Aurubis AG
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Dear ladies and gentlemen, welcome to the Conference Call of Aurubis AG on the Publication of the Quarterly Report First 3 Months 2018/'19. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Angela Seidler who will start the meeting today. Please go ahead, Madam.
Good afternoon, ladies and gentlemen. And warm welcome to our conference call for the results of the Q1 '18-'19. My name is Angela Seidler. We released today that we have an EBT of EUR 40 million, that is in-line with our consensus estimation and we confirmed a forecast for the fiscal -- we confirmed our forecast for the fiscal year '18-'19. So from my point of perspective, not that good start in the year but as the forecast is concerned, we are very much looking forward for a successful year '18 -'19.
Thank you, Mrs. Seidler, and warm welcome from my side as well. As you've heard, obviously Mrs. Seidler is here today and sitting next to Mrs. Seidler -- to Mr. Rainer Verhoeven my colleague and diverse colleagues from accounting, controlling and the further investor relations who have prepared me very well. So as Mrs. Seidler said, we did now finish the first quarter, that publishes this morning. You might remember that we -- every year we're saying that due to seasonal factors, the first quarter normally is a weaker quarter for us due to general economic situations of our customers at -- towards the end of the calendar year. But this year, we had some very unexpected events. We had unscheduled shutdowns in Hamburg, Pirdop and Lünen sites at the same time. And these unexpected shutdowns did create a negative effect for our results of roughly EUR 25 million. This is a very untypical situation. Although we said this already in December last year, it's very untypical. Statistically this never happens but as usual, things are happening occasionally, we had a very good year in terms of reliability during the full last business year, in general, this was very stable. But bad luck at beginning of this quarter. And bad luck on the one side opens opportunities for the rest of the year. And that's what Angela Seidler just said. For the remainder of the year, we're very optimistic that we still will be achieving our total forecasted results so that we're going in the right direction for the rest of the year. This much lower EBITDA that we've seen of EUR 40 million, as a result, would have been without this unscheduled effect roughly EUR 65 million. And with this in a range of a rather good or stable first quarter which is very good. So nevertheless, if we compare this with the last year this is certainly weaker. We had in the last year some very different effects when it comes to mainly on the scrap side, this was a big part. But the general conditions remained very good for December. The facilities were running very good and everything was fine there. Previous year, as I just mentioned, and I'll come back to this on 2 or 3 slides later on when we talk about the results of the RCs for the last year, this was the main and biggest effect that we have. We see for the first quarter as well the net cash flow which is worth EUR 308 million quite negative compared to last year, I would say. But the first quarter, as we all know, it's always for us to build up for the next year of the inventory. And this year especially, we had incoming of higher levels of precious metal bearing material and intermediate products that is driving our cash flow up and our inventory up at the moment. During the full year, this will be that work through will create a better result and we'll create as well that normal level of cash flow, which we expect for the full year in the range of roughly EUR 230 million to EUR 280 million for the full year. Of course, the first quarter result is not very good. This has an effect on ROCE as well. So 11.1% is below our internal target of 15%, and of course, as well, below the 15.4%, which we have had in the last year. This is linked to the result but on the other side linked as well to the higher capital employed that we have had, as I just mentioned, due to the inventory impact of the precious metal bearing material. Internally, we're continuing to work on a quite handful of very potentially good growth opportunities. But we will talk about this later on, on due time when it really comes to more actuality. Our activities will remain being aligned with our strategy which is focusing on growth, efficiency and responsibility. In this respect, I want to mention, just in this moment already that you might have read on -- that on February 6, European Commission did prohibit the sale of the FRP or Flat Rolled Products segment to the Wieland-Werke. And that we are within our strategy now reviewing the different options that will be opening for us. So now that the contract -- we're working through the remainder of the contract, and we will be able in the very near future to go more intensively through what we do. As said before and this has not changed, our primary goal is still to find a good home, a good prospect for this segment where the business can develop very well within the long-term. So it's a long-term strategy. That's not only good for the business but it's also good for all our employees, and that's what we're trying to work out in the very near future. One of my preferred pages you see on the next page, which is our efficiency improvement program. Here, we are very much on track on the project success to achieve at least a EUR 60 million for this full year. That's in the plan and that's the number you know. We're continuously focusing on the standardization, automation and production areas and as well in the administration parts. So everything that is working through commercial and other where we think that the part of digitization is an important part as well. Currently, we're happy to say that we are exceeding the targets that we have had in times so far but this doesn't mean that we will exceed the total target. It does mean only that these are not coming day by day or linear so some things are coming a bit faster. And at the moment, we are quite successful in some very specific areas, and therefore we exceeding the -- so we're in advance conserving our time frame that we have had. The total number that I would like address to repeat this will remain within EUR 200 little bit plus millions for the full year 2019/2020. Just to give you a few examples again because people always ask me and I mention some different ones every time. This year, just to give you a feeling for what's in there, so one example is the improvement of our anode quality in Hamburg that's linked to the more efficient handling that we have and this leads to the reduction of internal scraps with the anodes. This has a very good impact because it's on the one side reducing the double handing through related cost to this and increasing on the other side as well the capacity of bottleneck assets that we have. And so has a very positive impact on our results continuously and very good and fast achieve results in this respect. We have some market activities in there as well where we develop new high-margin customers. They are not only in Europe but they can be also in Asian countries. We take this only into consideration if we consider this as long-term and sustainable activities. Some in-sourcing activities mainly in Lünen where we did some significant improvement coming as a consequence of this. And a very simple thing which sounds sometimes -- with this typical question is there's a lot of these activities, why didn't you do this earlier? It's always the big question. But now we're doing this and that's something as positive. So we did adapt our dryer pumps in the asset plans. And with this, we are reducing the sprinkling water quantity that goes on these pumps and with this we are reducing the energy that's -- there consumed there. And with less water, we have less energy, and we have less cost, of course, at the same time. And it's surprising how much money is coming together with this part of activities. And so we are very fast in the 6 midsize, 6 digit range with these kinds of activities. So we are proud that this is going faster. I don't say at the moment -- we don't say that we're going over the EUR 200 million so the total number will remain the same. And of course, and I put this disclaimer always on potential decline of market conditions and that's what we saw in the first quarter. Sometimes output -- throughput compared to the reference year of '14/'15 could counteract this, so things like inflation or currency changes or other cost increases might absorb parts of these improvements that we see there. So in end essence, it goes in a good direction. As I mentioned before, some words to the market, and that specifically with -- I start with the scrap RCs because that's the thing that is peaking very much. And that was the big difference that we've seen compared to the first quarter of last year. And you see this on this slide with the brown curve where the volatility is extremely high. The availability is very good in all regions. So refining charges are in the last. And we see this at the end for this year rather flat. But quite a bit lower compared to the first quarter business -- of the business year of last year. So I don't give the precise number, but I give the indication of CRU, which is announced at an average of EUR 328 -- EUR 326 per ton for the period of October to December 2018 versus at EUR 562 per ton RC for October to December 2017. So this is more than EUR 200 less. And of course, this is for us not positive and has a negative effect in expense as a part why the results are going down as well as compared to the first quarter of last year. Global demand, in general, is still very strong. It has picked up a little bit. General market condition might change just a little bit but we don't see this at the moment. What might, nevertheless, have an impact is the higher increased demand of copper scrap from China. They had some legal changes there, which are not totally here. They will come only very likely midst of this year when they -- because they did announce that they might include scrap number 6 in the restricted import list. And it's not totally clear in what amount this will have an impact. Anyway, there will be more demand to compensate for this copper and there might be more availability in the remaining countries as well so -- especially in Europe that then would have a very positive effect for us. But it's not totally clear yet. The Chinese are acting there very short-term. Coming to the TC/RCs, remember 2018 benchmark was $82.25 per ton and $8.225 per pound of copper. In November 2018, the new accepted benchmark was agreed between Jiangxi Copper and Antofagasta with $80.08 per ton and $8.08 per pound of copper, which then was lower, which was, as I mentioned to you as well, a bit disappointing for us because with the availability that was there and the forecast, it was bit surprisingly -- we hoped, at least, for a rollover at that time but that's what's coming out. Officially, the buying flow for the China Smelter Purchase Team, they announced a higher number for the first quarter of the calendar year for their purchases, so above the benchmark. That's what we see only partially [ I have to admit ] because the spot prices are in the right where the benchmark is at the moment. For the next year, we have some pluses and minuses concerning -- so for 2019 -- for concerning the availability, we think that roughly 1.5 million tons of copper in concentrate will come on top of the market and some other quantities will be going out but that's the new availability. And there we talk about Cobre Panama new mine, [ Duobauchun ] the Phase 2 is going to start-up behind [ D'or ], Pumpkin Hollow on the 2 block caves at Chuquicamata and Grasberg. So new quantities while on others, there will be a reduction of availability as well. Talking about sulfuric acid. The base, I think, for the spike at the moment is not only the higher demand but the continued disruption that was coming out of the maintenance activities or shutdown activities of some significant smelters, Tuticorin on the one side and on the other side, we see also the Chilean maintenance shutdowns. And all of this has tightened the market and pushed up the prices significantly for this year. On the other side, we saw as well increased acid consumption in China, Brazil and Russia. So this is -- demand is up, supply is going down, which leads at the end to higher prices. Nevertheless, we see it more or less stable in a very high level. As in some areas, due to weather conditions and other conditions, there is a slight delay or slowing down in the market. Expectation is down as well concerning the availability of material. So we know that we will have a shutdown -- scheduled shutdown in Pirdop smelter and also Atlantic Copper Huelva smelter will have some maintenance outages so the availability will be going down which then will help to -- even in the declining market -- to stabilizing or keep the prices on a high level. The ACP, the Aurubis copper premium was agreed at USD 96 per ton for 2019 after USD 86 per ton for 2018. This is accepted in the market as going quite well. The spot premium's currently in the range of USD 75 to USD 85 in Western Europe and USD 60 to USD 65 in Shanghai. And then I'll come back to what I said before on the scrap side, due to the fact that scrap imports are going down Chinese are using more cathodes as a substitute. And this is driving -- or keeping prices up and driving it up. The usual situation for us concerning US dollar, we have the roughly $600 million in this year. So long position we are in our strategy to hedge roughly 2/3 before the year starts. So at the -- for the [ current ] fiscal year, we have secured 56% at $1.22. And for the next fiscal year, around 50% at $1.20 -- sorry, EUR 1.20 per dollar. So -- sorry, I get confused. So EUR 1.24 per dollar.Okay, so I see the financial part. I hand over to the specialist, Rainer Verhoeven to bring this back in-line to continue with explanation what's happening in the year.
Thank you, Jürgen, thank you very much. So good afternoon also from my side. My name is Rainer Verhoeven. So I will guide you through a brief look over the financials, which is, you can see on the following page. Compared to the previous year Q1, for sure, we -- our EBT declined considerably in the first quarter of this fiscal year. This is particularly due to the fact that we had the series of unplanned and unscheduled shutdowns in our -- in 3 of our 4 primary smelters. And while it was also due to the lower RCs on the scrap sides, and of course, a bit also to the TC/RCs, which have gone down, let's say, year-on-year here as well. If we look to the revenues, you see that we are down by roughly 9%. This, of course, is the function of the lower copper price because the copper price has come down year-on-year by roughly 6% from EUR 4,800 to EUR 4,500 in the comparable quarters. But the revenue has also decreased due to the fact that we had production related decreases in our precious metal sales. Of course, if you have unplanned shutdowns of your primary smelters, you end up piling up in principle material somewhere in your supply chain. That is what happened in principle over the quarter. And that -- you see that also as an outflow in our negative cash position in the negative development of our net cash flow over the first quarter. As you all know, the revenues are not really key performance indicator for our business. It's not really relevant for us because the metal prices for Aurubis are only a transitory item. So we hedge them through, so they do -- say little about our operational performance and that is not the key for us. On the cost side, so we had a couple of increases on that one, especially if you look to the personnel expenses, they have increased, they have gone up due to the salary increase -- the general annual salary increase that we do have. And however, we do have now a couple of more employees in the, I'd say, future areas where we want to develop, which is, of course, our R&D department, it's the IT. It's more going into the technology. And for sure, it's our big flagship program which is the FCM. However, we also had higher energy costs. That hit us quite -- or struck us quite hard quarter-on-quarter by roughly EUR 5 million here. This is mainly due to the recent rallying of the CO2 certificate on the one side but also the function of the coal price on the other side. We do have our long-term power plan contract which, of course, ensures energy supply. Nonetheless, it's of course, at very good prices. And the pricing is linked to CO2 and for sure to coal prices, which is deliberately [ covered ] from the normal EEG's price. From the depreciation and amortization, we are in principle on the level of last year, slightly above it. So all in all, an EBT of EUR 40 million is, of course, not something where we are happy with for sure. This is mainly due to the already explained unplanned outages in 3 of our 4 big plants. And so that was really Murphy's Law here at that point. If the stability is back and which is to be expected, we have seen that now since in principle Lünen has come back in middle of December. We see quite a stable operation in pretty much all our plants. We expect that we can go to the scheduled shutdowns which is Lünen in March, Pirdop in May and then Hamburg coming in October. Going to the next page, looking at the KPIs of our company. You see that all the main key figures remain very robust. We are in a good position in principle to further execute on our internal and external growth strategy. Though we might say, we haven't seen too much of it, you can be sure that there is lots of work internally done here. And you see that also on the employee side as we are building upon, let's say, those future fears, we were -- we are preparing in principle for exactly that. The ROCE, of course, as Jürgen already explained is lower due to an EBT which has come down drastically and the higher capital employed which has gone up year-on-year by EUR 240 million. For sure, it's impossible to keep the 15% unfortunately for the time being. We have still a very strong equity ratio which is close to 57%, tendency is still growing. Our net debt EBITDA ratio is at 0.4. So here we are still in a very good situation with regard to our interest coverage. And then looking to the CapEx, we had some smaller investments. We do have some delays, which you are already aware of. And Jürgen will explain it a little bit further also in our FCM. This will, let's say, come more and more this year. However, we are a bit cautious here to place the orders. So therefore, we are bit behind with regards to our Capex on that end. The rest is in principle refurbishment that we're doing here and there in our plants and our training centers in Lünen and here in Hamburg as well. Well, net cash flow for this year is always minus EUR 308 million is far from satisfying, no doubt about that. So we are well behind also last year's figures. And for the full fiscal, as already said by Jürgen Schachler, we expect something in the area of EUR 230 million to EUR 280 million. This is still a cautious and first assumption. And as you know, we have a couple of standstills -- scheduled standstills this year, which will throughout the year lead to a well elevated amount of inventories which needs to be financed. So don't expect positive cash flows pretty much throughout the year. We will manage that only towards the end of the year when we go towards the stoppage here in Hamburg, and the -- let's say, amount of Pirdop, and it will go down. So let's have a small look at the segments, starting with MRP. MRP, if you want to say so, is the prevailing segment, the biggest -- the big segment here with our big smelter locations in Hamburg, Pirdop, Olen and Lünen and the rod and shapes sites. So the operating EBT here was EUR 58 million also well below the previous year which has to do with the standstills again. The concentrate through-put is about 10% lower with only 592,000 tons year-on-year also due to the shutdowns. And I already mentioned the TC/RCs, the benchmark TC/RC in the first quarter this year is at, let's say, $82 still because it's the old one. And the year before is what -- it was $92, so that is a $10 difference as well. That explains a bit the -- further effects on the EBT. So it's not only the shutdowns, the unscheduled shutdowns, it's more than that. Of course, also on the scrap side, also mentioned by Jürgen already, we are down by roughly 20%. If you look to CRU, you see that in December '18, we were at EUR 325 as compared to something in the vicinity of EUR 600 last year. So yes, the scrap RCs have come down considerably. But if you compare that on the long-term average, we are still, and that has been shown in a couple of slides before, on a very good and stable level for us. We had good metal gains in the first quarter, however, the metal prices are a bit disappointing. The copper price was down like -- in euros, like, 6% year-on-year, silver price even 10% and we don't see too much recovery on that. And for the time being, I think CRU is currently at EUR 6.3 or EUR 6,300 for the full fiscal year. With regards to the market situation, I will come to the outlook a bit later. Sulfuric acid, we are still having a very solid high demand. We have limited supply in the world market. It's due to several smelter disruptions which we see worldwide. We see still that the revenues on sulfuric acids are continuing to go up year-on-year, it's 80% up. So despite we do have lower volumes due to this -- due to the shutdowns that we hedge, unfortunately. So prices up, volumes down. On the cathode output, we were also below previous year, again the shutdowns for sure. We increased the Aurubis copper premium, however for the first quarter, it's not yet fully -- it's not coming into effect. So the copper premium will go up to $96 per ton only from January onwards. That reflects the good demand in Europe and we do see still a very stability -- very much stability. I'll come to that when I'm talking about the outlook, situation is not that bad here. Spot premiums in Western Europe in the vicinity of $85 to $95. If you go to Western Europe and the Shanghai premiums are in the area of $70 to $75 per ton. What is still at the very good prior year level with still a robust demand, shapes quite stable also. From January onwards, just as a reminder, we will have the additional volumes from Deutsche Giessdraht coming up there. We took over the Codelco shares in Deutsche Giessdraht, so we will have another total volume of 100,000 tons to 120,000 tons annually on top. Let's see whether we will be successful to place that at reasonable prices into the market. We have very positive contributions from our efficiency improvement program. This is really going quite well. Jürgen already explained some examples there. So we are really, really satisfied with what's going on there. And we will continue seeing -- reaping the fruits out of this very, very good program. On the CapEx side, as already mentioned, we were a bit -- we were at the area of EUR 34 million. I talked about the innovation and training center here. And we did some, let's say, additional maintenance here and there, which also led to additional invest, and we are now preparing for the big shutdowns in -- mainly in Lunen, Pirdop, Hamburg. So going to the next page. Looking to FRP, not as successful because still in the negatives here in the first quarter, which is also a seasonal effect. Still year-on-year, quite an improvement coming from minus EUR 7 million going to minus EUR 2 million. By far, not what we wanted to be, for sure. We see effects from the Emerald program. We do see effects from the market as well. And if you look to the ROCE which is going to 6.3% now that has to do with the, let's say, rolling quarters that we take into consideration. One bad quarter rolls out, one better quarter rolls in. So therefore, you see a better ROCE on that end. But it's, by far, not satisfying. So there is still quite something to do. On the products market, I would say -- I will come to the outlook for the whole group but coming to FRP -- or looking to FRP, we do see quite some difficulties in the European market. We had first a temporary effect on the WLTP with a connector strip in the automotive industry. And this hopefully, can be compensated by the one or the other sale in other segments. We have to see how the car makers -- how the automotive industry will develop further. On the individual sales segments, in the U.S. market, we also do see some weaknesses or some, let's say, they are behind the expectations here and there. But overall, still satisfying order intakes on that end. Nonetheless, we are 2,000 tons roughly year-on-year below the last year's quarter. CapEx is just replacement investments on a very small scale, we are investing here only EUR 3 million. So with that said, I'd like to handover back again to Jürgen on the strategy of FCM.
Thank you, Rainer. So if we have a look at our strategy, I want to concentrate on only one thing this time, part of the growth strategy to give you some update on where we stand with our FCM project. We said that we will have by the end of the year in January, ending our basic engineering. We are through this. And we are entering now in the phase of what we call value engineering where we with the potential buyers have discussions about what they did offer and going into more details and talking about -- and discussing with them what the next steps could be. First result is something that we did expect already during the less -- last 6 months. And this -- at the end with the offer was somewhat confirmed. We saw that the order books and the general economic situation of the equipment manufacturers was very positive and very prosperous. And with these -- even somewhat over-heating economy and their order intake, we are currently expecting, not only longer delivery times than expected in some cases but also higher prices than we have I'd say assumed in our previous feasibility study. So what we do at the moment is going with -- through every single preparation and discussing with the potential suppliers the parameters with a goal to stay within the original frame of the CapEx that we have seen. So this would mean that the awarding of the contracts after this value engineering phase will be slightly delayed. But we expect that we stick to the original schedule when it comes toward the realization of the contributions and earnings which we did forecast for the business year '22, '23 for this year. So we stick to this final date. But in between, we see that we will slow down and later on then accelerate it again to meet this goal. Other conditions on FCM so far are constant and nothing to report. With this, on the forecasts, I hand over to Mr. Verhoeven, to Rainer.
So ladies and gentlemen, what does it now mean for the fiscal year '18/'19? Where will all it go in this fiscal year? So let's summarize it in a bit. On the copper price, we see the Reuters poll at $6,307 per ton. Today, we are at $6,100. So a bit increase to be expected but not as much as previously seen. So we're not going to the levels of $6,800 -- $6,700, $6,800, back again. At least, that is what Reuters is seeing for the time being. With regards to operations, after the unforeseen and unfortunate outages that we had in the first quarter, operational stability is key for us. And the on-time delivery of our plans standstills is key and is the main driver of our business. After all, we are still a volume-driven company. So overall, we do still expect that the volumes will be behind the last fiscal year, nonetheless, also due to the fact that we had these outages in the first quarter. From a market perspective, I have to say that nearly all the markets in which we are active are still looking quite positive and all earnings drivers going to the right direction. So if we look to the concentrates, the TC/RC benchmark has come down to $80.8, yes true. And on the other side, we do still see a very good concentrate availability and of course the smelter outages of our competitors in this case in Chile, on the Philippines, in India, for instance, do help with regards to concentrate availability. On the scrap sides, the scrap RCs has come down compared to the record of the last year's Q1. But they are still double the value compared to the long-term average. All facilities are fully supplied throughout Q2 at very good conditions. Further expectations not yet to be made because it's spot business to scrap. On the assets, we do see a sky high, very strong asset market. If this positive trend continues, this market segment can be even better than the records that we already had in the last year. So that is very, very positive. Product side's stable and strong for rods and shapes. Additional volumes kicking in from January as already explained from the [ DD. ] On the federal business, satisfactory with an eye on the auto industry. On the US dollar, of course, we do have a negative effect due to the hedging rates. We're hedged for this fiscal year on $1.22. While the last year, we had $1.14 locked in. So that gives an effect year-on-year by roughly $13 million negative. Our efficiency improvement will help us. And we're well ahead of schedule. We are close to sure to achieve the EUR 60 million for this fiscal year. And we are also pretty confident that we will deliver the project success overall the EUR 200 million then during the course of the next year. So on the forecast overall, we still confirm the moderately lower operational EBT for '18/'19 with a slightly lower ROCE compared to the years '17/'18. So with that, we have arrived at the end of the presentation. And we are happy to receive your questions.
[Operator Instructions] Mr. Rochus Brauneiser, Kepler Cheuvreux.
Few questions from my side. One is on the further decision-making process on FRP. I guess you were mentioning that all available options are being studied now. Can you give us a bit of a sense about time frame under which this should occur? You're going to have an incoming CO by the mid of the year? Shall we expect this to happen then afterwards? And can you talk a bit in general about the direction of these strategic options? That's the first question. The second one is on the outlook for sulfuric acid markets. I think your tone was pretty constructive, but you were mentioning kind of discrepancies in the market. So can you speak about the nature of this -- the divergence of prices -- if I'm correct that obviously, the Asian market seem to be weaker than the ones in Latin America. And thirdly, looking at your downstream business, I think in post rod and the strip parts, we've been seeing quite a significant momentum loss in volumes whether it's previous quarters. Is that in power segments related to auto? Or are there any other major areas where you see weaker demand at the moment?
Let's start with FRP. Yes, the situation is that with the [indiscernible] with the, let's say non-approval of European Commission, we will -- we are now in a position to, let's say, finalize our contractual relationship with Wieland, only thereafter will we be able to really have a look into the different options. And we do have those options, I repeatedly said that. It will take a couple of months. Let's be realistic, we will still have to figure out what are those options, how do they look like, how viable are they. And what is the future prospects we are looking at? So if your question with regards to timing can be answered that way, it will take a couple of months. That is answer that we can give. Then was the question, can you tell us a little bit the direction in which it goes? We would be happy to do so but it wouldn't make sense. It would not -- at this point in time, it's too preliminary to talk about this -- on that end. Then was the question and I take that as well with regards to the product sites on the Rod & Shapes. There you said that the Q1 had been a bit weaker than the quarters before. That is in principle seasonality. So what we were talking about the auto industry, the auto industry is one small bit of the Flat Rolled Product business. So we are talking about engine cooling. We are talking about the connector strip business which hit us here in [ Staubli ] mainly in our Flat Rolled part. But that is pretty small tonnage. If you compare that to the overall tonnage that we have in the Rod & Shapes business. So in this, so to say, sister products business that we are running they are -- they keep being quite strong and we keep being bullish there. As well if you look to the fact that we will get the additional 100,000 tons from DG from January onwards now in -- and our sales guys have been quite bold on that they will manage to bring this quantities into the market without further effects on the prices, which is a very, very good signal that the market continues to be very robust on that end.
Yes, and when it comes to sulfuric acid, some thoughts from my side. So we are fully sold out for the next quarter. We are optimistic that this will continue. So that's the information we get from our customers because they start to requesting even more quantities. Nevertheless, we know that this might be subject to change given the U.S., Chinese relationship. But in essence, I think as this goes more -- mostly in the mining and the food industry, so I'm optimistic that the demand will remain rather high.
Okay. Maybe let me come back to the question I had on Rod & Shapes. I think I'm aware of the seasonality effect. When I look at the Rod business in Q4 and Q1 year-over-year it was more or less around a flat number, whereas in the reported Q2 and Q3 was still up 9% to 10% year-on-year which in my understanding is not so much of a seasonal thing. But at least on that kind of time frame, cooling in the same on the FRP, that you are coming from 4% to 7% year-over-year growth in Q1 and Q2 down to minus 3%, 4% in Q4 and Q1. Is that now the kind of slowing of the economy? Is this the order side? Or shall we think about any other trend in the market?
Yes once again, not to go into too much detail. And if we look to the Rod business in last year we had some 760,000 tons, I would -- I'm guessing now. I don't have the figures right in front of me. But 780,000 tons. So you can be pretty sure that the numbers this year will be considerably above this figure. So we do not see at all any down-swing on the Rods business whatsoever. On the Shapes, we just initiated our fourth shift here in Hamburg in order to produce more shapes even to fulfill market demand. So also there, I don't want to bother you with any figures. I can just say that on both products we are very, very good. And if you compare then year-on-year on the Flat Rolled side, we talk about 55,000 tons rather 53,000 tons. So all in all, we lost 2000 tons, but 2000 tons compared to our overall tons is neglectable. And the only thing that we have said is that yes, [ Staubli ] connector strip business. It is, of course, a high-margin business to us. And we see that this -- effect that we saw, it would be temporary only coming from the WLTP that this is prolonged now. But doesn't have a general effect that will, let's say, completely have a detrimental effect on our result, not at all.
The next question is from Menno Sanderse of Morgan Stanley.
Just 2 very short ones. You mentioned that in your opinion the quarter would have delivered about EUR 65 million of EBITDA ex the unplanned maintenance. Can you quickly tell us how you get to this number? Do you just assume volumes are the same as last year and everything else unchanged or you put some other assumptions behind it? And following up from that, how comfortable are you that before these big closures we're not going to face any more unexpected outages. So any indication you can give us that the operations are humming quite nicely would be good. And then secondly, and a bit surprising to me as you said, Future Complex Metallurgy clearly you're facing a difficult tendering environment because people are busy, order books are full, that leads to higher prices and later deliveries. But you still going to end this thing on time. So are you basically absorbing the contingency that you built into your CapEx guidance and into your timeline? Or are you doing something else to still deliver on time despite these clear delays or you're just at the start?
So Mr. Sanderse, let me start on the first question. EUR 65 million -- how do we come to the EUR 65 million. It's very simple, it's EUR 40 million plus EUR 25 million. So the EUR 25 million have been calculated bottom-up on the basis of our plant throughput that we normally would have with our contribution margins. So I'm looking now to the controller. We have done that in complete detail if you want to say so. So we are absolutely sure -- and let's go into the vicinity of 95 upwards percent that the EUR 25 million is calculated thoroughly. That is the effect -- that is the direct and indirect effect of the sense of in the different measures of this unfortunate event that has happened. So -- and that is very simple you can just add this to normal EBT because we would have more through-put in our primary smelters. And we wouldn't have lost the KRS throughput in Lünen with all the effects. We are not talking about the net working capital effect here yet. If you can also see as a huge -- German we would say [ brench poor ] in our balance sheet actually. So how comfortable are we? As already said, the most uncomfortable we would be with Lünen, as Lünen is having the standstill in the 1st of March. We are pretty comfortable that we can reach all scheduled shutdowns without further unplanned interruptions there. So May in Pirdop, October in Hamburg. We are pretty sure that we will go there without any further interruptions.
And from my side just some information to FCM. So it's not coming as a surprise that the economy was red hot for us. So we did fill this somehow in as buffers or contingencies. We nevertheless did in some areas not totally expect the intensity, we talked about civil works, I think even privately we see at the moment at least in Germany, if you want to build something it's -- I don't want to use the word nightmare but luckily as an industrial you'll be a little bit ahead compared to some private who wants to build something up. But it's a very -- more difficult situation, it will consume the buffers and the contingency that we have concerning the time. It was built-in and therefore at the end we might come to the same result situation as we did expect. There are some movement within the timing but at the end that something we will still sticking on.
The next question is from Olivia Du Bank of America Merrill Lynch.
So most of my questions have been answered. But just one more. Could you please add a bit more color on your capital allocation priority, please? Because I noticed that your balance sheet is turning cash positive. And I just want to know your thoughts on this, please.
So I don't know whether I got the question completely right but I'm trying to answer it. So capital allocation at the moment I would say quite simple. You saw our balance sheet structure and as already explained during my part of the explanation to the quarterly results, we are well set for our -- for executing on our strategy on the external and internal growth parts. Yes, we do see some headwinds as already explained by Jürgen Schachler with regards to FCM. It's -- we're not in the state -- and it's too early to mention or to talk about figures here. We will continue working on this project diligently. And this will, of course, meet some of the capital that we need to allocate there. And there is still external growth opportunities in the market. We have -- at several occasions, we have said that we look to the EBITDA multiples. We're not buying at any prices here. We need to have reasonability in there. And we do see that with the economy slowing down this reasonability comes back. And we are, let's say, still in the race on the one or the other thing which then also would need some capital to be allocated. And yes, this -- the normal business doesn't stop. We do have our standstills, the scheduled shutdowns throughout the year. And you will see a considerable, and I'm talking about really considerable increases in our inventory, which had to be financed. And we do that in order to not jeopardize our results at the end of the year. And that, we can only do so because we do have this financial strength. That is very fortunate in this situation. Other companies without such financial background would just have sacrificed result which we don't need to do. We have to make sure that our tank houses are always full so we will built up piles of anodes before the major shutdowns in Hamburg and in Pirdop.
Perhaps let me add one sentence to this. Of course, we stick with our strategy. So for me, the allocation would be, first, we will pay our dividends. And secondly, within our strategic fit, we are ordering with the profitability of the different projects that we have in line.
So -- and sorry just to clarify, will you consider increasing dividend towards your improved result? And then on the external growth opportunity, is it more like considering other smelters or other maybe small mid-scale mines that could be better integrated into your business model? Or things like that?
Yes, and first of all on the dividends, we have increased the dividend and you know our proposal there to the Annual General Meeting. I think that is the reasonability question. With that, we are at 26%, if I'm not mistaken, of the group result which means we're sticking to what we have said to the Capital Market also. We -- in case, we have good results, which we had last year, it was the third best result of Aurubis history. We want you or the shareholders to participate in it. With regards to the growth opportunities, be sure that whenever there is something which fits to the strategy of -- to our strategy, to the multi-metal strategy which is well laid out to you and which will not change also here over the near future, we will continue to deliver exactly on that strategy. So everything, which fits into that multi-metal strategy we will have a look at -- we will have a look at external targets here for sure. And as soon as we have something to announce, you will be one of the first to do so.
There are no currently no further questions. [Operator Instructions] There is another question from [ Jatin Durga ], Exane BNP Paribas.
Just a quick one on your moderately lower year-on-year guidance. What sort of utilization have you assumed on your scrap supply? Because you mentioned that lower copper prices could result in some constraints on scrap supply availability depending on how China behaves in categories 6 and 7. So just trying to understand what's your base case assumption in your current guidance?
So currently, we don't expect any changes. At least, we haven't budgeted it. That would be -- let's say, a windfall, if something changing, it's coming up. But at the end, we did not change from our expectation that we have had 3, 4 months ago.
If you allow -- with the flexibility of our flow sheet of the different plans, we do have also the possibility to be optional. So if we don't have the one scrap available, we'll take others. Like we substitute scrap with blister, something like that. We do take more [ of these scrap ]. And so the flexibility with our flow sheet is much bigger than in other comparable plants.
And we have a follow-up question from Rochus Brauneiser, Kepler Cheuvreux.
One question is on your market conditions in the complex scrap material area. I guess, in the quarter report you where were saying that, that you're facing or you're exposed to intense competition there. Maybe can you put that in the context because my basic understanding was that the more complex materials you looked at, this is the area where you usually have less competition because it's more complicated and therefore it needs more technical expertise to process it. So what is the background? And what are the kind of competitors which are causing you apparently some headache here?
Thanks for the question Mr. Brauneiser. We are talking about strength, right? Complex strength?
Complex strength, yes.
Yes, so this, of course, we see this that the demand when we talk about printed circuit boards or others, we see that next to the European market is only U.S. market. So -- and we see that there's more Asian concentrating on this as well. Specifically the Japanese but also Europeans are coming up there. So that's what we're seeing. But it's becoming more difficult in Europe. So with the technologies that we are applying there, I think we will see an advantage as well but we know that specifically, the Japanese did install pre-processing facilities in Europe. And with this, of course, the demand for it is increasing and such is the competition for it.
[Operator Instructions] Haven't received any further questions. I hand back to you gentlemen.
Okay, thank you very much for your attendance and your questions. Next conference call we going to have on May 15 and we're going to report about our Q2 results. We are very much looking forward to that. So I wish you all a nice afternoon and all the best, thank you very much.
Thank you very much and bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.