Chalco posts quarterly loss on low aluminium prices, 2018 profit slumps

BEIJING (Reuters) - Aluminum Corp of China Ltd, known as Chalco, posted its first quarterly loss in more than three years on Thursday and said annual net profits fell last year due to low aluminium prices and slack domestic demand.

An employee of Aluminum Corp of China walks inside the company's headquarters in Beijing March 26, 2010. REUTERS/Christina Hu/File Photo

Beijing-based Chalco, the listed arm of China’s biggest state-run aluminium firm Chinalco, said in a statement to the Shanghai Stock Exchange it recorded a net loss of 626.1 million yuan ($92.92 million) in the fourth quarter, versus a profit of 23 million yuan a year earlier.

The figure, for a three-month period in which Shanghai aluminium prices fell 5 percent to two-year lows, marks Chalco’s first quarterly loss since the third quarter of 2015, according to Refinitiv Eikon data.

Annual net profit fell 38 percent to 870.23 million yuan last year, versus a restated 1.41 billion yuan for 2017.

The plunge underscores the financial pressure Chinese smelters were under in 2018 as costs for raw material alumina and electricity rose, while aluminium prices slipped below the average break-even for the industry.

Chalco rival China Hongqiao Group, the world’s biggest aluminium producer, managed to lift profits by 5.4 percent last year to 5.41 billion yuan, partly thanks to an increase in alumina sales.

A 13 percent rise in Chalco’s own alumina sales helped keep its total 2018 revenue broadly flat at 180.2 billion yuan, down 0.4 percent year-on-year.

However, demand for aluminium, used in everything from automobiles to drink cans, softened on the back of a slowing economy in top consumer China, which is embroiled in a trade war with the United States.

“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 price slump saw Chalco shutter 470,000 tonnes per year of annual output in November, including some production lines at 200,000-tonne subsidiary Shandong Huayu.

Chalco said in January it would completely close that plant and consider upgrading it.

The company has set an investment plan of 12.5 billion yuan for 2019, after investments in projects totalled 9.13 billion yuan last year.

Reporting by Tom Daly; Editing by Jan Harvey