While the preliminary results for the first nine months 2019 remain, overall, within the scope of the full year outlook outlined in the ad-hoc notification of August 14, 2019 (preliminary 9M/2019 recurring EBIT: Group: approx. €54 million, CFM: approx. minus €2 million, GMS: approx. €71 million, Corporate: approx. minus €15 million), continued weakness is becoming apparent for the final quarter 2019 in the reporting segment Composites – Fibers & Materials (CFM). This is due to the further weakening in the market segment Textile Fibers as well as the deteriorated economic environment in the market segment Industrial Applications.
We therefore now expect for the full year 2019 a recurring EBIT in the reporting segment CFM in a negative mid to high single digit million € amount (previous guidance: positive mid-single digit million € amount). This results in a Group recurring EBIT for the full year 2019 in the magnitude of €45 to 50 million (previous guidance: approx. €55 million).
The earnings deterioration at CFM triggers an impairment testing. Based on the preliminary status of the new five-year plan, a non-cash impairment charge of €70 to 80 million is becoming apparent in CFM mainly due to the lower starting point in 2019 as well as the ongoing weakness in the market segments Textile Fibers and Industrial Applications. This impairment charge will be recorded in the third quarter 2019. In recent years acquired assets of the former joint ventures with BMW and Benteler are not affected by this impairment.
Due to the earnings deterioration in CFM and thus also at the Group level, we also anticipate a write-down in deferred tax assets in the amount of up to €10 million, which will also be recorded in the third quarter 2019.
Mainly due to the above-mentioned impairment charge of €70 to 80 million €, consolidated net results in the fiscal year 2019 are expected to reach approximately minus €100 million (previous guidance: consolidated net results to reach a high single digit million loss).
An initial outlook for 2020 is also becoming apparent based on the current status of the new five-year plan: Group sales is expected slightly below the 2019 level (which is anticipated between €1.05 and €1.1 billion). Group recurring EBIT is likely to be 10 to 15 percent below the expected 2019 level. As already outlined in the ad-hoc notification of August 14, 2019, we are planning to publish further details on this and the new Group plan in January 2020 at the latest.
Comprehensive countermeasures initiated to improve CFM earnings
While the market segment Industrial Applications is characterized by an economic downturn, the market segment Textile Fibers is additionally burdened by a structural decline due to substitution effects. In order to counteract the resulting weak earnings development in the business unit CFM, the company has initiated comprehensive countermeasures.
The countermeasures include:
- targeted staff reduction of around 3 percent in the business unit CFM; half of the reduction has already taken place. The expenses for these restructuring measures are included in the revised full year guidance for 2019.
- accelerated conversion of textile fiber production lines into precursor production lines for carbon fiber production
- product mix improvements in the Industrial Applications and Textile Fibers market segments
- selective price increases
- accelerated implementation of Operational Excellence programs and implementation beyond production functions
In contrast, the strategic growth markets of the business unit CFM, automotive and aerospace, remain intact. In the market segment Automotive, the growing number of projects bears proof that the company's strategy to develop complete composite-based components is beginning to take effect. Especially the increasing number of projects driven by electromobility will have a positive impact. In the market segment Aerospace, SGL Carbon has increased its presence and expanded its product portfolio in recent months. The company plans to accelerate growth in the higher-margin aerospace business.
The interim report on the first nine months will be published on November 5, 2019, as planned.