Chinalco's listed subsidiary Chalco, China's biggest aluminum producer, has reported a 99.9-per cent plunge in net profit for 2008 - 10 times more than expected and warned that the first-quarter profit would plummet by almost 100 per cent due to the global economic slowdown.
In a surprise move, Chalco's chairman and chief executive Xiao Yaqing resigned and relinquished all his other posts with immediate effect yesterday - not as retribution for the loss; he is is likely to be made the deputy secretary general of China's State Council or cabinet in the near future.
Chinalco's chairman, Xiong Weiping has been nominated to the post, which will be put forth for shareholder's approval at the annual meeting on 26 May.
As metal price and demand plunge throughout the globe, the company said net profits dropped to 9.2 million yuan ($1.9 million), down from 10.75 billion yuan the previous year.
"Aluminum product prices slumped while fuel costs rose. Our group faced unprecedented difficulties and challenges," company president Luo Jianchuan told at a news conference.
Chalco posted a larger than expected loss of 2.57-billion yuan in the fourth quarter, its first loss in a decade and warned of a first-quarter loss as global demand for the metal continues to wane.
The company also said in a statement that it suffered major losses from the snowstorm that ravaged most of Central and Southern parts of China at the beginning of last year, and the earthquake that hit Sichuan province, three months prior to the Beijing Olympics last year.
Due to the global financial meltdown, the price of alumina, which was quoted 4,500 yuan per tonne in the Chinese domestic market in 2008, dropped drastically to 1,900 yuan per tonne.
Luo Jianchuan said that although the economic gloom would persist through 2009, the company will cope with the problem and save 13 billion yuan this year by initiating cost-cutting measures as well as control investment and maintain stable production.
The company plans to use up the high-cost inventories in the first quarter although the stockpiles value has depreciated by 1 billion yuan at the end of 2008.
Chalco has already pruned its alumina production by 40 per cent and lowered its aluminum capacity by 24 per cent due to losses but said that it may resume production in the second quarter if conditions improve.
On Saturday, Chalco said that it plans to sell up to 20 billion yuan ($2.93 billion) worth of debt to supplement working capital and repay bank loans subject to shareholder's approval.
According to industry analysts, China's aluminum output will drop 4.4 per cent while domestic consumption will be approximately 1.9 per cent, since the stimulus package of $586 billion announced in early November, (See: China pumps $586 billion to bolster economy) will still take some time to have effect in the domestic market.