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. The manufacturing of precious metals and specialty products completes our product range.

The company’s headquarter, 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 of Europe, Aurubis also has a production site in the US and a global sales and service network.

About 6,500 employees work for Aurubis worldwide.

Business model

The Aurubis Group’s current business model, which was also relevant for the 2016/17 financial year, 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. In further processing, Aurubis has manufacturing capabilities for continuous cast copper wire rod, continuous cast shapes, rolled products, strip, specialty wire and profiles.

Additional products result from the processing of copper by-elements contained in the raw materials. In particular, this includes precious metals, sulfuric acid and iron silicate.

Aurubis’ direct customers include companies from the copper semis industry, the electrical and electronics sector and the chemical industry as well as suppliers from the renewable energies, construction and automotive sectors.

In fiscal year 2016/17, a comprehensive development process resulted in our Vision 2025, which was presented at the Annual General Meeting on March 2, 2017. This resulted in a business model, which expands the previous model. In this connection, Aurubis continues to position itself along the value chain, but is expanding the focus on copper with a broader multi-metal approach. In the future this means that in addition to copper, other metals will be extracted from purchased raw materials and intermediate products, and processed into value-added saleable products.

Business model in fiscal year 2016/17: Integration of copper production and copper processing

Chart: Business model in fiscal year 2016/17: Integration of copper production and copper processing

Group structure

In fiscal year 2016/17, the Aurubis Group’s organizational structure was oriented to the underlying copper-based business model. Two operational Business Units (BUs) – BU Primary Copper and BU Copper Products – formed the Group’s basic organizational structure, on which basis the segment reporting according to IFRS 8 for fiscal year 2016/17 took place.

  • BU Primary Copper mainly combines the production facilities for processing copper concentrates and copper scrap, as well as the production of copper cathodes. This BU is also responsible for the production and marketing of precious metals, sulfuric acid and iron silicate.
  • BU Copper Products produces and markets continuous cast wire rod, continuous cast shapes, pre-rolled and finished strip as well as specialty products. From an organizational perspective, the product business is divided into Business Lines (BLs) Rod & Shapes, Flat Rolled Products, Bars & Profiles and Marketing Cathodes. Recycling is also organizationally assigned to the BU.

The primary locations continued to be Hamburg, Lünen, Stolberg (Germany), Olen (Belgium), Zutphen (Netherlands), Pori (Finland), Avellino (Italy) and Buffalo (USA). We also own a 60 % share of Deutsche Giessdraht GmbH in Emmerich, and a 50 % share of Schwermetall Halbzeugwerk GmbH in Stolberg. 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 supported the operating Business Units. The Supply Chain Management division, which was 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 shareholdings pursuant to Section 313 (2) of the German Commercial Code (HGB) as at September 30, 2017 is provided in the notes to the financial statements.

Since October 1, 2017, Aurubis has had a new organizational structure, which will also be reflected in the reporting for the new fiscal year 2017/18. The previous division into the Business Units Primary Copper and Copper Products will lapse. In the future, reporting will be based on the two operational Business Segments Metal Refining & Processing and Flat Rolled Products (FRP).

The Segment Metal Refining & Processing includes the Commercial and Operations divisions. The Commercial division combines all market-relevant organizational units, and is therefore responsible for the purchase of raw materials and the sales of products. The Operations division is responsible for the production of all basic products and metals, as well as for their further processing into other products, such as continuous cast wire rod and continuous cast shapes.

The second Segment, Flat Rolled Products, will continue in its previous Business Line structure.

The organizational core, which is geared toward supporting the value chain, will be framed by the central functions Corporate Development and Technology, as well as by supporting units such as Human Resources and Finance & Controlling.

Significant influencing factors relevant to the business

The significant factors specific to the business are the treatment and refining charges for raw materials, the copper price, copper premiums and shape surcharges for copper products as well as sales revenues for sulfuric acid. Furthermore, efficient metal gains in our plants can lead to effects on earnings.

The copper price is formed 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 are negotiated with suppliers when purchasing copper-bearing raw materials. Their development depends on the respective supply and demand structure on the global markets. Essentially, this refers to discounts on the purchase price for turning 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 premium and shape surcharges, which are charged for converting cathodes into copper products, are also part of the sales price.

External factors, which also influence business development, include first and foremost the 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