Business model of the Group

Business activities

Aurubis AG is an integrated copper group focusing on copper concentrate processing, metal recycling and fabrication of a variety of copper products. Precious metals and specialty products complete our range of services. Aurubis is therefore active in significant parts of the value chain for copper.

The Group’s sites are primarily located in Western Europe, with larger production centers in Germany, Belgium and Bulgaria. Outside of Europe, Aurubis also has a production site in the US and a global sales and service network.

About 6,300 employees work for Aurubis worldwide.

Business model

The strength of the Aurubis Group’s business model lies in the closely coordinated connection of copper production and copper processing.

The Group’s raw material supply is based on two pillars and is therefore well suited to utilizing market opportunities and absorbing supply risks. On the one hand, the Group globally sources and uses copper concentrates drawn from ores. On the other hand, Aurubis processes a wide range of intermediates, copper scrap and other metal-bearing recycling materials.

The product portfolio mainly includes standard and specialty products made of copper and copper alloys.

The main product is copper cathodes, which are traded on the international metal exchanges. Aurubis produces about 1.1 million t of copper cathodes annually and is thus one of the leading producers in the world. Copper cathodes are the starting product for fabricating additional copper products in the Group, but they can also be sold directly. Aurubis processes copper into continuous cast copper wire rod, shapes, rolled products, strip, specialty wire and profiles. All of these products are available in a broad range of types.

Other elements found in copper raw materials are processed into additional products, in particular precious  metals, sulfuric acid and iron silicate.

Aurubis’ direct customers include companies in the copper semis industry, the electrical and electronics sector, the chemical industry and suppliers in renewable energies, construction and the automotive business.

The Aurubis Group is managed from the corporate and administrative headquarters in Hamburg, where the main production facilities are also located.

Business model: integrating copper production and processing

Chart: Business model: integrating copper production and processing

Group structure

The Aurubis Group’s organizational structure is oriented towards its underlying business model. Fundamental adjustments were made in fiscal year 2014/15 and the new structure went into effect on July 1, 2015. Up to this date, the Group’s organizational structure was made up of three operating Business Units (BUs): BU Primary Copper, BU Recycling/Precious Metals and BU Copper Products.

As of July 1, 2015, Aurubis’ activities are divided into two operating BUs: BU Primary Copper and BU Copper Products. The segment reporting pursuant to IFRS 8 is also based on this new structure.

BU Primary Copper mainly combines the production facilities for processing copper concentrates and producing copper cathodes at the Hamburg and Pirdop sites. The precious metals sector in Hamburg, which is centralized for the entire Group, was added in the course of the reorganization.

BU Copper Products consists of the Lünen recycling plant and the Olen production site, an organizational step that strengthens the orientation of recycling to customer business. This BU also produces and markets products from the copper product sectors wire rod, continuous cast shapes, rolled products and specialty products.

From an organizational perspective, the product business is divided into Business Lines (BLs) Rod Shapes, Flat Rolled Products, Bars Profiles and Marketing Cathodes.

The significant production sites are Hamburg, Stolberg, Emmerich (Germany), Olen (Belgium), Zutphen (Netherlands), Pori (Finland), Avellino (Italy) and Buffalo (USA). Service centers in the United Kingdom, Slovakia and Italy and a global sales and distribution network complete the service profile.

Cross-group functions support the operating Business Units. The newly established Supply Chain Management, which is responsible for raw material management across the Group as well as the sale of sulfuric acid and other ­specialty products, should be emphasized in particular.

A list of investments pursuant to Section 313 (2) German Commercial Code (HGB) as at September 30, 2015 is provided in the notes to the financial statements.

Organizational structure: two operating Business Units with central management

Chart: Organizational structure: two operating Business Units with central management

Significant parameters relevant to the business

The significant parameters relevant for Aurubis are the copper price, treatment and refining charges for raw materials, cathode premiums and shape surcharges for copper products as well as sales revenues for sulfuric acid.

The copper price is formed first and foremost on the ­London Metal Exchange (LME), which facilitates physical transactions, hedging and investment business. The price represents a benchmark beyond exchange trading and is recognized internationally.

The copper price is the basis of price calculations in the raw material and product business. There are no significant direct risks from price fluctuations since the price is extensively and continuously hedged.

However, the copper price indirectly influences the raw material supply and demand. Furthermore, efficient metal production in our plants can lead to effects on earnings, which can cause changes accordingly depending on the raw material composition and metal price fluctuations.

Treatment and refining charges (TC/RCs) are negotiated with suppliers when purchasing copper-bearing raw materials. The TC/RC trend depends on the supply and demand structure on the global markets. TC/RCs are essentially the compensation for turning raw materials into the commodity exchange product, copper cathodes, as well as other metals.

The metal exchange and market quotation for copper serves as the price basis for our copper product sales. The Aurubis cathode premium and shape surcharges, which are charged for converting cathodes into copper products, are also part of the sales price. Economic trends and other developments have an impact as well.

Pricing along the value chain

Chart: Pricing along the value chain