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[August 2006]
SGL Carbon: First Half of 2006
SGL Carbon (Wiesbaden, Germany) reported that thanks to the favourable development of demand in all three business units, consolidated sales increased by 9% to €568.9 million in H1/2006, or 7% after adjusting for foreign currency changes. EBIT before the European Court of Justice (ECJ) decision increased more than expected, by 45% to €79.2 million. The main reasons for the earnings growth were the sustained positive development at Carbon & Graphite and Specialties as well as cost savings amounting to some €12 million.In the first half-year, pre-tax earnings before ECJ decision more than doubled from €26.8 million in H1/2005 to €56.7 million in the reporting period. Due to the absolute level reached and the minimum taxation regulations in Germany, SGL Carbon did not book any deferred taxes for the tax-deductible interest expenses from the antitrust proceedings. Including the charges from the ECJ decision, a net profit for the period of €1 million was generated. Based on an average number of shares of 60.2 million, earnings per share amounted to €0.02.
In H1/2006, Carbon and Graphite (CG) sales increased by 9% to €338.5 million, currency-adjusted by 7%. This was due to successfully implemented price increases for graphite electrodes and higher sales of cathodes. Despite the planned reduction in graphite electrode shipments, EBIT increased by 26% to €76.1 million as a result of price increases and ongoing cost reduction measures. The return on sales improved to 22.5% in comparison to 19.4% in the same six months of the previous year. The average prices for graphite electrodes increased by 22% in USD and 10% in EUR compared to H1/2005. As expected, the reporting period saw a reduction in graphite electrode shipments of 10% compared to the exceptionally strong H1/2005. Even so, deliveries reached a level of 99,000 metric tons, which is comparable to the average first six months of previous years. The factor cost increase was at the upper end of the indicated range of 10% to 15%.
Specialties (S) sales increased by 15% to €145.9 million, currency-adjusted by 14%, particularly due to demand from the solar and nuclear energy industry as well as from industrial applications and as a result of the good order book in Process Technology. Against H1/2005, which included the weak Q1/2005, EBIT more than doubled owing to the sales growth and the resulting improvement in capacity utilisation. Like in Q1/2006, the 11.8% EBIT margin in H1/2006 remains within SGL's target range of 10% to 15%.
SGL Technologies (T) sales increased by 3% to €83.7 million, adjusted for currency, sales remained flat. Higher demand for carbon fibres more than compensated for the project and development related shift of Composites sales to H2/2006. EBIT at €0.2 million is positive despite – as reported in Q1 – the burden resulting from a receivables write-down of approximately €1 million due to the Chapter 11 proceedings of Dana Corporation in the USA, one of SGL Carbon’s customers in the area of Expanded Graphite.
For Q3/2006, SGL Carbon said it was anticipating an increase in consolidated sales of at least 10% and consolidated EBIT of at least 20% compared to Q3/2005. Carbon and Graphite sales are likely to increase up to 20%, while the improvement in EBIT is again likely to be stronger with an increase of 30% to 40%. For Specialties, SGL Carbon expects another solid quarter of sales and EBIT, roughly at the same level as the strong third quarter of the previous year. At SGL Technologies, sales growth exceeding 10% and a positive EBIT is expected despite the shortfall of the AUDI special effect compared to Q3/2005. After the close of the first half-year, the company is now raising its guidance for 2006, expecting sales to increase by 5%–10% and an EBIT improvement before ECJ decision of at least 30%. A financial result before ECJ decision of approximately minus €50 million is still planned. As a consequence of the improved operating development, SGL Carbon anticipates pre-tax and net profit before ECJ decision to more than double against the previous year.
www.sglcarbon.com
ENDS