Guangdong Kinen Sanitary Ware Industrial Co.,Ltd. , https://www.kinengroup.com
In a recent development, Chinalco, one of China's leading aluminum companies, reported a significant loss in 2013. The company disclosed that its total profit and net profit both suffered substantial declines. Specifically, the total profit loss reached 6.549 billion yuan, representing a 32.2% decrease compared to 2012, while the net profit loss was 7.786 billion yuan, down 21% from the previous year. This loss accounted for approximately 10% of the company’s audited net assets for 2013.
The decline in profits was attributed not only to market conditions, such as falling prices for key products like aluminum and copper, but also to internal restructuring efforts aimed at protecting its listed subsidiaries from being classified as *ST*, which would signal financial distress. These measures, while helping to avoid a *ST* designation, placed additional pressure on the listed aluminum companies, forcing them to absorb more losses due to the lack of improvement in the broader market environment.
Chinalco explained that the main reason for the massive loss of 7.8 billion yuan was an overcapacity in electrolytic aluminum production, coupled with declining sales prices for core products. The average annual sales price of electrolytic aluminum dropped by 1,096 yuan per ton (including tax) compared to 2012, while the price of electrolytic copper fell by 4,436 yuan per ton. These downward trends significantly impacted the company’s profitability.
While market factors played a role, the situation was more complex. In 2012, Chinalco had already reported a loss of 8.2 billion yuan, and another year of losses could have led to a *ST* warning, which would have had serious consequences for investor confidence, bank relations, and bond issuance costs. To avoid this, the company took several steps, including selling off certain assets to its parent company and transferring shares to reduce the burden on listed entities.
Despite these challenges, Chinalco managed to turn things around. In 2013, the company achieved a net profit of over 9 billion yuan, successfully avoiding the *ST* designation. A significant portion of this profit came from capital operations, with internal transactions playing a major role. As one executive noted, "Trading with major shareholders is like getting half your income, and the other half comes from your own efforts."
To further improve performance, Chinalco has been actively managing its operations, including shutting down underperforming plants and promoting reforms in its aluminum processing businesses. However, the overall industry remains challenging, with overcapacity and rising electricity costs continuing to weigh on the sector.
In response, Chinalco has been diversifying its business, transitioning from a single-aluminum focus to a broader mining and resource-based model. It now operates in three main areas: aluminum, copper, and rare earths, alongside related sectors like engineering, trade, and exploration. Despite these efforts, the aluminum segment still faces significant challenges, and the company continues to work on reducing costs and improving efficiency.
Looking ahead, Chinalco aims to achieve a more sustainable and competitive structure, focusing on cost control, operational optimization, and strategic reforms. The company has outlined three key breakthroughs: accelerating structural adjustments, benchmarking industry best practices, and deepening internal reforms to enhance enterprise vitality.
With a growing emphasis on bauxite resources and the elimination of outdated production capacity, Chinalco is working to build a more resilient and efficient operation. It is also exploring new partnerships and international expansion opportunities to better manage its global footprint and reduce reliance on volatile domestic markets.