Good afternoon, ladies and gentlemen, and a warm welcome to the analyst call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to Elke Brinkmann.
Good afternoon, also from my side, and welcome to the Aurubis AG nine-month results. I'm here with our CEO, Roland Harings, and our CTO and interim CFO, Markus Kramer, who will present the nine-month figures and current developments at Aurubis in a moment. The floor will be open for questions following the presentation. If you would like to ask a question during the Q&A session, please use the key sequence nine star. Let me now turn the floor over to Roland Harings.
Thank you, Elke. Also from my side, good afternoon and warm welcome to our Q3 conference call today. As we are coming together, we are reporting here as Aurubis on a challenging quarter, as we have successfully invested around EUR 250 million in the most extensive and complex maintenance shutdown in the company's history here at the site in Hamburg. We are very proud of our colleagues who have done a remarkable job because that exactly is what sets Aurubis apart. Throughout the entire smelter network, we learn from each other from the measures, be it repair work, replacement investments, or greenfield projects, as it's currently the case in the U.S. The exchange of experience, the learning curves that we achieve are part of our success. Let me have just a quick look at the nine-month figures.
Aurubis delivered a strong operating result with an EBT of EUR 333 million, exceeding the previous year's earning level by 30% despite the maintenance shutdown just mentioned. This was a result of a strong operative performance paired with higher treatment and refining charges for concentrate, a significantly higher metal result, high demand for cathodes and wire rod, and lower energy costs. These positive effects counteracted lower sulfuric acid revenues, lower income from refining charges, and higher costs. Operating ROCE, taking EBIT for the past four quarters into account, came in at 11.1% compared to 11.2% in the first nine months of the previous year. In particular, the increased capital employed due to the ongoing investments and the negative financial impact of the criminal activities had an impact on the ROCE, which is still well above 10%.
The net cash flow was again positive, coming in at EUR 52 million despite the continued increase of working capital due to the shutdown in Hamburg, which ended very successfully just after the Q3 closing. The guidance for the net cash flow for the full year remains intact, as we will release working capital in the final quarter of this current fiscal year. All in all, and based on the positive half-year result, we are confirming our forecast range for the current fiscal year at EUR 380 million-EUR 480 million operating EBT. Coming to the next slide, you can see that the revenues came in at previous year's level. As a result of the previously mentioned earning drivers, gross profit was at 18% up, significantly above last year's level. All in all, operating EBITDA, EBIT, and EBT came in considerably higher compared to previous year.
This was in part due to the adjustment of the previous year figures, which we explained in detail during our half-year conference call. Just as a reminder, you can find the adjustments of the previous year figures in the appendix. Looking now quickly at the market developments, the metal market showed positive momentum during the third quarter. In particular, copper, gold, and silver ticked upwards. Despite the ongoing tighter concentrate market, Aurubis saw a good supply situation in quantity and quality of concentrates with increased TCRCs during the reporting period, again compared to the previous year. As we discussed in all the quarterly calls recently, Aurubis' activity on the spot market is very limited due to its positioning on the market with long-term supply agreements with our mining partners. The availability of recycling materials in Europe and overseas was competitive during the reporting period.
The decline in treatment and refining charges on the spot market for concentrates led to higher purchases from Asian smelters during the reporting period. During Q3, the positive momentum on metal markets improved availability temporarily for the European market. All in all, RCs were below the previous year's level during the reporting period. Looking ahead, our production sites are already well supplied until the end of the fourth quarter of fiscal year 2023/2024. Specifically talking about sulfuric acid, the sulfuric acid market continued the positive momentum from previous quarters, but pricing levels still remain under previous year's very high levels. Demand from the European chemical and fertilizer industries is steadily progressing towards normal levels, meeting subdued demand due to shutdowns in the smelter industry and lower availability of sulfur as input material for sulfur burners.
The return of some fertilizer manufacturers in the North American region has supported demand in the Mediterranean markets. Price levels improved during the reporting period for Aurubis. ACP, also here, nothing new to report. The copper premium for calendar year 2024 remains unchanged at $228 per ton, and it's very well accepted in the market and similar to what we charged in 2023. U.S. dollar, as you know, Aurubis has a long position of approximately $640 million in this fiscal year. Within the scope of our hedging strategy, we are 68% hedged for this fiscal year at a rate of 1.101 and around 64% at a rate of 1.093 for fiscal year 2024/25. Coming now to our gross-margin comparison. The breakdown of the income components continued to show our well-balanced business model.
In an annual comparison, the gross margin, so overall earnings from the three main pillars of the business for the first nine months, increased by 11%. Aurubis continued, in absolute terms, to benefit from good TCRCs for concentrate and RC from recycling materials. Earnings from premiums and products were slightly higher in absolute terms than the previous year's level. They were positively influenced by higher earnings from the cathode premiums with ongoing strong demand for wire rod. The lower sulfuric acid earnings contribution counteracted this position partly. At a group level, metal gains were significantly above previous year's levels. This is a result of a group operating performance of a good operating performance with good recovery rates and higher metal prices compared to the previous year, despite the large maintenance shutdown here in Hamburg.
At this point, just a short reminder about the adjustment of the prior year figures in the metal result. Details can be found in the appendix of the presentation. Looking at the group costs, the costs increased by 6% to EUR 1,479 million, mainly driven by an increase in personnel costs and other operating expenses, as well as startup costs for the strategic project currently in implementation. In addition to higher wage tariff payments and expenses for the severance packages, personnel costs also increased mainly due to the additional staff for the growth projects we will talk about in more detail also later. Other operating expenses have risen significantly compared with the previous year, mainly as a result of additional expenses for legal advice as well as consultancy fees caused by the criminal activities directed against Aurubis. Energy costs declined, especially for electricity and natural gas.
In the reporting period, we received lower government grants, such as the electricity price cap in Bulgaria, than in the previous years. With this, I would like to hand over to Markus, who will go into details of the financials.
Thank you very much, Roland, and good afternoon also from my side. Aurubis's key performance indicators once again show a solid and robust picture. Our equity ratio of 54% remains well above our target level. Aurubis's debt coverage was slightly affected by the strategic investments in our greenfield and brownfield expansions. Our financial position is still absolutely sound with the debt coverage well below one. The increase in capital expenditure resulted mainly from strategic growth investments, primarily in our U.S. recycling plant, Aurubis Richmond, and the shutdown in Hamburg. Here in Hamburg, we also invested in the construction of the new precious metal refinery and Complex Recycling Hamburg. Further CapEx was attributed to the project Bleed treatment in Olen, ASPA in Beerse, and the tankhouse expansion in Pirdop in Bulgaria.
Net cash flow was EUR 52 million below the previous year's level of EUR 73 million as a result of the high payments for inventories. Compared to the first half of 2023/2024, the development of net cash flow was clearly positive at EUR 47 million despite the further increase in working capital. Now, let's take a look at each of our segments. The Multimetal recycling segment generated an operating EBT of EUR 109 million compared to EUR 143 million in the previous year. Lower refining charges due to reduced throughput of recycling materials had an impact. This was a result of lower market availability due to diminishing construction activity as well as declining industrial production and the associated availability of industrial residues. Challenging effects compared to the previous year included lower treatment charges for other recycling materials.
The operating result was impacted by the plant startup costs, mainly for our U.S. site, Aurubis Richmond. This all resulted in an operating ROCE of 10.4% with an increase in capital employed in large part due to the high growth level of investments. In the Custom Smelting and Product segment , the operating EBT came in at EUR 317 million in the reporting period. Due to the adjustment of the prior year's figures, the previous year's level of EUR 173 million was significantly exceeded. The segment's positive performance resulted from higher treatment and refining charges for concentrates, a significantly increased metal result, increased earnings from the Aurubis copper premium, higher revenues from the sale of copper wire rod, and lower energy costs compared with the prior year. On the other hand, revenues from sulfuric acid were lower than in the prior year as a result of lower prices.
Yet, sulfuric acid markets are steadily improving and showing positive indications for Q4 as well. The segment's operating ROCE, considering the rolling EBIT of the last four quarters, increased to 16.1% from 12.2% in the previous year. The segment's ROCE was positively impacted by higher earnings, and the previous year was affected by the criminal activities against the company. In parallel, the capital employed increased because of the investments in our assets. Let's now move on to the outlook for the markets for fiscal year 2023/2024. Aurubis and external researchers expect the concentrate market to grow both on the supply and demand side. This was largely discussed in our last earnings call. During Q3, the spot market stabilized at low levels and showed first indications of improvement, also due to the reduced buying and demand from Asian smelters.
Aurubis is not active on the spot market due to our long-term sourcing strategy from mining partners. Aurubis remains well supplied until the end of the calendar year 2024 at reasonable and profitable terms for our primary sites. The strong and positive development of metal prices in Q3 has improved the availability of recycling markets for copper scrap no. 2 and blister. Lower-grade scrap materials like shredder, heavies, and industrial residues remain on a subdued level, while electronic scrap was available in good quantity and at good pricing. We expect this trend to continue for the remainder of the fiscal year with a good availability of copper scrap and blister and a sufficient availability of other recycling materials.
With the latest improvement in the availability of materials, Aurubis is well supplied with materials until the end of fiscal year 2023/2024, and our diversified supplier network buffers potential supply shortages from the market. Both CRU and ICIS expect the positive trend of price levels we have seen in recent months for sulfuric acid to continue. Ongoing high input costs for sulfur burners harm the output, resulting in lower availability on the market, meeting good demand from the chemical and fertilizer industry in Europe, Turkey, and North Africa. In comparison with our previous expectations, we now expect a slightly better development of the revenue situation for sulfuric acid. We expect it to remain just slightly below the previous year's level. The Aurubis copper premium ACP for calendar year 2024 has been set at $228 per ton. And last but not least, our copper products.
We foresee a continued strong demand trend for wire rods at the high levels of the previous year, while expectations for shapes and flat rolled products are still at subdued levels. Overall, we are confirming the group guidance we provided based on our latest assumptions for both earnings drivers and cost components and continue to expect an operating EBT between EUR 300 million and EUR 400 million and an operating ROCE between 10% and 14%. For the EUR 380 million to EUR 480 million and an operating ROCE between 10% and 14%. Sorry. For the Multimetal Recycling segment, we expect an operating EBT between EUR 60 million and EUR 120 million and an operating ROCE between 5% and 9%. The anticipated ROCE is due in large part to growth investments in Aurubis Richmond.
For the Custom Smelting and Product segment , we expect an operating EBT between EUR 410 million and EUR 470 million and an operating ROCE between 19% and 23%. Let us now report about the status of some of our major investment projects. I will cover our Hamburg and Lünen site, and then Roland will take over and talk about our other strategic projects. First, the largest plant maintenance shutdown in our company history at the Aurubis Hamburg plant was successfully concluded. With investments of almost EUR 250 million invested here, the primary smelters are well set up and modernized, which allows us to prolong the regular maintenance schedule to a three-year schedule again. During the shutdown in Hamburg, maintenance was completed, and the strategic investments, Industrial Heat Phase II and the H2-ready anode furnace, were installed.
Roughly 500 individual tasks, including a technical inspection of the waste heat boiler, the overhauling of the flash smelter, and installing heat exchangers in the contact acid plant, were concluded. Among these were more important investments in the Hamburg plant's efficiency and environmental protection. With the H2-ready anode furnaces in Hamburg, we are further expanding our pioneering role in sustainability. The H2-ready anode furnaces can be fueled with hydrogen instead of natural gas, providing the possibility of reducing CO2 emissions by at least 5,000 tons a year, further reducing our carbon footprint, which is already well below the industry average. Additionally, during the shutdown, we expanded our investment in feeding more carbon-free industrial heat into Hamburg's district heating network.
Aurubis has been supplying heat since 2018, and with the addition of the second stage, we can now heat a total of up to 28,000 households in Hamburg as of the 2024/2025 heating period. The anticipated heat volume makes this the largest industrial heat project in Germany, avoiding up to 120,000 tons of CO2 in the city of Hamburg every year. Around 2,000 people were involved in the large-scale project here in Hamburg, including 1,500 workers from partner companies, suppliers, and service providers. All the shutdown tasks were finalized with the highest quality technical and logistical tour de force, given the extreme complexity of the shutdown. We are very proud of the entire team and our partners for the flawless completion of all the work accomplished during the shutdown period. With this shutdown, we once again proved that our team has exceptional expertise in planning these complex and extensive processes.
The schedule for this maintenance shutdown was very ambitious, and the shutdown could only be successfully completed because all the pieces meshed reliably as planned. And of course, we also benefited from the support of our unique and professional smelter network. We can also rely on our smelter network with the teams at the other sites if challenges occur. By combining forces and with extensive expertise and a high degree of flexibility, we can master such challenges together. Now, second, at our site in Lünen, we successfully commissioned a new sample preparation system in the plant that is setting new standards in the recycling industry. Since then, sample preparation of input materials such as electronic waste has been fully automated and carried out using state-of-the-art robotics. We invested a mid-single-digit million euros sum in the new system. Investments are also planned for Hamburg, Pirdop, Beerse, and Aurubis Richmond.
In addition, we completed the general overhaul of the electrolysis plant for copper production at the Lünen recycling site on June 6, 2024. The modernized plant has around 10% more production capacity than before and can therefore produce up to 210,000 tons of copper cathodes per year. The total investment of EUR 60 million will make the electrolysis plant fit for the coming decades and thus secure the long-term success of the recycling site. This is characterized in particular by the fact that, in addition to copper, high proportions of other metals such as gold, tin, and nickel can be processed during the processes. And now I will hand back to Roland to talk on our other major investment projects.
Thank you, Markus. So let's continue. You see on the picture the visible progress at our site, Aurubis Richmond.
To give you some update there about the progress of this very important project in our growth strategy. As you can see, the site is steadily and constantly progressing. On September the 20th, we will celebrate the start of the commissioning of the new Aurubis recycling site here in Georgia in North America. You can see that much of the equipment compared to pictures we shared with you before have now been, which were stored outside of the plant, has now been installed inside the assets. Technical equipments like vessel burners, electrical equipment is being installed and finalized, and the team is doing an excellent job, a tremendous job in developing the site and preparing it now for the cold and subsequently hot commissioning. Important also, all main contracts have been concluded with our suppliers, creating now a very solid foundation for the overall project budget.
This expansion in the U.S. marks Aurubis' entry into this important market, and it provides, although given the location and the size of the land that we own there, a platform for potential further growth. Switching now from the U.S. to our European markets, as Markus mentioned, two important projects here in Belgium, BOB and ASPA, also two pictures here. In our plans, these two strategic projects at Olen and Beerse are progressing also extremely well and are very close to being finalized and partly are already in the ramp-up phase. They are on time and in budget, and the major construction stages are behind us, and electrical instruments, pipe connections, data connections, everything is in place. These facilities, as you can see on the pictures, will provide a very attractive working environment for highly trained people running these sophisticated assets and processes.
These investments are another prime example of the value creation from the group from well-connected sites within the different metallurgical focuses and will positively contribute to the bottom line for the shareholders once they are in full production and ramped up. And as I said, this will be relatively soon, and you will be informed about the dates for the official inauguration of the commissioning and the production soon. Looking now at some pursued growth opportunities, and here let's talk again about battery recycling to provide you an update. We are convinced that Aurubis is ideally positioned to take part in the future growth in the battery recycling industry with our patented hydrometallurgical process. We continue to aim for market entry once there is sufficient input material available. We are progressing well with our demo plant.
You can see a sketch on the slide here, and the process is capable of working on an industrial scale as well. The site selection process continues as we build up the demo plant, and we are confident to find a site with competitive electricity prices and overall good logistical connectivity to bring the input material and to deliver the materials back into the value chain. While we acknowledge that the battery recycling is a hot topic and a difficult topic, we maintain our discipline when it comes to ensuring technology robustness and the quality of the investment. Our decision will at all times be based on the profitability of the business case since this is a new business field for Aurubis. We continue very strictly with our project stage gate process.
Once the process stability is confirmed, the business case remains within our investment criteria and will drive the project forward to the stage of a potential executive and then consequently supervisory board decision. So on top of the already approved, announced, and undergoing projects, Aurubis remains full of new areas for sustainable and profitable growth. Let's have a look at the achievements and timelines of the different strategic projects. You can see on this slide the three years, 2024, 2025. And compared to what we discussed last time, we confirm everything is not changed, everything is as you saw it before, and we confirm our commitment to execute the projects as they are presented. At the end of my presentation, I would like to take the opportunity to say a few words on my own behalf.
Hard to believe, but it's exactly five years ago that I had my first quarterly call of the Q3 results with Aurubis, and it was fiscal year 2018-2019. Long, long ago. As you know, I will leave the company by end of August, and if we look at the figures and compare them, Aurubis has really changed a lot in the recent five years. The company has grown. It has become more international, even more robust. It's not just the poor figures that show this. Multiple crises have been successfully managed. The strategy has been restructured and defined. Very critical and important international investments have been made, and also new markets have been entered, and we have also new investors who have bought their shares. But I have to say today, it seems that some have also sold some because the share price is really under pressure today.
However, nationally and internationally, Aurubis is a highly attractive, respected, and valued partner, and during this time, the management team, but in particular all the employees of Aurubis, contributed significantly to the positive development of the company. The foundation has been laid, and I'm convinced that Aurubis will continue its successful development in the coming year. I have always been very, very proud to work for Aurubis and to represent the company, and I'm really thankful and want to express my gratitude that I was able to shape this exciting Aurubis journey. And with this said, I have the pleasure to introduce today the new executive board team, which would start as the following. As you probably picked up, on June 20th, the supervisory board appointed Dr. Toralf Haag as new Chief Executive Officer and also Tim Kurth as new Chief Operating Officer for custom smelting and products.
Both will start 1st of September 2024. Markus Kramer, sitting next to me, will step back into his role as a supervisory board member as planned on October 1st, 2024. With Toralf, Aurubis has succeeded in winning over a proven industry expert to Aurubis again. He will lead the company with great strategic vision. He is already very familiar with the company from his time as an Aurubis CFO. I think it was in 2003 to 2006 or something there. Tim Kurth, some of you have met him already on our capital market days, has done an exceptional job advancing our activities in Bulgaria and Pirdop. This extensive experience makes him the ideal candidate to take on responsibility for the important segment and the key elements of our Aurubis smelter network.
We are also very pleased to have been able to fill this crucial management role with an internal candidate. Together with the appointment of Steffen Hoffmann as a new CFO, who will start on October 1st, the reorganization of the executive board is so complete. So very briefly from my side, I wish my successor and the whole new executive board team all the best and, of course, the necessary bit of luck. And I also want to take this opportunity here as well to thank the investors, the analysts from the capital markets for the fruitful, challenging discussion, for your interest to join our events, road shows, and the many, many one-on-ones we had together. So thanks again for that. And with this, I would like to hand over to Elke again to take your questions.
Thank you, Roland and Markus.
Before we start the Q&A session, I would like to provide you with an outlook of the next event. Our annual report will be published on December 5th. As you can see, we have updated our financial calendar with the publication date for the next fiscal year. With this outlook, we would like to thank you for your attention, and I would like to ask the operator to take over for your questions.
Thank you very much. Dear ladies and gentlemen, we are now opening the Q&A session. If you have a question for our speakers, please press nine, followed by the star key on your telephone keypad. Submitting questions is only possible via the conference call. If you want to cancel your question again, please press nine, star, the second time. One moment, please, for the first question. First question is from Jason Fairclough, Bank of America.
Please go ahead.
Yep. Good afternoon, everybody. Thanks for the presentation. Look, my question, I guess, is about the TCRCs and ultimately the concentrate book. I think what you've mentioned on the call is that you've got good visibility through the end of this fiscal year. So that's eight weeks. And I'm just wondering what happens after that. TCRCs right now are up from their lows. They're up to $4 a ton, but that's still well below the levels that you were signing contracts at a year or two ago. So could you give us some color on how we should think about the book on concentrates into next year, please?
Yeah, Jason, thanks for your question.
Perhaps to put it a bit in the context, if you see also the results and how we are moving through also difficult periods, I think very important is always to recognize that Aurubis has very strong different earning pillars. We have a custom smelting operation in Hamburg and in Pirdop, but we have recycling, we have products, we have sulfuric acid, we are in different markets, we are treating a complex input mix in our smelters, and so on and so on. So I think it's important that you recognize that TCRCs for concentrate is also one part and not the biggest part of the equation.
Specifically to what you have asked, we are looking at annual contracts with our concentrates, which means the first quarter of the next fiscal year, 2024, 2025, the concentrates will come at similar conditions as we saw them during the first part of this calendar year. So we are well supplied in quantity and quality for the first quarter, and there's always a spillover of volumes into the beginning of the next calendar year. And therefore, the benchmark as it stands today for this calendar year, $88, which is the reference point for several contracts that we have in place, is also continuing for the first quarter of the fiscal year, 2024, 2025, as the reference point.
Okay. And I guess my question then, Roland, are you actually contracting now, or are you actually waiting to contract to see what happens in the market?
It's not black and white.
We are in continued discussion with suppliers. As we didn't disclose in detail, but we have contracts which are not based on a benchmark, which have different pricing components. Yes, we are discussing, we are contracting. Important is what is happening in the concentrate market. If you see the overall economic situation and how many significant mining projects are coming on stream. My personal belief is, but I have to stress this, this is my personal belief that the market has very much overreacted with the spot prices on TCRC because we have seen a good availability of concentrates in quality and quantity. We had no problems to source our smelters with the necessary material.
So therefore, when things become normal again and perhaps some positive signals from the mining industry, like for example, the clear timing on the restart of Cobre Panamá, which is an important mine in the copper industry, I personally believe we will see reasonable TCRC levels going forward.
So sorry, just to finish then. So does that mean that you will wait before contracting, or are you contracting on a rolling basis? How should we think about the direction of the realized TCRCs into the next calendar year?
Jason, this is now too early because we have a mix of contracts, long-term contracts. Some of them have a benchmark component, others don't. We will see in the second, let's say now in the last quarter of this calendar year where the whole development on spot markets and then the benchmark will go.
We have long-term contracts in place, which are well going into many more calendar years. And so the benchmark will be year one of the pricing components. So it's not that we start completely new for a calendar year with contracting. I think you're coming a bit from the spot view that you are permanently seeking and going for new volumes. We are well supplied in quantity and quality. The pricing for some of the contracts needs to still be, let's say, negotiated or be adjusted, given on the benchmark that will be found for next year.
Okay. All right. Well, look, I appreciate the color. Thank you.
Thank you very much. We are moving on to the next question. Next question comes from Ioannis Masvoulas, I'm sorry, of Morgan Stanley. Please go ahead.
Great. Thank you very much for the presentation.
First question for me is on the EBT outlook for the current fiscal year. As there have been some press reports that Hamburg has faced some ramp-up challenges following completion of the maintenance in early July, can you provide some color around this? And do you still think that the upper end of the EBT outlook is achievable for the current fiscal year? Thank you.
Yeah. Hello, Ioannis. Thanks for your question. So regarding the ramp-up, I think there were two things were a bit mixed regarding the ramp-up of Hamburg. There were some press news about sulfuric acid, but this was material that we bought as a spot sale in April. It had some quality background. We needed a specific quality for the market. There was nothing in relation, and it was well ahead of the shutdown in Hamburg.
The standstill, as Markus explained in some detail, was executed as planned. Really impressive what the team has delivered there. We have met our commitments to the market with the ramp-up phase in U.S.A., ramping up the volume throughout the month of July. There was a bit of a, I would say, things were connected, which had no connection. Regarding the EBT outlook for the total year, we have reconfirmed our range of EUR 380-EUR 480. We do also confirm what we said in Q2, that we will be in the upper part of the range with the total fiscal year.
Understood. Thank you very much for that. Second question on the recycling side. I think you suggested that there has been a temporary improvement in scrap availability. Could you please confirm around that point? What are you seeing in the market right now?
Are the Chinese smelters still bidding for scrap aggressively, yes or no? And what sort of scrap refining charges do you see in the spot market? Thank you.
Yeah, Ioannis, good point. What we have seen in the last couple of months was significant volatility in the scrap markets, with metal prices going to very high numbers, some arbitrage with the U.S., with COMEX, which we haven't seen before, some special incentivation in China. So many things are moving in various directions. What we can see, and we always quote the CRU number for scrap no. 2, this is at EUR 380 per ton. So let's say a decent number in the market. And the availability of scrap has gone down a bit, given all the lower LME prices.
But we are well supplied, as we made also in our statement, for the foreseeable period with scrap at a normal, let's say, call it a normal price level for scrap.
Okay. Got it very clear. And maybe just the last one for me on the ramp-up costs at Richmond. How much of that burdened your fiscal Q3 results? And are you still guiding to a EUR 30 million ramp-up impact, cost impact during the current fiscal year?
Yeah. So the team just gave me the numbers here. So it is until the first three quarters, it was EUR 16 million impact and another EUR 12 million for the running quarter.
Very clear. Thank you very much.
Thanks a lot. The next question comes from Bastian Synagowitz of Deutsche Bank.
Yes. Good afternoon, everyone. And thanks for taking my questions as well.
My first question is actually a quick follow-up on the secondary market business. Just could you please briefly let us know whether your realized scrap RCs will already start to improve in the course of your last fiscal year quarter, i.e., the order backlog which you've got there. Is that already indicating towards a higher profitability in the secondary business in Q4? That's my first question.
Yeah. Hello, Bastian. Roland speaking here. As we buy a very complex mix of recycling materials and we are permanently optimizing our portfolio, there is not this one number that you might ask for. And by the way, it's the number we also are not disclosing. We only take the reference to the CRU number regarding scrap no. 2, which is a good orientation for where scrap markets do play.
But we are not going into details as it's a highly fragmented market with many, many different prices. So we would probably mislead our audience if we would state here some other numbers.
Okay. Okay. Understood. Then just getting back on the primary business, could you maybe share with us the percentage of your volumes which actually do have a benchmark component? And what would happen if there is no benchmark? Would you basically just enter bilateral agreements? What would be the game plan here?
So a very interesting question, which I think you already assumed that you won't get the answer for that. No, this is really company secret how our contract portfolio looks like. And as we, I think, explained also in the past, we have a whole different, let's say, setup of the different contracts.
Some have fixed prices, some have a plan of fixed and benchmark, some have something, something. So there is really depending on the mines, depending on the age of the contracts. And therefore, it would also, again, be not a statement you could work with if we give you some kind of percentage of which contract because it's very complex what we have here in our portfolio. Regarding the second part of your question, what if there is no benchmark? Today's contract typically states that then the existing contract will be used, continued used until a real new benchmark can be found and it's been found.
Okay. Understood. That is very interesting. Then maybe very last question. I mean, do you believe that there is a realistic chance that ultimately the smelting market may be forced into maybe the discussed benchmark of, say, $10-$30?
And I guess as you were pointing out, given your diversification in your business model, how confident would you be to say that you'll be able to compensate in large parts basically the possible hit you may be taking on the primary concentrate business?
Yes. Challenging question. Thanks for that. If you look at the hard facts, we are very, as I explained to the question of Jason, fortunately, we have very different strong earning pillars. TCRCs for concentrate is only one of them. And if you look at this, as I've said also in the last call, Aurubis is the last man standing. We will run our plant even profitably at low TCRCs in the range that you mentioned. This is not the case for most of the smelters in the world. They will be negative because they don't have the earning pillars as Aurubis enjoys them.
So therefore, I don't see a realistic scenario. There might be a short period in time, but there is no realistic scenario that TCRCs will stay at this very low level because then smelting assets will be reducing their capacity or will even go out of the market. And the demand-supply balance will again work. So therefore, this low number, but it's again speculation, as I mentioned already to Ioannis' question, I think there will be things will change given what's happening on the mining side and what's happening on the smelter side. We will see better TCRCs going forward.
Okay. Thank you. Thanks, Mr. Harings. And also all the best for your next steps wherever they may lead you.
Thank you, Bastian. Thank you.
Thank you also from my side. The next question is from Cornelius Kik of Hauck Aufhäuser. Please go ahead.
Thank you for taking my question. I was wondering, you obviously have the impressive CapEx program of EUR 1.7 billion. I was wondering, once Richmond is ramped up, could you give us an indication where the annual maintenance CapEx for the plant will be? And maybe once you're through with all the CapEx program for the entire maintenance CapEx for Aurubis as a group. Thank you.
So what we provide, we are not disclosing per plant any maintenance CapEx numbers. But to give you an orientation in this kind of industry in which we're working, 3% of the invested capital as a maintenance CapEx is a good orientation for what you have to do. And if you look at the numbers that we are disclosing for the total company, it's about EUR 200 million per year as maintenance CapEx that we are spending.
Perfect. Thank you.
Thanks a lot.
Moving on, the next question comes from Christian Obst of Baader Bank. Please go ahead.
Thank you. And good afternoon. I start with more housekeeping question. So the other operating expenses increased by approximately EUR 75 million on a nine-month basis. So how much of that was one time because of legal severances or your settlements? Can you give us an indication for that? This is the first question. Hello?
Let us check the numbers and then get back to you in a minute. Okay.
Yeah. Okay. Then I come with the second question maybe. It's concerning the net financing, net debt position. It's increasing by approximately EUR 600 million, of course, because of working capital increases and all the CapEx. So how much of that is structural for your ramp-up, especially for the investments and for the start in the U.S.?
What kind of a guidance for the net financial position do you give for this year and the CapEx guidance for the next year? This is t he second question.
Working capital is between EUR 1.2 billion and EUR 1.4 billion. The CapEx budget this year is EUR 900 million, and for next year, around EUR 850 million.
Okay. The working capital of EUR 1.4 billion to EUR 1.5 billion is also something which is then sufficient for the next year in the phase of the ramp-up in the U.S.?
Yes.
Okay. Then I have a question also concerning the ramp-up in the U.S. Do you start with more, I would say, easy-to-treat material you're getting from your suppliers, something like cables or whatsoever, and then moving towards a more complex situation? Or do you directly start with some kind of a complex mix to ramp up your facilities there?
Yeah. Christian, Roland speaking.
It will be, let's say, within the ramp-ups. I have to admit, I don't have the details how they're exactly planning the ramp-up there. As we have focused on three different main material categories, which is used cable wire, which is electronic scrap, and also, let's say, I'll call it the scrap no. 2 and other metal-containing scraps there. We will certainly test and ramp up with all these different qualities. What will be exactly the mix and the plant and the different ramp-up phases? Difficult to say. But sure, in a ramp-up phase, you probably start with some easier-to-process material and then go to the more complex one thereafter. But I don't have the timing. I don't have really the details here at hand.
Another one concerning also more the U.S. and all the investments you have, we have seen, of course, an increase of personnel cost by 12.5% on a year-on-year basis. Are you now in a situation where you have enough people on board, or you are still in a hiring phase and we do expect more? Do we have to expect more of an increase when it comes to personnel cost and number of employees?
Christian, I think well picked. The majority of the people is on board for all the expansion projects, for the Belgian ones, and also specifically for the one in Richmond in the U.S.
There will be some additions in the operation side with the ramp-up, but I would say the heavy lifting in finding the right talent, getting people into training programs, and getting them really acquainted to our processes and technologies has been already well advanced and is not going to add significant cost by adding additional people in the next fiscal year.
Okay. Then thank you very much. And of course, also from my side, all the best for your future and everything you like to do going forward. Thank you.
Thanks, Christian. Appreciate it.
Thank you very much. The next question comes from Maxime Kogge of ODDO . The floor is yours.
Yeah. Good afternoon. So following on the guidance, there was up to now a guidance for operating free cash flow at EUR 500 -EUR 600 million this year.
Are you still committed to it, and can you even target the upper half, I mean, like for the EBT guidance?
No, we can confirm EUR 500-EUR 600 million. Given the, let's say, the volatility also here, we cannot give a smaller range at this point in time. So EUR 500 -EUR 600 million is what we can confirm today.
Okay. That makes sense. And second question is on battery recycling. So this has become a tougher market. We have seen some other players interrupt or oppose the plants. So how are you thinking of the market in that context? And as we see increasing substitution of LFP, sorry, for NMC, does your own model work in that new paradigm?
Yeah. Maxime, that's a very good question.
I think what we see today in the market very much confirms and underlines that we have the right strategy, how we address the battery recycling market. Because we are focused on delivering robust, leading, very cost-efficient, and also agnostic to the battery chemicals, to the battery composition technology in order to be best in class in the recycling industry. And that's where we are. That's why we are investing in the demo plant, which is going to start in the coming weeks with its production, confirming the industrial scale of this technology and also its cost leadership. And I'm very confident, and also the discussion that we had so far in the supervisory board and in the executive board, obviously, that we are really on track to be then in the market when there is a market and when money can be made.
And again, given the competence and the base work that we have done over now several years with pilot plant, now with demo plant, that we will be a very strong and can be a very, very strong partner in this industry. To your specific question, again, underline, our technology is flexible on the quality and on the mixture of black mass, so on the battery chemistry. So if it's NMC or iron phosphate batteries, both types of battery chemistry can be recycled with our process.
Okay. Okay. Good to hear. And also on my side, I wish you a lot of success in your next endeavors.
Thanks, Maxime. Appreciate it.
Thank you. Next question is from Daniel Major, UBS.
Hi there. Thanks very much. Most of my questions have been answered, but first one on recycling margins and outlook.
You mentioned tightening of the market and some downward pressure on the scrap refining charge. Could you give us any kind of expectations for 2025, particularly with the ramp-up of Richmond? We're hearing some tightness in the market in the U.S. because of the short squeeze on COMEX. Do you expect that to impact scrap availability and therefore your margins on Richmond as you ramp up into next year?
Yeah. Hi, Daniel. It's a good question, but you have to take into account what we are doing in Richmond is recycling of complex recycling materials. And if you see the squeeze or some challenge in the scrap markets in the U.S., it's very much clean scraps and scrap no. 2. It's a segment where we are hardly playing. So I think it's important.
We do complex recycling materials which are either not exported due to restrictions or where there is no recycling capacity somewhere else in the world. And we are tapping here with our first complex recycling plant in the U.S. into a complete new market space in the U.S. And regarding the pricing and availability, again, Europe for next year, there are some segments we have a very good predictability because we make also long-term contracts. Again, the more complex the recycling material, the more technology is required to recycle, the better we play, the longer-term commitments we have from our side and from our supplier side, from the customer side. Scrap no. 2, the visibility is only in months here. So today, I would not speculate where scrap no. 2 in the next year will be.
Fact is, there is enough scrap available, and if there is a fair competition, if there is a level playing field, Aurubis can really be competitive in world terms and will be competitive against any agent or anybody who would try to source material here in the European market.
Okay. Thanks. And then the next question's follow-up on the battery recycling strategy and comments. How much is the run rate of capital expenditure or broader expenditure on this growth option in the current fiscal year and your expectations for next year?
We are not disclosing this number, but I can assure it's a relatively modest number as we are in a demo plant status now and R&D work. So it's something which is well within our, let's say, budget levels in R&D.
The decision regarding an industrial-sized plant, which will then be EUR 400 -EUR 500 million of investment, that's the range for first full industrial-scale investment. This decision is not due yet. It's been worked on. It will be, let's say, on the table in line with our Stage Gate Process somewhere in the next calendar year, more to the second half of the next calendar year.
Okay. So typically, you expect to be ready to make an investment decision on this circa EUR 500 million battery recycling option within the next calendar year or calendar year 2025?
Again, Stage Gate, we are very rigorous on how we handle this, and I think we have talked today also about some really ups and downs in the market. So we go ahead. Technology, we are making excellent progress. Demo plant is the last big milestone in confirming the overall technology.
The business case has to be strong and convincing, and then we take the decision. If this will be the case in next year, we will be ready to take the decision. But it's all about profitable business case and clear visibility on how the black mass material and the whole market for e-mobility will develop.
Okay. Thanks. And just one very quick one, if I could. I think the second phase of Richmond's latest CapEx guidance was about EUR 300 million for phase II. I know you said that your overall group CapEx is still trending towards the EUR 850 million you guided, but is that EUR 300 million for phase II still the right estimate?
Yeah. So what we are not doing now is to really distinguish between phase one and two because they kind of merged into each other with this integrated side.
But clearly, as I said in the short presentation, all major contracts for phase one, obviously, but also for phase II have been signed, and we have now a very, very high confidence level that we will deliver this project within the set and announced budget range there.
Excellent. Thanks so much and good luck.
Next question is from Ioannis Masvoulas again, Morgan Stanley.
Thank you very much. Thanks for taking the follow-ups. Just a couple from my side. Just starting on with the recycling operations again. If we were to take the top end of the EBT guidance range for MMR for this current fiscal year, we would get a very small EBT for Q4 in the order of EUR 10 million. Is that what you really expect for the division to deliver?
Is this a function of the ramp-up losses at Richmond, or is there anything else to take into account there? Thank you.
This is what we do expect. This is Markus. This is what we do expect. This is mainly because of the ramp-up cost with regard to our investment projects in Belgium and in the U.S. in Richmond. Very clear.
Thank you. Second question on the hydrogen-ready anode furnaces, can you perhaps talk about what sort of price level of green hydrogen will be needed to get these furnaces to cost parity with using natural gas instead? Just to get a sense on the OpEx differential. Thank you.
Yeah. No, that's the big question that's been discussed in the German industry, specifically also in the steel industry.
If you look at what is now projected as a green hydrogen price when new electrolyzing capacity is coming on stream, I think there is a talk about EUR 6- EUR 7 per kilogram. Let's say that would be if everything is scaled up and running well with competitive electricity prices. In order to be on par with natural gas, it has to be a third of that. So we would need a price level to be competitive, same with natural gas of about two and less euros per kilogram of hydrogen.
Very clear. Thanks for that. And Roland, best of luck from my side as well to you and also to the new Aurubis board. Thank you.
Thanks, Ioannis.
Thank you very much.
Before we go back to the operator, we would like to answer the missing question from Christian Obst. Markus.
Yeah. Thanks. So back to you, Christian.
You asked about one-time items, one-time costs in our other operating expenses. This is roughly EUR 22 million. These EUR 22 million do relate to one-time costs with regard to consultancy, with regard to our safety program or legal advice, and with regard to the severance packages for our board members.
All right. Thank you. Then should we move on?
Yes. Please.
Perfect. Then the last question at the moment in our queue is from Bastian Synagowitz again, Deutsche Bank.
Yeah. Sorry. Just a very quick follow-up. In terms of the ramp-up cost, I think we'll be running at around EUR 14-EUR 15 million in the fourth quarter. Could you just please let us know how far that will be rolling into the next year? What is the latest cost estimate you have for ramp-up costs for the Richmond plant in the new fiscal year?
Is the EUR 15 million, is that a run rate which will fade very quickly? Will it even go higher initially and then fade? Some color on that would be great.
Yeah. Bastian, we have not guided yet for the next fiscal year, but just to repeat, for this year, we have EUR 28 million, EUR 16 million for the first nine months, and EUR 12 million as a run rate for the current quarter as ramp-up costs. We will give guidance for this with the announcement of the range for the next fiscal year.
Okay. Understood. Thank you.
Thank you very much. As there are no more questions in the queue, I'm handing the floor back over to the hosts.
Thank you. As there are no further questions, we will close the call and wish you a nice rest of the day. Thanks for your attention and good luck.