- Operating EBT at € 91 million in first half-year
- Effects of coronavirus pandemic successfully absorbed, but markets remain strained
- Full-year forecast confirmed
- With acquisition of recycler Metallo, Aurubis continues to implement multi-metal strategy with purpose
Despite the worldwide spread of the coronavirus, with extreme effects for the global economy, the Aurubis Group generated operating earnings before taxes (EBT) of € 91 million in the first half of fiscal year 2019/20 (previous year: € 103 million). Aurubis was able to balance out the reduced supply on the global raw material markets with flexible material planning and a broadly diversified supplier portfolio, ensuring that all production sites had a sufficient supply of concentrates and recycling materials. Stringent cost management nearly compensated for weaker demand for flat rolled products.
Robust business model and solid financial foundation
The robust business model and strong balance sheet position with a stable liquidity situation have proven to be an advantage during the crisis: in accordance with the resolution passed at the Aurubis AG Annual General Meeting on February 27, 2020, the company paid out a dividend of € 1.25 per share. The share buyback program Aurubis started on March 19, 2020 with the intention of acquiring shares at a total purchase price of € 200 million continues. Investments in the Group sites and the implementation of the multi-metal strategy are proceeding unchanged. The company has been able to avoid introducing short-time work thus far.
“Considering the COVID-19 pandemic, we have steered Aurubis through the crisis well so far. By implementing measures very early on, we were able to effectively protect our employees’ health, prevent infection chains from forming, and continue production without limitations,” Roland Harings, Aurubis AG Executive Board Chairman, assessed the first six months of fiscal year 2019/20. “Despite the increasingly challenging raw material and sales markets, we can confirm our forecast for fiscal year 2019/20 thanks to our very robust business model and strong starting position in particular.”
Concentrate throughput reduced in Q1 due to planned shutdown, good again in Q2
A planned maintenance shutdown at the Hamburg plant in Q1 of the fiscal year led to a lower concentrate throughput and, consequently, to a result of € 31 million in Q1. Production at all of the sites was at a good level in Q2. The result in the prior-year period was strained in the amount of approximately € 25 million due to unplanned shutdowns.
Lower sales prices for sulfuric acid and significantly weaker demand for shapes and flat rolled products negatively impacted the result of the first half-year. In the previous year, the recognition of a receivable of € 20 million from the rejected sale of Segment Flat Rolled Products (FRP) increased the operating result.
A substantially higher throughput in the KRS recycling facility in Lünen had positive effects on EBT. Refining charges for copper scrap were also considerably higher compared to the previous year. High precious metal prices and a higher metal result bolstered the 2019/20 half-year result.
Due first and foremost to higher precious metal prices, revenues rose to € 6,013 million (previous year: € 5,660 million) in the first half of fiscal year 2019/20. Operating ROCE (taking the operating EBIT of the last four quarters into consideration) decreased to 7.5 % (previous year: 9.2 %). This was due to the one-off effects at the end of the last fiscal year as well as the planned maintenance shutdown at the Hamburg plant. At € -25 million as at March 31, 2020, the net cash flow was significantly above the weak prior-year level (€ -334 million), which had been negatively influenced by high inventories in preparation for the planned shutdowns in 2018/19.
Aurubis achieved EBT of € 43 million from continuing operations on an IFRS basis (previous year: € 136 million).*
Outlook: markets becoming more challenging, Aurubis working intensively on implementation of multi-metal strategy
Despite a weakening supply on the markets, Aurubis still expects to source a sufficient supply on the raw material markets for concentrates and copper scrap. Though treatment and refining charges for concentrates are under pressure, refining charges for copper scrap are still at a high level despite declining slightly. On the sales markets for copper products, the negative effects of ongoing production shutdowns in customer industries are intensifying. Aurubis assumes that demand for wire rod and shapes products will be weaker in the next few months.
In the long term, however, Aurubis looks to the future positively: the acquisition of the Spanish-Belgian recycling company Metallo for a price of € 380 million, which the EU antitrust authorities unconditionally approved on May 4, 2020, will give Aurubis new growth momentum and strengthen its path to becoming a multi-metal provider. The merger is a key milestone in the implementation of our strategy,” Roland Harings explained. “Recycling is crucial for a sustainable society and, furthermore, is an attractive global growth market. Metallo’s processing know-how and technical processes perfectly complement Aurubis’ core expertise.” The formal closing of the transaction will take place on May 29, 2020.
To ensure it stays competitive in the future, Aurubis has transferred the existing Group-wide efficiency improvement program to a Performance Improvement Program (PIP) focusing on cost reduction. Measures have been identified and implementation has begun. Discussions have started with the employee representatives.
* Because the IFRS result includes measurement effects due to metal price fluctuations and other factors, Aurubis discloses an operating result (EBT) that differs from the IFRS result. The operating result largely eliminates the effects of metal price fluctuations and thus allows for a more realistic assessment of the business performance. Operating EBT is used for control purposes within the Group.
Segment FRP will continue to be classified as discontinued operations pursuant to IFRS 5 and is therefore not included in the IFRS result. The intended sale of the segment does not affect the operating reporting, however.
The complete Interim Report on the First 6 Months 2019/20 is available here.
At a Glance