Chalieco looks beyond non-ferrous metals sector

PUBLISHED : Saturday, 17 August, 2013, 12:00am
UPDATED : Saturday, 17 August, 2013, 4:26am


China Aluminum International Engineering Corporation (Chalieco) said it is seeking to expand outside its core sector and overseas as it posted a 47 per cent fall in interim profit.

The non-ferrous metals plant design and construction arm of Aluminum Corporation of China (Chinalco) cited "the condition of excess production capacity of the non-ferrous metals industry and shrinking industrial construction business" for its diversification.

Net profit for the first half was 281.6 million yuan (HK$354.3 million), compared with 534.7 million yuan a year earlier. The firm attributed the decline to a "structural change" of its operation as orders of the more lucrative plant design business fell while those of less profitable engineering and construction contracting grew.

Gross profit margin slid to 14.2 per cent from 18.5 per cent due to higher material and staff costs.

It made a margin of 40 per cent on design and consultancy work and only 9 per cent on engineering and construction, compared with 23 per cent on equipment manufacturing.

All three operations recorded lower margins year on year. Engineering and construction took up 81 per cent of its sales.

Chalieco eked out a 2.6 per cent rise in revenue to 7.05 billion yuan as it worked on projects outside the core non-ferrous metals sector, such as municipal facilities, roads and public housing.

First-half overseas sales accounted for 10.7 per cent of the total, down from 13 per cent a year earlier.

The firm obtained a US$500 million order in South America and other contracts in Malaysia and Turkey in the first half. It plans to set up offices in Brazil and Russia to seek more projects.

Chalieco signed 18.4 billion yuan worth of new contracts during the period, up 139 per cent. Outstanding contracts on June 30 stood at 49.4 billion yuan, an increase of 6.2 per cent from December 31.

Meanwhile, it planned to raise up to 5 billion yuan by issuing yuan debt on the mainland and offshore bonds denominated in yuan, US dollars or other foreign currencies, the company said in a statement. Their term will not be longer than 10 years.

Chalieco said the bond issue would help lower its financing cost, fund its operations, improve its debt structure and bolster working capital.

It will be subject to approval from shareholders. A mandate for their issuance will be valid for 36 months after the approval.