05-03-2012

SGL Group with a solid start into Business Year 2012

- Sales increased by 5 % to €382 million in the first quarter 2012
- EBIT at €36 million and net profit at € 14 million on previous year level
- Solid balance sheet structure: equity ratio improved to 47%, gearing at 0.39 significantly below target of approximately 0.5
- Outlook: Assuming recovery of the global economy in the second half of 2012, sales revenue and EBIT improvement expected for fiscal year 2012

Wiesbaden, May 3, 2012. SGL Group – The Carbon Company – delivered a solid start to fiscal year 2012 – against the backdrop of a still challenging economic environment. Group sales improved by 5% to €381.6 million in the first quarter 2012 (Q1/2011: €363.8 million) driven by the Business Areas Graphite Materials & Systems (GMS) and Carbon Fibers & Composites (CFC). EBIT at €36.2 million remained virtually unchanged compared to the same period one year earlier (Q1/2011: €36.3 million). The positive development in the established Business Areas Performance Products (PP) and Graphite Materials & Systems (GMS) – which together increased EBIT by a double-digit percentage – was completely offset by the earnings decline in the Business Area CFC. With this, the first quarter as a whole developed slightly better than expected by the company at the annual press conference on March 22, 2012. Particularly in the Business Area PP, SGL Group benefited from customers pulling forward some deliveries especially for cathodes. Due to uncertainties concerning further economic development, it is still difficult to make a projection for 2012, as already stated at the annual press conference. Based on the assumption that the world economy will begin to pick up pace in the second half 2012, which is expected by many experts, SGL Group currently anticipates improvements in Group sales and EBIT in 2012 compared to the previous year.

Robert Koehler, CEO of SGL Group: “Taking into account that the economic framework is still difficult, we had a very solid start into the fiscal year 2012. In the first quarter we performed slightly better than anticipated. However, it is still difficult to make a concrete projection for 2012, as it depends strongly on the future economic development. If the economy gains momentum in the second half, we anticipate revenue and earnings growth in 2012 compared to the previous year as already announced.”

Profit before taxes virtually unchanged

Based on a virtually unchanged EBIT, the improved net financing result was able to compensate for the reduced result from investments accounted for At-Equity. Accordingly, profit before tax of €21.1 million also remained on the same level as that of the previous year period (Q1/2011: €20.9 million). Due to higher tax expenses in the reporting period, net profit decreased slightly by 5% to €14.1 million (Q1/2011: €14.9 million). Based on an average number of shares of 70.1 million, basic earnings per share were €0.20 (Q1/2011: €0.23).

Equity ratio increased to 47.2 % - gearing at 0.39

Shareholders' equity increased slightly by 2% to €1,066.2 million as of March 31, 2012 (December 31, 2011: €1,041.1 million). Total assets remained virtually unchanged as of March 31, 2012 compared to year-end 2011; therefore, the equity ratio improved from 45.8 % to 47.2 % at the end of the first quarter. Net financial debt increased by 22% to €418.7 million as of March 31, 2012 (December 31, 2011: € 343.3 million) due to the deterioration of the free cash flow from minus €18.0 million to minus €69.8 million which was impacted by the inventory build-up driven increase in working capital. Correspondingly, gearing increased from 0.33 to 0.39 which is still significantly better than the Group target of approximately 0.5. SGL Group continued to consistently pursue its growth strategy in fiscal year 2012 which was reflected in its capital expenditure of €21.4 million (Q1/2011: €17.3 million).

Convertible bond successfully placed

In April 2012 SGL Group strengthened its financing structure further by successfully placing convertible notes. The convertible notes with an aggregate principal amount of €240 million and a maturity of 5 years and 9 months will be convertible into approximately 5.4 million no-par value shares of SGL Carbon SE, based on the share capital of the company as of March 31, 2012 this corresponds to 7.7%. The initial conversion price has been set at €44.10, representing a premium of 30% above the reference price of €33.92. The coupon has been set at 2.75% p.a.. SGL Group plans to use the proceeds from the issuance of the convertible notes for the funding of the acquisition of Fisipe, the expansion of its local production capacities for the Chinese graphite electrode market and to pay back the 2007/2013 convertible notes.

Segment Reporting

Performance Products (PP) with ROS improvement

Sales in the Business Area Performance Products remained unchanged at €197.7 million compared to the same period one year earlier (Q1/2011: €197.9 million). As expected, graphite electrode volumes were slightly below the previous year level. This development was, however, compensated by higher selling prices. The mild recovery in cathode volumes, which began in the middle of last year, continued in the reporting period, however, still at expected lower selling prices. EBIT increased by 11% to €33.7 million in the first quarter 2012 (Q1/2011: €30.5 million) mainly due to higher graphite electrode prices and the increased cathode sales volumes. Savings from the SGL Excellence initiative amounted to approximately €2 million. Start-up costs for the commissioning of the new Malaysian production facility continued to weigh on earnings in the reporting period. Return on sales improved to 17.0% (Q1/2011: 15.4%).

Graphite Materials & Systems (GMS) benefited from the high order backlog of the previous year

In the first quarter 2012, sales in the Business Area Graphite Materials & Systems grew by 13% to €128.9 million (Q1/2011: €114.6 million). As a typical late cyclical business, the Business Unit Graphite Specialties still benefited from the high order backlog of the previous year. The Business Unit Process Technology continued its positive development based on a record order backlog at the end of 2011. EBIT of the Business Area GMS improved by 19% from €19.3 million to €22.9 million in the reporting period, resulting in a return on sales of 17.8% (Q1/2011: 16.8%). This was primarily due to the strong order intake in the first half year 2011, which led to a high fixed cost absorption in the reporting period. In addition, savings from the SGL Excellence initiative of approximately €2 million as well as some smaller non-recurring effects also had a positive impact on the first quarter 2012 result.

Carbon Fibers & Composites (CFC) with slow start into the year

Sales in the Business Area CFC increased by 9% to €54.4 million (Q1/2011: €50.0 million) in the first quarter 2012. The sales growth was attributable to higher sales in the Business Unit Rotor Blades compared to the weak previous year quarter, and was partially offset by lower sales in our Business Units Carbon Fibers & Composite Materials (CF/CM) and Aerostructures (AS). EBIT in the Business Area CFC amounted to minus €8.0 million (Q1/2011: minus €2.1 million). The lower result is due to the continued negative earnings situation of the rotor blade business, the low capacity utilization in the carbon fiber business due to the temporary global oversupply situation as well as the unsatisfactory utilization level in the Business Unit Aerostructures, which was caused by delays in the shipment of orders for the Boeing 787 and the Joint Strike Fighter. Cost savings from SGL Excellence amounted to €1 million. The return on sales was minus 14.7% compared to minus 4.2% in the same period of the previous year.

In March, SGL Group acquired an 86% stake in the Portuguese company Fisipe – Fibras Sintéticas de Portugal S.A. – from the previous principal shareholder, Negofor. With this transaction SGL Group expands its production network for the supply of raw materials for carbon fiber production. At the same time, a mandatory public offer was submitted to the Portuguese securities commission for the remaining shares in Fisipe.

Sales of the At-Equity accounted investments within the Business Area Carbon Fibers & Composites increased by 74,7 % to €42.1 million in the reporting period (Q1/2011: €24.1 million, 100% values for companies), and are not included in the consolidated Group sales figure. As PowerBlades was sold at the end of the fiscal year 2011, the previous year’s sales figure was adjusted for the sales of the PowerBlades joint venture (€19.1 million) to ensure comparability.

Outlook 2012: Sales and EBIT improvements depend on further economic development

Due to the economic uncertainties, especially those resulting from unresolved sovereign debt issues, it is still difficult to make a concrete projection for 2012. With an improved economic backdrop in the course of the year, SGL Group currently anticipates improvements in Group sales and EBIT in 2012 compared to the previous year.

Regarding the development of the Business Areas in 2012, there will be a mixed picture. SGL Group anticipates an increase in sales of the Business Area PP at comparable margins. For GMS, the company expects sales revenues to remain stable. However, due to the anticipated slightly decreased capacity utilization in the Business Unit Graphite Specialties, it is not likely that the record return on sales of 18% achieved in 2011 will be repeated. Nevertheless, a return on sales well over the medium-term target of at least 10% is expected. In the Business Area CFC, the Business Units Carbon Fibers & Composite Materials and Aerostructures are expected to improve in the course of 2012, despite the slow start into the new fiscal year. However, these developments will not be sufficient to compensate for the losses anticipated for the Business Unit Rotor Blades.

Generally, the Business Area CFC continues to be characterized by a strong R&D driven substitution trend, which can lead to delays and to start-up/development expenses, which may not be fully projectable until a certain commercial maturity is reached.

In contrast to the usual cyclicality of our business, EBIT in the second quarter 2012 should remain on a comparable level to the first quarter 2012 due to customers having pulled forward deliveries from Q2/2012 to Q1/2012. In total, the first half year 2012 is expected to be within the framework of the planning.

The mid-term gearing target of approximately 0.5 remains SGL Group`s top priority. It will continue to be the governing indicator defining the investment program. The largest projects in this investment program are scheduled to be completed this year. Accordingly, the company forecasts capital expenditures in plant, property and equipment and intangible assets to be up to €150 million in 2012 which will largely be funded from operational cash flow. SGL Group anticipates free cash flow to be up to minus €60 million in fiscal 2012 (before acquisitions and dividend payment for fiscal year 2011). With capital expenditure forecasted to decline from 2013, the company seeks to again be free cash flow positive (before acquisitions).

Key figures of SGL Group for the first quarter 2012

 (in €m)

Three Months
Q1-2012 Q1-2011 Change
Sales revenue 381.6 363.8 4.9 %
Gross profit 107.1 98.5 8.7 %
EBITDA 54.2 53.5 1.3 %
Operating Profit (EBIT) 36.2 36.3 -0.3 %
Return on sales (ROS)(1) 9.5% 10.0 %  
Profit before tax 21.1 20.9 1.0 %
Net profit attributable to shareholders of the parent company 14.1 14.9 -5.4 %
Earnings per share, basic (in €) 0.20 0.23 -13.0 %
Capital expenditure on property, plant and equipment and intangible assets 21.4 17.3 23.7 %
Free Cash Flow -69.8 -18.0  
March
31, 2012
Dec.
31, 2011
Change
Total assets 2,261.0 2,271.3 -0.5 %
Shareholders’ equity 1,066.2 1,041.1 2.4 %
Net debt 418.7 343.3 22.0 %
Gearing(2) 0.39 0.33  
Equity ratio(3) 47.2 % 45.8%  
Employees 6,453 6,447 0.1 %
(1) Ratio of EBIT to sales revenue
(2) Ratio of net debt to shareholders’ equity
(3) Ratio of shareholders’ equity to total assets

 

About SGL Group – The Carbon Company

SGL Group is one of the world’s leading manufacturers of carbon-based products and materials. 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 very good electrical and thermal conductivity, heat and corrosion resistance as well as high mechanical strength combined with low weight. Due to industrialization in the growth regions of Asia and Latin America and increased substitution of traditional with innovative materials, there is a growing demand for SGL Group’s high-performance materials and products. Products from SGL Group are used predominantly in the steel, aluminum, automotive and chemical industries as well as in the semiconductor, solar and LED sectors and in lithium-ion batteries. Carbon-based materials and products are also being used increasingly in the wind power, aerospace and defense industries.

With 46 production sites in Europe, North America and Asia as well as a service network covering more than 100 countries, the SGL Group is a company with a global presence. In 2011, the Company’s workforce of around 6,500 employees generated sales of €1,540 million. The Company’s head office is located in Wiesbaden.

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 technological 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.

back to overview