HAMBURG Aurubis AG (NAFG.DE), Europe's biggest copper smelter, said on Wednesday it expected profit to rise significantly in the current financial year after reporting a 40 percent drop in 2015/16 earnings, partly due to smelter repairs.
Operating earnings (EBT) came in at 213 million euros ($226.72 million), compared with 343 million euros in the previous year. Aurubis had previously warned that it would not repeat last year's record results.
Analysts polled by Reuters had forecast full-year operating profit would come in at 217 million euros.
"Overall, we expect significantly higher operating EBT and slightly higher operating ROCE (operating return on capital employed) for the group in the fiscal year 2016/17 compared to the reporting year," CEO Juergen Schachler said.
The results were hit by significantly reduced refining charges for copper scrap, lower copper scrap supply, significantly weaker sales prices for sulphuric acid, decreased metal prices, a lower cathode premium and a scheduled shutdown at the Pirdop smelter in Bulgaria, it said.
Aurubis said it expected the good supply of copper concentrates (ore) to continue in the primary copper production sector this year, and that it expected "significantly higher" operating earnings from the sector.
"We assess the expected treatment and refining charge level as relatively high in light of the current market situation," it said.
Copper treatment and refining charges (TC/RCs) are paid by miners and other concentrate owners to smelters to refine concentrate into metal and are a key part of the global copper industry's earnings.
A three-week maintenance shutdown that is legally mandated every three years was carried out in October-November at its Hamburg smelter, which will strain the results for the first quarter of 2016/17, it said, adding that it expected high plant availability for the rest of the year.
"The likely development of the copper scrap supply is difficult to gauge," it added.
"Business in this area is conducted with short timelines... The market situation was able to improve slightly after the end of the fiscal year 2015/16 due to the increase in copper prices."
London copper CMCU3 surged to 16-month highs in November as speculation that infrastructure spending in the United States could jump under a Republican administration.
For copper products, "slightly higher" operating earnings are expected. The economic situation in relevant sales sectors is positive and with no major slumps expected in 2017, "we expect to be able to conclude the negotiation season for copper products with satisfactory contracts," the company said.
($1 = 0.9395 euros)
(Reporting by Michael Hogan; Editing by Victoria Bryan and Subhranshu Sahu)