Aluminium producer China Hongqiao in 1.9 billion yuan deal to boost capacity

China Hongqiao Group, one of the mainland’s largest aluminium producers, has announced a 1.9 billion yuan acquisition that would expand its production capacity by around 21 per cent and allow it to generate more of its own power.

The Shandong province-based and main-board listed firm said it had entered into a deal to buy all of Binzhou Municipal Binbei New Material, which trades bauxite, aluminium ingots, plates, foils, strips and makes processed aluminium products.

Binzhou recorded a net profit of 469.12 million yuan in the first nine months of this year, a net profit of 314.23 million yuan last year and a net profit of 91.35 million yuan in 2012, China Hongqiao said in a filing to Hong Kong’s stock exchange.

It owns facilities that have an annual capacity to produce 660,000 tonnes of aluminium products and power generators with installed capacity of 1,860 megawatts.

“The group expects that the acquisition will bring positive impact to the group’s financial position by enlarging [its] production capacity of aluminium products as well as the proportion of electricity produced in-house,” China Hongqiao said.

Binzhou’s seller, Shandong Binbei New Material, is a bauxite trader and maker of alumina and high-precision aluminium plate and foil materials. Bauxite is the raw material of aluminium production and alumina is an intermediate product.

The acquisition was of a size that required disclosure but not shareholder approval under listing rules, China Hongqiao said.

In September it raised HK$1.69 billion via a share sale to fund debt repayment, acquisition of bauxite resources and general corporate purposes.

China Hongqiao had 3.14 million tonnes of annual aluminium products production capacity and 4,380 MW of power generating capacity at the end of June.

It met 70.7 per cent of its power demand in-house in the first half of the year. Power typically accounts for around 35 per cent of an aluminium smelter’s operating costs.

Ching Hongqiao’s shares have risen 22 per cent so far this year, outperforming the Hang Seng Index’s flat performance.