03-17-2011

SGL Group Expects Sales Growth to €2.5 Billion by 2015

- Sales increased in 2010 by 13% to €1,382 million
- EBIT climbed 16% to €128 million, resulting in ROS of 9.3%
- Solid balance sheet structure: Equity ratio at 41%, gearing at 0.47
- Forecast for 2011: Sales growth >10%, EBIT increase to €150-165 million
- Vision 2015: Group sales to reach €2.5 billion, ROS of >12%

Wiesbaden, March 17, 2011. SGL Group – The Carbon Company – met its expectations for the fiscal year 2010, which had been increased in November. Group sales in 2010 increased by 13% (currency-adjusted: 10%) to €1,381.8 million (2009: €1,225.8 million). Operating profit (EBIT) improved by 16% to 128.4 million (2009: €111.0 million), resulting in a return on sales (ROS) of 9.3% (2009: 9.1%). This was due to the overall improved economic climate driven by the rapid recovery of the global economy, which benefited all three Business Areas.

Robert Koehler, CEO of SGL Group: “The results for the fiscal year 2010 are better than we originally expected. Our success is also the result of a multiyear investment program securing the sustainability of the Group in which we have consistently aligned SGL Group’s activities to growth markets. For 2011, we expect sales to grow by at least 10% and operating profit (EBIT) to continue to see a significant increase over 2010 to €150-165 million. This will mainly be driven by our growth areas GMS and CFC. In the medium term, we expect Group sales to increase to approximately €2.5 billion in 2015. Our carbon fiber and composites activities alone will reach the sales threshold of €1 billion in 2015, including total sales from At-Equity consolidated Joint Ventures of approximately €500 million.”

Consolidated Net Profit Significantly up to €52 Million

Net financing costs decreased by €4.4 million to €40.8 million (2009: €45.2 million). Profit before taxes improved to €75.7 million (2009: loss of €18.1 million). The tax ex-pense of €23.0 million (2009: €42.6 million) corresponds to a tax rate of 30.4%. Net profit amounted to €52.2 million in 2010 (2009: net loss of €60.8 million). Based on an average number of 65.4 million shares, basic earnings per share increased to €0.80 (2009: loss per share of €0.93).

Capex Largely Financed with Operating Cash Flow – Equity Base Further Im-proved

SGL Group continued to pursue its growth strategy in 2010 and was able to finance most of the capital expenditure of €136.9 million (2009: €153.9 million) through operat-ing cash flow. Free cash flow of minus €38.3 million was similar to the previous year's level (2009: minus €34.0 million). Despite the increase in net debt to €410.5 million (December 31, 2009: €367.9 million), SGL Group achieved a gearing ratio of 0.47 as of December 31, 2010, thus keeping it at the target level of approximately 0.5. This was due to the increase in equity attributable to the shareholders of the parent company to €864.4 million (2009: €749.4 million). Accordingly, the equity ratio improved from 39.6% to 40.9%.

Segment Reporting

Performance Products (PP) Achieves High Stable Results

The positive trend in graphite electrodes resulting from increased capacity utilization in the steel industry was partially offset by the anticipated sharp decline in the cathode business, which suffered from the capex pause and cathode inventory reductions in the aluminum industry in 2010. Nevertheless, sales in the Business Area PP rose by 19% to €762.6 million (2009: €641.6 million). The currency-adjusted increase in sales amounted to 15%.

Despite higher sales of graphite electrodes and cost savings of approximately €8 mil-lion, EBIT declined by 5.1% to €144.1 million compared to €151.9 million in 2009. The decrease was due to higher raw materials costs that could not be offset by price in-creases, the weaker cathode business and ongoing start-up costs for commissioning the new production plant in Malaysia. The return on sales therefore amounted to 19% (2009: 24%).

Graphite Materials & Systems (GMS) Achieves ROS Over 9%

New orders began a strong recovery at the start of 2010, which led to a notable sales increase as early as the second quarter of 2010. The upward trend continued through-out 2010 and was reflected in the year-on-year growth of 9% in sales to €395.9 million following €364.5 million in 2009. The currency-adjusted increase in sales was 6%. Whereas demand markedly improved particularly from the semiconductor, LED and solar industries, lower maintenance and replacement investments in the chemicals industry led to a slight decline in sales in the Business Unit Process Technology after two consecutive record years. Overall, EBIT went up by nearly one third, from €28.0 million to €36.9 million. Cost savings amounted to approximately €9 million. Return on sales at GMS increased significantly from 7.7% to 9.3%. The medium-term target of minimum 10% was already exceeded in the second half of the year.

Carbon Fibers & Composites (CFC) Improves Despite Difficult Environment

Despite the persistently difficult market environment – particularly with respect to car-bon fiber prices – sales in the Business Area Carbon Fibers & Composites increased in full-year 2010 by 5% (currency-adjusted: 3%) to €218.5 million (2009: €208.0 million) primarily in response to improved sales volumes of carbon fibers, composite materials and structural components for the aviation and defense industries (HITCO). This im-provement was partially offset by lower sales at SGL Rotec due primarily to the produc-tion conversions in offshore rotor blades and project postponements. Excluding SGL Rotec, CFC sales increased by over 30%.

Sales for the equity-accounted investments in the Business Area Carbon Fibers & Composites, which are not included in the consolidated sales of SGL Group, increased by 77% to €137.0 million in 2010 (2009: €77.3 million; 100% of the sales revenue of these companies.) Particularly due to operational improvements in all business units as well as higher sales and costs savings of approximately €6 million, the loss in the Business Area CFC was considerably reduced from €22.9 million to €6.6 million.

Outlook 2011: Double-Digit Sales and Earnings Growth

Outlook 2011: For the fiscal year 2011, SGL Group anticipates an increase in sales in excess of 10% as well as an EBIT between €150 and €165 million corresponding to a return on sales of 10-11%. Despite the continued need for high capital expenditure of up to €150 million for 2011, which again will be largely funded by operating cash flows, the target gearing remains at approximately 0.5.

Vision 2015: Group Sales to Reach €2.5 Billion

Medium-term targets 2011-2015: SGL Group has laid the foundation for profitable fu-ture growth through finished and ongoing investments in new technologies focused on lightweight construction, alternative energies, electric mobility and energy efficiency. Consequently and assuming that the global economy continues this positive trend, SGL Group expects annual organic sales growth of over 10% for the fiscal years through 2015.

SGL Group expects an increase in sales to roughly €2.5 billion by 2015, which will be driven by all three Business Areas. By 2015 GMS and CFC will together account for half of consolidated Group sales. As a result, SGL Group will achieve its long-term ob-jective to deliver sustainable profitable growth in all three Business Areas.

SGL Group’s carbon fiber and composites business will reach the sales threshold of €1 billion in 2015. This includes joint ventures accounted for using the equity method, which are expected to have a sales volume of approximately €500 million in 2015 (100% of the sales revenue of these companies).

All Business Areas are expected to be profitable from 2011 onwards. In addition, SGL Group expects a Group ROS of at least 12% from 2012 onwards. Free cash flow should be positive as of 2013.

Financial Highlights of SGL Group

 ( in € million)

Full Year
2010 2009 Change
Sales revenue 1,381.8 1,225.8 12.7%
Gross profit 369.6 337.5 9.5%
EBITDA 194.8 171.6 13.5%
Operating Profit (EBIT)(1) 128.4 111.0 15.7%
Return on sales (ROS)(2) 9.3% 9.1%  
Return on capital employed (ROCE)(3) 9.0% 8.2%  
Profit/loss before tax 75.7 -18.1  
Consolidated net profit / loss 52.2 -60.8  
Earnings per share, basic (in €) 0.80 -0.93  
Dec.
31. 2010
Dec.
31. 2009
Change
Total assets 2,113.3 1,891.0 11.8%
Equity attributable to
shareholders of the
parent company
864.4 749.4 15.3%
Net debt 410.5 367.9 11.6%
Gearing(4) 0.47 0.49  
Equity ratio(5) 40.9% 39.6%  
Capital expenditure in property, plant and equipment 136.9 153.9 -11.0%
Free cash flow -38.3 -34.0 -12.6%
Employees 6,285 5,976 5.2%
(1) Before impairment losses of €74.0 million in 2009
(2) EBIT to sales
(3) EBIT to average capital employed
(4) Net debt to equity attributable to shareholders of the parent company
(5) Equity attributable to shareholders of the parent company to total assets

 

About SGL Group – The Carbon Company

SGL Group is one of the world’s leading manufacturers of carbon-based products. It has a comprehensive portfolio ranging from carbon and graphite products to carbon fibers and composites. SGL Group’s core competencies are its expertise in high-temperature technology as well as its applications and engineering know-how gained over many years. These competencies enable the Company to make full use of its broad material base. SGL Group’s carbon-based materials combine several unique properties such as electrical and thermal conductivity, heat and corrosion resistance as well as high mechanical strength combined with low weight. Due to the paradigm shift in the use of materials as a result of the worldwide shortage of energy and raw materials, there is a growing demand for SGL Group’s high-performance materials and products from an increasing number of industries. Carbon and graphite products are used whenever other materials such as steel, aluminum, copper, plastics, wood etc. fail due to their limited properties. Products from SGL Group are used predominantly in the steel, aluminum, automotive, chemical and glass/ceramics industries. However, manufacturers in the semiconductor, battery, solar/wind energy, environmental protection, aerospace and defense industries as well as in the nuclear energy industry also figure among the Company’s customers.

With 45 production sites in Europe, North America and Asia as well as a service network covering more than 100 countries, SGL Group is a company with a global presence. In 2010, the Company’s workforce of around 6,300 generated sales of €1,382 million. The Company’s head office is located in Wiesbaden/Germany.

Important note:

This press release may contain forward-looking statements based on the information currently available to us and on our current projections and assumptions. By nature, forward-looking statements involve known and unknown risks and uncertainties, as a consequence of which actual developments and results can deviate significantly from these forward-looking statements. Forward-looking statements are not to be understood as guarantees. Rather, future developments and results depend on a number of factors; they entail various risks and unanticipated circumstances and are based on assumptions which may prove to be inaccurate. These risks and uncertainties include, for example, unforeseeable changes in political, economic, legal, and business conditions, particularly relating to our main customer industries, such as electric steel production, to the competitive environment, to interest rate and exchange rate fluctuations, to techno-logical developments, and to other risks and unanticipated circumstances. Other risks that in our opinion may arise include price developments, unexpected developments connected with acquisitions and subsidiaries, and unforeseen risks associated with ongoing cost savings programs. SGL Group does not intend or assume any responsibility to revise or otherwise update these forward-looking statements.

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