The Aurubis Group (Aurubis) generated operating earnings before taxes (EBT) of € 18 million in Q1 of fiscal year 2016/17 (previous year: € 36 million). The result was significantly influenced by a scheduled shutdown in Hamburg, as well as by negative measurement effects in connection with inventories at higher metal prices, which will nevertheless neutralize during the course of the fiscal year. Aurubis therefore confirms its forecast for the full fiscal year.
In addition to measurement effects amounting to € 26 million, the result of Q1 2016/17 was negatively impacted by a legally mandated maintenance shutdown in Hamburg and the resulting decrease in concentrate throughput (total impact on the result: € 15 million). Lower sulfuric acid revenues due to a surplus on the global markets, the traditionally weak product markets at year-end and a lower cathode premium also had a considerable effect.
In contrast, the strong US dollar, improved revenues from copper scrap input due to higher throughputs, and a higher metal gain with increased metal prices influenced the operating result positively.
“The first quarter is always traditionally the weakest quarter for Aurubis due to lower product demand resulting from seasonal effects. In this respect, the result is within our own and the market’s expectations,” explained Jürgen Schachler, Executive Board Chairman of Aurubis AG. “In addition to other burdensome factors, the significant increase in the copper price this quarter led to temporary measurement effects, which are clearly reflected in the quarterly result. However, we expect these to neutralize as the fiscal year goes on. Without the measurement effects and the shutdown in Hamburg, we would have achieved a very good Q1 result of nearly € 60 million.”
Treatment and refining charges (TC/RCs) in spot business decreased in Q1, influenced in particular by Chinese smelters’ increased purchasing activity. The first contract between a large mining company and a larger Chinese copper smelter for the year 2017 was entered into at lower TC/RCs than expected but established itself as a benchmark for the market. In this environment, Aurubis was able to continue procuring a good supply of copper concentrates, which allowed for higher TC/RCs owing to their complex qualities.
At a level of € 2,462 million, the Group’s revenues in the first three months of the fiscal year were similar to those of the prior year (€ 2,398 million). Higher metal prices stood in contrast to slightly lower sales volumes. Operating ROCE (taking the operating EBIT of the last 12 months into consideration) was 9.5 % (previous year: 17.5 %).
Aurubis’ EBT on an IFRS basis amounted to € 102 million (previous year: € -34 million). In contrast to operating earnings, IFRS earnings include measurement effects due to copper price fluctuations and other factors. Therefore, the operating earnings are decisive for Aurubis in assessing the business performance and managing the company.
Aurubis anticipates a good market situation overall in both the raw material and product markets. The supply of copper concentrates remains satisfactory with corresponding treatment and refining charges. Because of the high copper prices at the moment, the company expects a good supply of copper scrap and, consequently, higher refining charges than the previous year.
Aurubis also anticipates a good demand level on the sales markets for copper products, though demand in North America is likely to stagnate. The sales market for sulfuric acid remains under pressure due to the global surplus.
In the copper production sector, Aurubis expects the volume of copper concentrates processed to be higher than the previous year, with high plant availability. A scheduled maintenance shutdown at the Lünen recycling center in Q2 will reduce the throughput of materials for recycling.
In light of these assumptions, Aurubis confirms the current earnings forecast for fiscal year 2016/17. The Group benefits from the fact that, due to its ability to process copper concentrates with complex qualities, it can continue to obtain high treatment and refining charges despite the lower benchmark. Since much of the revenue is based on the US dollar, Aurubis also expects positive contributions to earnings due to the currency’s strength.
“As announced at the start of the fiscal year, we expect significantly higher operating EBT and slightly higher operating ROCE compared to the previous year,” Jürgen Schachler summarized.
You can find the complete report on the first three months of fiscal year 2016/17 at www.aurubis.com.