SGL Carbon annual report reviews 2024 fiscal year

Source | SGL Carbon Annual Report 2024

According to SGL Carbon SE’s (Wiesbaden, Germany) annual report, increasingly weaker demand from key sales markets over the course of 2024 is slowing the company’s sales and earnings growth. Group sales in 2024 amounted to €1,026.4 million, down slightly by 5.8% from 2023 (€1,089.1 million). The group’s adjusted EBITDA decreased by 3.3% to €162.9 million (2023: €168.4 million). However, despite the slight decline in sales, the adjusted EBITDA margin improved from 15.5% in 2023 to 15.9% in 2024. This is mainly due to positive price and product mix effects.

Declining demand from the key semiconductor and automotive markets, coupled with persistently unsatisfactory demand from the wind industry, led to a decrease in volume and sales in three of four of SGL Carbon’s business units. only Process Technology was able to improve its sales and adjusted EBITDA.

Moreover, earnings performance in the past fiscal year was strongly affected by non-recurring items of €-118.5 million (2006: €-52.9 million). These mainly included the impairment of assets of the Carbon Fibers business unit totaling €91.2 million (previous year: €44.7 million) and expenses from restructuring measures in the Carbon Fibers and Battery Solutions business lines totaling €19.0 million. After deducting one-off effects and non-recurring items, as well as depreciation and amortization of €58.7 million (2023: €58.9 million), EBIT amounted to €-14.3 million in 2024 (2023: €56.6 million).

Taking into account the financial result of €-32.6 million (2023: €-34.2 million) and tax expenses of €32.5 million (2023: €19.3 million), SGL Carbon recorded a net loss of €80.3 million (2023: net profit of €41.0 million) despite solid overall business performance.

Business units development

Graphite Solutions (GS), SGL Carbon’s largest business unit, increased its profitability in 2024 despite a slight decline in sales and earnings. While sales still grew by 1.3% in the first half of 2024, the second half of the year was impacted by weakening demand in the Semiconductor and LED market segment. Overall, sales for the fiscal year 2024 was 4.7% lower than in the prior year, amounting to €539.0 million (2019: €565.7 million).

Due to the significantly lower demand for electric vehicles compared to the automotive industry’s forecasts, demand for specialty graphite components for the production of silicone semiconductors in the second half of 2024 was significantly below expectations. In addition, high customer inventories had a negative impact.

Due to positive effects from changes in the product mix, adjusted EBITDA fell disproportionately less than sales (-4.7%) at 2.2%. Accordingly, adjusted EBITDA of €131.0 million in the reporting year was slightly below the previous year’s figure (2023: €134.0 million). The adjusted EBITDA margin improved year on year to 24.3% (2023: 23.7%).

SGL reports that the Process Technology (PT) business unit continued its positive business performance in the 2024 financial year, as in the 2 previous years, with sales increasing by 8.1% to €138.3 million (2023: €127.9 million). The very positive performance of PT was also reflected in adjusted EBITDA. This improved from €22.4 million in the previous year to €33.0 million. High-capacity use and a focus on higher margin projects, combined with the stable earnings from the service business, were reflected in the segment’s profitability and led to an improvement in the adjusted EBITDA margin from 17.5% in the previous year to 23.9%.

In 2024, the Carbon Fibers (CF) business unit’s sales continued to decline, decreasing by 6.7% to €209.8 million (2023: €224.9 million). The decline was due in particular to continued low demand from the wind industry and the increasing competitive headwind resulting from global overcapacity for textile and carbon fibers.

Adjusted EBITDA in the Carbon Fibers business unit decreased by €18.2 million year on year to €-11.0 million (2023: €7.2 million). The lack of fixed cost absorption led to high idle capacity costs and, combined with declining margins for SGL’s fiber products, had a negative impact on adjusted EBITDA. It should be noted that the Carbon Fibers business unit included the result of the equity accounted activities (mainly the joint venture Brembo SGL Carbon Ceramic Brakes/BSCCB) in the amount of €15.8 million (2023: €18.3 million). Excluding the contribution from the equity-accounted BSCCB, the adjusted EBITDA of Carbon Fibers would amount to €-27.0 million (2023: €-10.9 million).

In February 2025, as part of the review of all strategic options for Carbon Fibers, a decision was made to extensively restructure the Carbon Fibers business unit, which also includes the closure of unprofitable business activities. A complete sale of the Carbon Fibers activities was reviewed and is currently not considered feasible.

In the reporting period, sales in the Composite Solutions (CS) business unit amounted to €124.6 million, down 19.0% (2023: €153.9 million). The decline was due in particular to the premature expiration of a significant project-related supply contract with an automotive customer.

As a result of lower volumes and product mix effects, CS’s adjusted EBITDA decreased by €4.0 million or 18.0% year on year to €18.2 million (2023: €22.2 million). It should be noted that the adjusted EBITDA includes a compensation payment of €3.0 million for a prematurely terminated customer contract. The adjusted EBITDA margin remained almost constant at 14.6% compared to the previous year (2023: 14.4%).

Net financial debt, equity and free cash flow

In 2024, SGL says net debt could be reduced slightly by 6.6% to €108.2 million compared to the end of the previous year (2023: €115.8 million). The leverage ratio as of Dec. 31, 2024, remained stable at 0.7 (2023: 0.7), as solid as the equity ratio of 41.5% (2023: 41.1%). Despite higher capital expenditures of €97.3 million compared to the previous year (2023: €87.1 million) and lower cash flow from operating activities of €120.3 million (2023: €163.8 million), free cash flow remained positive at €38.7 million.

Forecast

For 2025, SGL Carbon expects different but overall challenging developments within its key sales markets. For the semiconductor industry, and in particular for silicon carbide-based semiconductors, the company expects demand to remain moderate. This is mainly due to lower-than-originally forecast growth rates for electric vehicles and continued high inventories at its customers site. At the earliest, SGL expects demand to pick up in the second half of 2025. It also expects a high degree of uncertainty combined with lower momentum for the automotive market segment.

SGL Carbon’s forecast for the current fiscal year 2025 takes into account all four operating business units, as the company is still in the early stages of restructuring its CF business. based on the assumptions regarding the development of the key sales markets, SGL expects consolidated sales for fiscal year 2025, including all business units, to be slightly below the previous year (2024: €1,026.4 million).

Taking into account all four operating business units, SGL expects adjusted EBITDA in 2025 to range between €130-150 million. Furthermore, SGL assumes that free cash flow at the end of the 2025 financial year — excluding payments for the planned restructuring of CF — will be below the previous year’s level but still positive (2024: €38.7 million).

Further details on business development in 2024 and the outlook for 2025 can be found in SGL Carbon’s annual report.