Reuters reported that Aluminum Corporation of China Limited missed forecasts with 22% fall in H1 net profit hit by higher interest costs.

Chalco posted a net profit of CNY 413 million compared with a forecast for 678 million in a Reuters poll. Sales rose 10.4 percent to CNY 66 billion. Finance costs including interest jumped by a sixth to CNY 1.55 billion. It had set aside CNY 273 million for expenditure incurred by its termination of a project to develop bauxite resources in Aurukun, Australia.

Analysts said that there has been solid domestic demand this year for aluminum, which is closely tied to economic activity, being widely used in industries from packaging to construction and aviation.

They generally forecast a better second half for Chalco on higher aluminum prices but some said additional low cost capacity would start operating in the H2 adding pressure to prices from the Q4. With a high cost aluminum position Chalco has been trying to diversify by commodity and geography.

In 2010, Chalco agreed with Rio Tinto Limited to invest USD 1.35 billion for 47% stake in JV to develop the Simandou iron ore project in Guinea. The company has indicated that it could issue additional equity via an A-share placement in Shanghai and a proposed issuance of H-shares in Hong Kong to help fund investment and capital spending.

Mr Daniel Kang an analyst at JP Morgan said that "While this may alleviate pressure on its balance sheet it is likely to remain an overhang on the company's A and H shares."

 

Source:Steelguru