Chalco H108 profit slips

Aluminum Corp of China Ltd, the world's third largest aluminium producer, said it planned to raise capital in the next two years and diversify overseas after reporting a sharp drop in first half profits.

Chalco said it would seek shareholders' approval on its plan to issue up to 10 billion yuan worth of 10-year bond in China in the next 24 months, raising capital to restructure its debt and to increase cash flow.

Facing fierce competition and scarcer raw materials, Chalco said it would also ask shareholders to back a plan to start producing high-margin sulphuric acid.

China's top aluminium maker reported late on Friday its first half net profit fell by about two-thirds, dented by high production costs, output disruptions and oversupply in the aluminium market.

In response to the squeeze, the company is investing in the Aurukun bauxite mining project in Australia's northeast and in several smelter projects, including Saudi Arabia.

It said it would take a 40 per cent stake in an aluminium plant and a 20 per cent stake in power plant in Jazan Economic City in Saudi Arabia in a project with total investment of about $US4.5 billion.

State-owned parent Chinalco teamed up with Alcoa of the United States to pay $US14 billion for a stake in Rio Tinto Plc, which is the target of a near-$US150 billion bid from rival miner BHP Billiton .

Chalco reported January-June net profit of 2.41 billion yuan ($US351.9 million), down from a restated 6.97 billion yuan a year earlier and worse than suggested in the company's warning in June that its interim net profit would slide by at least 50 per cent.

China's smelting capacity is expected to rise by almost a fifth this year to about 19 million tonnes, as smelters build new plants despite higher construction costs.

Chalco said the average price of aluminium, one of Chalco's main products, sold to external customers fell 4.5 per cent in the first half to 2,830 yuan per tonne. Average aluminium price dropped 5.64 per cent to 16,241 yuan a tonne.

The company has cut spot aluminium prices twice since June by a combined 24 per cent due to increased production in China.

The half-year net represents only 27.7 per cent of a full-year consensus forecast of 8.7 billion yuan from 20 analysts polled by Reuters Estimates.

Chalco shares ended Friday up 0.29 per cent at $HK7.02 before the results. But they fell 44 per cent in the first half of the year, underperforming a 26 per cent drop on the index for Chinese firms listed in Hong Kong.

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