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Yangtze Business Daily News● Yangtze Business Daily reporter Shen Yourong

As the industry recovers, Aluminum Corporation of China (601600.SH, 02600.HK), a leading company in China's aluminum industry, achieved new highs in operating performance.

Recently, Aluminum Corporation of China released its performance forecast. In the first half of this year, the company expects to achieve a net profit attributable to shareholders of the parent company (hereinafter referred to as "net profit") of 6.5 billion yuan to 7.3 billion yuan, a year-on-year increase of 90% to 114%.

In 2007, Aluminum Corporation of China was listed on the A-share market, and it has been 17 years since then. Its net profit in the first half of this year exceeded 6.5 billion yuan, setting a historical high for the same period.

In this regard, China Aluminum Corporation explained that its main products achieved high, stable and high-quality yields.

In fact, the aluminum market has picked up since the beginning of this year. Tianshan Aluminum, a peer company, has disclosed that the prices of electrolytic aluminum, alumina, etc. have increased significantly.

In recent years, the financial situation of Chalco has improved significantly. As of the end of 2023, the company's debt-to-asset ratio was 53.30%, which has declined for nine consecutive years and has also dropped by 26.13 percentage points from the end of 2014.

Since its financial improvement, China Aluminum Corporation, which had not paid cash dividends for many years, has paid cash dividends for three consecutive years.

In the secondary market, since the beginning of the year, China Aluminum Corporation's stock price has risen by about 40%.

Second quarter profit expected to exceed 4.2 billion

China Aluminum Corporation's operating performance has grown strongly.

According to the performance forecast, in the first half of this year, Aluminum Corporation of China expects to achieve a net profit of 6.5 billion yuan to 7.3 billion yuan, an increase of 3.1 billion yuan to 3.9 billion yuan compared with the net profit of about 3.4 billion yuan in the same period last year, a year-on-year increase of 90% to 114%. The company expects to achieve a net profit after deducting non-recurring gains and losses (hereinafter referred to as "net profit after deducting non-recurring gains and losses") of 6.4 billion yuan to 7.2 billion yuan, an increase of 3.5 billion yuan to 4.3 billion yuan compared with the net profit after deducting non-recurring gains and losses of about 2.9 billion yuan in the same period last year, a year-on-year increase of 122% to 150%.

A reporter from the Yangtze Business Daily found that the company made a profit of more than 6.5 billion yuan in the first half of the year, which was the best operating performance in the same period since Chalco was listed on the A-share market in 2007.

In the first quarter of this year, China Aluminum Corporation achieved a net profit and non-net profit of 2.23 billion yuan and 2.183 billion yuan respectively, an increase of 23.01% and 35.61% year-on-year.

By comparing the semi-annual performance forecast and the first quarter report data, it is found that in the second quarter, the company's net profit and non-net profit are expected to be 4.27 billion yuan to 5.07 billion yuan and 4.217 billion yuan to 5.017 billion yuan, respectively. Compared with 1.604 billion yuan and 1.274 billion yuan in the same period last year, they will increase by 166.21% to 216.08% and 231% to 293.80%.

The above data show that in the second quarter, the company's expected net profit and non-net profit both increased significantly year-on-year and month-on-month.

A reporter from the Yangtze Business Daily found that the net profit and non-net profit in a single quarter exceeded 4 billion yuan, both of which set new records.

In this year's first quarter report, the company explained that the growth in net profit was mainly due to the year-on-year growth in profits from the company's alumina and primary aluminum products.

In the first quarter of this year, the metallurgical alumina output of Chalco was 4.25 million tons, a year-on-year increase of 6.78%. The output of primary aluminum (including alloy) was 1.78 million tons, a year-on-year increase of 16.34%; the export volume of self-produced primary aluminum (including alloy) was 1.76 million tons, a year-on-year increase of 11.39%.

In the first quarter of this year, the operating income of Aluminum Corporation of China was 48.956 billion yuan, a year-on-year decrease of 26.14%. The company did not announce the operating income data for the first half of the year in its semi-annual performance forecast.

In the first quarter, operating income decreased, but net profit increased significantly. What is the reason? Industry insiders said that it was mainly due to the recovery of the aluminum market and the increase in aluminum product prices.

In the semi-annual forecast, Aluminum Corporation of China said that the company adheres to the ultimate business philosophy, and through measures such as seizing market opportunities, improving operational efficiency, and strengthening cost control, its main products have achieved high, stable and high-quality production, and its operating performance has increased significantly year-on-year.

Recently, Tianshan Aluminum, a company in the same industry, also announced its semi-annual results, with a substantial increase in net profit and non-net profit. The company explained that the average price of self-produced aluminum ingots sold to external parties increased by about 7% year-on-year, and the average price of alumina sold to external parties increased by about 26% year-on-year. At the same time, the production costs of aluminum ingots and alumina remained stable year-on-year, which led to a significant increase in the operating performance of the electrolytic aluminum and alumina sectors.

Based on this judgment, the increase in aluminum product prices, coupled with cost control, has led to a significant increase in China Aluminum's net profit and non-net profit.

Cumulative dividends of more than 2.5 billion in three years

The aluminum industry has obvious cyclicality. The substantial growth in China Aluminum Corporation's operating performance is due not only to the market recovery, but also to the company's own positive actions.

In the past, due to overcapacity in the aluminum industry, the overall operation of aluminum enterprises was under pressure, and Aluminum Corporation of China was no exception. In the past, the company was heavily in debt, but now it has improved significantly.

As of the end of 2023, China Aluminum Corporation's asset-liability ratio was 53.30%, down 5.37 percentage points from the end of the previous year.

At the end of 2014, the debt-to-asset ratio of Aluminum Corporation of China was as high as 79.43%. Since then, the debt-to-asset ratio has been declining year by year. It was 70.76% at the end of 2016, and dropped to 67.27% at the end of 2017. From the end of 2020 to the end of 2022, it was 63.48%, 62.17%, and 58.67%, respectively. After nine consecutive years of decline, the debt-to-asset ratio at the end of 2023 has dropped by 26.13 percentage points compared with the end of 2014.

At the end of 2023, the company had short-term loans of RMB 7.97 billion, non-current liabilities due within one year of RMB 17.234 billion, long-term loans of RMB 33.438 billion, and bonds payable of RMB 8.402 billion, totaling RMB 69.044 billion, a decrease of RMB 8.377 billion from the end of the previous year.

Correspondingly, at the end of the period, the company's cash and cash equivalents plus structured deposits were 26.117 billion yuan, an increase of 6.857 billion yuan over the same period last year.

Chalco is also reducing its financial expenses directly related to debt. In 2014, the company's financial expenses were 5.781 billion yuan, which dropped to 4.720 billion yuan in 2019. From 2020 to 2022, they were 4.241 billion yuan, 3.714 billion yuan, and 3.505 billion yuan, respectively, decreasing year by year. In 2023, the company's financial expenses were 2.972 billion yuan, a decrease of 533 million yuan from 2022.

In the first quarter of this year, the company's financial expenses were 697 million yuan, a decrease of 120 million yuan from 817 million yuan in the same period last year.

The financial situation has improved year by year, and Aluminum Corporation of China has begun to pay cash dividends. From 2011 to 2020, the company did not pay dividends to shareholders for 10 years because it did not meet the conditions for cash dividends. Starting from 2021, the company will pay dividends every year. From 2021 to 2023, the dividends it paid were 545 million yuan, 618 million yuan, and 1.373 billion yuan, respectively, totaling 2.536 billion yuan in three years. Among them, the dividend in 2023 was 1.373 billion yuan, accounting for 20.44% of the net profit of that year.

Regarding the dividend rate of less than 30%, Chalco once explained that although the company's operating conditions continue to improve, considering the obvious cyclicality of the industry in which the company is located, and under the background of the country's "dual carbon" policy, technological innovation drive, and the decline in domestic bauxite resources, the company's industrial layout and structural adjustment pressure are still relatively large. The company will carry forward the remaining undistributed profit funds in 2023 to the next year. On the one hand, it will be used for investment expenditures in projects such as industrial layout optimization, green and low-carbon, safety and environmental protection, scientific and technological research and development, and resource acquisition; on the other hand, the company intends to further reduce the scale of interest-bearing debt to continuously improve the company's operating efficiency.

In the secondary market, the share price of Aluminum Corporation of China has performed well this year. On July 12, the company's closing price was 7.92 yuan per share, up about 40.42% from 5.64 yuan per share at the beginning of the year.