Aurubis to write off fraud losses

Germany-based Aurubis AG, which has global copper and other metals production sites, has trimmed its earnings forecast for the current fiscal year and announced the results of an investigation into an inventory fraud issue it disclosed last month.

On the earnings side, the company has revised its fourth-quarter and overall fiscal year 2022-2023 guidance downward from an earlier figure of about $480 million to $585 million. Instead, Aurubis says, it is likely to earn from $330 million to about $375 million during the fiscal year, representing a decrease of about 33 percent.

The metals producer carried out an inventory process at the end of Aug. 31 in the aftermath of the theft and fraud cases. Aurubis says the losses as involve the misrepresentation of precious metals in purchased materials.

Aurubis Head of Corporate Communications Christoph Tesch tells Recycling Today the metals involved could include gold, palladium, platinum, rhodium and silver, but says additional details cannot be released pending the conclusion of the investigation.

“According to the results, the value of the precious metal shortage, which will negatively impact operating earnings before taxes [EBT] for fiscal year 2022-2023, amounts to 185 million euros [$198 million]," Aurubis says.

Aurubis further states it “expects to claim insurance payouts amounting to around 30 million euros [$32 million] and seize assets from the criminals involved, which could partially compensate for the negative effect on earnings.”

Regarding the scheme, Aurubis discovered “significant deviations from the expected inventory and discrepancies in special samples of specific shipments of input materials in the recycling area" during routine inspections of metal inventory.

“It is now clear that shipments and samples of input materials in the recycling area with high contents of valuable metals were manipulated to Aurubis’ detriment," the company says. "The shipments did not contain the metals in the amounts expected based on the manipulated samples, and inflated invoices were paid as a result. It was apparently possible to manipulate these input materials despite the high security standards, customary for the industry, in place at Aurubis.”

Subsequently, Aurubis has set up a task force to improve its security measures. “Based on initial recommendations, immediate measures were implemented in multiple focus areas: additional restrictions on access authorizations for sensitive areas, particularly sampling; increased checks of individuals and vehicles; and more extensive surveillance,” the company writes.

Although Aurubis operates in several European nations and in the United States, the company has indicated it is working with Germany’s Landeskriminalamt (LKA) law enforcement agency and has hired Berlin-based law firm Hengeler Mueller as an adviser.

“We are working closely with the investigative authorities and at full speed to get to the bottom of the criminal activities,” Aurubis CEO Roland Harings says. “We have pulled all of the necessary internal resources together and are using external forensic specialists.”

The company says its metals-purchasing customers have not been affected. Regarding scrap suppliers, Aurubis says, “At the moment, the company cannot yet make any statements about which suppliers this will impact. This is part of the ongoing investigation.”