Earnings call: SGL Carbon navigates challenging market, plans divestiture

In the latest earnings call, SGL Carbon (SGL) presented its financial results for 2023, revealing a mix of challenges and strategic successes. The company's Chief Financial Officer, Thomas Dippold, announced that despite a 4% decline in sales and a 2.5% decrease in EBITDA pre, SGL achieved its targets for the year.

Notably, three of its four business units reported record-high sales and profitability, with only the Carbon Fiber unit experiencing a significant downturn. The company also highlighted its healthy balance sheet, with a strong free cash flow and reduced net financial debt, and shared ambitious plans for growth and divestiture in the coming years.

Key Takeaways

• SGL's overall sales declined by 4%, while EBITDA pre-decreased by 2.5%.
• Graphite Solutions, Process Tech, and Composite Solutions units achieved record sales and profitability.
• The Carbon Fiber unit saw sales drop by 35% and is planned for divestiture.
• The company's balance sheet remains robust with a decrease in net financial debt and an increase in free cash flow.
• SGL plans to invest in capacity expansion, particularly in the semiconductor and silicon carbide sectors.
• Guidance for 2024 anticipates revenue at the prior year's level, with EBITDA between EUR160 million and EUR170 million.
• Long-term plans include growing sales to EUR1.6 million by 2028, with an EBITDA target between EUR300 million and EUR330 million.

Company Outlook

• SGL expects to maintain 2023 revenue levels in 2024 and aims for an EBITDA between EUR160 million and EUR170 million.
• By 2028, the company plans to increase sales to EUR1.6 million with an EBITDA of EUR300 million to EUR330 million.
• The company will focus on megatrends and has the flexibility to adjust its structure through divestitures or acquisitions.

Bearish Highlights

• The Carbon Fiber business faced a 35% decline in sales due to weak demand, particularly in the wind industry.
• Overall, the company experienced a sales decline and a slight dip in profitability in 2023.

Bullish Highlights

• Graphite Solutions' sales increased by 10%, with an EBITDA pre-increase of 13%, driven by strong semiconductor business performance.
• Process Tech's sales jumped by more than 20%, with profits more than doubling.
• Silicon carbide sales surged by 48% and 44% in the last two years.

Misses

• The company's Carbon Fiber unit underperformed and is now being considered for divestiture.
• The bread-and-butter business, which includes heat exchangers, saw a decline due to CapEx cuts in the chemical industry.

Q&A Highlights

• Executives squashed rumors about the CEO's departure, confirming his intent to remain with the company.
• They addressed the stable yet slightly declining EBITDA in the Process Technology segment.
• The company is in the early stages of finding a buyer for the Carbon Fiber business.
• Executives are optimistic about growth in the graphite solutions market and potential recovery in the wind market.
• The company clarified that no immediate plans exist for purchasing another isostatic press.

SGL Carbon has demonstrated resilience in a challenging market, with strategic investments and divestiture plans aimed at long-term growth. The company's focus on high-margin businesses, such as the semiconductor sector, and its intention to divest the underperforming Carbon Fiber unit, reflect a strategic realignment to capitalize on emerging market trends. With a healthy balance sheet and a clear vision for the future, SGL Carbon is positioning itself to adapt and thrive in the evolving global market.

Full transcript - None (SGLFF) Q4 2023:

Claudia Kellert: Welcome from SGL's side as well. Today, we want to present you our financial 2023 and give you more details about our expectations for the upcoming years. Today, we have our CEO, Torsten Derr, attending the call.

Torsten Derr: Good morning, everyone.

Claudia Kellert: Our CFO, Thomas Dippold.

Thomas Dippold: Hello.

Claudia Kellert: And our colleague, Jürgen Reck, from the accounting -- Jürgen Reck from Investor Relations.

Jürgen Reck: Good morning.

Claudia Kellert: So, thank you. And now I hand over to our CFO, Thomas Dippold.

Thomas Dippold: Good morning. This is Thomas Dippold. I would like to guide you through the full year figures for the year 2023. Apologies for my voice. It should last at least for this call. I suffer a little bit from a cold, but my very best to guide you through that. First of all, and most important message, which you can see on this slide, SGL has reached its targets we once set at beginning of the year for 2023. So, we've reached our guidance in a very challenging environment and with some ups and downs, which I would like to show you a little bit through. On the overall performance of SGL, it looks exactly as we described it as a kind of a stabilization year. And later on, when we look at the investments also into an investment year where we do major investments. And I think this is exactly what we performed. You see our sales declined by 4%, and our EBITDA pre-declined by 2.5%. This is more or less in line with what we said and is well within our guidance. However, if you take a closer look, underneath these general and overall figures, then you would see that three out of four business units that we have in our portfolio, which is GS, Graphite Solutions, Process Tech and also Composite Solutions, have the highest sales, the highest EBITDA and the highest EBITDA margin ever. So, the only thing that hindered that to show that is the performance of our Carbon Fiber, and I think we'll touch that throughout the presentation later on. Graphite Solutions grew quite a bit, is 52% of the overall turnover that we have now. Carbon Fiber declined heavily and reaches just 20% of the overall sales that we have. And when we look at the profitability and the sales and we just exclude Carbon Fiber, then the businesses -- the remaining three businesses would have grown 10%-plus in sales and 20%-plus in EBITDA. I think that's a remarkable development of our core businesses, which we clearly pointed out. It's just hidden with the poor performance of Carbon Fiber. And again, we talk about our plans as Carbon Fiber throughout the call quite a bit. On the next slide, you see the performance of our largest and most -- not the most but very profitable business unit, which is Graphite Solutions. Here, in the turnover, we see a sales increase of 10% now reaching EUR565 million, coming from EUR512 million the year before. So, it's a remarkable increase. And even more remarkable is the development of our EBITDA pre. This increases by 13% and now reaching EUR134 million. And when you just calculate what happened in between, the sales goes up by, let's say, EUR50 million and our EBITDA is up by 15%. Then you see that the incremental increase has reached a 30% margin. Where does it come from? Especially semiconductor business and there, in particular, our silicon carbide business. You see on the right in our comments, semiconductor business, we will also elaborate later on in the call a little bit on our plans, especially in this business, went up by 40%, the overall driver there. And we have fully utilized our capacities in this business unit. This is why we invest so heavily in this business. And in order to finance this growth, we collected throughout the year 2023 some EUR70 million, customer down payments from our customers that we now convert into assets in order to make the growth possible. This, as we always said, the customer don't have is our interest-free, no securities, only some guarantees that we have. So, it's a very cheap financing. And we like that very much because the customer are also tied to us because they have to order. Otherwise, they don't get the down payment back. The performance, especially in the bottom line, is quite remarkable. We now have an EBITDA pre-margin of 23.7% in this business. Despite all the other businesses where we have some chemical industries, some normal industrial business but also some automotive, this was just so or stable or maybe just growing the single-digit margin stable margin but growth rate. This very much performance for the overall -- yes, performance of [indiscernible]. The second one, which is the smallest business unit, participated also in a very good way, which is Process Tech, which you see here on Slide number 6. If you check the printout of our slides, Process Tech had a remarkable year 2023. This is just fantastic. The sales went up by more than 20%, and they now reach EUR127.9 million. And the profit more than doubled from roughly EUR10 million the year before to now EUR22.4 million. We now reach EBITDA margin in this business of 17.5%. We will later on also show a little bit the evolution of the margins in the business since 2020, since Torsten and I -- since we joined this company, how this business has evolved and how they develop. And I think Process Tech is one of the most remarkable turnaround stories that we have in our portfolio. And this margin is very healthy. And where does it come from? We have a very strong order book. I think we were very successful in acquiring a lot of big projects that will help us also throughout the year 2024. We have a big contribution also from our service business, which helps quite a bit. And this comes that the profitability is so strong and also the sales growth there. This helped also very much their contribution to reach our goals and to reach the guidance. The business unit which we will talk later on quite a bit about, and this is especially in Torsten's part that we will show something there, that was disappointing the most is our Carbon Fiber business unit. I think we discussed that throughout the year, and this is ongoing also in Q4. And here, you see the kind of accident report for the full year that we have in Carbon Fiber. Sales dropped by 35%, coming from roughly EUR350 million to now EUR225 million and, I mean, a sales drop which comes from, especially in particular, the wind market, where literally nothing could be sold. And we have a lot of idle stock and some inventory in the value chain. So, we could hardly sell anything. We started throughout the year to idle capacity. And with that, you can't cover the fixed costs anymore. And you see, especially in the profitability, we have a drop of roughly EUR35 million, coming from EUR43 million the year before to now EUR7 million. But when you slice this result in two slice or in two half, then you see here also in our comments, the result -- the equity result of our joint venture, BSCCB. Sorry for that, we just show -- I don't know if you see that. Okay. Sorry, there was a technical issue on the presentation. Apologies for that, at least on my slide. You see that the result contribution from BSCCB, our joint venture, is even increasing and now reaches EUR18 million. The year before, it was EUR16 million. And our contribution from the operative business for our Carbon Fiber business went down from 27 to minus 10. So, we have a 37 decline in operating profitability in this business unit. Now you know why we have some divestiture plans that we at least would like to test the market with. Again, this will be in Torsten's part when we talk about that later. But this major decline in sales going in line with the profitability really hit us hard. But again, the three other business could compensate. On the next slide, Slide number 8, you see our Composite Solutions business. Composite Solutions has a stable sales, reaching -- they were the year before EUR150 million. They are now EUR153 million. So, this is more or less in line and is now a pure player automotive that we have there. But you have to bear in mind, the year before, 2022, we still had our Gardena business in the United States. It's located in -- okay. It's located in the U.S., and this was an aerospace business, which we -- and we sold the business. And this business was contributing with EUR30 million the year before. And as the sales is now even, that means, in fact, you don't see a growth here. But if you exclude Gardena the year before, then you would see a 20% growth of this business unit, which is quite remarkable. And also, in the profitability, you hardly see a slight decline by 2 -- increased by EUR2 million coming from '20 to '22. But the thing is also our Gardena business contributed EUR5 million the year before. So also, here, the increase is quite remarkable, and we now reach a very healthy 14.4% EBITDA margin in 2023 in this business. On the next slide, I will show you a little bit of a reconciliation between our EBITDA and the EBIT. Throughout the year 2023, and this is maybe worth mentioning, we had one major impairment because of the poor development of our Carbon Fiber business. You probably remember at half year, we had to impair our Carbon Fiber business. That was a triggering event because wind market was performing so poorly. Also, the capital cost, the back increased quite a bit because the interest rates were soaring. And you see that we hardly have any one-off effects. These are remaining EUR2 million, there remains of the restructuring project. So, our EBITDA almost equals our EBITDA pre. The normal depreciation that we have is roughly EUR60 million. This is also, as you know, our guidelines for our operative CapEx and investments. And then we had this investment of divestiture -- or impairments, sorry, of EUR45 million and some purchase price allocations that come with it. So, in the end, we had roughly EUR50 million nonrecurring items. And then you see still a quite healthy EBIT of EUR56.6 million that we achieved in the year 2023. Coming to other KPIs here on Slide number 10, which -- where we are very much focused on, then you see that our balance sheet is super healthy. You see a net result of another EUR41 million. Yes, that's a huge drop compared to the year before. But here, you have to also see that we had this impairment of roughly EUR50 million, which I just explained. If you add this on top, then this net result in 2023 would have reached roughly EUR90 million. And in the year 2022, we had a one-off effect with the sale of our Griesheim business, where we could release some provisions. And this was a one-off that positively impacted our net result. This was exactly EUR26 million. If we take this out, then also our net result on our operative performance level would roughly be the same. We are very proud of our free cash flow. This was EUR67 million the year before, and we now reached EUR95 million. Yes, we guided it on the level of last year, but there are a lot of customer down payments, as I already mentioned in that. And just at the year-end, we received quite a bit of customer down payments, which the customer transferred the money to us. And this is why it overshoot quite a bit. 25 [ph] is very strong. And this also contributes that the net financial debt could be decreased so significantly, coming from EUR170 million to now EUR115 that we reached. That means a leverage of 0.7. This is a super healthy relation. And our ROCE reached 13 -- 11.3%, is almost unchanged. Our equity ratio is also at a very stable 41.1% despite the higher effects from higher interest rate and pension in -- on the equity side of the balance sheet. And I think we can be very proud of this development. SGL is a different company when you look at the balance sheet than it was some four years or five years ago. On Slide 11, we would like to show you a little bit where we invest, how we do that and where future growth trends for us are allocated. And you see that in the year 2023, we invested roughly EUR90 million. And you see in the total column, you see that roughly 60% is our depreciation and amortization level. So, 1.5 times our depreciation is what we invest or you can also say 8% to 9% of our sales is what we invest. It depends on what KPI you like better. And you see that our GS, Graphite Solution business gets a major chunk of the investments with almost €60million, where we increased the capacity to a large extent. We started that, and this will go on through the year 2024 and other years, especially in the increase of our capacities in the semiconductor business and there, especially in the silicon carbide business. This is all growth projects behind it, some replacements, but most of them are growth projects. We hardly have any CapEx in Process Tech. This is more or less a project business there. They hardly need any assets for that. In Carbon Fiber, we have a project with a biomass plant that we installed in our Lavradio site in Portugal. By that, we would like to replace gas, and we don't like the cyclicity and the consumption of gas there. And Portugal is a wood country. So, we're trying to have some renewable effects also there. So, this is a kind of a replacement that we have because we find an alternative way to create clean energy in order to run our production there. Composite Solution had just some EUR5 million with project tools and some line expansions there. And the other EUR10 million or EUR11 million [ph] that you see are corporate projects. And there, we also touched that, the capacity expansion on our Meitingen site near Oxford, where our joint venture part -- the German joint venture part of this BSCCB business is located. And they get a 9,000 square meters capacity expansion. I was last week in Meitingen. I think they're making great progress there. And the first €10 million to -- EUR10 million are also already in this building. The rest will come in 2024. As a summary, as I guided you with the initial slides to sales and EBIT, and now I guided you a little bit through the businesses, how they developed and performed as a summary, we guided our sales to be on previous year level. I think we reached it to a large extent. As we said, we already anticipated some downturns in Carbon Fiber, which we could kind of compensate with the other businesses. That then Carbon Fiber deteriorate even further, and the other businesses luckily could compensate that, to a large extent, makes us very proud. Same in the profitability. I think this is almost a perfect target hit that we had. We had EUR172 million the year before. We now have EUR168 million. This is a 2% deviation from that, and we are right in the middle of our guidance with EUR160 million to EUR180 million that we gave you. I think this helps a lot to digest the Carbon Fiber impact. And with that, I would like to hand over to Torsten, who will talk about a little bit about the Carbon Fiber business and our plans there and also our growth project that we have in particular. Torsten, please continue.

Torsten Derr: Thanks, Thomas. Yes. Here in this diagram, you can see the journey that Thomas and I took with SGL. And Thomas and me, we started our work in 2020, and we focused on the mega trends and innovative products in fast-growing markets. You can see here that three of our four business units achieved record turnover, record results and record margins. We are particularly proud of the high-margin level of almost 24% in our business units, the largest business unit, Graphite Solutions, where we have developed the portfolio into the direction of semiconductors. And despite many improvements, our carbon fiber business has developed in the opposite direction. And you can see this in the third bundle of this diagram, it went down. And those figures are without our BSCCB joint venture. It has developed in the opposite direction. Currently, we see weak demand in our main application, which we have in the wind industry. The wind industry carbon fibers are used for reinforcement of the wind turbine blades. Yes. We are following two routes to solve the problem. First is specialization in attractive niche markets. For example, hydrogen pressure. There we have developed a fiber for, and this is a market which is growing exponentially. Second solution is we are looking for a partner or an investor to provide these businesses the necessary resources which the business is -- business Carbon Fiber deserves. You can see on this slide something which we consolidate at equity, and we don't talk about it that much, it's our carbon brake disc business. This is in the diagram on the left, you can see the business unit CF results with the contribution of exactly this joint venture, BSCCB. And BSCCB is a 50-50 JV between us, SGL and the Italian brake company, Brembo. At BSCCB, we produce carbon brake disc and consolidate the results at equity. The Carbon Fiber results are here shown in petrol. And in gray, you can see the additional equity result of BSCCB. And at BSCCB, we attract in a luxury problem. The customers want more brake discs, and we have to expand our capacity because we are running at our limits. And if you buy your new Lamborghini or Ferrari (NYSE:RACE), it moves from extra equipment into serial equipment, and we will even see a faster growth than we experienced in the past. Currently, and you can see this on the right-hand side, we will invest in the next two years EUR150 million in this business. And EUR120 million go to our site, which is an SGL side in Meitingen and EUR30 million go to the site of our partner to the Brembo side in Steps. And down in the bar graphs, you can see that alone in Meitingen, we expand our capacity from today by 70% And we will more than double the surface in the production haul, which Thomas already mentioned. Yes. I already mentioned that our business with Carbon Fiber is an attractive opportunity, and Carbon Fiber represents a fully integrated Carbon Fiber business. It's highly attractive, and we operate world-scale capacities. We expect a recovery of the wind business soon, and we have blue-chip customers at hand. We are not the right owner for the Carbon Fiber business because we are always in difficulties where to put our money in. And as our Graphite Solution business is so important for us and so fast-growing and offers so high margin, the decision either to invest in Carbon Fibers or into Graphite Solutions, the answer is always Graphite Solutions. So, where we are looking for? We are looking for a good partner with a good story, who is a better owner than us and who is willing to invest some money into the business, which the business deserves. Next slide, Thomas. Yes. Due to the persistently weak demand in Carbon Fibers coming from the wind industry, we give the following guidance for 2024. We see the revenue on prior year's level. And EBITDA between -- will be between EUR160 million and EUR170 million. We will also on this year maintain the focus on our semiconductor business and on electromobility, and we are going to expand our capacities in our business unit, GS. If we could resolve the negative earnings situation, our business unit, CF, the company would be in an EBITDA frame between EUR180 million and EUR190 million. This is a hypothetical calculation. On the next slide, you can see what we are doing in our semiconductor business. Our biggest growth is driven by the business unit, GS. And within this business unit, we were able to increase the share of sales accounted to semiconductors from 36% to 46% in just one year. If we look deeper into the semiconductor business, and you can see this on the right-hand side of chart, you can see that we were able to increase our semi sales from EUR123 million in 2021 to EUR262 million in last year. In 2023, the revenue from graphite components used for silicon carbide production accounted for 61% of our total sales in SiC. Our semiconductor business is shown here in more detail and also the development which we expect for the coming years. In gray, you see the LED business, green is SI, the silicon semi business, and petrol is the silicon carbide business, which we are focusing it. And you can see that our aim -- that we are aiming to total sales of over EUR400 million in 2028. We were also able to increase the silicon carbide sales by 48% and 44% in the years -- in the last two years. The diagram, which is depicted here, is only based on existing contracts. So, there might be additional growth from customers or contracts, which we don't know yet. But this is a base case which we took into our calculations. Next slide, please, Thomas. Next slide. Let us now turn to our medium growth plans. In 2028, we plan to grow our sales to EUR1.6 million with an EBITDA between EUR300 million and EUR330 million. Due to the strong impact of our high-margin semiconductor business, we expect to grow our margin from today 15% in this market segment to 19% to 21%. Sales are expected to grow with a CAGR of 8%. EBITDA will grow with a CAGR of 14%. On the last slide, I want to summarize our midterm strategy, which has not changed at all. So, we stick to the strategy which Thomas and me have decided on in 2021. And here, you can see a brief summary. One, we focus on businesses -- on business units which are the megatrends: digitization, renewable energies and climate-friendly mobility. Two, we see an ongoing high demand for special graphite, especially for the production of silicon carbide-based semiconductors. Three, we will invest to increase our capacities. And you see this in carbon brake discs. You see this in our graphite segment. We reached the maximum of our capacities, and we are going to invest step by step. Most of our CapEx comes from customer down payments. So, this is a very cash-friendly way to expand our capacities. We focus on innovative and customer-focused products. And last but not least, and this is point five, I want to remind you, we are a portfolio company. We structured our company in four business units, and I often refer to companies in a company with an own P&L statement, which we report to the Capital Markets. And I want to remind you, we can easily adjust the structure of our company, either by divestiture or by acquisition. We will continue exactly this strategy. And with this word said, I'm going to hand over back to Claudia.

Claudia Kellert: Yes. Thank you. I think now we have enough time to answer your questions. Frenzy, maybe you can give a short introduction how to use the Q&A tool.

Operator: Thank you, very much, Claudia. [Operator Instructions]. Our first question today is from Andreas Heine from Stifel. Please go ahead with your question.

Andreas Heine: I have several and I ask them one by one. The first is on Q4. I was surprised about the positive outcome in Carbon Fibers as the operating trends have probably not changed. You might explain why we have seen positive EBITDA from the final quarter. And in the other direction, it was on the Corporate line, where there were higher expenses than in the quarters before. In the guidance for 2024, you also expressed that the Corporate line will see higher expenses in this year. Maybe you can explain this, and then I ask some smaller other questions.

Thomas Dippold: Okay. These were three questions, if I take it right. Andreas, I try to do my best to answer them all the way you asked them. The first one, you mentioned the relatively good result of Carbon Fiber in Q4. You're 100% right What happened there? There was an operative one-off effect. But our auditor confirmed it's an operative effect. It's not a pre-effect but an operative effect because we had a reversal of a deferral that we had of roughly EUR4 million. It's also explained a little bit in our annual report, at least to -- I can show you on the pages where we mention that. It's -- and we could reverse a deferral, and it's like a kind of a provision or in German, [Foreign Language]. And this had result effect on our P&L, this EUR4.1 million. And this certainly contributed in Q4, and this is the reason why Carbon Fiber is relatively good in this quarter. And you're right, if you take it out to see the real operative performance, we wouldn't be at minus 10.9 but at minus 15, if you take this out, 100% right. Second question, it's exactly the opposite on Corporate. On Corporate, we had two effects that explain that a little bit while Q4 was maybe in this direction. However, I would like to mention Q4 is exactly as promised. Normally, we have about corporate cost of minus EUR4.5 million per quarter and -- on a run rate. And if you take the full year, then we're exactly there. it's more the reason why the first three quarters may be a little bit less and then everything came on top in Q4. There are two effects. On the one hand side, we gave a true-up to the businesses. So, with that, our Corporate gets worse, but the operative businesses get better. This is one thing. And it's kind of digested in the operative business unit that we just presented. And the other effect, we had some higher provisions for our bonuses, especially on the corporate level, because the contribution -- how the corporate senior management is -- yes, is affected, has not been done throughout the year but especially in Q4. That's the main effects that are in there. But I would like to mention on the corporate cost overall, they're exactly in line with what they were guided. And your last question was on the guidance, if I remember that correctly, on the guidance for Corporate in the year 2024. Yes, we have roughly EUR3 million, EUR4 million higher costs that we guide in this kind of segment -- nonoperative segment. And these costs, on the one hand side, we have higher personnel costs that we see. Second reason is we calculate again with 100% bonus. They don't get 100% bonus, the corporate guys, in this year. And the third reason is also that some of the costs that we have with our market test with Carbon Fibers are also collected at the moment in this segment. These are the three effects that contribute to that.

Andreas Heine: Very good. May I squeeze one more financial question in? How do we have to think about the free cash flow in 2024? So, you have received the prepayments of EUR100 million already. You invest EUR150 million in 2024. And according to former statements, you have made this that the prepayments are, roughly speaking, paid back over three years period. So, of the EUR100 million, then maybe EUR30 million to be repaid in form of deliveries in 2024. Maybe you can help us there a little bit.

Thomas Dippold: I try my best. We -- of course, we -- €95 million something, we can't repeat there. And we are also honest with you the trends that our customers give us customer down payments to such a large extent that we see, in particular in the year 2023, will slow down. I wouldn't say that it goes down heavily, but we will see a slowdown. And you have to calculate -- you're 100% right. We so far received roughly EUR100 million inflow. And you have to bear in mind, in this particular year 2023, we already have EUR10 million reimbursed with the sale of our silicon carbide products to our customers. There will be a net inflow with customer down payments also in 2024. And this is a way that most of the money will be invested into CapEx expansion in this year. And I mean, we plan EUR150 million. This is massive. With our operative performance, we still would like to stick to our rule, where we say we invest with our, yes, own money on the level of depreciation to also maintain and achieve a healthy cash flow. We would like to maintain that, but we invest on, let's say, EUR50 million, EUR60 million level. The rest is customer down payment. And for the building of the expansion that Torsten mentioned for our joint venture part that we do in Meitingen, for there, we have a special financing. But certainly, you will see it in investing cash flow. And the financing then and the financing cash flow, this will be around EUR20 million that we do there. But with that, I think we reached EUR150 million, which is massive. We haven't done that for many, many, many years to invest so much. And bear in mind, except the EUR20 million that I just mentioned for the remains of the building with BSCCB, it all goes in value creation, machine capacity expansion, no new sites, no new buildings. We can all do that in our existing sites, and we do everything. And the that Torsten is always using there, it's debottlenecking, and we have a max out of our sites. This is what we try to achieve, and this is a major plan.

Operator: Our next question is from Lars Vom-Cleff from Deutsche Bank. Please go ahead with your question.

Lars Vom-Cleff: Thank you, very much. Good morning. Thank for taking my question. Three quick ones, if I may. The first one, regarding the medium-term guidance on Slide 22. I assume both the sales target as well as the EBITDA margin at this stage still includes Corporate -- not corporate finance, Carbon Fibers, correct?

Thomas Dippold: Yes. We have excluded -- it's not a discontinued operational asset held for sale. It includes Carbon Fiber, 100% right.

Lars Vom-Cleff: Okay. Perfect. And then maybe I know you're not giving absolute amounts of your order backlog or order intake. But are you still experiencing a positive momentum? Or is it declining at this stage?

Thomas Dippold: No. What we see in Q1 is similar of what we have seen in Q4. So, we see positive and negative effects, which are balancing out.

Lars Vom-Cleff: Okay. And then maybe the last one regarding Process Technology. I mean the chemicals industry is still in a difficult position. And in the most recent history, it was the case that the chemicals industry took the chance to use the lower business volume to do some maintenance and refurbishment from which your Process Technology division is benefiting. Is this still the case? Or is this -- are you seeing it fading out at this stage?

Thomas Dippold: Yes. Lars, if you cut our Process Technology business in half, there are two parts of the business. One, we call bread-and-butter business. These are, for example, heat exchangers, which we sell to chemical industry. And then they are replaced after 10 years, and then we sell new ones. And this business really went down, as you explained, because chemical industry has CapEx cuts and so on. We have the second business, which we call systems. And in systems, we sell, for example, apparatus to produce hydrochloric acid or cleaning of phosphorus assets. And we were lucky that we were able to compensate our bread-and-butter business in the weak chemical industry with a very, very strong systems business. And we sold a lot of synthesis equipment for phosphoric acid, which goes into lithium-ion phosphate batteries. And they need ultrapure phosphoric acid. And we have a very healthy demand for the systems in PT, and this drove our business. And we are in a lucky situation that, that business was balanced out by a very good one.

Claudia Kellert: So, I think the next question here will Thomas Junghanns. So maybe Frenzy, you can open the line for him.

Thomas Junghanns: Can you hear me?

Torsten Derr: Yes, yes, loud and clear.

Thomas Junghanns: Perfect. Thanks. So, the first question is a little bit of proxy question, if I may. We are surprised by the fact that you don't want to extend the contract, Mr. Derr. So maybe you can give us a little bit more color on this because I think SGL Carbon, yes, is the best of the company, especially if the company gets rid of Carbon Fibers. And so, my question is why don't you want to reap the fruits of your fantastic work. And maybe we can go one by one, the question.

Torsten Derr: Yes, you are right. And I can tell you all rumors which were written in the Internet are wrong. I like my friends, Thomas, very much. I have a very good relation to the Supervisory Board. And you are very right, we cleaned up the company and the company is ready for growth in very attractive segments. So, from this point of view, there is no reason to go. And the team which I have here is simply fantastic. It's the best team I worked with. But where I'm good at, I'm a specialist in transforming companies. And I will do this and I stay in the company. You have to suffer from some more conference calls with me in the quarters to come. So, I stay here for quite a while. I will continue and work on the project Carbon Fibers, and we'll try to find a better owner. And then SGL is in very good shape. And then, it's for me time to move on and use my skills where I'm good in another company. And I think there will be a very good successor to drive the growth of SGL forward, yes? This is the story, but nothing behind, nothing which drives me out of the company. SGL is a fantastic company, a fantastic company.

Thomas Junghanns: Very well explained. Understood. My second question is with respect to Process Technology. You are guiding for stable sales but a slight decline in EBITDA. Is it due to the production from the chemical industry products to products for the battery industry? Or why are you expecting a decline? And for how long does the order backlog provide visibility with respect to the operational development in Process Technology?

Thomas Dippold: Thomas, maybe -- yes, you're right. But you also have to look at the level of profitability that Process Tech has. We have reached EUR22 million and a slight -- or even a significant or major decline or increase would be EUR2 million. I think we had a major, major, major increase of profitability coming from the year 2022 to 2023. And you can be sure that Torsten and I, that when we have our target-setting meetings with the business units, we can be very rigid, very strict. And of course, we would like to drive the positive development. However, we see that their increase was very remarkable. And I think that they kind of consolidate on the level where they are is just a matter of a conservative planning, which you normally always had. You never had a disappointment. We never -- since Torsten and I are here with the company, you never saw a guidance adjustment in a negative manner. It's, if at all, in the other direction. And I think we would like to give them a year to breathe and to install a little bit of capacity. They want to invest at least EUR1.5 million there. This is -- and if they try to fulfill all the projects that they have in the books, and this goes in line with your second question, how well -- how good is the visibility of this business? It remains the same. We have a visibility of six months to nine months there. For that, this is exactly in line with the guidance that we gave. Q1 is almost over already now that we talk with the full-year figures, and we meet again in five weeks when we publish our Q1. I think this is -- we are not worried about the performance of Process Tech. I think they will perform as described.

Thomas Junghanns: Thanks. My third question is with respect to the potential divestment of Carbon Fibers. As I'm not -- correct me maybe, both Composite Solutions and joint venture with brand carbon fiber materials via the Carbon Fiber business unit, how is the business? We manage this Carbon Fiber, now it's being sold. What will be supply commitments be agreed with a potential buyer? Or how does it work?

Torsten Derr: Yes. So, Thomas, what we are doing, we consolidate the results of BSCCB at equity in our Carbon Fiber business unit, but they are managed completely independently by two management teams. And the only connection is that there is a buy-and-sell relationship. And it's not that large. We produce something which we call carbon ships. And the carbon ships are included in the brake disc. They are one of the raw material you use in carbon brake disc. And of course, we secure, because we invest in BSCCB that much, this supply relationship for a very long time. And this is a good solution for both parts, for CF, they have a long-term customer and also for our carbon business. But we don't sell our share in BSCCB, to make this clear. It's only the Carbon Fiber business we are talking about.

Thomas Junghanns: Yes. And what about Composite Solutions?

Torsten Derr: Composite Solution, it's another business unit. And this is core, core, core in our company. So currently, we only talk about the pure Carbon Fiber business.

Operator: And the next question is from Lukas Spang. Please go ahead with your question.

Lukas Spang: Good morning. I would like to follow on the Carbon Fiber strategic review. So, do you have already some interesting parties for this business unit? And if so, can you share a little bit more details? And how many parties are interested? Are these more strategic investors or financial investors? Anything you can share with us?

Thomas Dippold: Lukas, I think that's a nice try. I don't know exactly that we can answer that question. And sorry for that, but we just started the process. And let's put it this way: as this kind of target is not so often in the market, we see a certain interest, which we're very happy with. Let's put it this way. But the process has just started as we announced it. We're at the right at the very beginning.

Torsten Derr: And Thomas, to add both categories, Lukas mentioned the...

Thomas Dippold: Of course, of course. Everybody would like to have a look at it, for sure.

Lukas Spang: Okay. And then also, thanks for the transparency in terms of last year's CapEx. Can you also share a little more light on the 2024? How much is spending for Graphite Solutions? And how much would be for Carbon Fiber?

Thomas Dippold: I'm sorry, we also don't disclose that. But Carbon Fiber, you can imagine as we have 30%. I'm just trying to help. In fact, I can't answer the question. But the thing is if you have a 30% down in our revenues, that means -- or 35% even, that also means that we have idle capacity. So, the day the wind market or the pressure vessel market comes back or gets some boost, we will be up and ready and start production again. Do we need capacity expansion there? No. As I said, in this year, we made this biomass plant -- or biomass unit in order to produce our steam in a more environment-friendly way. This is what we did. CapEx goes down to a necessary minimum, I look at the profitability, why should we invest there? This is exactly the dilemma that Torsten has mentioned. Our super attractive market is graphite, and this is where the major chunk, also this is where the customer down payments come. And you can expect a lot to be invested in graphite.

Lukas Spang: Yes. And the EUR20 million you mentioned before is included in the EUR150 million? Or can this...

Thomas Dippold: Of course, CapEx is CapEx. And if you invest also in a building, of course, this is not so super attractive because, in fact, we can only get a rent and then later on a contribution from their result. But this is how the joint venture contract goes. And we are more than happy to give them a new home that they can start ramping up their production.

Lukas Spang: But that is included in the EUR150 million?

Thomas Dippold: Yes, yes, yes, it is. It is, just to clarify that again.

Lukas Spang: Okay. and then last question. If we compare the outlook for 2028, now it's one year later, but if you compare the numbers, you are more optimistic than one year before. So, you expect now EUR300 million to EUR330 million instead of EUR270 million to EUR300 million. So where does this more optimistic earnings outlook comes from? Is it just Graphite Solutions? Because one year ago, you were probably more optimistic about Carbon Fiber. So where does this come from?

Thomas Dippold: I understand where you're coming from, and I understand your problem. And at the moment, you still see kind of a back-end-loaded development of Carbon Fiber. The wind market will come back. We strongly believe that, and everybody is saying that. Otherwise, our -- especially in Europe, our goal is to get net zero and everything. And there will be hopes, and we can't do that. So of course, this is reflected in our plan. The wind market can't stay on the level where we are in the pressure vessel market. In the hydrogen and fuel cell business, this will also need and require carbon fiber. You can't contain the pressure of 700 bars in aluminum tanks and others. They need carbon fiber and hence -- and there are many, many companies out there who are developing this and preparing for this market. And this is reflected also, of course, in our business case. And if you are interested or whoever is interested in getting to know -- or want to buy Carbon Fiber, we'll see that reflected in our business case that we have there. And we believe in that. We just say we are not the right owner. And Carbon Fiber is also in there. I know that you would like to see how it's -- our development without Carbon Fiber, but the big chunk of the growth, to answer this question the other way around, is definitely Graphite Solutions, for sure. This is absolutely core, and this is the booster of our sales and profitability also in the future and there in particular, semiconductor and in super particular, silicon carbide.

Lukas Spang: Yes. Okay. But yes, you mentioned the right point. It's very back end -- it seems to be very back-end loaded.

Thomas Dippold: It is, for sure.

Operator: The next question is from Sven Sauer from Kepler. Please go ahead.

Sven Sauer: I'm going to go through the questions at once because I'm having some connection problems. The first one is, could you share with us why you received EUR5 million less in dividends this year? I maybe I'm mistaken, but I thought this was a fixed dividend payment. The second question would be, if you could maybe explain a bit more the theoretical calculation of the higher guidance. I don't fully understand what this would entail. Is it a sale of the business or a recovery? And also, what kind of timing are we looking at here? And the third question would be on Slide 20, where you showed the medium-term outlook for the SE and SIC business. It seems that there is a jump in 2026, a bit higher growth. But maybe I just saw it wrong Maybe you could share some info’s on that. Thanks.

Thomas Dippold: Sven, this is Thomas. And dividends, you are right. And you have good eyes that -- apparently, the dividend also has to be mutually agreed with the shareholders. We have Brembo and us. And you're 100% right, this -- from EUR15 million dividend that we had went down to EUR10 million. But exactly because of that -- Torsten has shown that, and it's shown in the press presentation on Slide number, give me a second, 15. We invest overall some EUR150 million in the expansion of the business, and only the buildings is being borne by the relevant shareholders. So, for us, it's EUR10 million last year and maybe some EUR20 million, I don't know when -- the groundbreaking, of course, already took place. But I think end of the year, beginning of 2025, this site or this expansion in Germany in Meitingen should be up and ready into the. I think it's faster. And because they have the building in, the Brembo side has a lot of idle space where they can expand their business. And they, of course, have to invest the other monies into the expansion, the machinery of their tools and their sites. And of course, they can take some loans, which, yes, can be done. But the start of the capacity expansion, they also did with their own cash flow. And therefore, we said we reduced the dividend, at least in this year, for that reason that they can achieve that before. They also maybe start their own financing and try to get the right monies from -- that they need to cope with that expansion. That's the background. But again, it's not a fixed dividend. We respect that, and it has to be agreed also with our JV partner. None of us has control. But we have a very friendly and a very good JV. This is maybe the only 50-50 JVs in our life that we see that it's really working over a long time. We like that very much. And we all agreed with that dividend adjustment.

Torsten Derr: Yes. And Sven, the next question was on the growth. And I have here again the slide which you mentioned, and you see this jump from 2025 to 2026. And a very simple answer: we invest into the semicon business. And a lot of investments are going to our site in St. Mary's [ph] in the U.S. What we need is more production haul capacity. So, we are -- we did the building construction in the last year. And then we ordered at the same time furnaces. And there are not that many suppliers in the market, and delivery time is up to two years. And they will come when we have all the connections, the utilities and the building is ready. Then we hope that the production equipment is coming, and we see a start-up end of 2025. So, we will have the sales in 2026. This is a simple reason for it.

Thomas Dippold: Sven, there was another question. We don't want to drop that or neglect that. But to be honest, I didn't get that. Maybe you can repeat that again.

Sven Sauer: Yes. Sure. Thanks for the answer. The theoretical calculation of the higher guidance, the -- I think it was EUR180 million to EUR190 million, I'm not sure -- I don't know the numbers. I'm wondering what would this entail? I mean, are you referring to if you would sell the Carbon Fiber business or if there was a recovery? Or -- and what kind of timing are you assuming for this guidance?

Torsten Derr: Sven, much, much easier. Just take Carbon Fiber out, yes? No rationale behind. This is what I call a hypothetical calculation, yes? There was no sales value or anything connected to it. Just taking it out, then you come to €180 million. This was the answer to it.

Sven Sauer: Okay. That's clear then. And then just going to sneak a final question on in the end. The battery material business in the Graphite Solutions segment was also a bit down in 2023. Could you maybe share some color on that?

Torsten Derr: Yes. It was down, and we don't see that much recovery on that market. And this is a special effect. You see a lot of battery manufacturing projects in Europe just disappearing. Because of the Inflation Reduction Act in the U.S., they all move to the U.S. or stay in China. And I see this as a big mistake for Europe because taking this into account, no battery plants, there will be no graphite for batteries, and this is why our demand is down. We still have the same set of customers, which are more customers coming from Asia, and they will buy a similar amount this year as last year. So not a big change, but we are not satisfied with the development.

Operator: [Operator Instructions]. And we have a follow-up question from Mr. Heine. Mr. Heine, please go ahead with your question.

Andreas Heine: Only a small one. Maybe you can update also on the trends on the Composite Solutions. I've seen that you expect slightly lower sales. The business unit had a strong performance, basically independent from what the global car production was, but now it seems that there is a link. Maybe you can explain a little bit what you expect for this division for 2024 and also midterm in your 2028 guidance.

Torsten Derr: Andreas, the short answer is this is a project business. And we had a global leadership conference, which we did exactly at the site of CS. And they brought some samples...

Thomas Dippold: CS.

Torsten Derr: CS. They brought some samples and some cars where the samples are built in. And we talk about Ferrari cars, so in the high luxury segment. And this is highly independent of everything you know about cars. It's still performing. And I asked Mr. Guy, who is the business head of this business unit, and he says order intake, still good. We just lost one project, which was one of the bigger ones. But we have a lot in our pipeline, and we will compensate this pretty soon, we think.

Andreas Heine: So, it's still that your trend is strong and independent from what is in a global car market?

Torsten Derr: Yes, yes. And same with the carbon brake disc. They also go in the luxury segment, and we see an uncontinues growth since three years or four years. And even Corona accelerated the business in both parts of the segment. We look at people who can buy the cars where our parts go in. And they need to have 10 million wells at least. And this share was growing after corona. So, the demand for this car is going up, and we are benefiting from this in both in the carbon brake disc and in our CS business.

Operator: The next question comes from Dario Digman [ph] from HSBC. Please go ahead with your question.

Unidentified Analyst: Hello. Thanks for taking my question. I would have a last question on the Carbon Fiber sale -- or potential sale. I'm sure that a lot of Chinese companies would love to buy your Carbon Fiber business. But how is it from a regulatory perspective? Could we exclude it since it will not be allowed? Or could they still be in for potential sale?

Thomas Dippold: We have to check that. But again, we're at the very beginning of the process. Let's see how far we get. Let's see who is the best owner for that. And we also have the last say in to whom we sell it. If there are some regulatory hurdle or whatever restrictions, I think we'll cross the bridge when we get there. It's too early to talk about that right now.

Unidentified Analyst: Okay. Thank you, very much. And maybe just last question. You mentioned that Carbon Fiber business would require additional resources going forward, which you obviously prefer to put in your graphite business. But what type of investments would be the most critical for the Carbon Fiber business?

Torsten Derr: You cannot say most critical, but it's very fixed cost-intense, this business. That means if you invest into extension of capacity, you can dilute the fixed cost very easy. For example, we could build additional precursor manufacturing lines in Lavradio or extend the number of lines in our big site in Moses Lake in the U.S. These were investments which we could do, and they would bring the cost position of the Carbon Fibers forward. So, this is what we have in mind. There's a clear investment plan to the front. But Thomas and me always decided more for the semicon business in the business unit, GS. This is why another owner or a different owner would be beneficial for the business unit.

Operator: And we have a follow-up from Mr. Junghanns. Please go ahead.

Thomas Junghanns: Thanks, again. One last question from my side with respect to CapEx. Are there any plans to purchase another isostatic press?

Torsten Derr: Thomas, thanks for the question. Not short term because I like low-cost debottlenecking very much. To do a brownfield investment is always better then to go into another site. And our current Carbon Fiber -- graphite press is in bond. In a bond, we have very limited space situation. That means we have to go to another site. And if you build a site from scratch with all the utilities, this is never the best solution. So short term, we will go exactly for low-cost debottlenecking like we did in the past. And there's a lot of potential still.

Thomas Junghanns: Perfect. Thank you.

Operator: And that was our last question for today. And I hand back to Claudia for closing comments.

Claudia Kellert: Yes. Thanks for your participation. Have a fantastic weekend. And you will find all the documents on our web page. And if you have additional questions, please call Jürgen or myself. Thank you and have a nice weekend. Bye-bye.

Torsten Derr: Have a nice weekend.

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