China Hongqiao Group earns greater profit in 2019 despite lower production and revenue

On Friday, March 20, the world’s biggest aluminium producer China Hongqiao Group announced that despite a significant drop in production, it could see a rise in net profit of 12.7 per cent in 2019. According to the group, lower production costs were a significant reason for the increase in its net profit.

In contrast to RMB 5.407 billion in 2018, the net profit in 2019 came in at RMB 6.095 billion, said China Hongqiao Group during a Hong Kong stock exchange filing while warning that coronavirus could have a profound impact on global supply chains.

The group’s revenue in 2019 declined by 6.7 per cent to come in at RMB 84.18 billion, along with the drop in its aluminium alloy production to 5.644 million tonnes.

The company attributed the higher profit to lower purchase prices for raw materials such as coal, higher efficiency, and greater sales of fabricated aluminium products.

For the downfall in primary aluminium production, Hongqiao said China’s winter restrictions on industrial output in 2019 and its switch to more advanced facilities and an outage caused by flooding near its Shandong headquarters in August were the two soul reasons.

The company is moving its 2 million tonnes of annual aluminium production from Shandong to Yunnan province for cleaner hydropower, but doing so will not increase its licensed capacity to 6.5 million tonnes per year of primary aluminium.

However, Hongqiao said that in the future it would increase the primary aluminium production through secondary aluminium or scrap aluminium and for that, it would add new production lines.

At present, the company makes aluminium using alumina. The sales of alumina rose 29 per cent to 5.28 million tonnes in 2019.