From the Sector

• Graphite Solutions with slight sales growth and positive margin development
• Process Technology again improves on good prior-year figures
• Weak demand in Carbon Fibers continues to impact Group sales and profitability
• Despite slight decline in sales (-4.0%), EBITDA margin improves from 15.7% to 16.1% compared to the first half of the previous year
• Outlook for 2024 confirmed

Q2 2024 confirms SGL Carbon's business development in an increasingly volatile market environment. After €272.6 million in Q1 and €265.4 million in Q2, SGL Carbon generated consolidated sales of €538.0 million in the first half of 2024 (H1 2023: €560.5 million). This corresponds to a slight decrease of 4.0% compared to the prior year period; adjusted for currency effects, Group sales decreased by only 2.2%. By contrast, adjusted EBITDA, an important key figure for the Group, remained almost constant year-on-year at €86.5 million (H1 2023: €88.0 million). The adjusted EBITDA margin improved from 15.7% to 16.1%, in particular due to the continued positive sales trend in the Semiconductor market segment and the associated change in the product mix. On the other hand, the persistently weak demand in the Carbon Fibers business unit continued to weigh on the Group's sales and earnings
performance.

Outlook
The current volatile development in some of their sales markets, which in some cases is below expectations, affects the expected sales and earnings performance of the business units. Due to the company's diversified business model, changes in demand for certain products can be largely offset by higher-than-expected sales in other businesses. SGL Carbon therefore continued to expect to achieve the forecast which was issued in March for the SGL Carbon Group at the lower end of the stated range. For fiscal year 2024, SGL Carbon expects Group sales to be at the previous year's level (2023: €1,089.1 million) and adjusted EBITDA at Group level to be between €160 million and €170 million.

Thomas Dippold, CFO of SGL Carbon, explains: “One of our most important market segments is the semiconductor industry and in particular the demand for graphite components for the production of silicon carbide-based semiconductors. These are used primarily in electric vehicles due to their higher efficiency and performance. In the first half of 2024, global demand for electric vehicles slowed compared to the growth in previous quarters, and a return to the previous year's growth rates is not expected in the coming months. In addition, there are high inventory levels in the semiconductor value chain, which are also impacting demand for our products. Even if we assume that the market for high-performance semiconductors for electric vehicles will continue to grow significantly in the future, we expect demand for our specialty graphite components for the production of SiC-based semiconductors to slow down in the second half of 2024. For Graphite Solutions, however, we continue to expect sales and adjusted EBITDA to be above the previous year."

On the other hand, other market segments are developing better than expected and can thus compensate for fluctuations in demand within the SGL Carbon Group. Taking into account the business unit developments in the first half of 2024 and the expected trends for their key sales markets, the Company expects to meet its forecast for sales and adjusted EBITDA in fiscal year 2024 at the lower end of the announced range.

As a traditional textile country, India has also established a strong position in the field of manmade fiber production in recent decades. The West Asian country has now become the second largest polyester yarn manufacturer in the world. The Indian textile industry covers the entire value chain from the melt to the finished textile end product.

The technical textiles sector in particular is regarded as a future market. With an average growth rate of 12% since 2013, this dynamic sector accounts for around 13% of the entire Indian textile and clothing market, according to the government organization Invest India. The market volume has almost doubled in the past ten years. In India, the production of industrial yarn has so far relied heavily on polyamide. Oerlikon Barmag has a strong market position here. "In recent years, we have commissioned plants for numerous customers," says Dr. Wolfgang Ernst, Head of Sales of the Oerlikon Business Unit Manmade Fibers Solutions.

Increasing demand for industrial polyester yarns
The construction boom and the increasing use of geotextiles and industrial textiles in various infrastructure projects as well as in agriculture and aquaculture show enormous growth potential. This is supported by the government's 2021 industrial development program, which includes technical textiles as one of ten priority sectors. The program is based on reducing dependence on imports. Until now, a large proportion of the technical textiles and yarns required in the country have been imported.

The trend towards high-quality technical textiles for the domestic market has also been noted by the Remscheid-based machine and plant manufacturer. "We are receiving more and more inquiries from Indian customers for spinning systems for industrial yarns," says Dr. Wolfgang Ernst. "What is new is the great interest shown by companies from downstream processes that are looking for backward integration. We attribute this to the stricter regulations of the Bureau of Indian Standards. Until now, industrial yarns were mainly imported from China. In order to guarantee the quality of the processed yarns, this has been strictly regulated by the government since last year. It therefore makes sense for Indian textile producers to enter the yarn manufacturing sector." This development was also noticeable at this year's Techtextil in Frankfurt, where the experts from Oerlikon Barmag were able to hold a disproportionately high number of technical discussions with Indian customers and interested parties.

The flexible spinning concepts of Oerlikon Barmag enable a variety of possible yarn products for numerous applications. The portfolio includes processes for the production of polyamide and polyester yarns with the required physical properties for a wide range of end applications, whether HMLS yarns for car tires, yarns for geotextiles, safety belts or even airbags.

KARL MAYER North America will return to exhibit at CAMX, a composites trade show, taking place from September 9 to 12, 2024 in San Diego. Here it will present as an innovative partner to the composites industry with machines such as the COP MAX 4, a all-rounder to produce multilayer, multiaxial fabric structures; the COP MAX 5, specifically for processing carbon fibers; and the UD 700 fiber spreading system. Furthermore, a new machine was launched this spring, called MAX GLASS ECO.

Besides the machines, KARL MAYER supports customers with pioneering application developments. The focus of the medial presentation will be the processing of natural fibers into sustainable composite reinforcements. In cooperation with representatives of the winter sports industry, KARL MAYER has already processed hemp tapes and flax fibers into non-crimp fabrics for snowboards and skis with COP MAX 4. Examples were launched at the last editions of this year's Techtextil and JEC World which were very well received by visitors.

Martin Shankland, Executive Board member for Global Operations, has informed adidas AG’s Supervisory Board that, after 27 years with the brand, he will step down from the Executive Board and leave the company. In mutual agreement with Martin Shankland, the Supervisory Board approved the termination of his appointment as an Executive Board member as of August 10, 2024.

Martin joined adidas Russia/CIS in 1997. During his tenure as Managing Director, he established adidas Russia/CIS as the market leader through the creation of a strong direct-to-consumer business. After leading adidas Emerging Markets region from 2017, Martin joined the Executive Board in 2019, with responsibility for product operations, sourcing and supply chain as well as tech, data & analytics, non-trade-procurement and sustainability. During this period, Martin led major transformation initiatives, including creating a more responsive, transparent and sustainable supply chain and built a more tech and data capable organization aided by the insourcing of tech talent into a network of global tech hubs.

Hoa Ly, SVP Sourcing, will have responsibility for all sourcing operations at adidas reporting into adidas CEO Bjørn Gulden. adidas CFO Harm Ohlmeyer will assume additional responsibility for supply chain and tech. As of August 11, 2024, the company’s new Executive Board will consist of Bjørn Gulden (Chief Executive Officer, Global Brands), Arthur Hoeld (Global Sales), Harm Ohlmeyer (Chief Financial Officer) and Michelle Robertson (Global Human Resources, People and Culture).

• Revenue up 4.8 percent year-on-year to EUR 1.31 bn in the first half of 2024
• Performance program shows effect: EBITDA up 20.4 percent year-on-year to EUR 164.4 mn in in the first half of 2024
• Free cash flow of EUR 141.5 mn (compared with minus EUR 165.4 mn in in the first half of 2023)
• Lenzing confirms EBITDA guidance for 2024

The Lenzing Group reports a gradual improvement in its business performance in the first half of 2024. As expected, the recovery of the markets relevant to Lenzing proved to be sluggish. Although fiber sales volumes increased, fiber prices remained at a low level. The cost of raw materials and energy remained high. At the same time, logistics costs rose significantly in the reporting period.

Outlook
The IMF left its growth forecast for 2024 unchanged at 3.2 percent and raised it to 3.3 percent for 2025. Nevertheless, a number of risks for the global economy remain.

Forecasting future economic growth is rendered more difficult by smoldering global conflicts, trade disputes, and the uncertain outcome of elections, including the USA and the EU.

Consumers are holding back on unnecessary purchases in an environment of rising prices, falling real wages in some cases, and concerns about economic growth. This is hampering a revival of the consumer apparel market, which is important for Lenzing.

The currency environment is expected to remain volatile in the regions relevant to Lenzing.

In the trend-setting market for cotton, a reduction in stock levels and a stable price trend at a low level is expected for the remainder of the 2023/2024 harvest season.

Earnings visibility remains limited overall.

Revenue and earnings in the first half of the year exceeded Lenzing’s expectations, despite the persistently difficult market. Lenzing is ahead of schedule with the implementation of its performance program. The company expects that the measures will make a greater contribution to further improving earnings in the coming quarters.

Taking the aforementioned factors into consideration, the Lenzing Group confirms its guidance for the 2024 financial year of year-on-year higher EBITDA.

Structurally, Lenzing continues to anticipate growth in demand for environmentally responsible fibers for the textile and clothing industry as well as for the hygiene and medical sectors. As a consequence, Lenzing is very well positioned with its strategy and is pushing both profitable growth with specialty fibers and the further expansion of its market leadership in the sustainability area.

CARBIOS and SASA, a manufacturer of polyester, fiber, filament yarn, polyester-based polymers, specialty polymers and intermediates, have signed a Letter of Intent (LOI) to cooperate through SASA’s potential acquisition of a license for CARBIOS’ unique PET biorecycling technology. This licensing agreement would allow SASA to construct and operate an enzymatic depolymerization plant in Adana, Turkey, with a capacity of 100,000 tons per year of prepared PET waste, and would give access to a circular recycling technology, enabling the production of polyester pellets, fibers and textiles from various waste sources, including polyester textile waste. With CARBIOS' biorecycling technology, SASA would diversify its offering to meet the growing global demand for sustainable materials in the textile industry, primarily catering to the European market.

Less than 1% of textile waste is currently recycled into new textile fibers^[1].  With European regulations moving towards the incorporation of more recycled content (at least 20% of recycled fibers by 2030), demand for recycled polyester in the EU is anticipated to increase, naturally positioning Turkey as a major producer alongside Asian countries.  In this context, SASA is striving to become the largest supplier of high value-added polyester in the region and beyond. To achieve this, SASA aims to introduce recycling as part of its activities, which already encompass the whole value chain from PET production to fiber and textile conversion. CARBIOS’ PET biorecycling technology plays an important part in SASA’s ongoing transformation strategy, which includes back integration, capacity expansion, even higher competitiveness, as well as circularity.

CARBIOS has developed a enzymatic depolymerization technology that enables efficient and solvent-free recycling of PET plastic and textile waste into virgin-like products. CARBIOS has ambitious plans to become a leading technology provider in the recycling of PET by 2035. After the recent announcement of a joint Letter of Intent with Zhink Group in China, this new Letter of Intent for a potential licensing agreement in Europe confirms global traction for CARBIOS biorecycling technology, and marks another significant step in the international roll-out of its licensing model. In addition to the world’s first industrial-scale enzymatic PET recycling plant which is currently under construction in Longlaville, France, this potential plant in Turkey would process PET waste that is currently not recyclable using conventional recycling technologies.

[1] System Circularity and Innovative Recycling of Textiles | Circular Cities and Regions Initiative (europa.eu)

Spinnova Plc and ECCO Investment Corporation have signed a Letter of Intent (LOI) regarding the future plans for their 50/50 owned joint venture company Respin Oy. The development work of Respin’s leather waste-based fibre has shown good quality results during the current year. ECCO has successfully made a prototype shoe, which includes fibre from the Respin pilot line produced using Spinnova technology. A product launch by ECCO, using the fibre produced by Respin, is expected to take place before the end of Q1/2025.

Spinnova and ECCO see significant opportunities in scaling up Respin’s production volumes to a commercial level. According to the LOI, both parties are committed to scaling up operations and will work together in order to achieve a final decision, at the latest, by the end of Q1/2025 on how to proceed with the production scaling and commercialisation of Respin.

In line with Spinnova’s strategy and the Respin joint venture agreement, Spinnova will be the technology provider for any production scale-up. Furthermore, as stated in Spinnova’s strategy, Spinnova does not itself expect to raise further external financing to fund the increase in Respin’s production capacity.

Azonprinter Company, a company in the Direct-To-Film (DTF) printing industry, launches its Universal Electronics Kit. This solution addresses the critical challenges of the DTF process, delivering quality, safety, and reliability for apparel and material decoration.

DTF printing has revolutionized the decoration industry with its quality and durability. However, common challenges such as unreliable ink, powder, and film quality, and concerns over the safety and durability of automatic powder electronics during extended unattended operations, have persisted. Azonprinter’s Universal Electronics Kit is designed to overcome these hurdles, ensuring a seamless and superior DTF printing experience.

Azon's Universal Electronics Kit is meticulously engineered to guarantee performance and safety, outperforming the alternatives currently on the market. With an open-source programming platform, the kit provides limitless customization possibilities, empowering users to tailor their DTF process to their precise needs. Built for durability, Azon's electronics kit ensures smooth, safe operation even during extended unattended use, mitigating risks associated with inferior quality products.

Major developments:

• Currency-neutral sales up 11%, driven by adidas brand accelerating to 16% growth
• adidas brand up double digits across all channels with increases in all markets
• Underlying gross margin improves around 1.5 percentage points to 50.5% despite significant currency headwinds
• Operating profit of € 346 million compared to € 176 million in prior-year period
• Healthy inventories at a level of € 4.5 billion to support future top-line growth
• Full-year guidance upgraded on July 16 to reflect current brand momentum

Full-year outlook
High-single-digit revenue increase expected in 2024
On July 16, adidas raised its top- and bottom-line guidance as a result of the better-than-expected performance during the second quarter and taking into account the current brand momentum. adidas now expects currency-neutral revenues to increase at a high-single-digit rate in 2024 (previously: to increase at a mid- to high-single-digit rate). The company’s operating profit is now expected to reach a level of around € 1.0 billion (previously: to reach a level of around € 700 million). Within this guidance, adidas assumes the sale of the remaining Yeezy inventory during the remainder of the year to occur on average at cost. This would result in additional revenues of around € 150 million and no further profit contribution during the second half of 2024.

Outlook impacted by significant currency headwinds
The company continues to expect unfavorable currency effects to weigh significantly on its profitability this year. These effects are negatively impacting both reported revenues and the gross margin development in 2024. This was particularly the case during the first half of the year.

The Lenzing Group is working with the non-profit organisation RTDS Group and 13 other partners from research and industry to promote the scaling of lyocell filaments as part of the CELLFIL project. Co-funded by the EU with EUR 6.9 million, the project aims to drive the reformation of the textile industry towards greater sustainability and a circular economy.

The Austrian organisation RTDS has launched the CELLFIL project with great vision. In close cooperation with Lenzing Group, which is at the technical helm of the project, CELLFIL aims to reform the textile industry. The centrepiece of the project is the sustainable and robust production of lyocell filaments. By optimising the entire fabric production process and its intermediate processing steps, the aim is to replace synthetic fibers with environmentally friendly lyocell filaments in recyclable end applications. This approach aims to develop and utilise alternative raw material sources for textiles. The realisation of these goals is crucial for scaling up lyocell filament production and promoting a circular economy that represents an environmentally friendly alternative to the currently dominant fossil-based synthetic filaments.

CELLFIL is part of the EU research and innovation program Horizon Europe and is supported by 15 partners from eight different countries. EUR 6.9 million from the European Union's Horizon Europe program has been made available for the implementation of this initiative. The European Commission has presented a visionary roadmap for the future of textiles, aiming for a circular economy in which all textiles on the EU market are durable, repairable and recyclable. This underlines Europe's commitment to sustainable innovation and a greener future in the textile sector.