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SGL Group sets further strategic milestones for long-term profitable growth

The main financial target is to improve the return on capital employed in the Group, as well as in the business units to at least 15% in the medium term.

8th July 2015

Innovation in Textiles
 |  Wiesbaden

Industrial, Transport/​Aerospace, Construction, Civil Engineering

The Board of Management and the Supervisory Board of SGL Group, the leading carbon fibre manufacturer, has identified further strategic milestones to secure long-term profitable growth.

Firstly, an extensive growth initiative has been decided for the business units Graphite Materials & Systems (GMS) and Carbon Fibers & Materials (CFM) targeted to organically increase sales by around 50% until 2020 compared with 2014.

Secondly, the business unit Performance Products (PP) will become a separate legal entity within SGL Group. This measure will enable the unit to optimally adapt its business model to the changed market fundamentals especially in graphite electrodes, the company reports.

 Financial target

The decisions represent a further development of SGL Group’s strategy, which started in fall 2013 with the group-wide cost savings programme SGL2015 and continued in September 2014 with the announcement of the key strategic cornerstones, the manufacturer reports.

The main financial target is to improve the return on capital employed (ROCE, on EBITDA basis) in the Group, as well as in the business units to at least 15% in the medium term.

“With the growth initiative for GMS and CFM and the organization of PP in a separate legal entity, we are now making another important strategic step as part of the realignment of SGL Group. The new structure enables us to further adapt our business models towards both, the challenges and the manifold growth opportunities in the respective business units, and opens up new strategic options for the business unit PP,” said Jürgen Köhler, CEO of SGL Group.

Growth initiative for GMS and CFM

The business units GMS and CFM are already characterized by dynamic market and product development opportunities with above-average growth potential. In 2014, GMS and CFM posted combined sales of EUR 737 million and an EBIT before non-recurring charges of EUR 17 million.

The company expects that through accelerated organic growth, the market position of both business units will be enhanced along the value chain, while simultaneously processes and cost will be further optimized.

Combined sales are targeted to grow organically by roughly 50% until 2020, while meeting the minimum ROCE target of 15%. In addition, selective accretive bolt-on acquisitions are planned to complement SGL Group’s portfolio in terms of technology and market positions.

PP to become a separate legal entity

The business model of PP will be adapted towards standardized products for cyclical markets that show rather long-term growth potential. This is in response to the changed market conditions particularly for graphite electrodes. The corresponding measures are intended to ensure that the business unit remains competitive in the long term.

At the same time, the separation is said to enable the business unit to respond flexibly to strategic options that may arise in the industry. Thus, SGL Group could participate in possible future consolidation scenarios in the graphite electrode industry, if and when appropriate.

The organization as a separate legal entity is set to be completed by the end of fiscal year 2016 at the latest. In the 2014 fiscal year, PP posted sales of EUR 588 million and EBIT before non-recurring charges of EUR 26 million. The business unit will continue to include graphite electrodes, cathodes, carbon electrodes and furnace linings.

Cost savings programme SGL2015

Along with the enhancement of the Group strategy and the company’s portfolio, the strategic realignment of SGL Group also includes the cost savings programme SGL2015 and a general review of its business processes.

Savings of more than EUR 240 million are targeted through SGL2015, of which EUR 172 million had already been achieved by the end of the first quarter of 2015. SGL2015 is expected to be largely completed this year.

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