They can breed with humans to make half demons, but actual demon on demon reproduction is more of a "creating a demon out of an existing soul" kind of thing, yeah. There are a few ways a demon might be created but none of them are through coitus.

Souls can basically be used as raw magical energy to do magic with, so you could use it as a sacrifice to do powerful rituals, or I guess just eat them to increase your own magical power over time. Doing this is obviously considered shitty.