03-14-2013

SGL Group: Dividend Unchanged despite Write-offs

- Sales revenue up 11% year-on-year to €1,709 million
- EBIT (before write-offs) at €154.2 million down slightly on prior year
- Solid balance sheet ratios: equity ratio at approx. 42%, gearing at 0.43 within target of approx. 0.5
- Proposed dividend unchanged at €0.20
- Positive net profit of €7.2 million generated for the fiscal year (despite non-cash write-offs of €54.2 million on Boeing 787 projects)
- Outlook for 2013: Slight increase in revenue with weaker EBITDA, positive free cash flow anticipated

Wiesbaden, March 14, 2013. In fiscal 2012, performance varied in the Business Areas of SGL Group – The Carbon Company. The established Business Areas of Performance Products (PP) and Graphite Materials & Systems (GMS) maintained their strong market positions and performed well in fiscal 2012 within the framework of expectations. By contrast, the Business Area Carbon Fibers & Composites (CFC) had to absorb project and development postponements, which resulted in, among other things, non-cash project write-offs in the amount of €54.2 million. Group sales revenue rose by 11% over the prior-year figure to €1,709.1 million (2011: €1,540.2 million), thanks in particular to the robust trends at PP and GMS. In addition, the Portuguese acrylic fiber company Fisipe, which was acquired in fiscal 2012, contributed approximately €81 million to the rise in revenue. EBIT before write-offs decreased slightly by 4% year-on-year to €154.2 million (2011: €160.4 million). The return on ales (ROS) declined accordingly to 9.0% (2011: 10.4%).

The Board of Management and the Supervisory Board will propose to the Annual General Meeting on April 30, 2013 to distribute an unchanged dividend of €0.20 to each dividend entitled share for fiscal 2012.

Robert Koehler, CEO of SGL Group: “Our performance was mixed in fiscal year 2012. On the positive side, we maintained our market leadership in the Business Area PP and achieved the second-best results in the Company’s history in the Business Area GMS. However, the trend at CFC was disappointing. Postponements in the aviation and wind energy industries overshadowed the progress made in other areas of CFC and led to notable one-time charges. We do not anticipate this trend reversing until after 2013 due to the uncertain economic situation. This does not alter the prospects for carbon, a material that is being discovered by more and more industries. The year 2013 will be a crucial year in this respect with the launch of the BMW i-series and the ramp-up of the Boeing 787.”

Profit before tax declined to €9.7 million (2011: €83.7 million) and net income fell to €7.2 million (2011: €73.2 million), primarily due to write-offs in the Business Area CFC. Based on an average number of shares of 70.4 million, basic earnings per share amounted to €0.10 (2011: €1.09).

Balance sheet figures remain solid: Gearing at 0.43 within target of approx. 0.5

Total assets increased by 13% to €2,560.0 million as of December 31, 2012 (December 31, 2011: €2,271.3 million), primarily due to the convertible bond issued in April 2012 and the initial consolidation of Fisipe. By contrast, equity attributable to the shareholders of the parent company rose by only 2.4% to €1,066.1 million (December 31, 2011: €1,041.1 million). The equity ratio decreased accordingly from 45.8% to 41.6%. While SGL Group succeeded in reducing net debt by €80 million in the fourth quarter of 2012 to €459.3 million, it was still above the prior-year level of €343.3 million. The main reasons were the acquisition of Fisipe and continued financing of the At-equity accounted investments as well as an increase in working capital based on higher inventories. Gearing therefore rose from 0.33 to 0.43 but remains within our target of approximately 0.5. Free cash flow performed better than anticipated. Thanks to consistent working capital management and lower capital expenditure, free cash flow before acquisitions was limited at €-49.3 million (2011: €-33.1 million). Taking the acquisition of Fisipe into account, free cash flow amounted to €-80 million and was therefore well below the forecasted €-115 million.

Segment Reporting

Performance Products (PP): Double-digit increase in sales revenue and earnings

Sales revenue in the Business Area PP rose by 11% to €940.7 million in the past fiscal year (2011: €845.7 million). As expected, PP benefited from higher graphite electrodes shipments in the second half of the year versus the first half of 2012 as well as higher prices compared with the prior year. The slight recovery in cathode sales volumes continued, albeit at the anticipated lower sales prices. The final settlement of a long-term supply contract in the low double-digit million range contributed to the rise in sales revenue. EBIT increased by 27% to €181.7 million (2011: €143.3 million). Start-up costs for the plant in Malaysia again weighed on earnings. Nonetheless, the return on sales improved from 16.9% to 19.3% in 2012. Cost savings from the SGL Excellence initiative amounted to approximately €10 million.

Graphite Materials & Systems (GMS): Second-best year ever

Sales revenue in the Business Area GMS rose by 4% to €486.2 million in the reporting year (2011: €468.7 million). The growth was based on the positive trend in the Business Units Process Technology (PT) and New Markets (NM), while the Business Unit Graphite Specialties (GS) saw a slight decline. The upward trend at GMS underlines SGL Group's broad materials base that compensates for the cyclical downturn in the solar, semiconductor and LED industries. As expected, EBIT did not reach the record level of the previous year and amounted to €69.3 million (2011: €84.0 million). The return on sales decreased accordingly to 14.3% (2011: 17.9%). The anticipated deterioration in return on sales was primarily attributable to lower fixed cost absorption.

Capacity utilization in 2012 was below the prior year’s very high level, as GMS had already adapted production to the lower order intake level. GMS realized cost savings of around €9 million from our SGL Excellence initiative in 2012.

Carbon Fibers & Composites (CFC): Negatively impacted by project adjustments

Sales revenue in the Business Area CFC rose by 26% in 2012 to €277.2 million (2011: €220.2 million). This figure includes the initial revenue contribution of €81.1 million from Fisipe, the Portuguese acrylic fiber company acquired in April 2012. Sales growth was offset in part by project write-offs in the Business Unit Aerostructures (AS), which reduced sales revenue by €32.5 million. Adjusted for these two factors, sales growth amounted to 4% at CFC. The increase resulted from higher sales revenue in the Business Unit Rotor Blades (RB) compared to the weak prior-year period, although it was partly offset by lower sales revenues in our Business Units Carbon Fibers & Composite Materials (CF/CM) and Aerostructures (AS).

Earnings in the Business Area CFC were heavily affected in the reporting year by non-cash project write-offs in the Business Unit Aerostructures (AS), which amounted to €54.2 million. This Business Unit produces Boeing 787 structural components for Tier 1 Boeing suppliers on a large scale. The write-offs under the rules of IFRS were necessary due to repeated postponements in production and delivery of the Boeing 787 (Dreamliner) as well as a shift in production volumes of the Boeing 787-8 in favor of the Boeing 787-9 model. Write-offs therefore had to be recognized mainly on contracts for the construction of Boeing 787-8 components. SGL Group has asserted claims for damages against one of its customers based on its contractual rights that are common practice in the aviation industry. Possible future compensation payments would reduce the losses under the contract, but under IFRS they cannot be recognized until the corresponding payments are assured. Boeing has announced higher production volumes for the Boeing 787-9 model to make up for reduced production of the Boeing 787-8 model. Thus the decrease is expected to be partially compensated by higher production volumes for Boeing 787-9 components, although this can only impact future income.

EBIT before project write-offs in the Business Area CFC amounted to a loss of €39.2 million (2011: loss of €16.9 million). The reduction in operating earnings is attributable to the continued negative earnings situation in the wind energy/rotor blade business and lower capacity utilization in the carbon fiber business. In addition, the aforementioned postponements of contracted deliveries for the Boeing 787 and the joint strike fighter resulted in unsatisfactory capacity utilization in the Business Unit AS. Cost savings from the SGL Excellence initiative amounted to approximately €7 million in 2012.

Revenue from equity-accounted investments within the Business Area CFC, which is not included in the consolidated sales revenue of SGL Group, increased by 26% to €149.5 million (2011: €119.0 million; both figures based on 100% ownership of the companies).

Outlook: 2013 will be influenced by economic uncertainty

The economic uncertainty makes a specific forecast for 2013 difficult. Nonetheless, SGL Group anticipates a slight increase in Group sales revenue in fiscal year 2013 compared with 2012. PP is expected to see a slight rise in sales revenues versus the 2012 figure, which was positively impacted by final settlement of a long-term supply contract. For the Business Unit GMS, the first half is likely to be on the weak side due to a lower level of new orders, with a recovery not expected before the fourth quarter. Sales revenues are nonetheless expected to remain stable compared with the record level achieved in 2012. In the Business Area CFC, sales revenues are anticipated to rise moderately since a general turnaround is not expected in the wind energy and aviation industries, our key sales markets.

EBITDA in the PP and GMS Business Areas will be below the prior-year levels, given that PP benefited from the non-recurring final settlement of a long-term supply agreement in 2012 and GMS is impacted by the ongoing lack of momentum in the solar, semiconductor and LED industries. For CFC, however, the Company anticipates a moderate improvement in EBITDA, although this will not suffice to offset the expected earnings declines in PP and GMS. Total Group EBITDA for 2013 is likely to fall approximately 10% to 15% below the prior-year level (2012: EBITDA of €239.7 million before write-offs).

The Group will be able to use the operating cash flow to cover capital expenditure requirements, which will be below the 2012 level. SGL Group is therefore maintaining its target of returning to positive free cash flow (before acquisitions) in the current fiscal year and maintaining gearing within our target of approx. 0.5.

Given the fundamental trends are intact, SGL Group is maintaining its forecast of medium- to long-term profitable growth, particularly with respect to material substitution in carbon fibers & composites. The increased use of the Company’s products in energy technology and major opportunities such as those in the automotive industry is gaining traction.

Key figures of SGL Group

 ( in € million)

Full Year
2012 2011 Change
Sales revenue 1,709.1 1,540.2 11.0%
Gross profit 443.31) 419.0 5.8%
EBITDA2) 239.7 231.7 3.5%
Operating profit (EBIT) before special effects 2) 154.2 160.4 -3.9%
Operating profit (EBIT) 100.0 165.5 -39.6%
Return on sales (ROS)3) 9.0% 10.4% -1.4 %-pts
Return on capital employed (ROCE) 8.9% 10.0% -1.1%-pts
Profit before tax 9.7 83.7 -88.4%
Consolidated net profit attributable to equity holders 7.2 73.2 -90.2%
Earnings per share, basic (in €) 0.10 1.09 -90.8%
Dividend per share 0.204) 0.20  
Dec.
31. 2012
Dec.
31. 2011
Change
Total assets 2,560.0 2,271.3 12.7%
Equity attributable to shareholders of the
parent company
1,066.1 1,041.1 2.4%
Net debt 459.3 343.3 33.8%
Gearing5) 0.43 0.33  
Equity ratio6) 41.6% 45.8% -4.2 %-pts
Capital expenditure
for intangible assets and
property, plant and equipment
133.5 138.8 -3.8%
Free cash flow -80.0 -33.1  
Employees 6,686 6,447 3.7%
1) Before project write-offs of €-54.2 million in 2012
2) Before project write-offs of €-54.2 million in 2012 and before reversals of impairment losses and impairment losses totaling €+5.1 million in 2011
3) EBIT to sales revenue (before project write-offs in 2012 and before reversals of impairment losses and impairment losses in 2011)
4) Proposal to the Annual General Meeting for fiscal 2012
5) Ratio of net debt to equity attributable to the shareholders of the parent company
6) Ratio of equity attributable to the 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 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 2012, the Company’s workforce of around 6,700 employees generated sales of €1,709 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.

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