Business performance in the Business Units

Business Unit Primary Copper

Key figures

T 020
 
in € million 2016/17
operating
2015/16
operating
     
Revenues 6,320 5,325
EBIT 241 154
EBT 236 143
Capital expenditure 124 104
Depreciation and amortization – 86 – 83
Operating ROCE 26.6 % 16.4 %
Capital employed 905 939
Avg. number of employees 2,780 2,750

Business performance and earnings trend

The main factors driving earnings in the BU Primary Copper are 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.

In fiscal year 2016/17, the BU Primary Copper generated operating earnings that were significantly above the previous year’s earnings. The previous year was influenced by the major shutdown and associated capacity optimization at the Pirdop site, which had a positive effect during the ongoing fiscal year.

An advantageous input mix, good availability of copper concentrates and higher refining charges for copper scrap contributed positively to the Business Unit’s earnings improvement. A higher metal gain with higher metal prices, as well as the ongoing strength of the US dollar, also had a positive effect.

In total, the BU Primary Copper generated operating earnings before taxes (EBT) of € 236 million in the fiscal year, exceeding the previous year’s figure by € 93 million. This was in line with the forecast made in the Annual Report 2015/16.

At 26.6 % (previous year: 16.4 %), the ROCE also showed significant improvement, and was also in line with the forecast.

At € 6,320 million, the BU’s revenues were € 995 million above the previous year. This was primarily due to higher metal prices.

Raw material markets

Satisfactory treatment and refining charges for copper concentrates

The international copper concentrate market was characterized by an overall satisfactory supply during the past fiscal year. At the beginning of the fiscal year, the availability of copper concentrates on the spot market declined, particularly due to the inventory build-up at Chinese smelters. A market recovery began due to the end of strikes and export restrictions, but only in the course of the fiscal year. Treatment and refining charges in spot business remained under the level of long-term contracts, and were at a somewhat lower level compared to the previous year.

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.

Good availability of copper scrap leads to higher refining charges

Metal prices had increased since the beginning of the fiscal year, particularly the copper price, and this positively influenced copper scrap availability and lead to higher refining charges. Our facilities were completely supplied under good conditions due to the higher copper scrap supply.

Slight recovery on the sulfuric acid markets

At the beginning of the fiscal year, the market for sulfuric acid was initially characterized by sustained oversupply in light of weak global demand. However, supply decreased by the end of the first half-year as a result of shutdowns at smelters and sulfur burners, which led to an increase in prices. The positive price trend on the spot market continued at a low level until the end of the fiscal year.

Production

Throughput and output volumes exceeded those of the previous year, in particular due to very good performance in Pirdop

A good supply of copper concentrates and recycling materials ensured that our production facilities were utilized during the entire fiscal year. The BU Primary Copper processed a total of approximately 2.4 million t of copper concentrate (previous year: 2.2 million t), more than in all previous fiscal years. The copper scrap input in the BU was 96,000 t (previous year: 91,000 t).

Concentrate throughput

Graphic: Concentrate throughput

The Hamburg site processed approximately 1.1 million t of copper concentrate, thus reaching the prior-year level despite a scheduled shutdown. The throughput of 1.3 million t at the Pirdop site was significantly above the previous year’s figure (1.0 million t). On the one hand, this was due to the negative impact of the major shutdown in the previous year; on the other hand, this was implemented as an optimization measure and had a positive effect on production.

Corresponding to the concentrate throughput, the sulfuric acid output was 2.4 million t, above the previous year’s level of 2.1 million t.

At 624,000 t, cathode output in the BU Primary Copper was higher than the previous year’s figure (584,000 t).

The tankhouse in Hamburg produced 394,000 t of cathodes during the fiscal year (previous year: 370,000 t). The tankhouse in Pirdop generated an output volume of 230,000 t (previous year: 214,000 t).

The use of input materials containing precious metals led to a very good silver output of 1,071 t, significantly above the previous year’s level of 961 t. Gold output was at the previous year’s level of 42 t.

Silver output

Graphic: Silver output

Gold output

Capital expenditure

Capital expenditure in the BU Primary Copper amounted to € 124 million in the past fiscal year (previous year: € 104 million).

The focus of the capital expenditure was on long-term electricity sourcing. Furthermore, investments were made in measures within the framework of the scheduled maintenance shutdown in Hamburg, in a project to supply district heat, as well as in the ongoing optimization of our Bulgaria site. In addition, investments were made to improve environmental protection and the infrastructure at the sites.

Capital expenditure in the BU Primary Copper

Graphic: Capital expenditure in the BU Primary Copper

Business Unit Copper Products

Key figures

T 021
 
in € million 2016/17
operating
2015/16
operating
     
Total revenue 9,149 7,531
EBIT 105 106
EBT 100 101
Capital expenditure 50 40
Depreciation and amortization – 44 – 44
Operating ROCE 9.6 % 9.4 %
Capital employed 1,101 1,130
Number of employees (average) 3,397 3,335
     
Certain prior-year figures have been adjusted.

Business performance and earnings trend

In addition to the copper premium, a significant earnings component within BU Copper Products is the so-called shape surcharge, which is levied for processing copper cathodes into copper products.

In the recycling business, earnings are generated above all through refining charges (deduction from the purchase price of the metal) and the additional metal yield.

Overall, BU Copper Products generated operating earnings before taxes (EBT) of € 100 million in fiscal year 2016/17 (previous year: € 101 million). The operating EBT was therefore at the previous year’s level and not slightly over the 2015/16 operating EBT, as forecast.

With 9.6 %, the ROCE was at the previous year’s level (previous year: 9.4 %) and therefore remained within the scope of the forecast.

The following developments contributed to the BU Copper Products’ result:

At US$ 86/t, the copper premium for 2017 was lower than in the previous year (US$ 92/t).

After a slow start in the first quarter of the fiscal year, sales of continuous cast wire rod developed positively again in the course of the year. The previous year’s level was exceeded significantly for shapes. Surcharges for both were above the previous year’s level. In Business Line Flat Rolled Products, the sales volume increased perceptibly in comparison with the previous year.

The recycling business in Lünen and Olen profited from a good supply of copper scrap and other recycling raw materials with correspondingly high refining charges in the reporting year.

Product markets

The fiscal year was characterized by a very satisfying market environment for shapes and by restrained sales of wire rod. The latter was influenced by inventory corrections in the cable sector, which caused demand to remain below our expectations. The main reason for this was a change in standards for cable within the European Union with regard to their fire resistance, which lead to uncertainties on the part of customers. However, this effect is temporary and we expect a stable market in the following year. Geopolitical influences in the Middle East additionally caused incoming orders to be lower than expected. In contrast to this, we were able to record very positive sales of shapes.

Demand for flat rolled products developed positively in the markets significant for us. The automotive and electrical industries provided strong growth momentum. Only in the radiator segment did the market recovery not occur as desired.

Recycling markets

The increasing metal prices positively influenced copper scrap availability, leading to higher refining charges. We were able to fully supply our facilities at attractive conditions due to the higher copper scrap supply.

Competition for complex recycling materials increased, particularly in Asia. This raw material category includes industrial residues and electrical and electronic scrap, for example. These materials have a lower copper content and contain additional nonferrous metals, as well as precious metals.

Throughput and output

Copper scrap input increases significantly

Input of copper scrap in the BU Copper Products took place mainly in our recycling plant in Lünen and took the good market availability into account. It was at approximately 176,000 t during the fiscal year, surpassing the comparative volume of the previous year (162,000 t) significantly.

Complex recycling material input in the Kayser Recycling System (KRS) at the Lünen site increased to 270,000 t (previous year: 254,000 t).

Copper scrap input in the Group

Graphic: Copper scrap input in the Group

AURUBIS ROD output below previous year’s figure

Due to demand, the Group’s four AURUBIS ROD plants produced 719,000 t in fiscal year 2016/17. This corresponds to a decline of 5 % compared to the previous year (previous year: 758,000 t).

Continuous cast wire rod output

Graphic: Continuous cast wire rod output

Significantly higher output in AURUBIS SHAPES

All in all, AURUBIS SHAPES had an output of 190,000 t during the fiscal year. This represented a significant increase of 11 % compared to the previous year (172,000 t).

Continuous cast shape output

Flat rolled products increased

At 220,000 t, the output of flat rolled products in fiscal year 2016/17 was about 6 % higher than in the previous year (208,000 t). All of the sites continued to work on implementing the programs to improve efficiency and to enhance productivity and quality.

Bars and profiles output stable

At 12,500 t, output for bars and profiles was in fiscal year 2016/17 on a par with the previous year’s level of 12,400 t.

Cathode output surpasses previous year’s level

Cathode output in the BU Copper Products was 532,000 t in fiscal year 2016/17 and therefore approximately 6 % higher than in the previous year (499,000 t).

Cathode output in the Group

Graphic: Cathode output in the Group

Cathode output in the Group by sites

Graphic: Cathode output in the Group by sites

Capital expenditure

Capital expenditure in the BU Copper Products was € 50 million in fiscal year 2016/17 (previous year: € 40 million). The focus of the capital expenditure was on long-term electricity sourcing. In addition, investments were made to improve the areas of efficiency, energy, environmental protection, product quality and infrastructure.

Capital expenditure in BU Copper Products

Graphic: Capital expenditure in BU Copper Products