Good afternoon, ladies and gentlemen, and welcome to the Arrubis 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. Please go ahead.
Good afternoon also from my side, and a warm welcome to the conference call on the results of the first nine months twenty twenty four-twenty twenty five of Aubert LG. Lee from Investor Relations are here with our CEO, Thurman Park and our CFO, Stefan Hoffmann, who will present the figures for the first nine months of 2024, 2025 and current developments at Auerubis. After the presentation, the floor will be opened for questions. Before we begin, a brief reminder of the disclaimer on forward looking statements. Today's capital market presentation contains forward looking statements about Aruba'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 Thurman Taske.
Thank you, Helke, and good morning and good afternoon. Warm welcome from mostly sunny Hamburg. Today, we are reporting on a quarter in which we successfully completed the largest scheduled maintenance shutdown at our Bulgarian site in three decades, on time and within budget. Our team, together with local partners, carried out this demanding project with the highest level of professionalism and delivered successful results in every respect. We would like to thank everyone involved in making this achievement possible.
Let's have a look into the nine month figures. Despite the shutdown period up in a challenging environment, Rubis achieved a robust operating EBT at EUR $286,000,000. Operating EBITDA at €462,000,000 remained nearly in line with the prior year level, underlining the strength of Aruba's solid business model. Net cash flow came in at €357,000,000 well above the previous year's low level of €52,000,000 due to the robust earnings situation and comparatively lower inventories. The net cash flow for the previous year was affected by the high payments resulting from the shutdown at the Hamburg site.
The free cash flow improved as well compared to the previous year, as we will highlight later in the presentation. Return on capital employed decreased to 9.1% compared to the previous year due to the increase in capital employed for executing our strategic growth projects. All in all, and based on this nine months result, we are sharpening the forecast range for operating EBT to EUR $330,000,000 to EUR $370,000,000. From today's perspective, we expect an operating EBT around the midpoint of the forecast range for twenty four point two five. In light of recent developments, I would like to first comment on The U.
S. Tariffs on copper imports before we dive into the development of our key markets. Last week, as most of you know, the U. S. Administration specified that import tariffs in the order of 50% will apply to semi finished products such as wire and strip as well as to copper intensive derivatives such as cables, connectors and electrical components.
Copper raw materials ranging from ore and concentrates to copper cathodes as well as copper scrap are not subject to Section two thirty two or reciprocal tariffs. However, 25% of the high quality scrap originating from The U. S. Must be sold in The U. S.
And likewise starting in 2027. 25% of the copper raw materials that originate from The U. S. Must be sold domestically. This target quota is set to increase to 30% in 2028 and forty percent in 2029.
Regarding the effects on Arubis, we have mentioned on previous occasions that we generate only 1% of our sales in The U. S. And therefore, the effects of import tariffs on our Copper Products business are expected to be limited. Still, the imposed tariffs and the requirement to process scrap domestically signal the U. S.
Administration intention to strengthen The U. S. Copper industry from smelting and refining down to product fabrication. With our investment in Aruba's Richmond, we are becoming part of this domestic industry, in particular, in the area of copper recycling, the sector that will be supported by last week's ruling through higher local availability of copper scrap. Overall, we feel that with Aruba's Richmond, we are well positioned to play a relevant role in The U.
S. Copper value chain. Let us now look at market developments throughout the third quarter. Here, we can see continuing trends. Stock buildup in anticipation of the implementation of tariffs led to strong demand for cathodes from The U.
S. In line with demand, there was a rapid increase in the European copper premium on the spot market in the third quarter. On the opposite side, the supply deficit led to historically low TCRC levels. Arubis remains well supplied with materials in terms of both quantity and the quality of concentrates, thanks to its diversified supplier base with long term contracts. Aruba's physical concentrate supply situation is covered well into Q4 of the 2025 calendar year.
Furthermore, the availability of some recycling material groups tightened last quarter due to subdued economic activity. Consequently, the RC level in Q3 was reduced compared to previous months. Looking forward, our production sites are already supplied with material until the end of the 2025. The sulfuric acid market continued to show positive demand from the fertilizer and chemical industries in the reporting period, while delivery bottlenecks of sulfur for sulfur burners tightened the supply. Even though total sulfuric acid production was temporarily reduced by the plant shutdown and buildup, Arubis continued to benefit from the sulfuric acid market.
With a view to metal price development, I would like to highlight gold. During the 2025, the price increased further and reached a new all time high. And while not at the same magnitude, with more than 5%, silver prices rose as well.
Compared to the price development of the two precious metals, the copper price on an LME basis was broadly flattish. However, this statement is not true for the copper price on the COMEX exchange, which showed a significant increase in the reporting period in response to a 50% tariff announcement. Arubis benefits from price developments predominantly in the metal result and not to the full extent as we hedge certain volumes against price fluctuations. This works both ways. Last but not least, the euro strengthened versus the US dollar.
Our Rubik's long U. S. Dollar position remains unchanged at approximately US625 million dollars for this fiscal year, with 70% of the euro exposure hedged at 1.085. For fiscal year twenty five-twenty six, around 83% of the exposure is hedged at a rate of 1.125. After this overview, I would like to hand over to my colleague Stefan Hoffmann, for some more details on the numbers. Stefan, please.
Thank you, Thorolf, and a warm welcome from my side as well. Let's have a look at the financial figures for the first nine months. Revenues came in higher compared to the previous year, driven by significantly higher copper and precious metal prices. The gross profit was at around €1,200,000,000 and thus slightly below the previous year's level. Despite the shutdown in Peeledop and the challenging market environment, Arubis generated an operating EBT of €286,000,000 The main drivers were a considerably higher year over year metal result due in part to increased metal prices, significantly higher sulfuric acid revenues and robust earnings from copper products.
On the other hand, we were faced with decreased concentrate throughput with lower treatment and refining charges, a mild decline in earnings from the processing of recycling material and, as expected, higher ramp up costs for the strategic projects currently in implementation. And as Torres has laid out, the ROCE was at 9.1% as we just had higher capital employed due to the strategic investments. I'm moving on to the gross margin. We generated a gross margin of more than €1,500,000,000 in total, which is well balanced across our different income components. So for us, it's yet another sign of the resilience of the Arubis business model with its various earnings drivers.
As a result of reduced concentrate throughput at lower TCRCs, the contribution from treatment charges fell below last year and refining charges for recycling raw materials were slightly reduced as well. This was compensated by a significant increase in metal result year over year as we benefited, among other factors, from higher metal prices, in particular for copper, gold and silver. Last but not least, our Premium and Products business remained stable with an increased contribution from the sale of sulfuric acid. Going into the segments. In the Custom Smelting and Products segment, operating EBT rose to €342,000,000 which represents an absolute increase of 25,000,000 compared to last year despite the scheduled maintenance shutdown in Piedmont.
Start up issues in Hamburg and the scheduled maintenance shutdown in Piedmont lowered the concentrate throughput and hence sulfuric acid production volumes. Additionally, we were faced with reduced treatment and refining charges and lower revenues from the processing of recycling material. These effects were overcompensated by a significantly higher metal result, notably increased sulfuric acid revenues and robust copper product revenues. Adding these parts together, the return on capital employed, ROCE, increased to 17.6%, where the influence of the improved earnings situation outweighed the rise in capital employed due to the shutdown as well as growth investments like in the complex recycling Hamburg project or the precious metals refinery Hamburg and the tank house expansion in Piedmont. The Multimetal Recycling segment generated an operating EBT of €36,000,000 On the positive side, the gross margin, as you can see it on the right hand side of the chart, increased by €9,000,000 with higher recycling volumes processed compared to the same period last year.
On the downside, the drop in earnings year over year is primarily due to higher ramp up costs for The U. S. Richmond site, which rose as anticipated by €18,000,000 to €34,000,000 The scheduled shutdown at the Lunen site also weighed on the result with a tightened availability of some input materials towards the end of the quarter. In addition, depreciation on an equity investment was recognized. Combining the diminished earnings situation for the rolling past four quarters with the increase in capital employed owing to high investments in growth, especially Richmond, the segment's ROCE came in at 0.6%, below prior year figures.
And I want to stress, this is clearly below our double digit ambition level. If we look at our expenses, total group costs decreased by more than 4% compared to last year. The prior year included costs from the sold entity Arubis Buffalo. The group costs for the first nine months were impacted, as expected, by higher ramp up costs and increased scheduled depreciation related to the strategic projects. These effects were partially offset by lower consulting expenses.
Over the medium term and on the cost side in particular, we will reduce G and A expenses by a mid double digit million figure. The areas in which we want to be particularly more cost conscious are costs for consulting services, G and A expenses and travel expenses. Last quarter, I introduced our net working capital initiative, which targets a mid triple digit million euro reduction. I would like to take the opportunity to expand on this self help measure a bit. In the first step, we will be focusing on intermediates.
Here, we will improve our inventory level by reducing stock levels and making better use of material within our unique smelter network. In the next step, we will take a look at other inventory positions and identify further potential for freeing up working capital. I'm moving on to the cash flow bridge, the next chart. As a consequence of the robust performance in the first nine months, we generated an operating EBITDA of €462,000,000 which is almost on par with the previous year. With reduced inventories, higher receivables and increased liabilities, total change in net working capital, as you can see it in the bridge, was at minus €82,000,000 in the first nine months.
Twelve months ago, the seasonal net working capital effect in the bridge would have been significantly more negative. Other positions amounted to €50,000,000 and taxes to minus €74,000,000 Higher tax rate for Bulgaria applies here. All of that results in a total net cash flow of €357,000,000 for the first nine months, which represents a large improvement versus the low prior year. To sum it up, we remain on track to meet the guided range for net cash flow of 500,000,000 to €600,000,000 for the full fiscal year. In general, I would like to flag that net cash flow, as always, is subject to fluctuations over the course of the fiscal year, which balance out again as the year goes on.
The cash outflow for investment activities includes our baseline investments, such as the maintenance shutdown in PeerDOP as well as those for executing the growth strategy and will lead to higher EBITDA contributions in the midterm. As expected, investment intensity in the '5 is higher than in the first half. As indicated in the last call, this year, the dividend disbursement took place in Q3 instead of Q2 and led to a cash outflow of €65,000,000 towards our shareholders. With interest payments at a low level of €15,000,000 Free cash flow added up to minus €276,000,000 In Q4, net cash flow and free cash flow should be positive. Aruba's key performance indicators on the balance sheet side show healthy development and enable our growth strategy.
The equity ratio increased further to 56% and remains well above the target level, thanks to our good earnings generation. Despite a slight increase to 0.6%, our debt coverage remains low. CapEx was, as planned, at a high level of €565,000,000 This was driven by the execution of the strategic investments as well as baseline CapEx like investments made during the Piedmont and Lunen shutdowns. As a consequence, capital employed increased by approximately €200,000,000 to 4,200,000,000 in total. On that note, Thorave, I'd like to hand over to you.
Thank you. On the next chart, let's move on to the strategic projects. This overview is well known to you, just a repeat of the time line of the strategic projects. Arubis continues to deliver on what we promised. The first project like ASPA, BOB and Industrial Heat Phase II are in operation and will gradually deliver on the expected and guided EBITDA contributions once fully ramped up. At Aruba's Richmond, the pre commissioning of the first stage has already started and will be further intensified in the coming months.
Commissioning of the first stage is scheduled to begin in September 2025, followed by a ramp up over the course of 2026. We have planned to invest €1,700,000,000 in strategic projects, of which €1,200,000,000 of these investments are already behind us. In the first nine months of this fiscal year, twenty twenty four, twenty twenty five, around €350,000,000 were spent on strategic investments. To summarize, Arriba remains well on track. Executing the approved strategic projects remains one of the key priorities of the Executive Board and for Aruba.
Let me now focus on two CapEx projects in the last nine months in detail. First, the buildup shutdown. A significant portion of the baseline CapEx of EUR $390,000,000 planned for fiscal year twenty four-twenty twenty five was allocated to the shutdown at our Bulgarian site. The nearly EUR 150,000,000 investment helps secure the Bulgarian plant's strong operational performance for the foreseeable future. Over approximately two months, 120 coordinated projects were executed on schedule and within budget.
Major projects were the renovation of the flash smelter, the replacement of two electrostatic participators and the monetization of sulfuric acid production. Here, new converter was installed and six heat exchangers were replaced. Thanks to major investments in advanced plant technology along with numerous digitization and automation initiatives during the past shutdowns, Rubik achieved a substantially higher level of efficiency and stability in production. Building on the stable foundation, we are set to extend the interval between future planned maintenance shutdowns from two three years. The maintenance shutdown of this magnitude is a major logistical and technical project.
Planning for the latest shutdown began back in 2023. In addition to the Ubers Bulgaria team, around 2,000 people from 12 countries representing partner companies, suppliers and service providers were involved. As in regular operation, work safety and health protection were given the highest priority. Successfully completing such a large scale project in just around two months is a clear testament of our capabilities. Arubis can execute complex projects safely and reliably.
This is a strategic investment in the long term viability of the site, which is the vital pillar in the group. Second example, the sample preparation system in Hamburg. We continue to invest in our baseline to improve efficiencies and to strive for further production asset reliability. Our new innovative and fully automated sample preparation system that began operations at the Hamburg site at the June is another example. Equipped to handle up to 20,000 samples per year, the facility is setting new standards in the recycling sector and more than doubled sample preparation capacity at the Rubis plant.
The state of the art facility is a key component in the overall sampling process and plays a central role in ensuring consistently high quality and efficient material sampling. The new system employs modular technology, allowing it to fully automatically prepare almost all the input materials sampled at the site. These include not only electronic scrap, but also slags, catalysts, sludges, concentrates and anode slimes. The Hamburg facility offers a level of versatility that is currently one of a kind in the global industry. In addition to increasing sample preparation efficiency, the system also features state of the art filter and exhaust systems that enhance safety and environmental protection.
Complete automation within a closed system supported by modern authentication systems also significantly raises process reliability. Let's now move on to the outlook for the markets for fiscal year twenty fourtwenty five. The concentrate market is seeing increased demand from the smelter industry that is outpacing supply growth on the mining side. Therefore, the copper concentrate market is expected to be in a slight deficit. Our primary smelters, as said, are already supplied with concentrates into the 2025.
For the recycling markets, we anticipate a lower supply for some material groups at the group level. The recycling market remains a short term market influenced by short term developments in sectors like collection rates, metal prices and Chinese imports. On the copper product side, we continue to expect stable demand for wire rod driven by the infrastructure sector. While demand for cast shape is expected to be on par with the previous year, for flat rolled products, we expect demand to fall below the prior year due to the sale of Arrubes Buffalo. We predict that earnings contributions from copper product sales will increase year over year.
Sulfuric acid. Based on the latest developments with stable demand from the European chemical and fertilizer industry, we expect high revenues from sulfuric acid sales. In order to reflect the increased visibility, we sharpened the full year guidance from an operating EBT around the midpoint of the EUR300 million to EUR400 million range to around midpoint of the EUR330 million to EUR370 million range. The operating return on capital employed is expected to be between 810% for the Arubis Group in fiscal year twenty twenty four-twenty twenty five. This range continues to include an approximately EUR 50,000,000 EBT effect for ramp up costs.
Net cash flow generation is forecast between 500,000,000 and €600,000,000 In the Multimetral Recycling segment, we now anticipated an operating EBITE between €50,000,000 and €70,000,000 and an operating return on capital employed between 46% for this fiscal year twenty twenty four-twenty twenty five. The ongoing low segment ROCE arises from the anticipated results of operations with increased capital employed due to ongoing high investment. For the Custom Smarting and Products segment, we now expect an operating EBT between EUR $340,000,000 and $370,000,000 and an operating ROCE between 1618% for the fiscal year twenty twenty four-twenty twenty five. To conclude our presentations, on the first nine months of the fiscal year, I would like to summarize the key takeaways. At group level, our EBITDA was EUR $462,000,000, was almost at the prior year level.
And with EUR $286,000,000, we once again generated a robust EBT despite the challenging environment, in particular in our supply markets. Our cash flow generation was significantly above the previous year's level, and we are maintaining a focus on strengthening our free cash flow profile. For the last fourth quarter of the fiscal year, we anticipate ongoing uncertainty in the markets. However, based on our well diversified earnings portfolio, we will cope well with the challenging environment as high revenues from sulfuric acid sales and increased metal result and a rising contribution from copper product sales will compensate for lower earnings from processing raw materials. Combining the performance of the first nine months and the outlook for the last quarter, we feel comfortable sharpening our guidance and now expect an operating EBT between EUR $330,000,000 and EUR $370,000,000, still around the midpoint of this range.
In line with our robust annex this fiscal year, we also confirm our expectation of delivering a net cash flow between EUR 500,000,000 and EUR 600,000,000. And with this, I would like to hand over to Stefan once more before we continue with the Q and A session.
Yes. Thank you, Therese. There's one more thing. We would like to invite you to this year's Capital Market Day, which will take place on October 8 in London. There, we would like to take the opportunity and introduce ourselves and share the aspirations as well as the priorities that guide us as an Executive Board in our daily work with you.
Furthermore, we will talk about the macro trends in our business, the developments in key market segments and how we will position ourselves vis a vis these opportunities and challenges. In this context, we intend to provide you with additional insights on our Rubis' competitive positioning, the implementation of the strategy as well as our strategic direction going forward. Of course, we will present an updated medium term guidance. It goes without saying that there will also be ample time for Q and A, including during the dinner that we'll be hosting at a nearby restaurant after the presentations. We'll send out to save the date in the next couple of days.
And obviously, we are looking forward to seeing many of you at our CMD in October. With this, I'd like to hand back to Elke for our Q and A session.
Thank you, Thorav and Stefan. I would like to provide you with an outlook on the next events following our Q3 publication. Stefan mentioned already our Capital Market Day on October 8, followed by the publication of our financial year results on December 4. 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. And the first question goes to Boris Bautier of Kepler Cheuvreux. Please go ahead.
Hello. Thank you for taking my question. I will have two questions. The first is on guidance. If so Q3 was a weak quarter impacted by a significant amount of maintenance.
If we want to target the midpoint of your full year guidance, then that implies EUR 64,000,000 in Q4. That's just CHF 7,000,000 above Q3, while most of this significant headwind from maintenance will be up. So what justifies this conservative number? That's my first question. And and the second question, it's about the the CMD.
Can can you share a bit give us a flavor about your the the philosophy of this of all CMD, the main message? And maybe I will add a third one on tariffs. What does it change for your Richemont prospect? Thank you.
Yes. Thank you, Boris. I start with your question on the guidance. So let me reassure you that there is no negative message built in with regards to Q4 built in the full year guidance. So we build our own consensus.
And for Q3 versus our own consensus with the actuals, we are slightly ahead. We have not changed the midpoint of the guidance. So you could say that we are a bit ahead versus the midpoint going into the last quarter. What did we do? We reiterated the midpoint, and we narrowed the range with only three months to go.
We meant this as a sign of comfort and of resilience. How do we look at the Q4? There's a few aspects that I would like to mention. One element is that we still have a bit of standstill effect, PeerDOP and LUNAR standstill effect into Q4. For example, for PeerDOP, it's approximately EUR 8,000,000 out of the EUR 34,000,000 that we would see in Q4.
What else do we see in Q4? Higher depreciation level after the shutdown as well for finalized strategic projects. So there is a certain effect below the EBITDA visible, and you've seen generally us making the point that EBITDA versus last year is stable. So there's a certain impact on depreciation out of those additional projects. Next point I'd like to mention is with regards to Recycling Materials.
We see a bit lower availability. We are doing well, but it's still a bit of lower availability that we see for Q4. TCRCs, we said it throughout all the quarters that, let's say, the TCRC effect during the quarters have become more prominent and the likelihood that in Q4, TCRs, the negative implication is a bit stronger than in Q3 is given. But then also on the other side, I would want to mention that with regards to throughput on CSP, we are very comfortable with Hamburg now going on continuously on the right level and also PEDOP as we have picked up there very fastly after the shutdown. So from a throughput CSP perspective, we can be quite happy.
Let me try to summarize a bit how we look at the Q4 and the calculated midpoint that you were mentioning. I would not exclude that it can be a bit higher than the quarter midpoint, and I would be disappointed if it would be below the midpoint of the quarter range. And you know, generally, we are conservative guys.
On the second question was on the Capital Market Day on October 8 in London. The main focal points will be an update on our overall strategy, including further CapEx projects expansion plans secondly, an update on our U. S. Strategy, what can we envision to further do in The U. S.
And thirdly, an update on our cash flow outlook, including all components that influence the cash flow. So a little bit more detail on these three major topics. On your question on tariffs, after the tariffs, I can say we feel even more comfortable about our U. Investment because it shows also that the administration takes the deficit situation they have in copper in The US more serious and that the need for smelting capacity on the primary side, but also on the secondary, on the recycling side, is is very strong in The US that the that there are efforts being taken to keep the scrap material inside The U. S, which will help, of course, also supply situation.
So we are even more convinced after this publication that we are doing the right thing now.
Thank you.
And the next question goes to Jason Fairclough of Bank of America.
Thanks very much for the the presentation. Always very good information in there. A couple simple questions from me. Stefan, I think you alluded to the fact that TCRCs, as we come into the last quarter, will start to become more evident. And I'm just wondering, can you give us some color on how much we'll be seeing something equivalent to spot TCRCs, or is there still further downgrades to come through in future quarters?
Jason, good to hear you. Definitely not q four TCRC, definitely not on spot rate levels. I would see q four TCRCs being lower as Q3 TCRCs. Percentage wise, I would say that probably they would be 20%, 25% yes, around 25% lower in the quarter four than in the quarter three, but far from spot rates.
Still far. And and if we were to mark to spot, is there any color or any sensitivity you could give there? Like, how much of a negative delta would that be on a a quarterly basis?
If we were on a spot level, is that the question?
Yep. So so in other words, if if we think about the the q four profitability that we're discussing, if if TCRCs were actually reflecting spot, how much lower would that q four EBIT or EBT be?
Yeah. That brings me in the delicate situation that I don't know what the spot price is, and I don't wanna know what the spot price is. But it's apparently the discussion between two different parties, and we are not part of those discussions. So it's it's very hypothetical. But let me let me let me try to to answer this question a bit differently.
Last quarter call, we were making the point that the weight of PCs in our overall profit pools is onesix. So TCRC is onethree, TC is onesix. With this quarter, it even was less than a six. Percent. I think we calculated it being 11%, if I recall it right, just the TC impact.
So if TCs were wherever you want them to be and whatever other people talk about and other people label it spot, it it would still be a positive figure, but I don't wanna participate in those calculations.
I'm just gonna push you a little bit here, Stefan, because, again, I'm struggling to wrap my head around this. So let let's say that if we look at the latest benchmark, it's been signed at zero. Right? And that's TCRCs, you know, zero and zero. And so if you say to me that one third of your revenues or one third of your gross profit is coming from TCRCs, why wouldn't I assume that one third goes away?
No, Jason, because we would never pay what you refer to as the spot rate only. So I think we made the point that out of all the contracts we have with dozens of mines, 20% of the contracts have no indication to whatever current rate. We have long term contracts ranging from two to four years. In those contracts, it's paperwork that goes around it's more than dozens of pages, so it's not only one line saying we pay whatever others qualify as a spot rate. So there's so many other pieces of legal language in those contracts that bring us into a situation that we would always pay more than, in your example, nothing receive more than, in your example, nothing.
Okay. Alright. That's helpful. Just a second question if I could. So you guys are a new management team.
You've inherited this project in The US. It sounds like you're excited about it. How do you think about the the parameters of the projects that you've inherited? You know? And that could be in terms of a return on capital employed target, which the previous management team had, or maybe in terms of margin.
I'm not sure how you're thinking about it now that you've taken over.
Well, as you rightfully mentioned, Jason, we've taken over quite an extensive CapEx agenda.
Yep.
But the impression of the new management team is that these projects are well managed by the project leaders in place. And of course, we looked at the assumptions of the business plan, which for us is, at the end, the EBITDA contribution when they are fully improved and when they are finished and when they are finally contributing and then on the return on capital of these projects. And there have been, after review, some deviations, but they haven't been major, some are up and some are down.
So in summary, we must say we can confirm the major parameters of these CapEx projects. And like we said in the presentation, we are fully focused on executing them, and we are on a good track because we completed already 70%. Does this answer your question?
Yes. It does. Let me just one quick follow-up if I could. So just could you remind us for the record, at the end, of the project, where do you see capital employed, at Richmond, and and what is the the target for return on capital employed, please?
Jason, we it it might be that your question on the capital employed, we will we will need to give the answer later during the call, but but we'll look into it. We do disclose project specific ROCE targets, but we have obviously communicated and reiterate medium term ROCE target of 15% for the group. And we are relentless to see that Richmond is contributing in an accretive way to this 15% target. So in other words, not below 15%.
So so maybe even 20%. Was Stefan, sorry. Last one, I promise. Was there an absolute EBIT delta that you expect to see from these two lines?
An absolute EBIT delta. Which two lines do you mean?
Well, from the the line one and line two at Richmond. I mean, is this an extra $203,100,000,000 a year of of EBIT? Is is that a number that you're willing to talk to?
You mean the EBITDA contribution of Richmond One And Two together? Is is that your question?
Yep. Exactly.
We would reiterate the €170,000,000 EBITDA target for the midterm. We feel comfortable with that.
And the next question goes to Janis Masvoulas of Morgan Stanley. Please go ahead.
Yes. Good afternoon. Thank you very much for the call. Just a couple of follow ups, if I may, on on Richmond specifically. I was trying to understand the impact of the tariffs to your business model because the idea was to treat low grade scrap, transform it into blister, and majority of that is shipped to your European facilities.
This requirement of a minimum 25% of high quality scrap and other inputs to stay domestic in The US, does that include a blister which could impact your ability to potentially export?
No. This 25% refers to scrap, so so input material for our facility. And like you said, out of the scrap and other input materials, we make the blister copper, which in the first phase will go to our European sites. But in the in the midterm range, we will, on the one hand, supply it to our European sites, but we also will sell it in The US to some other customers.
Okay. Very, very clear. Thank you. And a related question on Richmond. Given the, again, the tariffs that have been put in place, which are more focused on downstream products, semi products like Copper Road, etcetera.
What's, what would make sense for you going forward? Would you consider adding a third module producing blister, Or do you find it increasingly attractive to now start to look at investing downstream?
Well, Janus, that's an interesting question you're raising. We are still keeping us all options open to expand in the same level of the value added chain of copper production or to go further downstream. So we will give you some more light in at our Capital Markets Day. So reason for you to come to the Capital Markets Day.
Very clear. Thank you. And one more, if I may, on the scrap tightness that you talked about, which was more pronounced towards the end of the quarter. How much of that is the China demand pool that is manifesting into a tighter supply in the European market? And could you also give us an indication on what scrap prices you are seeing in Europe at this moment?
The scrap supply side is always impacted by Chinese competition, but this is limited. It's mostly impacted by the economic activity in Europe, which has been down for the last month, as you see, in various industries. So and it's very short term. It's more short term, the supply side here than on the concentrate side. So it mostly depends on the economic activity like construction, infrastructure, car manufacturing and so on in Europe.
That's the main point. And we see the refining charges a stable level at the moment. Of course, it's a little bit influenced by the supply situation, but we don't see any further major decreases.
Sir, could you share with us what you've seen in maybe June, July just to get an indication on current level of RCs?
It to give you an indication, it's about 250 currently, the RC level for scrap.
$2,250?
Euros. Yes.
Perfect. Thanks very much. Thank you.
Bye. Yeah.
And the next question goes to Bastian Zinagowicz of Deutsche Bank. I
only have two quick follow-up, please. So first one is just on the I guess, on The U. S. Situation around Richmond, and I guess your view on the project. And your first question is, I guess, given what you know about the current policy situation, have you become basically more confident on the steeper, I think, ramp up curve in terms of your earnings contribution versus what you were six months ago?
And then also related to that, is there any, I guess, details around that policy, which you're still waiting for to really make up your mind with regards to the September event? Or are there any no regret moves you're thinking about at this point? That's my first question.
Yes. Thanks for the question, Bastian. We don't see a major improvement of the ramp up curve because of the market situation because the ramp up curve is mostly determined by our production capabilities to ramp up the facility. We are now getting the first materials in. We are also getting to know the market.
So the availability of material the assurance of availability of material in tonnage but also in the composition has increased through this current this latest announcement. But the ramp up curve, we don't see any improvement because it's mostly determined by our production and ramp up capabilities of this new plant. We are not waiting any more details on the new policy. Of course, you can expect some more details in the next weeks or months, but we have made this decision to invest in The U. S.
Because it's a very attractive market. This is, for us, the main driver and not the policies. This is the nice add on right now for us, but the major driver for investment is the attractiveness of the market and the demand supply chain in The United States with a high import of copper. Right now, it's 900,000 tonnes they import every year. So there's a big demand for smelting on, like I said, on the primary and the secondary level for smelting capacity in The U.
S. And further decisions on investments either in the same value added chain bracket or for the downstream are made mostly on market considerations and not so much on the policy.
Okay. Got you. Very clear. And then second question, I guess, the last call, Stephan, you gave us just the high level moving parts for, I guess, an early earnings bridge into next year, which was very helpful. Is there anything which has changed or where you would highlight maybe a bit more conviction or a bit more risk to be kept in mind when looking at the current Street numbers, I guess, to €400,000,000 pretax next year?
I mean I did, Bastian, I did not give a specific number for next year, but I tried to conceptually talk about it without that being meant to be a guidance. And basically, the way we look at it next year, now three months later, is very similar to how we looked at it during the last call. So just to recap, we still see that the macro trend are intact. We are strongly convinced that multi metal is needed. We are convinced that we play an important role there, and we are convinced and still confirmed in the last actions by U.
S. Authorities that going into The U. S, here, we have a certain first mover advantage, which also should start unveil for next years. Today, we have reiterated the guidance with the midpoint. We have kind of narrowed it down.
So as I said, we look at this year being the starting point for next year. Similarly, what do we see when we look into next year? We continue seeing that TCRCs will be low for longer and that there's a slow recovery. I did make the point that Q4 TCRC wise is this quarter four is lower than Q3. This is not a new view.
We had the similar or the same view already three months ago. And then we will see whether this is it from a TCRC level or where is Q1 versus Q4. It's a bit premature. But basically, we would see a slow recovery from a certain low level. On sulfuric acids, it's, as always, early days, but we continue to see no negative signs, and we continue to see positive signs.
Free metals has been developing favorably in Q3, and we don't see anything adverse to that one. For next year, there's no planned standstill, which should help us. And I did make the point that Hamburg throughput is improving, and Piedmont did a perfect standstill with a perfect ramp up. We do see a bit of an EBITDA contribution from the strategic projects in the lower double digit million area for next year. But hand in hand with the strategic projects, we see a higher depreciation.
And then finally, we are working on self help measures being on the cost on net working capital side. So in a nutshell, same view as three months ago, but this is not a formal guidance. And with that, I've not now exactly said where we see next year versus this year.
And the next question goes to Christian Obst of Baader Bank.
Yes. Thank you. Good afternoon. Maybe I missed it. Just can you remind me what was the impact from the write down and what kind of company was affected?
This is the first question, and I'll take them one by one.
Christian, it was not yet said what the impact was, but I'm happy to say it, that it was a low double digit million euro figure that had an entry into the MMR figures. And it's an investment of minor importance that is not active in the core business of Arubis.
And you don't like to mention the name?
Right.
Okay. Thank you. But you talked a lot already about refining charges and the situation in the entire scrap market.
If I look into your wording, you are saying that you are well supplied into the fourth quarter where we are in now. So it seems that it's a little bit less than we have seen before, where we had one and one point five quarters well supplied into the future. So am I right when I'm saying that you're a little bit betting that this is now the low point and we are increasing it going forward and you have some kind of a low supply level so far? Or is that part of your inventory management? Or I'm completely on the wrong side.
On the concentrate side, we were saying we're well supplied into Q4 of the calendar year, not fiscal year. So basically, we are saying we are well supplied into Q1 of the next fifty year on the concentrate side for concentrate.
But I mentioned recycling or I like to mention recycling for the scrap supply.
For recycling, we are supplied into the end of the quarter four of the fiscal year. And no, I'm sorry. We're supplied into the fourth quarter of the calendar year '25 as well.
Okay. So nothing special here?
Nothing special here. It's a bit tighter, but it's good to have good relationships. And we work ourselves well through and trust if we talk about very, very recent trading on the scrap supply side, We had good arrivals in July. August was on a normal seasonal level. And so this this rather confirms that there is nothing special here.
And you highlighted again the additional EBITDA of €260,000,000 of from all these strategic investments. So of course, there are not included so far the €170,000,000 coming, which should come from The U. S. But then we still have some kind of €90,000,000 and you already invested €1,200,000,000 So is there any of this EBITDA which comes from strategic investments already in the current results or nothing?
Well, in the current results, there's a very minor piece out of Bob and Aspar, for example, but it's very early days. So as I said, we'll see a bit of a stronger contribution of the strategic projects next year with an EBITDA contribution in the double digit million euro facility or vicinity. And then obviously, the year after, we expect a strong increase of strategic projects helping EBITDA. We would talk a bit more on that at the Capital Market Day. And just for clarity, the EUR 170,000,000 Richmond EBITDA midterm effect that we confirmed is part of the EUR $260,000,000.
Yes. So am I right when I'm saying that so far, the EUR 1,200,000,000.0 of investment, the return on that positive contribution from that is negative so far and might become positive end of next year?
You are right.
The next question goes to Maxime Caugel of AutoBHS. Please go ahead.
Good afternoon. Yes. So a first question on RISPONSE. So you said earlier in the call that it would start processing material in the coming weeks. So then we have a ramp up period of twelve months, if I'm right.
At that time, do you expect to achieve the full EBITDA objective of around EUR 8,000,000? Or will it take a bit longer before you reach that threshold? And perhaps in relation to that, can you shed more light on the profit drivers for Richemont? Will it be only refining charges? Or will you have some free metal as well as part of the response gross margin?
Well, you're right. We start operation or we plan to start operation in September, '25, and then it will take twelve months for full ramp up. We don't give interim guidance here because it depends a lot on the market dynamic also, which kind of material we're going to get. Important is that we reach the full ramp up. And then in parallel, we will start in 2026, the Phase two, which is also well on track.
And there, the ramp up will be another twelve months, so full ramp up one year later.
And Maxim, we did not completely get you to technical issues. The second question, would you mind repeating it?
Yes. The second question is on basically the profit drivers for which one? Is it only refining charges? Or do you have some free metal as well building up making up the projected €80,000,000 of EBITDA?
It's both, Maxim. It's on the one hand, the refining charges. We have different input materials like circuit boards or cables or scrap, where we have refining charges, and then it's also metal gains we get out of the material.
Okay. Clear. And more broadly, I mean, copper, including scrap, has been retained or exported to The U. S. In recent months, and it now seems it could take years to absorb this excess supply in The U.
S. What do you see that impacting the economics of Richmond? And should we also expect some some of that material to flow back into Europe in the coming months, which could be positive for your European activity?
We the copper demand in The U. S. Is very strong. So we don't expect any major influence by this strong import that we have seen over the last month, and it will not affect us significantly.
Okay. No. Neither in Europe nor in The US.
And and, Maxim, it's also a function of the arbitrage between COMEX and LME.
Okay. And just the last one is on the Hamburg smelter. So the throughput was good in Q3, but the output was quite low compared to the previous quarters. And perhaps can you shed more light on this underperformance in terms of cathode output at least? And more generally, are you happy with the current performance of the Hamburg smelter? Or do you see some potential improvement in the coming quarters?
Yes. At the beginning of the Q3, we still had some operational difficulties. But since a few weeks and six weeks, it's now running better. We have more stable production. And another factor was also the availability of scrap material at the middle of the quarter, which this situation has also improved.
Okay. Thank you.
And we have received a follow-up question from Mr. Fairclough. Please go ahead.
Hi, folks. Just to pick up on this question on the profitability of Richmond. So you you've guided to I think it's a €170,000,000 of EBITDA. So in dollars, if we call that, I don't know, $200,000,000, and then is it 70,000 tons a year of copper? So it looks like you're gonna be planning to make about $2,800 per ton of EBITDA.
And, I was just comparing that to your existing recycling, business where the the profitability per ton seems to be much lower. So I'm just wondering if you could help me understand the difference between the two businesses.
Jason, thank you for the question. It's on the one hand or the major driver is the input mix of materials. So we have more higher value added mix plant in The U. S. Because of the availability of, like, for example, circuit boards and so on.
And, technically, it's a function of the metal gains we get from the input material.
So is it fair to say that there's a lot of value that's gonna come here from from other metals, so I guess, particularly gold and and PGMs?
Yes. That's fair to say.
Okay. Alright. Thank you very much.
Ladies and gentlemen, since we didn't receive any further questions, we will leave the line open for a moment. Okay. There seem to be no further questions. So let me hand back over to your host for some closing remarks.
Thank you. The IR team will, of course, be happy to answer any further questions you may have after this call. We would now like to close today's conference call, and thank you for your attention. We wish you a pleasant rest of the day. Thank you, and goodbye.