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

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 from 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 Segments, 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 Segment 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.

Compared to the previous year, Aurubis AG’s business performance in fiscal year 2018/19 was negatively impacted by a lower concentrate throughput accompanied by reduced treatment and refining charges, as well as substantially lower refining charges on the copper scrap markets, for which the supply situation was good. Furthermore, maintenance and repair shutdowns and non-recurring special charges deriving from termination of the Future Complex Metallurgy (FCM) internal investment project had a negative impact on the result. In contrast, a higher metal gain, higher sulfuric acid revenues due to increased sales prices, and robust sales volumes for copper wire rod had a positive influence on the result.

Revenues increased by € 232 million to € 8,200 million during the reporting year (previous year: € 7,968 million). This development was primarily driven by higher sales revenues for copper products due to pricing.

With a higher cost of materials ratio (cost of materials/(revenues + changes in inventories)) due to price factors, and taking into account own work capitalized and other operating income, the gross profit decreased by € 49 million to € 557 million (previous year: € 606 million). Other operating income decreased by € 30 million, from € 82 million to € 52 million, due in particular to lower currency gains. Income of € 20 million, deriving from the prohibited sale of Segment FRP, counteracted this decrease.

Personnel expenses increased in the past fiscal year by € 20 million to € 265 million (previous year: € 245 million). As was the case in the previous year, the increase was especially attributable to wage tariff agreement increases and an increased number of employees.

At € 53 million, depreciation and amortization of fixed assets remained at the prior-year level (previous year: € 51 million). Other operating expenses decreased by € 31 million, from € 163 million to € 132 million, due in particular to the decrease in currency gains. Additionally, impacts of € 23 million were recognized during the fiscal year, which resulted from the discontinuation of the internal investment project Future Complex Metallurgy (FCM). Taking personnel expenses, depreciation and amortization, and other operating expenses into account, the operational result (EBIT) amounted to € 107 million (previous year: € 147 million).

The financial result for the reporting year was € 50 million (previous year: € 24 million). In addition to dividends of € 96 million from subsidiaries (previous year: € 52 million), this included a € 3 million write-up of the carrying amount of the investment in Aurubis Italia, the net interest result of € -30 million (previous year: € -28 million), and write-downs of securities classified as fixed assets amounting to € -19 million as at the reporting date (previous year: write-ups of € 2 million).

After taking a tax expense of € 32 million (previous year: € 51 million) into account, net income for the year amounted to € 125 million (previous year: € 120 million). The decrease in the tax expense resulted primarily from the non-deductible portion of the higher income from participatory investments, which nearly doubled compared to the previous year.

Fixed assets increased in the fiscal year by € 32 million to € 2,152 million (previous year: € 2,120 million), especially due to investments in property, plant, and equipment. The investments amounted to € 126 million in total and primarily related to the planned shutdown of primary copper production in Hamburg, to the construction of the new Innovation and Training Center in Hamburg, and to the overhaul of the electrolytic refining facility (tankhouse) at the Lünen site. Investment in the FCM project, amounting to € 14 million in the fiscal year, was derecognized together with the amounts invested in the previous year (€ 23 million in total) after an announcement was made to terminate the project.

Inventories decreased marginally by € 7 million to € 815 million (previous year: € 822 million). Whereas raw material inventories decreased by € 70 million due mainly to a decline in copper-bearing concentrates, inventories of finished goods and work in process increased by € 63 million as at the closing date. This was particularly due to the planned shutdown of primary copper production in Hamburg.

Trade accounts receivable increased by € 77 million compared to the previous year, primarily due to higher receivables in the product areas for precious metals and rod, due to both increases in volumes and prices.

Overall, total assets increased by € 201 million to € 4,010 million compared to the previous year. Therefore, the comparative share attributable to fixed assets was 54 % (previous year: 56 %), while inventories accounted for 20 % (previous year: 22 %) and receivables and other assets accounted for 16 % of total assets (previous year: 12 %).

Equity increased by € 125 million due to the earnings generated for the fiscal year reported. The dividend paid, amounting to € 69 million, had a counteracting effect. Equity therefore amounted to € 1,566 million (previous year: € 1,510 million). The equity ratio was nearly unchanged at a level of 39 % (previous year: 40 %).

Provisions increased in total by € 26 million to € 284 million. The growth was due to higher pension provisions, personnel-related provisions, and accruals for outstanding invoices. The tax provision that had been set up in respect of a completed tax field audit was utilized when the related tax arrears were paid.

Bank borrowings decreased by € 11 million to € 267 million (previous year: € 278 million).

Trade accounts payable increased by € 61 million to € 530 million as at the closing date, primarily due to concentrate deliveries whose due dates for payment were after the closing date. Payables to affiliated companies primarily comprise borrowings, which increased within the context of normal financial transactions, from € 1,129 million to € 1,206 million. Other payables amounted to € 16 million.

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 € 16 million.

Net borrowings were at € 737 million as at September 30, 2019 (previous year: € 744 million). They resulted from bank borrowings of € 267 million (previous year: € 278 million), receivables from and payables to subsidiaries of € 882 million deriving from refinancing (previous year: € 890 million), after deducting cash and cash equivalents of € 412 million (previous year: € 424 million).

Cash pooling arrangements exist between Aurubis AG and its subsidiaries. For a further analysis of Aurubis AG's liquidity situation, refer to the explanations concerning the financial position that are included in the Combined Mangement Report. Aurubis AG's financing was secured at all times.

In addition to cash and cash equivalents, Aurubis AG had access to unutilized credit line facilities and thus has adequate liquidity reserves. Furthermore, within the context of factoring agreements, Aurubis AG sold receivables without recourse as a financing instrument.

Capital expenditure
In the past fiscal year, investments of € 126 million were made at the Hamburg and Lünen sites (previous year: € 111 million). Investments were primarily related to the shutdown of primary copper production in Hamburg, the FCM project, the construction of the new Innovation and Training Center in Hamburg, and the overhaul of the electrolytic refining facility (tankhouse) at the Lünen site. Furthermore, investments were made in various infrastructure and improvement measures at the Hamburg and Lünen plants.