CapitalVue reported that Aluminum Corporation of China recorded a 2011 net profit of CNY 238 million down from the CNY 778 million earned in 2010.

Chalco had earned CNY 968 million during the first Q3 and the results thus indicated a huge loss in the Q4. The profits were mainly due to government subsidies. With average aluminum prices of CNY 17,000 per tonne in 2011, a majority of producers last year failed to generate profits and many did not reach the breakeven point. The situation has not improved this year.

Chalco obtained CNY 186 million of government subsidies last year. It earned CNY 497 million from the fair value changes of its tradable financial instruments.

Chalco attributed the drop in profits last year to rising interest rates, an increase in liabilities and a rise in energy prices that lowered gross profit margins. The company has large capital requirements and failed to raise capital through an issuance of new shares. This failure led to a rise in finance related costs.

According to an analyst, the company's stock price is 90% below its peak and problems such as overcapacity and weak demand have not been resolved.

Mr Luo Renyuan an analyst at Industrial Securities said that aluminum prices had not rebounded sharply after the Spring Festival due to the property curbs, and the current price of CNY 16,000 per tonne is not profitable for producers.

Source - Capitalvue.com

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