Chalco Surges After Returning to Profit in 2013: Hong Kong Mover

Jan 13, 2014 3:18 am ET

Jan. 13 (Bloomberg) -- Aluminum Corp. of China Ltd., the nation’s biggest producer of the light metal, surged the most in 16 months in Hong Kong trading after returning to profit last year as it cut costs and sold assets to its parent.

Net income was about 1 billion yuan ($165 million) in 2013, compared with a record net loss of 8.23 billion yuan in 2012, the state-owned company said in a statement on Jan. 10, citing unaudited preliminary results. The average of 13 analyst estimates was a 1.75 billion yuan loss, according to data compiled by Bloomberg.

Shares rose 7 percent, the most since September 2012, to close at HK$2.77, against a 0.2 percent gain in the benchmark Hang Seng index. The stock dropped 24 percent last year, compared with a 2.9 percent gain in the Hang Seng.

Chalco is striving to turn around losses exacerbated by the industry’s excess capacity, as China puts pressure on state companies to improve profitability. The Beijing-based aluminum producer’s profit would be its biggest since 2007, according to data compiled by Bloomberg.

“After having made a year of accounting profit, and avoiding consecutive years of losses, there is less pressure on the company,” Barclays Plc analysts led by Ephrem Ravi said in a Jan. 10 report. “Frantic disposals to the parent company that we saw in 2013 are unlikely to be repeated.”

One-time gains from the asset sales are close to 8 billion yuan which implies the underlying operations were still loss- making, according to the report.

“The company further optimized the asset structure, fulfilling the goal of expanding the businesses into the upstream of the industry chain and the higher end of the value chain,” Chalco said in the statement.

Chalco sold its aluminum fabrication business in June to its parent for about $1.3 billion. It said in October it was selling its 65 percent stake in the Simandou iron-ore project in Guinea, a venture with Rio Tinto Group, for about $2.07 billion.

--Editor: Jason Rogers