China Hongqiao reports 37.3% rise in profit in H1 2019; slashes 2019 production guidance by 5% due to flood impact

China Hongqiao reported results for H1 2019 on Friday and slashed its 2019 production guidance by up to 300,000 tonnes, or about 5%, after recent flood caused by a Typhoon hit its premises. The company however reported a sharp rise in first-half profits.

Hongqiao’s net profit rose by 37.3% YoY to RMB 2.48 billion (US$350.15 million) in the first half of 2019 despite lower aluminium prices. This was against the RMB 648.8 million loss it made a year earlier on disposal of subsidiaries. Operation remained stable during the review period.

The claimed largest aluminium producer, which reports earnings half-yearly basis, said revenues decreased by around 6.5% to RMB 41.43 billion. Alumina revenues rose 14.9% to RMB 6.16 billion.

Hongqiao’s aluminium alloy production dropped 10.3% in H1 2019 from the same period of previous year, “mainly due to the impact of the ... government’s policy of production restriction in heating season,” the statement added.

According to analysts Hongqiao was exempt from environmental curbs on industrial output in the previous 2017/18 winter and continued with full output.

Hongqiao, which has now slashed its output guidance due to flood impact, initially denied any impact of the Typhoon Lekima on its operations in Shandong.  The company  admitted that “some of the group’s production workshops were damaged by the rain, which might bring adverse impact on ... production.”

“According to the preliminary assessment ... it was estimated that the group’s production volume of aluminium products for 2019 will decrease by 200 to 300 thousand tonnes as a result,” it said in a filing to the Hong Kong stock exchange.

“Save for the aforesaid affected production capacity, the group’s business operation is in normal condition,” Hongqiao said on Friday.

According to an April statement from Hongqiao, the smelter’s 2019 output guidance was 6.3-6.35 million tonnes. A 300,000 drop in production would be equivalent to 4.8%, while a 200,000 tonne impact at the higher end would be 3.1%.

SHFE aluminium hit a nearly 10-month high this week after the news of flood in Shandong and 500,000 tonnes of capacity shut down in Xinjiang.