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[Audio Gap] very warm welcome to him. And you [Audio Gap] my colleagues from Investor Relations and Accounting Department. I'd like to hand over now to Jürgen Schachler.
Yes. Thank you very much, Angela. So good afternoon to all listeners on the telephone here, and a very warm welcome from sunny Hamburg today on this occasion. So the sun shines as our results are on the first 3 months of the year 2017/18. So as said, we are kind of a broader group, but we have 1 person who is the first time here with us. He is Rainer Verhoeven, who joined the Board of Aurubis on January 2 this year. With him the board is now complete again with the 3 persons that we have. And I have to admit, in the first 6 weeks, we had a lot of discussions and work together. And we had a very good start together, and I'm looking forward to continue to work with them. But let him have some words for his introduction himself.
Yes. Well, ladies and gentlemen, good afternoon. My name is Rainer Verhoeven. Warm welcome also from my side. Well, just to introduce myself, I'm 49 years old, married with 2 grownup kids. And I've been working for more than 20 years in the steel industry in principal with thyssenkrupp steel and my background is banker. So I learned banking, studied business administration and was then in several functions with thyssenkrupp in the accounting and treasury. Then I moved to business line controlling, and I was also part of the overseas project in Brazil and in the South of the U.S. And probably some of you have visited me there already because we also -- I know that some of you are also covering thyssenkrupp. From 2014 on then until the end of last year, I've been working in the company -- in the business area steel of thyssenkrupp -- so-called thyssenkrupp Electrical Steel in Gelsenkirchen. And I am happy to be on board here as CFO since the beginning of this year.
Thank you very much, Rainer. So with this, good luck, again, for your -- for our common endeavor for the future. With this, I'd like to go directly into -- I don't know if there's an echo or something. I'll try to keep the distance here. Sorry for that. So if there's an echo then just let's get it informed about this. So before we get into the first quarter of the last business year, I'd like to have some words about the ad hoc announcement that we published last afternoon -- yesterday afternoon, which is related to our segment, Flat Rolled Products. The information was that we are in very advanced negotiation concerning a purchase agreement about FRP together with Wieland-Werke. This step is very much in line with our strategy that we have announced in December 2017, with our clear focus on multi-metal. It will help us to focus even more on our growth and development in this area, while at the same time, it's a very good home to our FRP segment, its technology and its employees. As you all maybe know, Wieland-Werke is a very specialized partner, customer of ours as well, working on this area since 200 years. It's in -- since 200 years in the family-owned business, so to say. And it's one of the leaders in its segment worldwide, which I think will be beneficial to the FRP technology, to its employees and mainly I think to the customers that are existing in this area. So we expect that this -- now we have the term sheet signed. We are working on a purchase agreement with them together, on the timing, I might come back later on, on this.Before we go deeper into this, as I said, some ideas about the first quarter results and you see this on the first slide -- on Slide #2. As expected, Q1 had a very good result with an operating EBT of EUR 79 million, very good, driven mainly as well by the high metal prices that we see that were bolstering our scrap supply with good charges. The refining charges for copper scrap were good and continuing to be good compared to the figures of the last year that we see on the slide. Just to remember, we had, in the first quarter last year, a shutdown in Hamburg -- in the Hamburg site, which did have an impact of EUR 50 million at that time, and we had first quarter negative measurement effects connected to the inventories of EUR 26 million. So this was a bit worse than the number -- it was better than the number shows here. The result was actually worse by some one-off effects that went away. The ROCE effect is significantly better than last year, as the results are very good and the quarter is falling apart from the last quarter of the year '16/'17 drives this result. Just a reminder, this is always based on the operating results of the last 4 quarters. So the average now for the last 4 quarters is 15.4% for the whole company. We see the net cash flow as well with minus EUR 246 million for the first quarter. This is higher than it would be usually. We had quite a significant inventory effect due to some delays in -- by the end of September -- in the September month versus the first quarter, which we did build up again. We saw this, and we have normally a buildup in the first quarter of the inventories, which is mainly linked to the customer behavior in the end of the calendar year, which then is driving us to increase our inventory. We're using this time as well to do some small maintenance activities. And in order to remain capable of supplying our customers, we build up the inventory. So in addition, again, in September, the inventory has been rather low. Bulgaria had some delays of some shipments, and the ships did arrive in the beginning of October instead of the end of December. So some impacts were on this base as well. So it was a bit lower than expected.On the next page, Page #3. We see the trend is the most important earnings driver. We see the different curves, and we might have a look because we bring this in percentage, so in relative terms. If we have a look at the biggest drivers that are on the top level then we can -- I'll go just from what I see here. So in the first quarter, the conditions for TC/RCs remained rather good. Remember the TC/RCs benchmarks are always for the full calendar year. That means for the first quarter that we have had in this business year, the TC/RCs was still at 92.5 and 9.25. In the year before, it was 97. So it's a same thing. It's not too obvious this year, but it is broken the calendar year. Actually at Aurubis, we're focusing on more complex materials. We even did see that we could increase due to the mix effects, the TC/RCs versus the -- the year before. The new benchmarks that were announced in last December for the year 2018 were based on an agreement between Tongling, a Chinese copper smelter and the mining company Freeport. They -- the level was slightly -- was below -- significantly below the level of the previous year, now at $82.25 and $0.08225 per pound of copper. So it's roughly, let's say, a $10 decrease on the TC/RCs that we see for this calendar year.The effect of cost is not there, as I said, in the first quarter; it's the calendar year that counts in this. The main arguments for the decrease was, I think, a bit weak, but there was a possible strike situation mainly in South America because there are, I think, they're denying negotiations for salary, negotiations for different mines over there. So that's quite significant on this pressure. We see that the spot conditions are in the range, around 80 at the moment, so they are rather strong, very close to where the TC/RC's benchmarks are seeing at the moment. The scrap RCs, that's the brown line on this slide, that is really going up. It's on a very good supply, and it's going up quite significantly. So I don't want to quote the CRU here on the prices because these are very often on very small levels. But I think they're showing a very good trend that this is very stable on a very high level and that's what we see as well. And you see the numbers where we stand compared to the September '19 -- 2016. So the level is significantly high, and we see this as we are in the 300% range. So tripling of these prices is, of course, something that's very positive for us.The Chinese import ban for Scrap #6 and #7 is still in force. This has a very positive effect at the end of the remainder of the work. We're talking here about quantities in the range of more than 300 -- more than 3 million tonnes of scrap with a copper content of something between 25% and 30%. So round about 1 million tonnes of copper that might find different flows for the future. But of course, this is opening new opportunities for us, and we are prepared to go to this. This will lead, of course, to some demand changes in China as well that might go into more capital business-owned generation of scrap in China. Sulphuric acid, we see this on this level as well, is in very good demand. And most producers are already sold out for the year 2018. And this is driving prices up, and that's something where we see some positive developments on our results as well. The Aurubis copper premium is stable for the calendar year '17 and '18. So we kept it at $86 per tonne in comparison to the year before, which we still saw in this comparison of the quarters, it was $92 in the Q1 2016/'17 implied. The 2 things that go -- to give us some headwind at the moment is certainly the U.S. dollar/euro exchange rate. We know that -- you all know that we are preferring a strong U.S. dollar because at the end, we have a long position of U.S. dollar of roughly $600 million per year. So an increase of the value of the euro is -- has a negative impact on us. Nevertheless, we have a hedging strategy for the U.S. dollar. So normally we are depending on how close we are. We are trying to secure quite significant amount. For the current fiscal year, we have secured 2/3, 67%, at an exchange rate of 1.14 and for the next fiscal year, we are at [ 90% ] at an exchange rate of 1.17.On Page 4, we have outlined the most important factors that have an influence on our results. At the same time you see on this page as well the adjustments that we have made in order to arrive at operating from the IFRS results. As we state both, we think that working as we do, and all of you know this probably, we are focusing on the operating results method because we do believe that this figure is just reflecting much more accurately the operational performance that we have. For more details, I think -- I don't want to go into all the details that we do normally. Just have a look in the quarterly report. I think there we addressed this, again, very much in detail.We see on this slide nevertheless that the IFRS result of EUR 170 million was significantly above the operating result of EUR 79 million. The Delta is mainly explained by positive measurement effects from the inventories and the purchase allocation in the total amount of the EUR 91 million, which you see on the adjustment side on this slide. Overall, the positive effects outweighed the negative of Q1. We see a strong increase of the throughput we had in Hamburg, remember, in the first quarter last year, the shutdown, as I said before. But despite this and if we calculate this out, there was still a growth rate. So the -- both plants, at the end, did run quite well; and this was very positive. Significant higher refinement charges of copper scrap, as mentioned before, they are 155% higher, but we have some slightly lower throughput range of 16% in this area due to the mixes that we are using. We had higher acid revenues due to the higher prices, and this is reflected by the stronger margin, as I just mentioned. Material yield was linked to the copper price; it did increase. And rod where we did 12 last year, with some tension due to some changes of some legislations, we did see in the first quarter a significant increase of 11% over the first quarter, and in Flat Rolled Products, a plus of 4%, which show in the good general economy that we are having at the moment. The copper premium, as I just said, had a slightly negative effect, as -- in the first quarter, it went down from the $92 per tonne to the $86 that we have had. And of course, the weaker U.S. dollar, as I just mentioned before, would have to be mentioned as well.On Page 5, you'll see the financial figures. They are all higher than previous year revenue, mainly due to the metal prices and slight decreases on quantity. The copper price, just to mention, did increase on average by EUR 895 per tonne in Q1 compared to the previous year. So quite a significant driver on the revenues there as well. For us, just to remind you, revenues as a key performance indicator is not the most important because the metal prices have such a big importance there. So we're looking more for the ROCE profit and ROCE results later on, and we see that the ROCE results are EUR 61 million above previous year, so -- which is mainly driven by increased throughput and higher refining charges for scrap. The cost of the EUR 210 million at previous level, so no big changes. Depreciation and amortization are roughly at the level as the year before, while interest expenses are roughly EUR 3 million lower than the previous year, due to lower interest rates and the reduction of the debts that we have.On Page 6. The key figures that we have remain very robust and very strong. As I said, I talked about the ROCE already 15.4%, which was very strong. Equity now is above 50%, as we see, 51.4%. And the net debt to EBITDA is at 0.1 with a net debt of EUR 65 million that we have had at the end of the quarter.Now we come to something that has changed in the first quarter for the first time.With the beginning of this quarter, we are reporting according to the new segment structure that we have started on October 1, and it's the first time that we report on this. So the new segment, MRP, which is metal refinement -- Metal Refining & Processing, you see on Page 7, and this segment is including all smelter locations, so that is Hamburg, Pirdop, Olen and Lünen, and furthermore also in the group-wide rod and shapes sites. Overall, as you can see on this slide, the segment shows a very good result. Last year -- I don't want to bring this up again, but we had the special effects in Hamburg and the measurement effect that was there. Nevertheless, on the concentrate throughput, the level was roughly 20% up over last year, taking out the effects of Hamburg, that's still a quite significant increase over last year. Pirdop did run very well. Ramp up growth was through. So Fit for Future is pretty much in effect, and it is increasing the performance of the Pirdop facility with higher throughput, so that's on a very positive effect. I mentioned the TC/RCs already that went slightly down from the year before 97.5 to 92.5 in the first quarter. This could be compensated by more complex materials that we have. Scrap market, as I mentioned, is very strong. The RC is very strong, as I said. Sulfuric acid, we don't have to repeat it, very strong demand at the moment and growing at the moment. The fertilizer market, in general, and especially Bulgaria and Turkey, had a strong impact there on our Pirdop facility. Higher metal prices, as I just mentioned before, is EUR 895 in the first quarter. It had a positive effect on our metal gains. Rod output very, very good and continuing to be very strong, that's good. Actually, we had in the first quarter the strongest activity, the highest activity for the first quarter ever. So that's very positive. And this is pretty much rolled out on different segments, so power cable, automobile and the melt is all in the same direction. Demand for shapes was nearly as good as the previous year. Cathodes output very strong in the Q4 to -- in general, we can say, it was a good quarter. What was not as good, as I mentioned before, was the U.S. dollar. In this respect, we had a negative impact on the first quarter result of EUR 5 million.What we do first time as well with the new segment structure is to present you with the metals that we are selling. So this time we're talking not only about gold and silver but also the other precious metals that we show and focus on our multi-metal strategy. And you see here the volumes that we have selling for gold, silver, lead, nickel and tin as well as for other bimetals and the bimetals are mentioned here below on this slide: it's selenium, tellurium, rhenium, antimony and bismuth and as well as the platinum group metals, which are mentioned here as well. It's platinum, osmium, iridium, ruthenium, rhodium and palladium. So you can see this later on. We just brought them together in bimetals, not to mention all these different areas. So this -- all these metals have one thing in common. Certainly, we are producing them, but secondly, they are used in very modern applications. More information about these applications you can also find in our Q1 report, where we did explore this a little bit further. Currently, a portion of these metals are not sold as refined metal but as intermediate products. And the quantity is not only on our technology -- depending on our technology but also depending on the imprints that we're putting in. So either in concentrates or in recycling materials, there are different mixes, which we -- depending on -- nevertheless, we're focusing on enriching as much of our production as we can.With the launch of the FCM facility in Hamburg and Olen, which we did report, I think, in the last quarter, these numbers will change, and specifically everything that's intermediate will be more focused on -- in the production, in our hubs.The second segment on which we will report from now on is the segment FRP, Flat Rolled Products. On this, I mentioned already before that we went and talked yesterday because we are in advanced negotiations on the sale of this segment. And nevertheless till this sale is really executed and finalized and we expect this to be towards the end of the year, we will continue not only to report but also put our full attention on this segment in terms of the improvement activities and different visions that we have for this segment. So the operating result for this separate FRP was in the first quarter strained by an effect of EUR 3 million negatively, which was similar to the effect that we have had in the last -- in the first quarter last year. In the last quarter, we had -- so last year, we had an effect of EUR 4 million. So if this negative measurement effect were not taken in consideration because it's a temporary effect that can be managed and we will manage in the next quarter. When we regard these results, the operating result before taxes would be then minus EUR 4 million, which is still not glorious, but compared to the minus EUR 7 million that we would have had last year, it's a significant improvement. This improvement is coming from the Emerald program on which we did report on a regular basis, which is part of our improvement program. So this program is going in a good direction. We don't see it on the total result, but remember the first quarter, specifically for FRP, is the weakest quarter of the year, which has a lot of very special effects. So we should not take this result as representative. We are optimistic that with our targets and the focus on FRP, we will -- getting close to our targets or achieve our targets by the end of the year.So in FRP, we have bundled, as you know, the different activities of production locations in U.S., in the Netherlands, in Finland and in Germany. Most of these facilities were acquired in 2011, and since then, I think the improvement work has been taking place. I talked about the Emerald program already, that's the improvement program, which is part of our overall improvement activity where we're very active and I think running in a good direction. The developments were perhaps, at the beginning, a bit slower than we expected in the first years, but I think now we have taken really pace on and I think we're going in the right direction. So we expect, as I said before, fundamentally positive market development and a result development for FRP for the full year.Coming now to Page 10. It's more or less repeating what I've just said that we went -- I talked that we are in this advanced discussions that we think and believe that Wieland is a proven specialist and probably the very best home for this kind of production in order to serve the customers of FRP and in the segment best. The transaction in total is comprising of the total FRP activities, that means all the sites that I've mentioned, including the 50% share that we have in Schwermetall together with Wieland today already. So we are already very experienced in working together and partnering up; that's very positive. We expect that we, from our term sheet, we will evolve to a share purchase agreement within the next 6 to 12 weeks together with them. So this will be between end of March and end of May. And after this, I think, we will go to the antitrust authorities for further permission, which will take another 3 to 6 months or so. So that at the end of the year, we will come to a closing of the -- of this case. On the Page 10, you'll see the different production numbers. So 230,000 tonnes of copper production and alloys, roughly 1,900 -- 2,000 employees together with 150 (sic) [ 300 ] Schwermetall, so 50% revenues of EUR 1.3 billion. So that's for the case of FRP at the moment.On Page 11. We're coming to the outlook on the fiscal year 2017 and '18. According to last month's Reuters poll, the average copper price for the calendar year 2018 is at $6,684 per tonne, which is pretty much where we are at the moment. So no significant changes at the moment. Due to this very high copper prices, we expect that the attractive environment will continue. The concentrate production of the mines will continue despite a possible strike. So we don't expect significant changes there, that the current benchmark conditions are below previous year and that they will result -- influence our results. It's clear, but we are partially capable of offsetting this due to more complex materials. But of course, the impact will be there with the decline of the TC/RCs. We expect very high capacity utilization in the primary copper smelters in Hamburg and Pirdop. There is no significant shutdowns scheduled so far whatsoever. So the sulfuric acid market is good, has good recovered in the recent weeks and we expect it to remain strong for the rest of the year. Scrap market is very positive at the moment. As I said before, we are always a bit careful to anticipate more than 3 months in advance. So for the next quarter, we think it will remain rather strong, and after this, we got to see. So we are more conservative in our approaches there, and we hope for the best but we are prepared for whatever will be coming. Our cathode output will be higher than the previous year. Cathode premium, as I mentioned before, was the same as last year. Demand for rod remains very strong. You remember the 11% for the first quarter. So we see strong order intake as well, as well as for shapes. So I think, we're strong and above previous level. FRP is doing fine, 4% in the first quarter and the economy is doing well. So also there, this is going in the right direction. The ideas are very good in all what we are having there. The improvement program is continuing in all sites that we have. So in both segments, the ideas actually are good as we're going in a good direction. So I personally, I think, after the start that we've done for roughly a year now, I'm very impressed actually by the dynamics that is developing here. So it's creating a lot of momentum and the effects are very positive with a lot of excitement.The weak U.S. dollar, I mentioned before, I don't know where the U.S. dollar is going. But again, we are -- for this business year, we are hedged at 67%. That's positive and then we have to see where it goes.All in all, we confirm our forecast for the fiscal year 2017/18, and we expect an operating EBT at the previous year's level and a slighter operating ROCE compared to previous year, a lot due to the investments that we have and the high [indiscernible].So on Page 12. Some words on the progress of the ONE Aurubis transformation program. On this slide, you see the 5 pillars that we are working on at the moment: strategy, organization and responsibility, business improvement, leadership and employee development, and culture and communication. We provided you already with an update on the strategy. We are now working heavily on the refinement and on the implementation of our strategy, and I think first things you have seen. Remember, Deutsche Giessdraht, where we did acquire one part, which -- we'll come later to this and the FRP discussion. Organization is adapted as you have seen with the 2 segments. The business and efficiency enhancement program, business improvement, I will come back to you in a few minutes. Leadership employee, we had carried on various 360-degree feedback assessment and discussions, very positive. So all the workshops are going in the direction. And when we talked about culture, this has the impact on working together on the leadership positive effect that we see with all our employees.On Page 12. The picture, again, that shows a bit of our strategy. It's the balance of growth, efficiency and responsibility. And here, at this point, I'd like to mention that we have reinforced our team there internally again. So not only Rainer Verhoeven is now on board but we have enhanced and enriched our management committee as well with Bill Scotting. Bill Scotting has -- was formally heading strategy part of the mining part from ArcelorMittal and later on was CEO of Nyrstar, and he joined us on midst of January as well, now reinforcing the team and driving us forward to the next successes and through the next steps, which I think is very positive use for our team as well. They're very excited to have him on board.So Deutsche Giessdraht, a few words, just to round this up. As we said on January 19, we signed the purchase agreement with Codelco on the remaining 40% of the shares that were outstanding. With this, we will be able to increase our wire rod capacity by roughly 100,000 tons a year. We have them and will have them very soon fully consolidated in our company. So that's something that's very positive. And again, drives as well our strategy orientation in this direction further for the year.Okay. Business improvements. On Page 15. I can say that business is going in a good direction. It's actually going a bit faster, we don't show this year, but we are on track. And I'm optimistic that for this year, we should be not only achieving but also overachieving our activity that we have here. Remember, we anticipate a total project result of above EUR 200 million. The track is there as we have seen EUR 30 million, EUR 30 million to EUR 60 million and EUR 80 million over the years to come. And we are going -- I think, they're in a good direction there. Not a lot to be said, there's a lot of work on more than 600 different projects that we are running at the moment. So the company is very well aware on these activities, and we -- I'm very satisfied on how this is proceeding. So we have, of course, the same activity in both segments. As I mentioned before, the Emerald program, we've taken this always a little bit out and highlighted this for the FRP side. This has continued during this year as well; there is no question. But not only there but also in the MRP side we are very positive on the development.So having said this, I think I'm through with this presentation. And I will -- we would now be open for your questions, if you have any. Thank you very much for your attention.
[Operator Instructions] First question as far as I can see is from Reinout Goossens from Morgan Stanley.
[Audio Gap] this quarter because of a stronger euro. And do you have any estimates for the impact on the coming quarters if you assume spot euro? And...
Excuse me, we had some technical problem. So we didn't get the first part of your question. Can you repeat it, please?
Yes, I'll repeat it. Is it now better?
Yes.
Yes, yes, yes.
So my first question was on the stronger euro. So you mentioned EUR 5 million impacting the first quarter. Do you have an estimate on the impact at the current spot euro on the coming quarters? And what is the assumption you made when you set the guidance? What did you assume in terms of euro/U.S. dollar? And then my second question is on the return on capital employed in the Metal Refining & Processing business. How does that 20% that you reported now, how does that compare historically? Is it high? Is it low? Why is it high or low? And if you assume that you get to those EUR 200 million EBITDA improvements, what should that return on capital be in that segment?
Okay. Reinout, I might come back to your second question because I need some clarification. For the first question, the impact that I mentioned before 67%, we did secure in hedge. The remaining part is certainly open. Last year, we were at EUR 23 million positive effect. For this year, we expect a negative effect for the full year of EUR 15 million. So that's the difference between the 2 years that we have. You asked what we anticipate for the remainder of the year, that's what the banks are anticipating. So pretty much where we stand looking forward. We already have and that we are round about in the -- at the 120 range if you combine these activities.
The second question?
And your second question, can you repeat?
Yes, I'll just repeat. So you reported 20% return on capital employed in the Metal Refining & Processing business. And I'm just wondering how does that compare because you now splitted it out between metal and refining and Flat Rolled Products. How does that 20% compare historically? Is that high? Is that low? And why is it high or is it low?
So what we see here -- because, again, we are still in the largest [indiscernible]. It's a good quarter. It's not extraordinarily high, but it has been a good quarter for this quarter. So I can't give you the numbers exactly for the last year, but of course, you can ask Angela Seidler later on, and I think we can produce it. I don't have it with me here at the moment.
Next questioner is Marc Gabriel.
I have some questions. First of all, in your cash flow statement, there was a EUR 7.8 million proceed from a disposal. Could you elaborate on this in more detail? And the second question is regarding the European refining charges for scrap. That significant move, is it fair to assume that your current contract prices do not really reflect these spot price increases yet fully? Third question is on regards to the export volumes of cathodes. Did you increase the export volumes, especially to China, with regards to that scrap issue in China? And then, the combination of your copper strip with Wieland, that would create a world market leader with more than 400 kilotons. And this could ring the bell at the cartel authorities, in my view. Is it right to assume that Wieland asked you for such a deal after you were looking for an acquisition in Flat Rolled Products outside of Europe? And with regards to a possible pricing of that such deal, I remember that you bought flat rolled from Luvata with a badwill. You did a lot of restructuring. But at the end, now you said that you expect this year a turnaround in the positive operating profit. Why selling now? So it doesn't make sense, in my point of view. Could you elaborate a little bit on your thoughts why it is now the right time to sell it? And why sell it to Weiland and why not the opposite?
So thank you for the questions. I'm going to start with the last question first. Of course, at the moment, we cannot give too much information about the spending deals. So I'm a little bit careful to answer any of the questions. You're totally right that we are going to have a look at the antitrust authorities concerning the site. But we're optimistic, with the analyses that we've done, that despite the strength, it will even strengthen the market and it will bring some technologies. But that's something we're going to see and we only know, I guess, by October or November, around that.
May I just step in? Rainer Verhoeven, here. So one additional information or piece of information on the FRP. It might be that deconsolidation will most probably, as things stand, not lead to an impairment of the book values.
Okay. So the first question, concerning the EUR 7.8 million that you have seen there. This was the disposal of a property in Switzerland that was still on the books that we tried and it's now finally sold out. So it's not linked to business. It's nonmaterial for us. So we sold it in order to clean this up. On the export volumes to China, there were stable quantities, nothing really specific to be mentioned there. We nevertheless expect that due to the ban of these #7 scraps that there might be a change of the material flow worldwide. And I would assume that China in the future might increase their imports of cathodes globally. The last question is concerning the RCs. As I said before, we did see some -- we did read actually that the CRU RC for spot quantities for #2 scrap of -- we mentioned EUR 560. This is certainly a very small quantity that's something that is not always not -- if at all achievable in an industrial scale. But we are roughly EUR 160 -- 160%, sorry, above the last year. As I mentioned before, the 155% that I mentioned over the last year's average price. And scrap is not very much contract-driven. That's mainly more or less on a spot base, so it's really step-by-step. It's not long-term commitment for us and with very little backlogs that we have.
And is it right that Wieland asked you for the acquisition of FRP or?
Even at the moment, I cannot and I don’t want to disclose. But it's the right moment. Otherwise, we wouldn't have done it. It's a good moment despite the fact that we are very strongly believing on the results of Emerald and the improvement activities. But if you find the right partner and you're convinced that's the right partner, then it's probably the right moment.
Yes, because my thoughts were that you were looking for a deal with Poongsang in Korea, but anyway.
No. Actually, we did not.
Actually, on my list, I don't see any further questions. Are there any further questions? So please let us know. Yes, there's one question. I see only the name, James. So your question please.
This is James Gurry from Crédit Suisse. Can you talk about the inventory levels and working capital? It's just gone up in this quarter? I remember in previous years when there was a good opportunity to secure a lot of scrap, that's what you did and you worked through it during the year with pretty much guaranteed profit margins. Are we seeing something similar here this year? Or has the inventory just gone up because copper prices were higher in December than previously? And just in relation to the divisions, what happens next year if you sell this division now, the Flat Products division? You're just left with one division or are we going to see a more -- another split or division of the business? So that -- to give us a deeper understanding of the future strategy and where you're headed and some -- it's great to see a little bit more transparency with the other metals being disclosed. So if you just could comment on that, that would be great.
Yes, thank you for that question. The inventory levels are, I would say, at normal levels. And even despite the fact that especially the RCs are rather high, the generation supply is rather complex from our supplier. So we certainly have them lined up for longer-term. But we don't fill the inventories too long because the evaluation and the processing should be rather timely in order to make sure that we can develop the right values out of this material. So no extraordinary inventory levels on this side at the moment. Then we talked about the one segment for the future. Yes, at the moment, if we are not adding some significant other business unit from the outside, I would assume at the moment that we will work on one segment of activity. We will still have the full year to discuss this through. While we are at the same time, I think, creating a lot of transparency even with -- in the case that we would just remain in one segment, because you see a lot of different numbers and you see this, as you rightfully mentioned, with the multi-metal approaches that we have, even more clarity for everybody.
Okay. Can I just follow up then and ask, does that mean that for the scrap charges the risk is to the downside for the rest of the year? And therefore, couple that with the takedown that you're see from January in the treatment charges, how confident are you on that guidance? Is the risk to the upside or to the downside?
So I think the scrap RCs are not linked to the TC/RCs. They are mainly linked to -- for the general economy, when we look to whatever the business if you talk about steel prices, aluminum prices and copper prices, of course, and the relation to this is very strong, what we see. So will there be an up or down swing? It is not very clear at the moment. We are certainly in general very conservative in our approaches with all assumptions that we have. I'll just remind you that if we talk about this #7 import ban of China, we're talking there about a quantity that is not purchased only in Europe. It's purchased globally, about roughly of more than 3 million tons, with roughly 1/3 of copper content. So this in total would be more than 1 million tons of copper that will not be exported into China. So I would assume that the supply of scrap should be rather strong, which then should have a stabilization effect on the RCs in general for us. So I gave 2 answers. One, we are very conservative in our approaches. And secondly, I believe that we don't see a sudden drop, but we are, of course, anticipating that peak levels of RCs might not be there forever.
Okay. And how quickly do you think you'll return back to a net cash position rather than a net debt position?
I think if you look for the end of the year, we have to look for the inventory and certainly for the copper prices at that time as well. We know that we have a year this year, remember, with the investments and the preparation for FCM, a rather strong investment year, which will be significantly higher than the years before -- that we are ending up with close to EUR 300 million of investments. With the -- so we think versus the end of the year, we should become close to being balanced there again.
Next question, [indiscernible], Eggert Kuls, please.
Meanwhile, I was thrown out of the call. I don’t know why. So maybe I'll ask a question which has already been asked. On the Flat Rolled Product division, so some 30% of your staff will go to Wieland if this deal will happen. Maybe a question on your pension provisions. I expect the part which is related to Flat Rolled Products will be somewhat lower due to the Luvata activities. Can you give us a number, what amount of pension provisions is related to Flat Rolled Products, please? And if you take some time, maybe an additional question. So regarding your ROCE targets. So if you get rid of the Flat Rolled Products business, this clearly would mean that your margins and also your ROCE would jump upwards. And I assume the new business you tend to build up will also deliver margins which are similar to the remaining division. So can we expect in the future to see ROCEs clearly above the 15%, which I think was in the past the target for the group?
You're right. The target is the 15%, and this is an average. And what we see in MRP, this is at the moment is higher. We see with some new investments that are partially higher, partially around, so we will discuss during the year where we don't see any impact yet because FRP, the closing date would be by the end of the year. And for the next year, we'll discuss if there would be changes. The 15%, nevertheless, I think, is a rather good number. It's an ambitious number in general for these approaches. And we will discuss with our Supervisory Board later on if we will want to adapt to the situation. Concerning your first question, the pension, actually, I don't know what the total number of pension is, but for the FRP side, this was EUR 31 million.
EUR 31 million? Okay, good.
Are there any further questions because I don't see any further questions here on my screen. There are no further questions. I think we'll close. Wait, Mr. Kuls. Eggert Kuls, you have a question from your side, no?
Yes, yes. Sorry, I've forgotten my last question, yes, because I was in a hurry to enter the call again. So the question, so I heard earlier that there's no impairment necessary on the book value of your Flat Rolled Products division. Can you give us a number how much capital is bonded in inventories in the Flat Rolled Products division currently? Because as far as I remember, in 2010 or '11, you have paid more or less only for the inventories when acquiring Luvata.
Yes, I think it's not the right moment that we give this number out at the moment. Just remember, what we're talking about is not only the perimeter of Luvata that is bigger because at that time, [indiscernible] and Germantown was not part. And on the other side, the copper price was significantly higher at that moment. I think at that moment, to my memory, the copper price was above $9,000 when Luvata was purchased and today we are at $6,800 or whatever it is now. So at a later point, once we're getting close to the closing or in the closing, I think, this number will be disclosed, not at the moment.
James, do you want to raise another question?
Yes. Just on sulfuric acid. Can you talk about how much it contributed in the December quarter versus September? And how much visibility do you have going forward? From what I understand, Bulgaria is more of a spot sulfuric acid market and therefore reflects these price changes that we're seeing in the market. But you also comment that the contract on sulfuric acid around Germany has also increased in realized price. So could you just elaborate on that a little bit, please?
We see that the demand actually in every segment is very strong. We see this very strong in South America at the moment, where we have very high levels. I think, we have about the 90 now in CFR prices when it comes to Chile. Brazil is very strong. So the industry as a total has a very strong demand, and most companies that are working on this are pretty much sold out. So if this condition remains, despite the fact that most of the business is, let's say, there's a part that's contractual, but a part is spot as well, we do expect that we will remain on this increased level till the end of the business year. Is this sufficient?
And the increase, is that reflected in these December numbers?
The prices.
The prices, although they were increasing over the quarter, they are reflected in these numbers, yes.
Okay. And from what we understand about sulfuric acid, it pretty much goes straight to the profit line because it's a byproduct, right? You're producing it, anyway?
Yes, yes. And we're producing pretty much for 1 ton concentrate, 1 ton of sulfuric acid. But if you speak about increases, then we speak about EUR 1, EUR 2 or EUR 3. So the total number is over-seeable, I would say, right? It doesn't make a big sum, but it's, of course, an important part of our business. No question about it.
And Mr. Lurch, you are the next one.
I have 3 questions, 2 on the market and one on capital allocation. The first one on the market is on copper and TC/RCs. Do you feel that there's any pressure from miners at the moment to reduce contract volumes and sell more at spot TC/RCs? The background here is that spot TC/RCs are below the benchmark at the moment, so it would be better for miners to push through more spot sales. Is this something which you're seeing? And maybe could you update us on how much you're expecting to sell this year on contract versus spot in the concentrate business? The second question is on copper scrap. You've mentioned a number of times the scrap import restrictions in China. Do you expect that this will be -- will create increased demand by China for high-quality scrap, i.e., the scrap #2, which could be a risk for your RCs there? Because it looks like China needs to replace lower-quality scrap with other units of copper, for example, cathodes, for example, concentrates, and potentially higher-quality scrap. Is this something which you think is a risk for your scrap business? And lastly, on capital allocation, you're planning to simplify the business with the sale of Flat Rolled Products, and you have now a lot of -- still a lot of balance sheet capacity. Are you expecting or are you considering to soon grow the business through acquisitions? And you mentioned you have now Mr. Scotting on board. And given his mining background, do you think that this makes it more likely that Aurubis could move upstream in the mining business?
So thank you for the questions. TC/RCs, first question. I heard about this. We are not experiencing this pressure towards shortened delivery of contractual quantities. I think the partnership that we have with our miners that we are working with is rather good. And there has been always ups and downs and variations, spots higher, spots lower than the TC/RCs. And I think this is something that in this partnership, people are used to. So we don't see this, but we have heard from this. Then the question of contract versus spot. We are mainly covering roughly 90% every year on the spot business -- sorry, sorry, on the contract business, so there's not a lot left then for spot business at the end of the year. Then, I cannot remember.
China and the import restrictions.
China.
Yes, on the scrap, we don't think that there will be a lot of increased demand for more pure scrap at the moment. What we see and hear is that, there will be increased imports of cathodes at the moment in replacement of the scraps, and there might be as well some wanting of Vista flows and other flows. That's something we don't know. And what they did start internally, and that's I think the major part, is a push for inner China scrap development. I think that's one of the drivers that we have heard from China, from the companies over there and from politicians. So not more imports but more home generation and more replacement of scrap through imports of cathodes, [indiscernible] I think. And our capital allocation, last answer -- last question first, no, we will not go into mining. That's what we always said. That is not our cup of tea. But getting closer to the mines, as I said always, that's certainly something that we're interested, working on the urban mining and mining in this field between refinement and this is an idea, but not mining. And of course, we are continuing to work on acquisitions. But again, disclosure on acquisitions can only come after we are very close to signing the agreement. Otherwise, it's very complicated.
Mr. Brauneiser, are you in the call now? If yes, I would like to take your question now. [Technical Difficulty]
I don't know whether I missed in the previous discussions. I'm not sure whether you discussed the feasibility, which is still ongoing in Korea, to create this joint venture. Is there any update you can provide at this stage? The second question is on this minority purchase of Deutsche Giessdraht. Can you maybe share a little bit? Is this now something you were actively pursuing or was it more from the Codelco side? And is there anything beyond the pure minorities arithmetics we should consider of? Will there be a change in the way you run that business as it's now 100% owned by yourself? What is the synergies from doing this deal? And maybe finally, on the guidance or the outlook you're giving for TC/RCs. So you're saying despite the lower terms, you still expect a satisfactory result because of a higher complex share. Can you give us a bit of more flavor behind that? Do you expect to increase the complex exposure in the same way as you did last year? Is this becoming more of a driver this year because you still have capacity in Bulgaria maybe? Any color would be appreciated.
Thank you for the question, Mr. Brauneiser. So concerning LS-Nikko, I cannot give very much update. The group is working at the moment, so I think I don’t expect any significant that can be reported before midst of the year. I would think by then, we are getting further with our feasibility study. And I think by midst of the year, we should actually know if and when we will execute on the finance -- on the findings and on the next steps. But there is nothing that changed -- that ideas are not working at the moment. I think it's a very positive development as far as I know. But that's not really an update because we don't make the next step yet. Deutsche Giessdraht, we are trying to integrate them much stronger, but this will be starting only by the end of the year. Till then, Codelco will continue to use their own raw material and their own sales channels. So by the end of the business year, we will integrate and much stronger synergies from us are coming, of course, from much a stronger technical exchange with the 3 other rough plans that we're having at the moment. So technology-wise, there will be an exchange. It will increase even further the supply security for our customers. And one of the big synergies that we will have in the future is that we will deliver the cathodes actually for the transformation into Deutsche Giessdraht, the quantities, as I mentioned before, these 100,000 tons supplementary that in the past were delivered not by us because this was the capacity used by Codelco. Who did contact whom? At the end, it does not matter. And we always wanted to have it, and now we have it, and that's the positive news coming out of it. TC/RCs and Codelco wanted to certainly concentrate on what we're doing, and we wanted to have Deutsche Giessdraht since quite a while because I think it's a very good roundup for us. TC/RCs, on the past, yes, we will continue to even go further with the complexity of the material. But of course, very often, complexity is paid with a penalty. That means if the base -- if the benchmarks are going down, even the base for the complex material is going down. So we try to increase the percentage of complex material for us. But then, the base will be lower, but we'll see a positive mix effect of adding more complex material into our portfolio. So we still would like to see TC/RCs that are in the $100 range and above. No question that we're optimistic that one day, we will go back in this direction, hearing that especially in China, their cost base is increasing quite significantly from the supply side and from the environmental side. And I think that the likelihood of them, as they are the biggest player in the negotiation of the benchmark, we'll in future be probably more reluctant and aiming for higher TC/RCs in order to offset their results.
Okay. Maybe just one brief follow-up on -- at the moment you are selling FRP, to what extent is that diminishing your EUR 200 million efficiency improvement target?
So for this year, we will continue to work on the Emerald Program. So this will be still part of the development. But in future the part of FRP was roughly 25% -- roughly EUR 50 million of the total EUR 200 million improvement potential.
Okay. Got it. Maybe I missed that part on sulfuric acid. I think you're sounding as optimistic on sulfuric acid as I probably couldn't remember the last couple of years. What is really changing here? And how are you so confident that you can make a guidance for the rest of the year already at that stage even though usually the visibility is a couple of months. What's different now that you have this kind of better outlook now?
I think that the general economic situation globally is quite positive. So I wouldn't bet my life on it, so to say. But I think the general economy is so good that most of the suppliers, as we have heard, are sold out. And if this is the case, then the likelihood that prices are remaining on the good level is very high. And that's what I try to express. So it is not a guarantee that everything is happening there, but the general conditions, as we see it, are very favorable, so I would assume that there is no significant change downwards possible for the remainder of our business year.
[Operator Instructions] Okay, there is one question from Katja Filzek.
Just a strategic question on your planned disposal of your Flat Rolled Products business. As I understand, this is quite an international business also with a foothold in the United States. Does this somehow change your M&A targets now that you might now want to get stronger in the U.S. market also for reasons for scrap dealings or purchasing volumes or any good step into the market? Because maybe if you could give away all these sales guys, which were also involved in closing the loop strategy, is there any change on your scrap purchasing strategy going forward? And will that require maybe that you have to build up a new entity there or you have to change your M&A targets a little bit to maybe fill the gap that maybe the Flat Rolled Products organization will leave within the company?
Thank you, Ms. Filzek. You have a very good question, and the question shows that you know our company very well. I don't know how to answer to this. The U.S., as I've always said, is certainly one of the most interesting markets for us in general, for the simple reason, after Europe, it's probably the most stable one in this direction, and we have a close loop to the U.S. We have had this in the past, we said this. And we will continue to have this in the future. And this will not be changed by the decision to separate from the FRP area. And some of the arguments you certainly mentioned, they are valid and they are good.
As there are no further questions, we are now going to close the call. Thank you very much for your interest. Thank you very much for your questions. And well, have a nice afternoon.
Thank you very much from my side as well. Enjoy the rest of the week and enjoy the sunny day wherever you are. Thank you. Bye-bye.