Chalco’s 2018 net profit slumps 38% despite growth in production

Aluminium Corporation of China Limited (Chalco), the listed arm of China’s biggest state-run aluminium firm Chinalco, reported that it recorded a net loss of RMB 626.1 million ($92.92 million) in the fourth quarter of 2018.  According to Refinitiv Eikon data, the company faced the first quarterly loss in more than the past three years, and that was primarily due to low aluminium prices and sluggish domestic demand.

Annual net profit plunged 38 per cent to RMB 870.23 million last year, versus a restated RMB 1.41 billion for 2017.

Chalco’s net profit stood low last year despite a year-on-year rise in production by 16 per cent to 4.17 million tonnes. The net profit drop could be because of the financial pressure that Chinese smelters underwent in 2018. The prices of raw materials like alumina and electricity had increased, while aluminium prices slipped below the average break-even for the industry. 

Chalco rival China Hongqiao Group’s annual profit, however, increased last year by 5.4 per cent to RMB 5.41 billion, partly thanks to the rise in alumina sales.

The revenue yielded by Chalco last year remained broadly flat at RMB 180.2 billion. It dropped only by 0.4 per cent year-on-year. A 13 per cent rise in its alumina sales primarily helped in keeping the revenue flat.

“Affected by the domestic economy and higher tariffs imposed by the U.S., consumption growth declined compared with the previous year, resulting in a general decline in (the) aluminium price,” Chalco said in a filing to the Hong Kong stock exchange.

The aluminium price slump led Chalco’s 470,000 tonnes per year of annual capacity shut in November, including some production lines at 200,000-tonne subsidiary Shandong Huayu.

However, for 2019, Chalco has set an investment plan of RMB 12.5 billion.