Theft and fraud: Aurubis lost precious metals worth 185 million euros

DThe shock was huge when Aurubis announced in early September that it had discovered large-scale fraud. Damage in the triple-digit millions range, earnings forecast as investors fled and Europe’s largest copper processor briefly lost almost a fifth of its stock market value. In just three weeks you will be able to see more clearly. The share price temporarily rose 5 percent after the Hamburg-based company reported details of the results of a special inventory count. The damage, however, is considerable: precious metals worth 185 million euros were missing from the inventory.

This is not just a case of recently discovered sample fraud that has resulted in some suppliers of recycled precious metal material being overpaid by Aurubis. This inventory difference also includes damage caused by the theft of precious metal from the plant. The case came to light in June following a major raid in which police arrested several people and confiscated some of the loot and valuables totaling €20 million. Both cases are being investigated by the State Criminal Police of Hamburg.

Aurubis has not quantified the damage from this summer theft and is unwilling to provide any specific information at this time. While recycling fraud and precious metal theft have apparently been going on for years, the €185 million shortfall now revealed only dates back to this year. Aurubis’ profits will fall accordingly in the 2022/2023 financial year, which ends on September 30. The full €185 million is not included. Instead, Aurubis expects an insurance payout of around 30 million euros, as well as compensation for the value of the confiscated property.

Income drops sharply

Thus, Aurubis’ new profit forecast is significantly lower than the previous one. If previously the operating result was expected to be between 450 and 550 million euros, now the company expects only 310-350 million euros. Operating return on capital employed reaches only 8–12 percent instead of the previously projected 14–18 percent. It shows the fourth quarter of the fiscal year, which ends in a few days, was likely worse than expected. Aurubis announced details of the financial year and forecast for 2023/24 on 6 December.

It is unclear to what extent criminal cases caused significant harm in previous years. An Aurubis spokesperson responded to a question that it is not currently anticipated that the balances will have to be recreated. Although Aurubis shareholders can already be counted among the victims, this does not apply to customers, Hamburg emphasizes: “Aurubis can exclude that customers suffered from fraud.”

To better protect its business processes from criminal activity, the Hamburg-based company has formed a working group, which also includes forensic experts from an external consulting company. As immediate measures, additional checks on people and vehicles were introduced, and permission to enter sensitive areas, particularly for sampling, was limited. The Supervisory Board of Aurubis AG also sees a challenge ahead. The committee formed a special “Safety” committee, which monitors the progress of health and safety measures at the enterprise and is supported by the law firm Hengeler Mueller.