German copper company Aurubis AG (NDA.XE) Wednesday said that it expects operating profit in its fiscal year ending Sept. 30 to increase, adding that extraordinary effects that hit results in the first quarter will "level off" over the course of the year.

"The annual operating result is expected to be above the corresponding prior-year earnings," said Chief Executive Bernd Drouven, without quantifying the outlook.

The Hamburg-based company said that fundamental copper market conditions suggest there will be a continuation of the high prices.

"A substantial production deficit is generally expected in 2011," Aurubis said.

The tight supply of copper pushed its price to an all-time high of $9,740 per metric ton at the end of the company's first quarter. Copper prices have gained since then, reaching fresh record highs at over $10,000/ton in January.

Aurubis said that demand from the booming Chinese economy will continue to support copper prices despite "countercyclical measures" by the government to rein in inflation.

China is the world's largest copper consumer and its demand for the metal has been the driving force behind the price rally in recent years.

Aurubis said that it expects steadily increasing demand from European customers with "positive signals" coming from core European Union countries.

The company also gave details of the adjusted operating pretax loss for the first quarter of fiscal 2011, which it had reported last week.

The loss was due to metal supply contracts that had not been fixed upon delivery. The effect of these deals--in which Aurubis's supplier bears the price risk--will level off when the prices for the delivery will be fixed once the company starts processing the purchased metal.

Aurubis said that a temporary build-up of inventories amid increasing copper prices and a two-week unplanned standstill at one of its smelters also weighed on the first-quarter operating result.

"These burdens will be cancelled out during the course of the fiscal year and when the inventories are reduced," Aurubis said.

The adjusted operating pretax loss was EUR21 million compared with an operating profit of EUR47 million a year earlier, Aurubis said.

Reported first-quarter pretax profit according to IFRS accounting rules was EUR135 million, down 21.5% from EUR172 million a year earlier, it said.

Net profit in the three months to Dec. 31 came in at EUR97 million, down 19.8% from EUR121 million a year earlier.

Rising copper prices and robust demand drove revenue 31.3% higher to EUR2.73 billion from EUR2.08 billion a year earlier, Aurubis said.

At 0829 GMT Aurubis shares traded lower EUR0.16 or 0.4% at EUR42, underperforming a broadly firmer market.

-By Jan Hromadko, Dow Jones Newswires; +49 69 29 725 503; jan.hromadko@dowjones.com

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