Chalco first quarter profits fall 19.4 percent on lower aluminum prices

BEIJING (Reuters) - Aluminum Corp of China Ltd 601600.SS2600.HK, known as Chalco, said on Monday that first-quarter net profits fell by 19.4 percent from a year ago due to lower aluminum prices but one-off gains helped it avoid a much worse result.

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

The company, China’s biggest state-run aluminum producer, said in a filing to the Shanghai Stock Exchange that net profit during the January to March was 308.6 million yuan ($48.94 million), versus an adjusted net profit of 382.9 million yuan a year earlier. Revenues, meanwhile, fell by 10.5 percent to 36.7 billion yuan.

The numbers point to thinning margins for aluminum smelters in China, the world’s biggest producer of the metal, in a quarter when prices fell.

Helen Lau, an analyst at Argonaut Securities in Hong Kong, said the Chalco numbers were in line with her expectations, of 1.3 billion yuan on an annual basis, but noted that without one-off gains totaling 282.25 million yuan, the company would only have made around 26 million yuan in profit.

These one-offs included a 166.4 million fair-value gain on subsidiaries and affiliates. Chalco in January issued shares to buy back stakes in four subsidiaries for about 12.7 billion yuan, only a month after selling them to a group of outside investors.

In the fourth quarter of 2018, Chalco profits were 38.9 million yuan, lowest since the first quarter of 2016, as an aluminum price rally ran out of steam.

The price decline continued in the first three months of 2018, with Shanghai aluminum futures SAFcv1 falling 10.6 percent, the worst quarter since the middle of 2010, as Chinese inventories rose.

Since the end of the first quarter, aluminum prices have risen by 8.1 percent in Shanghai - and by around 25 percent in London CMAL3 - amid supply concerns after U.S. sanctions on Russian producer United Company Rusal 0486.HK.

Chalco produced approximately 3.61 million tonnes of aluminum last year, according to a filing to the U.S. Securities and Exchange Commission last week. That compares to 3.71 million tonnes for Rusal.

Chalco’s shares closed down 2.3 percent at 5.01 yuan in Shanghai and slipped 4.2 percent to HK$4.81 ($0.6132) in Hong Kong on Monday.

Reporting by Tom Daly; Editing by Christian Schmollinger