SGL Carbon: Improved profitability despite slightly lower sales

Weak demand in some of our customer markets is increasingly hindering SGL Carbons sales growth. After nine months in 2024, SGL Carbon generated sales of 781.9 million, which was slightly below the prior-year level at minus 4.8% (9M 2023: 821.7 million). Adjusted for currency and structural effects, Group sales decreased by 3.6%. Adjusted EBITDA, an important key figure for the Group, remained at a comparable level of 127.6 million in the reporting period (9M 2023: 130.0 million). Despite the slight decrease in sales, the adjusted EBITDA margin improved from 15.4% in Q1 and 16.7% in Q2 to 16.9% in Q3 and amounted to 16.3% after nine months (9M 2023: 15.8%). The reasons for the improved adjusted EBITDA margin are, in particular, product mix effects in the Graphite Solutions and Process Technology business units. By contrast, the ongoing weakness in demand and the associated price pressure for carbon and textile fiber products in the Carbon Fibers business unit continued to weigh on the Groups sales and earnings development.

Even with our diversified product portfolio, we can no longer completely withdraw from the generally weak economic environment. In addition, there was a decline in demand for specialty graphite products for the semiconductor industry in the third quarter. In particular, our products for the manufacture of silicon carbide-based semiconductors are suffering from the restrained demand for electric vehicles on the customer side, explains CEO Dr. Torsten Derr. While the last 18 months were characterized by enormous demand for silicon carbide semiconductors and insufficient production capacities, the market has cooled down significantly. Due to a lack of demand from the automotive industry, our semiconductor customers have significantly reduced order volumes. We do not expect to see a significant upturn in demand for our specialty graphite products until the sales figures for electric vehicles pick up again.

Based on the adjusted EBITDA of 127.6 million and taking into account depreciation and amortization of 41.0 million (9M 2023: 43.3 million) and one-off effects as well as non-recurring items of minus 18.3 million (9M 2023: minus 47.2 million), EBIT after nine months of 2024 will be 68.3 million (9M 2023: 39.5 million). The one-off effects and non-recurring items result, among other things, from the restructuring measures at Carbon Fibers and the Battery Solutions business line as well as from expenses for a strategy project. When comparing with the previous year, it should be noted that the first nine months of 2023 were disproportionately affected by an impairment loss on the assets of Carbon Fibers ( 44.7 million).

Development of the business unitsAfter nine months in 2024, sales in the Graphite Solutions business unit stagnated at 412.5 million, the same level as in the prior-year period (9M 2023: 418.4 million). While sales in this business unit had still grown slightly by 1.3% in the first half of 2024, the slowdown in demand in the Semiconductor & LED market segment weighed on Q3 2024. The reason for the weakening demand for our graphite products is the significantly lower-than-expected decline in electric vehicles, which in particular use silicon carbide semiconductors. Our products are needed to manufacture silicon carbide-based semiconductors, meaning that the market development of these semiconductors has a direct impact on our business. Looking at the first nine months of 2024 as a whole, slight sales increases in the Semiconductor & LED and Automotive & Transport market segments were offset by the decline in demand in the other market segments.

Adjusted EBITDA at Graphite Solutions increased by 4.8% to 104.3 million (9M 2023: 99.5 million) despite the lower level of sales. This is mainly due to the change in the product mix compared with the first nine months of the previous year. Despite the decline in demand in Q3 2024, overall production capacity used for our silicon carbide semiconductor customers was higher than in the previous year. Accordingly, the adjusted EBITDA margin improved year-on-year to 25.3% (9M 2023: 23.8%).

Process Technology generated sales of 106.2 million and continued its positive business performance with an 11.0% increase in sales in a nine-month comparison. This is also reflected in the adjusted EBITDA, which increased from 17.5 million in the same period of the previous year to 25.6 million (+46.3%). Higher capacity utilization and positive product mix effects led to an improvement in the adjusted EBITDA margin from 18.3% in the first nine months of 2023 to 24.1% in the reporting period.

The Carbon Fibers business units sales for the first nine months of 2024 amounted to 157.1 million, significantly below the figure of 179.6 million for the prior-year period. The decline is due in particular to the continued weak demand from the wind industry and to the increasing competitive pressure resulting from global overcapacities for carbon and textile fibers.

Idle production capacities and the associated lack of fixed cost absorption as well as declining margins for commodity products led to a further deterioration in the adjusted EBITDA of the Carbon Fibers. The adjusted EBITDA of the Carbon Fibers business unit fell to minus 7.9 million in the first nine months of 2024 (9M 2023: 3.2 million). It should be noted that the adjusted EBITDA of the Carbon Fibers business unit includes an earnings contribution of 11.6 million from the joint venture BSCCB, which is accounted for At-Equity (9M 2023: 14.1 million). Excluding this contribution from the At-Equity accounted BSCCB, the adjusted EBITDA of Carbon Fibers would have been minus 19.6 million (9M 2023: minus 10.5 million).

SGL Carbon assumes that demand for carbon fibers will not recover in the coming months and that the realizable prices for these products

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