Business model of the Group

Business activities

Aurubis AG is an integrated copper group whose main activities are copper concentrate processing, metal recycling and fabrication of a variety of copper products. Precious metals and specialty products complete our product range.

The company’s headquarters, which is also home to key production facilities, is located in Hamburg, Germany. The Group’s sites are primarily located in Western Europe, with larger production centers in Germany, Belgium and Bulgaria. Outside Europe, Aurubis also has a production site in the USA and a global sales and service network.

About 6,450 employees work for Aurubis worldwide.

Business model

The Aurubis Group’s business model links the production and processing of copper. The necessary raw materials are purchased, as the company doesn’t have its own mines or stakes in mines. Aurubis primarily processes copper concentrates that are mined from ores and sourced on the global market. The processing of purchased intermediates, copper scrap and other metal-bearing recycling materials plays an important role as well.

The product portfolio mainly comprises standard and specialty products made of copper and copper alloys. These include copper cathodes, the product format traded on the international metal exchanges. They are the starting product for fabricating additional copper products, but they can also be sold directly. Aurubis processes copper into continuous cast copper wire rod, shapes, rolled products, strip, specialty wire and profiles.

Other elements found in copper raw materials are processed into additional products, in particular precious metals, sulfuric acid and iron silicate.

Aurubis’ direct customers include companies in thecopper semis industry, the electrical and electronics sector, the chemical industry and suppliers in renewable energies, construction and the automotive business.

Business model: integrating copper production and processing

Chart: Business model: integrating copper production and processing

Group structure

The Aurubis Group’s organizational structure is oriented towards its underlying business model. The Group’s organizational structure is made up of two operating Business Units (BUs): BU Primary Copper and BU Copper Products. The segment reporting pursuant to IFRS 8 is also based on this structure.

BU Primary Copper is made up of the production facilities for processing copper concentrates and producing copper cathodes at the Hamburg and Pirdop sites. Furthermore, the precious metals division in Hamburg, which is centralized for the entire Group, is part of this BU.

BU Copper Products produces and markets continuous cast wire rod, continuous cast shapes, rolled products and specialty products. From an organizational perspective, the product business is divided into the following Business Lines (BLs): Rod & Shapes, Flat Rolled Products, Bars & Profiles and Marketing Cathodes. Recycling is also part of this BU within the organization.

The main sites are Hamburg, Lünen, Stolberg, Emmerich (Germany), Olen (Belgium), Zutphen (Netherlands), Pori (Finland), Avellino (Italy) and Buffalo (USA). Processing centers in the United Kingdom, Slovakia and Italy, as well as a global sales and distribution network, complete the product business.

Group-wide functions support the operating Business Units. The Supply Chain Management division, which is responsible for raw material management, as well as the sale of sulfuric acid and other specialty products across the Group, should be emphasized in particular.

A list of investments pursuant to Section 313 (2) German Commercial Code (HGB) as at September 30, 2016 is provided in the notes to the financial statements.

Significant parameters relevant to the business

The significant parameters specific to the business are the treatment and refining charges for raw materials, the copper price, cathode premiums and product surcharges for copper products, as well as sales revenues for sulfuric acid. Moreover, efficient metal gains in our facilities also lead to an earnings effect.

The copper price is set first and foremost on the London Metal Exchange (LME), which facilitates physical transactions, hedging and investment business. The price represents a benchmark beyond exchange trading, and is the basis for establishing prices in the raw material and product business.

Treatment and refining charges (TC/RCs) are negotiated with suppliers when purchasing copper-bearing raw materials. The TC/RC trend depends on the supply and demand structure on the global markets. TC/RCs are essentially surcharges on the purchase price of the metals, that are charged for turning these raw materials into the commodity exchange product – copper cathodes – as well as other metals.

The metal exchange and market quotation for copper serves as the price basis for our copper product sales. The Aurubis cathode premium and product surcharges, which are charged for converting cathodes into copper products, are also part of the sales price.

External factors that also influence business development include economic performance in key countries and activities on the international financial markets; the political, legal and societal conditions; changes in the exchange rate and interest rate level; and the situation on our relevant markets.

Pricing along the value chain

Chart: Pricing along the value chain