August 8, 2019 / 6:26 AM / 3 months ago

Aurubis earnings hit by slowing auto sector, halting project

HAMBURG (Reuters) - Aurubis AG (NAFG.DE), Europe’s largest copper producer, on Thursday posted a 72% slump in third-quarter earnings hurt by slower demand from the cable and automotive sectors and costs related to halting its Future Complex Metallurgy (FCM) project.

Operating earnings before taxes (EBT) fell to 22 million euros (£20.28 million) in the third quarter to end-June from 78 million a year earlier.

The company had warned in June that the difficult economic environment would reduce its earnings, while higher-than-expected costs from halting its Future Complex Metallurgy (FCM) project meant a strain of about 30 million euros on third-quarter results and would affect full-year numbers.

Aurubis repeated on Thursday its previous forecast that operating EBT for the 2018/19 full year will be “significantly below” the previous year.

“Our result in the third quarter was strained by several extraordinary factors,” new Chief Executive Officer Roland Harings said in a statement.

“In addition to one-time expenses from the halt of the FCM project, the operating performance of our large production units fell below expectations,” Harings said, adding that the decline in demand in the product markets hit the company’s earnings in May and June.

Aurubis in June released former CEO Juergen Schachler from duties with Harings taking over earlier than scheduled.

Aurubis anticipates weaker demand for copper rod from cable producers and considerably lower demand for copper shapes compared to the previous year, the company said.

“Demand for flat rolled products, especially in the European automotive sector, has been declining since autumn 2018. This is expected to continue for the rest of the fiscal year,” Aurubis said.

Because of shutdowns and investments at production sites, Aurubis expects plant availability to be lower and thus the volume of copper concentrates (ore) processed during the current fiscal year to fall significantly.

Production of cathodes is also expected to fall.

Aurubis expects satisfactory treatment and refining charges (TC/RCs) for copper concentrates until the end of the fiscal year.

TC/RCs are fees paid by mines to copper smelters to refine ore into metal and are a key part of a copper refiner’s income.

“Because Aurubis is sufficiently supplied with concentrates from existing contracts for the current fiscal year, the company doesn’t have to purchase concentrates at spot market conditions, which are weaker at the moment,” the company said.

Aurubis said it will undertake a planned maintenance shutdown at its Luenen smelter lasting 25 days in September which will have a roughly 3 million euro impact on operating EBT.

At its main Hamburg refinery, it will carry out a planned maintenance shutdown lasting 36 days in October/November which will have a roughly 30 million euro impact on operating EBT.

Former CEO Schachler launched a multi-metals strategy to expand Aurubis into other metals alongside copper.

“Our multi-metals strategy remains in place,” Harings said. “We will be able to apply some of the plans and plant configurations developed during the FCM project and use them to carry out the strategy in the future.”

Reporting by Michael Hogan; editing by Subhranshu Sahu and Jason Neely

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