Presentation UniCredit German Investment Conference 24.09.2013

UniCredit · Kepler Cheuvreux11th German Investment Conference

Jürgen Muth, CFOJürgen Muth, CFOMunich

24 September 2013

Company profile

• SGL Group is one of the world’s largest manufacturers of carbon-based products

• Sales of ~€ 1.7 bn in 2012

• Head office in Wiesbaden/Germany

Investor Relations Presentation

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• Comprehensive portfolio ranging from carbon and graphite products to carbon fibers and composites

• 45 production sites worldwide

• Service network covering more than 100 countries

• Head office in Wiesbaden/Germany

• Approx. 6,500 employees worldwide

Introduction to


Page 3

SGL Group’s Businesses

Base Materials Advanced Materials

Performance Products(PP)

Graphite Materials & Systems (GMS)

Carbon Fibers & Composites (CFC)

• Graphite & Carbon Electrodes (GCE)

• Graphite Specialties (GS)*

• Carbon Fibers & Composite Materials

SGL GroupBusiness structure


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Electrodes (GCE)

• Cathodes & Furnace Linings (CFL)

(GS)*

• Process Technology (PT)

Composite Materials(CF/CM)

• Aerostructures (AS)

• Rotor Blades (RB)

Technology and Innovation (T&I)

Six Sigma (SGL Excellence)

* Former Business Unit New Markets integrated into Business Unit GS as of May 1, 2013

Base MaterialsPerformance Products (PP)

Business units

• Graphite & Carbon Electrodes

• Cathodes & FurnaceLinings

2012 Group sales PP sales & EBIT margins

563 644 713836

966

642763

941846

24%19%

31%29%

24%

19%15%

17%19%

2004 2005 2006 2007 2008 2009 2010 2011 2012


Performance Products (PP)



GMS 29%

CFC 16%PP 55%


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Key industries served

• Steel

• Aluminum

• Ferrous and non-ferrous metals

Characteristics

• Supplying the metal industries

• Leading competitive position

• Ongoing growth in BRIC

• High ROS & ROCE

• Strong cash flow

• Stable growth

2004 2005 2006 2007 2008 2009 2010 2011 2012

Sales €m EBIT margin

GMS 29%

Worldwide steel production [in mt]

Performance ProductsGraphite electrodes (GE) for steel production in EAFs

• Growth in steel production fuelled by infrastructure demand from emerging countries

• Scrap availability limits EAF growth in emerging countries

• Due to continued 800

1000

1200

1400Blast oxygen furnace

Electric arc furnace






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• Due to continued efficiency gains GE demand growth only1 – 2% p.a.

• GE critical to EAF furnace efficiency but only ~3% of steel-making 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)

0

200

400

600

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Source: WSD, IISI, own estimate

Section view through EAF

Performance Products Graphite electrodes

Graphite electrodeSteelmaking – An Electric Arc Furnace (EAF)

Graphite Electrodes

Furnace shell






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100 – 300 cm

35 – 80 cmConnecting Pin

Molten steel

Eccentric bottomtapping (EBT)

Teaming ladle

Rocker tilt

Tilt cylinder

Source: steeluniversity.org

Performance ProductsGraphite electrode production process

Graphite production• GE critical to EAF furnace efficiency but only ~ 3%of steelmaking conversion cost

• GE is a consumable – replaced every 5 to 8h

• GE usually sold mostly in annual contracts






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• Needle coke requirements sourced on basisof multiyear contracts

�Production process takes up to 3 months

Fundamentals for Aluminum production growth are solid. Various new Projects under construction and additional feasibility studies for capacity increase underway.

55

60

65

70

Aluminum global production scenarios2003 – 2020 / Above pre-crisis scenarios

Performance ProductsCathodes for the aluminum industry

• Aluminum demand driven by:– Population growth and urbanization

– Further industrialization of BRICs

– Weight / strength / cost advantages in higher energy cost environment

• Cathodes essential to aluminum smelters�Existing smelters relining

�Investment good (5 – 7 years lifetime)

�New smelter construction leading first to

Prim

ary

AL

Pro

duct

ion

in m

io. m

t/p.a

.

68 mio. mtWorld Primary AL Prod above 4% CAGR






Page 9

20

25

30

35

40

45

50

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012 e

2013 e

2014 e

2015 e

2016 e

2017 e

2018 e

2019 e

2020 e


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�New smelter construction leading first to project demand and long-term to higher relining demand

• Existing smelters upgrading�Amorphous � graphitized cathodes

�Only three to four major established producers of graphitized cathodes

• Cathodes essential for aluminum smelting but representing only 2% of production costs for 1 mt aluminum

Prim

ary

AL

Pro

duct

ion

in m

io. m

t/p.a

.39 mio. mt

36 mio. mt

50 mio. mt

Source: IAI, Habor, SGL Group’s own estimates, Hydro; Alcoa, CRU

Advanced MaterialsGraphite Materials & Systems (GMS)

Business units

• Graphite Specialties*

• Process Technology

2012 Group sales GMS sales & EBIT margins


287 300 340 364 412 365 396486

469

14%18%

8%11% 13% 14%

9%

7%8%





GMS 29%

CFC 16%PP 55%


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Key industries served• Chemical• Energy –

Solar/Battery• Semiconductor/LED• Metallurgy• Tool manufacturing• Automotive• High-temperature

processes

Characteristics

• Sustainable growth potential in renewable energies, energy efficiency and energy storage

• Broadest product portfolio

• Global footprint

• C-parts supplier to high tech investment goods industry

2004 2005 2006 2007 2008 2009 2010 2011 2012


GMS 29%

* Former Business Unit New Markets integrated into Business Unit GS as of May 1, 2013

Graphite Materials & SystemsBest solutions for our customers …





... in the PV / Semiconductor Industry

... in the LED Industry... in the Chemical and Automotive Industry

Iso graphiteheating element

Flange sealedby a gasket


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Iso susceptor,heating elements,

heat shields/insulation(Soft- and Rigid Felt)

Mono crystalline silicon ingot

MOCVD reactor

SiC coated Iso Graphite Susceptor

ReinforcedGraphite

Sealing Sheet

FlexibleGraphite

Foil

Fine grain graphite manufacturing is complex and requires four to six months production time





Manufacturing process of fine grain graphite

Coke & graphite Binder pitch

ShapingExtruding, vibration / die molding, isostatic pressing

Mixing

4-5 months

Grinding


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Source: GS Production

800-1,200°C

2.500-3,000°C

Carbonizing

Graphitizing

Pitch impregnating

FinishingMachining, purifying, coating

Tailor made product

2-4weeks

Graphite Materials & SystemsInnovation driving new product portfolio

GMS 2012 sales: €486 millionExamples:

• Advanced Silicon Carbide coated carriers for LED

• Carbon for anode material for lithium-ion batteries

• Expanded graphite for environmental needs and thermal management (JV between SGL Group and

1/3new

2/3






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between SGL Group and Lindner Group for Graphite-based “Green” Air Conditioning)

• SIGRABOND® Performance: carbon fiber reinforced graphite material for heat treatment applications

• Four new products launched in Process Technology: Ecosyn, Ecopor, Heatstorage, Fluegas Heatexchanger

1/3 of sales based on new products introduced over the last 4 years

2/3established

Graphite Materials & SystemsMajor customer industries and market shares 2012

% of totalGMS sales 2012

Global marketshare 2012

Chemicals 24% 35%

Energy: Batteries & Nuclear 18% 30%

Energy: Solar (including Polysilicon) 16% 25%

Semiconductor (incl. LED) 7% 20%






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Semiconductor (incl. LED) 7% 20%

Metallurgy 7% 25%

Tool manufacturing 6% 10%

Automotive 3% 15%

High-temperature processes 3% 15%

Source: SGL Group’s own estimates

Advanced MaterialsCarbon Fibers and Composites (CFC)

Business units

• Carbon Fibers/ Composite Materials

• Aerostructures

• Rotor Blades

2012 Group sales CFC sales & EBIT margins


93 122 131163

193 208 219277

220

-14%4%

2%

-3%-3%

-3%-11%

-18%

2004 2005 2006 2007 2008 2009 2010 2011 2012






GMS 29%

CFC 16%PP 55%

-8%

At-Equity JVsWith BMW, Brembo, Benteler


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Key industries served• Energy

• Aerospace & Defense

• Automotive

• Industrial

• Recreation

• Medical Technology

• Construction

• Pressure Vessels

Characteristics

• New applications in automotive, energy, aeronautics, industrial

• High earnings improvement potential

• Complete value chain in house

• Only EU carbon fiber company

Sales €m EBIT margin2004-05 SGL Technologies Business Unit excl. Expanded Graphite2004-07 incl. Brake Disc businessSGL Rotec consolidated from September 2008 onwardsFisipe consolidated from April 2012 onwards

GMS 29%

Where is carbon? Everywhere! Touching More and More of Everyday's Life





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SGL GroupThe only integrated European carbon fiber producer

Carbon Fibers & Composite Materials Composite Components

PAN Carbon Prepreg

Automotive

CarbonFiber

CompositeMaterials

• Benteler SGL (50%)

• Brembo SGL Carbon Ceramic Brakes (50%)RawMaterial






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PAN

Precursor

Carbon

Fiber

Prepreg

PreformAerospace &

Defense

Industrial & Energy

• HITCO (100%)

• SGL Rotec (100%)

• Fisipe (100%)• MSP: JV with

Mitsubishi Rayon (33%)

• Prod. Capacity~ 4kt in UK~ 2kt in USA

• SGL-ACF : JV with BMW (51%)~ 3kt in USA

• SGL epo (100%)

• SGL Kümpers(51%)

• SGL-ACF : JV with BMW (51%)

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68

Carbon Fibers & Composites: Carbon fiber demandgrowth delayed but all growth drivers intact

CF market forecast (in thousand mt p.a.)






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28 30 34 39 4149 53

6068

2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: SGL Group market research

CF demand forecast (January 2013)

Carbon Fibers & CompositesComposite Materials as differentiating factor

• Carbon fibers can be woven or braided and are often impregnated with resin before component production

• We aim to have a broad range of technologies for prepreging / preforming

– Impregnation (e.g., prepregs for wind turbine blades or aircraft parts)– SGL epo SGL Kümpers






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– SGL epo

– Weaving (e.g., sporting goods, automotive, medical industry)

– Preforms (e.g., automotive industry)

– Braiding (e.g., automotive industry)– SGL Kümpers

SGL epo

Carbon Fibers & CompositesJVs in automotive





• Benteler-SGL:– 50/50 JV between SGL Group and Benteler AG to

develop composite based automotive components– Leading position in developing structural automotive

parts and modern, automated production technologies– Successful manufacturing of prototype parts for the

BMW i projects– Set-up of the first high volume composite components

production plant

• Brembo-SGL:


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• Brembo-SGL:– 50/50 JV between SGL Group and Brembo SPA for

carbon ceramic based automotive brakes– Leading global position, supplying most of the high-

end car makers, with production sites in Germany and Italy

• SGL Group’s strategic objectives in automotive:– Drive the metal substitution process in automotive to

become a major automotive parts supplier– Ensure that SGL Group’s materials are at the forefront

in the automotive industry

• Milestone in serial application of carbon fibers in automotive industry –market launch of first serially produced car (BMW i3) with a CFRPpassenger cell in 2013

• €90 million total investment volume in initial phase, overall investmentvolume €230 million subject to BMW demand increase

• JVs to be accounted for at equity by SGL and BMW during build-up phase

• BMW guarantees certain minimum purchasing volumes at contractuallyagreed conditions in the context of safeguarding the overall project

• BMW provides debt financing

Carbon Fibers & CompositesJVs with BMW, Mitsubishi exclusively for BMW’s demand






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• SGL Automotive Carbon Fibers LLC, Moses Lake (USA): 51/49 JV betweenSGL Group and BMW Group to produce carbon fibers exclusively for BMW’sdemand (3kt carbon fiber capacity in 1st stage)

• SGL Automotive Carbon Fibers, Wackersdorf (Germany): 51/49 JV betweenSGL and BMW Group to produce composite materials (fabrics) in Wackersdorf(Germany) based on carbon fiber produced in Moses Lake (USA)

• These fabrics to be sold to BMW who will produce automotive parts and then assemble the BMW i3 and i8 in Leipzig (Germany)

• Precursor supply safeguarded by MRC – SGL Precursor Co. Ltd., Otake (Japan): 33/67 JV between SGL Group and Mitsubishi Rayon

Source: BMW Group

Moses Lake, USAStart C-Fiber Production

Q3/2011

Wackersdorf, GermanyStart Non-Crimp Fabric Production Q3/2010

Otake, JapanStart Precursor Production

April 2011

JV with Mitsubishi Rayon JV with BMW: SGL Automotive Carbon Fibers

Carbon fiberPrecursor Fabric

Carbon Fibers & CompositesSGL Automotive Carbon Fibers – A Truly Global Value Chain





BMW i3Official market launch

July 29, 2013

Q3/2011 Production Q3/2010April 2011

BMW Group

Leipzig, GermanyGround Breaking - Site extension

November 2010

Landshut, GermanyGround Breaking CFRP Production

July 2010

CFRPFabric


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Ensuring the futureSGL Excellence – enables productivity and growth

InnovationExcellence

CommercialOperational

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 + LEAN

• Our core methodology


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CommercialExcellence

OperationalExcellence

PeopleExcellence

• 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:– > 4,000 SIX SIGMA trained employees

– > 350 active Green Belts

– > 120 Black Belts

Ensuring the futureSGL Excellence savings

Since 2002 continuous cost reduction of €283 millio n in total

55


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55

2116 15

25 27 2823 24 2623

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Annual Net Savings (€m)

Latest Financials and Outlook 2013


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Latest Financials and Outlook 2013

SGL GroupH1/2013 Results for the Group

in € million H1/2013 H1/2012*

Sales revenue 828.2 809.8

EBITDA before extraordinary effects 67.3 108.2

Return on sales based on EBITDA before extraordinary effects (in %) 8.1 13.4

Operating profit (EBIT) before extraordinary effects 25.6 69.9

Return on sales based on EBIT before extraordinary effects (in %) 3.1 8.6

Extraordinary effects -153.2 -

Results from At-Equity accounted investments -10.8 -7.2


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Net financing result -25.9 -22.7

Profit before tax -164.3 40.0

Consolidated net profit attributable to equity holders -243.0 23.0

EPS, basic (in €) -3.43 0.33

* Adjusted for effects of adopting IAS 19R

• Sales revenue increase: 2.0%, currency adjusted 1% - Fisipe (acquired in Q2/2012) sales contribution of €59.0 or 4%

• EBITDA significantly decreased due to price pressure in PP, cyclical low at GMS, difficult market environment at CFC

• Sustainable cost savings of €13 million from SGL Excellence Initiative (SGL X)

• Negative non cash extraordinary effects of €153.2 million relating to the impairment of assets recorded within CFC

• High tax expense of €78.9 million include impairment of deferred tax assets on loss carry forwards due to lower short and midterm earnings expectations and provisions for tax risks from ongoing tax audits totaling €69 million

SGL GroupH1/2013 Results for Performance Products (PP)

• Sales revenue (+2%) virtually unchanged due to price pressure in graphite electrodes, currency effects had no impact

in € million H1/2013 H1/2012*


EBITDA 74.4 93.1

Return on sales based on EBITDA (in %) 17.7 22.5

Operating profit (EBIT) 54.0 74.3

Return on sales based on EBIT (in %) 12.9 18.0


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• Sales revenue (+2%) virtually unchanged due to price pressure in graphite electrodes, currency effects had no impact

• Lower EBITDA (-20%) due to

– higher factor costs

– lower selling prices

• €6 million savings from SGL X Initiative


SGL GroupH1/2013 Results for Graphite Materials & Systems (GMS)

• Sales revenue decrease: 17%, currency adjusted 14%

in € million H1/2013 H1/2012*


EBITDA 21.5 49.1

Return on sales based on EBITDA (in %) 10.2 19.4

Operating profit (EBIT) 12.8 40.3

Return on sales based on EBIT (in %) 6.1 15.9


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• Sales revenue decrease: 17%, currency adjusted 14%

– H1/2012 still benefited from high order backlog at the end of 2011

– Business Unit Graphite Specialties (GS) reached cyclical trough in H1/2013 driven by downward trend in new orders from all three regions (Asia, Europe and North America). Order intake in the previously more stable industrial applications substantially weakened in H1/2013, in addition to an already weak demand development in solar, semiconductor and LED industries

– Business Unit Process Technology sales reached previous year level

• EBITDA decreased significantly due to

– Underabsorption of fixed costs particularly in Business Unit GS as production levels adjusted to low order backlog

– Increasing price pressure in Business Unit GS due to intensified competition

• €3 million savings from SGL X initiative


SGL GroupH1/2013 Results for Carbon Fibers & Composites (CFC)

• Sales revenue increase: 37%, currency adjusted 38%

in € million H1/2013 H1/2012 *


EBITDA before extraordinary effects** -11.3 -8.7

Return on sales based on EBITDA before extraordinary effects (in %) -5.8 -6.1

Operating profit (EBIT) before extraordinary effects** -21.3 -16.5

Return on sales based on EBIT before extraordinary effects (in %) -10.9 -11.5


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• Sales revenue increase: 37%, currency adjusted 38%

– Initial consolidation of Fisipe (acquired in Q2/2012) contributed 16%-points of sales growth (H1/2013: €59.0 million, H1/2012: €29.8 million)

– like-for-like sales growth of 21% mainly due to higher sales in Business Unit Rotor Blades

• EBITDA decreased due to

– low capacity utilization in the carbon fiber business due to project shifts, resulting in lower material demand from wind industry and other industrial applications

– unsatisfactory utilization level in the Business Unit AS caused by Boeing 787 and Joint Strike Fighter delays

• €4 million savings from SGL X initiative

* Adjusted for effects of adopting IAS 19R** Negative non cash extraordinary effects of €153.2 million relating to the impairment of assets recorded within CFC

SGL Group H1/2013 Results for Central T&I and Corporate Costs

• Central T&I costs decreased by 26% mainly due to the already implemented cost savings measures as well as an investment grant received in H1/2013

• Corporate costs decreased by 31% primarily due to lower expenses for variable remuneration components and cost savings related to external services

in € million H1/2013 H1/2012*

Sales revenue/other revenue 2.2 1.0

Central T&I costs -4.9 -6.6

Corporate costs -15.0 -21.6


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savings related to external services


Financing Structure, Balance Sheet Ratios and Cash on HandAllow continuation of growth path

SGL Group established a solid long term financial s tructure in May 2007

• €200 million Corporate Bond at EURIBOR plus 125 bps (maturity 2015)

• €200 million credit facility, undrawn (original 2012 maturity extended to 2015)

• Partially converted in 2011/12, remainder (€145.5 million) repaid at maturity in May 2013: €200 million Convertible Bond at 0.75%

Followed by supplemental debt instruments in June 2 009 and in April 2012

• €134.7 million* Convertible Bond at 3.5%, adjusted conversion price of €29.00 (maturity 2016)(originally €190 million prior to conversion)


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SGL Group has currently no refinancing requirements

(originally €190 million prior to conversion)

• €240 million Convertible Bond at 2.75%, adjusted conversion price of €43.5164 (maturity 2018)

SGL Group has solid balance sheet ratios and liquidi ty at end of June 2013

• Equity ratio: 37%

• Gearing: 0.65

• Total liquidity: €148 million

* As at August 31, 2013

SGL GroupGroup Outlook 2013

Group

• FY 2013 sales slightly below 2012 level*

• EBITDA (before extraordinary effects) 50-60% below comparable 2012 level (€240 million before project write-offs)

• Improved At-Equity results from CFC JVs

• Substantial Group-wide cost savings program initiated: SGL2015

Capex, Balance Sheet, Cash Flow

• GEARING temporarily above mid term target of approx. 0.5

• CAPEX limited to €100 million

• Negative FREE CASH FLOW (however, variance vs. previous guidance of positive free cash flow limited and less than EBITDA deterioration due to restricted cap ex and working capital requirements)

Key risks to forecasts

• Further political, economic, and currency related uncertainties

• Further market risks arising from new capacities temporarily exceeding demand

* Based on constant currencies


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SGL GroupBusiness Area Outlook and Key Assumptions 2013


• Graphite Electrodes: comparable volume in H2/2013 vs. H1/2013 expected, prices in H2/2013 below H1/2013 and below previous year

• Cathodes: previous year EBITDA boosted by final settlement of long term contract, stepwise recovery in demand continues, price increases not yet enforceable

=> FY 2013 sales substantially lower YoY*, EBITDA ROS in H2/2013 significantly below H1/2013 level

Graphite Materials and Systems (GMS)

• Graphite Specialties: impacted by cyclical downturn across all end markets; demand from lithium-ion-battery industry for consumer segment in H2/2013 also weaker than originally expectedbattery industry for consumer segment in H2/2013 also weaker than originally expected

• Process Technology: strong order backlog at year end 2012 to positively impact 2013 sales and earnings resulting in a performance similar to its record year 2012

=> Sales significantly lower YoY*, EBITDA ROS below mid term target of ≥ 14%


• Carbon Fibers/Composite Materials: continues to be affected by overcapacities and low demand in the wind, sports and leisure markets as well as other industrial applications

• Aerostructures: HITCO continues to be negatively affected by delays in civil and military aerospace projects• Rotor Blades: SGL Rotec to reduce losses compared to 2012 thanks to new orders and further improving

productivity

=> Slight reduction in operating losses compared to 2012 due mainly to internal optimization measures

* Based on constant currencies


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SGL GroupSGL2015: Comprehensive group wide cost cutting plan introduced

Organizational restructuring

Review of organizational structure with support of external consultant

Site restructuring

Develop measures for site restructuring

• PP & GMS affected by cyclical downturn and temporary overcapacities, CFC impairedby repeated project and development delays

• requires decisive and urgent action of the management board: SGL2015, acomprehensive global cost savings program consisting of two pillars

with support of external consultant

• adjustment and simplification of business processes

• streamlining management structures

• Reduce SG&A cost base

restructuring

• Potential divestment of non core activities

• Transfer activities into partnerships

• Relocation, closure or sale of production assets

• individual projects currently being developed• details, including schedule, associated costs, and expected benefits, to be published

near term


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Fundamental long-term growth drivers for our busine sses

SGL Group approach

“Towards an ecologically sensitive world”

Key challengesChanged economic

environmentEnergy / raw

materials availabilityClimatechange

approach

Sustainable solutions

Energyefficiency

Lightweight

Alternativeenergies

Carbon contributes to all three sustainable solutio ns


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Thank you for your attention !


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Any Questions ?

Important note: This presentation contains forward looking statements based on the information currently available to us and on our current projections and assumptions. By nature, forward looking statements are associated with known and unknown risks and uncertainties, as a consequence of which actual developments and results can deviate significantly from the assessment published in this presentation. Forward looking statements are not to be understood as guarantees. Rather, future developments and results depend on a number of factors; they entail various risks and unanticipated circumstances and are based on assumptions which may prove to be inaccurate. These risks and uncertainties include, for example, unforeseeable


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based on assumptions which may prove to be inaccurate. These risks and uncertainties include, for example, unforeseeable changes in political, economic, legal and business conditions, particularly relating to our main customer industries, such aselectric steel production, to the competitive environment, to interest rate and exchange rate fluctuations, to technological developments, and to other risks and unanticipated circumstances. Other risks that may arise in our opinion include price developments, unexpected developments associated with acquisitions and subsidiaries, and unforeseen risks associated with ongoing cost savings programs. SGL Group assumes no responsibility in this regard and does not intend to adjust or otherwise update these forward looking statements.

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Presentation UniCredit German Investment Conference 24.09.2013