Results of operations, financial position and net assets of Aurubis AG

General information

In order to supplement our Aurubis Group reporting, we explain the development of Aurubis AG in the following section. Aurubis AG is the parent company of the Aurubis Group and is based in Hamburg with production sites in Hamburg and Lünen. Apart from managing the Aurubis Group, the business activities of Aurubis AG also particularly include primary copper production and recycling, as well as copper product and precious metal production. The separate financial statements of Aurubis AG have been prepared in accordance with the requirements of the German Commercial Code (Handelsgesetzbuch, HGB) and the German Stock Corporation Act (Aktiengesetz, AktG). The primary differences to the Group financial statements prepared in accordance with IFRS principles are in the accounting treatment of fixed assets, the measurement of inventories, the measurement of financial instruments and the accounting treatment of pension provisions.

The Aurubis Group is managed across all companies at Group level through Business Units (BUs), using operating EBT and operating ROCE as the financial performance indicators. These indicators are also used for Aurubis AG’s operating activities, which are a significant component of the Group. To this extent, the development and forecast of the financial performance indicators at the Business Unit and Group levels at the same time represent the development and forecast for Aurubis AG as an individual company.

The analysis of the development for the financial performance indicators outlined above during the fiscal year and the related forecast for the following year are provided in the Economic Report and the Forecast Report for the entire Group. Statements regarding the risk situation and opportunities can be found in the Group’s Risk and Opportunity Report.

Results of operations

Development of the annual result and significant income statement items (HGB)

T 022
 
in € million 2016/17 2015/16
     
Revenues 7,511 6,709
Changes in inventories/own work capitalized – 42 53
Other operating income 76 71
Cost of materials –6,948 –6,302
Gross profit 597 531
 
Personnel expenses –240 –220
Depreciation and amortization of intangible assets and property, plant and equipment –51 – 48
Other operating expenses –159 –131
Operational result (EBIT) 147 132
 
Financial result 50 34
Result of normal business ¬activities (EBT) 197 166
 
Taxes –48 –32
 
Net income for the year 149 134

The business performance of Aurubis AG in the 2016/17 fiscal year was positively influenced in comparison to the previous year by higher refining charges on the copper scrap markets as well as by a metal yield slightly below that of the previous year, accompanied by higher metal prices. Concentrate throughput was at the previous year’s level; for treatment and refining charges, the strong US dollar had a particularly positive impact on the result. However, in contrast to the previous year, lower revenues for sulfuric acid were generated. Lower revenues from the sale of copper products due to reduced demand also had a negative impact on the result.

Development of Aurubis AG revenues by product groups

Graphic: Development of Aurubis AG revenues by product groups

Revenues increased by € 802 million to € 7,511 million during the reporting year (previous year: € 6,709 million). This development was primarily driven by higher sales revenues for copper-bearing and precious metal-bearing products due to pricing.

With a cost of materials ratio [cost of materials/(revenues + changes in inventories)] at the prior-year level, and taking into account the change in inventories, own work capitalized and other operating income, the gross profit increased by a total of € 66 million to € 597 million during the reporting year (previous year: € 531 million).

Personnel expenses increased in the past fiscal year by € 20 million to € 240 million (previous year: € 220 million). The increase was especially attributable to higher collective wage agreement rates and an increased number of employees.

Depreciation and amortization of fixed assets increased by € 3 million to € 51 million (previous year: € 48 million). The increase resulted particularly from completed investments in the area of technical equipment and machinery, as well as buildings.

Taking other operating expenses into account, the operational result (EBIT) therefore amounted to € 147 million (previous year: € 132 million).

The financial result for the reporting year was € 50 million (previous year: € 34 million). This includes dividends from subsidiaries of € 14 million (previous year: € 35 million) as well as write-ups of equity interests of € 55 million. Furthermore, write-ups of € 7 million with respect to securities classified as fixed assets were recorded in the period reported, due to factors related to the reporting date. The financial result also included net interest expenses of € 26 million.

After taking a tax expense of € 48 million (previous year: € 32 million) into account, annual net income amounted to € 149 million (previous year: € 134 million). At a level of 24 %, the effective tax rate was above that of the previous year (19 %) due to a change in the earnings structure.

With respect to the impact of the initial application of the Accounting Directive Implementation Act on the disclosures concerning the results of operations of Aurubis AG, we make reference to the explanations given in the notes to Aurubis AG’s separate financial statements.

Net assets

Fixed assets increased in the fiscal year by € 111 million to € 2,065 million (previous year: € 1,954 million). The increase resulted particularly from higher investments in intangible assets as well as write-ups of long-term financial assets.

The € 52 million decrease in inventories to € 753 million (previous year: € 805 million) resulted primarily from lower inventories of finished and intermediate products as at the balance sheet date.

Overall, total assets rose by € 189 million to € 3,743 million compared to the prior year. Therefore, the share of fixed assets was unchanged from the previous year at 55 % (previous year: 55 %), while inventories accounted for 20 % (previous year: 23 %) and receivables and other assets accounted for 11 % of total assets (previous year: 10 %).

Due to the result, equity increased by € 92 million to € 1,456 million (previous year: € 1,364 million). The equity ratio remained at the prior-year level of 39 %.

Provisions increased by a total of € 11 million to € 261 million. The growth was particularly due to higher pension provisions.

Bank borrowings decreased significantly by € 152 million to € 327 million (previous year: € 479 million). This was particularly attributable to the repayment of a bonded loan of € 136 million. Trade accounts payable increased by € 54 million to € 533 million due to factors related to the reporting date. Payables to affiliated companies primarily comprise borrowings, which increased within the context of normal financial transactions, from € 845 million to € 1,012 million. Other liabilities increased slightly from € 17 million to € 20 million.

Balance sheet structure of Aurubis AG

T 023
 
in % 9/30/2017 9/30/2016
     
Fixed assets 55 55
Inventories 20 23
Receivables, etc. 11 10
Cash and cash equivalents 14 12
     
  100 100
 
Equity 39 38
Provisions 7 7
Liabilities 54 55
     
  100 100

Aurubis uses assets under the terms of leasing agreements that are not recognized as assets in the balance sheet. Financial commitments deriving from leases amounted to € 10 million. Apart from this, financial commitments under long-term storage and handling agreements amounted to € 117 million.

Financial position

As at September 30, 2017, after including bank borrowings of € 327 million (previous year: € 479 million), receivables and payables to subsidiaries deriving from refinancing of € 830 million (previous year: € 615 million) and deducting cash and cash equivalents of € 519 million (previous year: € 433 million), net borrowings amounted to € 638 million (previous year: € 661 million).

Analysis of liquidity and funding

In the 2016/17 fiscal year, the net cash flow increased by € 115 million to € 186 million. The main reason for this was the reduction of working capital as a result of lower inventories.

The cash outflow for investments in fixed assets was € 108 million (previous year: € 43 million). Investments in intangible assets of € 55 million primarily involve a long-term electricity supply agreement. In the area of property, plant and equipment, investments were made not only in various infrastructure and improvement measures, but also in connection with a district heating project.

The cash inflow from financing activities of € 8 million (previous year: cash outflow of € 22 million) is primarily attributable to an increased take-up of loans from subsidiaries in the context of the existing cash pooling arrangements. An offsetting factor was the repayment of a bonded loan of € 136 million, due to maturity.

Cash and cash equivalents at the end of the reporting period amounted to € 519 million (previous year: € 433 million). In addition to cash and cash equivalents, Aurubis AG has unutilized credit line facilities and thus has adequate liquidity reserves. Furthermore, within the context of factoring agreements, Aurubis AG sells receivables without recourse as a financing instrument.

Capital expenditure

In the past fiscal year, investments of € 108 million were made at the Hamburg and Lünen sites (previous year: € 51 million). In addition to investments of € 50 million in a long-term electricity supply agreement, investments of € 5 million were made within the scope of the scheduled maintenance shutdown in the primary copper production sector, as well as € 4 million in a district heating delivery project. At the same time, investments were made in various infrastructure and improvement measures in the Hamburg and Lünen plants.