Chalco earnings down 13.49pc on lower prices and higher costs

PUBLISHED : Tuesday, 18 March, 2008, 12:00am
UPDATED : Tuesday, 18 March, 2008, 12:00am

Aluminum Corp of China (Chalco), the mainland's biggest producer of the metal, yesterday reported a worse than expected 13.49 per cent drop in last year's profit on lower product prices and higher production costs.

Net profit at the Beijing-based company dropped to 10.24 billion yuan (HK$11.2 billion), from a revised record 11.84 billion yuan a year earlier, lagging a mean estimate of 11.3 billion yuan from 20 analysts polled by Thomson Financial.

Turnover increased 17.51 per cent to 76.2 billion yuan as output increased, but costs rose a faster 30.2 per cent. Chalco proposed a final dividend of 5.3 fen, down 54 per cent.

Chalco would also face cost pressure this year, especially in the raw material bauxite and power after Beijing cancelled electricity tariff discounts for the aluminium industry to save energy, analysts said.

Last year, Chalco produced 8.38 per cent more alumina at 9.57 million tonnes and 45.08 per cent more aluminium at 2.8 million tonnes.

Target output for this year was 10.2 million tonnes of alumina and 3.62 million tonnes of aluminium, it said.

Chalco's alumina average selling price last year fell 16.92 per cent to 3,412 yuan per tonne amid a growing number of new plants on the mainland.

Its average selling price of aluminium dropped 3.14 per cent to 16,914 yuan per tonne.

Operating profit at its aluminium smelting business rose 48.4 per cent to 7.42 billion yuan last year after it raised output. The operating profit margin rose 0.8 percentage points to 13.8 per cent.

However, a slump in sale price eroded operating profit at its alumina refining business by 41 per cent to 8.17 billion yuan with the margin falling 36.2 per cent to 23.2 per cent.

Separately, Chalco said it would bid for five aluminium fabrication plants and a smelter from its state-owned parent for up to 4.18 billion yuan.

The fabrication plants had annual capacity of 1.09 million tonnes, and the smelter's capacity was 232,000 tonnes, it said.

The assets were put on sale on the Beijing Equity Exchange.

Chalco expects a 'good chance of success in the open tender process' and plans to fund the purchases by internal resources.

Cost pressure

Beijing cancelled power tariff discounts for aluminium industry

Last year, Chalco increased sales on higher output, but production costs rose: 30.2%