Press Releases 2005


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	Press Releases

May 04, 2005

SGL Carbon: First Quarter 2005

Increase in sales of 13 % compared with Q1/2004
Above average improvement in EBIT with positive after-tax result
Further improvement in earnings anticipated for Q2/2005

Wiesbaden, 04. Mai 2005. SGL Carbon increased in particular as a result of the continuing strong demand for graphite electrodes, consolidated sales by 13% to €238.3 million (Q1/2004: €211.0 million). After adjusting for foreign currency changes, an increase of 15 % was posted. EBIT increased on a comparable basis by 25% from €16.7 million in the previous year to €20.9 million in Q1/2005 – largely the result of the ongoing favorable business development of CG and the reduced operating loss of SGL T. Adjusted EBIT for Q1/2004 of €16.7 million is calculated as follows: EBIT after restructuring expenses amounted to €7.7 million in Q1/2004. Taking into consideration the €6.5 million operating loss from the divested Surface Protection business, the cessation of the €1.3 million scheduled amortization of goodwill in line with IFRS 3, and the reclassification of the north American pension provisions of €1.2 million, that are now unified and shown in the financial result altogether in the above-mentioned EBIT of €16.7 million. The USD currency risk in financial year 2005 has been largely hedged.

Net financing costs
The net financing costs improved from €–15.2 million in Q1/2004 to €–13.1 million in Q1/2005. The quarterly net interest expense on loans decreased from €7.7 million in Q1/2004 to €7.0 million in Q1/2005. This is attributable to the lower volume of borrowing and the higher interest income. In addition, non-cash expenses in connection with the antitrust proceedings (interest expense and exchange rate effects) decreased by €0.9 million to €2.0 million.

Result before and after taxes
Profit before tax totaled €7.8 million in Q1/2005 compared with €1.5 million in Q1/2004. With a tax rate of approximately 50 %, the Group earned a net profit of €3.7 million (Q1/2004: €0.6 million). The high tax rate results mainly from the inability to offset profits in some countries from losses in other countries. For the remaining year the tax rate should level off by around 40–50%. Taking into consideration the loss of the Surface Protection business, the net profit after taxes increased by approximately €7.1 million from € –3.4 million in Q1/2004 to €3.7 million in Q1/2005. The resulting earnings per share was €0.07 compared with €–0.08 in the same quarter of the previous year.

Business Development of the Segments

Carbon and Graphite (CG)
Sales increased by 16 % from €122.6 million in Q1/2004 to €142.9 million in Q1/2005. Growth was 19 % after adjusting for foreign currency changes. Due to the ongoing favorable demand for graphite electrodes, further price increases, and ongoing cost reduction measures, EBIT for Q1/2005 amounted to €26.7 million – 49 % higher than the €17.9 million posted in Q1/2004. The return on sales improved from 14.6 % in Q1/2004 to 18.7% in Q1/2005. The average price for graphite electrodes increased over Q1/2004 by 11% in USD terms and by 4% in euro terms. Approximately 52,000 metric tons were delivered in Q1/2005 – nearly 16 % more than the 45,000 metric tons delivered in Q1/2004. In line with our forecasts, raw material and energy costs rose by approximately 10% over 2004.

Graphite Specialties (GS)
Sales of €57.3 million were 1% less than the €58.1 million posted in the same quarter the previous year. This development was influenced in particular by Process Technology (PT), which was included as part of GS for the first time. The PT business reported lower project related sales in Q1/2005, which were down by 15 % to approximately €10 million. This development is expected to be recouped already in Q2/2005. Excluding PT, the sales of GS improved by around 3% to € 47.5 million. EBIT is €1.3 million in Q1/2005 compared with a figure of €5.3 million in Q1/2004. The Q1/2005 figure included a loss generated by the PT business of €–1.5 million (Q1/2004: €0.4 million). The business of GS alone, which totaled €2.8 million, declined by approximately €2 million in Q1/2005 compared with the €4.9 million realized in Q1/2004 – a result of the higher level of output as well as the inventory buildup in Q1/2004 due to the delivery structure of the orders realized in fiscal year 2004. Compared with 2004, no comparable inventory buildup was necessary this year due to an expected strong H2/2005.

SGL Technologies (SGL T)
Sales grew by 26 % from €29.8 million in Q1/2004 to €37.5 million. The favorable sales volume in composites, carbon-ceramic brake discs, and especially in fibers were in part offset by the EUR/USD exchange rate. Sales adjusted for foreign currency changes rose by approximately 30%. EBIT in Q1/2005 amounted to €–0.6 million (Q1/2004: €–1.8 million). With the exception of the carbon-ceramic brake disc business, which was subject to additional development costs in connection with the possible launch of series production, all lines of business contributed to this favorable development.

Corporate Costs
Corporate costs rose from €–4.7 million in Q1/2004 to €–6.5 million in Q1/2005. This is primarily attributable to the measurement of share-based payments for the first time in line with IFRS 2 beginning on January 1, 2005, which were not expensed in Q1/2004. Furthermore, a bonus was paid in Q1/2005, which did not occur the previous year, when the members of the Board of Management and executive management declined to receive bonuses.

Employees
Due to the restructuring, the number of employees in the Group fell by 18 from 5,109 as of December 31, 2004 to 5,091 at the end of Q1/2005.

Outlook
In Q2/2005, SGL Carbon anticipates a growth in sales of around 10 % and an improvement in EBIT of approximately 40 % compared with Q1/2005. Due to the favorable demand situation, additional increases in sales and higher average revenues for graphite electrodes have been forecast for the CG segment. Due to additional sales increases, a significant improvement in EBIT is expected for GS and in particular for PT in connection with project-related business. The favorable trend is also expected to continue in SGL T, especially through the further increase in fiber capacity utilization as well as the gratifying order backlog in aerospace and defense projects. For the year as a whole, SGL Carbon anticipates nearly unchanged an increase in sales of more than 5 percent, an above average rise in EBIT, and a positive after-tax result on a consolidated basis. Net financial debt is to be further reduced.

Financial Highlights SGL Carbon Group
(€ million, except per share amounts)

	First Quarter
	2005	2004
Sales revenue	238.3	211.0
EBITDA	35.0	31.1
EBIT	20.9	16.7
Return on sales⁽¹⁾	8.8%	7.9%
Net profit (loss) from continuing operations	3.7	0.6
Net profit (loss) from discontinued operations	-	-4,0
Net profit (loss) before minority interests	3.7	-3.4
Earnings per share (in €)	0.07	-0.08
Operational cash flow continuing operations⁽²⁾	11.4	3.8

⁽¹⁾ EBIT divided by sales revenue
⁽²⁾ Without currency exchange rate effects

	March 31 2005	Dez. 31 2004
Total assets	1,257	1,315
Equity	290	282
Net dept⁽³⁾	342	321
Debt ratio (gearing)⁽⁴⁾	1,2	1,1
Equity ratio⁽⁵⁾	23.1%	21.4%

⁽³⁾ Further information see shareholder letter first quarter of 2005
⁽⁴⁾ Net debt divided by shareholders' equity
⁽⁵⁾ Shareholders' equity divided by total assets

Remark:
Effective January 6, 2005, SGL Carbon concluded the sale of its investment in SGL ACOTEC GmbH, which included SGL’s Surface Protection business. The effects resulting from this transaction were already recognized in the annual financial statements for 2004. The Process Technology (PT) business remaining in the Group was integrated within the Graphite Specialties (GS) Business Area. Only the results of continuing operations are presented in this quarterly report.

According to IFRS 2, since January 1, 2005, share-based payments, such as stock option plans and share bonus programs, for employees and members of senior management are included under staff costs. Based on a current calculation, this change will burden the results of the segments and corporate costs by a total of approximately €2 million each quarter in 2005.

As we already discussed at the year-end press conference in March, the restructuring measures have now largely been completed. Therefore, profit from operations (EBIT) no longer includes a separate presentation of restructuring expenses.

Forward-looking statements:
This document contains statements on future developments that are based on currently available information and that involve risks and uncertainties that could lead to actual results deviating from these forward-looking statements. These risks and uncertainties include, for example, unforeseeable changes in political, economic and business conditions, particularly in the area of electrosteel production, the competitive situation, interest rate and currency developments, technological developments and other risks and unanticipated circumstances. We see other risks in price developments, unexpected developments relating to acquired and consolidated companies, ongoing restructuring measures and unforeseeable occurrences in conjunction with the reviews to be performed by the European antitrust authorities. SGL Carbon does not intend to update these forward-looking statements.