Arubis AG reported robust financial results for the first quarter of 2024, with a notable increase in operating earnings before taxes (EBT) and a significant improvement in net cash flow. The company’s strategic initiatives and diversified operations contributed to these positive outcomes, despite challenges in the broader market. With a market capitalization of $3.53 billion and trailing twelve-month revenue of $19.13 billion, Arubis maintains a strong financial position. According to InvestingPro analysis, the company is currently trading below its Fair Value, suggesting potential upside opportunity.
Key Takeaways
- Operating EBT increased by 17.5% year-over-year to €130 million.
- Net cash flow turned positive at €178 million, compared to a deficit last year.
- Arubis is advancing its U.S. expansion with a new facility in Richmond.
- Copper and sulfuric acid markets are driving revenue growth.
- The company maintains a strong hedging strategy and diversified supplier base.
Company Performance
Arubis AG’s first-quarter performance highlights its resilience and strategic foresight. The company achieved a 17.5% year-over-year increase in operating EBT, reaching €130 million. This growth was driven by higher metal results and increased revenues from sulfuric acid and copper production. The company also reported a positive net cash flow of €178 million, a significant turnaround from the previous year’s deficit of €202 million.
Financial Highlights
- Operating EBT: €130 million (+17.5% YoY)
- Net Cash Flow: €178 million (vs. -€202 million previous year)
- Gross Margin: Over €500 million
- Return on Capital Employed (ROCE): 11.7%
Outlook & Guidance
Arubis AG has set a full-year operating EBT guidance of €300-400 million, reflecting confidence in its strategic initiatives and market positioning. The company’s strong financial health is further supported by InvestingPro data showing it holds more cash than debt on its balance sheet, with liquid assets exceeding short-term obligations. For detailed analysis and forecasts, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers. The company expects its multi-metal recycling segment to contribute between €50-110 million in EBT, while the custom smelting and products segment is projected to generate €310-370 million in EBT. Arubis is also investing in strategic projects and expects the Richmond facility in the U.S. to be fully operational in 18 months.
Executive Commentary
CEO Toral Park stated, "The robust operating result for the first three months underlines the strength of our robust solid spits model." CFO Stefan Hofmann emphasized the company’s strategic move into the U.S. market, saying, "The strategic move of Arubis going into the US with a secondary smelter is absolutely the right one."
Risks and Challenges
- Market volatility in metal prices could impact revenue.
- The startup of the Richmond facility may incur initial losses.
- Supply chain disruptions could affect material availability.
- Regulatory changes in key markets might pose compliance challenges.
- Economic downturns could reduce demand for metals and chemicals.
Q&A
During the earnings call, analysts inquired about the contribution of sulfuric acid to quarterly revenues, which was reported to be in the low double-digit millions. Questions also focused on the expected timeline for the Richmond facility’s positive financial contribution, anticipated in the 2026/2027 fiscal year. Executives expressed cautious optimism about the supply of recycling materials, despite short-term challenges.
Arubis AG’s Q1 2024 performance underscores its strategic agility and operational strength, setting a positive tone for the remainder of the fiscal year.
Full transcript - Neptune Digital Assets Corp (NDA) Q1 2025:
Conference Moderator: Good afternoon, ladies and gentlemen, and welcome to the conference call of Arubis AG. At this time, all participants have been placed on a listen only mode. Let me now turn the floor over to Elke Brinkman.
Elke Brinkman, Investor Relations, Arubis AG: Good afternoon also from my side and a warm welcome to the conference call on the results of the first three months twenty twenty four-twenty five of Aroobis AG. We from Investor Relations are here with our CEO, Toral Park and our CFO, Stefan Hofmann, who will present the figures for the first quarter of twenty twenty four-twenty five and current developments at Aroobis. After the presentation, the floor will be open for questions. Before we begin, a brief reminder about the disclaimer on forward looking statements. Today’s capital market presentation contains forward looking statements about Auroville’s plans and expectations.
These statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Let me now turn the floor over to Tobias Park.
Toral Park, CEO, Arubis AG: Thank you, Eke, and good afternoon, ladies and gentlemen, and thank you very much for your interest in Eruviz. Like Eke said, we will report on the first three months of the running fiscal year. The robust operating result for the first three months underlines the strength of our robust solid spits model, even in challenging times for the economy as a whole as we have it today. The overall stable market conditions and satisfactory operating performance, operating EBT came in at EUR 130,000,000, which represents an increase of 17.5% compared to the previous year. Even if we consider the significantly increased capital employed, this resulted in a slightly increased return on capital employed of 11.7%.
Furthermore, net cash flow came in at EUR 178,000,000, well above the previous year’s level of minus EUR202 million. This net cash flow is highly supportive in financing the company’s growth investments and underlines the attractiveness of the Rubis (EPA:RUBF) business model. The free cash flow was also positive. Finally, looking ahead, we renew the guidance for the operating EBT at EUR 300,000,000 to EUR 400,000,000. On the next page, following the exceptional events of 2023, planned security and occupational safety continue to be the Executive Board’s top priorities.
Let’s take a look at planned security. We completed a comprehensive analysis of planned security optimization potential and identified around 400 measures. Roughly a quarter were already implemented in the past fiscal year and an additional 150 are scheduled for 2025. We’ve invested a middle double digit million amount in heightening securities since September 2023. Key objectives of these measures to raise plant security and better safeguard precious metals.
A comprehensive employee protection program was launched internally. It includes risk analysis of critical roles, meaning those who could potentially be approached by criminal networks. For work safety, we rolled out a program to transform occupational health and safety with three action areas. Number one, management culture, introduce and establish safe and conduct practices. Number two, risk management and safe side processes.
And number three, safety management, effective tools for safety management. Our goal is to create a definite safety culture with effective safety management. Looking next at market developments throughout the first quarter, you can see that market trends continued. Overall, the copper and metal prices showed some positive momentum in a year over year comparison. The latest Reuters copper pole now anticipates a median of USD 9,452 a ton in 2025 and USD 9,800 a ton in 2026.
Let’s have a look at the various markets. The global concentrate market continues to experience high demand from the smelting industry that is out pacing the growth in global supply from the mining side. As a result of the tighter concentrate markets, smelting and refining charges remain muted on the short term market. A rubis, however, remains well supplied with materials in both quantity and the quality of concentrates. Arobus diversified supplier base with long term contracts remains unchanged.
Aruba’s physical contract supply situation is covered well into Q3 of this fiscal year twenty twenty four, twenty twenty five. Looking at the residing markets, during the reporting period, we have seen a stable supply of scrap and blister copper for secondary smelters. Also for the other recycling materials, we have seen a stable supply with mostly stable refining charges on a group level. Looking forward, our production sites are already supplied with material until the end of the second quarter of this fiscal year twenty twenty four, twenty twenty five. Sulfuric acid.
The sulfuric acid market showed growing demand from the fertilizer and chemical industry in the reporting period. The maintenance of some sulfur burners and smelters in the industry lowered the availability of sulfuric acid for these offtake markets. Given the current market situation, Aruba’s benefits from the sulfuric acid market and so improved earnings in the reporting period. Copper products. We saw an ongoing robust demand for copper and copper products in Europe and our offtake markets.
U. S. Dollar. Arubus has a long U. S.
Dollar position of approximately $560,000,000 in this fiscal year. Within the scope of our hedging strategy, we hedged 70% of The U. S. Exposure at 1.085 for this fiscal year twenty four point two five and around 42% at a rate of ten eighty for the next fiscal year twenty twenty five-twenty twenty six. And now I hand over to my colleague, Stefan Hofmann, for some more details on the numbers.
Stefan, please.
Stefan Hofmann, CFO, Arubis AG: Thank you, Toral. Also a warm welcome from my side. Moving from the market to the financial figures for the first three months. Revenues came in slightly higher compared to the previous year driven by a significantly higher metal result, considerably increased sulfuric acid revenues and robust revenues from copper production. In line with revenue growth, the gross profit increased to million.
This resulted in a solid and robust operating EBT of million, which is a 17% increase over the previous year’s figures. The main drivers were a higher metal result due to increased metal prices and improved earnings from the sale of sulfuric acid, robust revenues from copper products and slightly lower costs at the group level. These effects were reduced by decreased concentrate throughput with lower treatment and refining charges as well as a mild decline in revenue from the processing of recycling material. Furthermore, depreciation and amortization and personnel costs in connection with growth investments increased. Based on the rolling four quarters of the EBIT, this results in a ROCE of 11.7%, which represents a slight improvement despite much higher capital employed due to the strategic investments.
On the gross margin, we generated a gross margin of more than EUR 500,000,000.0 in total, well balanced across our different income components. This is yet another sign of the resilience of the Arubis business model with its various earnings drivers. For metal result, we achieved a significant increase year over year as we benefited from higher metal prices in particular for copper, gold and silver. Our premium and products business remained stable with an increased contribution from the sale of sulfuric acid. Last but not least, as a result of lower throughput, treatment charges fell below last year and refining charges for recycling raw materials were slightly reduced.
In the Customs Melting and Product segment CSP, operating EBT increased to EUR 125,000,000 and was driven by a significantly higher metal result, a notably increased contribution from sulfuric acid and robust earnings from copper products. As already mentioned, lower throughput with reduced treatment and refining charges and decreased earnings from processing recycling material had a negative impact. Adding these parts together, the return on capital employed reached a significantly improved 19.4%. The improved earnings situation, therefore, more than compensated for increased capital employed due to the strategic investments in the smelting network such as complex recycling Hamburg and the expansion of the tank house in Pieddorp. In the Multimetal Recycling segment, MMR, operating EBT came in at EUR 27,000,000, which is a slight reduction compared to last year’s first quarter.
The result for this segment was supported by higher metal prices, which led to a significantly improved metal result coupled with higher throughputs of copper scrap and blister copper. However, as expected, the ramp up cost for Aurobus Richmond and the well executed shutdown of the anode furnace in Lunen in NovemberDecember last year, which had an EBT effect of minus million offset this positive contribution. And as a result of lower EBIT for the rolling past four quarters and the increased capital employed due to investments in Richmond, the segment’s ROCE came in at 5.5%, which is obviously below prior year figures. If we look at our expenses, total group costs decreased by 3.6% compared to last year with minor movements between the expense positions. On the positive side, at the group level, external services, consumables and energy costs declined in absolute terms in a year over year comparison.
In contrast, there were higher personnel costs because of wage and salary increases linked to collective wage agreements and increased staffing for the new Aruges Richmond site. Moving on to the transfer of EBITDA to net cash flow. As a consequence of our robust first quarter and the good commodity pricing for our core metals, our rubies generated an operating EBITDA of EUR184 million, which is ahead of Q1 last year. On the one hand, we build up inventories linked to operating performance. On the other hand, this effect was slightly counteracted by less capital outflow related to liabilities.
So in total, net working capital increased by million. Other positions, which are mainly influenced by valuation effects, led to a plus of million. Finally, taxes paid increased by million and reflect the increased profitability, but also the increase in the tax rate in Bulgaria linked to the Pillar two legislation with a 15% minimum tax rate. In total, net cash flow amounted to a healthy €178,000,000 and remains on track to meet the guided range of EUR500 million to EUR600 million for the full fiscal year. We focus on working capital management.
And in general, I also want to flag, however, that net cash flow is subject to fluctuations over the course of the fiscal year, which balance out again as the year goes on. Moving to the cash flow bridge. I mentioned the EUR178 million on the net cash flow side. The cash outflow for investment activities includes our growth strategy and baseline investments. Here, capital expenditure for Aurobus Richmond represented the largest part, which will lead to higher EBITDA contributions in the medium term.
With interest payments at a low level of EUR 6,000,000, free cash flow was positive amounting to EUR 38,000,000. So I think it’s fair to say that at the end of Q1, our Rubis had a solid cash and cash equivalents position of EUR $451,000,000. Our key performance indicators on the balance sheet side show a healthy and robust picture with a debt coverage close to zero. Our equity ratio was at 54.7%, remaining well above the target level. CapEx was, as planned, at a high level of EUR141 million, slightly below last year’s Q1.
This represents a further step in executing our strategic project pipeline after close to 60% of the EUR 1,700,000,000.0 CapEx program was realized last quarter. The substantial increase in capital employed to EUR 3,800,000,000.0 is a consequence of ongoing strategic investments and increases in our asset base. And on that note, I’d like to hand over to Torald Park again.
Toral Park, CEO, Arubis AG: Thanks, Stefan. And let’s move on to the outlook for the markets for fiscal year twenty twenty four-twenty five. Concentrates. As already widely discussed with the capital markets, the concentrate market is expected to be tighter as a result of the recent expansion in the smelter industry. This increased demand from the smelter industry outpaces the growing supply from the mining industry.
Despite the tighter concentrate markets, we are already 90% supplied with contracted concentrates for the current twenty twenty four, twenty twenty five fiscal year. Our primary smelters already supplied well into Q3 of this fiscal year. Scrap and recycling materials. For the recycling materials markets, we anticipate satisfactory supply at the group level. The recycling market remains a short term market influenced by short term developments and factors like collection rates, metal prices and Chinese imports.
Overall, we now anticipate a slightly lower earnings situation from Recycling Materials for the remainder of fiscal year twenty twenty four, twenty twenty five. In line with our broad supplier base, the secondary smelters are well supplied with recycling material until the end of Q2 twenty twenty four, twenty twenty five. Sulfuric acid, based on the latest market developments with good demand from the European chemical and fertilizer industry, we expect a continued positive earnings contribution from sales of sulfuric acid. Copper products. Coming to our copper products, the rod shapes, flat and rolled products.
We continue to see good demand for wire rods driven by the infrastructure sector. On our other downstream products, we expect shapes to be below the previous years levels. Flat rolled products are expected below previous year levels due to the sale of Arupus Buffalo in the last fiscal year. Coming to our guidance. In line with our announcement on December 5 and based on our latest assumptions for both earnings drivers and cost components, Arobus is providing a forecast for the group result and continues to expect an operating EBT of between EUR 300,000,000 and EUR 400,000,000 and an operating return on capital employed of between 711%.
This range already includes an approximately EUR 50,000,000 EBT effect for start up costs. For the multi metro recycling segment, we expect an operating EBT of between EUR 50,000,000 and EUR 110,000,000 and an operating return on capital employed of between 48%. The anticipated return on capital employed is subdue to enlarge part to the growth investments in Aruba’s Richmond and therefore the related startup cost. For the Custom Smelting and Products segment, we expect operating EBT of between EUR310 million and EUR370 million and an operating return on capital employed of between 1418%. The maintenance shutdown in Perdok in May 2025 with a negative EBT effect of EUR 34,000,000 is already included in these figures.
Let’s take a look at the strategic projects. This overview is not really new for you, just a repeat of the timeline of the strategic projects. Our Rubis continues to deliver on what was promised. The first strategic projects have now been commissioned and are being ramped up. The first projects like Aspar, BOP and Industrial Heat Phase II are in operation and will gradually deliver on the expected and guided EBITDA contributions once fully ramped up.
Executing the approved strategic project remains one of the key priorities for the Executive Board and for Robesp. The timeline for the start up operations of the strategic project remains laid out for the coming fiscal years and as such for when the first revenues will be generated. Let’s analyze how project progress corresponds with our CapEx spending. In the first quarter of fiscal year twenty twenty four-twenty twenty five, we made significant progress on the strategic agenda, Get Again. As just mentioned, the first projects were inaugurated and additional projects from our strategic agenda are progressing well.
In the first quarter, CapEx at group level totaled to about EUR141 million, of which around EUR86 million were spent on strategic investments. At the end of this first quarter, Arubus has spent close to EUR 1,000,000,000 for the strategic investments since the launch of the group’s strategic agenda. Roughly 60% of the anticipated CapEx for the strategic project is now behind us. As already announced, the fiscal year will be another year of high spending before the group’s CapEx level normalizes again. We will continue to invest in our baseline to improve efficiencies and strive for our production asset reliability.
To summarize, Aruba remains well on track. We continue to progress on the reported investments with a clear focus on the execution of the projects and good management of the operating business. With this, I’m happy to hand over to Ken Nagayama, who’s taking over the duties of Angela Zeidler in his new role as Vice President of Investor Relations at Arrubus. Over to you, Ken.
Ken Nagayama, Vice President Investor Relations, Arubis AG: Thank you, Toros. Much appreciated. And before we move over to the Q and A session, I would like to briefly draw your attention to our financial calendar and upcoming events. On the April 3, we will be welcoming our shareholders to our Annual General Meeting here in Hamburg. The next time we will speak each other in this format again will be on May 8 for our Q2 earnings call.
And with this, I would now like to open the floor for the Q and A session. Thank you very much.
Conference Moderator: Thank And first up is Daniel Mater from UBS. Over to you.
Daniel Mater, Analyst, UBS: Hi. Yes, thanks so much for the presentation and the questions. A couple of questions. You mentioned positive contribution from sulfuric acid in the first quarter. Can you quantify that either quarterly delta or total contribution to EBITDA?
Stefan Hofmann, CFO, Arubis AG: Yes. Hi, Daniel. This is Stefan speaking. Yes, I would want to give you a range. The quarterly impact of the sulfuric acid is a double digit million euro figure, more in the lower vicinity.
And we expect that this trend continues in the quarters to come as well.
Daniel Mater, Analyst, UBS: Okay. So sorry, double digit impact. And you said the trend continues, I. E. A similar level of earnings contribution or a incrementally higher earnings in the subsequent quarter?
Stefan Hofmann, CFO, Arubis AG: So what I meant is there was a positive deviation on the EBT line quarter over quarter for sulfuric acid in a double digit million euro figure, more lower double digit one. And we would also for the quarters to come see positive deviations at least for the let’s say in next two quarters to come. Obviously, I don’t know what the sulfuric acid price now is in three quarters. But for the full year, we think that this is a very strong supportive lever, probably the strongest supportive lever overall. So similar pattern of positive deviation as we saw in Q1 also in quarters to come.
Daniel Mater, Analyst, UBS: Very clear. Thanks. And then maybe on the other side of the earnings bridge, you mentioned the expectation of lower earnings from recycling materials despite your book being covered from a perspective of volumes. I guess that implies lower secondary refining charges. Yes, you mentioned strength of or potential pickup in demand from China post Chinese New Year, etcetera.
I mean, it seems from my side the logic from the smelting industry if you’re operating with a $20 benchmark treatment charges to use more scrap everywhere. Is that a risk from a perspective of sharply lower refining charges and shortages of scrap?
Stefan Hofmann, CFO, Arubis AG: Talking about those topics, I think you heard us talking today a bit more to provide an outlook based on earnings as it paints a more comprehensive picture by than combining now or than detailing, let’s say, the pieces below the earnings being kind of TCRC figures times volumes. So I rather want to talk on earnings than on more detailed KPIs. Generally, on the recycling market, I mean, the business with copper scrap and other recycling materials is of short term nature, obviously, we know that depending on a variety of influences that are difficult to predict, such as metal prices and the recycling industries collecting activities or the question about China, China’s activities. Generally, we do share the view that the refining charges are somewhat under pressure. But you do know that we always want to highlight that we have a very robust business model that stands on several pillars.
We also usually want to highlight that we have long term contracts that help us. We also want to highlight that those figures that other participants mentioned on spot and benchmark and whatever that is, that they do not translate one to one in our balance sheet. So yes, this is a year where generally those types of KPIs are a bit more under pressure. However, we also need to see as we discussed in the first question that sulfuric acid revenue streams give us certain upside that can counteract.
Daniel Mater, Analyst, UBS: Very good. Thank you. I’ll let someone else have a go. Thanks.
Conference Moderator: And the next question comes from Yanis Masbulas from Morgan Stanley (NYSE:MS).
Yanis Masbulas, Analyst, Morgan Stanley: Hello. Good afternoon. Thank you for the presentation. Just going back to the point that Dan made around the scrub markets. You used to provide in the past visibility on how well supplied the refining facilities are.
You’ve done that for the smelters, the custom smelters today. You talk about the smelter network being well supplied with concentrates through to Q3 of this current fiscal year. Can you give us some indication on how well supplied the recycling network is at this point?
Stefan Hofmann, CFO, Arubis AG: Yes. Toros, do you want to take the question on how well the recycling network is provided during the course of this year?
Toral Park, CEO, Arubis AG: Yes. It’s provided we said the concentrate market, we are well supplied until the Q3 of this year and recycling market, we are well supplied until the second quarter of this year because it’s, of course, more short term than the concentrate market. Even though there is some tightening of the TCRCs, we are cautiously optimistic that we will have a good supply also for the remaining quarters, Q3 and Q4. So we are we have contracted supply until end of Q2, but we’re also looking that we are having good supply in Q3 and Q4.
Yanis Masbulas, Analyst, Morgan Stanley: Understood. Thanks for that. And just a second question going back to the discussion on CapEx. Could you remind us what’s the maintenance CapEx we should be taking to our models once all the strategic projects are in production? I’m thinking fiscal year twenty twenty eight, ’20 ’20 ’9 onwards, just to get a sense on cash flow generation.
Thank you.
Stefan Hofmann, CFO, Arubis AG: Yes. Yanis, I think on the Page 17 in our deck, you see this midterm plan on CapEx divided between baseline and strategic CapEx. So you do see the baseline line, which kind of oscillates between a SEK300 million figure in SEK26 million, SEK27 million and SEK390 million in SEK24 million, SEK25 million. Obviously, the baseline CapEx includes as we reflect here on the chart, the maintenance operations along with investments in efficiencies. So it’s not only repairing, it’s obviously improving the future and environmental protection and so on and so forth.
You also do know that our strategy is to shift the maintenance schedule for the primary smelters from a two year timeframe to a three year timeframe, all of that is baked in. I think I can also give you an additional data point on Q1. The vast majority, let’s say, more than two thirds of the Q1 CapEx that we were flagging here or talking about, which was 141,000,000 let’s say, more than two thirds was related to strategic CapEx, whereas less than one third in this quarter was related to baseline CapEx.
Yanis Masbulas, Analyst, Morgan Stanley: Understood. So maybe something in the order of EUR $350,000,000 is a good assumption beyond the next three to four years of metron’s CapEx?
Stefan Hofmann, CFO, Arubis AG: I think the baseline was the connection was not so good. Did you say that on average $350,000,000?
Yanis Masbulas, Analyst, Morgan Stanley: 3 50 million dollars would be a good estimate beyond that.
Stefan Hofmann, CFO, Arubis AG: You see four figures on Page seventeen, $390,000,000, 3 70 million dollars, 3 hundred million dollars and $350,000,000. So if you want to build the average on that one, I don’t have my calculator now here, but
Yanis Masbulas, Analyst, Morgan Stanley: Sounds about right.
Stefan Hofmann, CFO, Arubis AG: But you will do the math.
Yanis Masbulas, Analyst, Morgan Stanley: Thanks very much. Thank you.
Conference Moderator: And next up is Bastian Sinagovits from Deutsche Bank (ETR:DBKGn).
Bastian Sinagovits, Analyst, Deutsche Bank: Yes, good afternoon all. Thanks for taking my questions. My first one is actually just a quick follow-up on the recycling business. Just coming back on the supply which you currently have here, which I guess, basically for the next two months, I think in the context of history, that’s clearly a little bit less than usual. Are you getting a bit more concerned about your ability to fill the pipeline maybe throughout the next couple of quarters?
I think you seem to be signaling that you’re cautiously confident, but maybe you could just like explain that a little bit better? And then secondly, also, is there already any guidance on when you expect Richmond to basically get from the current startup loss situation to above breakeven, I. E, can we expect that already next business year Q1, Q2? Is there any further timeframe on that? These are my first questions.
Stefan Hofmann, CFO, Arubis AG: I would shortly talk on MMR and then perhaps, Doris, you can take the second question on Richmond. So Bastian, we did not intend to flag that we are more cautious on MMR. So the way we look at the market is and I made the point earlier that obviously and you know very well on the recycling material that let’s say the visibility is always shorter than on CSP. And we have I think at the last at the full year disclosure call, we said we have a visibility till end of Q1 for recycling. Now at the Q1 call, we say end of Q2.
So basically what we are trying to say is, it’s the similar unusual type of turnover and of visibility and we did not want to flag that we are more cautious. And with that, Toalf, I would hand over to you on Richmond and the ramp up.
Toral Park, CEO, Arubis AG: Yes, Bastian, on Richmond, we expect like we said on this fiscal year start up losses of around EUR 50,000,000. Next (LON:NXT) year, we still anticipate some start up losses, but significantly reduced and then a positive contribution in the following year in 2026, ’20 ’20 ’7.
Bastian Sinagovits, Analyst, Deutsche Bank: Understood. Perfect. Thank you. Then my next question is actually maybe a bit more technical on the benefits of your free metals. I guess you mentioned earlier that you basically locked in a larger part of your price exposure in free metals than usual.
Could you maybe share with us how much of your exposure you basically have hedged for this year? And maybe also next year, and given how strong many of the metals you’re exposed to have been, particularly, I guess, on the pressure side, could you maybe also provide us some sensitivity on how much more additional uplift to EBT you would see if you basically would run your free metals at current spot prices. That would be very helpful. Obviously, I know I’m going a little bit into the weeds here, but I guess it’s a very important number, so it would be great to have a bit more color on that front.
Stefan Hofmann, CFO, Arubis AG: Yes, Bastian. So what can I say? Let’s start with the current financial year 2024, ’20 ’20 ’5. The general approach for the current financial year generally is that you would hedge roughly two thirds and that you would leave open one third. For this year on gold and silver as we had rise and rise and rise over the last quarters, We have done a bit more than the two thirds on hedging.
And obviously, we’re enjoying good levels. And we are now in a situation where we are at the cap of what we want to hedge in the current fiscal year, not doing more, but obviously enjoying then more spot levels that are quite favorable at the moment. For the next fiscal year, we generally have very low hedging rates in relative terms. So we do not hedge a lot, do hedge very, very seldomly. Given the very interesting prices on gold and silver, we’ve done more than usual.
We’ve also done a bit very recently even this week to just enjoy very good levels. And we feel quite comfortable about the levels and the prices that we are achieving already for the next fiscal year. But once again, a caveat, we do hedge for the next fiscal year on a really low level, but more than usual given the very favorable environment.
Bastian Sinagovits, Analyst, Deutsche Bank: Okay. No, that’s very helpful already. Is there any color which you could give us in terms of what the gap is, given that again that’s sort of the important number. I mean, in principle, you could have locked this in early last year at some point. So I guess if we would mark things to market, I suppose it would definitely give you a relatively decent tailwind incrementally.
Stefan Hofmann, CFO, Arubis AG: Well, Bastian, I think for the time being, I would leave it with that level of granularity and transparency. Hope you can somehow understand.
Bastian Sinagovits, Analyst, Deutsche Bank: Yes. Okay. No problem. Then my last question is just on your cash flow statement. I guess you highlighted this $148,000,000 item from others in your cash flow and you said that that was valuation driven.
So if it’s valuation driven, I’m not quite sure why it would be impacting your cash flow. Is this basically just a cash settled hedges or is there anything else which is behind that? Maybe you can just explain that briefly and whether that reverses later?
Stefan Hofmann, CFO, Arubis AG: Yes, Sebastian. You know that on the profitability side between EBT IFRS and EBT operative, there’s a few differences. So basically, but this difference is not true for cash flow. So what I’m trying to say is there has been pieces that do not impact the EBT operative that would impact, however, the EBT IFRS, but that do impact the cash flow. And that’s kind of in those $148,000,000 Let’s put it that way.
We talk here about, as I said, valuation effects. It’s linked also to derivatives and basically to topics that are that explain the bridge between IFRS, EBT and EBT operators.
Bastian Sinagovits, Analyst, Deutsche Bank: Okay. But technically then, I guess, would be fair to assume that that reverses later on maybe via the operating number or?
Stefan Hofmann, CFO, Arubis AG: No, no. That’s not reversing. Yes. As of today, our assumption would be that this is not reversing.
Bastian Sinagovits, Analyst, Deutsche Bank: Understood. Okay, great. Thanks so much.
Stefan Hofmann, CFO, Arubis AG: Thank you.
Conference Moderator: And the next question comes from Christian Ochs from Baader Bank. Over to you.
Christian Ochs, Analyst, Baader Bank: Thank you and good afternoon. First of all, the still rising personnel costs should become or expect to come to an end for these rising or over proportion of rising personnel costs. And as we have fully staffed Richmond already, can we expect some kind of an under proportionate increase going forward? This is the first question. I’ll take one at a time.
Stefan Hofmann, CFO, Arubis AG: Christian, perhaps I start with the personnel cost and then again, Torek will talk on the Richland. Personnel cost, I mean, obviously, between one year and the next one, usually there’s a wage increase, there’s inflation. And that’s also the point here. Just to give you a data point on the wage increases, we did have out of the negotiations with the labor unions, we had in September 2024, a wage increase of 2% and we are we will have in April 2025 as part of the bargaining agreement, a wage increase in 4.85%. So inflation, salary inflation is the one piece.
The other piece is obviously the ramp up in Richmond, which at the end of the day is related to people or other of the CapEx strategic CapEx projects like Aspah for example. So there is a double digit headcount number increase due to those items. On the other side, I want to clearly state, we look intensively at costs. We have an ambition to counteract on a cost increase. We see potential on consultant costs, consultancy costs to reduce.
And we look at all cost levers, being it personnel costs, being it consumables, being it logistic costs, being it maintenance costs. And in those more volatile times in the European industry, it’s obviously clear that the management is doing everything to counteract cost increases and to work yourself down from that. Actually, we already have achieved the first things and continue to working on that. With that, I would hand over to Toraj on Richmond.
Toral Park, CEO, Arubis AG: Yes. Richmond, like you rightfully said, Christian, we are almost fully staffed for Phase number one. So we don’t expect there some more. But when we start Phase two or begin to build up Phase two next year, then there is planned to be an increase of another mid double digit personnel number. So it’s limited.
And like Stefan said, we’re looking not to increase significantly at our other operations. We had a strong buildup in not a strong, but we had a buildup in the last fiscal year for some investments and also for some safety personnel and also for some reporting personnel for the new guidelines. But this should have come to an end. So some buildup for Richmond Phase II, but apart from that, no further buildup.
Christian Ochs, Analyst, Baader Bank: Okay. Thank you very much. Then coming to electricity, so what is the mainly where do you see to increase or decrease going forward? And then most obviously, we will have a new coalition led by CDUC going forward. And in their programs, they are guiding for lower electricity tax and grid fees and stated that there might be a relief of at least $0.05 per kilowatt hour.
And we expect any support from this development.
Stefan Hofmann, CFO, Arubis AG: Tobias, do you want
Toral Park, CEO, Arubis AG: to come back? Yes. Electricity, we have in most of our plants, we have long term contracts. So we are not affected by these short term changes. We expect from the new government in Germany to continue to have some reliefs, which we are already enjoying today.
So we are looking for stable development of our electricity costs, but we need these reliefs in order to be stable in the long term. So there’s no additional upside.
Christian Ochs, Analyst, Baader Bank: Okay. Thank you. Then very briefly, you are guiding for a net cash position going forward $500,000,000 to $600,000,000 CapEx might be $820,000,000 for free cash flow should be negative this year between $200,000,000 and 300 hundred million. This is the right calculation, right?
Stefan Hofmann, CFO, Arubis AG: We I think you’re doing well, Yermeth.
Christian Ochs, Analyst, Baader Bank: Okay. Thank you. And then coming a little bit back to Richmond. So you’re guiding for the SEK 50,000,000 approximately negative development this year. So what is so the main lever you can work on to reduce these negative development, is it a certain throughput, is it to have a control on cost or whatever?
So what is the main leverage there, which brings you to the minus EUR 50,000,000?
Toral Park, CEO, Arubis AG: Well, the minus EUR 50,000,000 in this fiscal year, that is pretty much set because we have all the people on hand and we don’t have much sales yet after the start up in the summer of this year. In next year, we’re expecting some production and some sales and that will reduce the startup losses. So this year, we don’t see any significant improvement potential to further reduce the EUR 50,000,000.
Christian Ochs, Analyst, Baader Bank: Okay. Thank you very much, and all the best.
Toral Park, CEO, Arubis AG: Thank you.
Conference Moderator: And next up is Maxim (NASDAQ:MXIM) Koger from ODDO PHF.
Maxim Koger, Analyst, ODDO PHF: Yes, good afternoon. So first question is on TCRCs. So there was a first significant transaction settled at $21 in December for $20.25 dollars and since then there have been reports that Japanese and European smelters were trying to extract a higher benchmark level from the miners. Can you give us an update on where the negotiation stands and whether you’re still hopeful that you can get more than $21 as a benchmark in 2025?
Stefan Hofmann, CFO, Arubis AG: Hakim, the answer I give you is probably not the answer you want to hear.
Elke Brinkman, Investor Relations, Arubis AG0: I give it anyway.
Stefan Hofmann, CFO, Arubis AG: So as I said earlier, we reviewed some internal aspects and have decided to provide an outlook based product on earnings and detailing more, let’s say, TTRCs and volumes specifically. And over the recent years, externally published concentrate terms, call it benchmark, have already lost in relevance for various reasons, at least for us. With our long term oriented supply portfolio, we are paying less attention to individual agreements anyway. So those figures that are intensively debated, they do not arrive on that level and with that importance in our balance sheet, our profit and loss statement.
Maxim Koger, Analyst, ODDO PHF: Okay, fair enough. And the second question is on, yes, potential tariffs on copper imports in The U. S. How would that impact your activity in Richmond? And would that lead you to accelerate perhaps your thoughts about adding some downstream units to Richmond, I.
E. Refining and finished products?
Stefan Hofmann, CFO, Arubis AG: I mean, Maxime, obviously, tariffs and global trade wars could have a negative macro impact on growth and on fundamentals. And we all know now in our industry and with our metals, they are traded on a global exchange and therefore the price is not directly linked to tariffs. So it’s quite early to quantify the impact on our rubies. I also think, let’s say, the directions coming out of The U. S.
On potential tariffs vary on the day or on the week. So it would really be difficult to now chip in the figure. But I think one thing is safe and clear, the strategic move of Aruba is going into The U. S. With a secondary smelter and being the first one then there in operation is absolutely the right one.
It has been the right one before those tariff discussions and it’s even more right after those tariff discussions.
Maxim Koger, Analyst, ODDO PHF: Okay. So I’ll stop there. Thank you.
Stefan Hofmann, CFO, Arubis AG: Thank you.
Conference Moderator: And the follow-up question comes from Yannis Masoulas from Morgan Stanley.
Yanis Masbulas, Analyst, Morgan Stanley: Thank you for taking the follow-up. Just going back to Richmond. If we look at Phase one, when do you expect to hit full run rate of production?
Toral Park, CEO, Arubis AG: Well, like we said, we expect the start up of the facility in this summer and the full ramp up should be if operations goes according to our plan eighteen months later.
Yanis Masbulas, Analyst, Morgan Stanley: And as we think about Phase two, is that ramp up going to be faster given that you have
Toral Park, CEO, Arubis AG: a lot of the infrastructure already in place? Right now, we plan the same ramp up schedule. Could be faster, but right now, we plan for the same ramp up schedule.
Yanis Masbulas, Analyst, Morgan Stanley: Understood. Thank you very much.
Toral Park, CEO, Arubis AG: You’re welcome.
Conference Moderator: And next in the line is Lutz Keem from TCIS. Over to you.
Elke Brinkman, Investor Relations, Arubis AG1: Thank you. A question regarding non operating assets. Aurubis holds roughly 1,300,000.0 treasury shares. Are there any plans to monetize these shares? And what are the other major non operating assets of the company?
And what plans are in place to monetize these assets?
Stefan Hofmann, CFO, Arubis AG: On the treasury shares, the way this program was defined and approved by the AGM, the use of the treasury shares would be for purposes like possible acquisitions or future financing needs. Those shares would not be canceled. At the moment, there is no plan, no concrete plan with regards to any action.
Elke Brinkman, Investor Relations, Arubis AG1: And what are the other major non operating assets of the company?
Stefan Hofmann, CFO, Arubis AG: Just look at the colleagues here for a second. Give us ten seconds please. Can you perhaps be a bit more precise in your question because we do not exactly
Elke Brinkman, Investor Relations, Arubis AG1: Yes, I wonder, I find return on capital employed very impressive. It’s good. But my impression is the company has too much non operating assets. And there may be ways to monetize these assets to finance your growth.
Stefan Hofmann, CFO, Arubis AG: It might be that the piece you are looking for is, let’s say, the corporate center. We have when we have on the chart where we detail the return on capital employed for the two businesses MMR and CSP. And then if we go for a ROCE for the group, let’s say adding those two businesses CSP and MMR, you also need to add cost for the group, for the corporate center. This is functions like accounting, controlling, Investor Relations, communications, corporate procurement. And so it’s not let’s say, it’s not non operating assets.
It’s very active headcount doing a good job, but obviously bearing a certain cost piece to it. Perhaps that’s the piece you’re missing or looking for. Okay.
Elke Brinkman, Investor Relations, Arubis AG1: So back to the treasury shares. I mean, you’re talking about roughly EUR 100,000,000, which you’re holding on the balance sheet, which could finance CapEx, which could be distributed to shareholders in view of dividends. So we would have less debt rate on the balance sheet?
Stefan Hofmann, CFO, Arubis AG: As I said, the way this program that was passed at the AGM, I think some time ago was formulated. 2018. Yes, 2018 was formulated, possible usage could be for acquisitions. Today, we have no acquisition on our table. A possible use could be for future financing need.
Today, we don’t see the future financing need and that’s why it’s sitting on the balance sheet at the moment. You are right. It’s defined that those repurchasing shares will not be canceled. And at the moment, no decision has been made what to do with it. And at the right point in time, we will take a decision what we will do with it.
Elke Brinkman, Investor Relations, Arubis AG1: Okay. Thank you.
Stefan Hofmann, CFO, Arubis AG: Thank you.
Conference Moderator: And we have a question coming from Boris Bordeaux from Kepler Cheuvreux. Over to you.
Elke Brinkman, Investor Relations, Arubis AG0: Hello. Thank you for taking my question. The first question, you provide on Slide 17 the trajectory of CapEx. Could you please share if you have a trajectory of depreciation and amortization for the coming years? This is something you used to do, but I suppose it’s not up to date.
And the second point is just some clarification on which Mont. You’re referring to a minus EUR 50,000,000 start up cost. Is it only for Richmont or is it for the overall start up strategic projects? Thank you.
Stefan Hofmann, CFO, Arubis AG: Boris, on the depreciation and amortization, we have not provided, let’s say, the full timeline like over the same, let’s say, overall the fiscal years in analog to Page 17. But the data point that I can give you on this fiscal year twenty twenty four, twenty twenty five is that we anticipate depreciation and amortization around EUR $230,000,000 for this fiscal year. On the other question, I must admit that I did not completely hear it. Would you mind repeating it?
Toral Park, CEO, Arubis AG: I can answer it. It was the Richmond the EUR 50,000,000 is only for Richmond. It’s not it’s only for that plant. It doesn’t include any other startup costs.
Elke Brinkman, Investor Relations, Arubis AG0: Okay. So if we take the slight positive contribution of the Espa and Budd projects, then we shall have a small positive contribution overall sorry, a lower negative contribution overall?
Toral Park, CEO, Arubis AG: Yes, that’s true.
Conference Moderator: Okay.
Elke Brinkman, Investor Relations, Arubis AG0: And just if I can add a third question, it’s on TCRCs. I get your message that this is less and less relevant for you because of your contract relationship with suppliers. But can you share with us any view you have on the trends in the TCRCs for the coming years?
Stefan Hofmann, CFO, Arubis AG: Matthew, do you want to take that one?
Toral Park, CEO, Arubis AG: Yes. I mean, of course, we don’t have the exact forecast. We see, like we said today, tightening because of more demand than supply at the current moment. There’s some events which could lose this situation, like if some mines continue with the expansion. We know there’s a lot of or some CapEx projects in the pipeline for the mines, either for expanding existing mines or to explore new mines.
It really depends on how fast can they go on. So we have to take it, I think, step by step. But for this year, we still for this fiscal year, we still see a tight. And then maybe or hopefully, we will see some additional capacity coming on next fiscal year of the mines. And then the TCRCs should also improve.
Elke Brinkman, Investor Relations, Arubis AG0: Thank you.
Conference Moderator: There are no further questions. And with this, I hand the floor back to Elke Prinkmann.
Elke Brinkman, Investor Relations, Arubis AG: Thank you. We would like to thank you for your attention. And if there are further questions after this call, please give us a call to the IR team and then we say goodbye. Have a nice afternoon and nice rest of the week. Thank you.
Bye bye.
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