Source (all images) | SGL Carbon SE
SGL Carbon SE (Wiesbaden, Germany) published its half-year financial report (H1) 2024 on August 8 and confirmed the composite materials company’s solid business performance 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 represents a slight decrease of 4.0% compared to the same period last year; adjusted for currency effects, consolidated sales fell by just 2.2%. Adjusted EBITDA, an important Group key figure, 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 development in the semiconductor market segment and the associated change in the product mix. The persistently weak demand in the Carbon Fibers business unit, on the other hand, continued to weigh on the Group’s sales and earnings development.
“The different dynamics of our sales markets are also reflected in the development of our business units,” explains CEO Dr. Torsten Derr. “Graphite Solutions and Process Technology performed well in the first 6 months of 2024, as expected. Composite Solutions was unable to repeat its good previous year figures due to the termination of a supply contract and weak demand from the automotive industry. We do not see any recovery for the Carbon Fibers business unit even after 6 months of 2024.”
Taking into account depreciation and amortization of €27.0 million (H1 2023: €29.1 million) as well as one-off effects and special influences of €-3.6 million (H1 2023: €-46.9 million), EBIT for H1 2024 amounts to €55.9 million (H1 2023: €12.0 million). The one-off effects and special influences result, among other things, from the restructuring measures of the Carbon Fibers and Battery Solutions activities. When comparing the previous year, it should be taken into account that the first half of 2023 was disproportionately burdened by the impairment of Carbon Fibers’ assets (€44.7 million).
The Graphite Solutions Division generated sales of €284.2 million in the first half of 2024, slightly up 1.3% on the previous year (H1 2023: €280.6 million). The continued double-digit percentage increase in sales with customers from the semiconductor industry was almost completely offset by the decline in demand in the battery materials, solar and industrial applications market segments.
With an increase in sales of €16.4 million or 13.1% compared to the same period last year, the “LED and semiconductor” market segment in particular contributed to the positive development of Graphite Solutions and now represents around 50% of Graphite Solutions’ total sales (H1 2023: around 45%). The most important sales segment is customers from the silicon carbide-based semiconductor sector, who recorded a sales increase of over 20% in the first half of 2024.
Graphite Solutions’ adjusted EBITDA increased disproportionately to sales by a significant 10.9% to €72.2 million in the first half of the year (H1 2023: €65.1 million). The adjusted EBITDA margin also increased accordingly in the first half of the year from 23.2% to 25.4%.
The company Process Technology Division The good sales and earnings figures from the previous year were increased again. With sales up 8.5% to €69.9 million (H1 2023: €64.4 million), the division continued its successful business development. Process Technology benefits from its global orientation with locations in North America, Europe and Asia. The high capacity utilization also led to a significant improvement in adjusted EBITDA from €11.9 million to €16.0 million in the first half of 2024. The EBITDA margin rose accordingly from 18.5% in the first half of 2023 to 22.9%.
In the first half of 2024, sales in Carbon Fibers Division amounted to €110.1 million, which was below the figure for the same period last year of €125.1 million. The decline was due in particular to the continued weak demand from the wind industry. In the first half of 2024, global overcapacities for products in the textile fibers, industrial applications and transport market segments also led to a decline in sales in the low double-digit percentage range.
The adjusted EBITDA of Carbon Fibers fell accordingly by €10.5 million to minus €4.4 million (H1 2023: €6.1 million). The lack of fixed cost absorption due to temporarily closed production lines led to high idle costs and, in combination with falling margins on commodity products, had a correspondingly negative impact on the adjusted EBITDA. It should be noted that the adjusted EBITDA of the Carbon Fibers division includes an earnings contribution of €7.7 million from the BSCCB joint venture accounted for using the equity method (H1 2023: €11.0 million).
Revenue in the Composite Solutions Division fell by 16.0% to €66.9 million in the first half of 2024 (H1 2023: €79.6 million). The decline is due in particular to the termination of a project-related supply contract with an automotive customer. The lower sales figures for electric vehicles also had a noticeable impact on demand. The automotive market segment is the dominant customer segment and accounts for 93% of Composite Solutions’ half-year sales. As a result of the lower sales volumes, Composite Solutions’ adjusted EBITDA fell significantly year-on-year by 34.1% to €8.1 million (H1 2023: €12.3 million). The adjusted EBITDA margin weakened accordingly from 15.5% in H1 2023 to 12.1%.
The company expects to achieve its guidance for revenue and adjusted EBITDA in fiscal year 2024 at the lower end of the announced range.
Net financial debt increased slightly by 3.1% to €119.4 million as of June 30, 2024 (December 31, 2023: €115.8 million). The debt-to-equity ratio remained unchanged at 0.7. Due to the positive consolidated result, the equity ratio increased slightly compared to the end of 2023 to a solid 44.3% (December 31, 2023: 41.1%).
The investment volume in H1 2024 amounted to €44.2 million, significantly higher than the depreciation of €27.0 million.
outlook
The currently volatile and in some cases below-expected development in some of SGL Carbon’s sales markets is affecting the expected sales and earnings development of the business units. Due to the diversified business model, changes in demand for certain products can be largely offset by higher than expected sales in other businesses. The company therefore continues to expect to achieve the forecast for the SGL Carbon Group given in March at the lower end of the range mentioned. For the 2024 fiscal year, the company expects group sales at the previous year’s level (2023: €1,089.1 million) and adjusted EBITDA at group level of between €160 million and €170 million.
“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,” explains Thomas Dippold, CFO of SGL Carbon. “Due to their higher efficiency and performance, these are used primarily in electric vehicles. In the first half of 2024, global demand for electric vehicles slowed compared to the growth in previous quarters, and a return to the growth rates of the previous year is not expected in the coming months. In addition, there are high inventories in the semiconductor value chain, which also affect demand for our products. Even though 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 weaken in the second half of 2024. For Graphite Solutions, however, we still 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 H1 2024 and the expected trends for our key sales markets, the company expects to achieve its forecast for sales and adjusted EBITDA in fiscal year 2024 at the lower end of the announced range.
Further details on business development can be found in the half-year financial statements presented here.
