Metal Prices Hurt Chalco

Aluminum Corp. of China Ltd., a.k.a. Chalco (ACH - Analyst Report), witnessed a loss in the first half of the year, driven by a fall in metal prices. Net loss in the period amounted to RMB 3.52 billion ($515 million). This reflected a 47% decline from the profit of RMB 2.39 billion ($349 million) in the year-ago period.

Chalco’s sales fell 29% to RMB 27.98 billion ($4.09 billion) during the period due to weak demand from aluminum-related industries like autos and construction. The company thus suffered from overcapacity. In response, it reduced capital spending by 51% and withdrew interim dividend payments.

The company faced steep competition in both alumina and primary aluminum markets as China continued to open its aluminum industry to international trade. The global economic slowdown also resulted in lower demand for Chalco’s products.

In 2008, Chalco’s profit shrunk nearly 100% to RMB 158.37 million ($20.43 million). Net profit attributable to shareholders stood at RMB 9.2 million ($1.19 million).

We maintain our long-term Neutral recommendation on the shares of Chalco.

 

Read the full analyst report on ACH