Good afternoon, ladies and gentlemen, welcome to the Aurubis AG conference call on the interim report first six months, 2022, 2023. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. Let me now hand the floor over to Elke Brinkmann.
Thank you. Welcome to today's investor and analyst call from me as well. Our CEO, Roland Harings, and our CFO, Rainer Verhoeven, will present the current financial figures and developments at Aurubis in a moment. At this point, a hint in advance. If you would like to ask a question in the Q&A session that will follow, please press nine star, nine star. Only nine star. With that said, I hand over to Roland Harings.
Yeah. Thank you, Elke. Good afternoon to everybody. I have to start and would like to take the time for some really sad news, and I apologize today also in for the later call that we are still in a emotional shock after what we have seen, what happened this morning in our plant here in Hamburg. At around 2:30 this morning, a serious incident occurred at our primary smelter here in Hamburg. The detailed cause and reason behind is not yet fully known. However, three of our employees were seriously injured and taken to hospital after the event for further treatment. One employee has died since then in the hospital, and two are still in intensive care, and they are in a critical situation.
What we know is a nitrogen leak occurred during a regular maintenance at the equipment, and these three employees were directly affected. The rescue workers and also the plant fire department were immediately deployed and did all what needed to be done. Important also, at no time, there was any danger to neighbors or the environment. We have obviously, given the severity of this incident, informed the authorities which are on site, and we are working very closely with them, very openly to investigate the root cause of this accident and what needs to be done to ensure that this is not happening again. We are really deeply saddened by this tragic accident. Our sincere condolences go out to the families, to the loved ones of those involved and anyone else impacted.
We, as a company, we provide to the employees the first aid and the counseling as much as we can do as a company. This is really with a lot of emotion, as you can imagine, because I have been today in the plant, have talked to the people who were close to the accident, who know the colleagues. Therefore, again, please send best wish, think about people who are now in serious condition and have also some understanding that we might not be in the same shape today as we are normally in this call. Thank you very much. With this, I come to the presentation of our Q2 results and the first six months.
Aurubis, you saw the numbers this morning, delivered again strong earnings in the second quarter of our fiscal year 2022, 2023. We are pleased to have almost matched the record results of the previous year. As we announced in our ad hoc release on April 21st, we have also raised our forecast for the fiscal year to EUR 450 million-EUR 550 million operating EBT. Of course, as the whole industry, we are still confronted with higher inflation and high energy costs in particular. However, as we will go through the presentation, you will see that specifically the measures we have taken in energy management have allowed us to mitigate a large part of these cost increases. Our metal result also decreased compared to the previous year.
As you know, this always depends very much on the input materials in the respective quarter. Declining metal prices, especially for industrial metals, additionally weighed on the metal result. Sulfuric acid made an extraordinary contribution to earnings last year, which we discussed in several of our calls. In this fiscal year, prices have fallen, but overall, the contribution is still satisfactory and we are seeing now much more normal situation compared to the extraordinary situation for the pricing and demand in Sulfuric Acid. We come to this later. Our cash flow is subject to significant fluctuations during the year. Although well-known, this is due to the fluctuation in working capital. The money is in the inventories, and the increase in the inventories this quarter is due to the preparations for the maintenance shutdown in our plant in Bulgaria and Pirdop.
This will even out again over the course of the fiscal year. Let's be more specific. Our revenues are largely driven by metal prices. This was also the case in this quarter. Industry metals, in particular, were lower than in the previous year. Gross profit was only slightly below the very good level of the previous year. The reasons, significantly increased treatment and refining charges for concentrate with slightly reduced throughput. The significant increase in the Aurubis copper premium, a continued very high demand, strong demand for wire rod, and higher earnings from refining charges due to the increased use of recycling materials. This was offset by significantly lower metal earnings due to lower input materials and declining metal prices, in particular for industrial metals. Significantly lower sulfuric acid earnings due to lower sales price compared to last year.
What we see is a lower demand for flat rolled products in our remaining three plants compared to last year. We also see higher costs in the group. Bottom line, however, we achieved our target ROCE, or above our target ROCE, with 15.6% for the first half-year, are not on the same level that last year. However, I mentioned the working capital effect of large maintenance. Looking at the specific pricing of key drivers, we have seen different trends in metal pricing during the reporting period. While copper and other industrial metals showed a negative trend in comparison to the prior year, precious metal like gold and silver developed very favorably after the disruption in the banking sector. As usual, let's have a look at the different markets.
We continue to see good supply in quantity and quality from the concentrate market, despite some isolated smaller operational problems on the mining side. Spot terms conditions showed a stable development around the newly set benchmark. The new benchmark for this calendar year is set at excuse me, $88 per ton and $0.088 per pound for framework contract for this calendar year. Already in the last quarter we started, there's always some overlap from the previous year, but we started to benefit in the last quarter from this new price level. Supply is secured well into Q4 of our fiscal year, we adhere to our long-term sourcing strategy. Looking at the recycling markets, during the reporting period, we saw rather good availability of scrap materials on our markets with good RCs during the first half.
CRU estimated an average RC of EUR 378 per ton during Q2 for copper scrap no. 2, excluding logistics. ERC for more complex materials remained at a stable level also in comparison to the last year. Looking forward, our production sites are already supplied with material up until the fourth quarter of the current fiscal year. Coming to sulfuric acid. The sulfuric acid market continued to normalize from the very high prices in the two previous years. Given the reduced demand from European chemical and fertilizer industry caused by high energy, specifically gas prices, although the demand for acid and although, consequently, acid prices declined. Given the longer-term orientation of our contracts, we discussed this in nearly all our calls, we only participate in spot pricing to a limited extent.
The earnings contribution from sulfuric acid sales were well below the very high level of the previous year, though they remained at historically high levels for the group. Talking about our Aurubis copper premium for this calendar year 2023, we have announced and set the premium at $228 per ton, and this went into effect in the markets at the beginning of Q2 of our fiscal year. This higher ACP reflects the ongoing strong demand for cathodes end products in Europe, and we will benefit from higher premiums for the remainder of the fiscal year and also the calendar year. Regarding US dollar, we have a long position of approximately $500 million, although in this fiscal year.
Within the scope of our hedging strategy, we are hedged with 70% of this amount at 1.133 for this fiscal year, and we have already hedged 53% at a rate of 1.093 for the coming fiscal year. With this, I would like to hand over to Rainer sitting next to me.
Thanks, Roland. Good afternoon, ladies and gentlemen. Let's come to the gross margin. The gross margin split of the group has seen some shifts in our three main earnings pillars year-over-year. With the increase of the concentrate treatment and refinement charges and earnings from refining charges for the recycling material remaining rather stable year-over-year, we saw an increase in this earnings pillar at group level. Premiums and products also saw an increase with a considerably higher ACP and ongoing strong demand for wire rod, despite sulfuric acid prices that were at a subdued level in comparison to the prior year. Input materials related to the metal gains were also down compared to last year, with decreased metal prices mainly for industrial metals like Copper, nickel, and tin. Nevertheless, metal gains remain a significant earnings driver for the Aurubis Group.
All in all, this reflects the solid business model of Aurubis, where different earnings drivers level out each other. Having a look at the group costs, the total cost of the group increased by, may I say, only 5% to EUR 928 million compared with the prior half year. We continued to see general cost inflation at moderate levels. We were able to counter inflationary tendencies by strict cost management. We have seen inflation in all cost items except for energy, which could be reduced from the elevated cost levels in the previous year. All in all, we continue to see cost inflation, though it remains at manageable levels for the group due to good countermeasures. Despite the reduction in energy prices and subsequent costs for the group, the availability of sustainable and affordable energy remains one of the prevailing topics for the Aurubis Group.
Overall, energy costs in the first half year decreased compared to last year. Taking a more granular look, you can see that due to the long-term supply contract with Vattenfall, the indirect CO₂ compensation and state refunds provided to our site in Bulgaria, as well as a good energy management and the sale of excess contracted energy helped reducing electricity costs for the group to a more manageable level. Besides electricity costs, which went down, gas prices substantially increased compared to the previous year. We currently see a recovery back to lower levels. While we were well hedged in the last fiscal year in gas, the level of hedging in the current fiscal year for sure has clearly reduced. Aurubis managed to pass on those higher energy costs, in particular natural gas, to its customers.
On the right-hand side, you can see preliminary figures for our CO₂ emissions, which have yet to be audited. It's our own calculations, if you want to say so. By using a greener electricity mix, for example, in Olen with our wind PPA, the photovoltaic plant in Pirdop, and the sourcing of greener electricity, we managed to reduce the CO₂ emissions of the group by roughly 16% year-over-year, underlining our strong ambition to decarbonize our production. Looking forward, we will continue to work on further electrification of our production processes and invest in decarbonization of our production. Secure and sustainable energy supply at reasonable prices will remain the relevant factor for Aurubis in the coming years. Aurubis key performance indicators continue to show a very solid picture.
At 15.6%, our ROCE is above group target, but down from the previous year, with earnings performance remaining pretty stable. Temporarily, high inventories to supply our Pirdop site during the upcoming maintenance shutdown of the primary smelter resulted in a higher capital employed compared to last year. We remain with a strong Equity Ratio of 53% and a Debt Coverage Ratio of -0.2, both of which are the foundation for our strategic growth path. The increase in capital expenditures resulted mainly from the investments in our new recycling plant in Richmond, in the U.S., and the second stage of our industrial heat project here in Hamburg. In addition, for the preparatory measures for the maintenance shutdown in Pirdop in the third quarter, which will start now on the 17th of May.
At some EUR 19 million, the net cash flow was below the prior year level of EUR 54 million due to the high inventories in the first six months, already explained, due to the shutdown in Pirdop. The net cash flow is subject to fluctuations during the year, which will balance out, especially in the coming months during the shutdown in Pirdop, where we will consume the anodes that we have piled up. Let's have a look at our segments. As most of the earnings drivers and market developments have already been touched on, let me briefly highlight some financials and the production figures from the Multimetal Recycling segment. All in all, the throughput volumes and cathode output were above the previous year levels.
Although the segment benefited from slightly higher refining charges for the recycling input, at EUR 103 million, the operating EBT was well below the very good previous year. Due to the input material mix, the metal gain in the MMR segment was below the prior year level, with reduced metal prices, especially for the industrial metals, as already mentioned by Roland. For example, tin declined by around 38% on average. Zinc declined on average by 13% in the second quarter compared to last year. Increased costs in general and for logistics and consumables in particular, weighed on the MMR segment earnings. As a result, we show a reduced EBT in line with a moderate ROCE of 18.7%, which is still above our target rate of 15%.
Please bear in mind that a quarterly breakdown of our restatements of the operating EBT can be found in the appendix of this presentation. That was a request or a question from several analysts. Looking to the Custom Smelting & Products segment, the operating EBT increased from EUR 205 million to EUR 223 million in the reporting period. The segment benefited from the higher TC/RCs for concentrate, the increased Aurubis copper premium in the product side, and the very strong demand for wire rod, especially from the energy sector. Positive market conditions, combined with a relatively good concentrate throughput, led to positive earnings contributions from concentrate. In particular, the performance of our smelter in Pirdop has to be highlighted, which has run without any downtime since the last year's maintenance shutdown.
The negative effect on the operating EBT of CSP was caused by a declining sulfuric acid price, and thus its revenues attributable to the prices. A lower metal gain due to declining metal prices also mentioned, and considerably increased costs, in particular for consumables and transportation compared to the previous year. Shapes and flat roll products were below the previous year's level due to a reduced demand in the market. At FRP, the partial sale of the former FRP division also had an impact which is still included in the previous year's figures. The return on capital employed reached 19.1%, which is well above the targets. Let's move to the market outlook for the remainder of 2022, 2023.
The outlook for the concentrate market from CRU and WoodMac continues to be foreseen a growing market from both the supply and the demand side. The new benchmark set at $88 and $8.8 reflects this increase. We'll continue to benefit from higher treatment and refining charges year-over-year. Both our primary smelters are well supplied into Q4 of this fiscal year, in line with our long-term supply strategy. The markets for copper scrap and complex recycling materials remain short-term markets and are driven by influences like metal prices and collection activities from the recycling industry. We currently foresee a stable market for both copper scrap and recycling materials with good RCs for the remainder of the fiscal year. The availability of some material groups, like shredder, car shredder materials, is expected to be subdued for the remaining fiscal year 2022, 2023.
Our production plants are supplied with recycling materials well into Q4 of this fiscal year. The outlook for sulfuric furic acid, as already mentioned by Roland, remains quite bearish. Both ICIS and CRU expect reduced demand from the European fertilizer and chemical industry due to high input and especially energy costs. As seen in our half year figures, we foresee a reduction in the earnings contribution from sulfuric acid year-over-year. Given the long-term contract situation, acid sales are still expected reasonably good for the remainder of the fiscal year. Aurubis continues to benefit from the Aurubis copper premium for the calendar year 2023, which has been set at $228, well above the prior year level, which was at $123.
Looking at our copper products, rod, shapes, and the flat roll business, we foresee a continued strong demand trend for wire rod and despite a slowdown in the construction sector. The product demand for shapes and flat roll products is now expected at a lower level compared to last year. With that, I hand back to Roland.
Yeah. Thanks, Rainer. On April 21st, Aurubis released the preliminary figures and informed capital markets about the increase of our forecast range. The very good Q2 results came in higher than anticipated and triggered this increase. Based now on our updated assumptions, we do expect an operating EBT in between 450 million EUR and 550 million EUR for the group. For ROCE, our expectation is now between 14% and 18%. Looking at the segments, Multimetal Recycling, we expect an operating EBT between 110 million EUR and 170 million EUR, and a corresponding ROCE with between 13% and 17%. For Custom Smelting, and Products, for this segment, we now expect an operating EBT between 390 million EUR and 450 million EUR and an ROCE between 18% and 22%.
Talking now about the growth strategy. Our strategy is clearly focused and executed in a disciplined manner. On this slide, you can see the breakdown of our truly ambitious short, medium, and long-term projects currently being implemented, executed, or prepared. In total, we have decided and are currently executing projects, approved CapEx projects in the magnitude of EUR 1.1 billion and delivering an EBITDA contribution of EUR 260 million starting in the fiscal year 2026, 2027. I will show you a detailed overview of the approved projects in a minute. The projects in our medium-term planning, like battery recycling, for example, are constantly developed and worked on until they reach the maturity to bring them to the final approval just ahead of execution.
We will provide an update, a detailed update on the growth project and our detailed strategic agenda going forward later in June, on June 13th during our Capital Markets Day in London. I really want to repeat the invitation that all of you have received. It would be our pleasure to see you there, either in person or if you could participate virtually, to have an in-depth discussion about how we see the project, what's the status of the project, and what else and what new we have in the pipeline. Looking forward to welcome you in London. As it was requested, we have introduced a slide with the timeline here, to give you a better orientation of the various projects, and we have quite an active agenda, as we have discussed.
What is the project execution timeline, and very specifically, what is the commissioning? That means, the start of production for the different projects. Although this will be shared with you in more detail during the Capital Markets Day next month. Let's use the time and show some more details about some key projects. The most important growth project is our recycling plant in Richmond, in Georgia, U.S. As you can see on the picture, I think it's quite obvious the very good progress that we have made. For those with some who are going to look close to the screen, you see perhaps some boxes at the left side of the building. The delivery of equipment has started last week.
The contract that we signed and announced with SMS to supply the main equipment of the plant for lab and sampling and also the metal treatment has started to arrive on-site, and installation will now begin within the finished buildings. Our decision to go to the US has been more than confirmed. There is a recycling boom in the U.S. We see continued good availability of the relevant recycling materials for our company, and this combined with low and predictable energy prices, will confirm or has confirmed our very attractive business case. Important is also Aurubis Richmond increases our Aurubis sustainability position even more and strengthen our commitment outside of Europe. The CapEx spending currently stands at EUR 78 million. Of course, over the course of the year, additional contracts for the construction of the plant were completed.
We have locked in and signed at fixed terms the majority of the CapEx for the plant already. I'm sure there will be some questions later to be more specific. Also here again, I would hint to our Capital Markets Day where we are going to have all of the time to discuss this in detail and hopefully convince you that we are well on track in time and budget. Main focus today is finishing or say, working on the erection of the plant, but also the start of recruitment and onboarding of new employees and training also here with this new site, new greenfield site. This is now a focus activity of the team, more and more being localized in the U.S.
Coming now to the other topic, have been also raised a lot of attention for good reason, is the topic battery recycling. We shared with you that since March 2022, we have operated a pilot plant here in Hamburg to test and verify our know-how and the technology for this recycling of complex high-grade materials, the so-called black mass, from used and shredded batteries. It contains valuable metals like lithium, nickel, cobalt, and manganese, along with graphite. All very important raw materials for meeting the steadily increasing demand for lithium-ion batteries for the electric vehicle market. We successfully completed over 60 test series at our pilot plant over the last year and achieved constantly and consistently a recovery rate above 95% for, and very important, that's one of the key elements of our technology, for lithium as well.
This outstanding number, combined with the very attractive OpEx case has proven our excellent technology and also our metallurgic expertise in this recycling, new recycling stream growing at fast pace. We believe and benchmarking that we achieve highest recovery values with this innovative process and will become a very important player in this battery material sector as we believe we are and will be really competitive with our technology and per processes there, and clearly will be well better than what is the coming and changing European Battery Directive regulation.
Our next step, very important and sure part of the discussion, again, highlights the more deep dive that we will have in the Capital Markets Day, is the construction of a demo plant in where we do the next scaling up of the technology for the recovering of lithium and also have more facts and data for the then later coming industrial scale investment in the battery recycling plant. To be perfectly clear, the final investment decision, especially for the site, has not yet been made. As we have centered our technology around the use of electricity, this energy cost is one of the very important decision criteria's for site selection. Rainer pointed on the uncertainty about energy costs in, especially in Germany. Therefore, it's one of the investigations and analysis which we are doing as we speak.
With this, certainly will raise some questions. Again, I would again invite you to join us on the Capital Markets Day, where also the experts, the responsible person for this sector will be present and will be able to answer any of your questions in more depth. Coming to the next growth project. In February, we announced our plans to expand our tank house in Pirdop. This is the single largest investment for the site since Aurubis took over many years ago. The investment is a perfect example of strengthening our core business. We continue to also beside our growth agenda to execute also this element of our strategic pillars. We will expand the tank house in Bulgaria and will increase the capacity of about 120,000 tons of cathode production.
Operational will be this investment, which is now in execution by beginning of 2026 calendar year 2026. You see on the next slide some of the KPIs and investment number is 120 million EUR. The total production amount in Pirdop will be then at the level of 340,000 tons of top quality cathodes. In the second half we will be then full second half of 2022. Start up will be in beginning of 2026, first half and then ramp up. This facility will deliver an additional earnings contribution of about 30 million EUR EBITDA once full in production. Ultimately this higher cathode production in Pirdop also means additional industrial metal availability for the transformation agenda for the growing demand in the European market. The next project, construction kickoff.
At the beginning of March, we officially started then the construction of our BoB, our dross and oil pretreatment plant in Belgium, which will increase besides the treatment of the electrolytes, although clearly the capacity for additional important industrial metals like nickel and obviously also like copper. It's a state-of-the-art efficient technology. We are also able to process and extract impurities from the electrolytes and optimize the material streams within our smelter network. This project is another very, I think, very prime example of how Aurubis is activating synergies in the smelter network and further draws out valuable metals from the various input streams that we receive. We do expect the commissioning of the new facility with an overall investment volume of around EUR 70 million in the second half of 2024.
The annual EBITDA contribution is expected to be at EUR 15 million once this plant is fully operational, which we do expect in the fiscal year 2025, 2026. Coming now to the topic of sustainability. At the end of March, we published our new 2023 sustainability report with the headline Enabling Tomorrow. This comprehensive sustainability report clearly shows that Aurubis has always viewed sustainability as an essential part of our own conduct and business activities. We are committed to handling our planet's limited natural resources responsibly, and we ensure that the people we work with also take priority. At Aurubis, treating our employees, suppliers, customers and neighbors with respect is a matter of course.
With the new Enabling Tomorrow sustainability report, Aurubis is raising the bar on its standard for corporate conduct even higher. Along with the Global Reporting Initiative, GRI, the company has also aligned its reporting with the voluntary Task Force on Climate-related Financial Disclosures for the first time. Aurubis has expanded its leadership role in sustainability despite the serious challenges and uncertainties of the past year. A sustainable energy supply is one of the key factors here. We are implementing a series of new energy project to further increase the flexibility of energies of our energy supply and to reduce CO₂ emissions. I would like to share some examples with you, like the in-house solar park that powers the plant in Pirdop with 13,500 MW hours of electricity and reduces CO₂ emissions by around 22,000 tons per year in Bulgaria.
It's, by the way, the largest solar plant for internal electricity production for the company in Southeast Europe. Our target and decided is to increase this by a total of 24,000 MW hours from solar power by 2024. Our site in Ulm, just to pick another example, has signed an agreement with a wind park, with an offshore Belgian wind park, and receives now 90% of the electricity demand from this wind park. The potential CO₂ savings here compared to the status before is 42,000 tons per year. Here in Hamburg, we are already actively in the execution and preparation for our second expansion stage for industrial heat, starting with the 2024-2025 heating period. This alone will prevent additional 100,000 tons of CO emission per year today emitted here in Hamburg for the heating of private homes in the city.
Last but not least, we are progressing with the use of blue ammonia as an alternative CO₂ free energy source in a pilot project, which we announced last October, aimed to advance the decarbonization/the replacement of natural gas in the copper product production. Many things are in the making, and I'm only here at this time able to share some of the projects. Capital Market Day will allow here a much more deeper dive. With all these activities, we are pursuing the clear objective. We will and we are going to achieve a carbon neutral production well before 2050. We have, as Aurubis, invested more than EUR 780 million in protecting the environment and the climate since the year 2000. We are clearly the leading company in this aspect and are respected.
I come to a minute to our relationship and the discussions and agreements we have signed. We are really seen, and I have to say, admired by many players in the copper industry about our spending, about our achievements there. Clearly, to underline, we are on track with our decarbonization agenda. Aurubis today is already producing many metals, not just copper, many metals with less than half of the average CO₂ emissions compared to the global markets. Specifically copper, our footprint for copper is 60%, again, 60% lower than the global average in copper production. Continue with the talks about sustainability. We have initiated, and you see some nice pictures here, strengthened our partnership role in achieving sustainability.
In November last year, Anglo American and Aurubis announced a closer cooperation on sustainability initiatives along the whole production chain from mining till to the products for copper. Both companies, and I have had the opportunity to meet and see sites, mining sites of Anglo American, and I can just underpin both companies show their very clear commitment in line with our Tomorrow Metals program that we are going to move the supply chain and the value chain of copper to the next level. We want to develop copper products that meet the increasing expectations for future enabling metals, and those metals will be, and are, sustainably sourced and supplied. We have already established the first tangible results from our collaboration. Anglo American and Aurubis have committed to using the Copper Mark Chain of Custody Standard.
Repeating, as you heard before, the Copper Mark is an assurance framework to promote responsible practices and demonstrate the transition in the minerals industry. The Chain of Custody Standard will increase the transparency in copper supply chains and bring responsibly sourced copper to the market. It's the first standard that covers the full copper supply chain. As someone who takes their responsibility in the supply chain very seriously, we are one of the first to support this Chain of Custody as Aurubis. On the right side, you see Máximo Pacheco, CEO of Codelco. In January this year, we signed an agreement to cooperate on a more sustainable and responsible copper value chain, also with Codelco. The MOU identifies potential areas of cooperation with respect to smelter operation, with the aim of reducing emissions, ensuring health and safety, and strengthening the joint agenda or the company's agenda of decarbonization.
In this context, technical visits have happened and are planned, a design and exchange program to also bring our leading environmental technology to the smelting activities of Codelco in Chile has been kicked off and is in execution. At the same time, we are looking at potential areas of cooperation regarding the circular economy projects in Chile, as well as training and development initiatives for employees which are part of our cooperation. I'm sincerely convinced our future cooperation with Codelco has the potential to make an immense contribution to advancing the sustainability of the whole copper supply chain. Both agreements share one aspect. Both contain an accord, Anglo American and Codelco, that stipulates a concerted effort to promote the Copper Mark, which we see as the gold standard for sustainability and supply chain integrity in the copper industry.
The Copper Mark, just although you heard this, but I would like to repeat, the Copper Mark's responsibility production criteria are really comprehensive and rigorous. They are derived from 32 internationally recognized leading sustainable standards. We, as Aurubis, ambitionately and resolutely promote the Copper Mark seal for ourselves, for our partners, but also for the whole industry. In close cooperation with the Copper Mark organization, we follow the continuous improvement approach with our business partners. As of today, already 25% of the world's copper producers are Copper Mark assured, meaning a quarter of the globally mined copper is responsibly sourced, documented, and audited. This, I think, is a great milestone, and we are proud to be part and one of the driver of this initiative.
For us, the Copper Mark is also a tool we, as the copper industry, must use to demonstrate our dedication to a clean value chain. With this, I would like to hand back to Elke.
Thank you, Roland and Rainer. I would like to provide you with an outlook on the next events that follow our Q2 publication. As already mentioned, we will follow up with our Capital Markets Day on June 13th in London. More information will be shared with you in due course on the website and by email. Our next analyst call on the nine-month figures will take place on August 7th. 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. Ladies and gentlemen, if you would like to ask a question, please press nine and the star key on your telephone keypad. In case you wish to withdraw your question, please press nine and star again. Please press nine and star now to register for a question. First up is Ioannis Masvoulas from Morgan Stanley. Over to you.
Hello. Thank you for the presentation, and my condolences for the accident at the Hamburg smelter. Perhaps we can start on that topic. Could you perhaps give some indication or color on the operational impact? What's the status of the plant, and whether this was an isolated event that shouldn't really have any implications for the year? Thank you.
Yeah. loannis, thank you for your empathy. Clearly, this is an isolated event in one area of the plant. It has no impact on the plant itself and on the production.
Okay. That's very clear. Thank you. The second question on copper products, you clearly indicated a more cautious outlook around shapes and flat roll products. Which end markets drive this more cautious view relative to a few months ago? Should we expect the volume for these products to be down perhaps double digits year-over-year?
Yeah, loannis. Looking at the FRP, we clearly pursue the approach of pricing before volume. We see that there is, from certain segments, slower demand, but it's also in a double-digit percentage. I have to say it differently. We see some really different dynamics in different markets. If we take one of our plants, which is the plant in Finland, Pori, we see a very high demand given on the products they are focused on, which is very, let's say, clean, very special alloys, which are used for e-mobility, battery applications, and so on. Here, we enjoy very full order books. This plant is running at capacity.
In the European market, where we serve from our plant in Stolberg and in U.S. from our plant in Buffalo, we see a bit of a mixed picture. They are very proud in the products they are producing, and there is also construction material is part of their portfolio, and specifically in this segment, which also is directly connected to the shape segment, where a lot of these billets is being used for tube production, we are supplying to some customers. The construction market, some other segments, so a bit of a, let's say, mixed picture. Some plants very full, some segments running extremely well, some others low. Overall, we see a reduction in a double-digit number of demand. However, at still and maintained good price levels.
If I may add.
Sure.
Sorry, Roland, from an overall group perspective, this has only a very minor impact.
Yeah.
On the results.
That's very clear. Thank you both. Just one more from me, if I may. On a comment you made around excess power sales in the quarter, which brought down energy costs. If I understood correctly, what was the P&L benefit in the period?
Yeah. Rainer here. Let's say we keep silent. We do have, for sure, here and there, additional amounts of electricity, for instance, that we are not using for our own production, that we have been able to sell at very good conditions, especially during the peaks in the last year, also on forward sales. Here and there, of course, as you can imagine, we have some production outages, and in those outages, we have been able to really manage very well the sale of electricity forward. That's how we do it.
That fits through to the energy pie chart that you provide in your slide deck, I would assume.
Yeah. This always shows the net figure in energy, which means also including the price cap that we have in Bulgaria, for instance, on electricity. This also includes the so-called
Perfect. Thanks.
Here to add. We receive a segment, a sector who is eligible for, I'd say, subject to carbon leakage. We are eligible for price compensation for indirect CO₂ costs in the electricity price. This rebate we get with a one year or two years delay even, this is included in our energy cost because it's part of the electricity bill.
It's 50% of the CO₂ inside the electricity price.
Yeah.
Yes, indeed. Thank you both.
Yeah.
The next question comes from Jason Fairclough from the Bank of America. Over to you.
Hi. Good afternoon, gentlemen. Thanks for the presentation. Look, just a couple of questions, if I could, on your growth projects. You're looking at spending almost 40% of your market cap on projects. I'm just wondering if you're willing to talk about hurdle rates. I mean, I'm looking at the ROCE of the group this year. I think you're saying about 15% or 60% return on capital employed. It looks like these projects might have a lower ROCE than that. How do you think about hurdle rates when you're deploying capital? Also on the projects, could you talk a little bit about sourcing scrap? I mean, you say the U.S. is in the middle of a recycling boom.
you know, do we need, you know, 100% utilization to get up to the EUR 260 million of incremental EBITDA? What sorts of feed rates do we need to see to get to these targeted EBITDA numbers?
I'll take the first question. Thanks, Jason. Well, of course, we have not provided in the, let's say, official papers, the return, so to say. You can nonetheless, have a clear view on with an EBITDA, figure that is provided compared to the investment that we are doing, that for sure, those projects and all of them are clearly above the hurdle rate of 15%. We are definitely well, well above the 15%. That's something I can assure you.
Yeah. If I add, Jason, to your second question regarding markets, just to give you some numbers here. The European recycling market, so the material we are looking at, has a magnitude of 6 million tons, and we see a growth rate of about 5% per year projected for the coming years. The capacity we are installing Aurubis Richmond for phase I and II will be 180,000 tons of processing capacity. I think this puts it in perspective. With the very intensive discussion that we have, also with established supplier who are supplying today, also our European operation with scrap from the U.S., has more than proven the availability of scrap.
The market availability will be not the limiting factor, but the throughput, how quickly we are going to ramp up and what we really finally will process in the plant. Here's some kind of insights. We are, with all the projects that we're doing, we are doing a conservative planning. 180,000 tons is the number we have stated, but I'm not disclosing, but expectations are given the size of the plant, the size of the equipment that we are installing. My personal expectations are definitely higher, and we will go for it. Clearly the markets are there, the material is there. The market is waiting for us with our first recycling plant of this kind in the U.S. This will be well supplied without any doubt.
Yeah, maybe some addition, if you allow. Also here, if you look how we operate our inter-integrated smelter network here in Europe, it is never a question of input materials, it's a question of the input material mix. What we are aiming at, we are always aiming at 100% production, so full throttle production. The question is how good with how attractive materials we can fill the mill. As Roland Harings pointed out, in the U.S., for sure, there will be highly attractive, available products.
Yeah.
Look, could I just follow up? Thanks very much for the color. I appreciate it. If I could just follow up. In some other industries, what we're seeing is that participants are looking at scrap and scrap availability as some kind of a strategic enabler. For example, Aperam, which is a stainless steel company, has actually bought its largest scrap supplier. In the U.S., we've seen Cliffs, which is a steel company, buying scrap collectors. Is that something that you think might be important for your business in the medium term?
Jason, a very, very good question here. Clearly, no, we don't see this as important because the nature of the copper market and the scrap market is a different one than what you see in steel. Copper is very often, let's say, an additional stream to large scrap recycling companies. Given the where copper is used, widely spread in all different industrial and in general, in applications, we are dealing with many, many different companies who are supplying different scrap materials to us. There is not, compared to the steel industry, also to the aluminum industry, there's not this one, two, three big companies who would make the difference and would ensure you a large supply. The biggest supplier in our portfolio of recycling is always a low, let's say, a low single digit number of our material inputs.
That means our strategy is half strong but very diversified and broad relationships with our supplier base, and also to the point that Rainer mentioned, also to provide us then the flexibility to have the best mix in our feed to ensure the highest profitability of the recycling capacity, which, and again, repeating what Rainer said, which we run always at 100%.
Okay. Very helpful. Thank you so much, guys. Appreciate the color.
The next question comes from Bastian Synagowitz from Deutsche Bank. The floor is yours.
Yeah. Good afternoon, all. I've got a couple of questions, please. Could I firstly follow up briefly on energy costs? Here I'm wondering whether we can see any further meaningful relief in the third and fourth quarter, or will it be mostly a 2024 topic given the hedges which you've got in place?
Yeah, I'll try to start.
Yeah, we join to each other.
Yeah, exactly.
Yeah.
Try to start answering the question. You saw that year-over-year, we have managed the energy costs quite well, so we are below last year. That's clear. We will continue enjoying, let's call it this way, positive effects from the hedging that we did of excess electricity also in this fiscal year. What we can say going forward, the race will become a bit more difficult because we are, let's say, running out of the very favorable hedges that we have done logically because prices are elevated, which means in the next fiscal year, it might be a bit more difficult. Nonetheless, please bear with us.
As you have seen throughout the cycle, we, as Aurubis Group, have been able to manage our energy costs in, I would say, quite an impressive way, and we will continue doing so. We will not be having huge hikes or difficulties on energy. That is what we, both Roland and me, continuously say. We will stay below this 20% of total cost in the energy, and manage it around that level.
Yeah, if I, if I add to Rainer's comment, I think one thing which should or has to be taken into account is that we have been able, in new contracts, specifically for products, to include energy escalation clauses. This means you don't see this because it's part of the revenue and the gross profit, but clearly, we have, beside the hedging strategy for the securing of electricity and natural gas, which are the two main components, we have also clearly changed our contract structure with most of our customers to have for wire rod as the main product, mainly pass through elements of price movements on the energy. Therefore, we are, as you can imagine, we are very active in the energy management, and the numbers prove that we are very successful what we are doing.
Therefore, for this fiscal year, we expect quite stable conditions compared to what we have achieved for the first half year. Next year, there are some uncertainties, like political decisions where we are very much in discussion in Bulgaria, in Germany, you know about the discussion about the industrial energy price.
Which is now picking up momentum in Germany. Certain things are in the making. There is always, in this volatile days, there's always this cautionary or the disclaimer that we have to put in. I can assure you, we are extremely active in this and are very, very, I would say, I look at a relaxed CFO who is nodding that we have this well under control.
Okay. Perfect. Well, thanks for the color. That's very helpful. Secondly, on CapEx, where you seem to be running significantly below your target run rate, could you please just update us on what the CapEx number is which we should be expecting for this year? How much of the total EUR 1.1 billion approved budget have you firmly contracted and locked in already?
Yeah, the first question is the easier one. It is something around EUR 600-700 million, if you take the middle of it. I mean, it's always a bit difficult. As you have seen, we have had quite some delays in payouts, not in the projects, just in payouts to the projects. We have Aurubis Richmond coming up with some advanced payments that we will be doing. If you are in the middle of the 600-700, you are, as I would say, at a fair ballpark. Looking to the second part, we have Pirdop as the standstill, which is a recurring investment, rather, you know the figures there.
We have the recycling plant in Richmond, for sure, with That's a major chunk here on investment and also the other strategic. Putting a figure there is difficult, but you always can say we have something like EUR 220 million, EUR 250 million on recurring invest, the rest then is coming from the strategic projects.
If I add over here, I think it's a very good point, and we don't have this, what is contracted, what is firm here at our fingertips, but I think it's a very good question that we are happy to prepare for our Capital Markets Day. Another good reason to join.
Yeah. Exactly.
Okay. Okay, thanks. Looking forward to that. Last quick one, if I may. What are you seeing in the scrap market? Seems like it's actually been improving a little bit as of late. I think you're still covered for the rest of the year from what you say. That means you should be having pretty good visibility on the secondary business. Can we already expect an uptick in your profit contributions from secondary in the remainder of this year when we compare the quarterly run rates?
Here for recycling, for MMR, I would again subsegment this area. Scrap no. 2 , which is one of the input materials, has a very short-term visibility. This is spot market, more or less on a monthly basis. Given China, given metal prices, we are a bit hesitant to predict exactly what's going to happen there. We have seen, and the numbers from April, that RCs, and also RCs went up to EUR 415, the EU number, for scrap No. 2 without logistics. Availability has been okay, given also some drop in the metal prices, which has a direct influence on the availability of scrap, given the business model of our scrap suppliers.
For the other scrap materials, we have a very, let's say, clear and stable outlook for this fiscal year. A long answer to your question. It's given the very, I would say, spot term segment with scrap No. 2, I would not make here a clear statement how this is going to develop in the running 6 months.
Okay. Got you. Thanks so much.
Next up is Maxime Kogge from Oddo. Over to you.
Hello. Yeah, just a tough question on energy, although you already gave a lot of details. You had previously guided for, EUR 400 million to EUR 420 million of energy costs this year. Are you able to update that figure?
I, No, thanks for the question, Maxime. I'm not sure that this number doesn't really ring a bell with me.
For me neither.
If you look at the energy cost which we had shared just with you for the first half year.
138.
It's EUR 138, Given our statement that we see for the running quarter and the coming quarter, similar levels, I would come up more in the range of EUR 280 million-EUR 300 million energy costs as we show them there. I think even perhaps with a tendency, given recent market developments on natural gas and also on coal, which is one of our, let's say, indicate or say, price components in the energy supply, electricity supply in Germany, rather with a downward trend on the pricing side. Therefore, I cannot reconcile the number that you just said.
Yeah. Maybe one clarification of a potential misunderstanding. There might be a look at the gross energy costs, which is the legal P&L, where you might have looked into, or the pie chart that we regularly present, which is the net energy costs.
Energy costs where we deduct all topics that we have mentioned, like the energy price compensation, CO₂ price compensation, like the cap in Bulgaria, the electricity hedges or energy hedges that we are doing, and so forth. Yeah.
Okay. on the, on the basis, which could be around EUR 280-300 million for the full year.
Yeah. To be on the safe side, yeah.
Okay. Second question is on the metal result. This was a constituent of the growth margin that was a bit weak in Q2 in contrast to TCRCs and premium. It's always a bit of a black box, although you provide more disclosure now on this item than in the past. Could you perhaps help us understand the evolution of this constituent over the next quarters?
If you tell me how the copper price will move in the next six months, I'll tell you what our metal result does. No, that is just joking. Keep joking aside here. The point is, as mentioned, the metal result is the only component in the Aurubis group where we are exposed to really price fluctuations in the market. Here we have seen a really, let's say, year-over-year reduction in the industrial metals. We have benefited, and we have used, I can tell you, the good development in gold and silver. platinum is okay. palladium is also a bit weak still. Let's put it this way, Roland and myself, we still hold a bit our fire. We don't need to, let's say, generate metal result.
We don't need to to fix this metal result. We are waiting for a recovery. Pretty much everything depending on how will the industry in China develop in the second half. What I've recently read is that there is, let's say, a slight hope that the Chinese will do better in the second half, but that's what it is at the end, Maxime, no?
Okay. Mm-hmm.
What more to say to that?
Nothing.
To highlight, Maxime, to also highlight one important metal for us, which is now part of our portfolio with the integration of Metallo, which is tin. If you look, I think Rainer mentioned this, we are the largest tin producer in Europe, and prices for tin have really dropped from a very high level, from a very good level in the previous years or previous period. This had quite an influence beside the other industrial methods that Rainer mentioned. Therefore, I think we are very agile and look how markets are developing. To Rainer's point, we are not, let's say, we don't have to take a decision on certain methods at the wrong point in time. Put it like that.
Okay. Just the last one on cash flows. Cash flow was broadly neutral in Q2. That followed a quite weak Q1. Q3 might perhaps be again weak, given the maintenance shutdown at Pirdop. Is it possible to get a view on net debt evolution for Q3 and Q4? Or otherwise said, to have a kind of guidance for cash flow before CapEx for the full year.
Let's talk about the net cash flow, which has been, let's say, a little bit higher than zero, EUR 19 million, if I'm not mistaken, out of my head. This net cash flow will develop to a figure between EUR 450 and EUR 550 million because we're just eating up the inventories that we have built up prior to the standstill. We have now a standstill in Pirdop in front of us, which is 40-plus days, so quite a long standstill in which we will consume all the anodes that have been pre-produced. Let's say with the additional production steps towards the end of the year, we will, let's say, digest all that working capital and bring it out and improve our net cash flow to a figure somewhere between EUR 450-EUR 550.
Given a CapEx of, let's say between EUR 600 million and EUR 700 million, I said EUR 650 million, plus dividends, for sure we will be free cash flow negative in this year. That is something, nothing new to the market, I would say. That is something we announced already in previous calls.
Okay. No, that's clear. Thank you.
The next questioner is Sylvain Brunet from BNP Paribas.
Good afternoon, gentlemen. Thanks for the details so far. Two questions from me. Page five of the report, you were talking about a lower nuance for flat roll products. I was keen to get a little bit more granularity by end market, if you, if you could, of what you're seeing and what you're seeing in the ordering, order book, order intake at the moment. My second question is, perhaps a little bit on the, on the CapEx sequence that we were just discussing, which based on your guidance imply the shipping of CapEx in the second half. Is that even, like, doable at this point to accelerate so much?
I might say, I wonder if the pace of CapEx spend could be perhaps a bit extended if you've been spending on an average of EUR 80 million per quarter now. Or are we missing some billing which are coming to, gonna come in the second half, and we're not recognizing the first half? If you could help us just understand how this large acceleration is even doable.
Yes, Sylvain, I'll take the first question. Roland speaking. Regarding FRP, I think I hinted some of the changes in the segment. FRP is supplying a bit different from each of the plants that we have. A variety of segments. None of them is dominant segment. Clearly what I also mentioned, where we see some slow demand is from the construction sector, which is not a surprise given interest rate and build rate and approval rate for new permits. I think we see this market being down. Regarding what is the perspective there, also here last fall, there are ambitious targets, if I take Germany, regarding construction of new houses. In the moment, we don't see any pickup in the market in this specific segment like construction.
Therefore, we continue to see and do expect some lower demand from certain segments. Again, none of the segments is of, let's say, of major importance for the results of the FRP sites.
Yes.
Rainer will talk about the CapEx.
Yeah, looking at the CapEx, rightfully the question. I mean, you look at our CapEx figures for the six months, you see EUR 180 million of invest in total, you wonder how on earth are they going to spend the figures that I have just mentioned? Please bear in mind, we are well advanced with our projects. The initiation of those projects, you have seen the groundbreakings, you have seen the civil works being done. If you only take Richmond, for instance, now on a daily basis, there is plenty of containers with the prefabricated equipment arriving, which triggers payment points in our contracts, which leads to very high payout.
In addition comes, we'll have the second phase, the contract signed, that also has triggering points for payouts, for advanced payments and so forth. This is all gonna happen. Really, you need to trust here, we will be managing to have that payout, and we will be managing to come close to that figure that I've just mentioned.
I think also what Rainer said before to add here, important is that the projects are showing the right progress according to our plans. If we don't have to pay, we are not forcing our suppliers to take the payments if there is the possibility. Again, priority projects are in full execution according to our plans, and this is the criteria, and payments do follow. The master is the timing, and the payment is the slave.
Yeah. And capability of doing so, please also bear in mind that this payouts happen on completely different sites. For instance, the shutdown in Pirdop, which is starting now, tackles a complete different team than, for instance, the Richmond or the BoB or all the strategic projects that we have just mentioned, which means from a resource perspective, yes, we can handle those projects.
Okay. Thank you. Thanks so much.
Yeah.
Now we're coming to the next questioner. It is Christian Obst from the Baader Bank.
Yes, good afternoon, and thank you very much for your patience, to be honest. Two smaller questions. One is on net interest. Do you expect to be net interest positive like you have been in the first half, also for the entire year? Next one is on the tax rate, quite low, around the 21%. Do you also expect that to remain at that level in the course of the year and going forward? Then I have a follow-up.
Hello. Rainer here. I understood the second question, the question on the tax rate. That of course, as we have a very decentralized business model, heavily depends on the earnings contributors within the group. So far, yes, we continue to benefit, let's say, more outside Germany, which means the profitability of our plants outside Germany is higher than the ones inside Germany, which leads to this very low and attractive average tax rate. That for sure is also going to continue. At least we'll try our best to keep it that way. You need to repeat, sorry, the first question again, because we didn't get it acoustically.
First question was about the net interest payment. It was positive. What was, approximately EUR 5 million, when I'm right, is my calculation here. Do you expect something like that also going forward or with the high cash out going forward, that you are going into the negative territory there end of the year or going into?
With this investment and with a negative, total negative free cash flow, we will let's say have of course negative or a positive net financial ratio that clearly, which means we go into indebtedness, which also means at prevailing, currently prevailing interest rates, we will incur higher interest costs. Please also bear in mind that some of the receivables that we are having to or from our customers are interest bearing. That also created part of the positive interest, which also continues to be the case. All in all, the interest will be. We will pay more interest out, of course, to the banks, to the financial institutions for our indebtedness in the future.
Okay. Thank you. The last one is a little bit strategic planning there. Tank house Pirdop, plus 50% capacity. You mentioned always in your release that there are strategic options also for the entire group. Can you give us a short overview where you see these strategic options when you have enlarged the tank house by 50%?
That's to give the European perspective. There is a demand for copper, refined copper in Europe of about 3.6 million tons, of which about locally produced, something around 3.1 million tons. Europe is already having a deficit of cathodes of materials. There is room, and also just to point to the situation with Russia, where historically significant volumes of Russian cathodes have been imported into Europe, which less and less, especially also we, customers are not willing to take going forward. We see for cathodes alone, a demand.
Secondly, given the plans and the talks with our rod customers, we see an increasing demand for rod in Europe, which we with the available capacity that we have still in our four rod plants in our European footprint here, which we are going to also be able to meet and will source, therefore, also additional units. Therefore, again, bottom line, Europe is a significant net importer of cathodes, so therefore there is room for locally sourced materials. Yeah.
Are you then planning to use pre-materials from the U.S. for this tank house there?
No, no. What we are doing today, if you look at the total production capacity of Pirdop, they have the capacity in anode production in the smelter to fully feed the enlarged tank house.
Okay.
Today we are using anodes from Pirdop to ship into the system, and we have anode surplus capacity in our system. The bottleneck today is our tank house capacity, so we are also in line with strengthening and securing the core. We are also here debottlenecking, actually, by adding cathode capacity.
That's what I missed. That's all right. Thank you very much.
Welcome.
At the moment, there are no further questions. For any additional questions, please press nine and star. Nine and star if you have any additional questions. There are no further questions. Okay. If there are no further questions, we will end here the call now. If you have any further questions, please do not hesitate to contact myself or Janet van Hout. We would like to thank you for your attention and would like to wish you a very nice day. Thank you. Goodbye.
Goodbye.
Bye.