Aurubis AG
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Dear, ladies and gentlemen, welcome to the conference call of Aurubis AG. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Angela Seidler, who will lead you through this conference. Please go ahead, madam.
Good afternoon, ladies and gentlemen. I warmly welcome you to the conference call and the webcast on the occasion of the presentation of our Q1 2019/'20 figures. Here in Hamburg, I'm sitting together with my colleagues from Investor Relations, Accounting and Controlling, who are also taking part of this conference call. All documents are already available since 7 a.m. in the morning on our website. After the presentation of our CEO, Roland Harings; and our CFO, Rainer Verhoeven, we will, of course, be available to answer your questions. Now I would like to hand over to Roland Harings.
Thank you, Angela. Good afternoon also from me here from rainy Hamburg to this conference call, and thanks for joining. I would like to start with a brief overview of our first quarter. We saw very solid results in Q1. And just as a reminder, Q1 fiscal year is always one of our weaker quarters in our annual year. We met market expectations with an operating EBIT of EUR 31 million, which corresponds to an ROCE of 7.6% based on the EBIT of the last 4 quarters. And as you well known, we are burdened by last year's impairment in the FRP segment in the amount of more than EUR 50 million. Net cash improved significantly to 70 -- by 70% to minus EUR 93 million. We are proud that we finalized the scheduled, very complex shutdown in Hamburg in October, November, within time frame, within budget and with all the measures that we planned to conclude. All the year, you have heard before, the impact on our EBIT in the quarter of this significant maintenance was EUR 34 million. Regarding Metallo, you have notified that we have not given now the final information about the clearance of the deal. It's still being reviewed by the European antitrust authorities. And also, as a brief overview, we confirm our forecast for the operating EBIT between EUR 185 million and EUR 250 million for this fiscal year. Next page. Again, to summarize, a solid quarter in results of the seasonal effects and also of the Hamburg shutdown. If you just normalize our results and take the EUR 34 million of the Hamburg shutdown into account, it would have been a pretty good quarter -- for last quarter of a calendar year. Talking about the market sentiment and looking at this slide, you see some of the graphs moving up and down. Talking specifically about copper, the copper price increased steadily in the last quarter from a level of USD 5,600 per tonne to approximately USD 6,200 at the end of December. Coming to TC/RCs for concentrates. Again, supply was very sufficient and stable from the mine site and certainly supported also by the good copper price level that I just referred to. The spot TCs for clean concentrates stayed at low levels of USD 50 to USD 60 per tonne according to Wood Mackenzie. But as we repeatedly stated, we are long-term partners of the mines and we are hardly active in the spot market due to our long-term supply strategy and also our focus on complex -- more complex materials. Regarding the benchmark TC/RCs for this calendar year, as we already discussed in December 2019, a contract was signed between the U.S. mining company and 3 Chinese smelters. They have agreed on a level of USD 62 per tonne and 6.2, which is, in our view, a very unsustainable low number. However, this quotation was accepted by the copper industry as the new benchmark for 2020; for clean concentrate and for -- by the major smelters. Again, we believe with rising costs and also other effects, this is not a sustainable level and is not in line with the demand-supply balance that we see from the mines and the demand from the smelters. On the positive side, you see the scrap RCs. Especially in Q1, we saw a positive momentum. Availability of scrap was good and although RC pricing was also on the higher level. CRU announced average RCs for scrap #2 and without logistics of EUR 380 per tonne, which is for the period of September for Q1 fiscal year '19/'20, which is roughly 15% higher than compared to the similar quarter last year. Again, this is not the price level of Aurubis. This is just the reference number, and -- but it gives you an idea where the market is heading to. Talking about sulfuric acid. Spot prices have stabilized in our fiscal Q1, although European spot prices came back to a level of USD 32 to USD 38 FOB, partly also supported by a smelter outage in Spain. Despite recent corrections from the record high levels, sulfuric acid continues to be a profitable earnings contributor for us. Talking about ACP. In Q1 2019 and '20, we announced the Aurubis copper premium for 2020 which -- to stay at the USD 96 per tonne level similar to the level that we announced for 2019. However, spot premiums came again under pressure in Q1 and we're at a low level of USD 54 to USD 65 Shanghai at the end of Q1, which is a very low level, also looking at the last 6 months. Spot premiums in Rotterdam were at USD 40 to USD 50 CIF but more important to compare our Aurubis copper premium to the indication delivered German works, which stood at USD 80 to USD 90 per tonne, so close to our official ACP period. U.S. dollar -- we have, as you know, a long position of approximately USD 600 million in a year, and our aim is to hedge up to 2/3 of this for the calendar year. In the moment, we stand at 57% hedged at a rate of 1.17. And for the next fiscal year, we are hedged at 36% at 1.15. Rainer Verhoeven will elaborate on this in his part. The situation of the coronavirus, I think, we all have heard a lot and it's a very, let's say, confusing situation. But before I start to talk about how we see the impact on the copper industry, I would like to express my sympathy with the people in China and affected and also our, say, market participant and competitors who are going through very difficult days and we hope that this epidemic is going to be over soon. As a small gesture, as a sign that we are -- that we care, we helped our competitor, Tongling Nonferrous, by the supply of safety equipment. So we sent -- as they were running out of materials in their plant, we sent them some breathing masks in order to protect their people during the work. So again, it's very difficult for us to judge the situation there, but we really hope it's going to be solved soon. The overall situation is Hubei province is a very important industrial state within China, with a lot of copper activity and we know, we heard that certain copper smelters had already to reduce their production, certain logistic disruptions occurred and although the refined copper demand has vacations after the New Year were extended, has been subdued. So in a moment, it's very difficult for us to have a complete picture of the impact. We see some -- we are not happy about, but we see some opportunities that we can help our long-term partners from the mining site to buy some distressed shipments, which cannot be delivered to the plant destination in China and in our partnership approach, we help there. On the other side, we are very much focused on our European market where we have not seen an impact yet. So there was a question about the sulfuric acid because the plants in China have to supply the sulfuric acid as we have to do as a smelting company on a continuous basis. There is limited storage capacity. So difficult again from our side to judge what is the overall impact. But we believe for Aurubis, it will be -- there are pros and cons and difficult to judge what's finally the outcome, if it will have an impact on our business, we believe, if it will be, very limited going forward. So with this, I would like to hand over to Rainer Verhoeven, who will lead you through the financials.
Thanks, Roland. Good afternoon to everybody on the lines. I'd like to guide you through the major earnings drivers, KPIs and our P&L. What you see in the revenues is that year-on-year we could increase the revenue by 4%, even though we had a concentrate throughput that was lower than last year's first quarter. These revenues are mainly influenced by the higher precious metal prices that we could see and enjoy in the first quarter of this financial year. In Q1 '19/'20, we have -- and Roland has been talking about it. We have had our maintenance shutdown in Hamburg. So we had an EBIT influence of roughly EUR 34 million as compared to influence of unplanned shutdowns last year of roughly EUR 25 million. So all in all, this -- you can consider this to be a wash. Nonetheless, we had quite a successful start after the shutdown -- after the maintenance shutdown here in Hamburg and plants are operating quite smoothly. On the -- of course, I've already talked about the lower concentrate throughput side, we have clearly enjoyed the higher scrap RCs mainly and of course, higher metal gains due to free metal with sky-high palladium prices that we had in the first quarter. Operating EBIT was EUR 31 million net. All in all, more or less the market expectations. A couple of information on the cost side. So yes, we had higher personnel costs, mainly due to the wage increases year-on-year, but we also see first restructuring costs coming from our performance improvement program. If we go to the next slide or the next 2 slides, actually, I would like to give you a bit of an overview on the situation of our energy cost in the Aurubis group in total. So the EUR 47 million that you see on this slide here in the pie chart is about 16% of the overall cost of the Aurubis group, and about 80% of it is already electricity-driven. You see 67% directly electricity, but the oxygen, of course, is the electricity that is consumed by the air separation plant. So all in all, you can say 80% is already electricity-driven while the rest is still fuels and gas. So in total, we have 1.4 million tonnes of CO2 emissions. Out of this 0.5 million coming from so-called scope 1. So direct CO2 emissions, these are the ones where we also get the CO2 certificates for and the 0.9 million roughly coming from scope 2, that is the CO2 component, which is in the electricity price. And here in Germany, at least due to the carbon leakage status of Aurubis, partially compensated currently by 50% compensated. And the point is, we are currently actively campaigning through various channels for the retention of this very special status that we are having here for the copper sector because we are currently at risk to lose that status. And that would be, of course, quite detrimental to our results. On the next slide, I'd like to give you some ideas of our CO2 emissions. Let's start with the first, let's say, paragraph here. We have already managed some 35,000 tonnes of CO2 emission reductions over the last 2 years with the projects that you can see here, first of all, of course, the very prominent district heating solution that we have implemented here. And then 2 smaller things, 1 in Hamburg, 1 in Olen, the wind turbine and the back pressure turbine in Pirdop, altogether 35,000 tonnes. There is further ideas. Of course, we are in talks with the city of Hamburg with regards to the district heating parts, too. And we are constantly working on further flexibilization of the energy supply or energy consumption, better to say. And there is ideas on hydropropulse concentrate ships on a full-scale implementation of energy management systems, the so-called NEW 4.0. So the [ Norddeutsche ] [indiscernible], that is an activity that is initiated by the Ministry of Economy and Energy in Germany, where about 60 partners in the northern sphere of Germany try to flexibilize their energy consumption. So there's plenty of ideas, I would say, we are, let's say, well prepared to further reduce CO2 emissions. On the other side, of course, we need also the political framework set in the right way. If we then go to the next page, the key figures, also here, not too much to say. Of course, equity ratio, still very solid, above 50%, pretty much no indebtedness in the Aurubis group. The capital expenditure was a bit higher than previously, of course, due to the big shutdown that we had in Hamburg here, and the net cash flow, as already mentioned by Roland, was with minus EUR 93 million also much better than last year. But last year, we were preparing for other shutdowns and also improvements and so forth. So it's always a question of breathing tubes in the net working capital versus the cash flow. By the end of the year, we expect to be at the level in the net cash flow roughly at the same level of last year, where we had about EUR 270 million. If we then take a short glance at the segments. We do have our MRP, of course, that is the big and important segment. You see the concentrate throughput has gone down compared to last year. Again, the shutdown and with that, for sure, the sulfuric acid output as well. The market drivers were already touched. The maintenance shutdown in Hamburg was completed very successfully. If we look to the rod, we see still an increase compared to last year. Here, we have the issue that the Deutsche Giessdraht part was not included last year. We are there on a stable level, rather a bit down. And you see on the shape side, we have been hit quite heavily here with only 35,000 tonnes versus 45,000 in the last year that is the outcome of the economic development that we could see in the first quarter. Quite positively and against this trend was, of course, a high metal result, which comes from the higher metal prices that we enjoyed in the first quarter. The scrap markets have already been touched by Roland so I can skip that. All in all -- the cathode production, we had this incident in Olen. The cathode production was affected by the crane damage. Nonetheless, with, let's say, the support from the other side and the cooperation that we have throughout our production network, we were able to supply the rod plant in Olen with cathode from the other side. If we go to the next page then. We will be looking at the FRP segment, and we see a bit of a mixed picture. Roland will tell a bit about the outlook to come there. Nonetheless, what I would like to highlight here is that despite the 20% lower sales volumes that we had in the first quarter of '19/'20, the result was kept quite stable. This is due to mainly 2 effects. One effect is, of course, that we could still increase the prices here and there. On the other side, we were heavily working on the efficiency improvement and on the cost discipline side, so we reduced costs, we slashed cost quite heavily. And with that, we managed to keep the results in a level which is as last year. Of course, the ROCE of the segment will be distorted for the next quarters to come due to the impairment, which has already been mentioned, the EUR 51 million that we had in the end of last year. So you will see an ROCE that needs to be, if you want to say so, corrected by this onetime effect. So we then will be slightly positive or around 0. We had a CapEx of EUR 3 million, mainly maintenance CapEx in that slide. And talking about FRP, Roland Harings will explain on the next slide about what are we going to do with our initiatives on the M&A side. So I hand over to Roland.
Yes. Thanks, Rainer. So then a few words regarding our strategic initiatives. I just touched on the Metallo acquisition, and it's still subject to the approval of the European Commission. But I want to underline, I'm very confident and I'm very close to the process that we will receive a positive decision by April. And it's -- to distinguish, it's unlike the FRP result that we had last year with the refusal of the sale to Wieland that we are talking here about complementary business models. Metallo is doing a complete set of different metals and also additional and different technologies to what Aurubis is doing and it really enhance our flow sheet and our capabilities. And here, we are talking without a doubt about the global market. To give you a bit more an idea why this takes longer than we originally anticipated, it's a very complex market, especially if you look into the different scrap streams many, many players and also a global changing environment. This was really the very intensive and close cooperation with the commission was necessary to build up this market and provide the understanding to the case teams in order to evaluate this case correctly. But again, very confident that we will receive clearance, by latest, April. Regarding FRP, again underlying the discussions are ongoing with industrial investors. And we, therefore, continue this segment as discontinued operations. And as Rainer mentioned, the segment itself, the team of FRP has made significant progress in efficiency and also on cost optimization and I will come to this in the outlook. We see now that this business has clearly bottomed out in the last quarter, and we see some positive signs in the demand. And with this much better cost position that we have developed, we are more optimistic looking forward. Coming to the topic of sustainability and a bit although elaborating of what Rainer has said, this decade is the year of the decade of sustainability. Aurubis has already done a lot in the last 20 years. And just to give you again the number regarding CO2 footprint, we have reduced, for a tonne of copper produced, the CO2 footprint by 35% to 40% compared to the year 2000. So we -- and Rainer showed how we moved from fossil energy to electric-based processes. We have done already a lot and we have a lot in our drawers, in our idea box, how we can even further decarbonize our business in the future. Again, we need to have clarity about the pricing, about the mechanisms, how energy will be priced going forward and one of the key elements is eligibility, which is now in discussion with the European Commission. Energy-intensive industry like we are, in an industry which is a price taker, we work in world markets. We need to be protected against the increase of energy prices, which are not competitive compared to players outside of Europe. But here's sort of a very -- this is acknowledged by the political group we are talking to. And again, here in March, December -- in March this year, we will have the final hearing and we are, again, progressing there well. If I look at the table that you have, at the slide that you have in front of you. We have received updates of the following ratings. And without speaking about all of them, I think you see the improvement that we achieved in most of the ratings. And specifically, we are proud, if I pick EcoVadis 2019, that they rated us as being 1 of the top 3% companies in their rating, which is for Aurubis, a very good and important achievement. Similar to MSCI 2018, we are AA. And with this, we belong to 6% of the top-performing companies in their core. So again, we are moving -- we have moved a lot on the sustainability agenda, and we will put even more focus on this going forward. Outlook. Outlook for 2019 and '20. The Reuters 2020 copper price pulled from January came out at $6,240 per tonne. The stable copper demand is predicted on the industry forecast and also the automotive sector is a bit subdued, but we see also here some signs of recovery and also the topic of e-mobility and new vehicles coming now into volume production will also lead to a stronger or more solid demand going forward. The TC/RCs for copper concentrates in 2020 will be significant lower than 2019, reflecting -- or I'd say, taking this lower benchmark into account. On the other side, copper scrap, we see a good supply with good RCs at a good level going forward. Sulfuric acids, there is a stable demand and we expect also a steady pricing going forward. Copper premium was mentioned, set at USD 96, similar to last year for this calendar year 2020. Rod and shapes, Rainer mentioned that we saw in shapes, some low volumes in our -- in the last quarter. This has improved. We have also been able to win new customers to compensate some lower demand on the FRP side, and we expect to be in rod, at similar levels of 2019 and at shapes, although at least at similar levels, again, compensating the lower demand in FRP. FRP total, again, with the improvement that we just saw this quarter, customers coming back. Also here, we are confident to achieve levels at last year's volumes. U.S. dollar for this fiscal year, we are hedged at 1.17, which means a 57% hedge rate compared to our exposure. Our efficiency program will be transferred to a performance improvement program, and we will put the focus clearly on cost reduction in 3 different sectors. We will come to this in a minute. Given significant investments that we have done in -- especially in Hamburg, but also in other plants, we are convinced [Audio Gap] and the level of unplanned shutdowns this fiscal year will be lower, much better than what you have experienced, what we have experienced last year. And I can tell you without disclosing any secrets, since we have done the shutdown and the maintenance campaign, things are much better and also January was a solid production month. So coming now to the efficiency program. These are some internal factors I would talk about. You know the efficiency program, which was started in 2016 achieved a target of EUR 120 million, and we call it a project success. We have really achieved significant improvements, again, on efficiency, on throughput in our company. At the end of last year, we saw that we are running a bit in this area to serve the limitations, although given the subdued market demand. So we refocused this program on cost reduction in 3 main areas. So we addressed the Hamburg plant itself, we addressed SG&A, which is quite usual that we -- with all the investments we did in IT systems, in digital, in more efficient processes. So we'll review our organization. And we also look into the procurement sector to see what kind of reduction and cost improvements we could develop there. We have defined work streams for all these 3 pillars, and we have set ourselves a target to come up with some clear executable measures by mid-end of March. And today, I can state we are making very good progress and I confirm this deadline and the implementation of these measures, low-hanging fruits, have been started and we will achieve the full results with the fiscal year '22, '23 when we are at the run rates that we have -- that will serve as a target. To conclude here, for -- after Q1, we confirm our forecast for the fiscal year. For the Aurubis Group, the operating EBIT will be between EUR 185 million and EUR 250 million, which corresponds with an operating ROCE between 8% and 11% for the fiscal year. Talking about the segments, MRP, the forecast is between EUR 230 million and EUR 310 million EBIT, which corresponds with 11% to 16% ROCE. And FRP, EUR 11 million to EUR 15 million with an ROCE of 5% to 7%. Yes. With this, I would like to hand over to Angela again, and thanks for your attention.
Yes. Thank you, Roland Harings and Rainer Verhoeven. We are now ready to answer your questions. So please, I hand over to the operator again.
[Operator Instructions] The first question is from Rochus Brauneiser, Kepler Cheuvreux.
A few points from my side. One is on the FRP disposal process. Can you give us a bit more color on how that discussion is going? I think we have been hearing similar statements of, I think, over the last couple of months that you're in discussions with parties. So are these always the same parties? And how is the -- now the direction of these discussions? Is this making progress as the process is going on for quite some time now? And related to that, can you talk a bit more about the change in the performance? First, can you say how much of this FRP business is linked with auto? And to what extent and to what magnitude are you seeing the orders getting better now in the FRP segment? Maybe I have 1 to 2 other questions afterwards.
Yes, okay. Thanks for the question. It's Roland taking it. So FRP, as we are talking with industrial investors and there are several parties we are talking to, but we are doing a very, let's say, sophisticated, detailed review regarding the antitrust competitive situation. Because as we have experienced in the Wieland case, we need to work here through all the details and numbers before we are going to conclude or announce something. So therefore, we take the time it needs to be sure that we have a solution which is going to be accepted and we'll be able to conclude. So that's why we are taking the time it takes. Regarding performance improvement, your first question, the share of auto business in our FRP is around 20% to 25% of our volume, is directly linked or indirectly, several levels of supply chains are behind to automotive demand. And the performance improvement that was...
Volumes.
Volume improvement.
The volume?
I think you were talking about some improvement in the business now, yes.
Yes. So what we see now that the volume is back on a level that we have seen as a stable demand in last year. So this dip that you saw in Q1 of our fiscal year is really behind us, and we are back on a 2019 levels. And again, regarding automotive, here, we see now a much more constant intake of orders and the order book is increasing. So it's improving to a level that we have seen before.
Okay. Another question is on your personnel expense. I guess you indirectly mentioned that, I think, over the last couple of quarters, the wage increase -- or the cost increase is going well below -- well beyond the wage increases. Can you help us and strip out what the kind of other effects and to what magnitude, other effects played into that personnel numbers in the last couple of quarters? And maybe, thirdly, can you comment on how you view the cash flow performance in the Q1? I think it looks pretty much like a strong snapback, and it feels to me that inventory has come back quite strongly. Is there any mitigation we can expect into the second quarter from there?
So hello. Mr. Rainer Verhoeven here. First point, personnel costs, yes, for sure, we have quite a steep increase. I've said that besides the typical wage increases, so the inflation that you see year-over-year dependent on the site where you are. So we are -- here in Western Europe, we would see an increase of 2%, 2.5%. While in Bulgaria, of course, the increases are much higher on a much lower level overall. Nonetheless, it's of course, always a function of the amount of employees that we're having. There we have been, still year-on-year, if you compare Q1 this fiscal versus Q1 last fiscal year, we have still increased. Nonetheless, we have already started with, let's say, reducing the 1 or the other personnel position here. And with that or in preparing for the performance improvement program, we had some restructuring costs and expenses that we have put into the P&L. And it is too early now to answer in more detail. We have then said and Roland Harings has explained it, we will be explaining more details by the end of March. Please give us the time. We are working full throttle here now to detail out all the work streams and all the detailed measures which at the end, will lead to cost reductions. On the other side, there is of course, cost involved in order to implement those measures. For instance, IT in automation, digitization. That's the 1 thing. Coming to the cash performance. I would say it's not unusual effect that you would see in the industry overall. For sure, Q1 has always a rebouncing effect after the fiscal year-end. This is quite normal. And on the other side, we do have the big standstills here and there, which also lead to a higher or more elevated net working capital. In addition, comes quite high metal prices, which had another impact to our inventory. And if you look to the inventory and the net working capital, you see that this is where the cash is going, then nothing else has happened. But mainly, this effect is, let's say, the reason for the cash performance of the Aurubis group. All in all, also the reshuffling of inventories after the incident in Olen did have an impact on our inventories and rest assured that towards the end of the year -- I wouldn't say that by the next quarter ending, but by the end of the year, we will be in a good cash position again. And I think cash is the least problem that Aurubis faces.
The next question is from Ioannis Masvoulas, Morgan Stanley.
Two questions on my side. The first is regarding the comments on the compensation you get on the scope 2 emissions of 50% and the risk that, that may reduce in the future. Is that in relation to the green deal that the European Commission is working on? And can you perhaps provide some color on the state of negotiations there? And then secondly, you mentioned the disruptions we've seen in concentrate flows in recent days and potential for some opportunities there. I just wanted to figure out how much flexibility you have to change your, let's say, the concentrate fees. Because my understanding is majority of your input is priced on the annual contract terms. So how much spot exposure do you have? And how much potentially you have to increase the overall volume intake? And I will leave it there.
Okay. Thanks for the question. Regarding this topic of eligibility, it's a process which, is not unknown that the commission is part of the green deal, you're right. The commission always reviews the sectors, which are eligible for this CO2 compensation in the electricity price. So we're going through this normal consultation process. And again, there is copper production, is energy-intensive as many other industries. And discussions are very intensively ongoing, and there's a recognition that copper is in -- at risk of carbon leakage because, again, our company is -- has done a lot in decarbonize the production of copper. Our material is produced with half the CO2 footprint that you would find outside of Europe. So this is all recognized and also seen positively by the commission. But again, they want to be fair and look at all the aspects in eligibility. Consulting and discussions are happening now with the commission, and we are in -- as Aurubis joined with other players in the copper industry, but also with other players in the nonferrous metal industry in a very open and direct dialogue with Brussels. So again, it's a key element in the energy pricing for the energy-intensive industry, so we are confident that, again, as in the last process that also copper will be eligible for this compensation going forward. Regarding the concentrate flows, there are some smaller volumes that we are, again, supporting our long-term partners from the mining, also from the traders, where they see some short-term needs to offload materials from ships. And here, we kind of help. But really, I don't want to emphasize or overemphasize this effect. These are small effects, smaller quantities. We are long-term partners. We have long-term contracts with our suppliers. And as we said many times, we are hardly active in the spot business. So we are talking about an effect, which is very small to our total concentrate inflow and consequently, to our P&L.
The next question is from Bastian Synagowitz, Deutsche Bank.
My first question is just a follow-up on the carbon leakage status. Could you just confirm that the impact would be about EUR 15 million to EUR 20 million at the current certificate price level if the EC is going to remove your status? And then you also mentioned the deadline in March. So does this refer to the decision on the carbon leakage status? Or does this refer to anything else? Those are my first questions, and I have a few more.
Yes. So it's -- you're right. It's a bit higher. It's in the magnitude of EUR 20 million if this would be completely, let's say, withdrawn. And the process is now -- there is a consultation process of the initial proposal from the commission was presented, and the consultation process will go until mid of March in Brussels, where, let's say, interested parties are able to present their case and discussions are ongoing. Decision will be taken then in the term of the second calendar quarter towards, let's say, late summer in the commission.
Got it. Understood. And then just another question on your metal gains. And you mentioned that you had a high metal result in the first quarter. I know it's always a little bit of a sensitive topic. So without going into detail on the absolute levels, could you please give us some guidance on whether you would expect the contribution from metal gains for the remaining quarters to be higher, lower or similar versus Q1 if we were to assume that the current precious metals prices would remain broadly stable?
Rainer Verhoeven, Mr. Synagowitz, again, as you said, it's a very sensitive topic, which you're touching. And we are, as you know, and all of the other participants on the telephone know, also very, let's say, quiet about our metal result. The point is -- and you can follow that. You know from our quarterly and also year-end demonstrations, how much metals we are bringing out besides copper. And for sure, there is always a certain percentage on the amount of free metals. That is also clear. So if now palladium has gone through the roof in the first quarter and is going down in the second, you have to expect that for sure, the metal gains will be lower in the quarters to come. I think that -- and also, that holds true for all metals. We have seen prices after Q1 of our fiscal year have come down. So therefore, I would rather say that this metal gains are not to be expected to be in the next quarter.
The next question is from [ Rhea ] [indiscernible], Bank of America Merrill Lynch.
I just wanted to sort of follow up on the scrap market. I know you talked about an increase in availability of copper scrap. I'm just wondering what you've seen in discounts [indiscernible] grew following the scrap ban in China? That's it.
Yes. No, thanks for the question, Rhea. Regarding scrap market, if we talking about -- or if we use the reference number of CRU, it's the scrap #2 market. And this is really a global product. This has not been impacted really by any scrap bans back and forward. And there were quickly some other players outside of Europe who stepped in when Chinese were limited on buying those. And so the number we have mentioned for the RCs, official, again, this is not our number, is at EUR 380 per tonne, logistics included. And residues and other very low metal-containing materials, they are mainly also processed within Europe. There are shipments outside of Europe. But these are stable shipments, which have not been impacted. So overall, the supply situation in scrap has been stable in Europe, and we saw some additional inflows from the U.S. into the European market, which is probably to the situation in China that certain materials couldn't be easily shipped to this region anymore.
At the moment, there are no further questions. [Operator Instructions] There are no further questions. So I would like to hand back to Angela Seidler.
So if there are no further questions, I would like to thank you for your attention and your questions. And next time we hear each other -- well, of course, in between, at any conference taking place, but next reporting time will be in May, then we are going to publish our 6 months results. So thank you, again, all the best and bye-bye.
Yes. Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.