Chalco confident of tackling credit crunch
Updated: 2008-11-28 06:57
(HK Edition)
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Aluminum Corp of China, the nation's largest producer of the metal, is capable of weathering the global credit crunch and economic slowdown as the company has as much as 60 billion yuan in cash reserves, an executive said.
"We have between 50 billion and 60 billion yuan in cash, which is sufficient to tackle the crisis. All companies are making preparations to combat the financial turmoil and economic slowdown," said Lu Youqing, vice president of the State-owned company known as Chinalco on phone from Beijing.
Companies worldwide are seeking to secure credit as losses at financial companies have crippled capital markets, and profits dropped with the slowdown. Chinalco has lost 74 percent of its biggest overseas investment in Rio Tinto Group.
"The government will continue to support Chinalco to grow bigger, so there shouldn't be any problem in fundraising if the company needs money to invest," Li Zhuiyang, analyst at CITIC Securities Co, said on phone from Shanghai.
Aluminum Corp Of China Ltd, Chinalco's publicly traded unit, rose 3.45 percent to HK$3.3 in Hong Kong trading.
Chinalco and Alcoa Inc paid 7.2 billion pounds for a 9 percent stake in London-based Rio Tinto, the world's third-largest mining company, in February. The value of the holding has slumped 74 percent. Chinalco has previously said it may raise its stake to 14.99 percent.
BHP Billiton Ltd, the world's largest mining company, this week abandoned a $66-billion bid for Rio Tinto on concerns that it may have been burdened with huge debt.
Third-quarter earnings at Chinalco's listed unit, also known as Chalco, slumped 93 percent. JPMorgan Chase & Co expects it to post a loss for the fourth quarter.
Chairman Xiao Yaqing said the company is curbing expenditure and cutting costs to counter a 25 percent drop in the metal price this year.
An expected slowdown in consumption next year may delay overseas projects, CITIC's Li said.
Aluminum demand on the mainland may grow 5-6 percent next year, Li said. Beijing Antaike Information Development Co, a research body that advises the government, earlier forecast that the aluminum demand would grow by 2-3 percent.
Bloomberg
(HK Edition 11/28/2008 page3)