Business performance in the Business Units

Business Unit Primary Copper

Key figures

T 019
 
in € million 2015/16
operating
2014/15
operating
     
Revenues 5,325 5,914
EBIT 154 271
EBT 143 256
Capital expenditure 104 70
Depreciation and amortization (83) (86)
Operating ROCE 16.4 % 33.2 %
Avg. number of employees 2,750 2,730
    
Certain prior-year figures have been adjusted.

Business performance and earnings trend

Business Unit (BU) Primary Copper produces pure copper cathodes from copper concentrates and recycling materials and processes intermediates from other smelters. The BU also produces and markets precious metals, sulfuric acid and iron silicate.

The main production sites are Hamburg (Germany) and Pirdop (Bulgaria), which both have smelting facilities and copper tankhouses.

The main factor driving earnings in BU Primary Copper is treatment and refining charges (TC/RCs) that are negotiated as surcharges on the purchase price of the metals for converting raw materials into the exchange product – copper cathodes – and other metals. Additional earnings components include revenues from precious metal and sulfuric acid sales, the cathode premium and the metal gain.

Operating earnings in BU Primary Copper in fiscal year 2015/16 were significantly below the previous year’s earnings. One reason was the extensive scheduled maintenance and repair shutdown at our smelter site in Pirdop, Bulgaria in Q2 of calendar year 2016.

Furthermore, market-related factors, such as reduced revenues for sulfuric acid, low refining charges for copper scrap and lower premiums for copper cathodes, strained the BU’s result. A lower metal gain with lowe r metal prices also had an impact.

In total, BU Primary Copper generated operating earnings before taxes (EBT) of € 143 million. Compared to the previous year, this was a € 113 million decline. At € 5,325 million, the BU’s revenues were € 589 million below the previous year, primarily due to lower copper prices.

Treatment and refining charges at a high level

The international copper concentrate market was characterized by good supply overall during the past fiscal year. This was largely due to high output from mines with no notable production losses.

Treatment and refining charges (TC/RCs) for long-term business in 2016 were somewhat lower than the previous year but still high. In the course of the year, TC/RCs in the spot market even exceeded the level for long-term contracts. New projects in Latin America and a low number of production disruptions contributed to this development. Demand pressure for concentrates of a purer quality decreased considerably. The availability of more complex concentrates remained good.

We were able to secure a good concentrate supply for our smelting operations in Hamburg and Pirdop and continued to be in a position to enter into additional long-term supply contracts.

The copper scrap market was impacted by declining and simultaneously volatile metal prices, as well as lower refining charges. The supply was secured despite difficult market conditions.

Difficult sulfuric acid business

Fiscal year 2015/16 started with weak global demand on the sulfuric acid market in an environment influenced by seasonal factors. The market surplus, especially in South and Central America, weighed on the price trend as well. In addition, the sales options for sulfuric acid from smelters’ production processes weakened due to the expansion of sulfur burner capacities. The negative price trend on the spot market continued until the end of the fiscal year.

Throughput and output volumes down on previous year due to shutdown

A good supply of copper concentrates and recycling materials ensured that our production facilities were utilized during the entire fiscal year. BU Primary Copper processed a total of 2.2 million t of copper concentrate (previous year: 2.3 million t). The copper scrap input in the BU was 91,000 t (previous year: 102,000 t).

Concentrate throughput

Chart: Concentrate throughput

Corresponding to the concentrate throughput, the sulfuric acid output was 2.1 million t, slightly below the previous year (2.2 million t).

The Hamburg site processed more than 1.1 million t of copper concentrate, thus reaching the prior-year level. The throughput of 1.0 million t at the Pirdop site was below the previous year (1.2 million t). This was due to the scheduled shutdown that was carried out in Q2 of calendar year 2016.

At 584,000 t, the cathode output in BU Primary Copper missed the prior-year level of 615,000 t. This was also due primarily to the shutdown in Pirdop.

The tankhouse in Hamburg produced 370,000 t of cathodes during the fiscal year (previous year: 383,000 t), due in part to lower copper anode deliveries from Pirdop and slightly lower copper contents in the processed concentrate. The tankhouse in Pirdop produced a lower output volume of 214,000 t due to the shutdown (previous year: 232,000 t).

The development in precious metal production varied: silver output was 961 t, above the prior-year level of 958 t, while gold output decreased from 45 t to 42 t. This was due to the lower throughput of copper concentrates and lower gold content in the raw materials.

Silver output

Chart: Silver output

Gold output

Chart: Gold output

Capital expenditure

Capital expenditure in BU Primary Copper amounted to € 104 million in the past fiscal year.

The focus of the capital expenditure was the scheduled production shutdown in Bulgaria.

Additional investments were made in the BU to improve environmental protection and infrastructure at the sites.

Capital expenditure in BU Primary Copper

Chart: Capital expenditure in BU Primary Copper

Business Unit Copper Products

Key figures

T 020
 
in € million 2015/16
operating
2014/15
operating
     
Revenues 7,531 8,586
EBIT 106 138
EBT 101 130
Capital expenditure 40 41
Depreciation and amortization (44) (44)
Operating ROCE 9.7 % 12.4 %
Avg. number of employees 3,335 3,330
     
Prior-year figures have been adjusted.

Business performance and earnings trend

Business Unit (BU) Copper Products produces and markets high-quality copper products, such as continuous cast wire rod, shapes, pre-rolled and finished strip, and specialty profiles, primarily from internally produced copper cathodes. We also use the copper recycling process to fabricate rolled products. Recycling and the Lünen and Olen sites belong to BU Copper Products as well.

The AURUBIS ROD brand of continuous cast copper wire rod is the strongest copper product in the portfolio by volume. It exhibits high electrical conductivity, very good workability and an excellent surface, making it a preferred feedstock for the cable and wire industry, as well as special semi-finished products. Aurubis is a world leader in this market segment and produces AURUBIS ROD with state-of-the-art plant technology at four sites: Hamburg (Germany), Olen (Belgium), Avellino (Italy) and Emmerich (Germany).

The AURUBIS SHAPES brand includes various continuous cast copper shapes that serve as preliminary products for semi-finished product fabricators and tube rolling mills. Large piece weights, unique dimensions and special copper grades are our specialty. A significant part of our AURUBIS SHAPES output is directly delivered to our subsidiary Schwermetall Halbzeugwerk GmbH (50 % Aurubis holding), which produces pre-rolled strip for a number of semis fabricators worldwide.

Finished strip is produced in Stolberg (Germany), Pori (Finland) and Buffalo (USA). We fabricate shaped wire for the electrical industry in Stolberg. Moreover, Aurubis Belgium in Olen produces copper bars and profiles.

At the recycling plant in Lünen, we produce high-quality copper cathodes from a variety of raw materials for recycling, including electrical and electronic scrap, as well as other complex materials. The Olen site also performs recycling activities and has a tankhouse for the production of copper cathodes.

In addition to the cathode premium, another significant earnings component within BU Copper Products is the so-called product surcharge for processing copper cathodes into copper products. In the recycling business, earnings are primarily generated through refining charges (surcharges on the purchase price of the metals) and the metal gain.

Overall, BU Copper Products generated operating earnings before taxes (EBT) of € 101 million in fiscal year 2015/16 (previous year: € 130 million).

The following developments contributed to BU Copper Products’ result, which was lower than that of the previous year: 

The cathode premium for 2016 was lowered from US US$ 110/t in the previous year to US US$ 92/t.

Sales of wire rod reflected a stable trend until the third quarter of the fiscal year and weakened in the fourth quarter. The shapes sector was slightly above the prior year. Product surcharges were at a good level in both areas. The sales volume in Business Line Flat Rolled Products was also at the prior-year level.

Recycling in Lünen and Olen was influenced by a short supply of copper scrap, with low refining charges accordingly. The lack of volumes was more than compensated for by blister copper, though refining charges in this area were also low.

Product markets

High demand for copper products was recorded during the first half of fiscal year 2015/16. Southern European markets continued to recover, and the German market environment was stable. As the year went on, however, the impact of the lower crude oil price and the related economic crisis in the Middle East became evident.

Demand for copper wire rod remained very strong, supported by all key sectors. We recorded positive sales of shapes, though the rolled products business was initially subdued.

Demand for flat rolled products developed differently in individual markets. While the automotive and electronics industries grew in particular, demand in the radiator segment declined due to a lack of investment momentum.

Recycling markets

The conditions on the copper scrap market were difficult during the fiscal year. Due to low prices for steel and aluminum scrap, collection activities declined overall. This was also true for copper, which is collected together with aluminum and steel scrap.

The decrease in the copper price, the growing uncertainty about the further metal price trend and lower availability at the upstream stages of the recycling chain led to limited willingness to sell among traders. The attainable refining charges came under pressure and stagnated at a low level.

Despite the difficult market situation, the production facilities were sufficiently supplied.

In the case of complex recycling materials, which have lower amounts of copper and contain additional non-ferrous and precious metals, stronger demand was observed from the competition, especially in Asia. This raw material category includes industrial residues and electrical and electronic scrap, for example. There were no significant fluctuations in availability.

Copper scrap input in the Group

Chart: Copper scrap input in the Group

Production

Stable output of AURUBIS ROD

The Group’s four AURUBIS ROD plants produced 758,000 t in fiscal year 2015/16 (previous year: 764,000 t).

Continuous cast wire rod output

Chart: Continuous cast wire rod output

AURUBIS SHAPES output slightly higher

All in all, AURUBIS SHAPES had an output of 172,000 t during the fiscal year, a 1 % increase compared to the previous year (170,000 t). We further reinforced our focus on specialty alloys.

Continuous cast shape output

Chart: Continuous cast shape output

Flat rolled products stable

At 208,000 t, the output of flat rolled products was at the prior-year level during fiscal year 2015/16 (previous year: 207,000 t). All of the sites continue to work on implementing programs to improve efficiency and to enhance productivity and quality.

Bars and profiles output develops positively

The output of bars and profiles rose by 9 % to 12,400 t (previous year: 11,400 t). Improvements in operating performance and a reinforcement of the market position contributed to this development.

Cathode output unable to reach prior-year level

Cathode output in BU Copper Products was behind expectations in fiscal year 2015/16. Output was 177,000 t (previous year: 187,000 t) at the Lünen plant and 322,000 t (previous year: 336,000 t) in Olen. The decrease was caused by a lower output of copper anodes (Pirdop shutdown) and the insufficient availability of copper scrap on the market.

Cathode output in the Group

Chart: Cathode output in the Group

Cathode output in the Group by sites

Chart: Cathode output in the Group by sites

Recycling impacted by short supply of copper scrap

The availability of material on the copper scrap market was limited in fiscal year 2015/16. This negatively affected the input volume in our recycling facilities, so the copper scrap input was only 162,000 t (previous year: 192,000 t). The use of blister copper more than compensated for the lack of volumes.

The input of complex recycling materials in the Kayser Recycling System (KRS) reached 254,000 t in fiscal year 2015/16 and was therefore also below the prior-year amount of 269,000 t. This was due to a shift in the input mix towards more profitable materials.

Capital expenditure

Capital expenditure in BU Copper Products was € 40 million in fiscal year 2015/16.

Capital expenditure in the BU was focused on improvements in the areas of efficiency, environmental protection, product quality and infrastructure.

Capital expenditure in BU Copper Products