Chalco to close down eight plants

Moving to halt losses in its mainstream operations, Aluminum Corp of China (2600) is to sell all of its remaining aluminum-fabrication interests to its parent firm, Chinalco, for 3.24 billion yuan (HK$4.10 billion).

The eight plants, of which only one was profitable last year, accounted for over 1 billion yuan of losses for Chalco in 2012, China's largest aluminium producer said in an exchange filing.

In all, Chalco suffered a loss of 8.3 billion yuan last year.

Chalco says it is exiting the fabrication side of the business as it lacks competitive advantages, and it is expected to book a gain of 1 billion yuan from the sale of the eight plants.

Yesterday's announcement of the sale came three days after it said it was disposing of a processing plant in the country's northwest for 1.66 billion yuan.

With the disposals, Chalco says, it can make the best use of assets, lower the debt-to-asset ratio and improve the debt portfolio, increase cash flow and strengthen its refinancing abilities.

Chalco is also transferring loans totaling 1.76 billion yuan owed by two units being sold in Henan and Qingdao to its major shareholder, which will mean a loss of 1.17 billion yuan.

But it means Chalco will have the means to make repayments on other loans and have working capital for other projects, including moving on production at an alumina mine.