Despite the HK$1.15 billion representing a 25.9% rise in profit from the previous year, the company performed well under expectations due to a 53.4% increase in costs, including selling, general and administrative expenses.

 

The company said higher pension fund costs, management salaries, a newly introduced medical fund and increased provision for bad debt all contributed highly to the increased level of spending during 2002.

 

In a bid to compensate, Yanzhou has increased its sales target from 35.05Mt last year to 38Mt.

 

The company said it has already signed contracts to sell 10.8Mt of coal to domestic buyers as well as letters of intent to sell 14.46Mt with an additional planned 14Mt of exports.

 

The average sale price of domestic contracts signed was HK$170.30 per tonne also up on last year.

 

Another looming problem for Yanzhou though is the competition from Australia for Japanese customers, who make up 80% of Yanzhou's exports.

 

Australian companies and Yanzhou are currently negotiating contracts with Japanese customers.

 

Japan are also going to slap a HK$14.87 tariff on thermal coal making up for 8% of Yanzhou's sale price.