China's Chalco Q3 net profit 2.04 billion yuan, below forecast
Aluminum Corp of China (Chalco), the nation's biggest aluminum producer, said third-quarter net profit totaled 2. 04 billion yuan.
For the first nine months, net profit was 8.44 billion yuan, Chalco said in a statement to the Hong Kong stock exchange late Monday.
It did not provide year-earlier figures or other details.
The results came in weaker than expected, said JP Morgan analyst Feng Zhang.
""We suspect the weaker-than-expected results are mainly because of higher costs, mainly higher alumina costs such as heavy oil, coal and bauxite costs, "" said Zhang.
Alumina is a powder refined from bauxite and used to produce aluminum, a lightweight metal used in making beverage cans and in aircraft.
Chalco produces both alumina and aluminum.
Aluminum prices in the third quarter were 2 percent below the first-half average, while gross margin in the period was 23 percent, down from 29 percent in the first half, said Zhang.
Soft aluminum prices could weigh on Chalco's fourth-quarter results, Zhang said.
For October on the Shanghai Futures Exchange, aluminum prices averaged at 18,775 yuan per ton, down 6 percent from the average price in the first half.
Chalco also cut its spot alumina selling prices by 10 percent to 3,500 yuan per ton from 3,900 per ton in September.
""Prices of major raw materials such as oil, coal and bauxite are likely to remain high in the fourth quarter,"" Zhang said.
Looking forward, Zhang expects improved fundamentals for the aluminum producer next year.
The analyst said Chinese aluminum production growth could peak in 2007, which could arrest any fall in alumina prices, ""but in the short-term, strong production growth will likely weigh on the domestic aluminum prices.
JP Morgan kept its ""neutral"" call on Chalco.
Chalco ended the morning session Tuesday down 20 cents or 0.9 percent at 22.75 dollars.