From the Sector

Weak demand in some of their customer markets is increasingly hindering SGL Carbon's sales growth. After nine months in 2024, SGL Carbon generated sales of €781.9 million, which was slightly below the prior-year level at minus 4.8% (9M 2023: €821.7 million). Adjusted for currency and structural effects, Group sales decreased by 3.6%. Adjusted EBITDA, an important key figure for the Group, remained at a comparable level of €127.6 million in the reporting period (9M 2023: €130.0 million). Despite the slight decrease in sales, the adjusted EBITDA margin improved from 15.4% in Q1 and 16.7% in Q2 to 16.9% in Q3 and amounted to 16.3% after nine months (9M 2023: 15.8%). The reasons for the improved adjusted EBITDA margin are, in particular, product mix effects in the Graphite Solutions and Process Technology business units. By contrast, the ongoing weakness in demand and the associated price pressure for carbon and textile fiber products in the Carbon Fibers business unit continued to weigh on the Group's sales and earnings development.

“Even with our diversified product portfolio, we can no longer completely withdraw from the generally weak economic environment. In addition, there was a decline in demand for specialty graphite products for the semiconductor industry in the third quarter. In particular, our products for the manufacture of silicon carbide-based semiconductors are suffering from the restrained demand for electric vehicles on the customer side,” explains CEO Dr. Torsten Derr. “While the last 18 months were characterized by enormous demand for silicon carbide semiconductors and insufficient production capacities, the market has cooled down significantly. Due to a lack of demand from the automotive industry, our semiconductor customers have significantly reduced order volumes. We do not expect to see a significant upturn in demand for our specialty graphite products until the sales figures for electric vehicles pick up again.”

Based on the adjusted EBITDA of €127.6 million and taking into account depreciation and amortization of €41.0 million (9M 2023: €43.3 million) and one-off effects as well as non-recurring items of minus €18.3 million (9M 2023: minus €47.2 million), EBIT after nine months of 2024 will be €68.3 million (9M 2023: €39.5 million). The one-off effects and non-recurring items result, among other things, from the restructuring measures at Carbon Fibers and the Battery Solutions business line as well as from expenses for a strategy project. When comparing with the previous year, it should be noted that the first nine months of 2023 were disproportionately affected by an impairment loss on the assets of Carbon Fibers (€44.7 million).

Development of the business units
The Carbon Fibers business unit's sales for the first nine months of 2024 amounted to €157.1 million, significantly below the figure of €179.6 million for the prior-year period. The decline is due in particular to the continued weak demand from the wind industry and to the increasing competitive pressure resulting from global overcapacities for carbon and textile fibers.

Idle production capacities and the associated lack of fixed cost absorption as well as declining margins for commodity products led to a further deterioration in the adjusted EBITDA of the Carbon Fibers. The adjusted EBITDA of the Carbon Fibers business unit fell to minus €7.9 million in the first nine months of 2024 (9M 2023: €3.2 million). It should be noted that the adjusted EBITDA of the Carbon Fibers business unit includes an earnings contribution of €11.6 million from the joint venture BSCCB, which is accounted for At-Equity (9M 2023: €14.1 million). Excluding this contribution from the At-Equity accounted BSCCB, the adjusted EBITDA of Carbon Fibers would have been minus €19.6 million (9M 2023: minus €10.5 million).

SGL Carbon assumes that demand for carbon fibers will not recover in the coming months and that the realizable prices for these products will remain at a low level beyond 2025. Therefore, SGL Carbon anticipates that the expected improvement in sales and earnings for the Carbon Fibers segment will be delayed and is revising its existing mid-term planning for this segment. Due to the expected deviation, an ad hoc impairment test is currently being carried out. This indicates a non-cash impairment charge of €60–80 million, which will be recognized in Q4 2024. The structured transaction process initiated for Carbon Fibers is still ongoing.

Sales in the Composite Solutions business unit amounted to €95.8 million in the first nine months of 2024, down 16.2% (9M 2023: €114.3 million). The decline is due in particular to the early termination of a project-related supply contract with an automotive customer. Furthermore, the lower sales figures for electric vehicles are also having an impact on Composite Solutions.

Adjusted EBITDA in Composite Solutions fell from €16.6 million in the prior-year period to €10.7 million (minus 35.5%), due in particular to lower volumes. The adjusted EBITDA margin weakened accordingly to 11.2% (9M 2023: 14.5%).

Outlook
Macroeconomic conditions, lower than expected sales volumes in some customer groups and price pressure for commodity products are increasingly hindering SGL Carbon's growth ambitions. Thomas Dippold, CFO of SGL Carbon, explains: “Due to the diverse and diversified industrial applications of our products and our strict cost management, we continue to expect to achieve our guidance for 2024 at the lower end of the range of €160–170 million. The coming months will not be easier. We need to prepare for a flat demand development in some of our sales markets.”