From the Sector

• Three out of four business units with record sales and results
• Carbon Fibers business weighs on the Group's profitability
• Group sales of €1,089.1 million (-4.1%) and adjusted EBITDA of €168.4 million (-2.5%) in a difficult market environment
• Sales and earnings forecast for 2023 achieved despite drop in demand from key market
• 2024 further capacity expansion in graphite components for silicon carbide-based semiconductors

In fiscal year 2023, SGL Carbon achieved the sales and earnings targets set at the beginning of the year despite the drop in demand from the important wind market and an increasingly challenging economic environment. Group sales decreased slightly by €46.8 million (minus 4.1%) to €1,089.1 million (previous year: €1,135.9 million). At € 168.4 million, adjusted EBITDA, a key performance indicator for the Group, was also down slightly (minus 2.5%) compared to the previous year (€172.8 million) but was clearly within the forecast range for 2023 of €160 to 180 million.

While the positive sales development of the Graphite Solutions (+€53.5 million to €565.7 million), Process Technology (+€21.6 million to €127.9 million) and Composite Solutions (+€0.8 million to €153.9 million) business units had a positive effect, the Carbon Fibers business unit had a negative impact on Group sales with a sales decline of €122.3 million to €224.9 million.

Outlook
The global economy will continue to face comparatively high interest rates and subdued growth prospects in 2024. Tighter financing conditions, weak trade growth and a decline in business and consumer confidence are also weighing on the economic outlook. In addition, heightened geopolitical tensions are contributing to increased uncertainty.

SGL Carbon expects different developments in our key sales markets in 2024. The most important sales and earnings driver will be demand for specialty graphite components for the semiconductor industry. In contrast, all indicators currently suggest that demand for carbon fibers for the wind industry will remain weak in 2024 and that the Carbon Fibers (CF) business unit will therefore continue to record operating losses. Even if demand picks up, SGL Carbon assumes that Carbon Fibers will require additional resources to make the most of market opportunities. With this in mind, teh company announced on February 23, 2024, that they are reviewing all strategic options for Carbon Fibers. These also include a possible partial or complete sale of the business unit.

SGL Carbon's sales forecast for the financial year 2024 takes all four operating business units into account, as the company is only at the beginning of evaluating the strategic options for CF. In line with the assumptions outlined, SGL Carbon is therefore expecting Group sales at the previous year's level (2023: €1,089.1 million).

In the earnings forecast, SGL Carbon has taken into account underutilization of production capacity in the Carbon Fibers business unit and the associated high idle capacity costs. The projected operating loss of CF will have a negative impact on the adjusted EBITDA of the SGL Carbon Group in 2024. Due to the expected positive development of Graphite Solutions, SGL Carbon anticipates an adjusted EBITDA of between €160 million and €170 million for fiscal year 2024, taking into account all four operating business units. Should the process of reviewing all strategic options for the CF business unit result in a sale, the forecast of adjusted EBITDA in 2024 would be between €180 - 190 million.

Hermann Finckh received the JEC Composites Innovation Award in the category Equipment Machinery & Heavy Industries for the innovation MAXIMUM WEIGHT REDUCTION OF COMPOSITE TOOLS. The research team from the German Institutes of Textile and Fiber Research Denkendorf (DITF) developed a new modular cutting tool for woodworking machines, which was produced and successfully tested by the industrial partner Leitz GmbH & Co. KG.

The extremely lightweight planing tool was made from carbon fiber-reinforced plastics (CFRPs) instead of aluminum using a completely new modular construction principle. As a result, it weighs 50 percent less than conventional tools. It enables significantly higher working speed, which enables a one-and-a-half-fold increase in productivity. The development of the extreme-lightweight principle was performed by numerical simulation and every solution was virtually tested in advance. A patent application has been filed for the concept.

• Sales up 1.9% year-on-year to €560.5 million with stable adjusted EBITDA of €88.0 million
• Strong business performance of the Graphite Solutions, Process Technology and Composite Solutions businesses
• Sales and earnings decline at Carbon Fibers due to weakness of wind market
• Impairment at Carbon Fibers of €44.7 million

Despite the increasingly difficult economic environment, SGL Carbon was able to increase sales in H1 2023 from €549.8 million in the previous year to €560.5 million. Adjusted EBITDA (EBITDApre) remained almost unchanged at €88.0 million (H1 2022: €87.9 million). The expected good business performance of the Graphite Solutions business unit and the better-than-expected sales and earnings development of Process Technology and Composite Solutions compensated the drop in demand in Carbon Fibers.

In particular, the Graphite Solutions (GS) business unit contributed to the stable development of the Company with a 15.3% increase in sales to €280.6 million (H1 2022: €243.4 million) and a 20.6% improvement in adjusted EBITDA to €65.1 million (H1 2022: €54.0 million). GS benefited especially from the high demand of the semiconductor industry. The semiconductor and LED market segment now accounts for around 45% of GS revenue (H1 2022: around 35%).

With a 30.9% increase in sales to €64.4 million (H1 2022: €49.2 million) and a significant rise in adjusted EBITDA from €4.1 million to €11.9 million, the business performance of Process Technology (PT) was significantly above the original planning. Composite Solutions (CS) also reported a higher-than-forecast sales increase of 14.4% to €79.6 million in H1 2023 (H1 2022: €69.6 million) and an improvement in adjusted EBITDA of 26.8% to €12.3 million (H1 2022: €9.7 million). By contrast, the business performance of the Carbon Fibers (CF) unit was not in line with expectations, with a 28.9% decline in sales to €125.1 million (H1 2022: €176.0 million) and a 78.4% drop in earnings to €6.1 million (H1 2022: €28.2 million).

An important market segment for the Carbon Fibers business unit is the wind industry. Demand for carbon fibers for the wind industry has declined sharply since the beginning of the year. According to current estimates, the expected recovery in demand in H2 2023 will not materialize. SGL Carbon expects customer demand from the wind industry to pick up in 2024.

As already announced in the ad hoc release of July 24, 2023, an impairment loss of €44.7 million was recognized on the assets of Carbon Fibers as of June 30, 2023.

Results situation
SGL Carbon's adjusted EBITDA (EBITDApre) remained almost stable in a half-year comparison at €88.0 million (H1 2022: €87.9 million). Due to the lack of demand from wind industry, CF's production capacity utilization decreased and idle capacity costs weighed on adjusted EBITDA. By contrast, higher margins from product mix and volume effects in the other three business units had a positive impact on adjusted EBITDA.

Non-recurring items and one-off effects not included in adjusted EBITDA totaled minus €46.9 million in the first half of 2023, of which €44.7 million resulted from an impairment loss in the CF business unit.

In addition to the above-mentioned effects and nearly unchanged depreciation and amortization of €29.1 million (H1 2022: €28.9 million), the decline in EBIT resulted in particular from the impairment loss already described (€44.7 million). After €69.6 million in H1 2022, EBIT amounted to €12.0 million in the reporting period.

Taking into account the slightly improved financial result of minus €15.8 million (H1 2022: minus €16.6 million), consolidated net income for the first six months of the current financial year amounted to minus €10.0 million, compared to €48.8 million in the first half of the previous year.

Net financial debt and equity
To complete its refinancing, SGL Carbon issued convertible bonds with a volume of €118.7 million in June 2023 and drew an existing term loan facility of €75 million in July 2023, which was used together with cash of the Company on July 28, 2023 to repay the corporate bond (outstanding as of June 30, 2023: €237.4 million). Accordingly, cash and cash equivalents increased to €310.5 million as of June 30, 2023 (€227.3 million as of December 31, 2022) and financial debt temporarily increased to €480.4 million (€398.1 million as of December 31, 2022). Net financial debt remained nearly unchanged at €169.9 million as of June 30, 2023 (Dec. 31, 2022: € 170.8 million).

Despite the impairment loss of €44.7 million in Carbon Fibers, shareholders' equity amounted to €565.2 million as of June 30, 2023, only slightly lower than at the end of 2022 (Dec. 31, 2022: €569.3 million). This corresponds to an equity ratio of 36.1% (Dec. 31, 2022: 38.5%).

• Sales increase by 4.7% to €283.7 million in Q1 2023
• Adjusted EBITDA improves by 9.0% to €40.1 million
• Growth based in particular on strong demand from the semiconductor industry

SGL Carbon generated Group sales of €283.7 million in Q1 2023 (Q1 2022: €270.9 million). This corresponds to an increase of €12.8 million or 4.7% compared to the same period of the previous year. Increased demand for specialty graphite components for the semiconductor industry from the Graphite Solutions business unit contributed in particular to the pleasing increase in sales. But also the Process Technology and Composite Solutions business units continued their positive business development.

Accordingly, adjusted EBITDA (EBITDApre) improved by 9.0% to €40.1 million in the reporting period (Q1 2022: €36.8 million).

Sales development
In the first three months of fiscal year 2023, the business unit Graphite Solutions was the main driver of SGL Carbon's growth with an increase in sales of €21.3 million or 17.8%. This is due in particular to the reallocation of production capacities from the solar industry market segment to the semiconductor industry. The Process Technology (+€6.6 million) and Composite Solutions (+€4.0 million) business units also contributed to the increase in sales.

The Carbon Fibers (CF) business unit recorded a decline in sales of €24.0 million in the reporting period. The decline is mainly due to the scheduled expiry of the attractive supply contract for the BMW i3 in the middle of last year. Freed-up production capacities were compensated by orders from the wind industry in the 2nd half of 2022. But the necessary construction of wind turbines in Europe is currently stalling. Low building permits and high manufacturing costs are temporarily hampering the construction and expansion of wind parks and therefore the necessary increase in renewable energy.

Earnings development
In line with the sales development combined with higher capacity utilization and positive product mix effects, adjusted EBITDA (EBITDApre) improved from €36.8 million to €40.1 million in Q1 2023, representing a quarter-on-quarter increase of 9.0%.

Taking into account depreciation and amortization of €14.3 million (Q1 2022: €14.1 million) as well as one-off effects and non-recurring items of minus €0.1 million, EBIT in the reporting period amounted to €25.7 million (Q1 2022: €31.2 million). It should be noted that Q1 of the previous year was positively impacted by one-off effects and and non-recurring items amounting to €8.5 million. Accordingly, net profit for the period of €15.3 million was lower than in the same quarter of the previous year (€21.5 million).

Debt, equity and capitel expenditure
Net financial debt increased slightly to €174.2 million as of March 31, 2023 (Dec. 31, 2022: €170.8 million). The leverage ratio remains unchanged at 1.0. Due to the positive consolidated net income, the equity ratio increased again slightly compared to the end of fiscal 2022 to 39.5% (Dec. 31, 2022: 38.5%).

Looking at the capital expenditure in Q1 2023, it amounted to €19.0 million, which is higher than the average values of the previous quarters. "At the beginning of 2023, we had already announced the expansion of our investment activities to expand production capacities in the Graphite Solutions business unit. In previous years, our capital expenditure was in line with depreciation and amortization. In addition to these approximately €60 million, we will invest further €20 to €30 million in 2023, which will be financed by advance payments in the context of long-term supply contracts from our customers in the semiconductor industry. Our semiconductor customers secure future production capacities for graphite components, which are needed for their own growth. In return, SGL Carbon's long-term supply contracts will enable future profitable growth," said Dr. Torsten Derr, CEO of SGL Carbon.

Outlook
In line with the business performance in the first three months of 2023, the company confirms the sales and earnings guidance issued on March 23, 2023.

For the financial year 2023, Group sales are expected to be at the prior-year level and  EBITDApre between €160 - 180 million. Taking into account depreciation and amortization, EBITpre is forecast to be between €100 - 120 million. Furthermore, free cash flow at the end of fiscal 2023 is expected to be at the prior-year level and return on capital employed (ROCE) between 10% and 12%.

Fibres, fabrics, epoxy resins and adhesives from Sicomin have been used by Grand Largue Composites (GLC) to construct the first Class40 racing yacht to feature a significant quantity of flax-fibre reinforcements.
The yacht, called Crosscall, won the Class40 World Championships in June 2022 and is a prototype of the new Lift V2 design by Marc Lombard, one of the leading naval architects in this field.

Class40 is one of the most competitive fleets in yacht racing. The hulls of Class40 yachts must be light in weight, strong and stiff, and durable in the most extreme of conditions. Furthermore, to keep costs down, they cannot be reinforced with carbon fibres. The quality and reliability of the resins used for the infusion and lamination of the hulls are therefore of paramount importance.

Crosscall's cockpit was designed to be effectively non-structural, with the mainsheet, which can generate huge shock loads, supported separately. This would allow the cockpit to be made from a hybrid biaxial fabric comprising 50% flax fibres. Other parts of the boat that incorporate flax fibre include the tunnel, the engine cover, the ballast tanks and the cap. The rest of the boat is reinforced with 100% glass-fibre fabrics.

To help it realise this ambitious design, GLC, an infusion specialist, turned to its long-time material supplier, Sicomin. The hull was moulded and infused in one piece and the deck – including the hybrid flax-fibre cockpit – was also infused as a single part. The internal structure was then laminated into the hull by hand before the hull and deck were finally bonded together.

The infusion resin selected was Sicomin’s SR 1710, a high-modulus structural epoxy. Designed specifically for use in infusion and injection processes, it has exceptionally low viscosity and its low-reactivity hardener makes it suitable for the production of large parts. Composites components made from SR 1710 possess high interlaminar shear-strength and the resin retains its mechanical properties in wet environments.

Sicomin’s low-toxicity SR 8200 was used to laminate the internal structures onto the skin of the hull. Ideal for hand laminating, this system includes a choice of hardeners with a wide range of reactivities, which makes it equally suitable for making large or small parts. The hull and deck were joined together with Sicomin’s Isobond SR 7100, which demonstrates high fatigue strength and is very resistant to microcracking.

An epoxy bonding primer – called Undercoat EP 215 HB+ and supplied by Sicomin’s sister company, Map Yachting – was applied to the moulds first to make demoulding easier. It also serves as an undercoat in the polyurethane exterior paint system that is used instead of gelcoat to protect the epoxy hull from UV damage.

Since the launch of Crosscall, GLC has started building a second Lift V2 Class40 and a third one is now planned, both for which Sicomin will supply the materials.

Hexcel Corporation has received Type Approval for its HexPly® M9.6GF prepreg products from Bureau Veritas (BV), a leader in testing, inspection, and certification services.

This certification enables carbon fiber-reinforced epoxy prepregs to be used in the production of parts for all BV-approved marine vessels. It also guarantees the quality, performance and consistency of the prepregs for ship and boat builders.

BV-approved HexPly M9.6GF prepregs can be reinforced with unidirectional, non-crimp and twill-weave fabrics. They are particularly suitable for use in the manufacture of masts and other large structural components for wind-assisted ship propulsion (WASP). To reduce reliance on engines and cut fuel usage, WASP vessels harness the power of ocean winds often using large carbon fiber-reinforced masts flying durable composite solid sails.

HexPly M9.6 prepregs were recently used to manufacture the mast for the Chantiers de l’Atlantique Silenseas project. The HexPly M9.6 prepregs satisfied all the requirements of the Silenseas consortium’s mast-section manufacturers for quality, mechanical performance, and processing characteristics, while also proving to be cost effective.

The European Pultrusion Technology Association (EPTA) has published a report from its latest conference, which focuses on advances in sustainability and recycling.

More than 130 professionals from the global pultrusion community gathered at the 16th World Pultrusion Conference in Paris on 5-6 May 2022. Organised by EPTA in collaboration with the American Composites Manufacturers Association (ACMA), the event featured 25 international speakers sharing insight on market trends, developments in materials, processing and simulation technologies, and innovative pultruded applications in key markets such as building and infrastructure, transportation and wind energy.

‘Bio-pultrusion’:  
Composites based on natural fibres offer a number of benefits, including low density and high specific strength, vibration damping, and heat insulation. The German Institutes for Textile and Fiber Research Denkendorf (DITF) are developing pultrusion processes using bio-based resins and natural fibres. Projects include the BioMat Pavilion at the University of Stuttgart, a lightweight structure which combines ‘bamboo-like’ natural fibre-based pultruded profiles with a tensile membrane.

Applications for recycled carbon fibre (rCF):
The use of rCF in composite components has the potential to reduce their cost and carbon footprint. However, it is currently used to a limited extent since manufacturers are uncertain about the technical performance of available rCF products, how to process them, and the actual benefits achievable. Fraunhofer IGCV is partnering with the Institute for Textile Technology (ITA) in the MAI ÖkoCaP project to investigate the technical, ecological and economic benefits of using rCF in different industrial applications. The results will be made available in a web-based app.

Circularity and recycling:
The European Composites Industry Association (EuCIA) is drafting a circularity roadmap for the composites industry. It has collaborated with the European Cement Association (CEMBUREAU) on a position paper for the EU Commission’s Joint Research Centre (JRC) which outlines the benefits of co-processing end-of-life composites in cement manufacturing, a recycling solution that is compliant with the EU’s Waste Framework Directive and in commercial operation in Germany. Initial studies have indicated that co-processing with composites has the potential to reduce the global warming impact of cement manufacture by up to 16%. Technologies to allow recovery of fibre and/or resin from composites are in development but a better understanding of the life cycle assessment (LCA) impact of these processes is essential. EuCIA’s ‘circularity waterfall,’ a proposed priority system for composites circularity, highlights the continued need for co-processing.

Sustainability along the value chain:
Sustainability is essential for the long-term viability of businesses. Resin manufacturer AOC’s actions to improve sustainability include programmes to reduce energy, waste and greenhouse gas emissions from operations, the development of ‘greener’ and low VOC emission resins, ensuring compliance with chemicals legislation such as REACH, and involvement in EuCIA’s waste management initiatives. Its sustainable resins portfolio includes styrene-free and low-styrene formulations and products manufactured using bio-based raw materials and recycled PET.

Hexcel will present a wide range of high-performance composite innovations for the Automotive, Marine, Wind Energy and Recreation markets during JEC World 2022 in Paris on May 3 – 5.

G-Vent Technology for Marine Structures
Hexcel has developed a new technology for out-of-autoclave (OoA) processing that delivers a game-changing reduction in process time and cost for marine manufacturers without compromising mechanical performance. Hexcel has leveraged its experience in aerospace and wind energy to develop its new G-Vent technology for OoA processing of highly loaded, thick section marine structures such as masts, foils, and wind-assisted ship propulsion (WASP) components. A full range of Hexcel marine prepregs are now available with integrated G-Vent technology, reducing the requirement for debulking steps and ensuring extremely low porosity (<1%) regardless of the laminate thickness. Leading marine non-destructive testing specialists Q.I. Composites recently confirmed that the thick section G-Vent panels they had evaluated had void contents and laminate quality in line with state-of-the-art autoclaved prepreg components. Visitors to the Hexcel stand will see a unique 400mm carbon cube cured in a single stage using 695 layers of HexPly M79 carbon fiber UD600 prepreg with G-Vent technology.

New HexPly® Nature Range Sustainable Prepregs
HexPly® Nature Range prepregs feature proven resins such as HexPly M49, M78 and M79 with bio-derived epoxy resin content. Created for use in all industrial markets, HexPly Nature Range materials can be seamlessly integrated into existing production processes, maintaining consistent mechanical performance and processing properties. A dedicated sustainability corner of the Hexcel stand will detail Nature Range products optimized for automotive, marine, wind energy and winter sport applications. The display will include an alpine ski produced by leading manufacturer Tecnica Group Ski Excellence Center which produces skis for Blizzard and for Nordica using HexPly Nature M78.1 UD flax prepreg material. In addition to the reduced environmental impact of the sustainably grown reinforcement, the flax fiber laminates also improve impact resistance and vibration damping in the ski.

HexPly® XF Surface Technology for Improved Part Surface Finish Quality
HexPly XF is a lightweight, semi-preg material that replaces traditional in-mold gel coat. It eliminates time-consuming refinishing work typically required to obtain a paint-ready surface and produces lighter, more consistent parts with shorter cycle times and a cleaner working environment. Visitors to the stand will see a composite panel illustrating a high-quality painted surface enabled with XF technology in a diverse range of industrial applications such as super yacht roof parts, Class A surface automotive panels, and both prepreg and infused wind turbine blades.

HexPly® M49 Prepreg for Automotive Visual Carbon Parts
HexPly M49 is easy to process and is especially suitable for visual carbon fiber-look applications such as the Brabus hood scoop on display on the Hexcel stand at JEC.

HexPly® Prepregs and HiMax® Reinforcements for Performance Marine Structures
Using a scale model of a Gunboat 68 performance sailing catamaran, Hexcel will illustrate how its HexPly and HiMax materials provide manufacturers with a complete set of lightweight composite solutions for high-performance marine structures. HexPly prepreg was selected for critical structural parts of the Gunboat 68 and provides very high mechanical performance including high dry and wet Tg.

Heavyweight HiMax reinforcements offer high deposition rates and remain easy to handle after cutting, making them highly suitable for industrial applications. In combination with a lightweight PrimeTex® woven fabric, the package of carbon fiber HiMax materials developed for the Gunboat 68 enabled consistent resin flow during infusion with reduced surface print-through.

Hexcel Fibers and Reinforcements for Lightweight Sporting Equipment
Sporting equipment manufacturers rely on Hexcel composite materials to deliver the ultimate performance at the lowest possible weight. Hexcel will exhibit a number of the latest high-performance sporting equipment applications such as a Bauer hockey stick featuring PrimeTex 98 gsm AS4C 3K fabric and a Corima tri-spoke cycling wheel made with lightweight Hexcel carbon fiber UD tape. Hexcel will also demonstrate how its HexTow® carbon fibers are used in key leisure and marine applications by displaying an AEROrazr solid carbon rigging component manufactured by spar and rigging manufacturer Future Fibres for the 36th America’s Cup.

International technology group ANDRITZ will be presenting its special-purpose machines for needlepunch production (including its portfolio for carbon applications) at JEC World 2022 in Paris, France, from May 3 to 5.

Experience and Know-How
ANDRITZ designs, develops, and engineers special-purpose machines for very specific and sensitive applications, like aerospace, railway, and military needs. Therefore, it can provide the market with customized machines offering perfect solutions, whether they are needed for prototypes or for industrial production.

Skilled Engineers
In increasingly demanding markets, the skilled ANDRITZ engineers and technicians help customers get the most out of their investments. The variety of cases they face every day enables them to optimize both output and quality depending on the fibers used, the challenge, and the customer’s final application.

Carbon Expertise
Experience with conductive fibers enables ANDRITZ to overcome challenges and provide access to new product developments. The company’s expertise lies in textile know-how as well as a deep understanding of related constraints. It includes carded/crosslapped processes for nonwovens made from recycled carbon fibers, which can be delivered in rolls or die-cut shapes.

Unconventional Needling for End-Uses
ANDRITZ addresses customers’ challenges by offering solutions and expertise in terms of straight and multi-axial needling, enabling the consolidation of fibers on flat or non-flat surfaces (such as rounded shapes) and even of layers up to 350 mm thick. New developments are made possible thanks to the outstanding ANDRITZ testing facility.

Support and Development
The ANDRITZ needlepunch technical center in Elbeuf, France, is open to visitors. Innovative strength and adaptability are the characteristics that make ANDRITZ the preferred partner in the search for genuine, efficient, and reliable solutions in the interests of productivity and premium, state-of-the-art consolidation. Secrecy being key in such sensitive development work, ANDRITZ naturally always guarantees the utmost confidentiality.

Hypetex®, a leader in colouring carbon fibre materials, is delighted to announce that its Hypetex® Kromaskin™ field hockey stick for adidas has been selected as a finalist for the 2022 JEC Innovation Awards.

Hypetex® was commissioned by adidas to develop a market leading hockey stick differentiated from existing equipment not just by its unique pigmented carbon fibre finish, but also by its game changing hitting power and consistency. The patented range of Kromaskin™ sticks, created with support from project partners Textreme® and Marque Makers, was found to outperform competitors in a benchmark study against eight other premium hockey sticks carried out by Loughborough’s Sports Technology Institute (STI).

Hypetex® lead the design, engineering, materials, and production process development for the adidas field hockey stick project. By incorporating the stick’s finish colour within the outermost carbon fibre layer, the stick mould could be adjusted outwards, placing the highly structural spread tow materials right at the outer extremities of the mould cavity, increasing mechanical performance and maximising the structural benefits of the composite materials used.

Whilst the Kromaskin™ surface provides a stunning depth of colour with minimal finishing required after demoulding, the Hypetex® technology, including an epoxy based expanding microsphere system used in the core, delivers significant performance gains on the hockey pitch. In tests at the STI, adidas Kromaskin™ sticks had up to 16% higher coefficient of restitution (COR), meaning they will return more energy and the ball will travel faster. In addition, through the production led design and materials used, the variation in COR was 70% less than the other sticks on test, a significant reduction in the production inconsistencies common with the manufacturing of performance sporting goods.