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UPDATE 2-Copper smelter Aurubis sees profits bouncing back

Michael Hogan
Monday, 16 Dec 2013 | 6:42 AM ET

* Operating earnings drop 62 pct to 114 mln euros

* Hit by weak scrap, acid markets, maintenance

* Sees higher copper price on demand from China

* Better treatment, refining terms from miners

HAMBURG, Dec 16 (Reuters) - German copper smelter Aurubis expects profits to bounce back this fiscal year from a sharp fall in the previous one, thanks to strong demand from China and a rise in the price for treatment and refining paid by miners.

Europe's largest copper producer said on Monday its operating earnings fell 62 percent to 114 million euros ($157 million) in the year ended Sept. 30, with turnover down 10 percent to 12.34 billion euros.

It had said on Nov. 5 that earnings before taxes would drop by more than half due to weak copper scrap and acid markets, low metal yields, a scheduled maintenance shutdown at its main refinery in Hamburg, and modernisation in rolled product works.

"Although the first quarter will be strained by the large-scale shutdown in Hamburg and the restructuring of Business Line Flat Rolled Products, we are confident that we will return to a much better earnings level in fiscal year 2013/14," Chief Executive Peter Willbrandt said on Monday.

The company does not expect a loss in the first quarter of the new financial year, Willbrandt added at a press conference to present the company's results.

Aurubis proposed a dividend for 2012/13 of 1.10 euros per share, down from 1.35 euros the previous year.

"The global copper market will likely be characterised by good demand for cathodes (new metal) for much of 2014," the company said, pointing to continued strong demand from China.

"The copper price is well supported from the current perspective. Many developments show that it has upward potential, though the trend will be volatile overall."

Copper prices touched a six-week peak on Friday in a sixth straight session of gains as nervous investors bought back short positions before a U.S. central bank meeting.

IMPROVING TERMS

Aurubis said it processed 2.2 million tonnes of copper concentrates (ore) in 2012/13 against 2.1 million tonnes in the previous year. Output of copper cathodes was unchanged at 1.15 million tonnes. Output of by-product sulphuric acid was over 2.1 million tonnes against 2.0 million tonnes in the previous year.

"On the raw material side, we anticipate a good market situation for copper concentrates, which are especially important for us, and therefore a good supply and strongly improved treatment and refining charges," it said.

Copper ore treatment and refining charges (TC/RCs) are paid by miners to smelters to refine concentrate into metal and are a key part of the global copper industry's earnings.

Next year's benchmark TC/RC terms have just been settled between miner Freeport McMoRan and Japan's largest smelter Pan Pacific Copper at $92 per tonne and 9.2 cents per lb versus $70 and 7 cents respectively in 2013.

Willbrandt said he expected these levels to provide the basis for Aurubis' 2014 TC/RC contracts.

Higher TC/RC terms reflect the fact mining capacity has been expanded, while there has been little investment in smelting.

Aurubis said it was "less confident" about a recovery in copper scrap and sulphuric acid markets.

"A more favourable market situation for sulphuric acid is not foreseeable for the time being, and while we expect an improvement in the market environment for copper scrap markets, we aren't sure when this will take hold," it said.

Willbrandt said he was concerned at the European Union investigation into the discounts German industries get on renewable energy surcharges.

The company did not believe the discounts were a subsidy, he said. But the investigation created major uncertainty about whether investment in Germany can be made, he said.

Aurubis shares were down 1.4 percent at 41.27 euros at 1040 GMT, with Germany's MDAX index for medium-sized companies up 0.7 percent.