Continued stable trend in earnings attractive dividend

Transcription

1 NA Group Information on the results of the fiscal year 2001/02 (October 2001 to September 2002) Continued stable trend in earnings attractive dividend Hamburg, 16 December 2002 On 30 September 2002 Norddeutsche Affinerie (NA) closed the fiscal year 2001/02 with a profit before tax of 38 million. In view of the difficult economic environment this is a positive result. The advantageous combination of copper production and processing in the NA Group made a significant contribution to this. The throughput of copper concentrates in the fiscal year at 958,000 tonnes was 116,000 tonnes higher than in the previous year (842,000 tonnes). Together with Hüttenwerke Kayser, an all-time high production output of 554,000 tonnes (previous year: 540,000 tonnes) of copper cathodes was achieved in the Group. The production in the continuous casting sector was stable in this fiscal year. With an output of 203,000 tonnes we again reached the high quantity of last year (204,000 tonnes). Due to market factors the output of continuous cast wire rod at 285,000 tonnes was clearly less than the previous year s level (347,000 tonnes). The good annual profit enables the payment of a dividend of 0.65 per share to be recommended at the Annual General Meeting on 26 March The payout ratio amounts to 68 %. Thus, we are following our continuous dividend policy, also in a weak economic environment. NA is concentrating on the core business of copper and thus performing adjustments to its portfolio of subsidiaries. Therefore, in April 2002 it sold its subsidiary MicroMet. Currently NA is in negotiations with an international company on the repositioning of Spiess-Urania Chemicals GmbH. 1

2 Consolidated key figures Fiscal year 2000/01 Fiscal year 2001/02 12 months 12 months Turnover mill. 2,010 1,920 Gross profit mill Personnel expenses mill Depreciation mill Earnings before taxes (EBT) mill Earnings before taxes (EBT) * mill EBITDA mill EBIT mill DVFA/SG cash flow** mill Earnings per share* Capital expenditure mill Copper and copper alloys 1,000 t Copper price (average) US$/t 1,684 1,525 Number of employees (average) 3,195 3,612 * without minority interests ** as per the German Society of Investment Analysis and Asset Managers/Schmalenbach Gesellschaft 2

3 Group turnover and profit The NA Group achieved a turnover in the amount of 1,920 million (previous year: 2,010 million ). The reduction of 90 million resulted from lower copper prices and unit sales. The consolidated pre-tax profit amounts to 38 million (previous year: 57 million ). It reflects stable earnings at NA AG and a clear decline in earnings at Hüttenwerke Kayser (HK). Due to the continued low copper price quoted on the metal exchanges, the refining charges for copper scrap decreased to the lowest level for many years. The availability of this material suffered from this as well. HK was especially impacted and, mainly as a result of an additionally required fiscal year-end price depreciation on copper inventories, showed losses. With the current copper price these losses would have been compensated to a great extent. The other subsidiaries made a positive contribution to earnings. Prymetall GmbH & Co. KG (Prymetall) including its 50 % stake in Schwermetall GmbH & Co. KG (Schwermetall) achieved a positive pre-tax profit. However, it was unsatisfactory in view of the difficult economic environment. Throughout the Group work continued on performance enhancement and restructuring programmes. The main emphasis was on the integration project Euro-Copper at Prymetall. Earnings before interest, taxes, depreciation and amortisation (EBITDA) at 103 million (previous year: 111 million ) were again at a high level. Earnings before interest and taxes (EBIT) amounted to 50 million (previous year: 65 million ). Apart from the acquisition of Prymetall and Schwermetall effective 1 January 2002, a total of about 45 million was invested in the NA Group in fixed assets (previous year: 69 million ), of which the largest amount was directed into the Kayser Recycling System (KRS) at HK in Lünen. The DVFA/SG cash flow amounted to 72 million (previous year: 86 million ). 3

4 Earnings per share declined from 1.26 to Besides the decline in earnings, this was mainly due to non-deductible losses at HK that led to a comparably high tax rate in the NA Group. The good annual surplus at NA AG, the parent company, enables us again to pay an attractive dividend of This corresponds to a payout ratio of 68 %. At the same time the revenue reserves could be increased by about 10 million. Copper market In the fiscal year 2001/02 the copper market reflected the overall weak economic trend. Copper demand in the USA and Europe did not recover in the course of the year whilst Asia presented a rather better picture. Copper usage, which had dropped in the year 2001 worldwide to 14.7 million tonnes, rose in 2002 to 15.1 million tonnes. In Europe, our most important market, demand for copper did not recover in 2002 and at about 4 million tonnes was almost 5 % lower than that in The rise in stocks in the warehouses of the metal exchanges LME and COMEX initially continued in 2002 to a level of 1.2 million tonnes. A slight reduction in stocks by about 50,000 tonnes could only be observed from early summer onwards. In particular, the strong demand from China is an explanation as to why the copper stocks have not further increased despite the unsatisfactory sales situation in the Western world. In view of the trend in the stocks on the metal exchanges the copper quotation on the LME showed a rather untypical course and by the beginning of June had risen to almost 1,700 US$ per tonne. However, due to economic reasons, the copper price dropped in the last quarter of the fiscal year, to under 1,500 US$ per tonne. Currently the copper price is being quoted at a level of about 1,600 US$ per tonne. On average in the fiscal year it amounted to 1,525 US$ per tonne. Compared with the previous year this is a drop of about 10 %. 4

5 Raw material markets For the NA Group the copper concentrate and the copper recycling markets are the most important sources of raw materials. At the end of 2001 major mining companies resolved to cut back their production of copper concentrates in order to take account of the reduced copper demand and to support the copper price. These production cutbacks also led to short supplies on the international market for spot purchases and the treatment and refining charges obtainable thus sinking to an historical low. The market for long-term agreements, from which NA mainly procures its supplies, was not affected as much. On the market for copper recycling materials, especially copper scrap, there was a dramatic shortage. On account of the restrictive export policy of some Eastern European countries, in particular Russia and the Ukraine, the export flow of copper scrap from these countries initially became severely restricted in the last two years and has finally been cut off completely. The resultant lack of supplies could only partly be compensated by material from other countries. In addition, the situation was intensified by the aggressive actions of Asian smelters. This market situation confirms our strategy to reduce our dependence on the copper scrap markets and to concentrate even more strongly on complex recycling materials. The new smelting process of the KRS at HK in Lünen is aimed at achieving this. Copper production In the last fiscal year the processing of copper concentrates in the primary smelter (RWO) could be increased to 958,000 tonnes (previous year: 842,000 tonnes). However, the new capacity of our plant of 1 million tonnes of concentrates was not quite achieved. With an output of 374,000 tonnes (previous year: 360,000 tonnes) the cathode production in Hamburg achieved an all-time high. Despite the copper price related shortage on the copper scrap market the plants at HK in Lünen could be kept sufficiently supplied and the tankhouse capacity of 180,000 tonnes fully utilised. 5

6 The total output of copper cathodes in the NA Group therefore amounted to 554,000 tonnes and corresponded to full capacity utilisation. The NA Group was thus able to hold up better than its European competitors. The merger of HK with NA has thus once again proved to be especially advantageous since the raw material markets can be used significantly more effectively. In HK s smelters the scheduled start of the KRS operation at the end of February 2002 has led to a fundamental change in the treatment processes and process procedures. This new process represents state-of-the-art technology in copper recycling. It sets new benchmarks in environmental protection and energy efficiency. The operation is running successfully, but as expected requires further optimisation. This mainly concerns increasing the throughput. Technical problems with part of the plant equipment which arose at the beginning could meanwhile be removed. In the last two years NA was able to significantly improve its position in the processing of precious metal bearing raw materials. As a result our production of precious metals has achieved new highs. The silver output rose to 727 tonnes (previous year: 680 tonnes) and the gold output amounted to 28 tonnes (previous year: 23 tonnes). The project to expand the precious metal facilities in Hamburg is running to schedule. The production of sulphuric acid rose due to the higher input of copper concentrates by 145,000 tonnes to 953,000 tonnes (previous year: 800,000 tonnes). Sales of the additional quantities could be secured without difficulty. We are meanwhile observing a slight improvement on the sulphuric acid market. Product markets In our most important customer industries the economic climate was difficult. The demand for copper in the automotive industry and in the energy transfer was relatively stable. However, the strained situation in the cable and wire industries had of course a negative effect. An additional adverse impact was provided by production expansions at competitors, the closure of two cable works and the relocation of production works to Eastern Europe. 6

7 The copper demand in the construction sector stayed at the low level it has maintained for years now. In other sectors, such as the IT branch, the telecommunications and coin industries, demand considerably declined. Sales of copper flat products were supported by the increase in demand in Asia, especially in China. Sales of specialty products have decreased considerably due to lack of investment by the communications companies. This reduction could be compensated by additional business in North America and Asia. The integration of Prymetall and Schwermetall had a positive impact on the production of our continuous cast shapes in Hamburg, since these are partly used as supplies for Schwermetall. Order receipts at Schwermetall have again been at a high level since May Copper processing In the fiscal year 2001/02 the NA Group produced a total of 726,000 tonnes of copper products (previous year: 685,000 tonnes). Intercompany supplies between Group companies are not included. Although the production of continuous cast wire rod at 285,000 tonnes was still at a good level, it was clearly less than in the previous year (347,000 tonnes). The output of continuous cast shapes in Hamburg at 203,000 tonnes again reached the excellent level of the previous year (204,000 tonnes). Prymetall and Schwermetall were likewise impacted by the weak European and international market environment. At Prymetall in Stolberg, in the first 9 months since its acquisition by NA, 44,000 tonnes of strips and 9,000 tonnes of wire were produced. Our production share of Schwermetall amounted to 112,000 tonnes of pre-rolled strip, of which 55,000 tonnes were destined for processing at Prymetall. 7

8 Human resources The Group had on average 3,612 employees. The increase of 417 is attributable especially to the acquisition of Prymetall and Schwermetall. As at 30 September 2002 the number of employees in the Group amounted to 3,711 (previous year: 3,207). A total of 210 young people are currently in apprenticeships in the NA Group, of which 138 apprentices are being trained in Hamburg. With a percentage of the workforce of 6.6 % NA AG has the most extensive apprenticeship programme in Hamburg s chemical industry and currently offers training in 13 trades and professions. On 1 October 2002 the NA Group launched a new structure in personnel management. This focuses on Group-wide personnel planning and development. The personnel management has additionally been made still more strongly service-oriented towards the production sectors and departments in the whole Group. With effect from 1 January 2003 NA s Supervisory Board has appointed Dr Bernd Langner as a member of the Executive Board. Dr Langner (aged 53) has been employed at NA since He is currently the Head of our Business Unit Copper Products and at the same time is the Managing Director of Prymetall GmbH & Co. KG in Stolberg. Dr Langner will retain his position at Prymetall. With this personnel change NA s operative business and strategy in the Segment Copper Processing will again be substantially strengthened. Strategy Vision NA 2000 Plus As a result of the acquisitions performed in the last two years NA has developed into a forward integrated copper Group, whose strengths are formed in the combination of copper production and processing. These strengths were increased in the last fiscal year by steps towards consolidation and performance enhancement. A particular focal point was the introduction of Value Based Management at NA AG (dynamic). In the context of continuous improvement this system is gradually being transferred to the whole NA Group. 8

9 In the Segment Copper Production our strength is the especially competitive and environmentally safe processing of copper concentrates and recycling materials, such as copper scrap. This is enhanced by our concentration on complex recycling raw materials, for which we commissioned the KRS in Lünen this year. In parallel with the expansion of our copper production, we have further improved the processing of precious metal-bearing raw materials. The Segment Copper Processing focused on the integration of Prymetall and Schwermetall (50%). At Prymetall considerable potential for performance enhancement and improving results could be identified with the Project Euro-Copper and the corresponding measures implemented. Due to this project Prymetall is well positioned for an economic upswing and will take a very good position as a niche producer. As agreed between the shareholders, a performance enhancement programme has also been started at Schwermetall, which will still further improve the company s very good position in the international market. The NA Group is concentrating on its core business of copper production and processing. Thus, in April 2002 its subsidiary MicroMet GmbH Pulvertechnologie (MicroMet) was sold to the metal powder specialist Ecka Granulate GmbH & Co KG. Like MicroMet, Spiess-Urania Chemicals GmbH (Spiess-Urania) is also not part of NA s core business. Therefore, NA is in negotiations with an international company about the repositioning of Spiess- Urania Chemicals GmbH. With this step the concentration of the NA Group on the core business of copper would be complete. NA shares On 8 October 2002 Hamburgische Landesbank took over the just under 10 % stake in NA held by the US American shareholder, OM Group Inc. NA very much welcomes the commitment shown by Hamburgische Landesbank. 9

10 NA shares have held up well in the continued difficult stock exchange environment. Compared with all the German share indices NA shares are clearly the outperformer. At the end of the fiscal year 2001/02 NA shares closed at 10.80, which corresponds to a market capitalisation of 353 million. The recommended dividend for the fiscal year 2001/02 in the amount of 0.65 per share thus corresponds to a yield of 6 %. Deutsche Börse AG has decided on a new segmentation of the equity market with the creation of a Prime Standard and adjustment of the indices. Realisation is planned for 24 March We have already applied for admittance to this Prime Standard and are assuming that we then will be listed in the so-called classic MDAX. The Prime Standard demands additional requirements which are already fulfilled by NA with the exception of the International Accounting Principles. We will introduce these in the permitted transfer period. Corporate Governance NA has committed itself to responsible, transparent corporate management and control, oriented to increasing enterprise value. Our aim is to strengthen still further the confidence of our national and international investors, business partners and employees as well as the general public in the governance of the Group. We understand Corporate Governance as a continuous process to improve management and control in the light of new experiences and regulations as well as further developing national and international standards. We therefore welcome the German Corporate Governance Code. We have already fulfilled its principles in the past. The Executive Board and Supervisory Board have announced in their first joint Declaration of Conformity dated 5 December 2002 that the recommendations in the Code are being and also in future will be fulfilled. Two not yet applied recommendations will be implemented quickly after approval at the Annual General Meeting in March Only one recommendation cannot be fulfilled in future: making the consolidated financial statements publicly accessible within 90 days after the end of the fiscal year (30 September). This would be realisable for NA but, due to the public holidays for Christmas and New Year, would not be practical as a publication date. 10

11 Outlook The upswing in the national, European and international economic trend that has been expected for many months has still not materialised. The forecasts for the short and medium term development, especially in Germany and Europe, are assuming very weak economic growth. We are therefore coming to terms with the fact that the coming months will to a great extent be similar to the course of the last fiscal year. The first quarter of the current fiscal year should, as usual, be influenced by the special impact of the month of December. Nevertheless, there are the first signs for an improvement in the sales situation for the special copper products sector which could indicate a possible reversal in the economic trend. This conclusion is strengthened by the beginning of a shortage of copper cathodes on the European market which has made itself noticeable by a rise in the copper premiums. In this indifferent and difficult to assess situation NA is concentrating on continuing its measures to enhance performance, reduce costs and improve its market position. As a result we are creating the prerequisites for our optimal participation in the economic upswing expected in the medium term. Legal Notice: Forward-looking Statements This information contains forward-looking statements based on current assumptions and forecasts. Various known and unknown risks, uncertainties and other factors could have the impact that the actual future results, financial situation or developments differ from the estimates given here. We assume no liability to update forwardlooking statements. 11