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| November 11, 2004 |
SGL Carbon: Nine month figures 2004
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- Continuing healthy development in core businesses CG
and GS
- Profit from operations more than doubled over Q3/2003
and Q1-Q3/2003
- Cost-cutting program of €11 million for administrative
functions launched
- Further improvement of profit from operations in Q4/2004
over Q4/2003 expected
WIESBADEN, 11. November 2004. The positive economic trends of the
steel and semiconductor industries were also favorably reflected
in the development of sales volume and prices during the third quarter:
During the third quarter, SGL Carbon was able to increase sales by
approximately 4% to €264.6 million over €254.6 million
in the same period the previous year. Sales of €769.2 million
during the first nine months were slightly below the previous year’s
level, whereas after adjusting for foreign currency changes growth
of 4% was posted.
During the third quarter of 2004, profit from operations after
restructuring expenses considerably increased to €14.0 million
(Q3/2003: €-1.3 million, including restructuring expenses
of €3.0 million and a provision for antitrust charges of €5.0
million). The principal causes of this development were the continuing
improvement of prices and sales volume of graphite electrodes and
Graphite Specialties as well as further cost reductions in all
areas of business. Profit from operations before restructuring
expenses amounted to €19.5 million – almost triple to
the figure for the same quarter of the previous year (Q3/2003: €6.7
million).
The restructuring expenses of €5.5 million in the third quarter
of 2004 resulted from the following factors:
- Expenses of €1.7 million resulted from the known current
cost cutting programs.
- As already explained in the press release separately published
today, SGL Carbon has
established a cost-cutting program for administrative functions.
This should result in annual savings of €11 million beginning
in 2006. This development requires non-recurring expenditures of €5 – 6
million, of which €1.4 million were booked during the third
quarter of 2004.
- In conjunction with the focus on cash flow generation, SGL Carbon
sold land and buildings of an already closed-down US location at
Hillsboro, Oregon, at the beginning of October 2004 with a cash
in on sales of €2.7 million. A non-cash write-down in connection
with this transaction amounted to €2.1 million.
During the first three quarters of 2004, profit from operations
after restructuring expenses increased by 136% to €39.4 million
over the same period the previous
year (Q1– Q3/2003: €16.7 million). Profit from operations
before restructuring expenses of €51.0 million more than doubled
(Q1– Q3/2003: €24.7 million); adjusted for extraordinary
income of €2.8 million from the sale of the electrical contact
(EC) business in the first quarter of 2003, growth amounted to
133%.
Excluding the new cost-cutting program for administrative functions,
during the first nine months savings of €27 million from the
existing cost reduction programs were realized. Related restructuring
expenses totaled €8.1 million. SGL Carbon still expects to
realize the planned savings in the gross amount of €40 million,
with expenses amounting to approximately €10 million for 2004
overall.
The net financing costs totaled €-44.8 million during the
2004 reporting period, compared with €-39.8 million in the
same period the previous year. The increase in the net interest
expense on loans to €-22.3 million (first three quarters of
2003: €-18.2 million) is largely attributable to the higher
average interest rate of 6.1% for loans in 2004 that were in connection
with the refinancing operations at the beginning of the year. The
other financial result comprises a one-time write-down of €-1.5
million for a receivable arising from the sale of the process engineering
operations in 2000.
The tax expense of €0.5 million for the first nine months
2004 originated from the tax burden on the profits of foreign subsidiaries
adjusted for capitalized deferred taxes of tax losses, in particular
for the German subsidiaries. The net result for the first three
quarters of 2004 thereby amounted to €-5.9 million (first
three quarters of 2003: €-23.7 million).
Operational cash flow increased by 126% to €69.9 million
over the same period the previous year. Due to the order situation
during the third quarter, Graphite Specialties produced in advance
for delivery during the fourth quarter. Together with a project-related
inventory buildup in Corrosion Protection and SGL Technologies,
during the first three quarters of 2004 working capital increased
by €33.8 million to €417 million after adjusting for
foreign currency changes. Due to deliveries in all businesses,
working capital will decline considerably at year-end compared
with the third quarter of 2004.
Net cash from operating activities excluding antitrust and refinancing
payments totaled €28.1 million. After deducting cash used
in investing activities of €-29.1 million, the resulting free
cash flow amounted to €-1.0 million. Because of the reduction
of working capital during the fourth quarter, for 2004 as a whole
we anticipate a positive free cash flow.
As already reported, SGL Carbon has mandated an investment bank
to assist in the planned divestiture of the surface protection
business of Corrosion Protection. The goal is to find a solution
as soon as possible.
Carbon and Graphite [CG]
Sales rose by 3% over the third quarter of the previous year to €140.5
million (Q3/2003: €136.4 million); after adjustment for foreign
currency changes growth was 9%. The increase for the first three
quarters of €412.6 million fell slightly short of previous year’s
level of €414.0 million, a 5% increase after adjusting for foreign
currency changes.
Sales volumes of graphite electrodes during the third quarter
of 2004 amounted to 53,000 metric tons – 4,000 metric tons
or 8% more than in the same quarter the previous year. Overall,
a total of 153,000 metric tons were delivered during the first
three quarters – up by 7,000 metric tons (+5%) over the comparable
period in the previous year 2003. Average price per ton for graphite
electrodes grew by 15% in the US dollar region and by 1% in the
Euro zone over the comparable period in the previous year.
During the third quarter, profit from operations before restructuring
expenses increased by 77% to €25.1million (Q3/2003: €14.2
million) over the same quarter the previous year. In connection
with the ongoing plant optimization programs, restructuring expenses
for headcount reductions at our plants in Italy and Poland amounted
to €0.5 million (expenses in Q3/2003: €0.2 million).
Profit from operations after restructuring expenses thereby totaled €24.6
million during the third quarter of 2004 -76% higher than during
the same period the previous year (Q3/2003: €14.0 million).
Compared with the same first three quarters the previous year,
the Company improved profit from operations before restructuring
expenses by 51% to €71.8 million (Q1– Q3/2003: €47.7
million). This development was largely caused by price increases,
full capacity utilization for graphite electrodes, and by the consistent
implementation of cost reduction measures.
After deducting accumulated restructuring expenses of €3.5
million during the first three quarters of 2004, profit from operations
increased by 44% to €68.3 million, compared with €47.4
million during the first three quarters of 2003 where accumulated
restructuring expenses totaled €0.2 million.
Due to the continuing solid order backlog, SGL Carbon also anticipates
a considerably improved result in the fourth quarter of 2004 compared
with the same quarter the previous year (Q4/2003: €18.7 million).
Graphite Specialties [GS]
Caused by the ongoing favorable demand for semiconductors, high-performance
batteries, and for solar industry products, sales increased 17% to €49.6
million during the third quarter of 2004; a growth of 20% was realized
after adjusting for foreign currency changes. Sales improved by 9%
to €143.1 million during the first three quarters compared with
the same period the previous year (Q1–Q3/2003: €131.2
million); after adjusting for foreign currency changes the increase
amounted to 12%.
Profit from operations before restructuring expenses totaled €3.2
million during the third quarter of 2004, 129% higher than the
figure of €1.4 million realized in the third
quarter of 2003. During the third quarter of 2004, within the current
cost reduction programs restructuring expenses totaling €0.6
million were realized resulting from the shutdown of machining
capacities in the UK as well as their consolidation in Poland and
Germany (Q1– Q3/2003: €2.2 million). On a quarter-to-quarter
basis, profit from operations after restructuring expenses grew
to €2.6 million in Q3/2004 compared with €-0.8 million
in Q3/2003.
Profit from operations before restructuring expenses of €11.7
million for the first three quarters 2004 was up by 38% over previous
year’s level of €8.5 million. After adjusting for extraordinary
income of €2.8 million from the sale of the EC business during
the first half of 2003, SGL Carbon was able to double the result
for the first three quarters. Beside the cyclical improvement in
the sales volume, other cost reduction measures contributed to
the increase. Including restructuring expenses of €0.6 million
during the first three quarters of 2004, the Company generated
profit from operations of €11.1 million, compared with €3.5
million the first three quarters of 2003. Restructuring expenses
of €2.2 million arose during the first three quarters of 2003;
profit from operations was also adjusted by the €2.8 million
generated by the sale of the EC business.
Due to the high volume of pre-production in the previous quarters
of 2004 and the related working capital increase, SGL Carbon anticipates
a corresponding delivery-related reduction in the fourth quarter
of 2004. Although the resultant lower level of output during the
fourth quarter of 2004 will burden profit from operations compared
with the previous quarters, it will also serve to improve cash
flow.
Corrosion Protection [CP]
Burdened by the ongoing weak economy and structural changes in the
investment behavior of customer industries, sales fell by 13% to €40.8
million compared to the same quarter of the previous year (Q3/2003: €47.0
million); after adjusting for foreign currency changes there was
a decline of 12%. Compared with the same period in 2003, sales of €114.2
million for the first three quarters were down by approximately 13%,
whereas adjusted for foreign currency changes the decrease amounted
to 12%.
Despite the continued low sales revenues, profit from operations
before restructuring expenses of €-0.6 million during the
third quarter of 2004 was considerably better than in the previous
quarters. Measures resulting from the spin-off process and the
related potential sale of the surface protection business resulted
in restructuring expenses of €0.6 million during the third
quarter at German locations (Q3/2003: €0.6 million). Profit
from operations after restructuring expenses thereby declined in
Q3/2004 to €-1.2 million from €0.6 million in Q3/2003.
Profit from operations before restructuring expenses for the first
three quarters totaled
€
-8.7 million in 2004, down by €3.4 million from the same period
of the previous year (Q1–Q3/2003: €-5.3 million). This
development resulted mainly from the above-mentioned weak sales.
Restructuring costs during the first nine months of 2004 rose to €3.7
million (in 2003: €0.6 million). Profit from operations after
restructuring expenses amounted to €-12.4 million during the
first nine months 2004 (Q1–Q3/2003: €-5.9 million).
SGL Carbon expects fourth quarter 2004 operating earnings to develop
similarly to the third quarter of 2004.
As already reported, together with an investment bank the Company
has commissioned, it is striving to find a solution for the surface
protection business.
SGL Technologies (SGL T)
Sales during the third quarter of 2004 were up by 18 % to €33.4
million on a quarter-to-quarter comparison; after adjusting for foreign
currency changes growth of 26% was posted. During the first three
quarters of 2004, SGL Carbon recorded a 3% increase in sales to €97.9
million; after adjusting for foreign currency changes the growth
was 10%. This development was influenced in particular by the positive
development of demand for fibers and carbon ceramic brake discs.
The first three quarters 2004 were burdened by start-up costs
for new projects in the civilian and military aerospace industries;
this will shift earnings into 2005 and 2006. In addition, the order
backlog and capacity utilization of the fiber business considerably
improved. For this reason, the Company reduced the operating loss
totaling €-2.9 million by nearly half during the third quarter
of 2004 from the third quarter of 2003 (€-5.0 million); the
loss of €-8.1 million for the first three quarters was also
down considerably (Q1-Q3/2003: €-10.4 million).
SGL Carbon anticipates a favorable sales trend during the fourth
quarter compared with the fourth quarter of 2003 as well as the
previous quarters in 2004. Overall, with the exception of the brake
disc business, SGL Technologies is in line with the expected substantial
improved results over 2003 in all areas. During the second half
of 2004 (proportionately in the third and fourth quarters), the
Company approved additional, unbudgeted research and development
costs of approximately €5 million for its carbon ceramic brake
discs. These additional expenses are in connection with the potential
for an accelerated transformation of the pilot plant to large-scale
serial production and related costs for process and quality developments
as well as plant planning and designing.
Employees
The number of employees in the Group fell by 360 to 6,566 during
the first nine months of 2004 (December 31, 2003: 6,926). Particularly
contributing to this staff reduction were the restructuring expenses
in Poland and Italy at CG and in Germany at CP.
Outlook
SGL Carbon expects its core areas of business – CG and GS – to
continue developing favorably for the remainder of the year. With
the exception of carbon ceramic brake discs, the business of SGL
Technologies is generating the expected substantial improvement in
earnings over 2003. During the second half of 2004 (proportionately
in the third and fourth quarters), the Company approved additional,
unbudgeted research and development costs of approximately €5
million for its carbon ceramic brake discs. These additional expenses
are in connection with the potential for an accelerated transformation
of the pilot plant to a large-scale serial production and related
costs for process and quality developments as well as plant planning
and designing.
SGL Carbon intends to considerably improve the consolidated operating
result before and after restructuring expenses during the fourth
quarter of 2004 over the same quarter the previous year (Q4/2003: €14.2
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.
Financial Highlights SGL Carbon Group
(€ million, except per share amounts)
|
First Three Quarters
|
2004 |
2003 |
| Sales revenue |
769.2 |
773.4 |
| EBITDA before antitrust charges and restructuring expenses |
103.7 |
78.2 |
| EBIT before antitrust charges and restructuring expenses |
51.0 |
24.7 |
| EBIT |
39.4 |
16.7 |
| Return on sales(1) |
6.6% |
3.2% |
| Net loss before minority interests |
-5.9 |
-23.7 |
| Earnings per share (€) |
-0.12 |
-1.07 |
| Operational cash flow(2) |
69.9 |
30.9 |
|
|
(1) Ratio of profit from operations before antitrust charges
and restructuring expenses
to sales revenue
(2) Without currency exchange rate effects
|
Sept. 30
2004 |
Dez. 31
2003 |
| Total assets |
1,450 |
1,247 |
| Equity |
370 |
117 |
| Net dept (3) |
359 |
448 |
| Debt ratio (gearing)(4) |
1,0 |
3,8 |
| Equity ratio(5) |
25.5% |
9,4% |
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(3) Further information see Shareholder letter First Three Quarters
of 2004
(4) Net debt divided by shareholders’ equity ratio
(5) Shareholders’ equity divided by total assets
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