The integration of Norddeutsche Affinerie and Cumerio is progressing well. The new enlarged company is to be called Aurubis. “The name represents all that unites us and makes us strong, our common passion for copper”, said CEO, Dr Bernd Drouven, yesterday in Hamburg. Aurubis is the largest copper producer in Europe and is the global leader in copper recycling. It produces some 1 Mt/y of copper cathodes and more than 1.2 Mt/y of copper products per annum. It has about 4,800 employees at 12 production sites in seven European countries (Germany, Belgium, Bulgaria, Italy, Switzerland, Great Britain and Slovakia).
In its core business, Aurubis produces marketable copper cathodes from copper concentrates, copper scrap and other recycled raw materials. These are processed in the group into continuous cast wire rod and shapes, rolled products as well as specialty wire made of copper and copper alloys. Precious metals and a series of other products, such as sulphuric acid and iron silicate, complement the product portfolio.
Aurubis is derived from Latin and means ‘red gold’. “The name puts in a nutshell what copper symbolizes for us and our customers – a metal of extraordinary value. It is the oldest metal in the world and has always been the cornerstone for progress and civilisation. This holds true even today: mobile phones, computers, electricity – nothing would function without copper. This special meaning makes us work with passion on our product. To us, copper not only glitters like gold, it is just as valuable”, continued Drouven.
Norddeutsche Affinerie’s (NA) well-known logo, the blue triangle, will not be changed. It has a long tradition and originally showed three metallurgical tools. It has been modernised several times in the course of the company’s 142-year history.
The official renaming under German commercial law will not take place until after the official resolution is passed at the Annual General Meeting in February 2009. Until then the shares will also still be listed as Norddeutsche Affinerie AG.
NA significantly improved its earnings in the fiscal year 2007/08 ending on September 30, 2008. Preliminary earnings before taxes (EBT) increased to € 341 million (€ 251 million in the prior year). The earnings include positive one-off and valuation effects in the amount of about € 73 million, of which most result from the reduction of metal inventories at NA. Revenues rose 30 % to € 8.385 billion (€ 6.469 billion in the prior year). A considerable contribution to the revenues and earnings was made by the full consolidation of Cumerio since March 2008 as well as the high commodity prices and shortage of metal.
The overall very successful business performance was influenced inter alia by the following factors:
- Constantly good production rate of metals at high metal prices
- Lower treatment and refining charges for processed copper concentrates than in the prior year but considerably above market level
- Very good level of refining charges for scrap and other recycled materials
- Positive results from backwardation and reduced inventories
- Higher prices for sulphuric acid
- Increased cathode output
- Higher volume of sales and increased revenues for wire rod
- Profit contribution from subsidiaries at the level of the prior year
- Profit contributions from Cumerio despite high write-downs on metal inventories
- Increased personnel expenses due to a higher number of employees because of the inclusion of Cumerio, tariff wage-scale increases and restructuring measures
The very good earnings situation resulted in earnings before interest, taxes, depreciation and amortisation (EBITDA) of € 475 million, up from the already high level of € 318 million in the prior year. Earnings before interest and taxes (EBIT) reached € 383 million, compared with € 260 million in the prior year.
After deducting net interest and tax expense, consolidated net income amounted to € 237 million (€ 159 million in the prior year). The increase in net interest expense included in this figure results from the financing of the shares acquired in Cumerio as well as its first-time consolidation. At the same time the tax rate was reduced from 36.7 % to 30.4 % on account of the Corporate Tax Reform Law 2008 and the tax-neutral release of negative goodwill.
After elimination of the minority interest, earnings per share amounted to € 5.82, compared with € 4.24 for the prior year.
The extraordinarily high earnings before interest, taxes, depreciation and amortisation resulted in an increase in gross cash flow to € 403 million (€ 231 million in the prior year). This was due to the reduced tax rate in the group as well as the cash flow of Cumerio that is included. The strong cash flow enabled the credit lines, which were taken up in conjunction with the acquisition of Cumerio, to be significantly reduced in the course of the fiscal year.
Capital expenditure totalled € 114 million in the reporting period (€ 94 million in the prior year) and primarily focused on expansions in the concentrate processing facilities and measures to optimise the Hamburg rod plant. In addition, capital expenditure was directed into various smaller projects, such as the expansion of the electronic scrap processing, and in infrastructure measures. At Cumerio, capital expenditure focused on the new tankhouse in Pirdop that was commissioned in July. The cash outflow for the acquisition of shares in Cumerio in the past fiscal year amounted to € 525 million.
The average copper price over the year of $7,785/t was significantly higher than the prior-year figure of $7,088/t. The raw material markets showed disparate trends. While as in the prior year only limited quantities of copper concentrates were available due to production disturbances at the mines, the supply situation on the recycling markets was very good. As a result, the development of the treatment and refining charges for copper concentrates was unsatisfactory, while the refining charges for recycled raw materials developed very well overall.
The Copper Production Segment, including Cumerio from March 2008 onwards, processed 1,606,000 t (1,115,000 t in the prior year) of copper concentrates. Cathode output rose to 852,000 t (572,000 t in the prior year). Sulphuric acid production increased to 1,600,000 t (1,103,000 t in the prior year).
In the Copper Processing Segment, growth declined towards the end of the fiscal year, following a positive start. The market trend for the main product, continuous cast wire rod, was very good, but was by contrast unsatisfactory for continuous cast shapes. Wire rod output, including Cumerio from March 2008 onwards, increased substantially to 718,000 t (445,000 t in the prior year). Shapes output fell to 222,000 t (232,000 t in the prior year).
Personnel expenses rose from €215 in the prior year to €266 million, primarily on account of the significantly higher number of employees due to the Cumerio takeover (4,764 including apprentices and trainees compared with 3,284 in the prior year) and increased production in the rest of the group. This item also includes tariff wage-scale increases and restructuring costs at Cumerio.
The combination of the two companies has already resulted in the implementation of a considerable number of improvements. As a consequence, synergy effects of some €5 million were recognised in income in the past fiscal year. Implementation of the medium-term synergy potential of more than €40 million/y is progressing steadily.
Following the outstanding results of the last fiscal year, NA initially expects earnings to be significantly weaker in the first quarter. “We expect business performance to stabilise as the fiscal year continues, even if it is at a weaker level than in the prior year”, said Drouven.