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Goldman SachsUK and European Capital Goods Conference 2009
7-8 December 2009London
2
Global Trend 1Continued demand for resources when growth returns
• Global growth will continue postfinancial crisis induced recession –projections for 2010 corrected upwards in IMF World Economic Outlook of October 2009
• Economic growth inducesdemand for
Materials:- Infrastructure- Capital goods- Packaging- Transport/LogisticsEnergy:- Oil- Gas- Electricity
Means continued growth in steel and aluminum production …
Estimated GDP Growth (in %)
Source: IMF Report (October 09)
-5.3-4.2
8.5
5.4
-7.5
-0.7
-2.7
0.3
9.0
6.4
1.53.5
1.50.3
Germany ChinaIndiaRussiaBrazilUSAEurozone
2009 2010
33
Infrastructure build up in emerging economies has only just begun …
Global Trend 1Continued demand for resources when growth returns
Steel and aluminum:• Essential for infrastructure in Asia and Eastern Europe• High per capita growth potential in steel and aluminum in comparison to Western World
Steel consumption Aluminum consumption
Source: World Steel Association Steel Statistical Yearbook 2008Source: European Aluminium Association Aluminium Use in Europe Country Profiles2004-2007
2007 Total Aluminum (kg/capita)2007 Crude Steel (kg/capita)
671 653 621558 555
375 373
236
134 128
321
4547
312
35121
329
0
100
200
300
400
500
600
700
800
Japa
n
Italy
Spai
n
Ger
man
y
Can
ada
Turk
ey
USA
Rus
sia
Chi
na
Fran
ce
Mex
ico
Arge
ntin
a
Braz
il
Sout
h Af
rica
Indi
a
Philip
pine
s
Indo
nesi
a
41 41
33 33 31 29
21
10
136
10
2
84
05
101520253035404550
Italy
Ger
man
y
Japa
n
Spai
n
USA
Can
ada
Fran
ce
Chi
na
Turk
ey
Mex
ico
Rus
sia
Sout
h Af
rica
Braz
il
Indi
a
Philip
pine
s
4
Meanwhile …Worldwide record-size stimulus packages to fuel demand
• Biggest packages in history forUS, Germany and many other countries
• China is committing a massive14% of GDP
• The Far East is committingmuch more than other regions
• Major industries benefitinginclude:
– Infrastructure
– Renewable energy
• Early days but signs of results
0
200
400
600
800
1,000
US
Japan
China
Germ
any
Spain
Canada
Australia
France
UK
Denm
ark
Singapore
Taiwan
South Korea
Hungary
Italy
Netherlands
Indonesia
Sweden
India
Finland
Austria
Malaysia
Greece
0%
2%
4%
6%
8%
10%
12%
14%
16%
Investment $bn
Investment/GDP %
5
Protecting the Vulnerable$81bn
Tax Relief$288bn
Meanwhile …Almost every stimulus package has an infrastructure component
US Stimulus – Investments China Stimulus – Investments
“Most” will be spent on building:• Highways• Airports• Other public works
Germany Stimulus – Investments
Package includes • €17.3bn investment in infrastructure • Cars > 9 year old, receive € 2,500
towards a new car on trade in• 14% of stimulus investment to go to infrastructure• + $17.4bn loans to auto companies
Infrastructureand Science
$111bn
Education & Training$53bn
State & LocalFiscal Relief$144bn
Health Care$59bn
Other $8bn
Energy$43bn
Source: The American Recovery and Reinvestment Act
6
Miscellaneous 5%
Miscellaneous 1%
Titanium 6%
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
2005 2006 2007 2008 2009 2010 2011 to2015
Global Trend 2Acceleration of Substitution Process – Example: Civil Aircraft
Boeing 747 – In service 1970
Boeing 787 – Expected in service 2010/2011
Estimated Carbon Fiber Tow Usage*
* Usage in commercial jets worldwide (tonnes)Source: The Carbon Fiber Industry: Global Strategic Market Evaluation 2006 – 2010
Airbus Boeing
Composites 1%
Aluminum 80%
Steel 12%
Titanium 15%
Composites 50%
Aluminum 20%
Steel 10%
Growing demand for raw materials puts pressureon supplies and prices of traditional materials and energy
Accelerated substitution by carbon and graphiteExample: increased composites content in new
aircrafts to reduce fuel consumptionand emissions
7
010.00020.00030.00040.00050.00060.00070.000
2007 2008 2009E 2010E 2011E 2012E 2013E
Global Trend 3Alternative energy sources
Annual wind turbine installations (MW)
Installed cumulative wind turbine capacity (MW)
Growing demand for energy acceleratesdemand for alternative energy sourcesdue to scarcity of fossil fuels as well asglobal warming (CO2 emission)
Example: Wind
Wind energy today provides only ~1.3%of electricity generation worldwide• Economic crisis expected to impact wind
industry in 2009, mainly in US, leading to postponements of large projects
• No dip expected in 2009 on global basis as decline in US is compensated by significant growth expectations in Europe and Asia
• CAGR of annual installations of 22% expected over next years
Source: BTM World Market Update (March 2009)
Source: BTM World Market Update (March 2009)
Europe
Americas
Asia
RoW
050.000
100.000150.000200.000250.000300.000350.000400.000
2007 2008 2009E 2010E 2011E 2012E 2013E
CAGR24%
CAGR22%
8
Global Trend 4“Where other materials fail”
“Carbon – where other materials fail”
Unique properties of carbon, graphite and carbon fiber/composites:
• Stability at very high temperatures (up to 3,000 degrees Celsius)• Very light weight• Self-lubricating• Non-corrosive• Resistance to chemical attack • High purity and inertness• Electrical and thermal conductivity can be varied• Highest degree of stiffness and flexural strength
9
Global Trend 4“Where other materials fail”
Graphite Examples
Special graphite recipes forlithium-ion batteries
Graphite components for solar grade silicon
Specialty graphitesfor semiconductors
Graphite partsfor solar/LED production
10
Global Trend 4“Where other materials fail”
Carbon Fiber Examples
Carbon fiber com-posite materials and componentsfor automotive
Carbon fiber com-posite components for aerospace
Carbon fibers for reinforcement of cement and con-crete
Carbon fiber prepregs for windmill blades
11
Global trends support the carbon and graphite industry and –SGL Group as its largest global player
• Carbon and graphite industry uniquely positioned to benefit from global trends• SGL Group as the largest global carbon and graphite player to participate in growth
opportunities resulting from these trends
Global Trends
Resources Demand Substitution Process Alternative Energy Unique Properties
1 32 4
Performance Products(PP)
Graphite Materials & Systems (GMS)
Carbon Fibers & Composites (CFC)
Performance Products (PP) Advanced Materials (AM)
12
SGL GroupBusiness structure
Performance Products (PP) Advanced Materials (AM)
Performance Products(PP)
Graphite Materials & Systems (GMS)
Carbon Fibers & Composites (CFC)
• Graphite & Carbon Electrodes
• Cathodes & Furnace Linings
• Graphite Specialties (GS)• Process Technology (PT)• Expanded Graphite (EG)
• Carbon Fibers/Composite Materials
• Composite Components• Aero Structures
Technology and Innovation (T&I)
Six Sigma (SGL Excellence)
13
Performance ProductsGraphite electrodes (GE) for steel production in EAFs
• Growth in steel productionfuelled by infrastructure demandfrom emerging countries
• Scrap availability limits EAFgrowth in emerging countries
• Due to continued efficiencygains GE demand growthonly 1 – 2% p.a.
• GE critical to EAF furnaceefficiency but only 2 – 3% of steelmaking conversion cost
An EAF (electric arc furnace) is a furnace that heats charged scrap steel material (also known as mini mills)BOF (blast oxygen furnace) is the steelmaking route that uses iron ore and coking coal to produce primary steel (also known as integrated steel)
PP AM
CFCGMSPP
0
250
500
750
1,000
Source: WSD, IISI, own estimate
Blast oxygen furnace
Worldwide steel production: blast oxygen furnace/electric arc furnace [in tm]
Electric arc furnace
1970 20101980 1990 20001975 1985 1995 2005
14
Performance Products Graphite electrodes
Source: steeluniversity.org
Graphite Electrode
100 – 300 cm
35 – 80 cmConnecting Pin
Graphite Electrodes
Molten steel
Eccentric bottom tapping (EBT)
Teaming ladle
Furnace shell
Rocker tilt
Tilt cylinder
SECTION VIEW TROUGH EAF
PP AM
CFCGMSPP
Steel Making – An Electric Arc Furnace (EAF)
15
• GE critical to EAF furnace efficiency but only 2 – 3%of steelmaking conversion cost
• GE is a consumable – replaced every 5 to 8h• GE sold mostly in annual contracts• Needle coke requirements sourced on basis
of multiyear contracts
Production process takes up to 3 months
Performance ProductsGraphite electrode production process
PP AM
CFCGMSPP
16
North/Middle East,Africa, Australia 8%
Americas 22%
Asia 42%
Europe 28%
Performance ProductsGraphite electrode market
Capacity by competitor in 2008* – UHP/HP-quality
* Russia and China: Potential UHP capacity dependent on equipment,technical capability and needle coke availability
Source: SGL Group‘s own estimates (as of January 2009)
Regional Demand in 2008
0
50
100
150
200
250
SGL (GER) Graftech(U.S.)
Show aDenko (J)
TokaiCarbon (J)
GraphiteIndia (IN)
HEG (IN) Nippor,Carbon (J)
SEC (J) CGE (U.S.)
In tmt
SGL (GER) Graftech(U.S.)
ShowaDenko (J)
TokaiCarbon (J)
GraphiteIndia (N)
HEG (IN) NipponCarbon (J)
SEC (J) CGE (U.S.)
PP AM
CFCGMSPP
17
Performance ProductsCathodes for the aluminum industry
AluminumGlobal Production Scenarios 2003 – 2020/New
Source: IAI, King, SGL Group‘s own estimates, Hydro, CRU, Rusal
PP AM
CFCGMSPP
• Industrialization of BRICs & weight/ strength/cost advantages in higherenergy cost environment
Quantum leap in aluminum demandfrom historical 2 – 3% to 4 – 6% p.a.
• Cathodes essential to aluminum smeltersExisting smelters reliningInvestment good (5 – 7 years shelf life)New smelter constructionleading to higher relining demand long term
• Existing smelters upgrading=> amorphous cathodes => graphitized
cathodesonly three established producersof graphitized cathodes
• Cathodes essential for aluminum smelting but representing only 1% of productioncosts for 1t aluminum
SGL Group largest producer worldwide
2009 will be affected by the inventory cycle. Fundamentals for Al production growth remain solid – leaving the original long-termoutlook unchanged
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
36 mio. tm
39 mio. tm
49 mio. tm64 mio.
tm
World Primary AL Prod 3.6 % CAGR
2020E2012E 2018E2003 2009E 2015E2006
Prim
ary
AL
Prod
uctio
n in
kt/a
18
Performance ProductsCathodes for the aluminum industry
Source: SGL Group
Cathodes
PP AM
CFCGMSPP
4
4
4
1
3
2
Special glue
Cathode blocks
Ramming pastes
Sidewallblocks
30 – 70 cm
30 –50 cm
100 – 350 cm
Aluminum Smelter
19
Alcan 3%
CIS 12%
Carbone Savoie 20%
SGL 25%
Performance ProductsMarket shares in cathodes 2008
Market Shares in Cathodes 2008
Bawtry 5%
NDK 1%
SEC 13%
SourceSGL Group’s own estimates, market shares based on volume excluding Chinesecapacities
PP AM
CFCGMSPP
China 20%
Others 1%
• Western world concentrated, Chinese expected to follow in long term
• Substantial cathodes growth due to strong aluminum demand and subsequent new greenfield smelter investments and step-change in relining demand
• Continued substitution with graphitized cathodes where SGL Group’s market share is higher (> 30%)
• Double digit growth for graphitized cathodes due to higher efficiencyand yield advantages
• Graphitized cathodes industry highly concentrated (only 3 – 4 established players) – graphitization capability a bottleneck
20
Graphite Materials & Systems Graphite Specialties – feedstock production and machining
Raw Materials (Pitches & Cokes) PressingPre-pressing Processes
Graphitizing 2,800°C – 3,000°C Baking 850°C – 1,200°C
Machining Finishing
High quality rawmaterials fromreliable sources
Breaking, milling,sieving, binding, mixing, homoge-nizing
Formation of graphite structure and densification
Carbonizing,Densification
Isostatic pressing Extrudingor
Machining of the feedstock:Sawing, turning, milling, sanding,boring, lapping, polishing
Impregnation, coating, purification
PP AM
CFCGMSPP
21
Graphite Materials & SystemsFeedstock production isostatic graphite
PP AM
CFCGMSFurnacesElectrodes
Rest of the World 2%
North America 24%
Asia 48%
Europe 26%
Capacity by Competitor in 2009
Source: Own estimates (as of Feb 2009)
Regional Demand in 2008
0
2,000
4,000
6,000
8,000
10,000
12,000
Toyo Tanso (J) Tokai Carbon(J)
CarboneLorraine (F)
SGL (GER) Ibiden (J) Nippon TechnoCarbon (J)
In tmt
Source: Own estimates (as of Feb 2009)
Isostatic graphite
22
Graphite Materials & SystemsFeedstock production extruded graphite
PP AM
CFCGMSFurnacesElectrodes
Asia 30%
Rest of the World 4%
North America 28%
Europe 38%
Capacity by Competitor in 2009
Source: Own estimates (as of Feb 2009)
Regional Demand in 2008
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
SGL (GER) Graftech (U.S.) Tokai Carbon (J) Graphite India (IN) Nippon TechnoCarbon (J)
In tmt
Source: Own estimates (as of Feb 2009)
Extruded graphite
23
Graphite Materials & SystemsProduction sites
PP AM
CFCGMSFurnacesElectrodes
Blue MachiningRed FeedstockGray Feedstock and Machining
Pune
Yanqquan
Ningbo
Shanghai
YamanashiKyung Ki-DoNovotcherkassk
SteegVerdello
Madrid
Grenoble
Chedde
Nowy Sacz
Bonn
Limburg
Meitingen
SinkingSprings
Morganton
St. Marys
Valencia
Strongsville
Kitchener
Narita
24
Graphite Materials & SystemsGraphite Specialties can have different properties
The properties are modifiable to suit the required application!
Graphite Specialties have unique properties:
• Self-lubricating – Necessary where oil and grease would be detrimental– Suitable above permissible temperatures for oils and fats
• Mechanically stable up to very high temperatures– Allows faster operating rates than with metals– Some applications e.g. semiconductors could not be produced
without graphite equipment• Electrical and thermal conductivity
– Graphite powder is powerful and effective anode material in lithium-ion batteries– Metallurgical applications
• Highest thermal shock stability of all well-known materials– Graphite is both an effective lining and moderation material in nuclear power plants
PP AM
CFCGMSPP
25
Graphite Materials & SystemsGraphite Specialties – semiconductor application
Extremely pure graphite heater for the semiconductor industryReaches 99.9995% C
PP AM
CFCGMSPP
26
Graphite Materials & SystemsProcess Technology
PP AM
CFCGMSPP
We combat corrosion:
•Graphite and other high-tech materials like PTFE, silicon carbide and exotic metals build the broad base for our portfolio of corrosion resistant process equipment
•Our product portfolio ranges from specialized process equipment to complex engineered systems. Furthermore, we service our products worldwide.
•Our unmatched material, application and engineering know-how is one of our core competencies
•Our key industry segments are chemicals & pharmaceuticals, solar, environmental and steel
•We are the leading supplier of graphite-based process equipment with a global market share of ~40%
27
Graphite Materials & SystemsProcess Technology – product portfolio
PP AM
CFCGMSPP
Overview
Systems• HCl Synthesis• Sulfuric acid• Porous burner• FCHC destruction
Equipment• Heat exchanger• Columns• Pumps• Quenches/Vessels
Services• Parts• Diagnosis• Repairs
28
Graphite Materials & SystemsExpanded Graphite – natural graphite
Natural Graphite Flakes Formation of compound
Graphite Foils & Sheets
Thermal Shock 1,000°C
• Standard widths: 0.5 m; 1.0 m; 1.5 m
• Standard thicknesses: 0.1 – 3 mm
• Range area weight: 100 – 3,000 g/m2
Formation of a graphiteintercalation compound
Thermal expansion(shock) at 1,000°Cexpanded graphite
worms
Pressing expanded graphiteworms to graphite foilsor sheets (without any
binder addition)
Intercalation Solution(usually an acid)
Natural Graphite Flakes(C-content: 96 – 99.98%)
7.98
A
HSO4 H2SO4- .
HSO4 H2SO4- .
PP AM
CFCGMSPP
29
Graphite Materials & SystemsExpanded Graphite – sealing applications
PP AM
CFCGMSPP
• Nearly 90% of Expanded Graphite goes into sealing applications (automotive and industrial)
• Increase in expanded graphite demand due to asbestos ban
• SGL is clear number 1 in sealing application• Sealing applications for various industries:
– Automotive (cylinder head & exhaust pipe)– Chemical, petrochemical– Power plants
• Required properties:– Low emissions acc. German Clean Air Act
(TA Luft, VDI 2440)– Long-term stable sealing properties – High blow-out resistance (TÜV)– Fire safety according to API and BS– High fault tolerance, high safety standard
Fire safety requirement of petrochemical industry
Fire safety test of pressurized flange system with graphite gasket
No leakage detectable during and after firing phase
30
Graphite Materials & SystemsExpanded Graphite for thermal management
• High thermal and electrically conductive graphite material - “Ecophit”• High-performance heat storage systems for industrial and solar processes• Smart gypsum plaster board “Climafit” and “Protekto” for cooling ceilings and EMI shielding
Solutions
• Wall/floor air conditioning systems• Heating/cooling ceilings • Thermal storages
Objective
• Plaster board improvement– Raise thermal conductivity of gypsum board (x3)– Protect rooms from EMI radiation
Objective
PP AM
CFCGMSPP
&
31
Graphite Materials & SystemsInnovation driving new product portfolio
PP AM
CFCGMSPP
Examples:• Graphite for Li-Ion batteries• Crucibles and molds for solar production
and LEDs• Molds and spacers for ceramic-armoring
applications• Heaters for the semicon industry• High purity expanded graphite for
thermal (electronics, climate) manage-ment and environmental needs
• Specialty graphite for nuclear power(PBMR)
• Graphites for particle filter for diesel engines and exhaust systems
GMS 2008 sales: € 412 m
1/3 of sales based on new products introduced over the last 4 years
1/3new
2/3established
32
Graphite Materials & SystemsMajor customer industries and market shares 2008
PP AM
CFCGMSPP
30%26%Chemicals
2%
3%
5%
6%
9%
10%
10%
15%
% of TotalGMS Sales 2008
Global MarketShare 2008
5%Glass and Ceramics
15%Automotive
15%High-temperature Processes
15%Tool Manufacturing
40%Energy: Batteries & Nuclear
20%Metallurgy
20%Semiconductor
25%Energy: Solar
Source: SGL Group‘s own estimates, w/o EC Business
33
Core Competencies Core Competencies
• Materials• Technology• Processes
• Development of final use/applications• Design of finished parts/
manufacturing techniques• Marketing• Promoting substitution
JV-partneringCore Business
PANPrecursor
CarbonFiber
PrepregPreform
Industrial & Energy
Aerospace &Defense
Automotive
Carbon FiberCompositeMaterials
e.g.HITCO (100%)
e.g.SGL Rotec (51%)e.g.Benteler SGL (50%)Brembo SGL Carbon Ceramic Brakes (50%)
Raw material
Composite Components
• EPG (44% JVwith Lenzing)
• JV planned with Mitsubishi Rayon (MRC)
• Prod. capacity• ~ 4kt in UK • ~ 2kt in USA
• SGL epo (100%)• SGL Kümpers
(51%)
PP AM
CFCGMSPP
Carbon Fibers & CompositesUnique offering of the complete value chain
JV with BMW (51%)
34
Carbon Fibers & CompositesPAN precursor and carbon fiber
Source: Grafil Inc.
Pre
curs
or
Process:
IntermediateMaterial:
PAN CF Precursor:
Process:
Propylene Ammonia
Ammoxidation
Acrylonitrile
Polymerization &Spinning
PAN Precursor
PAN Precursor
Oxidation(250°C)
Carbonization(1,300°C)
Carbon Fiber
Oxidized PAN:
Carbon Fiber:
Process:
Car
bon
Fibe
r
PP AM
CFCGMSPP
35
Carbon Fibers & CompositesCarbon fiber characteristics
Source: CARBON FIBERS Updated: April, 2004 – Raghavendra R. Hegde, Atul Dahiya, M. G. Kamath (Monika Kannadaguli & Haoming Rong)
ApplicationsCharacteristics
Large generator retaining rings, radiological equipmentElectromagnetic properties
Chemical industry; nuclear field; valves, seals, and pump components in process plantsChemically inert, high corrosion resistance
Textile machinery, general engineeringFatigue resistance, self-lubrication, high damping
Medical applications in prostheses, surgery and x-ray equipment, implants, tendon/ligament repair
Biologically inert,x-ray permeability
Automobile hoods, tooling, casings and bases for electronic equipments,electromagnetic interference (EMI) and radio frequency (RF) shielding, brushes
Electrical conductivity
Audio equipment, loudspeakers for Hi-fi equipment, pickup arms, robot arms, rollersGood vibration damping, strength, and toughness
Missiles, aircraft brakes, aerospace antenna and support structures, large telescopes, optical benches, waveguides for stable high-frequency (GHz) precision measurement frames
High dimensional stability,low coefficient of thermal expansion, low abrasion
Aerospace, transport, sporting goodsPhysical strength, toughness, light weight
PP AM
CFCGMSPP
36
CF market forecast [in t mt]
39.4 40.0 42.048.0
55.0
2008 2009 2010 2011 2012
CF demand forecast
PP AM
CFCGMSPP
Carbon Fibers & Composites Slow down in growth for carbon fibers expected for 2-3 years
37
Carbon Fibers & Composites Carbon fiber capacity
PP AM
CFCGMSPP
11,000
9,300 9,000
4,0003,300
2,000
approx.6,000*)
7,000
0
2,000
4,000
6,000
8,000
10,000
12,000
Source: SGL Group‘s own estimates (as of January 2009)*) SGL Group capacity from early 2009 on
Capacity in t
Toray (J)
Toho/Fortafil (J)
SGL (GER)
FormosaPlastic (TW) Hexcel
(US)
Cytec (US)
Aero/Ind.Aero/Ind.Ind.Ind.Ind.Ind.Aero/Ind.Aero/Ind.Markets
LTLTLTHTLTHTLTLTProduct
OwnOwnOwnPartially ownOwnOwnOwnOwnPrecursor
Name plate capacities* carbonfiber (excl. oxidized fiber)LT = Low tow fiber 1 – 24kHT = High tow fiber 50 – 300k
* Actual production tends to be 20 – 30%below name plate capacity
Zoltek (US)
MitsubishiRayon (J)
38
Carbon Fibers & CompositesComposite Materials
• Carbon fibers are braided, woven or impregnated with resin before component production
• We aim to have a broad range of technologies for prepreging/preforming
– Braiding (e.g. car bumpers)• SGL Kümpers
– Impregnated (e.g. prepregsfor windmill blades or aircraft parts)• SGL epo
– Preforms (e.g. auto industry)
SGL Kümpers
SGL epo
PP AM
CFCGMSPP
39
Carbon Fibers & CompositesComposite Components – HITCO
• HITCO: California based composite component manufacturer for aerospace & defense industry
• Historically, the prevailing process in carbon fiber based aero structures was hand lay-up – very slow and expensive & no competitive differentiation
• Investment into automation technologies AFP (Automated Fiber Placement machine) & ATL (Automatic Tape Layer machine) substantially improves competitiveness of HITCO
• Won Gold Level Preferred Supplier Certification for100% quality & delivery performance from The Boeing Company
• Supplier of the Year 2007 award in Structures Commodity category from The Boeing Company
• Recent contract wins/extensions:– Composite floor beams for Boeing 787 “Dreamliner”– Boeing 767 flap track fairings– … and more to follow …
AFP
ATL
PP AM
CFCGMSPP
40
** Previous years adjusted for actuarial losses from pensions
-3
190
50
193
259
-62 -66 -62 -65 -47
3144
13382
0
5.18.6
4.3
28.8
13.1
2004 2005 2006 2007 2008
94462 116 175 258 306
1,3731,1911,069
1,612
10.9%
14.7%18.8%
19.0%
6.6%
2004 2005 2006 2007 2008
SGL GroupRecent performance
2007 – 2008
• Sales up 17%
• EBIT up 18%
• EBIT margin 19% in 2008
• Cash interest cover reaches 28.8
8.1%2006
p.a.Average Cash Interest
3.4%2008
5.1%2007
• Profit before tax up 34%
• Net profit + 42%
Cash interest cover defined as EBITDA dividedby net cash interest paid
In € million
In € million
SalesEBIT
EBIT Margin
Net ProfitProfit before taxFinancial Result
Cash interest Cover
-3
**
**
41
SGL GroupRecent performance
2008
• EBIT at record level of € 306 million
• ROCE 25%
• Internal rate of return (hurdle rate) 10% pre tax
Capital employed is defined as working capital plus property, plant and equipment and intangible assets
In € million
Capital Employed ROCE
819 8601,054
785
1,355
14%
21%27%
25%
7%
2004 2005 2006 2007 2008
42
SGL GroupRecent performance
2007 – 2008
• Gearing down to 0.44
• Equity ratio increased to 43%
• € 200m convertible bonds & € 200m corporate bond issued in 2007
• € 200m undrawn credit facility for working capital and bolt on acquisitions
• Credit ratings improved
* Prior to 2007 refinancing
In € million
Net Debt Gearing
Ba1
Ba3
Ba2 (* Ba3)
Moody’s
BB (* BB-)SGL Group
S&PCredit Ratings
BBB-Corporate bond
BBConvertible bond
Equity ratio
321 265 229 285 333
41% 43%
0.58
1.06
1.41
0.440.47
32%18% 22%
2004 2005 2006 2007 2008
43
SGL GroupBusiness structure
Performance Products (PP) Advanced Materials (AM)
Performance Products(PP)
Graphite Materials & Systems (GMS)
Carbon Fibers & Composites (CFC)
• Graphite & Carbon Electrodes
• Cathodes & Furnace Linings
• Graphite Specialties (GS)• Process Technology (PT)• Expanded Graphite (EG)
• Carbon Fibers/Composite Materials
• Composite Components• Aero Structures
Technology and Innovation (T&I)
Six Sigma (SGL Excellence)
44
GMS 26%
CFC 14%
Performance ProductsPerformance Products (PP)
Business Lines
• Graphite & Carbon Electrodes
• Cathodes & FurnaceLinings
2008 Group Sales PP Sales & EBIT Margins
Key industries served
• Steel• Aluminum• Ferrous and non-ferrous
metals
Characteristics
• Supplying the metal industries• Leading competitive position• Ongoing growth in eastern world
PP 60%
563 644 713836
966
19%
24%31%
15%
29%
2004 2005 2006 2007 2008
• High ROS & ROCE• Strong cash flow• Stable growth
* Compound Annual Growth Rate in Sales 2004 – 20082004 – 2005: Carbon & Graphite Business Unit
Sales €m EBIT Margin
14% CAGR*
PP AM
CFCGMSPP
45
Graphite & CarbonElectrodes
75%
Performance Products (PP)Performance Products (PP)
Sales – 2008
Highlights 2008
• Production adjusted to reduced demand• Investment into 60kt Malaysian carbon &
graphite plant continues
Medium-term targets (2008 – 2011)
• Volume growth: 2 – 3% p.a.• ROS: > 20%
Strategic priorities
• Continued cost reduction projects• Major initiative to increase customer value
through product quality and consistency• Start of first GE production module in
Malaysia
Cathodes &Furnace Linings25%
PP AM
CFCGMSPP
46
GMS 26%
CFC 14%
Advanced MaterialsGraphite Materials & Systems (GMS)
Business Lines
• Graphite Specialties• Process Technology• Expanded Graphite
2008 Group Sales GMS Sales & EBIT Margins
Key industries served
• Chemical• Energy –Solar• Semiconductor• High-temperature
processes• Automotive• Mechanical engineering
Characteristics
• Supplying the manufacturingindustries
• Focus on innovativeapplications
PP 60%
287 300 340 364412
14%11%
8%7%
13%
2004 2005 2006 2007 2008
• Sustainable sales growth• Solid earnings potential
* Compound Annual Growth Rate in Sales 2004 – 20082004 – 2005: (Graphite) Specialties Business Unit incl. Expanded Graphite Business Line
Sales €m EBIT Margin
9% CAGR*
PP AM
CFCGMSPP
47
GraphiteSpecialties
68%
Advanced MaterialsGraphite Materials & Systems (GMS)
Sales – 2008 Medium-term targets (2008 – 2011)
• Sales growth: 6 – 8% p.a.• ROS: >10%
Strategic priorities
• Increase production and market sharein Asia and Eastern Europe
• Continue driving growth by innovationand material substitution
• Continued cost savings and margin improvement
ExpandedGraphite9%
Process Technology23%
Highlights 2008
• Graphite Specialties (GS):Capacity expansion soft felt, carbon fiber reinforced carbon, isostatic graphite
• Process Technology (PT):Production growth in Asia (China, India)and Russia
• Expanded Graphite (EG):Growth via new applications
PP AM
CFCGMSPP
48
GMS 26%
CFC 14%
Advanced MaterialsCarbon Fibers and Composites (CFC)
Business Lines
• Carbon Fibers/ Composite Materials
• Composite Components• Aero Structures
2008 Group Sales CFC Sales & EBIT Margins
Key industries served
• Energy• Aerospace & Defense• Automotive• Mechanical Engineering• Sporting Goods• Medical Technology
Characteristics
• New applications in auto-motive, energy, aeronautics
• High earnings improvementpotential
PP 60%
93122 131
163
228
-3%
2%
-3%
2%
2004 2005 2006 2007 2008
• Complete value chain in house• Only EU carbon fiber company
* Compound Annual Growth Rate in Sales 2004 – 20082004 – 2005 SGL Technologies Business Unit excl.Expanded Graphite Business Line
Sales €m EBIT Margin
25% CAGR*
PP AM
CFCGMSPP
49
Composite Components 9%
Composite Materials42%
Advanced MaterialsCarbon Fibers and Composites (CFC)
Highlights 2008
Medium-term targets (2008 – 2011)
• Sales growth: > 15% p.a.• ROS (mid term): > 10%
Strategic priorities• Secure own raw material supply• Expand Carbon Fiber capacities • Develop specific applications in:
– Alternative energies– Aviation/defense technology– Automotive
• Support organic growth with targeted partnerships and acquisitions
• Carbon Fibers & Composite Materials (CF & CM):Own precursor development New carbon fiber lines in UK, USA Continued growth from wind energy
• Composite Components (CC):Integration SGL Rotec
• Aero Structures (AS): Investment into automation technologiesat HITCO for aerospace & defense business
PP AM
CFCGMSPP
Sales – 2008
Carbon Fibers 15%
Aero Structure18%
Brake Discs (until FY 2008)16%
50
SGL GroupGroup outlook for 2009
P & L Statement
• Sales below record 2008 level
• Corresponding EBIT to decline more than proportionately – H2 EBIT roughly on same level as H1
• Net financial costs higher than in 2008
Capex and Balance Sheet
• Key KPI: Gearing level to remainaround 0.5 based on today‘s portfolio
• Capex substantially below €200 million
• Gearing ~ 0.5 defines capex level
51
Mid term Minimum Targets Over the Cycle Unchanged …… Once normality returns post 2009
To deliver profitable growth!
Group • Sales growth: 5 – 10% p.a. CAGR organic• ROS: > 12%• ROCE: > 17%
PerformanceProducts (PP)
Graphite Materials & Systems (GMS)
Carbon Fibers &Composites (CFC)
• Volume growth: 2 – 3% p.a.• ROS: > 20%
• Sales growth: 6 – 8% p.a.• ROS: > 10%
• Sales growth: > 15% p.a.• ROS: > 10% mid term
52
SGL Excellence
• Started in 2002• The core element of the Company mission• An ongoing and Company wide program• Our philosophy of doing business
SIX SIGMA
• Our core methodology• Focuses on:
– Customer value– Measurable objectives and results
• Applies to every function in our Company• Empowers our employees with skills and tools:
– > 2,000 SIX SIGMA trained employees– > 550 Green Belts– > 100 Black Belts
Ensuring the FutureSGL Excellence – enables productivity and growth
InnovationExcellence
CommercialExcellence
OperationalExcellence
PeopleExcellence
53
Ensuring the FutureSGL Excellence – enables productivity and growth
* Before antitrust
Since 2002 continuous cost reduction of € 187 million in total
97% 96% 94% 89% 86% 81% 81%72%
63% 65% 66%74%78%
70%
2002 2003 2004 2005 2006 2007 2008
Total Cost*/Sales (%) COGS/Sales (%)
55 2725151621
Annual Net Savings (€m)
28
54
Ensuring the FutureTechnology & Innovation – foundation for profitable growth
Technology & Innovation: SGL Group’s centralized R&D organization
• Combines material, process and application Know-how • T&I Center in Meitingen with working space for 150 scientists
Main Objectives
• Identify, evaluate and initiate new business opportunities fitting to company business product portfolio(new business development)
• Perform R&D projects for BUs and SGL Group to strengthen profitable growth of existing businesses (development & corporate projects)
• Develop high potential business ideas like ceramic composites and energy systems to profitable new business lines for SGL Group (start-ups)
• Safeguard new and existing businesses by managing a strong IP portfolio (total patents held: 1072)
55
Ensuring the FutureTechnology & Innovation – foundation for profitable growth
Activity Areas of T&I 2008
Strengthen Carbon Fiber Based Value Chain:• Development of PAN-Precursor to broaden Carbon Fiber Product Portfolio• Development of 50k Carbon Fiber based on own precursor• Development of Carbon Fiber based composite materials and components
New Business Opportunities in Energy Sector:• New graphite based materials for Li-ion batteries• Graphite foil and C-felt based materials for new battery systems• CFRC-components for nuclear applications
New Production Processes to Improve SGL Group’s Technology and Cost Position: • Continuous processes for ceramic materials and heat exchanger tubes• Processes for improved natural graphite foil
Innovations for Performance Products:• New raw materials and process technologies for consumption improvements of graphite electrodes• Projects for high performance Graphite Electrodes• Next generation Cathode & Furnace Lining materials for energy efficiency and life time improvement
56
Capital expenditure 2007 and 2008 [in € million]
* Total cap ex for the Group
11 14
21
25
69
111
90
30
0
40
80
120
160
200
240
280
2007 2008Carbon Fibers & Composites
Corporate projects
€131m*
Major investment projects:• Malaysian plant:
– € 200m investment 2007 – 2011for 60kt graphite electrode and cathode plant
• Carbon fiber expansion:– 2009: 6kt carbon fiber
capacity operational– 2012ff: further expansion
up to 12kt planned– Total investment approx.
€ 300m 2007 – 2012ff
Ensuring the Future Capital expenditure by business unit 2007 and 2008
Performance Products
Graphite Materials & Systems
€240m*
57
Ensuring the FutureMalaysia – the largest single project in our history
• First …– Greenfield development for 25 years
Graphite Electrodes and Cathodes plantin South East Asia
• Lowest cost plant worldwide:– State of the art technology– Optimal logistics– Favorable energy and labour costs– Integration into global production network
• Start up end 2008 (GE)Completion 2011 (full integration GE + CA):– Combined graphite electrode and cathode
capacity 60 kmt– Cathode production largely booked
under long-term supply contracts
Target RegionSoutheast Asia + Taiwan, India, Korea
58
Inverness (UK):Capacity end 2008 4,000t
Evanston (USA):Capacity early 2009 2,000t
Ensuring the FutureCarbon fiber capacity already at 6,000t by early 2009
Inverness, Scotland
Wyoming, USA
12,000t total planned capacity by 2012ff basedon market applicationand regional demand developments
59
Ensuring the FutureRecent acquisitions and new joint ventures
Production & distribution of specialty graphite products in Asia
75%SGL Quanhai Carbon (Shanxi), China (JV with Shanxi Quanhai Graphite, China)
1 Jul 07GS
PT
PT
BusinessUnit GMS
Manufacturer of fluorine plastic apparatus for corrosion protection
Process technology productsfor Asian market
Activity
1 Oct 07
1 Jun 07
EffectiveDate
Ownedby SGL %Company (Partner)
100%Dr. Schnabel GmbH & Co. KG, Germany
51%SGL Tokai Process Technology, Singapore (JV with Tokai Carbon, Japan)
60
Ensuring the FutureRecent acquisitions and new joint ventures
Precursor supply for JV with BMW33%JV planned with Mitsubishi Rayon (MRC)TBDCF
Manufacturing and processing carbon fibers and fabrics for the automotive industry
51%JV with BMW29 Oct 09CF/CM
Development of carbon ceramic brake systems as well as production and sale of carbon ceramic brake discs for the premium automotive segment
50%Brembo SGL Carbon Ceramic Brakes(JV with Brembo S.p.A., Italy)
28 May 09CC
Supplier of composite components for the automotive industry
50%Fischer Composite Technology GmbH (via JV Benteler Automobiltechnik GmbH)
Mar 09CC
Manufacturing of rotor bladeson “build-to-print” requirements
51%SGL Rotec GmbH & Co. KG, Germany (JV with Abeking & Rasmussen Rotec, Germany)
19 Sep 08CC
Development of carbon fiber reinforced composites for the automotive industry
50%Benteler SGL GmbH & Co. KG, Germany (JV with Benteler Automobiltechnik GmbH, Germany)
20 Feb 08CC
Carbon fiber unidirectional composite materials
100%epo GmbH, Germany27 Oct 07CM
Development of carbon fiberPAN-precursor
44%European Precursor GmbH, Germany (JV with Lenzing AG, Austria)
1 Mar 07CF
CM
CF
BusinessUnit CFC
Processing multi-axial carbonfibers into fabrics (braiding)
US carbon fiber production hub
Activity
1 Apr 07
29 Nov 07
EffectiveDate
Owned by SGL %Company (Partner)
51%SGL Kümpers GmbH & Co. KG, Germany (JV with Kümpers GmbH)
100%SGL Carbon Fibers LLC, USA
Appendix
62
SGL GroupHistory
Conversion to European Company (SocietasEuropaea/SE)
SGL Carbon SE2009
Delisted from NYSE in 2007, independent 100% free float Company with operations in EU, NA, Asia and 3 global Business Units
SGL Group – The Carbon Company2008
Listing on NYSE/USA, full independenceSGL Carbon AG 100% free float1996
IPO Frankfurt/Main, Hoechst remains shareholderSGL Carbon AG1995
Merger with Great Lakes Carbon (USA) 1992and with Pechiney Graphite (F) 1993
SIGRI Great Lakes Carbon GmbH59% Hoechst30% Horsehead Industries11% Pechiney
1993
Merger with Ringsdorff, BonnSIGRI GmbH100% Hoechst
1989
Merger Siemens Plania and Hoechst AG; GriesheimSIGRI GmbH50% Siemens 50% Hoechst
1985
Merger Gesco and Plania sites in PolandSiemens Plania Werke1928
Start of Carbon ProductionGebr. Siemens & Co. (Gesco)1878
63
12 Production Sites
7 Production Sites
21 Production Sites
SGL Grouphas a global presence
64
Latest results reflect destocking and lower demand in key industries9M/2009: Group
• Sales decrease 22%, thereof price/volume: -24%, currency: +2% mainly due to continued destocking and production cuts in steel industry particularly in H1/2009
• Disproportionate reduction in EBITDA (-54%) and EBIT (-65%) due to reduced production volumes and associated fix cost charges as well as high start up costs of new production facilities
• EBIT margin at 9% • Sustainable cost savings €15 million, once-off savings from temporary measures € 26 million• More than proportionate decrease in profit before tax (-79%) due to higher net financial costs• Despite economic crisis positive net profit at €31 million
2.340.48EPS, basic [in €]
150.531.2Net profit after minority interests
209.943.7Profit before tax
1,137.8892.4Sales
234.6
272.2
9M/20089M/2009in € million
81.9Profit from operations (EBIT)
125.7EBITDA
65
Latest results reflect destocking and lower demand in key industries9M/2009: Performance Products (PP)
• Sales decrease 36%, thereof price/volume: -37%, currency: +1% • Steel industry characterized by destocking activities and production cuts, therefore substantially
reduced demand for GE primarily in H1/2009• Cathodes, furnace linings, and carbon electrodes business continued to develop satisfactorily• Higher selling prices in all product lines compared to previous year• EBIT decrease of 49% due to lower sales and production levels as well as expenses relating to
the commissioning of the new Malaysian production facility• Cost savings of €8 million
31.8%25.3%Return on sales
681.6438.7Sales
217.0
236.0
9M/20089M/2009in € million
110.9Profit from operations (EBIT)
130.7EBITDA
66
Latest results reflect destocking and lower demand in key industries9M/2009: Graphite Materials & Systems (GMS)
• Sales decrease: 5%, thereof price/volume: -9%, currency: +4%• Besides positive currency translation effects sales supported by Business Line Process
Technology and the invoicing of a large project• GMS still benefiting from high order backlog from previous year, which was mainly related to
chemical, solar and lithium ion battery business – however order intake weak since beginning of year
• EBIT decrease of 46% due to currency losses from hedging transaction in Q1 and lack of fix cost absorption from declining sales, which were partially offset by the invoicing of a large project in Q2
• Cost savings of €4 million
15.9%8.9%Return on sales
299.3285.5Sales
47.6
58.2
9M/20089M/2009in € million
25.5Profit from operations (EBIT)
37.8EBITDA
67
Latest results reflect destocking and lower demand in key industries 9M/2009: Carbon Fibers & Composites (CFC)
• Sales increase: 26%, thereof price/volume/SGL Rotec: +24%, currency: +2%• Strong sales increase mainly driven by consolidation of SGL Rotec• On May 28, 2009, we completed the transfer of our brake disc activities into 50-50 JV with
Brembo. Up to this date, brake disc business was still consolidated in SGL Group and reported separately under Corporate Costs. Former Business Line Brake Discs was retroactively separated from CFC
• Earnings of CFC impacted by weak carbon fiber market, further start up costs and ongoing high R&D expenses
• Cost savings of €4 million
6.5%-12.0%Return on sales
124.1156.3Sales
8.1
13.1
9M/20089M/2009in € million
-18.7Profit from operations (EBIT)
-10.0EBITDA
68
Latest results 9M/2009: Central T&I, Brake Discs, and Corporate Costs
• On May 28, 2009, we completed the transfer of our brake disc activities into 50-50 JV with Brembo. Up to this date, brake disc business was still consolidated in SGL Group and reported separately under Corporate Costs. Since end of May, earnings of brakes business reported in financial result
• Central T&I Costs decreased by 24% reflecting clear focus of our R&D activities given difficult economic environment
• Corporate Costs decreased by 27% due to stringent cost management relating to purchased services and lower expense level relating to Management Incentive Systems
-1.3-8.6Brake Discs (EBIT)
32.811.9Other sales (incl. Brake Discs)
-25.4
-11.4
9M/20089M/2009in € million
-18.5Corporate Costs
-8.7Central T&I Costs
69
SGL Group has no refinancing requirements until 2012
• € 200 million Corporate Bond at EURIBOR plus 125 bps (maturity 2015)
• € 200 million Convertible Bond at 0.75%, conversion price of € 36.52(maturity 2013)
• € 200 million credit facility (maturity 2012)
• € 190 million Convertible Bond at 3.5%, conversion price of € 29.39 (maturity 2016)
SGL Group has established a solid long term financial structure in May 2007
Financing Structure, Balance Sheet Ratios and Cash on HandAllow continuation of growth path
• Equity ratio: 42%
• Gearing: 0.45
• Cash on hand: €337 million
SGL Group has solid balance sheet ratios and cash on hand at end of September 2009
Followed by a supplemental debt instrument in June 2009
70
Shares in Issue and Shareholder Structure
~ 73%Free float
65,379,227Number of Shares
723530Security Identification Number
Cusip Number
ISIN Number
Basic Shares
784 188 203
DE0007235301
16 May 2007Issue Date
0.75%Coupon
16 May 2013Date of maturity
€ 200 millionPrincipal Amount
Conversion Right
Conversion Price
Convertible Notes (maturity 2013)
5.48 million shares
€ 36.52
4.43%Landesbank Baden-Württemberg
3.55%Mackenzie Financial Corporation
5.12%Voith AG
22.25%SKion GmbH
Reported shareholdings according to §§ 21 ff. WpHG
16 May 2007Issue Date
EURIBOR + 1,25%Coupon
16 May 2015Date of maturity
€ 200 millionPrincipal Amount
Corporate Bond
30 June 2009Issue Date
3.5%Coupon
30 June 2016Date of maturity
€ 190 millionPrincipal Amount
Conversion Right
Conversion Price
Convertible Notes (maturity 2016)
6.46 million shares
€ 29.39
71
Financial Calendar/Contact Details
Contact
SGL CARBON SERheingaustraße 18265203 WiesbadenGermanyPhone +49 (0) 611 - 6029 - 103Fax +49 (0) 611 - 6029 - [email protected] on Nine Months04-11-2010
Interim Financial Reporting First Half04-08-2010
Annual Report18-03-2010
30-04-2010
28-04-2010
Financial Calendar
Annual General Meeting
Report on the First Quarter
72
IR Rankings and Awards
LACP 2008 Vision Awards
„Annual Report Competition“
GOLD
for SGL Group annual report 2008
in mid-cap material sector category
Thomson Reuters Extel Survey,
Wirtschaftswoche and
DIRK (German Investor Relations Association):
„German Investor Relations Award“
2008: 6th
2009: 5th
for SGL Group Investor Relations
in MDAX sector category
Forward-looking statements:
This presentation contains statements on future developments that are based on currently available information and that involve risks and uncertainties that could lead to actual results deviating from these forward-looking statements. The statements on future developments are not intended as guarantees; rather, such developments and results are dependent on a number of factors, they contain various risks and uncertainties and are based on assumptions that may prove to be incorrect. These risks and uncertainties include, for example, unforeseeable changes in political, economic and business conditions, particularly in the area of electric steel production, the competitive situation, interest rate and currency developments, technological developments and other risks and unanticipated circumstances. We see other risks in price developments, unexpected developments relating to acquired and consolidated companies, and ongoing cost optimization programs. SGL Group does not intend to update these forward-looking statements.
Important Notice