Chalco Falls in Shanghai, Hong Kong on Wider-Than-Expected Loss

Aluminum Corp. of China Ltd. tumbled as much as 9.6 percent in Shanghai trading after revealing a wider-than-expected loss amid asset writedowns and falling prices.

Aluminum Corp., also known as Chalco, probably had a net loss of 16.3 billion yuan ($2.6 billion) last year, the Beijing-based company said in a statement on Friday. That’s wider than the 6.5 billion yuan mean estimate of 14 analysts compiled by Bloomberg. Chalco fell to 5 yuan in Shanghai before trading 6 percent lower at 5.20 yuan at the lunch break. Its Hong Kong shares dropped 3.1 percent to HK$3.45.

The swing back to a loss at China’s largest aluminum producer for the second time in three years is due to impairment provisions at some halted production plants in Chongqing, Ningxia and Guizhou and one-off costs for workforce reduction, the company said. The scale of the full-year result implied that the fourth-quarter operating loss was also worse than expected, Barclays Plc Hong Kong-based analysts led by Ephrem Ravi said in a client note dated yesterday.

“The current share price seems unsustainable in the absence of significant external support,” Ravi said in the note. Chalco rose about 60 percent in Shanghai and 24 percent in Hong Kong in the past year.

Chalco is expected to post losses until at least 2016, according to data compiled by Bloomberg. Aluminum Corp. of China, Chalco’s parent, has been seeking to turn around its businesses by 2015 as the listed unit strives to recover from losses exacerbated by high electricity costs and overcapacity in the aluminum industry.

Aluminum Prices

“At current Shanghai aluminum prices, we estimate Chalco to remain at loss,” Credit Suisse Group AG analysts Trina Chen and Owen Liang said today in a note.

Aluminum for April delivery in Shanghai gained 0.2 percent to 12,840 yuan a metric ton at 10:41 a.m. local time, trimming losses for the past year to 3.8 percent.

Ge Honglin, the former mayor of Chengdu, was named in October as the new chairman of Chalco’s state-owned parent, replacing Xiong Weiping. Xiong’s five-year tenure in the parent ended after General Manager Sun Zhaoxue, the company’s No. 2 executive, was placed under a probe for graft.

— With assistance by Helen Yuan

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