[ET Net News Agency, 21 November 2017] S&P Global Ratings revised the outlook on
Yanzhou Coal Mining Co. Ltd. (01171) to positive from stable. At the same time, the credit
rating agency affirmed its 'BB-' long-term corporate credit rating on the China-based coal
producer.
S&P also affirmed its 'BB-' issue ratings on the two outstanding senior unsecured notes
and our 'B+' issue rating on the outstanding senior unsecured perpetual securities that
the company guarantees.
The agency revised the outlook to positive after Yanzhou Coal reported financial results
for the first nine months of 2017 that were above S&P's expectations, primarily due to
substantial increases in coal prices.
S&P expects Yanzhou Coal's financial metrics to improve materially in the next 12 months
on favorable industry trading conditions, increasing sales volumes, and declining capital
expenditure.
Coal prices saw a significant rebound from the second half of 2016 due to production
cuts by Chinese miners, in accordance with supply-side reform measures taken by Chinese
authorities.
S&P expects the reforms to continue in the next 12 months, leading to a better supply
and demand balance in the coal industry. This will support coal prices and aid Yanzhou
Coal's deleveraging process.
It forecast that the company's coal sales volume will grow by 20%-25% per annum
year-over-year in 2017-2018. The significant volume growth is due to the ramp-up of new
mines and the consolidation of Coal & Allied Industries Ltd., an Australia-based coal
producer acquired in September 2017.
S&P also expects Yanzhou Coal's acquisition appetite to reduce in the next two to three
years as the company's capacity has already reached its 13th five-year internal target of
150 million tons, following the Coal & Allied acquisition. As such, it foresees the
company's capital spending will decline, and its discretionary cash flow will turn to
positive from 2017 onwards. (KL)