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Earnings drop at SGL despite savings

The overall business development of carbon fibre producer SGL Group – in the first nine months of the fiscal year 2013 developed in line with the June guidance, recording an improved free cash flow as well as a decrease in sales by 4%. Due to the adverse development in all three business areas, group’s EBITDA decreased by 52% to €89.5 million and the EBITDA margin to 7.4%. Group-wide savings from SGL2015 amounted to approximately €34 million, of which approximately €19 million were attributable to the SGL Excellence initiative. Robert Koehler, CEO of SGL Group, commented: “The implementation of our Group-wide cost savings programme SGL2015, which was initiated in August, is proceeding as planned. Initial measures are already in the process of being implemented. By the end of 2015, we intend to generate savings of approximately €150 million, approximately €50 million of which will already be realised in 2013. Despite the fact that the business development is far below our original expectations, we have been able to improve free cash flow by more than €140 million within the last 12 months.”

11th November 2013

Innovation in Textiles
 |  Wiesbaden

Protective, Construction, Industrial, Transport/​Aerospace

The overall business development of carbon fibre producer SGL Group – in the first nine months of the fiscal year 2013 developed in line with the June guidance, recording an improved free cash flow as well as a decrease in sales by 4%.

Due to the adverse development in all three business areas, group’s EBITDA decreased by 52% to €89.5 million and the EBITDA margin to 7.4%. Group-wide savings from SGL2015 amounted to approximately €34 million, of which approximately €19 million were attributable to the SGL Excellence initiative.

Robert Koehler, CEO of SGL Group, commented: “The implementation of our Group-wide cost savings programme SGL2015, which was initiated in August, is proceeding as planned. Initial measures are already in the process of being implemented. By the end of 2015, we intend to generate savings of approximately €150 million, approximately €50 million of which will already be realised in 2013. Despite the fact that the business development is far below our original expectations, we have been able to improve free cash flow by more than €140 million within the last 12 months.”

Figures

The financial result improved slightly to minus €37.3 million. Result before tax therefore stood at minus €202.6 million and net loss at minus €277.8 million, including extraordinary tax expenses of €68.7, million which were already recorded in the first half of 2013.

After nine months of fiscal 2013, total assets decreased by 19% to €2.086.9 million. This was caused by extraordinary effects in the business area CFC, extraordinary write-downs of the production site in Lachute, the repayment of the convertible bond of €146 million in May this year and write-downs on deferred tax assets.

Net financial debt increased slightly to a total of €485.5 million, which was nevertheless more than €30 million below the half-year figure. Correspondingly, gearing was at 0.64 as of 30 September 2013. Free cash flow improved strongly to minus €16.1 million due to substantially reduced working capital and lower cash used in investing activities.

Performance products (PP)

Sales in the business area PP decreased by 12% to €595.9 million, due to the unsatisfactory price development in graphite electrodes. Accordingly, EBITDA before restructuring expenses went down by 44% to €94.3 million.

The prior-year result included a one-time positive earnings contribution from the settlement of a long-term supply contract amounting to a low double-digit million € figure. The EBITDA margin was 15.8%. Savings from SGL2015 amounted to approximately €16 million, of which approximately €9 million were attributable to the SGL Excellence initiative.

Graphite materials and systems (GMS)

Sales in the business area GMS decreased by 17% to €311.7 million. While sales in the business unit Process Technology (PT) slightly improved, Graphite Specialties (GS) recorded a substantial decline. Demand from industrial applications within the business unit GS, which was very stable in the previous year, had already been declining since the end of 2012.

However, this trend has stabilised in recent months. Demand from the solar, semiconductor and LED industries, which had been weak since the end of 2011, also seems to have bottomed out recently. The reduced capacity utilisation, as well as lower prices in some businesses in the Graphite Specialties business unit resulted in a significantly lower earnings level within GMS.

Carbon fibres and composites (CFC)

In the first nine months of 2013, CFC sales increased by more than 50% to €298.7 million. The sales contribution of the Portuguese acrylic fibre manufacturer Fisipe, acquired in 2012, amounted to €87.5 million.

The lower operating result is essentially due to the continued low capacity utilisation in the carbon fibre business, which continues to be impacted by project delays and lower material demand from the wind energy industry and other industrial applications.

Increased productivity and capacity utilisation resulted in a significant improvement in the business unit Rotor Blades. In contrast, delays in shipping orders for the Boeing 787 and the Joint Strike Fighter (F-35) led to an unsatisfactory utilisation in the business unit Aerostructures (HITCO).

Cost savings from SGL2015 in the reporting period amounted to €7 million, of which €5 million are attributable to SGL Excellence.

Outlook for 2013

SGL Group confirms its guidance for 2013. Consolidated EBITDA is expected 50% to 60% below the comparable prior-year figure of €240 million. Group sales are expected to be slightly lower than the prior-year level mainly due to lower expectations in PP and GMS. The cost reduction programme SGL2015 will lead to further restructuring expenses until the year end, of which approximately 60% will be non-cash. Overall, the restructuring expenses will almost reach a triple-digit million € figure.

The substantially lower EBITDA means that the set target for a positive free cash flow in full year 2013 can no longer be met. However, the decline in free cash flow will be substantially less than the reduction in the EBITDA due to rigid expense controls particularly relating to capital expenditures and working capital.

In the business area PP substantially reduced sales are expected in the full year 2013 compared to the previous year mainly due to the recent pricing developments in graphite electrodes. Despite the stabilisation in order intake, the business area GMS expects to record significantly lower sales in 2013 compared to the record year 2012. In the Business Area CFC, only a slight increase in sales is expected in the remaining quarter.

www.sglgroup.com

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