08-09-2012

SGL Group with solid performance in H1

- Sales increased 12% to €810 million, EBIT at €73 million in the first half 2012
- Performance Products and Graphite Materials & Systems in line with expectations, Carbon Fibers & Composites affected by delayed projects and developments
- Balance sheet structure affected by acquisition of Fisipe and successful placement of convertible bond
- Outlook for full year 2012: Improvement in Group sales, EBIT approximately €160 million

Wiesbaden, August 9, 2012. The operating performance of the three Business Areas of the SGL Group – The Carbon Company – showed a mixed picture in the first half of 2012 against the backdrop of a still challenging economic environment. While Performance Products (PP) and Graphite Materials & Systems (GMS) developed in line with expectations, Carbon Fibers & Composites (CFC) was affected by delayed projects and developments. Group sales improved by 12% to €809.8 million (H1/2011: €725.0 million). Excluding the initial consolidation of the recently acquired Portuguese subsidi-ary Fisipe, the increase was 8%. EBIT in H1/2012 amounted to €73.0 million compared to €76.2 million in the same period one year earlier. The positive development in the established Business Areas PP and GMS – which together increased EBIT by approx-imately 14% – was largely offset by the unexpected earnings decline in the Business Area CFC. Therefore and due to ongoing uncertainties concerning the further global economic development, SGL Group expects EBIT for the Group for full-year 2012 to be in the range of €160 million – comparable to the 2011 EBIT. Based on the assumption of a global economic recovery in the second half of 2012 the company continues to anticipate improvements in Group sales compared to the previous year.

Robert Koehler, CEO of SGL Group: “Our traditional and established Business Areas PP and GMS have developed positively within the framework of our expectations. Unfortunately, we see delays in developments and projects related to the known areas of aviation, energy and industrial applications affecting the build up of our CFC business. This is not unusual for market introductions in uncertain economic times. Irrespective of this we expect a Group EBIT for the full year 2012 to match last year’s level of € 160 million.“

Profit before taxes slightly improved

The net financing result remained virtually unchanged at minus €24.7 million compared to the prior year period. As the improvement in the result from At-Equity accounted investments was able to compensate for the slight decline in EBIT, first half 2012 pre-tax profit of €41.1 million was almost unchanged (H1/2011: €40.7 million). Due to higher tax computations in the reporting period, net profit attributable to the shareholders of the parent company decreased to €23.7 million (H1/2011: €35.0 million). Based on an average number of shares of 70.2 million, basic earnings per share amounted to €0.34 (H1/2011: €0.53).

Balance sheet affected by acquisition of Fisipe and issue of convertible bond

Total assets as of June 30, 2012 increased by 11% to €2,528.4 million compared to December 31, 2011, primarily due to the acquisition of the Portuguese fiber producer Fisipe as well as the issue of a new convertible bond to strengthen the financing struc-ture in April 2012. Shareholders’ equity improved by 6% to €1,104.1 million. The equity ratio consequently decreased from 45.8% to 43.7%. Net financial debt rose significantly by 63% to €558.6 million (December 31, 2011: €343.3 million) due to the inventory build-up driven increase in working capital as well as the acquisition of Fisipe and further financing for At-Equity investments. Correspondingly, gearing increased from 0.33 to 0.51 which is still in line with the Group target of approximately 0.5. SGL Group continued to consistently pursue its growth strategy which is reflected in an increase of capital expenditure from €41.2 million to €48.5 million – in addition to payments for At-Equity joint ventures of €27.7 million (H1/2011: €9.7 million) and payments related to the acquisition of Fisipe of €30.6 million. In total, free cash flow in H1/2012 decreased to minus €171.6 million (H1/2011: minus €58.3 million).

Segment reporting

Performance Products (PP): ROS improved to 18.3%

In the Business Area Performance Products (PP), sales increased by 6% to €413.1 million (H1/2011: €388.1 million). Graphite electrode volumes in the first half of 2012 remained below the previous year’s level due to the weaker first quarter. However, the effect from the lower graphite electrode volumes was compensated by higher selling prices. The recovery in cathode volumes, which began in the middle of last year, continued in the reporting period – however at expected lower selling prices. EBIT increased by 21% to €75.5 million in the first half 2012 compared to €62.6 million in the same period one year earlier, mainly due to higher graphite electrode prices and in-creased cathode sales volumes as well as savings from the SGL Excellence initiative of approximately €4.5 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 18.3% (H1/2011: 16.1%).

Graphite Materials & Systems (GMS) with continued strong performance

In the Business Area Graphite Materials & Systems (GMS), sales grew by 12% to €252.8 million (H1/2011: €226.0 million) due to a broad materials base which was able to more than compensate for the cyclical downturn in the solar and LED industries. The Business Unit Process Technology also continued its positive development based on a record order backlog at the end of 2011. EBIT improved by approximately 4% and thus less than proportionately to sales from €39.9 million in H1/2011 to €41.3 million in H1/2012, resulting in a return on sales of 16.3% (H1/2011: 17.7%). The predicted slight deterioration of the ROS is primarily the result of lower fixed cost absorption. Capacity utilization in the first half year 2012 was lower compared to the very high level of H1/2011, as GMS has adjusted production to the lower order intake levels recorded since the fourth quarter of last year. Savings from the SGL Excellence initiative amounted to approximately €4 million in the first half of 2012.

Carbon Fibers & Composites (CFC) in a challenging environment

Sales in the Business Area Carbon Fibers & Composites (CFC) increased by 32% to €142.9 million (H1/2011: €107.9 million) including an initial sales contribution of €29.8 million from the newly acquired Fisipe. The like-for-like sales growth of 5% was attribut-able to higher sales in the Business Unit Rotor Blades compared to the weak previous year period and was partially offset by lower sales in the Business Units Carbon Fibers & Composite Materials (CF/CM) and Aerostructures (AS). EBIT in the CFC Business Area amounted to minus €16.5 million compared to minus €4.2 million in the same period one year earlier. The lower result is due to the continued negative earnings situation of the wind/rotor blade business, the reduced capacity utilization in the carbon fiber business, where continued project shifts resulted in lower material demand from the wind industry and delays in the aerospace and defense industries (Boeing 787, Joint Strike Fighter). Cost savings from SGL Excellence amounted to approximately €4 million. Return on sales was minus 11.5% compared to minus 3.9% in the same pe-riod of the previous year.

Sales of the At-Equity accounted investments within the Business Area Carbon Fibers & Composites increased by 35% to €74.0 million (H1/2011: €54.8 million, 100% values for companies). These sales are not included in the consolidated Group sales figure.

Outlook 2012 adjusted due to adverse development in Business Area CFC

Based on the assumption that the world economy may begin to pick up pace in the second half 2012, SGL Group continues to guide to improvements in Group sales for the full year 2012 compared to the previous year. However, this assumption is subject to risk. Despite the Business Areas PP and GMS performing in line with guidance, the company now expects Group EBIT in the full year 2012 to remain on the 2011 level of approximately €160 million due to the higher than initially planned losses in the Business Area CFC.

Regarding the development in the Business Areas, SGL Group continues to anticipate an increase in sales of PP at comparable margins. For GMS, the company expects sales to remain on last year’s level and a return on sales which will be significantly high-er than the medium-term target of at least 10%. In the Business Area CFC, losses in the full year 2012 will be higher than in 2011 due to the difficult market situation in the Business Unit Rotor Blades, project delays in the military and civil aviation industries as well as delayed material demand from the wind industry, caused mainly by the produc-tion facility shutdown of a major customer. Nevertheless, CFC expects the losses to improve in the second half compared to the first half of this year. Generally, the Busi-ness Area 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 partially not be projectable until a certain commercial maturity is reached. However, there is no change to the considerable long-term growth potential in this material segment.

The mid-term gearing target of approximately 0.5 remains 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, SGL Group forecasts capital expenditure in plant, property and equipment and intangible assets to be up to €150 million in 2012 (including Fisipe) which will largely be funded from opera-tional cash flow. The company continues to anticipate free cash flow to be up to minus €60 million in fiscal 2012 (before acquisitions and dividend payment for fiscal year 2011). When including payments relating to the acquisition of Fisipe, SGL Group ex-pects free cash flow in the full year 2012 (before dividend payment for fiscal year 2011) to amount to approximately minus € 115 million. With capital expenditure forecasted to decline in the future, the company seeks to again be free cash flow positive (before acquisitions) in 2013.

Additional information about SGL Group and the report of the first half 2012 can be found at: www.sglgroup.com.

Key figures of SGL Group for the first half 2012

 (in €m)

1st Half Year
H1-2012 H1-2011 Change
Sales revenue 809.8 725.0 11.7%
Gross profit 212.7 199.7 6.5%
EBITDA 111.3 110.3 0.9%
Operating profit (EBIT) 73.0 76.2 -4.2%
Return on sales (ROS)(1) 9.0% 10.5 %  
Profit before tax 41.1 40.7 1.0%
Net profit attributable to shareholders of the parent company 23.7 35.0 -32.3%
Earnings per share, basic (in €) 0.34 0.53 -35.8%
Capital expenditure on property, plant and equipment and intangible assets 48.5 41.2 17.7%
Free Cash Flow -171.6 -58.3  
June
30. 2012
Dec.
31. 2011
Change
Total assets 2,528.4 2,271.3 11.3%
Shareholders’ equity 1,104.1 1,041.1 6.1%
Net financial debt 558.6 343.3 62.7%
Gearing(2) 0.51 0.33  
Equity ratio(3) 43.7% 45.8%  
Employees 6,677 6,447 3.6%
(1) Ratio of EBIT to sales revenue
(2) Ratio of net financial 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 47 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 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.

Further information on the SGL Group can be found online at: www.sglgroup.com.

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.

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