Chinalco Corporation Bidded for Listed Companies

On April 30, Chinalco announced its 2013 annual loss. The data shows that in 2013, Chinalco’s total profits and net profits all suffered large losses. Among them, the total loss of profits was 6.549 billion yuan, 32.2% lower than the loss in 2012, and the net profit was a loss of 7.786 billion yuan, 21% lower than the same period in previous years. The loss amounted to 10% of the company's 2013 audited net assets.

In addition to market factors causing price fall of major products, last year, Chinalco and its listed company Aluminum Corporation of China had a number of asset transactions. While protecting listed companies from ST, it also placed a heavy burden on the listed aluminum companies. In the absence of a substantial improvement in the market environment, they had to pay for losses again.

The salvage of listed companies for the huge loss of 7.8 billion yuan last year, Chinalco explained in the announcement, mainly due to a serious excess of electrolytic aluminum production capacity, coupled with market factors caused by the main product aluminum, copper sales prices continue to decline, significantly lower than expected. Among them, the company's average annual sales price of electrolytic aluminum decreased by 1,096 yuan/ton (including tax) from 2012, and the sales price of electrolytic copper decreased by 4,436 yuan/ton (including tax) compared with 2012.

Market factors may just be one of them.

The reporter noted that China Aluminum had lost 8.2 billion yuan in 2012. If there is another loss, Chalco will be ST because of continuous losses.

"It would be very difficult to put on this hat, the market does not understand, the resentment of shareholders, the bank's inquiries, the cost of issuing bonds, etc. Therefore, the stock company cannot wear ST." At a media symposium in January this year, Aluminum Chairman Xiong Weiping once told this reporter.

In fact, in addition to all the efforts made by China Aluminum, the majority shareholder of Chinalco had to take several measures to “cover the bottom”: In May of last year, China Aluminum sold the oxidation of Guizhou Branch to its parent company. The aluminum production line and the Northwestern Aluminum Processing Corporation and other assets, at the end of last year, announced that they would transfer 65% of China National Aluminum Corporation held by Chinalco Hong Kong Co., Ltd., its wholly-owned subsidiary, to the same parent company.

In the end, China Aluminum Co., Ltd. was willing to pay off: In 2013, it not only realized a net profit of more than 9 billion yuan, but also successfully avoided the danger of ST.

China Aluminum's calculations show that China Aluminum Corporation was able to turn a profit last year and its capital operation accounted for about two-thirds of the credit. "If you take into account the price factor, trading with major shareholders is equal to half the income, and the other half is on your own." .

For how to dispose of the aforementioned assets sold to Chinalco, Xiong Weiping once described how Chinalco has turned losses into profit. How to promote it has a dedicated team in promoting. Take aluminum processing companies as an example. “It is difficult to operate like Henan Aluminum. Closed several of its plants, the rest of the market to promote reform."

However, the above-mentioned “left handed down” approach is equally costly: In Chinalco’s multiple business segments, the aluminum losses are the most serious, and the difficult situation of the above-mentioned multiple assets has not been substantially improved by “changers”. On the contrary, Zhong Lu, who took over the plate, was even more struggling because of these new burdens.

Self-help Faced with the aluminum market downturn, Chinalco has taken various measures to reduce costs and increase efficiency, trying to achieve the goal of controlling losses and increasing profits. A year later, Chinalco’s loss reduction was more than 20%, but the amount of losses was still relatively large.

The company said in the announcement that the loss has not yet had a significant impact on its production, operation and ability to service its debt. However, the loss of up to 7.8 billion yuan made it difficult for Chinalco to face it calmly.

To change this embarrassing situation of “facelessness”, Chinalco needs to carry out more self-rescue.

In 2009, Chinalco began to transition from a single aluminum company to a comprehensive mining company. At present, it has gradually formed the three main businesses of aluminum, copper, and rare earth, and coordinated development of related diversified businesses such as engineering technology, trade, and resource exploration. Among them, before the aluminum's assets and sales also accounted for more than 80%, after adjustment, to last year, the total assets of the aluminum plate accounted for 46% of total assets, sales accounted for about 40%.

However, under the influence of factors such as overcapacity and continued rise in industrial electricity prices, most electrolytic aluminum companies including Chinalco are still suffering. According to statistical analysis by the Nonferrous Metals Association, in 2013, the country actually produced 21.94 million tons of electrolytic aluminum, the utilization rate of the production was 68.56%, and the surplus rate exceeded 30%. The excess production capacity even surpassed the steel industry. This situation is still continuing this year.

The continued decline in the sales prices of Chinalco's main products has also caused it to suffer from operating difficulties. Taking aluminum prices as an example, aluminum prices once fell below 12,500 yuan, which is a historical low in the past 20 years. Coupled with the rising costs of manpower, materials, and transportation, the domestic electrolytic aluminum company's loss in the first quarter has exceeded 90. %.

At present, its China Aluminum Corporation has already stopped through the elastic production of 800,000 tons of alumina and 600,000 tons of electrolytic aluminum, but the effect is not obvious. According to Chinalco's financial report, in the first quarter of this year, the company’s net profit attributable to the parent company was a loss of 2.157 billion yuan, and the loss amounted to an increase of 1.181 billion yuan over the same period of last year.

"We implemented these (measures) before, and it is also a helpless move to the market." Chinalco insiders once told a certain reporter.

According to Chinalco's assumption, this year will be a critical period for China Aluminum to achieve a slimming adjustment. It will strive to realize the company’s goal of getting out of difficulty by adjusting the reforms. It will no longer cause losses due to cycle fluctuations in the industry, and it will have industry-leading cost competitiveness. .

Our reporter has learned that now that Chinalco has such a large number of plates, except for the aluminum plate, the others have made profits. How to control losses and increase profits will continue to be the focus of Chinalco's efforts in 2014.

The company also made clear three breakthroughs in the announcement: First, speed up structural adjustment, create optimal development model, and speed up the growth and development of competitiveness; Second, benchmarking the industry first-rate standards, comprehensive management and upgrading, and improve market competitiveness; Deepen reforms and stimulate enterprise vitality.

Specifically, on the premise of bauxite resources, aluminum blocks will eliminate some of the backward production capacity of alumina, adjust and optimize some of the existing production capacity, and increase the investment in electrolytic aluminum for captive power plants and direct purchasing power companies. In terms of sectors, we will continue to promote competitive projects that have significant competitiveness, explore joint-venture and cooperative modes such as mixed ownership, and transfer some of our production capacity to energy-rich regions overseas.