© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, ladies and gentlemen. My name is Angela Seidler. I would like to welcome you here in Frankfurt on the occasion of the 9 months result of Aurubis AG. I'm here together in Frankfurt with my colleagues, the CEO, Roland Harings, first time here; and Rainer Verhoeven, CFO of Aurubis. I also would like to welcome all the listeners on the conference call and the participants on the webcast. We will start with the presentation first, and after the presentation, we will have a Q&A. And the Q&A, I would love to start first here in Frankfurt and taking then all the participants on the phone. So thank you very much, and I would like to hand over to Roland Harings.
Yes. Thanks, Angela. Good afternoon, everybody. It's a pleasure to be here today to have you here. I know it's a busy week for all of you. Many companies are announcing their results. So I'm really pleased that everybody could make it here. Regarding our presentation, you have seen our report, everything, so I would like to make it relatively brief and leave us enough time for Q&As because I'm sure there will be some interesting ones. And moving to the first slide. Summary for the first 9 months of our fiscal year '18, '19. Of course, our operating EBITDA is EUR 125 million, ROCE of 7.1%, and we cannot be satisfied with this result. It's a significant reduction of the year-over-year earnings by more than 50%. The operating performance was unsatisfactory, and even beyond the planned shutdowns. Some of our key assets, key plants went down unplanned which is having a significant impact on our financial results. You also saw, with the ad hoc message in June, there was a result in the -- which was in the results of Q3 that we have taken a very clear and difficult decision to stop the FCM project, which had an impact on the results of Q3 by around EUR 30 million, but we will talk about this in more detail. For me, being now new with the company, started 20 of May and officially on board as CEO from the 1st of July, I see this year as a year of transition for Aurubis. We had last year an excellent year. But this year, looking at the operating performance, this is not the standard and this is going to improve. Focus and cross teams for improving the reliability of our key plants are working intensively and very significant activities have already taken place or are going to take place in the coming weeks, which I will also go to talk about. I think also important being new now as the CEO is there is no change in strategy. FCM was a single and the right decision to take to stop this investment project, but it's not a change in our strategy to become a multimetal provider. And I think the proof of this direction is the acquisition of the Metallo Group, which is an important building block to execute the strategy. Important FCM, we have invested significant into basic engineering. And we have also documented these technologies and the developments that we have done in a way that we can use certain building blocks in the future. The reasons to stop FCM was really that the cost deviation was so significant after we went to the final phase of basic engineering, that we could not really find and prove the profitability, which was our core target, core objective for this project. So difficult decision, but we definitely had to take this decision at the time, and it's definitely the right decision. So about the shutdown in -- sorry, I'm now a bit -- speaking notes. Yes. Okay. So talking about the market conditions, sorry there's a confusion here. No? Okay, okay. Sorry. Yes, it's okay. So plant shutdown in Pirdop, we did a major revamp of the Pirdop operation in May and June. It was a 22 days shutdown, which had a significant impact on the results also in the quarter. It was a long-planned shutdown, but also here, it's -- with these large equipments, what we see, and therefore, I call this a transition year, just ahead of the major shutdowns. The equipment has also already a lot of hours in operation, and we were, to be honest, not really lucky in these periods because we had done some early problems just ahead of the shutdown and the revamp of the equipment, which had also an impact. Just to give you the number in Pirdop, we invested EUR 19 million of CapEx in order to maintain and upgrade the machinery to the latest status. About market conditions, the asset market worsened compared to prior year. And we had some very good months in the first part of this year, and then we see a significant change in the conditions. I will talk about this in a minute in more detail. What we could achieve, on the positive side, we have increased our input of complex feed materials and our gold production is on track and is even at a record level of 37 tonnes, which we have achieved after 9 months. Positive also, Metallo, the transaction, which we announced in May is on track. We are intensive in discussion with the authorities in Brussels, the antitrust authorities, and we are confident that we can close this transaction in -- during this or before the end of this calendar year. We have, in parallel, started reflecting or respecting what can be discussed before the final clearance from the antitrust authorities available, but we have started with the necessary integration work and have defined and set up the necessary team members on both sides of the organization. I think important Metallo, as we are looking forward, that this plant with very complementary technology will become a part of the Aurubis smelter network going forward. It will enhance our multimetal portfolio, and specifically, in the key metals of nickel, tin, zinc and lead. Back to the point of operational performance, we are also well advanced in the preparation of the shutdown of the Hamburg plant, which will take place end of September and will lead into October, beginning of November. It's a significant revamp of the key assets. Total investment CapEx is around EUR 45 million, so a significant replacement of key components in the plant and 36 days of stop of the key elements of the plant, which will have an impact, as you can imagine, of a significant impact on the reduction of -- or reduction of the concentrate throughput of the plant of about 125,000 tonnes, as you know the numbers. So however, this is on track and will, again, transition year will give us production base and asset base in the next fiscal year, which is robust, which has been renewed, and we do expect a much better performance and reliability of these assets. Regarding the efficiency program, EUR 120 million will be achieved this fiscal year. It will continue, something which my predecessor has started with the team. It's the right thing to do to improve efficiency of the plant and improve cost. However, the market conditions have changed. We'll use, as a reference year, 2014, 2015, today, although looking forward, we envisage not that supportive market conditions as we have seen in the past. However, achievement, we are on track to achieve this target. It's more ambitions -- ambitious and more challenging than we have seen it in the months before. If you go now to the next slide. The results compared to the very good year last year, our EBT for the 9 months declined significantly from EUR 264 million to EUR 125 million. And again, repeating, mainly operational issues reduced concentrate throughput and although lower refining charges for copper scrap. Just to sum it up, the negative effect of the unplanned shutdowns was in the magnitude of around EUR 40 million, so really significant impact on our bottom line results. Also in the results, you have the impact of the stop of the FCM project, which is in the magnitude of EUR 30 million, as you know. So all of these did put some pressure on our results. The revenues, you see, are quite stable, which is 2 effects: copper prices went down, but our portfolio of other metals, prices for these metals went up and compensated some of the revenue shortfalls of the copper side. The cost in our business were slightly higher. We had, as you can imagine, higher wage cost. There is a cost increase with our collective bargaining agreements with the unions, but also energy cost went up. Also the certificate cost for CO2 went up significantly compared to the periods before. The depreciation and amortization, slightly above previous year, which is due to some increased investments that we have conducted in the period. The operating result also includes the EUR 20 million, which we announced in the second quarter, which is an operating income resulting from the prohibited sale of FRP to Wieland, which was part of the agreement with Wieland in case the deal cannot be fulfilled, has to be paid as a compensation for the activities on our side. Coming to the next page. The highlights, and we are very proud that we could sign a binding SPA on the 22nd of May, and that we are going to acquire 100% of the shares of the Metallo Group from their today's major shareholder, TowerBrook. We will pay for the company EUR 380 million in enterprise value on a cash and debt-free basis. And Rainer Verhoeven will talk about this, we will do this without any capital increase or without issuing any new shares. It's a very interesting company. I had the opportunity to see -- to visit the company a couple of times already, and it will be enhancing for our results from day 1 and provide very important technology to us. The financing will be arranged through our house banks and the transaction is obviously still conditional to the approval of the antitrust clearance of the commission in Brussels. Again, we remain confident after the intensive discussion that have started and the prenotification phase, which is taking place that this transaction will be approved in the so-called Phase I. And again, that the transaction can be closed by -- before the end of this calendar year. How does it -- again, I think you have seen this, we had our first contact on the announcement of the Metallo deal, so I do this relatively brief. It's really Metallo is part of our strategy to increase our portfolio of multimetal and to include and take complex raw materials into our processes. And specifically, you see on the slide, other metals but copper. So we see, for example, zinc is a very new metal where Metallo provides excellent new technology, complementary technology to our processes today. So Metallo will be a very important part in enhancing, complementing our smelter network and the way we can treat complex materials in our system. If you look at this slide, again, it should give you some idea about the network of metals and smelters that we are providing. You see, I don't want to discuss this in detail, but within the processes that we operate, there are a lot of intermediate materials which are generated, different mixes of metals. And with this new setup and integrating Metallo in our flow sheet, we can really handle impurities in the feed materials, and we will be also much more flexible to changing market conditions going forward. Smelters today face really the challenge that recycling materials and industrial residues, smelter intermediates and primary raw materials are becoming increasingly complex in the composition in their various elements. The existing primary metallurgical process for nonferrous metals were developed really for purer raw materials, specifically, although concentrates, and thus, cannot really handle more complex components, which we see more and more coming into the material streams. And then there's also more and more legal restrictions, what kind of impurities, what kind of nonuseful elements in the different metal streams can be accepted? Hence, the addition of Metallo to our portfolio really enables us to use more complex materials and process more of the intermediate products, which are the outcome of certain steps within our process. So therefore, a smelter network like the one illustrated enables a cost-efficient and also important, simultaneously recovery of multiple metals, more and at higher efficiency than we could do this without Metallo. Overall, we will be stronger. We will be going towards a direction of zero waste that we can process more materials in-house than we could do before with this acquisition. So having said this, our focus is now on getting the antitrust approval as quickly as possible in order to work closely with Metallo to implement this strategy of an integrated smelter network with them. Some more details about the shutdown in Hamburg. As I mentioned, EUR 45 million of CapEx, which is, as you can imagine, a significant number and tells how many important key assets like the waste heat boiler, one component where we had in the last quarters, problems where we had some repair measures. So we are going to renew significant parts of this equipment. And without going into details, many of the key equipments for our process that will be renewed, and we will stop major parts of the plant for around 36 days. It's all on track on full. Every component is confirmed to be delivered on time and will be a very active time on the Hamburg side, we will have about 1,000 contractors on site, which are going to do, in the various parts of the plant, additional work to the existing workforce of Aurubis. So very important step, and again, we are very confident that this investment will have a significant impact and improve our reliability going forward. Talking about the efficiency improvement program. You know these charts, you know these bar charts, what we have achieved in the first year. Again, our starting point is the year '14, '15, and it's very much focused on efficiency that we have improved our process, have more throughput, have more reliability, but also have a reduction of certain cost elements. We are on track to achieve the numbers for 2018 and '19. And as I said before, it will be more challenging for next year to achieve the results that we have planned and also detailed in our long-term plan here. However, we see still significant potential, and we will put even more focus on the cost side in our business as we see due to less market demand in certain elements, the point of efficiency, increasing throughput in certain -- specifically downstream parts of our production will not be taken by the market as demands are not as bullish as we have envisaged them going forward. So this is something we will continue with even more effort, and again, focus also on the cost reduction. The main point is also, in our plant network, we are seeing significant potential in optimizing and learning from each other. Standard process, standardization of processes, automation and production, IT systems, which are -- which do need some upgrade in some areas, these are all elements that we are going to continue, that we are -- have been focusing on, and we are going to continue to focus on. And just to give you some example to explain what is really behind. There's an example in the plant in Lünen. We had quite a complicated process in analyzing our different input metals and input materials to feed materials and also the intermediate materials. This has been, by sharing best practice from Hamburg, from Pirdop and also from Olen, the team has developed a much leaner process and also a faster process to come up with the results. And get material quicker back into the process and get also the speed of analysis improved, as one example. One interesting example is also in Pirdop, improving the quality of anodes, which, as you know, is an important production step in -- after the refining of the metal. The team working with Lünen, Poland and again Hamburg, improved the quality of the anodes before they go to the tankhouse significantly so that the rejects in the plant could be less than half, which allow us to introduce more metal, scrap metal into the process where the capacity was before absorbed by recycling or retaking the failing anodes back into the process. And then also perhaps a bit of a -- not in the mainstream, the Pori plant, our FRP plant in Finland. Here, there were in the casthouse, some real problems on the casting quality on the failure of material in the downstream process after the casting. Also here with the expertise of Hamburg, where we run a large shaped cast house, the team could improve the reject rate and the quality of the casting process in Pori has improved significantly. So just to show you the ideas. I know it's a very technical detail here. However, the knowledge within Aurubis at various site is valuable to other sites, and that's part of our efficiency program that teams and sites work closely together. Now I would like to draw your attention to the topic of sustainability, a topic which is close to our hearts as much as it can be. We are improving, and I'm really pleased to announce that we have received, from all these institutions, better rankings in our sustainability than in the year before. So we were, for example, ISS-oekom 2019, we are among the top 10 of the industry; Vigeo Eiris 2019, we have improved in all aspects compared to 2017; Sustainalytics, improvement in all categories compared to 2018, and I could continue. We really have scored better with all our efforts on sustainability by the various rating agencies we are working with. So here, we are making good progress, and we will continue to work on this with the focus that is required. Here, a busy slide, probably a bit difficult to read, but overall, TC/RCs, we had a good supply situation in Q3 2018 and '19 from the mines. In general, we are a long-term partner of many mines as Aurubis, and we have also long-term contracts in place. So therefore, we are not active these days in the spot market. We all know that the Chinese smelting capacity has continued to increase. And looking at whatever study you could find different views, is there a deficit? Is there a surplus in mind? It's always very close to each other. We believe that the current TC/RCs, as we saw them on the spot market, are not yet -- are not sustainable. We see that these numbers are very low, and we have also read, you have read in the recent reports that certain smelters in Asia, in China have already, let's say, idled or have taken extra maintenance stops because we see that this level of TC/RCs is not profitable, even not on the cost -- cash-cost basis. If you look at the numbers at this current spot prices, again, not relevant for Aurubis these days, at least 1/3 of the custom smelters are operating below their net cash cost level, which is, I think you all agree, is not a sustainable solution and this is going to change in the near term. Additional to this, today's situation already, the new environmental restrictions, makes it increasingly difficult to operate smelters at a sustainable level at the current TC/RCs, and even more so to get new smelters permitted. This is already true in Europe, but it will become true very soon or is already true in China today, and you see that the pipeline of new smelters being announced is emptying. There are some investments still being put in place, but if you look into the projections, it's not an active agenda going forward. What you should take away, long-term concentrate contracts generally correlate with the benchmark level, that's true. But however, a large number of contracts for Aurubis have conditions above benchmark, and given our capabilities to treat complex, more complex input materials from the mines. We also, to some extent, decoupled from the spot benchmark for pure and clean concentrates. Regarding the scrap RCs. In the reporting period, metal prices, specifically the copper price, were quite volatile. And put some -- if you see the latest numbers, even came under more pressure with all these uncertainty due to trade conflicts to the uncertainty in the market. Additional more scrap became available in the U.S. In China, import quarters were introduced for scrap type 6, and this also changed the market and put some extra market dynamic, which led to a high availability of scrap in Europe. So we could source and we also sourced for this quarter with sufficient scrap volumes going forward. However, refining charges were not at the level of last year. The indication of CRU is that RC scrap #2 without logistics of EUR 415 per tonne in the period April to June 2019 versus an average of 316 -- sorry, EUR 360 per tonne RCs for the period of April to June show that there was a 15% year-over-year increase in the scrap RCs. In July 2019, the scrap RCs came down to a level of EUR 325 per tonne, according to CRU, which isn't unusual before the summer shutdowns as certain stockpiles of certain activity is going to slow down. So this is something that you can see in this -- in the slide. If you look at the sulfuric acid price until April 2019, the pricing, the market was tight. There was a strong consumption in all industries we are delivering or the industry is delivering, smelter disruptions and extended smelter shutdowns. One, for example, Codelco, influenced the market and led to this very high-priced level that we enjoyed in this period. You see the drop in May, prices went down significantly. One hand was lower demand from our customer base, specifically from the fertilizer and also from the chemical industry. On the other hand, we saw additional supply coming to the market from increasing smelter capacity from China. After spot prices at a 6-year high until May, European spot prices came back to a level of about $30 to $35 FOB for this product that we supply. Talking about ACP, we have announced the premium of USD 96 for the calendar year 2019, which reflected the good demand that we saw in 2018. Spot premiums today, if you look at CIF Shanghai are around 60 to 70 or 60 to 69 to be precise, CIF Shanghai, which is still a good level, but it's significantly behind its historic high last autumn. Limited supply because Chinese producers are using cathodes as a substitute for missing low-grade scrap from overseas, given the quarters, which have been introduced. What we see as spot premiums in Rotterdam today is around USD 39 to USD 50 per tonne. And if you have delivered conditions in Germany, it's around USD 80 to USD 90 per tonne. We were able, given that most of our cathodes are used for our production of wire rod or shapes to transfer or to ask our customers for the full ACP premium that has been announced. Talking about U.S. dollar, Aurubis, as you know, has a long position in U.S. dollar of about USD 600 million in this year. And within the scope of our hedging strategy, we aim to secure about 2/3 of this by forward hedge. For the current fiscal year, we have secured 56% at 1.22. And for the next fiscal year already, we have secured around 55% at a rate a of 1.17. So here, we have also managed the risk and benefited from a better exchange rate to the euro than in the year before. With this, to give you a bit more details about the financial, I would like to hand over to Rainer Verhoeven to talk about this in more detail.
Thanks, Roland. Ladies and gentlemen, good afternoon, also from my side. And I'd like to start with Page #11, going through the key figures of the Aurubis Group for the year-to-date 9 months. It's a bit of mixed picture. So let's start with the quite strong and robust equity ratio, which is still well above the 50% and the debt coverage ratio, which is at 0.9 currently, going down towards the end of the year. This all has to do with the inventory -- with the elevated inventory amounts, I'll come to that. Looking then at the ROCE, for sure, we have been, Roland has been talking about it already, it's halved by -- we are currently standing at 7%, roughly. So this has to do with the rolling EBIT, which are falling into it, and the EBIT has come down significantly year-over-year as well as the elevated capital employed that we see. The capital employed is roughly elevated compared to last year's -- last year ending with EUR 300 million. And this is mainly due to the intermediate products due to our standstills, and we still have our Hamburg standstill in front of us, which means we have built-up inventory in our anodes, mainly to ensure that the tankhouses will be full all times. So on the CapEx side, we see also here a small increase compared to last year. It's a conglomerate of smaller investments that have been done here, main things, for sure, are our standstills in Hamburg, in Pirdop, the big smelters, where we had already down payments to do. And of course, Pirdop revamping has already taken place. Then there is, of course, investments in our innovation, training centers in Hamburg, but also the continuous revamp of our electrolysis plant in Lünen. Looking at the cash flow, of course, the CFO is not happy with a minus EUR 240 million net cash flow compared to EUR 100 million last year. As explained already, this has to do with the elevated inventory amounts. We can already state that we will significantly bring that figure down or improve that figure towards the end of the year when we will go to better inventory levels. That brings me now to the segments. We start with our segments, metal, refining and processing. And the MRP segment has the big smelters in it. It's all primary smelters in Hamburg and Pirdop, or secondary smelters in Olen and Lünen and our rod and shapes plants. And here, as Roland already explained and laid out, we had a series of unplanned shutdowns and for sure, the planned shutdown in Pirdop contributed to the, let's say, lower results, if you look to the EBT level of EUR 176 million only. As already mentioned, the clear goal for MRP and our main focus also in the Board is to improve the operational performance here. And therefore, we have this cross-site task forces to really improve the performance in our big smelters. For that, of course, we also had much lower concentrate throughput. So year-on-year, it's about 13% less, which is more than 250,000 tonnes of lower concentrate throughput. We then also, year-on-year, compared had lower RCs for copper scrap, still the levels are well above the long-term average, we can say that, even the 325 that Roland has just been talking about, and we enjoyed throughout the year levels at 400. However, in the last fiscal year, we had levels of around EUR 600, even, so that has come down. We have a good supply situation on the scrap side, the average RCs are fine, and we are well supplied throughout the year with scrap in all our plants. With regards to sulfuric acids, we had a good market situation pretty much until April. As already explained here, we had prices compared to last year, which were roughly 50% above last year, so really sky high values, 6-year highs in the sulfuric acid prices. And now we saw the slide that has just been shown, they have come down significantly, drastically. Nonetheless, we are still on levels of USD 30 to USD 35 FOB on the European spot prices currently. So for the full fiscal year, we think that, on the asset, we will still be better than compared to last year. Cathode output, of course, due to the shutdowns has been well below previous year. We were able to get our copper premium, the 96, pretty much with our European products. But we see clearly that the premiums has come down. I don't need to repeat here. Looking at the rod performance, very good, better than last year. For sure, we have now the Codelco share of the Deutsche Giessdraht, which increases, let's say, capacity for us in the vicinity of 120,000, 130,000 tonnes per year. So there, we had a good demand, also pretty much until May, June. Now we also see that the worldwide economic downturn has an impact here on the rod side in the last month as well. What we see, in shapes, a significant -- we are significantly below the previous year. So it's also our FRP business quite hit by the economic downturn, mainly from the automotive business outcome to that in a minute. Well, the efficiency improvement program was quite positive. It contributed positively, and we had CapEx expenditures in the area of EUR 115 million here already explained the shutdowns and the training centers that we built for our apprentices. Coming to FRP. Despite the strong slump in the market. So the market has come down drastically. We are still having 0, which is not nice, for sure. But compared to most of the market participants, I think this is quite a success. And this shows that our Emerald program, our efficiency improvement programs and cost reduction programs could turn that result, and we are different from other years from the past, not having negative figures here, and we hope to have that also until the end of the year. We have an ROCE of 3.9%, so it is a bit better than last year's. However, we have this 4-quarter rolling EBIT in there and the capital employed has come down. So it's not satisfactory, for sure, but compared to the industry overall, FRP is not doing too bad. The European market for flat-rolled product has been hit hard, cooled off substantially. And this is mainly due to the automotive business, the connector strip that we are providing to the auto industry that has been the main trigger, but also in other industries in the U.S., for instance, we see a significant decline in our product markets. For sure, the trade conflicts of the U.S. between China and Europe do have a negative impact on those product sales. CapEx was at EUR 8 million, but this is mainly replacement CapEx, so there is no new or big investments necessary. Going then to the outlook for the full year '18, '19. According to the last Reuters' poll, the average copper price should be at $6,170 per ton. Today, it's at $5,700, so we are quite away from that. On the other side, we do see that the precious metal prices have come up significantly. We are well supplied with our copper concentrate until the end of the year, so no burden from low spot TC/RCs currently. Due to our expertise in processing the complex materials, the more complex materials, we will be able to stay with our TC/RCs well above the benchmark, that continues to be holding. Despite the current decline here in the spot market, no impact for August. On unplanned shutdowns, we have been hit a lot, I would say, this year, and we are awaiting the standstill in Hamburg, which will start in October, beginning of October. And for sure, we will have significantly lower concentrate throughput volumes and all other output volumes, which are connected to that. Sulfuric acids, we see that considerable decline in Q3. Nonetheless, for the full year, we will be above the last year's level. Volume, of course, also impacted by the standstills. On the scrap market, we see an ongoing positive development. Also there, the RCs are at a comparable high level. If you see the long-term developments there, we are fully supplied even until Q4. So with good conditions, no issues on the scrap side. Well, and then comes the products. And for sure, for what we see a lower demand in the cable industry, but also the automotive industry is seeing quite some downturn. And if you see what is happening in shapes and what is happening in our FRP business, there, we have significant lower demand situations. On the efficiency improvement, we are on track with our EUR 60 million that we want to achieve for this year. Nonetheless, the race gets tougher, that's for sure. We're facing some headwinds here from the market and also our efficiency programs are throughput-driven or throughput-related. So all in all, we can say it's still a mixed picture. The markets are giving some headwinds. The dollar will help us a bit. But overall, it doesn't help. We will be significantly below our last year's results. And for sure, we will also not catch up on the ROCE. So also, the ROCE will be significantly below the '17, '18 results. As already mentioned by Roland, after our shutdown in Hamburg, which will happen in October, we are then having all plants revamped and we should be running again with freshly overhauled plants at quite some stable operations. Let's see how the market develops in the next year. With that, I thank you very much for listening. And I would open to questions.
Sorry, just one last, sorry, Thanks, Rainer. And again, I want to underline also being now a few weeks with Aurubis. Again, a year of transition. And what we are doing with these major overhauls. We have talked about this in length and also this reliability initiative, we will ensure that in the future, we will not have all main plants with a major standstill and revamp in a single year. Because if you look, we talked about all major assets, which had either significant unplanned shutdowns or significant plant shutdowns, which is something with a different rhythm we are introducing now will be not as we will operate our assets in the future. So we have, due to the nature of our assets, we have at least every 3 years, very significant overhaul of our equipment, but again, not in the same year. I think that's something that we have seen. This is having a too high impact on the results of one fiscal year. So this will be our focus. And then generally, even now with some headwinds from the market and some lower demands in certain segments, we are extremely confident about the future of copper. E-mobility, renewable energy and electricity, I know you have heard us, I see some faces here, you've heard this before, but it's really also with the capability of recycling and the increasing capability of recycling in a circular economy or more and more circular economy will be a very important contribution to Aurubis in the future. So I think we are, even with a year of transition and some headwinds, we can be extremely optimistic about the future with copper and other metals going forward. With this, Angela.
Yes. Thank you very much. We are now at the end of the presentation. Thank you, Roland and Rainer. I would now like to open the Q&A session, first of all, here in Hamburg, and we've got a microphone here. So who would -- like to take the first question? Mr. Synagowitz?
Bastian Synagowitz from Deutsche Bank. I've got a couple of questions, maybe starting on your operations. Just looking at the throughput volumes in Hamburg, they appear to have been a little bit light. Has this been driven just by the upcoming maintenance break also, which you're taking in the plant in the next quarter? Or has there been anything else, which we should be aware of? And then, then also on metal gains, Mr. Verhoeven, I think you indicated in the last call that you've been packing quite a few metal gains in your inventories, and I guess, they now start coming through, we can see that in the higher gold numbers as well. Could you just give us any indication on whether these metal gains will get sequentially larger in the next quarter? I have a few questions more, but I'll stop there.
So first of all, on the throughput in Hamburg, yes, for sure, due to the fact that we will stop and have our maintenance, big maintenance shutdown on the 1st of October. For sure, there's preparation works ongoing, there's reduction in the throughput, and that is why you see that in the figures here in Hamburg throughput as well. With regards to the metal gains, absolutely right. We have a huge number of intermediate products, which is currently piled up. It is, in principle, the anodes. If you want to say so, so we have huge piles of anodes and the anode is, of course, containing all the precious metals, which are currently, let's say, tied up in our intermediates, and we are going to still have some anodes for the shutdown in Hamburg. So not all of those intermediate products will be completely processed through by the 30th of September. Nonetheless, we will let's say, significantly increase also our metal result and let's say, also the production of fine metal of gold, silver and all the PGM metals over this quarter until the 30th of September.
Just to be clear on that. So that means that the metal gains will get significantly larger in the next quarter?
Yes.
3Okay. Then just having that in mind and also just the developments on the current spot markets, which I think won't impact you that much given that you're pretty much locked in on contracts for the TCs as well as for sulfuric assets -- acids. Is it fair to assume that we'll get reasonably close to this mentioned EUR 75 million normalized pretax run rate in the next quarter? Or would that be too ambitious?
Well, ask me in a couple of months again. I would currently say, yes, the -- we have currently a consensus, which some analysts are starting at EUR 307 million for the full fiscal year, which is, let's say, far away from reality, unfortunately. And we do see the low figures at EUR 176 million, I think, it's the lowest, yes, EUR 178 million is the lowest. For sure, we will not achieve the EUR 307 million anymore, but I also guess that the EUR 176 million is a bit on the low end.
Okay. Then one question on working capital. I think you mentioned before that you aim for EUR 150 million to EUR 200 million free cash flow this year. We've been seeing quite a few movements in metal prices, is that still a valid statement? And maybe you can also give us any color on how much working capital overhang you plan to carry into the next business year?
So I would say that coming from the minus EUR 240 million that we have end of June, we would go to a positive 2-digit figure. It would be nice to achieve the EUR 100 million positive for the net cash flow, but it's still a bit an uphill battle, and it's also depending a bit on the market side.
Okay. And then maybe how much working capital overhang will you carry into the next business year?
On average -- and last year, we had total inventory in the vicinity of 1.5 and a bit billion euro for the whole Aurubis Group. For this fiscal year, it will be higher due to the fact that we still have to pile some anodes because we have the standstill in Hamburg in the 1st of October, and we have to ensure that throughout the standstill in Hamburg, we will be able to fill the tank cars with anodes.
[ Mr. Schlemm ] from [indiscernible]
Yes. One question concerning sulfuric acid prices. The prices, were heavily under pressure, what were the reasons for that? Or was this mainly due to oversupply in the market? Or is it rather because of weaker demand? And when can we expect a stabilization of the prices and what is key for stabilization?
Good question. The -- so first, you see the volumes that we have shipped were lower due to the unplanned and planned shutdowns of our smelters. So the total volume that Aurubis supplied to the market went down. In general, it's a product where we saw also some lower demands now going forward and spot markets are under pressure. And as I mentioned, additional capacities were either coming onstream or idling capacity was restarted. So if you take these all together, there was a pressure on the spot pricing. But rightly, as you also mentioned, there's quite a volume, which is supplied under long-term contracts. Specifically out of our Hamburg plant into the, let's say, the European industry.
And the reason is primarily because of the new capacities in China, therefore, the prices come under pressure.
This puts really, let's say, reduce the possibilities of high-priced spot markets that we shipped to other regions, but Europe from either Pirdop or from our plant in Hamburg.
Okay. Plus, if you allow me to add that plus you have the economic downturn all over Europe. We are supplying roughly 45% of all our of sulfuric acid into the European chemical industry. So yes, there is an impact also in the industry.
Any further questions here from Frankfurt? Otherwise, I would like to hand over to the first question here that is Jatinder Goel from Exane. Jatinder, are you there?
A couple of questions on FY '20, I know it's a bit early for the group to give guidance, but you've mentioned a year of transition. There have been a few one-offs this year, including [ SCM] [and Wieland, which are probably offsetting. But it -- with the backdrop of potentially weaker premiums, Hamburg shutdown and potentially lower TC/RCs, question marks around your efficiency achievement, weaker scrap margins and low acid prices, is it a fair assumption that next year's underlying EBT will still be higher than FY '19, wherever you ended on a clean basis? That's the first question I got. Just didn't want to -- at the same time.
This is Rainer Verhoeven again. Yes. Well, difficult to answer that question. We are still in the budgeting process. And we are revising our planning also right now because we do see changing market situations, mainly in our product markets also. So it's too early to announce figures here. Unfortunately, we will be only able to really have that once we have our budget closed. And therefore, I have to say, please ask again in December.
Okay. Just a second question on FRP. Do you have a timeline for how long will you carry it as asset held for sale? And are you able to indicate how much margin do you have against impairment given the return on capital is only like 3%, 3.5%, what type of discounter do you use? And how much margin do you currently have?
Yes, Roland speaking. Regarding the timeline, there is interest, real interest from a industrial player, and there are ongoing talks with potential buyers for FRP. So therefore, we remain confident that we will find, in the coming quarters, and be careful here, in the coming quarters, a solution for FRP. So therefore, it's held for sale, and we are working on this. And also now with me joining, we had a bit of a transition there. We are restarting the discussion intensively.
Okay. And if I could sneak in a last question. Cost of materials in the table that you disclosed in the report has gone up despite volumes coming down and copper price also being down. What's the key driver behind that cost of material going up?
Sorry. So I didn't get that question. What -- I think we still owe you the one on the margin. And there, I would also remind you that we said we will, through the products that we are selling, we are still able to earn our full ACP. And if you look what the cathode premium currently in the spot markets look like, then we must not underestimate the effect that FRP is still the product outlet for Aurubis, and therefore, quite important. And maybe you can just repeat your last question, once again, because acoustically, I couldn't get that.
Sure, no, it's just referring to Page 7 of your release. The cost of material line is higher year-on-year, despite volumes being down and also copper price being lower, so just wondering what's the key driver in costs going up despite massive decline in volumes and prices?
Well, you have to always combine it. It's a bit difficult to read here on our P&L because our revenues are clearly determined by the products that we are selling while the material input also has to be seen in combination with the inventory buildup that we are doing, so you have to add those. Therefore, it's a bit complicated to read that. There is a change in inventory which has to be added and therefore, the cost has been going up.
And the next one is Dan Shaw from Morgan Stanley. Dan, your question, please?
This might have been answered actually, but just one on scrap RCs given the lower copper price that we're seeing, especially over the last couple of months or so. Is it fair to assume that the direction of travel for these is likely to be further down from the EUR 325 million level you mentioned? Or have kind of the changing dynamics around kind of scrap exports, et cetera, does that provide some level of support that can keep RCs at the current level, what's your view on that?
Roland speaking. On the moment, we have no signs of a change here of the market dynamics on scrap RCs. It's volatile, that's what you see also in aircraft, but there is no trend, no significant change that we can comment here regarding these prices that have been achieved in the last months.
And the next question, we would like to take is from Rochus Brauneiser. Herr Brauneiser?
Let me start with a general question before we carry on with the other ones. I think you talked a bit about automotive. Can you help me explain what your automotive exposure is for your 3 product divisions? So for wire, shape and FRP, what are the different exposures? And then I come with a follow-up question.
I can try to answer it. We don't have a final figure because don't forget that our products are going to service centers and with the service center. So there is a quite a chain behind it. We can do a guess here, but that would be quite a wild guess. It's in the low 2-digit figures, percentage-wise. FRP, for sure, with our connector strip, especially in our plant in Stolberg has, let's say, a significant amount of connector strip business. On the other side, comparing this to the total volume of Aurubis, I don't have the figure off Stolberg right in front of me, but I would guess something in the vicinity of 40,000 to 50,000 tonnes of output overall, copper output. So therefore, it is not so significant. On the other side, if you take the cable producers, for sure, also there, quite an amount goes into the auto industry. But for sure, it's by far outweighed by the cable industry, which is used for overhead lines and others.
If I add to this point, if you see, we are supplying in the wire rod business, a very, let's say, standardized starter stock to all the various cable manufacturers. This starter stock can be used for all different applications, including automotive building and so on and so on. So we don't have here the numbers at our fingertip, we probably could make some estimates, which plants of our customers are producing what. But it's not really a differentiator and differentiating element for our supply as this is standardized.
Okay. Because when I read your statements, they refer a lot to the auto industry. But obviously, what you're saying now is it's -- the exposures are a bit more balanced between auto and non-auto and linked to the general economic downturn here. So the reason why I'm asking this is, when you look at FRP, and I think the business has held up quite well, given the volume outlook or volume performance. As this is still in a review for disposal, are you planning to step up the restructuring efforts there in order to have the best potential outcome of your negotiations?
Yes, good question. You see at the numbers and Rainer pointed on this, that the business has already significantly improved, that despite a significant reduction in volumes, we have been able not to drop below the 0 line, which was in the last years, what you have seen in the results. And given where we stand today, yes, we will intensify our efforts to further improve this business as we see potential there. There is still -- the efficiency program has identified a very interesting amount of additional things we can do in this business area in FRP, and we are going now with an accelerated effort in delivering these results to make this even more attractive as an asset for potential buyers.
Okay. This is very helpful. On this auto outlook, can you give us your impression, how you see the auto demand at the moment? I think a lot of the distortions in the market are related to destocking along the automotive supply chain. Do you have any sense, guess when this destocking process might come to an end in the quarters ahead?
I think it's -- now it's a bit in the area of speculation there, but when I see the order intake, and I'm talking now specifically about our FRP product, where we have some specific segments for the automotive markets. The impression is that we have now kind of bottomed out, that the supply chain has been adjusted, and the order intake on a lower level than we have seen is last year, has stabilized. So we don't see any further reduction. Hence, we conclude that the volumes in the various supply chain, and you know it's a very long supply chain, given that we supply semi-fab material seems to be adjusted now. But it's a kind of interpretation of what we see today. On the rest, I think automotive industry and the world market for automotive, I think I refrain from any comments. Very difficult to see how the way -- how it goes forward. I hope you understand.
Of course. Another question on this plant availability, I guess, comments in the past, suggesting that a lot of these things for bad luck, random work, by coincidence, it feels more now that you're trying to identify a certain pattern and you work on solutions to enhance the plant availability. I'm not sure what you meant by saying that in what regard, in what direction is this heading to? Because when you're now doing all the ramp-ups in Pirdop and then in Hamburg, then you would take another 2 years to apply changes to the equipment. So what should I take from this availability improvement measures?
Okay. Regarding reliability and availability of the equipment. What we are doing, the team, and I'm -- again after a couple of weeks, I'm not really having a deep insight yet, but what I have seen, they have completely identified the weak spots of the equipment, things which need to be removed, replaced strengthened. And what I have seen is very convincing, and we have also provided the necessary funds. You have seen the investment in buildup and what we have planned in Hamburg. So really, what needs to be done will be done on the key assets. And I have a very high confidence in the technical expertise of the teams that they know their assets, and they have really identified what needs to be done. So is there a guarantee with these very complex large plants that everything is perfect from day 1? Definitely not. But I think with all the best effort, everything is going to take place in the coming months. So we are very confident that the team will deliver on a much better reliability and availability going forward.
Well, before I ask Ingo Schachel -- to ask his question. [Operator Instructions] And now I'd like to take the question from Ingo Schachel, please.
Yes, the first one would be just a follow-up on your FRP timeline. I think the update you gave is very similar to what you already said on the call in May, that you have several interested parties and are looking at it. It's -- assuming that the progress in the last few months has been rather slow, just wondering whether you would point to any specific reason for that? It's just your own availability in terms of looking at the process? Or is it the macroeconomic uncertainty and disagreement of the earnings expectations or rather, on valuation? Or is it sort of the complexity of finding ways to make this work from a merger control antitrust perspective? What are the reasons why you still seem to be in a very similar situation like 3, 4 months ago?
I think you answered already your question yourself, to some extent. It's quite complex in the already, let's say, partly consolidated copper FRP industry. I take you as aside to find an industrial buyer because, as you said, exactly the restrictions. First, it's not a highly profitable industry in itself. So there are -- every potential industrial buyer thinks twice, 3 times about investing, getting further into this business, point one point. The second point is the antitrust and you have seen Wieland Aurubis was not allowed by the antitrust authorities. So also here, it needs a very, let's say, detailed check and analysis of what is really possible. And this is exactly what takes the time and it's not lack of resources, it's not lack of attention, it's really that we want to do this with the necessary attention to all the details before we go into the next step. It's also due to, let's say, I think we owe it also to the people, our people in the FRP business that if we make now a next step, a next announcement, it has to be bulletproof, it has to be a solution which can be executed. We cannot keep an uncertainty on, let's say, work on a deal, which is not going to happen. We are not going to do this again. So therefore, we will take the necessary time to be sure that whatever is being decided can be executed.
Okay, makes sense. And then I think regarding strategy generally, of course, you have elaborated on very many aspects to a very strong continuity when it comes to the strategy when it comes to merging metals and cost saving and so on. I think the only aspect that we did not speak so much about is sort of greenfield CapEx after the termination of the FCM project. I mean, especially if you were to realize significant cash proceeds from FRP divestment, would you be of the view that it's appropriate for Aurubis and for you as a CEO to deploy, let's say, bigger ticket items, EUR 300 million and EUR 400 million on greenfield CapEx? Or what's your stance on the appropriate size of greenfield CapEx be different from your predecessors?
So as you can imagine, I started with Aurubis with some ideas, with some ambition to do something. What I have seen so far, we have an impressive technology and capability in recycling in various area of metal processing. And if I look in regions, in continents around the world, there is definitely the need for these kind of capabilities. But I hope you understand that, at this point, I'm not making any statements in any direction as it would be premature, but I think we have it all in our hand. And we have also the balance sheet, we have also, let's call it, the firing power as Aurubis to do greenfield M&A, whatever makes strategic sense for us. But again, I don't want to make any statements, premature here in this -- at this point in time.
Yes. The last question I would like to take is from Marc Gabriel. Herr Gabriel, [Foreign Language]
Well, just coming back on the strategy with FRP. What about possible impairments, especially given the weaker macro environment and the limitation of possible industrial buyers? Is that something which we should have in mind for the end of the fiscal year? And the second question is, I was wondering why you think you can make a EUR 350 million relief in net working capital in Q4, given the fact that the Hamburg smelter shutdown is ahead of us? And is that mostly due to the sale of precious metals? And have you hedged any position of gold and silver? As far as I understood in the past, you only hedge the copper content, but not the precious metal content? Or could that even be higher -- that a relief of net working capital in Q4, given the strong gold and silver rally currently?
I'll take the first question regarding FRP, and then Rainer will respond to your working capital question. So FRP, I think you also understand that we are not in a position to make any statements regarding impairments of this business. You've seen the improvements, just as a comment. You have seen how efficiency in difficult markets have delivered much better results. And we have still, as I also mentioned, very interesting improvement potentials in the execution, but any statement regarding impairment, I think you should accept that this cannot be made at this point in time.
Yes. Then Mr. Gabriel, going to the second question with regards to net working capital, we had already the point that we said that the inventory will be a bit above the last fiscal year's number. Last year, we had EUR 1.5 billion, a bit more. And so therefore, yes, we will go down quite significantly from 30th of June onwards. And with regards to the hedging, so what we'll normally do with our metal result is that whenever we have metal gains physically, we start selling those positions strategically, which means not before we have produced them. So normally, and we do that on a weekly basis, we sit together, and have a look into whether we want to set limit orders or not. And we just recently had 2 gold positions and 1 silver position, which had hit the limits that we had set. And for sure, they were sitting there for quite some months because silver, especially were -- was very, very low throughout months and months, and we were waiting, and we didn't adjust and -- oh, well, we were lucky to sell those positions. Now does that mean that we will be having better -- even better net working capital relief? I wouldn't say so, so I would stick to what I've been saying earlier that we will be a bit above the last year's inventory levels.
One point. I think one question I didn't answer completely, there was about the investment and referring again to the stop of FCM, which has been quite a significant decision. I want to reemphasize that we have stopped this one project. But again, we have documented, we have really developed a lot of equipment and technology here, which we are going to implement, not as a complete package as the FCM, but we will take also now with reviewing what Metallo will bring to the whole smelter network, we will review and we'll invest all the elements, components of FCM in our plant system. So also to the point, it's not that we are not investing EUR 320 million that was -- but we are -- we'll go with a certain portion of this debt, and we'll announce this in due course.
Yes. Thank you very much, that -- if there are no further questions, I would like to beg you look at our financial calendar year. Next time, I think, we talk on December 11, when we're going to publish our annual report, and we will talk then about, of course, the forecast for the next fiscal year. Yes. Thank you very much, all of you participating here in Frankfurt, on the phone and on the webcast. Have a nice afternoon. And as I think some holidays are over, so enjoy the time to the next holidays. And if you have any further questions, be it on our quarterly results or whatever might be, the Investor Relations team of Aurubis, Elke Brinkmann, Christoph Tesch, and myself, of course, are more than happy to answer your questions. Write us an e-mail, give us a call, we are there to answer your questions. Thank you very much.