- Sales in Q1/2007 +18 %, EBIT +73 % compared to Q1/2006
- Return on sales further improved to 18 %
- Pre-tax profit with €45.4 million more than doubled compared to Q1/2006
- Earnings per share at €0.52 compared to €0.22 in Q1/2006
- Equity ratio further improved to 38.3 %
- Net debt increase of only €9.1 million despite EU-funding of €22.3 million
Wiesbaden, April 25, 2007. The increase in sales revenue of SGL Group – The Carbon Company - was driven by the ongoing positive demand situation from the customer industries, resulting in a notably high first quarter sales revenue as compared to prior years’ first quarters. Consolidated sales grew by 18 % to €314.6 million driven by all three business units. Excluding currency effects, sales growth was 22 %. Positive selling price and sales volume effects, continued high capacity utilization and further savings of €6 million overcompensated the increases in the key raw material prices, which only partially affected cost of sales in Q1/2007 based on year-end inventory levels. Consequently the gross profit margin on sales increased from 30.7 % in Q1/2006 to 34.8 % in Q1/2007. Selling, administrative, research and other income/expense increased by €3.2 million and thus at a lower rate than sales and now represent 16.6 % of sales revenue (Q1/2006: 18.3 % of sales revenue). EBIT therefore reached a record level of €57.3 million, an increase of 73 % compared to Q1/2006.
Net financing costs
Net financing costs at €11.9 million were virtually unchanged compared with Q1/2006. Net interest expense on loans remained at the Q1/2006 level mainly due to almost unchanged gross financial debt and related interest costs. Interest expense on antitrust decreased due to the cash funding and subsequent payment of the graphite electrode fine in 2006 and the cash funding of the graphite specialties fine in February 2007, therefore no longer requiring guarantee fees and interest accruals going forward.
Profit before and after taxes
During the reporting period, profit before tax improved to €45.4 million in Q1/2007 after €20.8 million in Q1/2006. The Q1/2007 tax expense amounted to €12.7 million and represents a tax ratio of 27.9 %. Cash taxes paid in Q1/2007 reached €3.4 million (Q1/2006: €4.7 million). Net profit after minority interests reached €32.5 million in Q1/2007 after €12.4 million in Q1/2006. With an average number of shares of 63.0 million, earnings per share (basic) in Q1/2007 improved from €0.22 to € 0.52.
Working capital
Working capital increased by €21.3 million to €448.7 million at end of Q1/2007 as a result of the growth in business activity especially in the Business Units Performance Products and Carbon Fiber and Composites and corresponds to the typical seasonal development at this time of the year.
Changes in equity
Shareholders’ equity increased by €40.4 million to €485.4 million by end of March 2007 mainly through the Q1/2007 net profit. This results in an equity ratio of 38.3% compared to 35.3 % at December 31, 2006. Subscribed capital increased to €162.6 million (December 31, 2006: €161.0 million) and is divided into 63,530,572 no-par value ordinary bearer shares at €2.56 per share. During Q1/2007 the Company issued 577,797 new shares for employees, which have been granted in the annual bonus plan in Germany and for the matching share plan. In addition 60,997 new shares were issued for employees in connection with the existing stock option plan and stock appreciation right plan.
Net debt
Despite cash funding of the remaining EU antitrust fine of €22.3 million, net debt increased by only €9.1 million to €238.2 million at by end March 2007. The positive EBITDA of €68.9 million also funded interest payments of €14.6 million, the increase in working capital (adjusted by currency impacts) of €22.9 million, investing activities of €19.1 million and other changes (€1.3 million) during this quarter.
Segment Reporting
Performance Products (PP)
In Q1/2007, sales revenue grew by 21 % (adjusted for foreign currency changes by 26 %) to €185.0 million in Q1/2007 (Q1/2006: €152.7 million) due to the continuing strong demand from the steel and the growing demand from the aluminum industry being reflected in selling price increases across all business lines and positive volume effects especially in Cathodes. Shipped Graphite Electrode volumes were 48,000, an increase of 7 % over Q1/2006.
Despite higher raw material and electricity costs as well as negative currency translation effects, EBIT in Q1/2007 increased by 67 % to €52.7 million due to above mentioned price and volume effects as well as savings of €3 million. Capacity utilization level remains high at all facilities with the 2007 order book full for all business lines.
Graphite Materials & Systems (GMS)
Sales revenue rose by 10 % (adjusted for foreign currency changes by 12 %) to €89.9 million in Q1/2007. All three Business Lines Graphite Specialties, Process Technology and Expanded Graphite contributed to this sales growth with strong demand coming especially from the semiconductor, solar, LED and lithium-ion battery and chemical industries. EBIT increased by 59 % to €12.7 million in the reporting period due to positive price and volume developments as well as savings from the SGL Excellence initiative more than compensating for factor cost increases. Both order intake and order backlog developments remain at high levels and reflect healthy global economic conditions in our customer industries.
Carbon Fibers & Composites (CFC)
Sales revenue increased by 19 % (adjusted for foreign currency changes by
22 %) to €38.7 million in Q1/2007 (Q1/2006: €32.4 million). A temporary interruption of carbon fiber production in Inverness (UK) caused some shipment delays, negatively impacting earnings in Q1/2007. These delays are expected to be made up in the course of the year. Strong sales volumes in carbon fibers, composite materials and brake discs as well as savings from the SGL Excellence initiative partially compensated for the shortfall in carbon fiber production in Q1/2007.
Central T&I and Corporate costs
In order to support SGL Group’s innovation strategy the Company established its new corporate center for Technology and Innovation (T&I) by the end of 2005 and further enhanced this structure during 2006. Within Corporate Costs the SGL Group will report all initiatives and start-up projects, which cannot be directly assigned to one of the existing businesses. This relates to basic research activities as well as to new product developments, which have not yet reached a commercialised status. The SGL Group decided to show such expenses at a corporate level in order to increase transparency and not to charge the businesses with expenses not directly related to their ongoing business. Central T&I costs in Q1/2007 at €1.3 million reached expected normal quarterly levels, whereas Q1/2006 still reflects the implementation phase. Corporate costs increased from €6.4 million in Q1/2006 to €7.1 million in Q1/2007. The increase is in part again related to management incentive plans, which are influenced by higher market valuation for share based programs.
Employees
Total employees were 5,249 by end of March 2007 (unchanged compared to end of 2006). While headcount in Europe slightly decreased by 29 to 3,932 employees, the Company increased headcount in North America by 7 to 1,144 employees and in Asia by 22 to 170 employees during Q1/2007.
Outlook
Q1/2007 has proven to be a very successful quarter. Even though the percentage increase in this quarter should not be directly extrapolated for the following quarters, management expects the positive trend to continue for the remainder of 2007.
The company is currently exploring new financing opportunities. The existing financing, particularly the outstanding corporate bond issued in February 2004 with a 8.5 % coupon, was established at a time when the company’s operational and financial situation was at a difficult point. This financing structure is now no longer optimal given the fact that the SGL Group has successfully restructured and are operationally and financially on very sound footing. The Company also has considerably improved ratings, which should allow to pursue a new and more advantageous financing structure in the near term.
Under these circumstances and upon legal advice, the SGL Group has decided to abstain from specifically guiding 2007 results at this time. The mid term targets, as published at the annual press conference in March 2007 remain valid.
Key Figures of SGL
Group
( unaudited / €m )
(1) Ratio of profit from operations to sales revenue
(2) Without currency exchange rate effects
 |
March 31, 2007 |
Dec. 31,
2006 |
| Total assets |
1,266.3 |
1,260.8 |
| Shareholders' equity |
485.4 |
445.0 |
| Net debt |
238.2 |
229.1 |
| Debt ratio (gearing)(3) |
0.5 |
0.5 |
| Equity ratio(4) |
38.3% |
35.3% |
|
|
(3) Net debt divided by shareholders' equity
(4) Shareholders' equity divided by total assets
About SGL Group – The Carbon Company
The SGL Group is one of the world’s leading manufacturers of carbon-based products. It has a comprehensive portfolio ranging from carbon and graphite products to carbon fibers and composites. SGL Group’s core competencies are its expertise in high-temperature technology as well as its applications and engineering know-how gained over many years. These competencies enable the Company to make full use of its broad material base. SGL Group’s carbon-based materials combine several unique properties such as electrical and thermal conductivity, heat and corrosion resistance as well as high mechanical strength combined with low weight. Due to the paradigm shift in the use of materials as a result of the worldwide shortage of energy and raw materials, there is a growing demand for SGL Group’s high-performance materials and products from an increasing number of industries. Carbon and graphite products are used whenever other materials such as steel, aluminum, copper, plastics, wood etc. fail due to their limited properties. Products from the SGL Group are used predominantly in the steel, aluminum, automotive, chemical and glass/ceramics industries. However, manufacturers in the semiconductor, battery, solar/wind energy, environmental protection, aerospace and defense industries as well as in the nuclear energy industry also figure among the Company’s customers.
With around 30 production sites in Europe, North America and Asia as well as a service network covering more than 100 countries, the SGL Group is a company with a global presence. In 2006, the Company’s workforce of 5,250 generated sales of € 1.2 billion. The Company’s head office is located in Wiesbaden/Germany.
Important note:
This press release 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. The statements on future developments are not to be understood as guarantees. The future developments and events are dependent on a number of factors, they include various risks and unanticipated circumstances and are based on assumptions that may not be correct. 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 and in the ongoing cost optimization programs. SGL Group does not intend to update these forward-looking statements.
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