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Economic performance

Recycling revenues and recurring EBIT were down 13% and 23% respectively as a result of a sharp drop in metal prices. Lower demand in certain end-markets of Jewellery & Industrial Metals and a lower contribution from its recycling activities also had a negative impact on revenues and performance of the business group. Capital expenditure was well up compared to 2012, as a result of increased investments in the Hoboken plant as well as investments in silver recycling and refining in Germany and Thailand. R&D spending stayed at similar levels to those of 2012.

In Precious Metals Refining, revenues decreased year on year as a result of the severe decline in metal prices. Despite a second maintenance shutdown of the Hoboken smelter, the business processed higher volumes than in 2012 leading to higher income from refining charges.

In industrial by-products, processed volumes increased compared to the previous year driven by higher arrivals of residues from the non-ferrous metal industry. While this market segment has become more competitive, Umicore managed to secure additional supply streams and expand its client portfolio. The intake of end-of-life materials was down year on year. The lower availability of electronic scrap reflected increasing competition, particularly in the market for less complex materials. Umicore remained well positioned in the high-end of the market. The supply volumes and commercial conditions of spent automotive catalysts remained subdued, while Umicore continued to position itself strongly on the market for industrial catalysts.

With the exception of palladium, metal prices were substantially down compared to the previous year. For some precious metals the impact on Umicore' earnings was partly mitigated as a result of Umicore having secured longer term pricing in previous periods. Lower spot prices for certain specialty metals, such as selenium, tellurium, ruthenium and iridium, which cannot be hedged, continued to have an impact on margins.

The investments to debottleneck the Hoboken plant made good progress with the second phase of the upgrade and expansion of the sampling facility and the investments to further enhance the environmental performance of the plant all nearing completion. In line with the strategy to grow its recycling activities, Umicore announced its intention to expand the treatment capacity in Hoboken to 500,000 tonnes a year – an increase of some 40%. Umicore engaged with the authorities to obtain the necessary permits (see case study).

Revenues in Precious Metals Management decreased year on year. This was mainly a consequence of a lower contribution from the trading activity, which was impacted by unfavourable price volatility and lower metal prices. Demand for investor bars increased in 2013 as lower gold and silver prices presented an attractive entry point for some investors. Physical demand for precious metals remained largely stable, with a higher demand for silver used in industrial applications and palladium for the automotive industry compensating for a lower industrial demand for platinum.

The Jewellery & Industrial Metals business unit recorded lower revenues year on year, primarily as a result of a lower contribution from the recycling activities. Refining volumes and revenues in Europe were down compared to the previous year, as a sharp decline in precious metal prices reduced the overall availability of gold and silver containing residues with the market for gold scrap showing the most significant contraction. Umicore’s silver recycling activities in Thailand continued to grow and capacity enhancements are being made to fulfil demand. The expansion of silver recycling capacity in Pforzheim, Germany, progressed according to plan and production start-up is anticipated for the second half of 2014. Sales for silver-based industrial applications were also lower year on year. Sales of products to the jewellery industry were somewhat lower than in the previous year in both the luxury and silver-based fashion segments. Lower metal prices did encourage investor demand for gold and silver bars, while the order levels for silver coin blanks from the German market were down year on year.

In Battery Recycling, Umicore successfully strengthened its position with (H)EV manufacturers for the processing of used rechargeable batteries. A number of technical enhancements were made to the UHT (Ultra High Temperature) smelter based on the results of the testing campaigns for spent batteries and other supply streams. These technical modifications should enable Umicore to further improve its processes and operational efficiency in this long term market development opportunity.