Heavyweight Chinese coal producer to list on NYSE

For those who want to invest in China’s long-term economic growth and in particular its infrastructure development, Puda Coal (PUDZ-O) might be worth a look.

The Chinese company, which through its subsidiaries supplies high-grade metallurgical coal used in China’s steelmaking industry, is listing on the New York Stock Exchange on Sept. 22 as PUDA-X.

Puda has three coal washing facilities with an annual coal washing capacity of 3.5 million metric tons.

The company is based in Shanxi province, which produces about 20%-25% of China’s total coal output and supplies nearly 50% of its coke. The province has the largest reserve base of high-quality raw coal in China. Not insignificant in a country that is currently the world’s  largest coal producer and consumer.)

Shanxi province, not to confused with China’s Shaanxi province, is in northern China and borders Hebei to the east, Henan to the south, Shaanxi to the west and Inner Mongolia to the north. The Yellow River forms the western boundary of Shanxi with Shaanxi.

Puda Coal sells its cleaned coal through a direct sales force that markets directly to customers. Primary customers are coking companies that supply steel mills as well as steel mills with their own coking facilities.

The company’s primary markets are Shanxi province, Inner Mongolia Autonomous Region, and Hebei province, all of which are accessible by rail lines, the most cost-effective method for coal transport.

In the last two years, the Shanxi government has closed many small companies to deal with economic, environmental, and safety issues. This has resulted in the elimination of more than 1,000 coal-related enterprises in the province.

In the second quarter ended on June 30, Puda posted revenues of US$48 million, down 9.8% from US$53.2 million in the year-earlier quarter. Net income reached US$1.7 million or about 11¢ per fully diluted share. Gross profit reached US$3.6 million, down from US$6.7 million for the same period in 2008.

A drop in sales tonnage to 440,000 metric tonnes from 592,000 metric tonnes in the year-earlier quarter was partially offset by an increase in the selling price to US$109, an increase from US$92, or 18% year-on-year.

“We experienced lower demand during the second quarter of 2009, as the steel industry worked through existing inventories and delayed placing new orders for coking coal,” Liping Zhu, Puda’s president and chief executive said in a statement announcing the financial results. “Even under these difficult market conditions, we remained profitable, generated positive operating cash flow and made progress in our efforts to acquire coal mines.”

The company acquired 18% of another coal company in Shanxi, Jianhe Coal, in the second quarter.

Zhu added that he anticipates tonnage sales in the third quarter will continue to improve from current levels as steel inventories decline and customers increase their order volumes.

At presstime, Puda was trading on the OTC Bulletin Board at US$5.48 per share, up $1.08 or 24.55% on news of the upcoming AMEX listing.