11-03-2015

First outlook on 2016 significantly impacted by renewed pricing pressure in graphite electrodes

- Rising Chinese steel exports and falling iron ore prices continue to weigh on electric steel production
- Beginning of negotiation season for graphite electrodes indicates renewed pricing pressure
- Legal separation of business Unit PP accelerated – further measures to be reviewed

Wiesbaden, November 3, 2015. SGL Carbon SE will report a solid Q3/2015 in all businesses - including the graphite electrode business - on November 5, 2015, in the context of its 9M/2015 consolidated statement. However, contrary to the Group’s prior expectations, the renewed deterioration in the overall steel markets is expected to have a negative impact on graphite electrode profitability going forward despite past and ongoing cost cutting measures.

Jürgen Köhler, CEO of SGL Group “The overall steel market situation today is comparable to the peak of the financial crisis 2008/09 with crude steel utilization on historic low levels. Chinese steel exports continue to rise, depressing steel production in most remaining regions of the world. In addition, the iron ore / scrap price development continues to be unsupportive for EAF steel production as iron ore prices are expected to reach new lows. Against this backdrop, graphite electrodes remain oversupplied, resulting in renewed pricing pressure.”

Modified 2015 outlook for business unit Performance Products

As a result, customers are starting to reduce and/or postpone their demand for graphite electrodes already for the fourth quarter of this year. Consequently, the earnings contribution from the Business Unit Performance Products (PP) is expected to significantly decline in the final quarter of this year compared to the first three quarters and the significant improvement in the 2015 EBIT of the Business Unit PP compared to 2014 – as previously expected – is no longer achievable; the PP EBIT 2015 is now expected to come in slightly below the 2014 level of €26 million (before non-recurring effects).

The guidance revision relates only to the graphite electrode business. The remaining businesses are performing in line with expectations or even slightly better. Thus, the Group outlook for a significant increase in the 2015 EBIT (before non-recurring effects) compared to the €3 million reported in 2014 remains unchanged.

First view on 2016

Planning for 2016 is still at an early stage. From today’s point of view, the Business Units Graphite Materials & Systems and Carbon Fibers & Materials as well as the cathodes business within the Business Unit PP will develop in line with SGL Group’s expectations. However, the anticipated renewed price erosion in graphite electrodes will prevent a further EBIT improvement in the Business Unit PP. In fact, the graphite electrode business is anticipated to be EBIT negative in 2016, resulting in a significant deterioration of the EBIT of the Business Unit PP.

The renewed downturn in the graphite electrode business confirms SGL Group’s strategy to legally separate the Business Unit PP, as announced on July 7, 2015. Furthermore, it calls for accelerated implementation and thorough execution of the required measures. As a result, SGL Group is confident that the technical carve out process within the SGL Group can be completed well ahead of schedule, i.e. approximately in mid 2016. In addition, SGL Group will also speed up the process of defining and executing on strategic options for PP.

Simultaneously, SGL Group is reviewing further site optimization and capacity reduction measures including potential site closures as well as further reductions in personnel from adapting its business model – this could result in additional restructuring expenses in 2015 in a mid to high double digit million € amount, of which the majority is expected to be non-cash.

As the planning process for 2016 is still in early stages and countermeasures need to be finalized and implemented and their impact evaluated, it is not fully clear what impact the operational and structural developments will have on the 2016 Group EBIT - from today’s point of view, a significant decline in EBIT (before non-recurring effects) is anticipated.

The 9M/2015 report will be published on November 5, 2015, at 7.30h CET as planned.

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 42 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 2014, the Company’s workforce of around 6,300 employees generated sales of €1,336 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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