Aurubis AG, Europe's largest copper producer, on Wednesday confirmed a reduced full-year earnings forecast on weak market environment and plant shutdowns, while posting a slump in its quarterly earnings.
Aurubis expects operating pre-tax earnings (EBT) in its 2018/19 fiscal year to fall "significantly" by more than 15% compared with the previous year. The copper producer in February had forecast full-year operating EBT to be "moderately lower".
The company had issued preliminary results on April 26.
Aurubis confirmed a slump in operating EBT to 63 million euros ($70.59 million) in the second quarter of 2018/19, down from 107 million euros in the year-ago periodAurubis confirmed a slump in operating EBT to 63 million euros ($70.59 million) in the second quarter of 2018/19, down from 107 million euros in the year-ago period.
The outlook for the second half remained mixed, with raw material markets being favourable but there has been a drop in demand for copper products, especially from the automobile industry, the company said.
Plant shutdowns will dent earnings further, Aurubis added.
"Due to weaker economic conditions, especially in the European automotive sector, Aurubis expects lower demand for copper rod and flat-rolled products," the company said, adding that the group, however, expects robust demand for copper shapes from the industrial tube sector.
"Because of scheduled and unscheduled shutdowns, we expect plant availability to be lower, and thus, the volume of copper concentrates (ore) processed during the current fiscal year to be significantly lower than the previous year," it said.
"This year is also a transitional year for Aurubis," said CEO Juergen Schachler.
Schachler said the company is using the scheduled maintenance shutdowns to undertake additional investment in modernising its production plants and to "achieve environmental protection standards beyond what is legally required".
"With measures from the efficiency-improvement programme, we are sustainably improving our facilities' reliability and our competitiveness," Schachler said.
The copper producer will schedule a 22-day mandatory maintenance shutdown around May and June at its copper plant in Pirdop in Bulgaria, which could have an impact of about 15 million euros on the company's operating EBT.
The Luenen plant in Germany will have a scheduled 25-day maintenance shutdown in September, which will also have an impact of roughly 3 million euros on the operating EBT.
The company expects "a good copper concentrate supply and satisfactory treatment and refining charges until the end of the fiscal year. We expect the positive trend on the copper scrap market to continue," Aurubis said.
Treatment and refining charges (TC/RCs) are fees paid by mines and other concentrate owners to copper smelters to refine concentrate (ore) into metal and are a key part of the copper refiners' income.
($1 = 0.8925 euros)
(By Michael Hogan; Editing by Riham Alkousaa and Sherry Jacob-Phillips)