Chalco Swings to Profit in Third Quarter on Higher Aluminum Prices, Sales

Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, turned to profit in the third quarter after metal prices increased.

The Beijing-based company, known as Chalco, posted net income of 555 million yuan ($87 million), compared with a net loss of 117.8 million yuan a year earlier, according to a Shanghai Stock Exchange filing yesterday. Sales gained 45 percent to 41.6 billion yuan.

The average price of aluminum traded in London gained 19 percent on year in the third quarter, helping Chalco widen profit margins amid higher power tariffs. Chairman Xiong Weiping in March vowed to cut costs in 2011 by 2.3 billion yuan. The company also booked a paper profit from futures trading during the quarter, it said, without elaborating.

“The third-quarter profit was good partly because of improved profit margins,” said Heng Kun, a Shanghai-based analyst with Essence Securities Co. “But it may swing back to a quarterly loss in the fourth quarter” because prices are falling.

Aluminum prices have slumped 21 percent from a record in May to $2,216.75 a ton as of 7:56 p.m. yesterday in Shanghai amid concerns that the European sovereign-debt crisis and a slowdown in the U.S. economy may curb demand for commodities. Some units of Chalco may face “tough” situations should prices continue to plummet, President Luo Jianchuan said in a statement Oct. 24.

Monetary Policy

Aluminum prices have dropped close to production costs and China’s tightening monetary policies make financing increasingly difficult, Luo said. Company profit fell in September from a month earlier, he said, without giving details.

Chalco gained 1.8 percent to HK$3.90 in Hong Kong yesterday before trading was halted for the earnings announcement. The stock will resume trading today.

Nine-month profit more than doubled to 967.6 million yuan from 412.8 million yuan last year, Chalco said.

China’s economy grew 9.1 percent in the third quarter from a year earlier, the slowest pace since 2009, on weaker export demand and monetary tightening. Premier Wen Jiabao said last week that China will maintain tight monetary policy to curb high inflation. China in April raised on-grid electricity prices in 16 provinces to help generators cope with higher fuel costs.

The company and Rio Tinto Plc altered the terms of their joint venture in Guinea and delayed the deadline for satisfying the agreement’s initial conditions to as late as mid-March, according to a separate Hong Kong exchange filing yesterday.