Aurubis, Europe’s top copper smelter, is reaping big profits from booming metals prices, but warned that the region’s lingering energy crisis may start to hurt its bottom line.
A spike in power and gas prices has wreaked havoc on many industrial plants, with several large smelters forced to curtail output or mothball operations during the crisis — sending metals prices rallying. Long-term power contracts and hedges have so far helped protect Aurubis from high energy costs, with the company on Monday reporting bumper quarterly earnings.
While that pushed the shares up as much as 5% to near a record high, Aurubis said that it expects to face “considerably” higher costs in the coming months.
Across Europe, major industrial companies are trying to adapt to a higher power-price environment that threatens to last into next winter and beyond. The impact has been particularly severe for aluminum and zinc smelters, with producer groups urging the European Union to roll out state-aid to support the sector after a slew of cutbacks and plant closures.
Aurubis said in December that it’s in the process of renegotiating a long-term power supply agreement that has helped to insulate it from the severe spikes in spot power prices in recent months. The German company signed the long-term agreement with Vattenfall Europe AG about a decade ago to fund the development of coal-fired power plant, and it’s now looking to source green power on equivalent terms, it said.
For now, the rise in power costs that Aurubis has incurred has been more than offset by surging prices for copper and byproducts like sulfuric acid. Its pretax operating profit climbed 85% from a year earlier to 152-million euros ($174-million) in the fiscal first quarter, the company said. Analysts at Baader called the results “outstanding.”
In October, Aurubis raised the premium it charges to supply copper customers to the highest in at least a decade, signaling that it sees demand remaining strong this year. That’s also partially offset the rising cost of power and gas, along with higher processing fees for raw materials, it said on Monday.
Aurubis’s shares were last up 3.6% at 96.50 euros in German trading. The stock hit a record last month after it boosted its full-year profit forecast to 400 million to 500-million euros.