Press Releases 2004


SITEMAP PRINT CONTACT DEUTSCH SEARCH

INVESTOR RELATIONS




	Press Releases

August 11, 2004

SGL Carbon: First half year 2004

Strong development of core businesses CG and GS
Divestiture of Surface Protection envisaged
Profit from operations more than doubles over previous quarter
Net profit in second quarter

WIESBADEN, 11. August 2004. Sales for the first half of the year totaled € 505 million, 3 percent less than in the same period of the previous year. Adjusted for foreign currency changes, sales rose by 2 percent. Compared to the first quarter, second-quarter sales grew by 15 percent to € 270 million.

Profit from operations after restructuring expenses for the first half-year of € 25.4 million were up by 41 percent over the same period the previous year (first half-year 2003: € 18 million). Adjusted for non-recurring expenses totaling € 6.1 million and exceptional income of € 2.8 million generated from the sale of the electrical contacts business during the first quarter of 2003, the first half-year profit from operations was 107 percent over the same period of the previous year. In the second quarter, profit from operations of € 17.7 million as expected after restructuring costs was more than double (+ 130 percent) the previous quarter’s figure of € 7.7 million and 37 percent above the same quarter of the preceding year.

This solid development was caused largely by higher graphite electrode prices and further cost reductions in all businesses. In the Graphite Specialties Business Area, the Company is benefiting from rising demand for electronic applications, process improvements, new product innovations and higher prices. The cost-cutting programs have already generated savings of € 15 million. SGL Carbon anticipates planned overall net savings – after deducting non-recurring expenditures of approximately € 10 million – of € 30 million in 2004. The operational cash flow of € 42 million for the first half of the year is significantly higher than the figure for the same period of the previous year (first half-year 2003: € 8 million).

The net financing costs amounted to € -29.9 million during the first half of the year, compared with € -26.2 million during the same period of 2003. The difference results largely from the corporate bond issued at the beginning of the year in conjunction with the refinancing, which carries an interest rate of 8.5 percent. Tax credit during the first half-year of € 1.7 million arose from the creation of deferred taxes on losses, especially by the German Group companies. As a result, net profit improved to € -2.8 million, compared with € -6.7 million for the same period of the previous year. The net profit for the second quarter was € 2.1 million.

As of June 30, 2004, compared with March 31, 2004, the buy-back in April of 62.6 percent of the convertible bond resulted in a corresponding reduction of the restricted cash for convertible bond as well as the financial liabilities, and thereby the balance sheet total. The buy-back of the remaining 37.4 percent of the convertible bond, for which the Company has liquid funds available in a special escrow account, will occur at maturity in September 2005. The equity ratio improved over the first quarter to 26 percent. Net debt was reduced by € 9 million to € 356 million in the second quarter (Q1 2004: € 365 million).

In the first-quarter interim report, SGL Carbon has announced as part of a strategic review of the Corrosion Protection business (CP) the separation of CP into two units: Process Technology (PT) and Surface Protection (SP). The Company has now largely finished the strategic review of both units.

SGL Carbon has concluded that SP is likely to remain a local business, inconsistent with the Group’s strategic objectives. The Company has therefore engaged an investment bank to examine various options for these activities including divestment. The SP segment has sales of approximately € 120 million per year.

Conversely, SGL Carbon will be retaining the PT operations which have developed into a global business with solid market and competitive positions as well as growth opportunities. PT has averaged a return on sales over the past eight to ten years of more than 10 percent per year.

Due to further progress in market developments and in the technological base, SGL Technologies is now beginning to yield opportunities through potential strategic partnerships in specific areas. Establishing the necessary preconditions for such strategic partnerships has always been a key element of the Company’s strategy to enhance further value creation.

Carbon and Graphite [CG]
Sales of € 272 million were down by 2 percent – slightly below the figure for the same period of the previous year. Negative exchange rate effects could be partially compensated for by considerably higher prices. Adjusted for exchange rate changes, sales for the first half-year rose by 4 percent. Compared with the first quarter, second-quarter sales were up by 22 percent due to the considerably higher volumes.

Sales volumes of graphite electrodes increased by 3 percent to 100,000 metric tons (first half-year 2003: 96,700 metric tons). The average price per ton for graphite electrodes for the first half of the year grew by approximately 16 percent in US dollars and by approximately 1 percent in euros over the same period of the previous year. Costs for raw materials and energy developed as expected and were within the framework of the budget.

CG was able to increase profit from operations over the same period of the previous year by 39 percent to € 46.7 million; this corresponds to a return on sales of 17.2 percent. Contributing to this development were higher prices, full capacity utilization at all plants, and cost reductions totaling € 9 million. Because of a further reduction by over 200 employees within the framework of the current plant optimization programs, SGL Carbon incurred one-time costs of € 3 million during the first half-year.

Despite seasonally lower sales volumes in the third quarter, the Company anticipates for CG profit from operations substantially above previous year’s third quarter (Q3 2003: € 14.2 million).

Graphite Specialties [GS]
Especially due to the continuing positive demand for semiconductors and high-performance batteries as well as in the solar industry, sales increased by 5 percent to nearly € 94 million over the same period of the previous year. Negative foreign currency influences were more than offset by the increased volume as well as by market share gains and price increases in the US.

Profit from operations for the first half-year totaling € 8.5 million was 20 percent higher than the figure of € 7.1 million in the first half of 2003. The return on sales consequently amounted to 9.1 percent. In addition to the higher sales volume, cost reductions also contributed to the higher profit from operations. Adjusted for extraordinary income of € 2.8 million attributable to the sale of the EC business during the first quarter of 2003, profit from operations doubled. Working capital rose in preparation for higher sales in semi-finished products during the second half of the year.

The Company expects for GS additional improvements in sales during the third quarter due to the ongoing favorable demand. Due to the planned reduction in working capital, profit from operations during the second half of the year will be slightly below the figure for the first half-year. However, this measure will contribute to an increase of cash flow.

Corrosion Protection [CP]
Sales decreased by 12 percent to € 73 million during the first half-year – the result not only of a sustained weakness of the customer industries in Europe, but of ongoing structural changes in the investment behavior of the chemical industry.

Profit from operations of € -8.1 million, compared to € -6.4 million in the same period of the previous year, is the result in particular of a weakness in sales. The announced restructuring measures caused € 3.1 million in expenses during the first half of the year, including costs for the separation of the Surface Protection business, compensation payments to former management personnel, and expenses for the social plan. Overall, SGL Carbon anticipates one-time costs of approximately € 5 million in 2004, which will make possible sustained savings of at least the same amount already in the following year. These measures were also implemented in preparation for the potential divestiture of the Surface Protection business.

During the second half of the year, the Company anticipates for CP considerably higher sales, a close to a breakeven EBIT, and thus a considerable improvement over the first half-year.

SGL Technologies [SGL T]
Sales continued to improve during the first half to € 65 million, € 35 million of which were achieved in the second quarter. This was attributable to higher sales of fibers and stronger business with the aviation and aerospace industry. After currency adjustments, sales rose by 3 percent over the first half of 2003.

Profit from operations of € -5.2 million developed as planned during the first half of the year. Overall, the first half-year was affected by preparatory work on new projects.

The Company expects increasing sales due to higher deliveries of brake discs, fibers and new projects during the second half of the year – for example, environmental protection components and particular new products in the automotive segment. Nevertheless, due to the terms of the delivery contracts, most of these sales increases will only be realized in the fourth quarter. SGL T will reduce working capital in order to increase the cash flow. This measure will encumber the result in the third quarter, which will approximate the figure for the second quarter. However, the Company anticipates for SGL T a considerably improved result in the fourth quarter.

Employees
In the first half-year the number of employees in the Group fell by 345 to a total of 6,581 (December 31, 2003: 6,926). The restructuring measures in Poland and Italy were the greatest contributing factors to this staff reduction.

Outlook
For the third quarter, despite seasonal effects the Company anticipates continuing favorable developments in its core areas CG and GS as well as a marked improvement in the CP operations. Contributing to this development are the ongoing full capacity utilization and rising prices for graphite electrodes, growing sales in the other areas, and additional cost reductions. SGL Carbon intends to more than double the third quarter’s profit from operations over the figure for the same quarter of the previous year (Q3 2003: € 6.7 million).

Forward-looking statements:
This press release contains forward-looking statements. These statements reflect the current belief of SGL Carbon’s management as well as assumptions made by, and information available to, the SGL Group. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual future results and developments could differ materially from those set forth in these statements due to various factors. These factors include changes in the general economic and competitive situation, particularly in SGL Carbon’s businesses and markets; changes resulting from acquisitions and the subsequent integration of companies; and changes resulting from restructuring measures. In addition, future results and developments could be affected by the performance of financial markets; fluctuations in exchange rates; changes in national and supranational law, particularly with regard to tax regulations; and other risks and uncertainties, including those detailed in SGL Carbon’s filings with the U.S. Securities and Exchange Commission. SGL Carbon assumes no obligation to update forward-looking statements.

Key figures SGL Carbon Group
(€ million, except per share amounts)

	Half Year
	2004	2003
Sales revenue	504,6	518,8
EBITDA before restructuring costs	66,2	53,1
Profit from operations before restructuring expenses	31,5	18
Profit from operations	25,4	18
Return on sales⁽¹⁾	6,2%	3,5%
Net profit (loss) before minority interests	(2,8)	(6,7)
Earnings per share (in €)	(0,06)	(0,30)
Operational cash flow⁽²⁾	42	8

⁽¹⁾ Ratio of profit from operations before restructuring costs to sales revenue
⁽²⁾ Without currency exchange rate effects

	June 30, 2004	Dec. 31, 2003
Total assets	1,457	1,247
Equity	371	117
Net debt⁽³⁾	356	448
Debt ratio⁽⁴⁾	1,0	3,8
Equity ratio⁽⁵⁾	25,5%	9,4%

⁽³⁾ Further information see Shareholder letter H1/2004
⁽⁴⁾ Net debt divided by shareholders’ equity
⁽⁵⁾ Shareholders’ equity divided by total assets