Chinalco’s operating profit reached nearly RMB 1.9 billion, marking its best performance in eight years.

On January 14, at Chinalco’s annual work conference, it was announced that the company posted an operating profit of nearly RMB 1.9 billion in 2016 and generated RMB 12 billion in operating cash flow, marking its best performance since the 2008 financial crisis. This results underscore that Chinalco not only met the loss‑control targets set by the State-owned Assets Supervision and Administration Commission but also achieved them ahead of schedule...

On January 14, at Chinalco’s annual work conference, it was announced that the company posted an operating profit of nearly RMB 1.9 billion in 2016 and generated RMB 12 billion in operating cash flow, marking its strongest performance since the 2008 financial crisis.
This performance report indicates that Chinalco not only met the loss‑control targets set by the State-owned Assets Supervision and Administration Commission but also turned a profit ahead of schedule. All business segments under Chinalco—including aluminum, copper, rare earths, engineering and technology, and finance—achieved their planned results, with some even surpassing their 30% target; overall, net profits increased by RMB 4.581 billion compared with the previous year. Meanwhile, Chinalco’s asset‑liability ratio has begun to decline, operating cash flow remains robust, and financial expenses have dropped significantly. In 2017, Chinalco is poised for a strong start and is expected to sustain its profitable momentum.
This also marks the second consecutive year that Chinalco has met the SASAC’s performance targets, under the leadership of Chairman Ge Honglin and his “addition, subtraction, multiplication, division” reform framework. In 2016, Chinalco restructured 10 zombie enterprises, reducing losses and boosting profits by RMB 1 billion. It also streamlined its corporate structure by closing or consolidating 50 legal entities, while a newly established asset management company revitalized and disposed of a portfolio of inefficient assets and production capacity, gradually addressing the longstanding legacy burdens that have long plagued state-owned enterprises.
Ge Honglin stated that turning a profit in the current persistently sluggish market environment has validated the direction and effectiveness of Chinalco’s reforms over the past two years. He also adopted a firm stance toward loss-making enterprises and outdated production capacity, warning that any such entity failing to return to profitability within the next one to two years will inevitably face closure.
Chinalco had originally planned to take up to two more years to fully turn around its losses and achieve profitability; it has now accomplished this goal one year ahead of schedule. According to a work report by Chinalco General Manager Yu Dehui, despite an unfavorable external market—indeed, the aluminum market hit historic lows in 2015—the company has maintained a steady trend of improving operating performance. In the second half of 2016, commodity prices began to rebound, yet the full-year average prices of Chinalco’s key products—alumina, aluminum, and copper—still failed to surpass 2015 levels, resulting in nearly RMB 5 billion in profit erosion due to price declines. Nevertheless, through cost reductions, Chinalco generated an additional RMB 10.4 billion in profits, outpacing the rate of price depreciation. Among Chinalco’s alumina business, 15 of 16 major performance indicators improved, while all four key metrics for electrolytic aluminum showed marked improvement.
Aluminum processing is poised to become the engine of future performance growth for Chinalco. Previously, several of Chinalco’s aluminum‑processing subsidiaries were spun off from the listed company due to severe losses. In 2015, following his appointment as chairman, Ge Honglin restructured the group’s processing capacity and established an Aluminum Processing Business Unit. At public events, Ge Honglin has stated that Chinalco will proactively extend its downstream industrial chain, accelerate the lightweighting of industrial materials, and reduce its reliance on primary products.
Shortly thereafter, Chinalco successively signed cooperation agreements with Dongfeng Motor, FAW Group, Geely Group, Baosteel Group, and others on new-material research and development and applications, and established a project team dedicated to automotive lightweighting. Last year, Chinalco and China Construction jointly founded China Construction Aluminum New Materials Co., Ltd., which has already begun mass-producing innovative aluminum alloy formwork for construction. In addition, Chinalco invested in the establishment of Chinalco Aluminum Foil Co., Ltd., entering the high-end aluminum foil market.
In addition, all‑aluminum train carriages produced by Chinalco’s materials division have already been put into service, while all‑aluminum commercial vehicles, aluminum alloys for large aircraft, and aluminum materials for shipbuilding have all made significant progress through collaboration with downstream enterprises. Chinalco Sapa has completed the mass supply of subway profiles and major components to cities including Xiamen, and Chinalco International has signed cooperation agreements with multiple partners covering dozens of products, such as aluminum pedestrian overpasses, aluminum‑based prefabricated housing units, and aluminum flood‑control barriers.
Aluminum Corporation of China spokesperson Nie Zhen revealed, “On December 30, 2016, the state‑owned enterprise reform fund led by Chinalco was officially established, and Chinalco’s future reforms will be even more vigorous. 2017 will be a pivotal year for Chinalco to fully emerge from its downturn, and we are confident that we will continue to take another major step forward.”
Industry experts analyze that, driven by the surge in aluminum prices in the second half of last year, a number of producers have resumed operations, while more than 5 million tons of new electrolytic aluminum capacity has come online. These developments could once again severely disrupt the supply‑demand balance in the aluminum market, raising the prospect of another sharp decline in domestic aluminum prices.
However, thanks to Chinalco’s substantial domestic bauxite reserves and the commissioning of several new high-grade mining projects, its cost advantages in bauxite and alumina will become more pronounced. Meanwhile, the increased share of self‑generated power has bolstered the company’s resilience to market risks, while the growing profitability of its aluminum‑processing segment will help Chinalco hedge against volatility in the primary commodities market. Consequently, Chinalco is highly likely to continue expanding its earnings in 2017.