Chalco expects to post loss of 4.8b yuan for last year

Aluminum Corp of China (Chalco), the nation's largest producer of the lightweight metal, expects to post a "major" loss for last year.

While the pickup in the mainland's economy would see higher demand and product prices this year, analysts expect the firm to remain in the red, although the loss would be narrower.

In a statement to the Shanghai stock exchange, the company cited a 7 per cent decline in average aluminium price, falling domestic ore quality and Indonesia's restrictions on bauxite exports for the loss. It said the restriction affected 1.7 million tonnes of alumina output, resulting in a 4 per cent rise in alumina production cost, as it had to procure bauxite elsewhere.

Bauxite is refined into alumina, which is in turn smelted into aluminium, an industrial metal used in the packaging, construction and transport sectors.

Chalco is projecting a net loss of 4.8 billion yuan (HK$5.97 billion), against a profit of 238 million yuan in 2011, according to the average estimate of 25 analysts polled by Thomson Reuters.

They expect the firm to see more losses - 2 billion yuan - this year, shrinking to a loss of 662 million yuan next year.

The company could be delisted from the exchange if it posts three consecutive years of losses unless it comes up with a credible turnaround plan, according to mainland listing rules.

Chalco said it aimed to cut costs through greater self-mined bauxite volume, technical upgrades and centralised procurement, adding production start-up of its coal mines would lift its bottom line.

UOB Kay Hian Securities analyst Helen Lau said the mainland's aluminium oversupply and rising power prices would partly offset the benefit from higher demand this year.

Lau said higher-than-industry production costs of Chalco's coal mines could mean they might not be very profitable.