Major coal companies in North China's Shanxi Province are expected to speed up their merger and restructuring process, after all three major producers in the province reported losses in the first quarter, despite a recovery in prices, according to media reports on Thursday.
In the first quarter of this year, Datong Coal Mine Group reported a loss of 291 million yuan ($42.77 million), while Lu'an Group saw a loss of 14 million, the Securities Daily reported, citing company filings. Another major producer, Shanxi Coking Coal Group Co, also reported a loss, the report said.
Analysts attributed the losses to high production costs and mounting debt.
"Coal prices weren't low in the first quarter. These companies' losses were due to relatively high costs as well as high interest payments from high debt," the Securities Daily report said, citing Deng Shun, an analyst at GF Futures.
At the end of the first quarter, Datong Coal Mine Group's total assets were at 292.28 billion yuan with total liability amounting to 248.23 billion yuan. The asset-liability ratio was 84.93 percent, the report said. Lu'an Group and Shanxi Coking Coal Group Co are also shouldering debt ratios over 80 percent, it added.
The losses and persistent problems in the complex Shanxi coal industry could mean an accelerated process of mergers and restructuring, according to analysts. There are seven provincial level State-owned coal mining groups in Shanxi.
The State-owned Assets Supervision and Administration Commission of the Shanxi Provincial Government has issued another notice, asking provincial SOEs to submit reports regarding their principal businesses no later than July 7.
The notice stated that the province will solve problems in Shanxi SOEs, including scattered industrial planning, "irrational structure," and homogenization of competition, according to media reports.
Such a move has been viewed as an indication that further reforms are imminent.
