Chalco’s net profit dropped by 14.1% YoY in H1 2019 on higher operating costs and lower aluminium prices

According to Reuters report, the net profit of Aluminium Corporation of China Limited, popularly known as Chalco, fell by 14.1 per cent year-on-year in the first half of 2019, attributing to higher costs that offset an increase in revenue.

As per the report, Chalco’s net income came in at RMB 705.8 million during January-June, down from a restated figure of 821.6 million a year earlier.

However, overall revenue grew by 15.2 per cent to stand at RMB 94.9 billion despite a 10 per cent decline in the primary aluminium segment.

In the second quarter alone, Chalco’s net profit was down by 52.7 per cent year on year to RMB 260.8 million, according to Reuters calculations, while revenue was up 11.3 per cent from the year ago.

Chalco said in remarks “Due to the trade friction between China and the United States, global economic growth slowed down, the manufacturing industry was depressed and the consumption market was sluggish.”

Chalco also pointed out to the decline of benchmark aluminium prices by 16.3 per cent over the year on the London Metals Exchange in last three months averaging at $1,849 per tonne cent and the drop in prices of alumina followed by the United States sanctions lift on Rusal and Norsk Hydro’s Alunorte alumina plant restart in Brazil.

Meanwhile, Chalco’s operating costs increased by 16.7 per cent year on year to RMB 88.5 billion in the first six months of 2019. The company also faced higher management expenses after missing out on the special payments for “zombie” enterprises, or unprofitable and indebted state-run firms, that it received a year earlier.

Chalco did not provide first half production data but said the output grew steadily.