Aurubis says strong financial results reflect 'robust' business model

Aurubis AG, headquartered in Hamburg, Germany, says it has generated operating earnings before taxes (EBT) of 133 million euros in the first nine months of its fiscal year 2019/20 fiscal year, despite the impacts of the coronavirus pandemic, exceeding the same period of the previous year, when EBT were 125 million euros.

Executive Board Chairman Roland Harings says in the company’s quarterly report: “The past quarter was very challenging with regard to external factors due to the global coronavirus crisis.

“Nevertheless, the commitment, flexibility and discipline of our employees, together with agile crisis management, ensured that we kept coronavirus infection numbers at a very low level at Aurubis and continued production at our smelter sites largely unaffected. Furthermore, the robust nature of our business model has proven itself once again during the pandemic, a fact that is reflected in the strong result.”

He adds, “However, Aurubis has to be more cost-conscious in the future, so we will continue implementing our cost reduction program in the next several months.”

The company says it “substantially increased concentrate throughput, recovered more metals at good prices and benefited from significantly higher refining charges for copper scrap” relative to the same time period last year.

Following the formal closing of the Metallo transaction May 29, the Metallo sites in Beerse, Belgium, and Berango, Spain, were included in Aurubis AG’s consolidated financial statements for the first time in June.

The group generated 8,896 million euros in revenue during the first nine months of fiscal year 2019/20 compared with 8,681 million euros for the previous year, which Aurubis attributes to higher precious metal prices. In contrast, lower sales of rod, shapes and flat-rolled products had a negative impact, according to the company, as did lower sulfuric acid revenues arising from reduced sales prices.

Operating return on capital employed (ROCE), taking operating earnings before interest and taxes of the last four quarters into consideration, improved year over year to 8.5 percent from 7.3 percent, despite the build-up of higher inventories of input materials to secure supply for the smelter network.

The company says its net cash flow of 166 million euros as of June 30 was “significantly above the low prior-year level” of negative 240 million euros because of precious metal sales at increased prices and cathode sales to Asia.

Operating EBT for Aurubis’ Metal Refining & Processing (MRP) segment amounted to 194 million euros during the reporting period, up significantly on the previous year’s 176 million euros.

A planned maintenance shutdown at the company’s Hamburg site in Q1 2019/20 had an impact of approximately € 34 million on this segment’s result. In the previous year, planned and unplanned shutdowns had a negative impact of about 40 million euros, according to the company.

Aurubis’ Flat Rolled Products (FRP) segment did not generate operating earnings before taxes (EBT) in the first nine months of the fiscal year. Although sales volumes were much lower than the previous year, losses have been avoided through cost management, the company says.

The company says it is negotiating the sale of its FRP segment.

Since mid-March, COVID-19-related measures have affected mines’ copper concentrate output in South America, sometimes resulting in production limitations, according to Aurubis.

Logistical delays concerning the transport and loading of concentrates in important transshipment ports also affected the company.

Aurubis credits a diversified supplier portfolio, active raw material management and timely spot market purchases for its ability to supply its smelter network during the period.

“After a stable, high-level trend in the first half of 2019/20, refining charges for copper scrap came under pressure at the start of Q3,” Aurubis notes in its quarterly report. “Impacts on economic activity due to COVID-19, as well as the weaker copper price, led to a lower supply of recycling materials in Europe and the U.S. At the end of the reporting period, the supply on the copper scrap market improved and, accompanied by the easing of coronavirus measures and a significantly higher copper price, caused refining charges to stabilize. During the reporting period, all production facilities were sufficiently supplied with copper scrap at conditions above the previous year.”

Aurubis says it assumes it will be able to supply its facilities with recyclables at good conditions until the end of the fiscal year at the end of September. Ongoing or additional reductions in economic activity related to COVID-19 and a decline in metal prices could negatively affect scrap supply, leading to lower refining charges, the company adds.

The cathode market saw stable demand in the first half of 2019/20, according to Aurubis. While spot premiums in Europe were stable, quotations in Shanghai declined because of the coronavirus pandemic. After much of the copper processing industry in China resumed production in March, that country’s copper demand recovered noticeably in Q3 2019/20. Aurubis says it took advantage of high Chinese demand for refined copper and sold more copper cathodes in Asia.

To finance its acquisition of Metallo and to serve other company needs, Aurubis says it placed a Schuldschein loan for 400 million euros with an environmental, social and corporate governance component for the first time June 24. The interest rate of the Schuldschein loan is directly tied to the rating Aurubis receives from the sustainability agency EcoVadis, the company says.

Other developments during the quarter included the July 15 signing of a purchase agreement for the software development company Azeti GmbH, Berlin, which develops and markets an internet-of-things platform that integrates and evaluates production data.

July 29, the Aurubis AG supervisory board appointed Heiko Arnold as the company’s new chief operating officer, which is effective Aug. 15. Arnold will be responsible for the production plants, the continuous improvement of operating processes, environmental protection and occupational health and safety. Former Chief Operating Officer Thomas Bünger will become Chief Technology Officer, concentrating on projects to further develop innovative metallurgical processes to expand the multimetal business and overseeing the Research & Development division, according to the company.

The company's full earnings report for the first nine months of its 2019/20 fiscal year is available here.