Year End Analyst Meeting Frankfurt March 14, 2013
SGL Group Consistent development and strategic direction Highlights 2012: 20th anniversary of SGL Group New corporate headquarters in Wiesbaden, Germany Strengthening our Corporate Identity Implementation and continuation of strategic projects on track: - planned expansion of Chinese Graphite Electrode production - iso graphite investments in Germany and China - backward integration into precursor for carbon fiber production through acquisition of Fisipe Reinstatement of dividend payments Successful placement of 240 million convertible bonds SGL Group certified as Germany s Top Employer 2012 2
Dividend Stable dividend proposal to the AGM in April 2013 Dividend Policy 2012ff Restart of dividend payment for fiscal 2011 with 0.20 per share Maintaining dividend proposal for fiscal 2012 despite lower net income Foundation for sustainable profitable growth established Reduced investment requirements in the medium term Free cash flow (before acquisitions) expected to be positive from 2013 onwards 3
2012 Financials
SGL Group 2012 Results for the Group Income Statement in million Sales revenue EBITDA before special effects* Operating profit (EBIT) before special effects* Operating profit (EBIT) Results from At-Equity accounted investments Net financing result Profit before tax Consolidated net profit attributable to equity holders EPS, basic (in ) Dividend per share (in ) FY 2012 1,709.1 239.7 154.2 100.0-32.6-57.7 9.7 7.2 0.10 0.20 FY 2011 1,540.2 231.7 160.4 165.5-32.6-49.2 83.7 73.2 1.09 0.20 Sales revenue increase: 11%, currency adjusted 8% Initial consolidation of Fisipe contributed 81.1 million to sales - corresponding to 5% of reported sales growth Project write-offs within BU Aerostructures negatively impacted EBIT by 54.2 million in 2012 EBIT includes sustainable cost savings of 26 million from SGL Excellence Initiative (SGL X) * Before project write-offs of 54.2 million in 2012 and before reversal of impairment losses and impairment losses of 5.1 million in 2011
SGL Group 2012 Results for the Group Key Ratios EBITDA before special effects* (in million) ROS based on EBITDA before special effects* (in %) Operating profit (EBIT) before special effects* (in million) ROS based on EBIT before special effects* (in %) Average capital employed (in million) ROCE based on EBIT before special effects* (in %) 2012 239.7 14.0 154.2 9.0 1,735 8.9 2011 231.7 15.0 160.4 10.4 1,597 10.0 * Before project write-offs of 54.2 million in 2012 and before reversal of impairment losses and impairment losses of 5.1 million in 2011
SGL Group 2012 Results for the Group Key Balance Sheet and Cash Flow Figures Total assets (in million) Equity attributable to the shareholders of the parent company (in million) Equity ratio (in %) Total liquidity (in million) Net debt (in million) Gearing (net debt/equity) in million Cash provided by operating activities Capital expenditures in property, plant and equipment and intangible assets Cash used in other investing activities (proceeds from sale of intangible assets and property, plant and equipment, payments for the acquisition of subsidiaries, payments for capital injection concerning at-equity accounted investments and for other financial assets) Free cash flow 31.12.2012 2,560.0 1,066.1 41.6 355.9 459.3 0.43 2012 115.0-133.5-61.5-80.0 31.12.2011 2,271.3 1,041.1 45.8 241.7 343.3 0.33 2011 136.2-138.8-30.5-33.1
SGL Group FY 2012 Results for Performance Products (PP) in million Sales revenue EBITDA Return on sales based on EBITDA (in %) Operating profit (EBIT) Return on sales based on EBIT (in %) FY 2012 940.7 222.8 23.7 181.7 19.3 FY 2011 845.7 179.9 21.3 143.3 16.9 Sales revenue increase: 11%, currency adjusted 8% higher graphite electrode volumes in H2/2012 compared to H1/2012 higher graphite electrode selling prices expected final settlement of a long-term supply contract in the amount of a double-digit million figure slight recovery in cathode volumes offset by expected lower selling prices EBIT increase: 27% higher graphite electrode prices final settlement of a long-term supply contract increased cathode sales volumes Start-up costs for gradual commissioning our new Malaysian plant continued to weigh on earnings 10 million savings from SGL X Initiative
SGL Group FY 2012 Results for Graphite Materials & Systems (GMS) in million Sales revenue EBITDA Return on sales based on EBITDA (in %) Operating profit (EBIT) Return on sales based on EBIT (in %) FY 2012 486.2 88.4 18.2 69.3 14.3 FY 2011 468.7 101.6 21.7 84.0 17.9 Sales revenue increase: 4%, currency adjusted approx. unchanged Business Unit Graphite Specialties declined due to the cyclical downturn in solar, semiconductor and LED industries positive trend in Business Units Process Technology and New Markets was able to compensate demonstrating the advantage of our broad materials base EBIT decrease: 18% resulting from lower fixed cost absorption as production has been adjusted to lower order intake levels since beginning of Q2/2012 particularly in Graphite Specialties still second best year ever for GMS 9 million savings from SGL X initiative
SGL Group FY 2012 Results for Carbon Fibers & Composites (CFC) in million Sales revenue EBITDA before special effects* Return on sales based on EBITDA before special effects (in %) * Operating profit (EBIT) before special effects* Operating profit (EBIT) Return on sales based on EBIT before special effects (in %) * FY 2012 277.2-20.6-7.4-39.2-93.4-14.1 FY 2011 220.2-5.3-2.4-16.9-11.8-7.7 Reported sales revenue increase: 26%, currency adjusted 23% initial sales contribution of 81.1 million from initial consolidation of Fisipe organic sales growth of 4% (excluding Fisipe and project write-offs) higher sales in Business Unit Rotor Blades compared to weak 2011 partially offset by lower sales in Business Units Carbon Fibers & Composite Materials (CF/CM) Before project write-offs ( 54.2 million) EBIT decreased due to continued negative earnings situation of our wind energy/rotor blade business low capacity utilization in the carbon fiber business due to lower material demand from wind industry unsatisfactory utilization level in the Business Unit AS caused by Boeing 787 and Joint Strike Fighter delays 7 million savings from SGL X initiative * Before project write-offs of 54.2 million in 2012 and before reversal of impairment losses and impairment losses of 5.1 million in 2011
SGL Group FY 2012 Results for Central T&I and Corporate Costs in million Sales revenue/other revenue Central T&I costs Corporate costs FY 2012 5.0-11.5-46.1 FY 2011 5.6-12.9-37.1 Central T&I costs decreased by 11% mainly due to a governmental subsidy received for our R&D activities Corporate costs increased by 24% primarily due to the acquisition of Fisipe, costs related to the relocation of the new head office, and costs from the implementation of a project to improve the internal reporting systems
Financing Structure, Balance Sheet Ratios and Cash on Hand Allow continuation of growth path SGL Group established a solid long term financial structure in May 2007 200 million Corporate Bond at EURIBOR plus 125 bps (maturity 2015) 145.5 million* Convertible Bond at 0.75%, adjusted conversion price of 36.30 (maturity 2013) (originally 200 million prior to conversion) NOTE FINAL DAY OF CONVERSION: MAY 2, 2013 200 million credit facility, undrawn (original 2012 maturity extended to 2015) Followed by supplemental debt instruments in June 2009 and in April 2012 134.7 million* Convertible Bond at 3.5%, adjusted conversion price of 29.21 (maturity 2016) (originally 190 million prior to conversion) 240 million Convertible Bond at 2.75%, adjusted conversion price of 43.84 (maturity 2018) SGL Group has solid balance sheet ratios and liquidity at end of December 2012 Equity ratio: 42% Gearing: 0.43 Total liquidity: 356 million SGL Group has currently no refinancing requirements * As at December 31, 2012
Ensuring the Future Capital Expenditure by Business Area Major investment focus in 2012: PP: Continued build up of new GE + CA production facility in Malaysia Replacement and EHSA investments in Spain and Poland GMS: Isostatic graphite capacity expansion in Bonn (Germany) Capacity expansion in USA and China EHSA investments in France and in USA Reconstruction of Sigraflex facility in Meitingen (Germany) CFC: Further investments in automation technologies at HITCO (USA) and SGL Kümpers (Germany) Infrastructure improvement in Lemwerder (Germany) ESHA investment in Scotland Capital expenditure and depreciation (in million) 131m 69 21 30 240m 111 25 90 154m 80 137m* 23 21 35 50 39 30 49 54 61 66 71 29 24 11 14 12 20 14 13 2007 2008 2009 2010 2011 2012 Central projects Carbon Fibers & Composites 66 Capex (left hand column) Depreciation (right hand column) 139m 61 46 Graphite Materials & Systems Performance Products 134m * Reported capex of 129.5 million for 2010 includes 7.4 million cash inflow for services rendered by SGL Group. Therefore cash outflow for capex was 136.9 million 86
Outlook 2013
SGL Group Group Outlook 2013 FY 2013 sales to grow slightly vs. 2012* Group EBITDA approximately 10-15% below 2012 level ( 240 million before project write-offs) mainly due to non-recurrance of a one time gain from the final settlement of a long term supply contract in 2012 Improved at-equity results from CFC JVs Capex, Balance Sheet, Cash Flow GEARING to remain at approx. 0.5 defining capex level CAPEX at best up to 120 million, funded from operational cash flow Positive FREE CASH FLOW (before acquisitions) Key risks to forecasts Political, economic, and currency related uncertainties Market risks arising from new capacities temporarily exceeding demand * Based on constant currencies
SGL Group Business Area Outlook and Key Assumptions 2013 Performance Products (PP) Graphite Electrodes: Volumes expected flat to slightly up prices for product and raw material below previous year Cathodes: Previous year EBITDA boosted by final settlement of long term contract, volume recovery continues, factor cost increases not yet compensated by selling prices => Sales slightly higher YoY*, EBITDA comparable to 2011 Graphite Materials and Systems (GMS) Graphite Specialties: Continues to be impacted by cyclical downturn in solar, semiconductor and LED industries Process Technology: strong order backlog 2012 record performance should be repeatable New Markets: Continued strong demand from Li-ion battery industry for consumer segment => Stable sales on record 2012 level*, EBITDA trends comparable to H2/2012, EBITDA ROS 14% Carbon Fibers & Composites (CFC) Carbon Fibers/Composite Materials: Continues to be affected by low demand in the wind, sports and leisure markets and other industrial applications Aerostructures: HITCO to benefit from new contract wins and existing program ramp-ups Rotor Blades: SGL Rotec to reduce losses compared to 2012 by higher capacity utilization and further improving productivity => Improved results compared to 2012, but still negative EBITDA * Based on constant currencies
Strategic Outlook
The strategy of SGL Group Well balanced mix between established and future business Established Business Future Business Performance Products (PP) Graphite Materials & Systems (GMS) Carbon Fibers & Composites (CFC) Graphite & Carbon Electrodes (GCE) Cathodes & Furnace Linings (CFL) ~ GDP volume growth Graphite Specialties (GS) Process Technology (PT) New Markets (NM) > GDP volume growth Carbon Fibers & Composite Materials (CF/CM) Aerostructures (AS) Rotor Blades (RB) equity accounted JVs (with BMW, Benteler, Brembo) Early in its lifecycle high ROS high ROCE strong cash flows Very high growth and earnings potential as only European integrated carbon fiber and composites supplier
The strategy of SGL Group Well balanced mix between established and future business Established Business Future Business Performance Products (PP) Businesses are long established End markets are mostly global, established and diversified enabling compensation amongst industries in case of weakness/shortfall Synthetic graphite is a known material in the industry and our core competence: we are market leaders in our key industries Consequently these businesses are more predictable and we can draw on historic experiences to forecast the future Graphite Materials & Systems (GMS) Well balanced mix between established and new businesses End markets are mostly global, established and diversified enabling compensation amongst customers in case of weakness/shortfall at one customer/industry Synthetic graphite is a known material in the industry and our core competence: we are market leaders in our key industries Energy Efficiency, Renewable Energy and Energy Storage offer new opportunities for graphite solutions. Carbon Fibers & Composites (CFC) Business is young (<20 years) as carbon fiber only at the beginning of large scale commercial industrial use End markets with development character (eg. B787, i3) new, unique projects carrying risk of setbacks and time delays, limited possibility to compensate for shortfalls in one project, project timing defined by customer leading to limited predictability With our core competence high temperature technology, matrix know how and materials processing, we (and our customers!) are still learning to command carbon fiber and composite technologies Will benefit from megatrend in material substitution
Strategic Outlook Group Sales to increase by more than 10% p.a.* CFC sales to exceed 1 bn** m 3000 2500 CFC GMS PP CFC ~ 1 bn** CFC at-eq. 2000 CFC ~25% 1500 1000 Fully consolidated Group sales ~ 2.5 bn GMS ~25% 500 PP ~50% 0 2005 2006 2007 2008 2009 2010 2011 2012 *organic growth, excluding currency effects and acquisitions **incl. additional sales from equity consolidated JVs in CFC calculated on 100% ownership 2012 includes 81 million sales from initial consolidation of Fisipe in Business Area CFC
Strategic Outlook Free Cash Flow* turning positive in 2013 Capex and depreciation expected to converge, free cash flow* turning positive in 2013 250 200 Capex (left hand scale) Depreciation (left hand scale) Free cash flow (right hand scale) 40 20 m 150 100 0-20 50-40 0 2005 2006 2007 2008 2009 2010 2011 2012 2013-60 Until 2012 free cash flow burdened by major investment projects (Malaysia, iso-graphite expansion, investments into carbon fiber and composite capacities) Major investments on schedule and now close to completion Free cash flow turns positive in 2013 (before acquisitions) enabling sustainable, earnings driven dividend policy Future capex converging with depreciation levels; gearing target remains at approx. 0.5 and is indicative for future capex levels *before acquisitions
Strategic Outlook Introduction of EBITDA as Key Performance Measure Over the past years, SGL Group has transformed from an INVEST-TO-MAINTAIN mode to a technology driven INVEST-TO-GROW mode Expansion focused on Asia for PP and GMS as well as the build up of our future growth in CFC INVEST-TO-GROW mode will continue, however controlled by our major KPI GEARING of approximately 0.5 Due to increasing depreciation, SGL Group will introduce EBITDA as an additional KPI to reflect more accurately actual operational performances of our fully consolidated activities In addition, SGL Group will incorporate the strongly growing CFC-activities accounted for atequity into its KPI ROCE (based on EBIT)
Group: EBIT Return on Sales (ROS) target of minimum 12% translates into EBITDA ROS target bracket of 15-17% Group EBITDA ROS target of 15-17% to be achieved in the mid term 25% 20% 15% EBITDA Target 15-17% 10% EBIT 5% 2005 2006 2007 2008 2009 2010 2011 2012 New assets coming on stream contribute to sales and cash flow growth but lead to higher depreciation therefore EBIT development for an interim period will be burdened by depreciation for the state-of-theart capacity buildup Introduction of EBITDA development reflects more accurately OPERATIONAL PERFORMANCE Rising capacity utilization to improve profitability from 2014 onwards Financial and economic crises require time for demand to absorb new capacities
Performance Products: EBITDA ROS target of 19-24% reflects EBIT ROS target of 15-20% New state-of-the-art facility in Malaysia on stream; strong cash flow m 1400 1200 1000 800 Sales (left hand scale) EBITDA ROS (right hand scale) Longer term EBITDA ROS target > 24% EBITDA ROS target 19-24% Sales to reach new peak levels 40% 35% 30% 25% 20% 600 400 15% 10% 5% 200 2005 2006 2007 2008 2009 2010 2011 2012 0% Investment in low cost carbon & graphite hub in Malaysia will enhance competitiveness, GE fully operational for 2013, CA to become fully operational in the course of 2013 Near to medium EBITDA ROS of 19-24% reflects slower global growth and delayed recovery of investment spending in aluminum industry Longer term EBITDA ROS 24% achievable Negotiations ongoing to enlarge our position in Chinese electrode market PP remains high performing business in terms of profitability, sales growth, ROCE and cash flow
Graphite Materials & Systems: EBITDA ROS target of minimum 14% reflects EBIT ROS target of minimum 10% Sales growth significantly > GDP; EBITDA ROS 14% throughout planning period 700 600 Sales (left hand scale) EBITDA ROS (right hand scale) Sales growth 10% p.a. 24% 22% 20% m 500 400 EBITDA ROS target > 14% 18% 16% 14% 300 12% 10% 200 8% 6% 100 2005 2006 2007 2008 2009 2010 2011 2012 4% Midterm structural sales growth of min. 10% p.a. CAGR due to rising demand from high growth end markets (semiconductor, solar, LED, lithium-ion batteries) EBITDA ROS to achieve min. 14% target throughout planning period
Carbon Fibers & Composites: still in development and ramp up phase until 2016 Strategic target: grow sales >20% CAGR. 2000 1800 Development phase, R&D, investment into full value chain ramp up phase commercialisation phase 1600 1400 Sales in m 1200 1000 800 ~ 1 bn sales** At-equity JV sales (100%) 600 400 200 Fully consolidated CFC sales 0-200 2013 2017 Until end 2013: development phase with limited customers/projects, sales development impacted by project delays in wind, aerospace and other industrial applications 2014-2016 ramp up phase starting to generate sales, earnings and cash flow 2017ff: commercialization phase begins driven by aerospace, wind, industrial and automotive applications Total CFC sales of more than 1bn targeted mid term including approximately 500 million sales of equity accounted JVs (calculated on 100% ownership)
Carbon Fibers & Composites: after ramp up phase EBITDA ROS target of minimum 14% reflects EBIT ROS target of minimum 10% Strategic target: EBITDA ROS min. 14% after ramp up phase 20% 15% 10% EBITDA ROS target min. 14% 5% EBITDA ROS 0% -5% -10% -15% -20% Development phase, R&D, investment into full value chain ramp up phase commercialisation phase Typical for development/ramp up phases, earnings development impacted by project delays resulting in underutilized capacities and start up/development costs for new products/production processes 2014/2015 expected inflection point in material substitution with launch of BMW s i3 and ramp up of B787/A350; BMW s i3 the catalyst for carbon fiber use in automotive industry and SGL Group chosen as sole supplier Earnings should improve substantially with new Fisipe PAN-precursor (2014ff) and portfolio optimization (realigning composite components and strengthening carbon fibers/composite materials core businesses) Including at-equity consolidated JVs, we translate our EBIT ROS target of min. 10% into EBITDA ROS target of min. 14%
Group: ROCE to remain based on EBIT, however including the growing CFC JVs accounted for at-equity Group EBIT ROCE target of min. 15-16% achievable in the longer term *capital employed/sales, measure of capital invested per of sales 40% 120% 35% 30% 25% Target ~80% 100% 80% 20% 15% 10% 5% 0% EBIT ROCE (left hand scale) Capital intensity* (right hand scale) 2005 2006 2007 2008 2009 2010 2011 2012 Target min. 15-16% 60% 40% 20% 0% Countercyclical investments including our equity accounted JVs - provide basis for long term profitable growth The resulting sales growth will lead to normalized capital intensity* improving from peak 109% in 2011 to ~80% as investment pace slows and sales growth accelerates Including at-equity accounted CFC JVs, longer term ROCE (EBIT) expected to be min. 15-16% (previously min. 17% excluding at-equity JVs) PP and GMS already fulfill this target, CFC lagging due to start up nature
Important note: This presentation contains forward looking statements based on the information currently available to us and on our current projections and assumptions. By nature, forward looking statements are associated with known and unknown risks and uncertainties, as a consequence of which actual developments and results can deviate significantly from the assessment published in this presentation. 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 may arise in our opinion include price developments, unexpected developments associated with acquisitions and subsidiaries, and unforeseen risks associated with ongoing cost savings programs. SGL Group assumes no responsibility in this regard and does not intend to adjust or otherwise update these forward looking statements.