means overseas listed foreign invested shares in the ordinary share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange; and
“A Shares” means domestic shares in the ordinary share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange.
FINANCIAL HIGHLIGHTS
(Prepared in accordance with International Financial Reporting Standards (“IFRS”)) The financial highlights are prepared based on the financial information set out in the audited summary of consolidated income statement, summary of consolidated balance sheet, and summary of consolidated statement of cash flows of the Group in 2007, 2006, 2005, 2004 and 2003.
Operating Results
Year ended 31st December
2007 2006 2005 2004 2003
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Net sales
Net sales of coal 14,356,930 11,846,948 11,353,485 10,354,337 6,794,335
Of which: the Company 13,451,697 11,710,664 11,353,485 10,354,337 6,794,335
Domestic 12,831,496 9,365,857 8,421,462 7,406,988 4,337,089
Export 620,201 2,344,807 2,932,023 2,947,349 2,457,246
Shanxi Neng Hua 243,571 21,875 — — —
Yancoal Australia Pty 661,662 114,409 — — —
Net Income of Railway
Transportation Services
203,714 160,399 163,437 220,771 154,585
Total Net Sales 14,560,644 12,007,347 11,516,922 10,575,108 6,948,920
Gross Profit 7,228,720 5,817,278 6,228,334 6,023,405 3,193,897
Interest Expenses (27,222) (26,349) (24,611) (35,942) (59,966)
Income Before Income
Taxes
4,543,313 3,726,624 4,419,973 4,673,332 1,974,918
Net Income attributable
to equity holders of the
Company
3,230,450 2,372,985 2,881,461 3,154,317 1,386,686
Earnings per Share RMB0.66 RMB0.48 RMB0.59 RMB0.66 RMB0.30
Dividend per Share
Notes 1: Dividend per share of year 2007 represents the dividend proposed.
Assets and Liabilities
31st December
Net Current Assets 5,808,755 6,043,863 7,522,121 5,774,466 2,045,252
Net Book Value of
Property, Plant and
Equipment
13,524,594 12,139,939 9,318,486 8,537,150 8,616,373
Total Assets 26,187,400 23,458,749 21,254,444 18,336,697 13,909,804
Total Borrowings 344,956 403,138 231,827 441,057 650,859
Equity attributable to
equity holders of the
21,417,537 18,931,779 17,618,577 15,523,751 11,083,239
5
Net Asset Value per
Share
RMB4.35 RMB3.85 RMB3.58 RMB5.05 RMB3.86
Return on Net Assets
(%)
15.07 12.53 16.35 20.32 12.51
Summary Statement of Cash Flows
Net Cash from
Operating
Activities
4,558,649 3,767,156 3,939,274 4,418,381 2,701,236
Increase
(Decrease) in
Cash and Cash
Equivalent
(250,995) (1,149,916) 667,529 3,192,966 479,599
Net Cash Flow
per Share from
RMB0.93 RMB0.77 RMB0.80 RMB1.44 RMB0.94
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Company for the year ended 2007 and the notes thereto are set out in the appendix to this announcement.
REVIEW OF OPERATIONS
The following discussion is based on the Group’s audited financial results for the two years ended 31st December 2007 prepared in accordance with IFRS.
ACHIEVEMENTS IN 2007
In 2007, raw coal production was 35.64 million tonnes, 35.11 million tonnes of salable coal sold and the railway transportation volume of coal reached 17.86 million tonnes. In 2007, net sales of the Company was RMB14,560.6 million, of which RMB14,356.9 million was attributed to the net sales of coal and RMB203.7 million was attributed to the railway transportation services (calculated on ex-mine basis and on the basis of transportation expenses being borne by the customers on designated railway assets), and the net income attributable to the equity holders of the Company amounted to RMB3,230.5 million.
COAL PRODUCTION
In 2007, the raw coal production was 35.64 million tonnes, representing a decrease of 0.41 million tonnes or 1.1% as compared to the same period last year, among which,
(1) the raw coal production of the Company was 32.83 million tonnes, representing a decrease of 2.66 million tonnes or 7.5%, as compared to the same period last year;
(2) the raw coal production of Shanxi Neng Hua was 1.23 million tonnes, representing an increase of 1.11 million tonnes or 925.0% as compared with the same period last year because Tianchi coalmine commenced its commercial operation in November 2006;
(3) the raw coal production of Yancoal Australia Pty was 1.58 million tonnes, representing an increase of 1.14 million tonnes or 259.1% as compared with the same period last year because Austar coalmine commenced its commercial operation in October 2006.
The output of salable coal of the Group was 34.56 million tonnes in 2007, representing a decrease of 0.08 million tonnes, or 0.2%, as compared with that of 2006, among which, (1) the output of the Company’s coal for sale was 32.07 million tonnes, representing a decrease of 2.02 million tonnes or 5.9%, as compared with that of 2006; (2) the output of salable coal of Shanxi Neng Hua was 1.22 million tonnes, representing an increase of 1.10 million tonnes or 916.7% as compared with that of 2006; and (3) the output of salable coal of Yancoal Australia Pty was 1.27 million tonnes, representing an increase of 0.84 million tonnes or 195.3% as compared with that of 2006.
PRODUCT PRICES AND SALES
The following table sets out the coal prices of the Group for the two years ended 31st December, 2007:
2007 2006
(RMB/tonnes) (RMB/tonnes)
1. The Company
Clean Coal
No.1 Clean Coal
No.2 Clean Coal
Domestic
Export
No.3 Clean Coal
Lump Coal
Average Price for Clean
Coal
Screened Raw Coal
Mixed Coal and Others
Average Coal Price of
The Company
of which: domestic
2. Shanxi Neng Hua
3. Yancoal Australia Pty
Notes: The coal prices represent the invoice prices less sales tax, transportation cost and miscellaneous fees for coal sales.
The average coal price of the Company was RMB414.02/tonne in 2007, representing an increase of RMB72.90/tonne or 21.4% as compared with that of 2006, among which: the average domestic coal price was RMB417.24/tonne, representing an increase of RMB85.05/tonne or 25.6% as compared with that of 2006; the average export coal price was RMB356.98/tonne, representing a decrease of RMB25.15/tonne or 6.6% as compared with that of 2006.
Decrease in average export coal price of the Company was mainly due to the export of 0.83 million tonnes of coal of the Company in the first quarter of 2007 (accounting for 47.7% of the Company’s total export in 2007), the contract of which was entered into in 2006, resulting in a decreased contract price as compared with that of the same period in 2006.
For the year 2007, the average coal price of Shanxi Neng Hua was RMB204.13/tonne. For the year 2007, the average coal price of Yancoal Australia Pty was RMB465.10/tonne.
The following table sets out the Group’s sales volume and net sales of coal in terms of product categories for the financial years ended 31st December 2007 and 2006, respectively:
Sales
volume
Net sales of
coal
% of total
net
sales of
net sales
of coal
(’000
Tonnes)
(RMB’000)
Tonnes
No.1 Clean Coal 712.9 423,385 3.0 869.3 439,320 3.7
No.2 Clean Coal 7,260.0 4,251,462 29.6 5,566.3 2,668,468 22.5
Domestic 7,018.5 4,168,125 29.0 4,064.2 2,003,752 16.9
Export 241.5 83,337 0.6 1,502.1 664,716 5.6
No.3 Clean Coal 8,616.2 3,931,502 27.4 12,129.7 4,581,674 38.7
Domestic 7,120.4 3,394,638 23.7 7,495.6 2,901,583 24.5
Export 1,495.8 536,864 3.7 4,634.1 1,680,091 14.2
Lump Coal 693.0 390,726 2.7 555.4 237,649 2.0
Subtotal for Clean
17,282.1 8,997,075 62.7 19,120.7 7,927,111 66.9
Domestic 15,544.8 8,376,874 58.4 12,984.5 5,582,304 47.1
Exports 1,737.3 620,201 4.3 6,136.2 2,344,807 19.8
Screened Raw Coal 11,357.5 3,848,454 26.8 10,826.4 3,138,506 26.5
Mixed Coal and
Others
3,850.7 606,168 4.2 4,383.1 645,047 5.4
Subtotal for The
32,490.3 13,451,697 93.7 34,330.2 11,710,664 98.8
Of which:
30,753.0 12,831,496 89.4 28,194.0 9,365,857 79.0
2. Shanxi Neng
Hua
1,193.2 243,571 1.7 140.9 21,875 0.2
3. Yancoal
Australia Pty
1,422.6 661,662 4.6 192.4 114,409 1.0
Total for the
Group
35,106.1 14,356,930 100.0 34,663.5 11,846,948 100.0
The Group sold 35.11 million tonnes of coal in 2007, representing an increase of 0.45 million tonnes or 1.3% as compared with that of 2006, among which, (1) the sales volume of the Company was 32.49 million tonnes, representing a decrease of 1.84
The Group’s coal products are exported to the East Asia, such as Japan and South Korea. Net export sales of coal in 2007 accounted for 8.9% of the Group’s total net sales of coal.
Domestic sales of the Group’s coal products are mainly concentrated in the eastern part of China, especially in the Shandong Province.
The following table sets out the Company’s net sales of coal in terms of geographical regions for the years ended 31st December 2007 and 2006
% of
total net
1.The Company
Eastern China
Shandong Province
Jiangsu Province
Zhejiang Province
Shanghai
Other Provinces in
889,748 6.2 386,876 3.2
Subtotal for Eastern China
Southern China
Subtotal for the Company
Total for the Group
Note: Other provinces in the eastern part of China include Anhui Province, Fujian Province and
Most of the Group’s coal sales were made to power plants, metallurgical mills, chemical plants etc.
The following table sets out the Group’s net sales of coal by industries for the financial years ended 31st December 2007 and 2006, respectively:
Power plants
Metallurgical mills
Construction material/chemical
companies
Fuel trading companies/others
Total for the Company
3.
RAILWAY ASSETS
In 2007, railway transportation volume of the Company was 17.86 million tonnes, representing a decrease of 1.63 million tonnes or 8.4% as compared with that of 2006. Net income from railway transportation services of the Company was RMB203.7 million in 2007, representing an increase of RMB43.315 million or 27.0% as compared with that of 2006, which is principally due to an increase of 3.23 million tonnes in the volume of coal deliveries, of which the transportation expenses were borne by the customers.
OPERATING EXPENSES AND COST CONTROL
In 2007, the total operating expenses of the Group were RMB10,186.6 million,
2007 2006 2007 2006
(RMB’000) (% of total net sales
of coal)
Net sales of coal
Net income of railway transportation
service
Total net sales
Costs of sales and costs of railway
transportation service
Materials
Wages and employee welfare
Electricity
Depreciation
Land subsidence, restoration,
rehabilitation and environmental costs
Repairs and maintenance
Annual fee and amortization of
mining rights
Transportation expenses
Other costs
Total cost of sales and costs of
railway transportation service
Sales, general and administrative
expenses
Total operating expenses
12
MANAGEMENT DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjunction with the audited
financial statements of the Group for the year ended 31st December 2007 and the
notes thereto included elsewhere in this report.
YEAR ENDED 31ST DECEMBER, 2007 COMPARED WITH YEAR ENDED 31ST DECEMBER 2006
The net sales in 2007 was RMB14,560.6 million, representing an increase of RMB2,553.3 million, or 21.3%, compared with RMB
Other operating income increased by RMB33.093 million or 20.0% to RMB198.9 million in 2007 from RMB165.8 million in 2006. This was mainly due to: (1) the gain on sales of auxiliary materials increased by RMB13.956 million as compared with the same period last year; and (2) the interest income from bank deposits increased by R
Interest expenses increased by RMB873,000 or 3.3% to RMB27.222 million in 2007 from RMB26.349 million in 2006.
Income before income taxes increased by RMB816.7 million, or 21.9%, to RMB4,543.3 million in 2007 from RMB3,726.6 million in 2006.
Income attributable to the equity holders of the Company increased by RMB857.5 million, or 36.1%, to RMB3,230.5 million in 2007 from RMB2,373.0 million in 2006.
Total assets have increased by RMB2,728.7 million or 11.6% to RMB26,187.4 million as at 31st December, 2007 from RMB23,458.7million as at 31st December 2006. This was principally resulted from the Company’s production and operation activities.
Total liabilities have increased by RMB233.8 million or 5.2% to RMB4,698.8 million as at 31st December, 2007 from RMB4,465.0 million as at 31st December, 2006.
Equity attributable to equity holders of the Company has increased by RMB2,485.7 million or 13.1% to RMB21,417.5 million as at 31st December, 2007 from
RMB18,931.8 million as at 31st December, 2006. Such increase was mainly due to the increase in profit from operating activities.
LIQUIDITY AND CAPITAL RESOURCES
In 2007, the Group’s principal source of capital was the cash flow from operations. The Group has utilised its capital mainly for payment of operating expenses, purchase of property, machinery and equipment, payment of Shareholders’ dividends and investment in the establishment of Huadian Zouxian Power Generation Company Limited.
The net cash flow from operating activities increased by RMB791.4 million or 21.0% to RMB4,558.6 million in 2007 from RMB3,767.2 million in 2006.
As at 31st December 2007, the bills and accounts receivable were RMB2,753.5 million, representing an increase of RMB541.6 million or 24.5% from RMB2,211.9 million as at 31st December, 2006, among which bills receivable has increased by RMB634.6 million or 31.7% to RMB2,639.0 million as at 31st December, 2007 from RMB2,004.4 million as at 31st December, 2006, which was mainly due to increase of bank acceptance bills. Accounts receivable has decreased by RMB92.955 million or 44.8% to RMB114.5 million as at 31st December, 2007 from RMB207.5 million as at 31st December, 2006. Such decrease was mainly due to (1) a decrease in new accounts receivable of the Company during this reporting period; and (2) a decrease
As reviewed and approved at the 16th meeting of the third session of the board of directors of the Company held on 18 April, 2008, impairment loss on accounts receivable and other receivables of RMB8.62 million was written-off.
As at 31st December, 2007, inventories have decreased by RMB139.5 million or 24.1% to RMB440.1 million from RMB579.6 million as at 31st December, 2006. Such decrease was due to decrease in coal inventories.
Prepayment and other current assets have increased by RMB95.163 million or 41.1% to RMB326.7 million as at 31st December, 2007, from RMB231.5 million as at 31st December, 2006. Such increase was mainly due to: (1) the prepayment of deposit for geological protection of coal fields of RMB200 million; and (2) the advances to suppliers decreased by RMB73.986 million.
As at 31st December, 2007, bills and accounts payable have decreased by RMB88.168 million or 11.8% to RMB657.5 million from RMB745.7 million as at 31st December, 2006.
Other payables and accrued expenses have increased by RMB771.4 million or 40.6% to RMB2,671.1 million as at 31st December, 2007 from RMB1,899.7 million as at 31st December, 2006, which was principally due to: (1) customer’s deposits increased by RMB267.8 million; (2) accrued wages increased by RMB126.5 million; (3) payables in respect of purchases of property, plant and equipment and construction materials increased by RMB172.6 million; (4) accrued payments
Long-term liabilities have decreased by RMB37.651 million or 5.9% to RMB599.3 million as at 31st December 2007 from RMB637.0 million as at 31st December, 2006. Pursuant to the Acquisition Agreement of Jining III Coal Mine in the year 2000, the Company has paid the Controlling Shareholder RMB13.248 million for the acquisition of the mining rights of Jining III Coal Mine during this reporting period.
In 2007, the Company contributed RMB900 million to the establishment of Huadian Zouxian Power Generation Company Limited and classify the investment as an associate company. Such payment was made out of the Company’s internal resources. s at 31st December, 2007, the Group’s debt to equity ratio was 1.6%, which was calculated on the basis of the equity attributable to the equity holders of the Company and total amount of borrowings amounting to RMB21,417.5 million and RMB345
The Group’s capital expenditure for purchase of property, machinery and equipment for year 2007 is RMB2,928.0 million, which decreased by RMB435.4 million or 12.9% as compared with RMB3,363.4 million for year 2006, which was mainly due to the decrease in the number of projects under construction and purchase of machinery and equipment as compared with that in 2006.
The Group’s capital expenditure for year 2008 is expected to be RMB3,679.0 million, which is intended to be made out of the Company’s internal resources.
2008 (Estimated)
（
2007
Yulin Neng Hua
Heze Neng Hua
Shanxi Neng Hua
Yancoal Australia Pty
Total
Considering the sufficiency in cash flow and capital sources of the Group, the Company believes that it will have sufficient capital to satisfy its operational and development requirements.
TAXATION
In 2007, the Company and all its subsidiaries incorporated in the PRC are still subject to an income tax rate of 33% on its taxable profits in 2007 and Yancoal Australia Pty is still subject to an income tax rate of 30% on its taxable profits.
CHAIRMAN’S STATEMENT
Benefiting from the rapid economic development in China, price recovery of fundamental energy, steady increase in coal price and
To express our gratitude to the Shareholders, the board of the directors of the Company (the “Board” or the “Directors”) proposes to declare a cash dividend payable in accordance with the Company’s persistent dividend policy at the sum of RMB836.1 million (tax included) or RMB0.17 per share (tax included).
Stable Production of coal in 2007.
Constructions of new projects have been making progress according to plans.
The 100,000 tonnes methanol project of Shanxi Neng Hua has entered into the trial production stage and will commence its operation in the second quarter of 2008. The 600,000 tonnes methanol project of Yulin Neng Hua has entered into the stage of key equipment installation and adjustment and will commence its operation in the second half of 2008. The filing and approval processes in relation to the acquisition of mining rights regarding Shandong Zhaolou Colamine have been completed. The main electricity supply, wind forcing, water drainage and underground parking systems have also been formed. Application for the establishment of the Yushuwan coalmine
Improvement in the corporate governance of the Company as a result of
operation standardisation.
Fulfillment in social responsibilities, and achievement in scientific development.
The Company has fulfilled its social responsibilities at various stages of production operation and has achieved harmonious corporate growth in line with the environmental and social development. In 2007, the Company achieved safe production of zero death rate in the production of million tonnes of raw coal, together with clean production of approximately 1.2kg of mixture in 10 thousand tonnes of clean coal, all of these have maintained its leading position in the world. To enhance resource utilization, the Company has achieved a coal
OUTLOOK FOR 2008
The demand and supply of coal in the domestic market have met an overall equilibrium. The coal price is maintaining at a high level, especially the price of high quality thermal coal which is expected to be stabilized at a higher level, while the price of clean coking coal in short supply will still have room for upward price adjustment. It is expected that the price of low quality coal will slightly decrease. Since China’s economic growth rate in 2008 is rated at 8% by the PRC government, the demand of coal for electricity, metallurgy, chemical, building materials and other fundamental industries will remain strong as they sustain a relatively high development pace. The domestic coal resource supply will be increased due to additional production from the newly constructed coalmines as well as implementation by the PRC government of related policies to reduce coal export,
Coal is expected to be in short supply in the international market, and the coal price will be significantly higher than that of 2007. As the prices of international oil and natural gas have reached successive new high records, the position of coal as basic energy will be further enhanced. Major coal suppliers around the world will experience diminishing increase in coal supply, while Australia is limited by port capacity, China, Vietnam, Indonesia, South Africa and other countries will not significantly increase coal export as they would like to meet domestic demand for coal. The aggregate global demand for coal will continue to increase as a result of the rapid development in electricity and metallurgy industries in Asia Pacific region, with more than 50% of global coal trading volume, will lead to a strong demand for quality thermal coal and coking coal. Since March 2008, spot price for Australian BJ thermal coal has stayed at approximately US$120 per tonne. It is expected that international coal price will increase significantly in 2008 as compared with that of 2007, and will remain volatile at a high level.
The average coal sales price of the Group is expected to increase significantly in 2008. Currently, the Company has signed domestic coal sales contracts and intentions amounting to 32.30 million tonnes, among which the average net contract price of sales contracts amounting to 9.51 million tonnes with increased by 38.10% over that of 2007; while price of the coal sales intentions of 22.79 million tonnes will fluctuate in accordance with changes in the market. The sales plan in relation to export coal is 500,000 tonnes and the negotiation for export coal has not completed yet. However, the Company expects a significant increase in contract price of export coal as compared with that of 2007.
The sales target of the Group for the year 2008 is 34.40 million tonnes, including (i) the Company’s sales target of 31.60 million tonnes; (ii) Shanxi Neng Hua’s sales target of 1.2 million tonnes; and (iii) Yancoal Australia’s sales target of 1.6 million tonnes.
OPERATING STRATEGIES
In 2008, the Company will continue to encounter various types of pressures and challenges such as to resettle the villages located above the coal field, increase in costs, volatility in coal price, difficulties in acquiring new coal resources. The resettlement of the villages located above the coal field exists generally in the economic cycles of coalmines in the eastern part of China. The Company is not able to rule out any risk affecting its production as may be caused by the untimely resettlement of villages located above the coal fields. Moreover, factors such as general price hike, increase in expenses caused by policies will have a negative impact on the cost control of the Company; state macroeconomic adjustment policies, changes in supply and demand of coal, and transportation capacity of coal will cause volatility in coal price while the upward movement in the price of coal resources will increase the operation costs of external expansion of the Company.
The Company will continue to improve its profitability and Shareholders’ return through implementation of strategies relating to organic development and external expansion in parallel. In 2008, the Company will focus on the following operating strategies:
Expediting the existing projects construction and continuously seek for new acquisition opportunities.
Improving operation management, effective cost control and enhancing profitability of the existing coal mines.
Regulating operations and improving social responsibilities of the Company.
On behalf of the Board
REPORT OF BOARD OF DIRECTORS
The Board is pleased to submit the Report of the Board of Directors for the year 2007 together with the audited financial statements of the Group for the year ended 31st December, 2007.
PRINCIPAL ACTIVITIES
The
PROPOSED PROFIT APPROPRIATION
The profit appropriation of the Company for the year ended 31st December, 207 as proposed by the Board is as follows:
(Prepared in accordance with PRC GAAP)
RMB’000
Net profit attribute to the shareholders of the Company
Unappropriated profits at the beginning of year
Appropriation to statutory surplus reserve
Distributable profits
Dividends payable – annual cash dividends for previous
year as approved at the annual general
meeting
983,680
Unappropriated profits at the end of the year
of which: Proposed cash dividends after the date of
the balance sheet
836,128
The proposed profit appropriation will be presented to the Shareholders for approval at the forthcoming 2007 annual general meeting of the Company (the “2007 AGM”). Pursuant to the articles of association of the Company (the “Articles”), the Company’s financial statements should be prepared in accordance with the PRC GAAP and the relevant laws and regulations as well as the IFRS and the accounting standards of the places in which the shares of the Company are listed. For the purpose of determining the dividends payable to the Shareholders in the relevant year, the lower of the profits after taxation in the financial statements prepared according to these two accounting standards will be applied for the relevant year. For this purpose, audited profits after taxation in accordance with the PRC GAAP will be applied to determine the proposed cash dividends after the date of balance sheet for the year 2007.
DIVIDENDS
The Directors have decided to propose at the 2007 AGM a payment of cash dividends for the year 2007 at the amount of RMB
Pursuant to the Articles, cash dividends payable to the Shareholders shall be calculated and declared in RMB. Cash dividends payable to holders of the Company’s domestic shares shall be paid in RMB, while cash dividends payable to holders of the Company’s H shares shall be paid in Hong Kong dollars.
MAJOR SUPPLIERS AND CUSTOMERS
The percentage of goods purchased and services attributable to the Company’s five largest suppliers was less than 30% of the total purchase of the Company in 2007. Net sales to the Company’s five largest domestic customers accounted for less than 30% of the Company’s total net sales in 2007.
RESERVES
Details of changes in the reserves for the year ended 31st December, 2007 and details of the distributable reserves of the Company as at 31st December, 2007 are set out in Note
BORROWINGS
Details of the borrowings are set out in Note
PROPERTY, PLANT AND EQUIPMENT
Details of movements property, plant and equipment during the year ended 31st December, 2007 are set out in Note
EMPLOYEES’ PENSION SCHEME
Details of the employees’ pension scheme of the Company are set out in Note
ON-GOING CONNECTED TRANSACTIONS
The on-going connected transactions between the Group and Yankuang Group for the year 2007 included the following three aspects:
1. On-going Supply of Materials and Services
The on-going supply of materials and services between the Group and Yankuang Group are executed in accordance with the Provision of Materials and Water Supply Agreement, the Provision of Electricity Agreement, Provision of Labor and Services Agreement, the Provision of Equipment Maintenance and Repair Works Agreement and the Provision of Products and the Materials Agreement entered into between the Company and Yankuang Group on 10th January, 2006, each with an effective erm from 1st January, 2006 to 31st December, 2008. These agreements and the respective annual caps for such transactions for the each of the three financial years have been approved by the independent Shareholders on 24th March, 2006.
Details of the on-going connected transactions are set out in the “Announcement on Continuing Connected Transactions of Yanzhou Coal Mining Company Limited”, which was published in China Securities Journal and Shanghai Securities News in China and Wen Wei Po and South China Morning Post in Hong Kong on 11th January, 2006 as well as in the circular of the Company dated 1st February, 2006. Details of on-going supply of materials and services between the Group and Yankuang Group for the year 2007 are shown in the following table.
No. Types of Connected
Transaction
Agreement
for the year
Value of
transactions
1
purchased from
“Provision of
Materials and Water
Supply Agreement”
565,200 454,649
2
from
“Provision of Electricity
Agreement”
400,000 368,993
3 Labor and services provided
by Yankuang Group
“Provision of Labor and
Services Agreement”
912,700 718,482
4 Maintenance and repair
services provided by
Yankuang Group
“Provision of Equipment
Maintenance and Repair
Works Agreement”
300,000 215,102
“Provision of Products
and Services
3,050,000 1,610,106
2. Mining Right Fee
According to the approval granted by the relevant state-owned assets management and coal industry management authorities when the Company was incorporated, and pursuant to the Mining Right Agreement entered into between the Company and Yankuang Group in October, 1997 as amended by the supplemental agreement entered in February, 1998, the Company has to pay RMB12.98 million per year to Yankuang Group as mining right fees of Nantun Coalmine, Xinglongzhuang Coalmine, Dongtan Coalmine, Baodian Coalmine and Jining II Coalmine (the “Five Coalmines”), which have been owned by the Company since its incorporation. Pursuant to the relevant agreements, Yankuang Group was authorised to collect the mining rights fee for ten years from 1997. After ten years, if the government promulgates any applicable new regulations governing payment of mining right fees, such regulations will apply.
During this reporting period, the Company has paid RMB12.98 million as the mining right fee for the Five Coalmines to Yankuang Group. In September, 2006, the State Council approved the “Implementation Proposal on Pilot Reform for Promoting System for Paid Use of Coal Resources” jointly issued by the Ministry of Finance, the Ministry of Land & Resources and the National Development and Reform Commission, which stipulates that if any enterprise obtains coal mining rights not for value, and if such mining rights are explored and ascertained based on investment by the relevant PRC government authority, such enterprise shall pay a mining right fee upon completion of evaluation of the resource reserve remaining. Shandong Province is one of the pilots designated for the use of paid mining rights. As at this reporting date, detailed implementation rules regarding the use of paid coal mining rights of Shandong Province have not been issued. The mining rights of all other coal mines owned by the Company and its subsidiaries were acquired for value.
3. Payment of Pension Fund
Pursuant to the Agreement Relating to Provision of Administrative Services for Pension Fund and Retirement Benefits entered into on 10th January, 2006, Yankuang Group undertakes to be responsible for the management of the payments of the pension insurance fund for the Group’s employees as well as management of the payments of pension and other benefits to retirees of the Group (the “Endowment Insurance Fund”) on a free of charge basis. Such transaction constitutes an exempt continuing connected transaction which has been approved by the Board. The annual limit of the amount of the Endowment Insurance Fund to be paid by the Company for the year 2007 as approved at the 4th Meeting of the Third Session of the Board on 4th
Views of the Independent non-executive Directors on the connected transactions of the Company
The Company’s independent non-executive Directors have reviewed the on-going connected transactions for the Group in the year 2007 and confirmed that: (1) all such connected transactions have been: (i) entered into by the Group in its ordinary and usual course of business; (ii) conducted either on normal commercial terms, or where there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favorable to independent third parties han terms available to or from the Group; and (iii) entered into in accordance with the relevant governing agreement on terms that are fair and reasonable and in the interests of the Shareholders as a whole; (2) the value of the connected transactions in respect of the on-going supply of materials and services stated under the paragraph headed“1. On-going Supply of Materials and Services” above has not exceeded the annual cap for the year 2007 approved by independent Shareholders on 24th March, 2006. Pursuant to Rule 14A.38 of the Hong Kong Listing Rules, the Directors have engaged the auditors of the Company to perform certain agreed-upon procedures in respect of the continued connected transactions of the Company. The auditors have reported their factual findings on these procedures to the Directors.
Mining Right Consideration for Jining III Coalmine
Pursuant to the Jining III Coalmine Acquisition Agreement entered into between the Company and Yankuang Group in 2000, the consideration for the mining rights of Jining III Coalmine is approximately RMB132.5 million, which shall be paid to Yankuang Group in ten equal installments, free of interest. Payment has commenced since 2001 and in 2007, the Company has paid a total of RMB13.248 million to Yankuang Group.
Establishment of Yankuang Group Finance Company Limited
At the 13th meeting of the third session of the Board held on 3rd August, 2007, the establishment of Yankuang Group Finance Company Limited jointly by the Company with Yankuang Group and Zhongcheng Trust and Investment Company Limited was approved. Its principal activities include internal transfer and settlement of funds among different accounts of its members, attract deposits from its members, extend loans to its members etc. The name and principal activities of the company are subject to the approval by China Banking Regulatory Commission and the confirmation by
Heze Neng Hua’s Acquisition of Mining Right of Zhaolou Coalmine
The Company acquired 95.67% equity interest in Heze Neng Hua from Yankuang Group in December 2005. According to the relevant acquisition agreements, Heze Neng Hua has the right to acquire mining rights of Zhoulou Coalmine at any time within 12 months from Yankuang Group’s acquisition of the mining rights of Zhaolou Coalmine.
On 28th June, 2006, Yankuang Group obtained the mining right certificate of Zhaolou Coalmine from the Ministry of Land and Resources. At the first extraordinary general meeting of the Company for the year 2008 held on 30th January, 2008, the purchase of the mining rights of Zhaolou Coalmine by Heze Neng Hua from Yankuang Group at a consideration of RMB747.3 million was approved. The acquisition is still pending the final approval by the relevant regulatory authorities in charge of national land and resources.
For details of the transaction, please refer to the “Announcement on Connected Transaction of Yanzhou Coal Mining Limited Company” dated 4th December, 2007 and the circular of the Company dated 14th December, 2007 in respect of the connected transaction and the proposal for amendments to the articles of association of the Company.
HOUSING SCHEME
According to the Provision of Labour and Services Agreement (which is set out in the paragraph headed “On-going Supply of Materials and Services” in the section headed “On-going Connected Transactions”), Yankuang Group is responsible for providing dormitories to its own employees and the employees of the
Details of the housing scheme are set out in Note 43 to the consolidated financial statements prepared in accordance with the IFRS contained herein.
SUBSTANTIAL CONTROLLED COMPANIES OR JOINT STOCK COMPANIES OF
THE COMPANY
Name of
Nature of
Business
Main Products or
Services
Registered
Capital
capital
contribute
d by the
assets as
at 31st
December,
Net assets
as at 31st
Net
profits
for the
year
Yanzhou
Coal Yulin
Neng Hua
Co., Ltd.
Energy and
chemicals
Mainly
undertaking the
construction and
operation of the
0.6Mt Methanol
Project
800,000 776,000
Yanmei
Shanxi
Investment
management
undertaking
management of
the project
invested in Shanxi
province by the
600,000 600,000
Heze Neng
Energy
Development of
coal resource in
Juye Coalfield
1,500,000 1,450,000
Yancoal
Australia
Pty
Limited
project invested in
Australia by the
AUS64
million
232,8
Shandong
Shipping
Goods
transportation
River shipping,
sales of coal and
other products
5,500 5,060
Zhong Yan
Trading
of Qingdao
Bonded
Area
International
trade
International trade,
product
processing,
commodity
exhibition, and
storage
2,100 1,100
29
As at 31st December, 2007,
Neng Hua, have not been commenced operation.
DISCLOSURE OF SIGNIFICANT EVENTS
Performance of the undertakings made by the Company, shareholders and the
actual controlling person
Special undertakings made by Yankuang Group as the shareholder of the original
non-tradable shares and the performance of the undertakings under the share reform
plan:
Shareholders
Special Undertakings
Performance of
Undertakings
Company held by Yankuang Group should not be
listed for trading purpose within forty-eight months
from the date of execution of the share reform plan;
The formerly
non-tradable shares in
the Company held by
Yankuang Group have
not
its operations and new projects relating to coal and
power which are in line with the Company’s
development strategies to the Company in
accordance with the relevant PRC regulations, with a
view to enhancing the operating results of the
Company and reducing the connected transactions
and competition between Yankuang Group and the
Company. Yankuang Group should allow the
Company to participate and invest in, for the purpose
of co-development of, the coal liquefaction project,
which is being developed by Yankuang Group.
In 2006, Yankuang Group
completed the transfer of
the coal project and new
electricity project to the
Company, which are in
line with the Company’s
development strategies.
Yankuang Group is in the
process of implementing
its other undertakings and
there has not been material
progress in this respect.
Yankuang
Corporation
for the non-tradable shares should be borne by
Yankuang Group.
The undertaking has been
fulfilled.
Increasing registered capital of Yancoal Heze Nenghua Co., Ltd.
At the 10th meeting of the third session of the Board held on 20th April, 2007, it was
approved that Yancoal Heze Nenghua Co., Ltd. (“Heze Nenghua”) increased its
registered capital from RMB600 million to RMB1,500 million, in which RMB876
million will be contributed by the Company. After such capital increase, the equity
interest held by the Company in Heze Nenghua will increase from 95.67% to 96.67%.
The increased registered capital will be mainly used for the construction of Zhaolou
Coal Mine.
30
Establishment of Huadian Zouxian Power Generation Company Limited
As approved at the 13th meeting of the third session of the Board convened on 3rd
August, 2007, Huadian Zouxian Power Generation Company Limited was jointly
established by the Company with Huadian Power International Corporation Limited
November, 2007. The registered capital of Huadian Zouxian Power Generation
Company Limited is RMB3000 million, of which the Company has contributed cash
at the amount of RMB900 million, representing approximately 30% of the registered
capital.
For details, please refer to the Announcement on Investment of Yanzhou Coal Mining
Company Limited posted on the website of Hong Kong Stock Exchange on 24th
August, 2007.
Amendments to the Business Scope and the Articles of Association
As approved at the annual general meeting of the shareholders for the year 2006
convened on 15th June, 2007, the Company, in view of its own production
deveopment and pursuant to the requirements of the Ministry of Commerce of the
State Council, amended its business scope and the relevant terms of the articles of
association. Details of such amendments were contained in the announcement of the
Company published on Wen Wei Po and South China Morning Post in Hong Kong on
27th April, 2007. Such announcement was also posted on the websites of the
Shanghai Stock Exchange and The Stock Exchange of Hong Kong Limited,
respectively, on the same day.
As approved by the first extraordinary general meeting for the year 2008 held on 30th
January, 2008, the Company amended the terms of the articles of association relating
to certain powers of its independent directors. For details of such amendments, please
refer to the circular of the Company dated 14th December, 2007 relating to the
connected transaction and the proposed amendments to the Articles,
MATERIAL LITIGATION AND ARBITRATION
On 13th December 2004, the Company made an entrusted loan of RMB640 million to
Shandong Xin Jia Industrial Company Limited (the “Entrusted Loan”). On 6
September, 2005, the Higher People’s Court of Shandong Province arranged and
auctioned 289 million shares out of the 360 million shares held by Lianda Group
Limited, the guarantor of the Entrusted Loan, in Huaxia Bank Company Limited
(“Huaxia Shares”) in accordance with the relevant laws. The proceeds of such auction
were for the repayment of the Company’s principal, interest, penalty interest and
relevant expenses of the Entrusted Loan. The auction price was RMB3.5 per Huaxia
31
Share and the total auction amount was RMB1,011.5 million. As at the date of this
report, the successful bidder of the Huaxia Shares is still undergoing the qualification
review by China Banking Regulatory Commission (“CBRC”).
While the successful bidder of the Huaxia Shares is undergoing the qualification
review by CBRC, the Company noted that Shandong RunHua Group Company
Limited (“RunHua Group”), a private enterprise, started legal proceedings claiming
for the transfer of and entitlement to 240 million Huaxia Shares held by Lianda Group
Limited.
As the two cases involve the same subject matter and as the Company has attached
the Huaxia Shares in priority, the Supreme People’s Court is in the course of
mediating the two cases. According to the mediation proposal of the Supreme
People’s Court, RunHua Group shall voluntarily guarantee the realization of the debt
of Yanzhou Coal and 200 million out of the 289 million Huaxia Shares attached to the
Company shall be transferred to RunHua Group for RunHua Group to finance the
settlement of debt whereas the 200 million Huaxia Shares and 89 million Huaxia
Shares held by RunHua Group and Lianda Group, respectively, should continue to be
attached to and frozen by the Company.
On 20
People’s Court of Shandong Province that the transfer of the 200 million Huaxia
Shares has been implemented and the procedures relating to continuation of the
attachment by the Company have also been completed.
The Company considers that the above arrangement is beneficial to the recovery of
the principal and interest of the Entrusted Loan. The Company will promptly disclose
any significant progress concerning the Entrusted Loan.
The Company was not involved in any other significant litigation or arbitration during
the reporting period.
MATERIAL CONTRACTS
Other than the agreements described in the significant events in the section headed
“Report of the Board of Directors”, the Company was not a party to any material
contract during this reporting period.
PRE-EMPTIVE RIGHTS
The Articles and the laws of the PRC do not contain any provision for any
pre-emptive rights, requiring the Company to offer new shares on a pro-rata basis to
the existing shareholdings of the Shareholders.
32
EXTERNAL GUARANTEES
During this reporting period, there were no guarantee contracts or outstanding
guarantee contracts and the Company had not provided any external guarantee. No
guarantees were extended to the controlling subsidiaries of the Company. There
were no illegal guarantees.
The above information concerning external guarantee by the Company is disclosed in
accordance with the relevant PRC (excluding Hong Kong) laws and regulations.
ENTRUSTED LOAN
Entrusted loans that occurred in the previous years which were also continued in this
reporting period are set out in the following table. Except for the disclosures made
below, the Company currently has no other plans to provide entrusted loans.
No. Borrower
Amount
of
Entrusted
Loan
Approved
Term of
Annual
Interest
Approval
Process
Whether
there is a
provision
for
devaluation
principal
has been
paid
Accumulated
interest
income
during this
reporting
period
Xinjia
Industrial Co.,
Ltd
RMB640
From 20th
2004 to 19th
January, 2005
7%
Reviewed and
approved at a board
meeting held on
13th December,
2004
No No
US$90
From 7th
November,
2005 to 7th
2008
5.98%
6.96%
28th June, 2005
approved to extend
for one year at a
board meeting held
on 17th August,
3
Yanmei Heze
Neng
Hua Company
RMB300
From 3rd July,
2006 to 26th
June, 2007
5.85%
approved at a
meeting of the
general manager
office held on 22nd
June, 2006
No
7,252,862.50
4
Yanzhou Coal
Yulin Neng
RMB500
October, 2006
to 20th October,
2009
6.30%
office held on 11th
September, 2006
RMB
33
From 17th May,
2007 to 17th
May, 2010
6.57%
25th October, 2006
6
Heze
Nenghua
5 years from
the date of
drawndown
(not yet
drawndown)
7.20%
office held on 27th
July, 2007
7
Tianhao
Chemicals
RMB190
drawndown )
8
RMB1.5
billion
From 15th
October, 2007
to 15th October,
2012
RMB 660
million was
17th August, 2007
4,530,000
9
Heshun
Tianchi
RMB50
From 24th
2007 to 24th
2010
7.47%
office held on 5th
November, 2007
As at a meeting of the general manager office held on 22nd January, 2007, Shanxi
Neng Hua, the Company’s wholly-owned subsidiary, was approved to extend an
entrusted loan of RMB200 million to Tianhao Chemicals, Shanxi Neng Hua’ s
controlling subsidiary, with details shown in following table.
Interest Approval Process
devaluati
on
RMB200
From 29th
March, 2007 to
28th March,
6.48%
approved at the daily
operation meeting by
the general managers
held on 22nd January,
4,528,800
At the Board meeting held on 28th June, 2005, the Company was approved to extend
an entrusted loan of US$90 million to Yanmei Australia Pty Limited. As approved at
the board meeting convened on 17th August, 2007, repayments of the principal as to
the amount of US$88.5 million and the corresponding interests of the entrusted loan
34
mentioned above were extended for one year and shall be due on 7th November,
2008.
The above information concerning entrusted loans is made pursuant to the disclosure
requirement under the relevant PRC laws (excluding Hong Kong).
SHARE CAPITAL
Details of the share capital of the Company are set out in Note
financial statement prepared in accordance with the IFRS contained herein.
35