December 14, 2016 / 12:12 PM / a year ago

UPDATE 2-Aurubis confident of better year ahead after 2015/16 profit tumbles

* Profit falls nearly 40 pct in year ended Sept

* Outlook helped by recovery in metals prices

* CEO says company on lookout for acquisitions (Adds details, CEO quotes)

By Michael Hogan

HAMBURG, Dec 14 (Reuters) - Europe’s biggest copper smelter, Aurubis AG, said it expected profit to rebound in the current financial year after reporting a near 40 percent drop in 2015/16 earnings on Wednesday, partly due to smelter repairs in Bulgaria.

The German company, which processes copper concentrate into metal, said it was now benefiting from high supplies of copper ore in the market and that it expected “significantly higher” operating earnings from the sector this financial year.

“We assess the expected treatment and level of refining charges as relatively high in light of the current market situation,” it said.

It reported operating earnings (EBT) for the year ended September of 213 million euros ($227 million), down from 343 million euros in the previous year and below a Reuters poll forecast for 217 million euros. Aurubis had previously warned that it would not repeat last year’s record results.

“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 (2015/16) reporting year,” new CEO Juergen Schachler said.

Schachler, who took over as CEO in July, said Aurubis is likely to seek deals to process more complex copper concentrate in coming months after a surprisingly low deal on fees to process standard ores.

Benchmark annual copper ore treatment and refining charges (TC/RCs) for 2017 reportedly agreed in November by smelter FreeportMcMoRan are too low and some negotiations are still being carried out above the benchmark level, Schachler told a news conference to present the results.

Freeport will reportedly pay $92.50 per tonne and 9.25 cents per pound for 2017 treatment and refining charges (TC/RCs), the second annual benchmark cut in a row and down from $97.5 per tonne for term contracts this year.

“Negotiations are still going on above this level,” Schachler said. “I still regard the level as too low in view of rising costs, an uncertain sulphuric acid market and strong mine production.”

Sulphuric acid is an important by-product of copper. When mine production is high, mines and other concentrate owners have to compete to gain smelter capacity and so TC/RCs are likely to be firm.

“The upshot of this level could be that we will seek agreements to process more complex concentrate grades instead of the standard grades in the benchmark agreement,” Schachler said.

Some spot TC/RC deals for standard grades were currently being made below the expected benchmark level, he said.

A scheduled shutdown at Aurubis’s Pirdop smelter in Bulgaria hurt its 2015/16 earnings. The company said its first-quarter earnings for the current financial year will be affected by a three-week maintenance shutdown in October-November at its Hamburg smelter, which is legally mandated every three years.

Schachler said the company was considering acquisitions although it had no firm targets in view.

“We could go towards acquisitions when they strengthen Aurubis’ core business,” he said.

Aurubis’ last takeover was its purchase of Luvata group’s rolled copper operations in 2011.

“We currently have no concrete projects although we are naturally always in discussions,” Schachler said. “We are financially in a rather strong position and have the potential.”

More details about the company’s strategy could be announced at the annual shareholders’ meeting in March, he said. ($1 = 0.9395 euros) (Reporting by Michael Hogan; Editing by Subhranshu Sahu and Susan Fenton)

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