HONG KONG, March 11 - Aluminum Corp. of China Ltd. , the world's No. 2 alumina maker, beat forecasts with a 44 percent rise in second half earnings, but sliding prices since August for its main product cast doubt over its 2007 performance.
The firm intends to enhance its global competitiveness and focus on expanding capacity and acquisitions this year, according to a statement provided to Reuters on Sunday, aiding the country's hunt for resources to feed a hungry economy.
Chalco, also China's largest aluminium maker, reported a net profit of 5.0 billion yuan (US$645.7 million) for the six months ended December, bringing yearly profit to 11.745 billion yuan last year versus 7.02 billion yuan in 2005.
That exceeded expectations of 4.65 billion yuan for the second half and 11.4 billion for the full year, according to the mean forecast of 19 analysts polled by Reuters Estimates.
But it failed to match a record first-half profit of 6.74 billion yuan, because Chalco had cut spot prices of alumina four times in the second half.
Aggressive capacity expansion in China -- the world's top buyer of alumina -- has turned a global shortage of the main material for aluminium production into a surplus.
Chalco, which is about 8 percent-owned by top global aluminium maker Alcoa Inc. (AA.N: Quote, Profile , Research), ended its run of price cuts this year by raising spot prices for alumina by 50 percent to 3,600 yuan a tonne in February.
Analysts fear the sharp price declines of year would hurt Chalco's earnings in 2007: the spot price for alumina still hovers some 36 percent below a peak of 5,650 yuan in August 2006.
ALUMINIUM PUSH
Chalco has beefed up acquisitions overseas and merged aluminium makers at home on hopes of boosting production -- especially in aluminium -- to help mitigate the impact of lower alumina prices.
In November, it announced plans to take two Shanghai-listed aluminium units private in a collective deal that could be worth more than $1 billion.
The firm said it would declare a final dividend after the completion of the deal, which involved a mainland stock listing and the merger of Shandong Aluminum Industry and Lanzhou Aluminum this year.
The company's aluminium output surged 84 percent to 1.93 million tonnes in 2006. It needs roughly two tonnes of alumina to make a tonne of aluminium.
It made 23 percent more alumina, at 8.83 million tonnes, in 2006.
The firm's shares rose 4 percent on Friday ahead of the earnings and have gained 11 percent this year, beating an 11 percent loss on the index of Chinese companies listed in Hong Kong .
But the stock lagged a 52 percent rally on the H-share index in the second half with a rise of about 25 percent. And it is cheaper at 7.9 times forward earnings than larger rival Alcan's 9.6 times and Alcoa's 10.5.
($1=7.743 Yuan)
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