Supervisory Board Report
The Aurubis Group generated operating earnings before taxes (operating EBT) of € 213 million in fiscal year 2015/16. The accomplishments of the Executive Board, management and employees in every department deserve our acknowledgement once again.
High sales of wire rod and shapes products, improved treatment and refining charges for copper concentrates and the optimized input mix had a positive impact. The strong dollar also contributed to the result.
The result was negatively influenced in particular by the scheduled shutdown in Pirdop, a lower copper scrap supply, a surplus of sulfuric acid with corresponding price pressure, a lower metal yield with falling metal prices and a lower cathode premium.
Collaboration between the Supervisory Board and Executive Board
The joint target of the Executive Board and Supervisory Board is to increase the enterprise value of Aurubis AG and its Group companies in the long term.
The Executive Board notified the Supervisory Board regularly, promptly and comprehensively on all issues concerning the Company, both verbally and in two written reports per month. These issues included the corporate strategy, the planning process and important business transactions in the Company and the Group, the associated opportunities and risks, and issues of compliance.
With respect to Company management, the Supervisory Board and its committees closely supervised, carefully monitored and advised the Executive Board once again during fiscal year 2015/16, and performed the functions incumbent upon it by law, the Articles of Association and rules of procedure. The Supervisory Board is confident that the Company was managed lawfully and appropriately. The Supervisory Board was promptly and directly included in all decisions of fundamental importance for the Company, as explained in more detail below.
The Supervisory Board discussed in detail all transactions that were of importance for the Group on the basis of the Executive Board’s reports. The Supervisory Board agreed on the Executive Board’s suggested resolutions after thorough review and consultation.
The Supervisory Board continuously received detailed information about the Group’s earnings and employment developments, the individual Business Units and the Company’s financial position. The Executive Board provided extensive explanation of any deviations from established plans in terms of business performance, discussed their underlying causes and initiated measures in conjunction with the Supervisory Board.
The Chairman of the Supervisory Board was also in contact with the Executive Board, in particular the Executive Board Chairman, outside meetings, and communicated with them about current developments.
Consultations in the Supervisory Board
Four scheduled Supervisory Board meetings (on December 10, 2015; February 23, 2016; June 7, 2016; and September 28, 2016) and one extraordinary Supervisory Board meeting (on October 2, 2015) were held in fiscal year 2015/16. Two resolutions were adopted by written consent in lieu of a meeting. Dr. Faubel was unable to participate in the extraordinary meeting (October 2, 2015) and was excused. In the Supervisory Board meeting of February 23, 2016, Prof. Vahrenholt participated by telephone due to illness. The average participation rate for Supervisory Board members was over 98 %. The Executive Board was not present for part of one Supervisory Board meeting. Dr. Drouven’s mandate was put on hold until October 31, 2015 due to his dispatch to the Executive Board.
Meeting topics which arose regularly for Supervisory Board consultation included the performance of the business, Group human resources, development of results and the raw material, foreign exchange and energy markets. The Supervisory Board also dealt with the financial situation and the status of capital expenditure. In particular, the Supervisory Board oversaw the planning of the Future Complex Metallurgy (FCM) and Metallurgical Slag Optimization (MSO) projects, the earnings trend of Business Line Flat Rolled products and various optimization and development projects (Step Up) that were presented by employees at the first and second management levels below the Executive Board. The chairmen of the Personnel Committee, the Audit Committee and the Technology Committee also reported at meetings on the committees’ work, suggestions made and the results achieved.
In the Supervisory Board’s extraordinary meeting of October 2, 2015, Mr. Schachler was appointed Executive Board Chairman from April 1, 2016 and Ms. Renate Hold-Yilmaz was elected Deputy Chairwoman of the Supervisory Board. Furthermore, the Supervisory Board filled the positions in the Conciliation, Personnel and Audit Committees that had opened up due to the retirement of the former Deputy Chairman of the Supervisory Board, Mr. Grundmann. The Supervisory Board adopted a resolution, by written consent in lieu of a meeting, to appoint Mr. Erwin Faust as Executive Board Spokesman until Mr. Schachler took office. In the same process, the responsibilities of the individual Executive Board members were redistributed on an interim basis until Mr. Schachler took office. Likewise, the Supervisory Board passed a resolution, using equitable discretion, to grant the two Executive Board members special compensation for their temporary additional responsibilities.
In the meeting of December 10, 2015, the Supervisory Board determined compensation levels for the Executive Board members for fiscal year 2014/15 contingent on the established objectives. Details are explained as part of this Annual Report in the Compensation Report.
In the same meeting, consultations focused on reviewing the consolidated financial statements and the separate financial statements for Aurubis AG for 2014/15, including the corporate governance report, and the preparations for the 2016 Annual General Meeting.
In the meantime, Mr. Schachler had notified the Company that he would only be available to serve as Executive Board Chairman starting July 1, 2016. Accordingly, the Supervisory Board made the required resolutions to accommodate the new situation. In this context, the Supervisory Board made a modest increase to the Executive Board’s special compensation. The Executive Board reported on the development of Business Line Flat Rolled Products and the planning for the FCM project. Furthermore, the Supervisory Board approved the amendment to the “Catalogue of Transactions Requiring Approval”.
In the meeting of February 23, 2016, the Supervisory Board addressed the results of operations following the end of the first quarter of the fiscal year, as well as the developments in Business Line Flat Rolled Products. The employee responsible for monitoring Step Up program provided the Supervisory Board with a general status overview of the optimization and development projects established in the scope of this program.
The chairman of the Technology Committee reported on the committee’s first meeting and addressed the status of the FCM project planning and the SCOPE (Supply Chain Optimization and Excellence) project’s degree of implementation, among other topics. The Supervisory Board approved a long-term contract with a Bulgarian service provider that encompasses the construction of tank capacities and transshipment facilities for external sulfuric acid logistics in the Burgas, Bulgaria harbor starting in late 2017.
In the meeting of June 7, 2016, the Supervisory Board discussed the progress of the shutdown in Pirdop and the effects of a lower concentrate throughput on the Aurubis Group’s earnings. The Executive Board and the respective project managers reported to the Supervisory Board on the status of the plans for the MSO and FCM projects.
The Supervisory Board approved the proposal for Aurubis AG to supply parts of the city of Hamburg with district heating (Hamburg District Heating project). The permit is subject to the conditions that the expected public funding is received and that a corresponding supply line is built. The head of the Legal Affairs Department communicated detailed updates to the Supervisory Board regarding the Market Abuse Regulation and its implementation.
The Supervisory Board meeting of September 28, 2016 took place at the Pirdop site in Bulgaria. Significant investments have been made at this site in recent years, and the Supervisory Board took the opportunity to have intensive discussions about the site during their visit. An extensive tour of the site enabled the Supervisory Board to witness the plant’s successful status firsthand.
The MSO and FCM projects were key topics at the Supervisory Board meeting once again. The Supervisory Board approved the Group’s investment and financial planning during this meeting. Furthermore, they discussed the budget for the next fiscal year and established the target EBT for Executive Board compensation.
The Supervisory Board set up a total of five committees, which effectively support the work done in the meetings, to fulfill its duties in fiscal year 2015/16. The committees prepared the Supervisory Board’s resolutions and the topics to be considered in the meetings. The Conciliation Committee in accordance with Section 27 (3) Law on Co-determination (MitbestG) did not meet during the reporting year.
General statements on the composition and working procedures of the Supervisory Board and its committees can be found in this year’s declaration on corporate governance as part of Aurubis AG’s Management Report.
All of the members participated in all of the committee meetings.
Personnel Committee work
The Personnel Committee met twice during the reporting period. During these meetings, it dealt with the postponement of Mr. Schachler’s start at the Company, going on to develop the recommendation to appoint Mr. Faust as Executive Board Spokesman for the interim period, a new temporary division of responsibilities and a recommendation for the arrangement of special compensation for the Executive Board.
Audit Committee work
The Audit Committee met four times in the reporting period to review the quarterly reports, the separate financial statements for Aurubis AG and the consolidated financial statements for the past fiscal year, and it discussed them with the Executive Board. The Audit Committee also addressed the monitoring of accounting processes, the effectiveness of the internal control and auditing system, and compliance management in the Group. In all of its meetings, the committee discussed the Group’s earnings trend.
The Audit Committee Chairman, Dr. Ernst Wortberg, has special expertise and experience in the application of accounting principles and internal control procedures. He is independent and not a former member of the Company’s Executive Board.
Apart from the appointment of the auditors and the agreement of the fee with the auditors, the committee established the focuses of the annual 2015/16 audit, specifically:
- Reviewing the derivation of the operating result
- Reviewing the measurement of the carrying amounts of Aurubis investments
- Reviewing the introduction of Aurubis Bulgaria AD’s SAP Treasury System
The Audit Committee furthermore monitored the independence of the auditors, obtained declarations of independence from them as recommended by the German Corporate Governance Code and addressed the additional services performed by the auditors. In this regard, the designated auditors were obligated to inform the chairman of the Audit Committee without delay about any possible grounds for exclusion or lack of impartiality arising during the audit.
The Audit Committee authorized the Executive Board to commission the auditors of the annual financial statements with permissible non-audit services, to a limited extent, starting October 1, 2016.
The auditors’ representatives attended one Audit Committee meeting and reported on the audit of the annual accounts.
Technology Committee work
The Technology Committee met twice during the reporting period. In addition to overseeing various optimization and development projects, the committee was primarily involved with the MSO and FCM projects. The Executive Board and project managers presented the current status of the technical planning for these two projects to the committee. Apart from the technical concepts, the committee also discussed the respective investment plans and the profitability calculations of the individual projects.
Corporate governance and Declaration of Conformity
The regular effectiveness review was performed by the Supervisory Board at its meeting of September 28, 2016. The Supervisory Board confirmed its effectiveness after extensive discussion.
The Executive Board reports on corporate governance at Aurubis AG, also on behalf of the Supervisory Board, in accordance with Section 3.10 of the German Corporate Governance Code in the declaration and report on corporate governance, which are parts of the Management Report.
On November 4, 2016 the Executive Board and Supervisory Board issued the updated Declaration of Conformity to the Corporate Governance Code in accordance with Section 161 German Stock Corporation Act (AktG) and made it permanently accessible to the public at www.aurubis.com. Aurubis AG complies with the code recommendations with two exceptions. Additional information can be found in the Declaration of Conformity.
Conflicts of interest
There were no conflicts of interest among Executive Board or Supervisory Board members that should have been disclosed to the Supervisory Board or announced at the Annual General Meeting. There were no significant transactions with an Executive Board member or parties related to an Executive Board member.
Audit of the separate financial statements of Aurubis AG and the consolidated financial statements
The Company’s financial statements prepared by the Executive Board in accordance with the German GAAP, the consolidated financial statements prepared in accordance with IFRS (International Financial Reporting Standards) for the fiscal year from October 1, 2015 to September 30, 2016 and the Combined Management Report for the Company and the Group have been audited by PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft, Hamburg, in accordance with the resolution passed at the Company’s Annual General Meeting on February 24, 2016 and their subsequent appointment as auditors by the Supervisory Board. The auditor responsible was Mr. Matthias Kirschke, who audited the Group and the Company in this capacity for the fourth year in a row. The auditors issued an unqualified auditors’ report in each case.
The meeting of the Supervisory Board to approve the financial statements was held on December 13, 2016. All members of the Supervisory Board received copies of the financial statements and audit reports as well as the Executive Board’s recommendation on the appropriation of net earnings and all other documents in good time before this meeting. These documents were discussed in detail at the Supervisory Board meeting to approve the financial statements. The auditors participated in this meeting, reporting in detail on how the audit had been performed and on their main audit findings, and they were available to provide the Supervisory Board with further information, discuss the documents and make additional comments.
Following a detailed discussion regarding the auditors’ findings and a thorough consideration of the auditors’ report and the recommendation of the Executive Board on the appropriation of net income, and on the basis of its own review of and discussion on the separate financial statements of Aurubis AG, the consolidated financial statements and the Combined Management Report for the Company and the Group, the Supervisory Board concurred with the results of the audit. The Supervisory Board concluded that no objections needed to be raised and, in accordance with the recommendations of the Audit Committee, approved the separate financial statements of Aurubis AG, which went on to be adopted, as well as the consolidated financial statements and the Combined Management Report at the meeting on the financial statements. The Supervisory Board concurred with the Executive Board’s recommendation on the utilization of the unappropriated earnings.
Changes in the Supervisory Board and Executive Board
Dr. Bernd Drouven was dispatched to the Executive Board from November 1, 2014 to October 31, 2015 pursuant to Section 105 (2) German Stock Corporation Act (AktG) and was appointed Executive Board Chairman. His Supervisory Board mandate was put on hold during this period. Dr. Drouven has returned to being an active member of the Supervisory Board since November 1, 2015. The Supervisory Board thanks Dr. Drouven for his willingness to step in and for his strong commitment to Aurubis AG. Mr. Erwin Faust served as Executive Board Spokesman from November 1, 2015 to June 30, 2016 and managed the Group with Dr. Stefan Boel on an interim basis. Mr. Jürgen Schachler became the new Executive Board Chairman of Aurubis AG on July 1, 2016.
Mr. Ralf Winterfeldt succeeded Mr. Hans-Jürgen Grundmann in the Supervisory Board on October 1, 2015. The Supervisory Board elected Ms. Renate Hold-Yilmaz as the new Deputy Supervisory Board Chairwoman on October 2, 2015.
Hamburg, December 2016
The Supervisory Board
Prof. Dr.-Ing. Heinz Jörg Fuhrmann