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As expected, SGL Carbon's second quarter impacted by Corona pandemic - Sales and recurring EBIT significantly decreased in first half of 2020

18/08/2020

As expected, the second quarter of SGL Carbon was impacted by the Corona pandemic, but not to the extent predicted in May when the quarterly statement for the period ended March 31, 2020 was published. Sales in the three months as per end of June decreased approximately 23 percent year-on-year, whereas Group recurring EBIT was at around 2 million euros and thus higher than anticipated. In total, SGL Carbon reached Group sales of 457 million euros in the first half year. This corresponds to a decrease of around 19 percent year-on-year. The decline is due to a pandemic-related overall weaker business development as well as expected declining developments in the market segments Battery & other Energy (GMS) and Textile Fibers (CFM) due to capacity adjustments. Group recurring EBIT was down approximately 71 percent to 11 million euros.

On July 28, 2020, SGL Carbon published a forecast for the full year 2020 under certain assumptions. Accordingly, the company anticipates Group sales to decline by 15 to 20 percent compared to the prior year. The operating recurring Group EBIT is expected to develop slightly positive. In particular, a second pandemic wave and an associated further decline in demand due to a recession is not taken into account in the current forecast. As a result of measures taken at an early stage and contrary to the normal seasonal trend, cash and cash equivalents at nearly 154 million euros as of June 30, 2020 developed very positively compared to 137 million euros at the end of 2019.

"My ambition is to achieve lasting success with SGL Carbon. Over the past two months, we have been conducting a comprehensive analysis of our processes, structures and markets," says Dr. Torsten Derr, CEO of SGL Carbon. "Based on this we will identify the options that will enable us to sustainably increase our profitability. The Corona pandemic is forcing us to act even faster."

In the first half year 2020, sales of SGL Carbon fell significantly by almost 19 percent to 456.5 (previous year: 561.5) million euros. Recurring EBIT decreased by 71 percent to 10.8 (previous year: 37.8) million euros. The return on capital employed (ROCE) based on recurring EBIT was 1.7 (previous year: 4.6) percent. After non-recurring items, EBIT in the first half year 2020 decreased to 5.7 (previous year: 33.5) million euros. Net financing result improved to minus 15.8 (previous year: minus 18.7) million euros. Due to the reduced EBIT, the result from continuing operations before income taxes decreased to minus 10.1 (previous year: 14.8) million euros. Consolidated net result of the period amounted to minus 13.8 (previous year: 10.1) million euros.

Composites - Fibers & Materials (CFM): Sales revenue in the second quarter impacted by Corona pandemic; recurring EBIT decreased by one million to 1.8 million euros in the first half of 2020In the business unit CFM, the effects of the Corona pandemic were clearly visible only since the second quarter. From April to July 2020, sales declined by approximately 22 percent year-over-year and recurring EBIT turned slightly negative. Based on the half year period, sales in CFM declined by approximately 15 percent (currency adjusted: minus 16 percent) to 185.7 (previous year: 219.4) million euros. The largest percentage decline was recorded in the market segment Textile Fibers, where one acrylic fiber line was converted to precursor and two acrylic fiber lines were idled since the end of 2019 as part of earnings improvement measures. Corona-related declines were recorded in the market segments Automotive and Aerospace. In contrast, business with the wind energy industry doubled and thus developed more favorable than initially anticipated. Industrial Application remained relatively stable and close to the prior year level. Recurring EBIT in the first half year 2020 declined from 2.8 million euros in the prior year period to 1.8 million euros in the reporting period due to the Corona related slight loss in the second quarter 2020. The substantially improved results in the wind energy business were more than offset by the approximately 4 million euros lower earnings contribution from At-Equity accounted investments. The reason for the lower At-Equity earnings are temporary production stops at both sites of Brembo SGL between end of March and end of April 2020. EBIT margin in the business unit CFM declined to 1.0 (previous year: 1.3) percent. Return on capital employed (ROCE) based on recurring EBIT of the reporting unit CFM was at minus 1.5 (previous year: plus 0.9) percent. The negative ROCE results from the calculation method employing recurring EBIT for the last twelve months.

Graphite Materials & Systems (GMS): Decline in sales revenue in all market segments except Semiconductors; decline in EBIT by approximately 51 percent to 24.3 million euros

The initial impacts from the Corona pandemic were visible in the business unit GMS only since the second quarter 2020 as well. Compared to the prior year quarter, sales declined by almost 23 percent and EBIT by approximately 47 percent. In the first half year, sales of GMS declined by approximately 21 percent (no material currency impact) to 258.0 (previous year: 325.8) million euros due to lower revenues in all market segments except Semiconductors, which grew by a low double digit percentage. Compared to the record earnings level in the prior year period of 50.0 million euros, recurring EBIT decreased by approximately 51 percent to 24.3 million euros. The IRFS 15 effect alone contributed 9 million euros to the earnings decline. The EBIT margin deteriorated to 9.4 (previous year: 15.3) percent. In line with the development in sales, almost all market segments recorded an earnings decline. Earnings in the market segment Automotive & Transport remained stable despite lower sales due to productivity improvements. Return on capital employ
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