Jiangxi Copper Co., China’s largest smelter of the metal, recorded an 8.6 percent drop in second-half profit and warned that first-quarter earnings will decline by more than half because of falling prices.
Net income was 2.29 billion yuan ($369 million) in the six months ended Dec. 31, compared with 2.5 billion yuan a year earlier. The result was derived by deducting six-month figures from full-year profit released yesterday. Profit in the three months ending March 31 will decline by more than 50 percent from a year ago should copper prices stay at current levels or even lower, it said.
Jiangxi Copper is also considering selling new shares in Hong Kong, it said in a separate statement. The proposed share sale, which needs shareholder approval, would represent no more than 20 percent of its outstanding Hong Kong-listed stock, it said. No price or size of the proposed share sale has been set. The company also has Shanghai-trade shares.
Copper is the worst performing metal in London this year amid concern demand from top consumer China was slowing. Global consumption of the metal will trail production by 81,000 metric tons in 2014, after a deficit of 175,000 tons last year, Barclays Plc said on Feb. 12.
China’s new leadership’s tolerance for a slower economic growth “will limit copper consumption by its end users,” Jiangxi Copper said in the statement. “Meanwhile, processing fees for copper smelting have risen to an eight-year high due to an adequate concentrate supply from mines.”
Jiangxi Copper advanced 0.6 percent to HK$12.58 as of 11:02 a.m. today in Hong Kong, compared with the 1.2 percent gain in the benchmark Hang Seng Index. The stock has declined 26 percent in the past year.
The company plans to produce 1.12 million metric tons of copper, 25.4 tons of gold, 560 tons of silver and 209,000 tons of copper concentrates in metal this year, unchanged from last year’s output, it said. The management may adjust the production plan according to market conditions.
“Weak copper price outlook and flattish production growth will continue to weigh on its earnings,” UOB Kay Hian Ltd. analyst Helen Lau, who maintained a sell rating on the stock, said today in an e-mailed note.
Average copper prices in London were 8.8 percent lower in the second-half from a year earlier. The metal dropped to the lowest level since 2010 on March 13 after an unexpected decline in China’s exports and the nation’s first onshore bond default.
Copper consumption in China will grow at 7.5 percent this year, with prices expected to average $7,100 a ton, Jiangxi Copper Chairman Li Baomin said March 5. Supply from Chinese smelters may decline because falling prices are narrowing their margins, Wu Yuneng, a Jiangxi Copper vice president said this month.
The company continues to see delays in its Aynak copper project in Afghanistan due to issues related to relocating some “cultural relics”, it said. The Northern Peru Copper Corp. project also has been delayed because of an environmental assessment and land purchases.