From the Sector

• Forecast raised for 2021

Based on the encouraging business performance in the first half of 2021 and the transformation successes, SGL Carbon expects strong Group results for the first six months of 2021 and raises its guidance for fiscal year 2021.

The company expects to exceed the upper end of the stated range of its Group EBITDA pre1 guidance (earnings before interest, taxes and depreciation adjusted by non-recurring items and one-time effects) for fiscal year 2021 of EUR 100 to 120 million and raises the EBITDA pre guidance for 2021 to EUR 130 –140 million.

SGL Carbon's sales forecast is also increased slightly to approximately EUR 1.0 billion for the current fiscal year, up from EUR 920 – 970 million originally. The company expects free cash flow for the full year to be correspondingly above the forecast of EUR 20 million given at the beginning of the year. A slightly positive consolidated net result is also predicted for 2021.

Previously, the company had assumed a consolidated net result of between EUR -20 million and EUR 0. According to preliminary figures, SGL Carbon expects Group sales for H1 2021 of around EUR 496 million (H1 2020: EUR 456.5 million). This corresponds to an increase of around 9% compared to the same period of the previous year. Based on the sales increase and the cost effects achieved from the transformation, EBITDA pre (EBITDA before non-recurring items and one-time effects) increased to around EUR 72 million in the first six months of 2021 (H1 2020: EUR 42.0 million).

The updated forecast for fiscal 2021 has been prepared on the basis of the prevailing market environment and assumes no deterioration in conditions due to the corona pandemic. In particular, it is based on the assumption that purchasing prices and logistics chains remain stable and production lines remain in operation. The communicated medium-term targets up to 2025 remain unaffected by the forecast adjustment. SGL Carbon will release its 2021 half-year figures as planned on August 12, 2021.

• Guidelines of the EU Commission to implement the Single-Use Plastics Directive have been published
• Uniform labelling obligation for wipes and feminine hygiene products containing plastics as of July 03, 2021
• Lenzing’s wood-based, biodegradable VEOCEL™ branded fibers as a sustainable alternative to plastic

The Lenzing Group welcomes the issuance of the guidelines for the implementation of the Single-Use Plastics Directive (EU) 2019/904, which took effect on June 05, 2019¹. In these guidelines, the EU Commission specifies which products fall within the scope of the directive, thus providing clarity in the joint fight of the EU member states against environmental pollution from plastic waste. Lenzing’s wood-based, biodegradable cellulosic fibers such as those of the VEOCEL™ brand comprise a sustainable and innovative solution to this man-made problem.

Uniform labelling rules for some single-use plastic products
The Commission implementing regulation (EU) 2020/2151 applying to the Single-Use Plastics Directive stipulate uniform labelling requirements for some of the single-use plastic products on the packaging or the product itself starting on July 03, 2021. They encompass feminine hygiene products and wet wipes for personal and household care containing plastic.

Consumers want sustainable hygiene products
Even before the implementation of the Single-Use Plastics Directive, Lenzing already gives consumers clear guidance in their purchasing decisions. Products bearing the VEOCEL™ brand logo on their packaging are produced in line with stringent certification criteria. As a consequence, consumers can be assured that the products contain biodegradable, cellulosic materials.

A Marketagent survey carried out in German-speaking Europe in October 2019² concluded that nine out of ten consumers would immediately change their purchasing behavior for wipes if they found out that their current product contains plastic. This would seem to imply that new market dynamics will emerge once the labelling rules for single-use plastic products takes effect. According to a Smithers Report³, about 500,000 tons of petroleum-based fibers are used each year for the production of wipes.

¹ Directive (EU) 2019/904 of the European Parliament and of the Council of 5 June 2019 on the reduction of the impact of certain plastic products on the environment
² Representative Marketagent Online survey, n = 1,005 (14 - 69 years old, from Austria and Germany). https://itsinourhands.com/
³ Smithers Report “The Future of Global Nonwoven Wipes to 2023”, published in 2018, page 23, reference year 2018

Lenzing – The Lenzing Group had a clearly positive revenue and earnings development in the first quarter of 2021. Growing optimism in the textile and apparel industry as a result of the vaccination progress and the continuing recovery in retail led to a significant increase in demand and higher prices in the global fiber market.

•    Significant increase in operating result: EBITDA at EUR 94.5 mn, cash flow from operating activities more than tripled
•    Major strategic projects continue fully on track – production start of the lyocell plant in Thailand expected in the fourth quarter 2021
•    Upper Austria’s largest photovoltaic plant at the Lenzing site
•    Lenzing exits Hygiene Austria joint venture
•    Guidance 2021: Lenzing expects operating result at least at pre-crisis level

Please read the attached document for more information.

Lectra announces its plan to acquire the entire capital and voting rights of US-based Gerber Technology. A key Industry 4.0 player in the fashion, automotive and furniture industries, Lectra designs smart industrial solutions – software, equipment, data and services – that help brands, manufacturers and retailers develop, produce and market their products.

The acquisition, if and when consummated, would allow Lectra to complement its market position and continue to enhance its offerings based on Industry 4.0 technology that will enable its customers to boost the productivity and profitability of their operations. After the French work council of Lectra is consulted and the binding documentation is signed, completion of the acquisition shall remain subject to merger control clearance and other customary conditions and shall be submitted to Lectra shareholders for approval.

The proposed combination would occur at an opportune time for both companies and their customers. The current uncertain economic climate and unprecedented challenges that fashion, automotive and furniture companies are facing due to the COVID-19 pandemic make it more important than ever for them to transform, digitalize and optimize their operations.

For over 50 years, Gerber Technology has used its proprietary technologies and deep domain expertise to provide integrated software and automated hardware solutions to companies around the world, including over 100 Fortune 500 companies in 134 countries.

The strategic combination of Gerber Technology and Lectra will create a premier advanced technology partner, able to quickly meet changing customer needs and deliver even more value through seamlessly integrated solutions. Together, the two companies will have a large installed base of product development software and automated cutting solutions in operation, with a worldwide presence and a long list of prestigious customers.

Consolidating the two companies’ research and development capabilities will enable the combined company to accelerate development of Industry 4.0 technologies and help its expanded customer base seize the full potential of these innovations.
Integrating the technology of the two companies will endow them with the resources to anticipate and address rapidly changing market conditions.

Key transaction terms

Under the proposed acquisition, Lectra would acquire all outstanding shares of Gerber Technology on a cash-free debt-free basis for an upfront payment of 175 million euros – through a combination of cash and debt – plus 5 million newly issued Lectra shares to AIPCF VI LG Funding, LP (“AIPCF VI LG”), an affiliate of American Industrial Partners that is Gerber Technology’s sole shareholder. This would represent a total amount of about 300 million euros based on Lectra’s closing share price on February 5, 2021. No contingent consideration is contemplated.

Gerber Technology’s revenues was 165 million euros in 2020.

Thanks to the strong value creation deriving from significant synergies, Lectra expects the transaction to be accretive for shareholders from 2022.

Upon closing, Daniel Harari would own c. 14.6% of the Lectra shares and AIPCF VI LG would own c. 13.3%.

Lectra’s Board of Directors would welcome a director representing AIPCF VI LG.

Daniel Harari would continue to be the Chairman and Chief Executive Officer of Lectra. Gerber Technology Chief Executive Officer, Mohit Uberoi, would assume special advisor to Daniel Harari role until end-2021.

Lectra’s shareholders would be invited to vote on the issuance of the 5 million new Lectra shares reserved to AIPCF VI LG at a dedicated Extraordinary Shareholders’ Meeting which is currently expected to be held on April 30, 2021. A report containing additional information will be made available to the shareholders prior to the Extraordinary Shareholders’ Meeting.

Lazard is acting as exclusive financial advisor to Lectra, and Latham & Watkins as legal counsel to Lectra.

Goldman Sachs is acting as exclusive financial advisor to AIPCF VI LG, and Ropes & Gray LLP, Baker Botts LLP and Gide Loyrette Nouel A.A.R.P.I. as legal counsel to AIPCF VI LG.

2020 results, update on the 2020-2022 strategic roadmap and guidance for the coming years will be disclosed on February 10, 2021.

Lectra management will discuss the transaction, provide forward-looking guidance for the combined company upon closing of the transaction and answer questions from the financial community during the February 11, 2021 webcast Analyst Conference meeting in French starting at 8:30 am (CET - Paris).

• Members of TMAS – the Swedish textile machinery association – have adopted a range of new strategies in response to the Covid-19 pandemic, aimed at assisting manufacturers of textiles and apparel to adjust to a new normal, as Europe and other regions emerge cautiously from lockdown.

“Many European companies have been forced into testing new working methods and looking at what it’s possible to do remotely, and how to exploit automation to the full, in order to become more flexible,” says TMAS Secretary General Therese Premler-Andersson. “Others have been taking risks where they see opportunies and there’s a new sense of solidarity among companies.

“It’s extremely encouraging, for example, that over five hundred European companies from across our supply chain are reported to have responded to the shortages of facemasks and PPE – protective personal equipment – by converting parts of their sites or investing in new equipment.”

New supply chains

Amongst them are TMAS members of the ACG Group, who quickly established a dedicated new nonwovens fabric converting and single-use garment making-up plant to supply to the Swedish health authorities. From a standing start in March, this is now producing 1.8 million square metres of converted fabric and turning it into 692,000 finished medical garments each month.

“In 2020 so far, we have seen new value chains being created and a certain amount of permanent reshoring is now inevitable,” says Premler-Andersson. “This is being backed by the new funding announced in the European Union’s Next Generation EU plan, with €750 billion marked for helping industry recover. As the European Commission President Ursula von der Leyen has stressed, “green and digital” transitions hold the key to Europe’s future prosperity and resilience, and TMAS members have new solutions to assist in both areas.”

Remote working

Automated solutions have opened up many possibilities for remote working during the pandemic. Texo AB, for example, the specialist in wide-width weaving looms for the paper industry, was able to successfully complete the build and delivery of a major multi-container order between April and May.

“Our new Remote Guidance software now makes it possible for us to carry out some of the commissioning and troubleshooting of such new lines remotely, which has been helpful” says Texo AB President Anders Svensson.

Svegea of Sweden, which has spent the past few months developing its new CR-210 fabric relaxation machine for knitted fabrics, has also successfully set up and installed a number of machines remotely, which the company has never attempted before.

“The pandemic has definitely led to some inventive solutions for us and with international travel currently not possible, we are finding better methods of digital communication and collaboration all the time,” says Svegea managing director Hakan Steene.

Eric Norling, Vice President of the Precision Application business of Baldwin Technology, believes the pandemic may have a more permanent impact on global travel.

“We have now proven that e-meetings and virtual collaboration tools are effective,” he says. “Baldwin implemented a home office work regime from April with only production personnel and R&D researchers at the workplace. These past few months have shown that we can be just as effective and do not need to travel for physical meetings to the same extent that was previously thought to be necessary.”

Pär Hedman, Sales and Marketing Manager for IRO AB, however, believes such advances can only go so far at the moment.

“Video conferences have taken a big leap forward, especially in development projects, and this method of communication is here to stay, but it will never completely replace personal meetings,” he says. “And textile fabrics need to be touched, examined and accepted by the senses, which is impossible to do via digital media today. The coming haptic internet, however, may well even change that too.”

Social distancing

The many garment factories now equipped with Eton Systems UPS work stations – designed to save considerable costs through automation – have meanwhile benefited from the unintentional social distancing they automatically provide compared to factories with conventional banks of sewing machines.

“These companies have been able to continue operating throughout the pandemic due to the spaced nature of our automated plant configurations,” says Eton Systems Business Development Manager Roger Ryrlén. “The UPS system has been established for some time, but planned spacing has proved an accidental plus for our customers – with improved productivity.”

“Innovations from TMAS member companies have been coming thick and fast recently due to their advanced know-how in automation concepts,” Premler-Andersson concludes.  “If anything, the restrictions imposed by the Covid-19 pandemic have only accelerated these initiatives by obliging our members to take new approaches.”

The previously communicated targets for 2020 are unlikely to be achieved due to the COVID-19 pandemic

The Board of Management of SGL Carbon SE determined today, that the forecasted results for the fiscal year 2020 are unlikely to be achieved due to the global COVID-19 pandemic. In light of the substantial uncertainty regarding the duration and the consequences of the COVID-19 pandemic, the Board of Management is currently unable to provide a reliable sales revenue and earnings forecast for the current year. Consequently, the guidance for 2020 is suspended. 

The previous expectation, which guided for a slightly lower sales revenue und a recurring EBIT1 approximately 10-15% below the prior year (sales revenue 2019: €1,087m; recurring EBIT 2019: €48m), was already made conditional by the Board of Management in the management report published on March 12, 2020, that negative effects from the coronavirus were not included, as the outbreak at that time was mainly restricted to China and Italy. In the meantime, numerous other governments have introduced far-reaching measures with substantial limitations on the public and economic sectors and leading economists now forecast significant reductions in economic output in key economies. 

The Board of Management of SGL Carbon has introduced and partially already implemented comprehensive measures to reduce the cost base and to secure liquidity. These measures include the introduction of short-time work, reduction of material and indirect spend, as well as further reduction resp. postponement of capital expenditures. In addition, we are exploring further financing options independent of the capital markets, some of which are already in preparation. The Company is intensively working on identifying and mitigating potential risks. 

As a result of the global COVID-19 crisis, the Lenzing Group expects based on recent developments a negative impact on its textile sales volume. The potential impact cannot yet be reliably estimated, as it strongly depends on the duration of the crisis as well as its further effects on the global economy and textile markets. Consequently, Lenzing suspends its result forecast for 2020 as disclosed on March 12, 2020, when it expected the result for 2020 to be below the level of 2019. In order to mitigate a potentially stronger than expected decline in earnings, Lenzing has already started to implement cost saving measures across its sites globally.

Within the framework of the preparations for the Group annual financial statements and based on preliminary results, SGL Carbon confirms its guidance for 2019 as revised in October 2019. Accordingly, the Company continues to expect Group sales between €1.05 and €1.1 billion and Group EBIT before extraordinary items between €45 and 50 million. In addition, net financial debt as of December 31, 2019 has also developed as expected, increasing by a mid double digit million € amount and thus remaining below the €300 million mark.

SGL Carbon also confirms the initial outlook for 2020 as presented in October 2019. Group sales is anticipated slightly below the 2019 level and Group EBIT before extraordinary items 10-15% below the 2019 level. To reflect the lower earnings expectations and within the context of a conservative free cash flow management, the Company will restrict capital expenditures to €70-80 million in 2020 (previous guidance: approximately €100 million) and thus approximately on the level of depreciation.

As usual, SGL Carbon will communicate further details on the guidance for 2020, particularly relating to the guidance on the level of the reporting segments, with the publication of the annual report 2019 on March 12, 2020.

The Company will also publish statements on the new mid-term plan on this date.

• Group sales increases by approximately 6 percent compared to the prior year period to 832 million euros due to organic growth in the market segments Digitization, Energy and Chemicals
• Group recurring EBIT at around 54 million euros; adjusted for a positive one-time effect in the prior year approximately on the comparable level of the prior year
• Business unit Composites – Fibers & Materials (CFM) deteriorated substantially in the third quarter 2019 due to the weak development in the market segments Textile Fibers, Wind Energy and Industrial Applications; Graphite Materials & Systems (GMS) developed better than expected on the very good level of the prior quarter reaching overall a record high level in 9M/2019
• Free cash flow from continuing operations improved significantly in the first nine months
• Impairment testing triggers a non-cash impairment charge of approximately 75 million euros in CFM in the third quarter
• Revised guidance of October 25, 2019: Recurring EBIT at CFM in a negative mid-to-high single digit million euros amount and on Group level at 45 to 50 million euros
• Countermeasures initiated to improve earnings of CFM
• Dr. Michael Majerus, Spokesman of the Board of Management of SGL Carbon: ”The structural growth drivers remain intact in our strategically relevant markets. The countermeasures to improve earnings of CFM will be implemented consistently.”

In the third quarter 2019, the business units of SGL Carbon developed very differently. While Graphite Materials & Systems (GMS) showed better than expected results, Composites – Fibers & Materials (CFM) deteriorated compared to the two previous quarters. This is attributable to the weaker development in the market segments Textile Fibers and Industrial Applications. In total, sales revenue in the first nine months 2019 grew by approximately 6 percent to reach 832 million euros. Recurring Group EBIT after nine months reached approximately 54 million euros. Adjusted for a positive one-time effect in the prior year, this was comparable to the prior year level.

In its ad-hoc notification of October 25, 2019, the company revised its guidance for recurring EBIT of CFM downwards to a negative mid to high single digit million euro amount. On the Group level the company now expects a recurring EBIT at 45 to 50 million euros. Due to the lower starting point in 2019 as well as the ongoing weakness in the market segments Textile Fibers and Industrial Applications in the business unit CFM a non-cash impairment charge in the amount of approximately 75 million euros was recorded in the third quarter 2019. In recent years acquired assets of the former joint ventures with BMW and Benteler were not affected by this impairment. In addition, the impairment charge of CFM led to a valuation allowance on deferred tax assets in the amount of 7.4 million euros. Against this background, SGL Carbon now expects a net result of approximately minus 100 million euros for fiscal year 2019.

At ITMA 2019 in Barcelona from June 20-26th, Goller will introduce the new Knit Merc for achieving the highest quality mercerization of knitted fabrics at the lowest tension and with under 3% variation in dimensional stability with high grade fabrics, for perfect dyeing results every time.

Mercerization is an essential textile finishing step for all cotton and cellulosic fibre-based fabrics in order to improve dye uptake and tear strength while reducing fabric shrinkage and imparting a silk-like lustre to the materials.

The Knit Merc is the result of intensive R&D developments at Goller and follows the successful introduction to the market of the company’s Sintensa Cyclone drum washing compartments for achieving the highest washing efficiency at the lowest tension.

The Knit Merc being exhibited at ITMA 2019 can accommodate 8.4 metres of fabric in its impregnation compartment and a further four metres in its first chain section to achieve a production speed of 25m/min at 30 seconds dipping time.

It is designed for dry-on-wet mercerizing, either cold or hot, and is equipped with an inlet combination of scroll and slat rollers for fabric guidance, a Tandematic uncurler in front of a rubberized de-airing roller and a grooved 320mm bottom roller with 320mm and 600mm perforated upper drums.

It benefits from automatic tension regulation and the low liquor content is ensured by the integrated lye tank and automatic circulation and filtration units.

An 8-ton high efficiency squeezer is stationed at the exit before the chain section and a 5-ton squeezer at the exit of the chain field.

Further fabric control and stability is provided by a cast iron pin chain with automatic optical and mechanical sensors, the Tandematic uncurler, an overfeed device and a driven belt arrangement for fabric support.