Letter from the Executive Board

Dear shareholders and friends of the company,

Following a turbulent fiscal year with its fair share of bumps, we have nevertheless achieved some important milestones. 

Such milestones include the acquisition of the Metallo Group, which is still subject to approval by the European Commission. The acquisition is an important step in our development into a multi-metal company, as it will boost our metal portfolio, particularly in nickel, zinc, tin, and lead. At the same time, we intend to strengthen our recycling business, an increasingly important driver of earnings for us, with the integration of the Metallo Group. The magazine accompanying our Annual Report provides deeper insights into our recycling activities – the challenges, opportunities, and successes.

In addition to the recycling business and a broad portfolio of non-ferrous metals, Aurubis and Metallo have another important feature in common: their efforts to bring their production processes in line with our environment and the society in which we live and work. With production sites in the heart of Europe, we already fulfill the highest environmental standards in the world. Nevertheless, we continue to set the bar a little higher. We have ideas for new technologies and processes to use hydrogen and renewable energies in production, for example, as well as for intelligent and lasting measures to reduce CO2. And not just within our plant boundaries, but beyond them as well. We want to make our contribution to the European vision of a CO2-neutral continent. This is a feat that can only be managed together – with policymakers and our partners in our value chain. 

"We want to make our contribution to the European vision
of a CO2-neutral continent."

Roland Harings

Fiscal year 2018/19 showed us once again that, despite careful preparations, reality sometimes develops differently than originally planned. After the European Commission prohibited the sale of our Segment Flat Rolled Products (FRP) in February 2019, we are now reviewing additional strategic options for a future sale. 

"We have to focus on further developing preventive maintenance."

Dr. Thomas Bünger

Moreover, the Executive Board and Supervisory Board made the decision to stop the internal growth project Future Complex Metallurgy – FCM for short – in its original form in June 2019. This wasn’t an easy decision for us, but it was necessary. It became clear at that point in time that the project would require much higher investments than planned. FCM was thus no longer as profitable as originally expected. A key focus of the project was to increase the throughput of complex raw materials in the Group. We have now fully documented FCM. It’s important for us to emphasize that the discontinuation of FCM does not mean that there will be a change in strategy.

Another thing that didn’t develop as we had expected was the operating performance of our production facilities. Unplanned shutdowns at three important sites impacted our earnings. We subsequently established different initiatives and working groups to address this issue, not only to analyze the reasons for the downtimes to develop incremental improvements, but to go one step further and rethink maintenance as a whole. Preventive maintenance needs to be a stronger focus. In addition, we’re taking a look at whether the materials and designs of the facilities concerned are fit for the future. We see an opportunity to learn from the setbacks of the past fiscal year, to draw the right conclusions to do things better in the future. 

It’s no surprise that these effects are reflected in the development of our operating result. After having one of the best fiscal years in Aurubis’ history in 2017/18, operating earnings before taxes (EBT) during the reporting year amounted to € 192 million. Operating ROCE, or return on capital employed, developed similarly to earnings and reached 8.6 % at the end of fiscal year 2018/19. 

During fiscal year 2018/19, significant influencing factors for the operating result included the shutdowns at our smelter sites. These in particular led to an over 300,000 t reduction in concentrate throughput, to 2.2 million t, and thus to lower income from treatment charges. Higher energy costs and weaker demand for shapes and flat rolled products due to a decline in demand from the automotive industry weighed on the operating earnings situation as well.

One exceptional factor was a change in the definition of our operating result that we made during the reporting year, which led to a permanent impairment loss on copper inventories in the Group. An impairment loss recognized against Segment FRP’s non-­current assets as well as expenses in the course of the termination of FCM were similar. A receivable from Wieland-Werke AG arising from the prohibited sale of Segment FRP had a counteracting impact. These four effects had a total impact of about € 60 million on the operating result. 

In contrast to these factors, a good metal gain had a positive influence in the fourth fiscal year quarter. Besides taking advantage of the high precious metal prices and selling more precious metals, we also benefited from higher sulfuric acid revenues during the reporting year: despite lower production volumes due to our shutdowns, we profited from good demand overall, with higher prices compared to the previous fiscal year. 

Our existing efficiency improvement program contributed positively to the operating results, though weaker market conditions compared to the base year 2014/15 caused stronger headwinds. For this reason, we will transfer the current program, which focuses on leveraging efficiency across the Group, to a new program focusing on cost reduction in 2019/20. As before, our goal is to counteract inflation and to prevent the risks of weaker economic and market conditions. We will of course do this with the necessary sense of proportion to allow room for growth.

Even with a challenging fiscal year behind us, Aurubis remains robust: at the end of the past fiscal year, we had an operating equity ratio of about 55 %, net surplus financial funds of around € 140 million, and a good net cash flow of € 272 million. We want to continue allowing you to participate in the company’s development and will therefore recommend the payout of a dividend of € 1.25 per share to the shareholders. As at the reporting date of September 30, 2019, this would correspond to an attractive dividend yield of 3.1 %. This equates to a payout ratio of 41 %, which considerably exceeds our dividend policy of paying out at least 25 % of the operating consolidated net income. The recommendation also takes into consideration the fact that we don’t want to burden our shareholders with the adjustment of our definition of the operating result.

"With a payout ratio of more than 40 %, we would considerably exceed
our dividend policy."

Rainer Verhoeven

Ladies and gentlemen, we can’t be satisfied with the business performance of the reporting year. To reiterate, we see an opportunity for improvement here. We are proud to see how Aurubis’ employees stand together even in challenging times during which we, the Executive Board, have to make hard decisions. We are facing an increasingly difficult economic environment as a team and are driving the transformation of our company together. At this juncture, the entire Executive Board would like to express its sincere gratitude to all employees for their high commitment and hard work.

Some of this work during the past fiscal year involved the further implementation of our digital strategy. In defined project teams, we pushed forward with the harmonization of software solutions, processes, and approaches throughout the Group, reaching important milestones in the process. For example, we’re taking stronger advantage of the options that sensors and data analysis provide to gain an even better understanding of the processes in our plants. We condense this knowledge in interdisciplinary teams from divisions such as Research & Development, Supply Chain Management, and Production to ultimately optimize process management in the plants. 

We want to get back on track for success in fiscal year 2019/20. With the successful planned maintenance shutdowns in Pirdop, Lünen, and Hamburg, we created important conditions for more reliable production in our plants in the future. However, we won’t be able to return to our earlier results immediately in fiscal year 2019/20, due also to the fact that the situation on our purchasing and sales markets has dampened and poses new challenges for us in fiscal year 2019/20.

In light of these challenges, we are confident that with our multi-metal approach and the targeted expansion of our international recycling business, we have the right strategy to successfully guide Aurubis into the future. This includes continued growth through acquisitions. We have sufficient financial leeway for this. We’re confident that we can make this path a reality together with our employees.

We would like to thank all of our employees, shareholders, customers, and suppliers for their continued trust in our company. We hope that you will continue to accompany us on our path into the future.


Roland Harings                 Dr. Thomas Bünger                 Rainer Verhoeven



The Executive Board

Roland Harings

Executive Board Chairman

After earning his mechanical engineering degree, Roland Harings began his career at Webasto AG. Following a number of international assignments, he switched to Alcan in 1995, where he held various positions. He most recently oversaw automotive sales for Alcan in Europe. Starting in 2005, Mr. Harings managed the integrated aluminum rolling mill of Novelis in Switzerland. He was in charge of Novelis’ global automotive business as of 2010. Prior to his appointment to the Aurubis AG Executive Board, he was CEO/managing director of Mansfelder Kupfer und Messing GmbH starting from 2014.

Dr. Thomas Bünger

Chief Operations Officer

Dr. Bünger studied non-ferrous metallurgy. He initially worked as a research fellow at the TU Bergakademie Freiberg and, starting in 1996, as an R&D engineer at Freiberger Compound Materials GmbH. In 2005, Dr. Bünger switched to Norddeutsche Affinerie (Aurubis since 2009), where he started out as a production engineer in the secondary smelter and subsequently held various positions, most recently, senior vice president of operations. He is also chairman of the Board of Directors at the Bulgarian site.

Rainer Verhoeven

Chief Financial Officer

After studying business management, Rainer Verhoeven started his career with what is now thyssenkrupp AG. He initially worked in finance and accounting at company headquarters. Starting in 2005, he held various managerial positions for thyssenkrupp outside of Germany. Before joining Aurubis, Rainer Verhoeven was chief financial officer of thyssenkrupp Electrical Steel GmbH.