Aluminum Corp. of China (Chinalco) reports 40% YoY increase in profits during H1 2019

Aluminum Corp. of China Ltd. (Chinalco), the world’s largest aluminium group reported 40% YoY increase in profits during H1 2019 on Monday attributing its success to sweeping organizational reforms. Higher debt continues to remain a burden to the group. The company reported a profit of about RMB 2.36 billion (US$340 million) and operating income exceeded RMB 170 billion.

China’s aluminium industry had a difficult 2018 due to low global aluminium prices and caps on production that affected many aluminium-makers. Yet in the first five months of this year, producer profits were up 23.4% year-on-year.

Chinalco could rise above industry hurdles partially because of the reforms to its previously bloated and inefficient structure caused by unplanned expansion and capacity building.  The group has been able to get over the operational issues in last three years improving various aspects of its operations, the company’s general manager Yu Dehui said.

Chinalco claims to be the world’s largest aluminium group after it acquired Yunnan Metallurgical Group from the Yunnan provincial government in May 2018. This increased its production capacity of lead, zinc and other metals along with aluminium. The company reported profits in all business segments the first half of 2019, though it has not divulged the financial breakup.

Chinalco nevertheless remains under heavy debts, with its asset-to-liability ratio standing at 66.12% of its 651.4 billion total assets as of the end of March. The integration of Yunnan Metallurgical Group has added to the debt pressure despite diversifying the company’s sources of income.

The acquisition of Yunnan Metallurgical Group gave Chinalco access to Yunnan Aluminum’s 1.6 million tonnes of smelting capacity, with another 1.45 million tonnes under construction. This was added to Chalco’s aluminium smelting capacity of 3.93 million tpy. China Hongqiao had 6.46 million tpy capacity including about 2.6 million tonnes idle capacity. This has technically put Chinalco as a bigger aluminium producer than Hongqiao.