Listed Chinese coal firm issues investor alert due to heavy losses

HARBIN - A Shanghai-listed coal chemical firm based in Northeast China's heavy industry base of Heilongjiang province on Thursday issued an investor alert due to high financial risks.

Heilongjiang Heihua Co Ltd, a subsidiary of ChemChina, is a major coal chemical industry firm in Heilongjiang, where coal mining and the chemical industry once prospered but now face a grim outlook.

Heihua's alert notice suggested its main business had stopped production, and is unlikely to resume in the next three months.

The company started to cut production starting in November last year, when it gave up production of urea. It shut off coke production lines on Monday.

However, the company's financial estimates suggested that if the main business continued, it could only expect a revenue of 50 million yuan ($7.7 million) for this year, while losses would reach up to 133 million yuan.

According to the stock exchange's rule on investor alerts, Heihua's stock will be suspended from trading on Friday. From March 11, the start of its three-month alert period, the stock's daily trading limit will be capped at 5 percent.

Founded in the 1950s, Heihua has been burdened by overstaffing and inefficiency due to aging production equipment and unqualified safety and waste treatment facilities.

It has some 11,000 current and retired workers on its payroll, but the number currently employed is only about 3,000.

Heihua's upstream coal mining firm, the state-owned enterprise Heilongjiang Longmay Mining, has just laid off 22,500 workers, the first of what are expected to be massive redundancies. Its downstream steel industry is also struggling with overcapacity.