Investor Relations Presentation September 2015
Table of Contents. Introduction to SGL Group s Businesses Page 3 - Reporting Segment Performance Products Page 6 - Reporting Segment Graphite Specialties Page 15 - Reporting Segment Carbon Fibers & Materials Page 23 - Reporting Segment Corporate & Others Page 34 - SGL Excellence, SGL2015, Business Process Excellence Page 38 - Technology & Innovation Page 48 Strategic Realignment Page 51 Latest Financials H1 2015 Page 63 Outlook Page 73 Appendix Page 78 Page 2
Introduction to SGL Group s Businesses Page 3
SGL Group in 2014. Organization with five business units and four reporting segments Graphite & Carbon Electrodes (GCE) Cathodes & Graphite Process Carbon Furnace Specialties Technology Fibers & Linings (GS) (PT) Composite (CFL) Materials (CF/CM) Main JVs -SGL ACF* -BremboSGL -BentelerSGL Carbon Graphite Corporate & Fibers & Performance Products (PP) Specialties Others Materials (GS) (C&O) (CFM) Corporate & Others (C&O): SGL Excellence (SGL X), Technology & Innovation (T&I), Corporate Functions JV Partners Business Unit Reporting Segment Business Unit Aerostructures (AS, HITCO) reclassified to discontinued operations as of June 30, 2014 *51% share reported in CFM Page 4
SGL Group at a glance. Based on 2014 reporting structure Reporting Segment 2014 Group sales Business Units Performance Products (PP) Graphite Specialties (GS) Carbon Fibers & Materials (CFM) Corporate & Others (C&O) CFM 22% GS 26% 1.34bn C&O 8% PP 44% Graphite & Carbon Electrodes (GCE) Cathodes & Furnace Linings (CFL) Graphite Specialties (GS) Carbon Fibers & Composite Materials (CF/CM) Process Technology (PT) Key industries served Steel Other metallurgy Energy Chemicals Automotive Corporate SGL Excellence T&I Administrative functions Shares services Major Joint Ventures 51% SGL ACF (carbon fibers and fabrics for BMW Group) 50% Brembo SGL (carbon ceramic brake discs) 50% Benteler SGL (fiber based composite components for automotive industry) Page 5
Reporting Segment Performance Products Page 6
Reporting Segment: Performance Products (PP). Business units 2014 Group sales PP sales - 2014 Graphite & Carbon Electrodes (GCE) Cathodes & Furnace Linings i (CFL) PP 44% Cathodes & Furnace Linings 21% Graphite & Carbon Electrodes 79% Key industries served Steel Aluminum Ferrous and non-ferrous metals Characteristics Supplying the metal industries Leading competitive position Historically solid ROS & ROCE Historically strong cash flow Strategic priorities Align infrastructure with market development (swing capacities) Reduce unit costs by increasing production and shipments at Malaysian plant Increase customer value with product quality and consistency Page 7
Graphite & Carbon Electrodes. Graphite electrodes (GE) steel production in EAFs Worldwide steel production [in million t] Growth in steel production fuelled by infrastructure demand from emerging g countries 1600 1400 1200 Blast furnace produces primary (integrated) steel based on iron ore Electric arc furnace produces secondary (electric) steel based on scrap Chinese steel exports limits EAF growth in most regions Continued efficiency gains slowing GE demand growth. 1000 800 600 400 GE critical to EAF furnace efficiency but only ~3% of steel-making conversion 200 cost 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Page 8 Source: WSD, IISI, own estimate
Graphite & Carbon Electrodes. Graphite electrodes for electric steel production Steelmaking in an electric arc furnace (EAF) Section view through EAF Graphite electrode Furnace shell Graphite Electrodes Molten steel 100 360 cm Rocker tilt Tilt cylinder Eccentric bottom tapping (EBT) 35 80 cm Connecting Pin Teaming ladle Page 9 Source: steeluniversity.org
Graphite & Carbon Electrodes. Graphite electrode production process GE critical to EAF furnace efficiency but only ~ 3% of steelmaking conversion cost Graphite production GE is a consumable replaced every 5 to 8h GE usually sold mostly in annual contracts Needle coke requirements sourced on basis of multiyear contracts Production process takes up to 3 months Page 10
Graphite & Carbon Electrodes. Graphite electrode market 250 Capacity by competitor in 2015** UHP / HP-quality [in tmt] Regional demand in 2014 200 150 100 North / Middle East, Africa 10% Americas 17% Europe / CIS 23% 50 Asia 50% 0 Page 11 SGL Graftech Showa Graphite HEG Tokai SEC Nippon (DE) (US) Denko India (IN) Carbon* (JP) Carbon (JP) (IN) (JP) (JP) *Announcement on August 5, 2015: graphite electrode capacity reduction by 22kt (Japan ). **Russia and China: Potential UHP capacity dependent on equipment, technical capability and needle coke availability. Source: SGL Group s own estimates (as of August 2015)
Cathodes & Furnace Linings. Cathodes for the aluminum industry Aluminum demand driven by: Population growth and urbanization Further industrialization of emerging countries 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 project demand and long-term to higher relining demand Smelters upgrading Comprehensive product portfolio to cope with all technology trends in the AL industry Page 12 luminum Produc ction [in mio. t] Primary A 80 70 60 50 40 30 20 10 Aluminum global production scenarios 2003 2020 / Above epre-crisis scenarios 67 mio. t 39 mio. t 36 mio. t 50 mio. t 2003 2005 2007 2009 2011 2013 e 2015 e 2017 e 2019 e Solid fundamentals for aluminum production growth Various new projects under construction and additional feasibility studies for capacity increases underway. Source: IAI, Habor, SGL Group s own estimates, Hydro; Alcoa, CRU
Cathodes & Furnace Linings. Cathodes for the aluminum industry Aluminum smelter Cathodes 30 70 cm 4 4 1 4 3 2 100 380 cm 30 50 cm Page 13 Special Cathode Ramming Sidewall glue blocks pastes blocks Source: SGL Group
Cathodes & Furnace Linings. Market shares in cathodes Increasing cathode demand due to new projects. High level of plant utilization Prepared to supply all regional growth markets CIS 7% Market shares in cathodes 2014 SGL 18% Balanced product portfolio enabling participation in all technological developments SEC 16% Various (Chinese & Others) 41% Carbone Savoie 18% Page 14 Source: SGL Group s own estimates, market shares based on volume (excl. China domestic) Various (Chinese & others): various cathode producers combined in this number, none of them exceeding 5% market share
Reporting Segment Graphite Specialties Page 15
Reporting Segment: Graphite Specialties (GS). Business unit Graphite Specialties (GS) GS 26% 2014 Group sales Key industries served Energy Solar / Battery Semiconductor / LED High-temperature processes Metallurgy Tool manufacturing Automotive Characteristics i Strategic priorities i i Higher value-added products (machining, coating) Specialized, partially tailor-made, products for differentiated customers Innovation driven business Engineered products for customers from > 35 industries some with high growth potential Focus on forward integration Combine material-know-how and engineering competence Advanced material, equipment, and process solutions in close cooperation with customers Page 16
Graphite Specialties. Best solutions for our customers... in the PV, Semiconductor, and LED Industry... in the Battery and Energy Storage Industry Meander heater for CZ units Reinforced graphite sealing sheet C/C carrier frame for solar wafers Flexible graphite foil Anode material for lithium-ion batteries SiC coated wafer carrier p for LED chip production Page 17... in the Chemical and Automotive Industry Redox flow battery electrode consisting of battery felt and bipolar plate Rotor and vanes for break assistant i t t pumps
Graphite Specialties. The reliable material supplier Full integration to ensure consis- tent quality Most comprehensive portfolio in the industry Partnering with customers from >35 industries Feedstock Machining Purification Impregnation & coating Global production: America, Asia / Pacific and Europe Isostatic Extruded Vibro molded Die molded Expanded Carbon fiber reinforced carbon Soft & rigid felt SiC coating Lithium ion battery Polysilicon, photovoltaic & semiconductor LED & sapphire Heat treatment Sealings & gaskets EDM Glass & refractories Mechanical engineering Page 18
Graphite Specialties. Specialty graphites required where other materials fail Properties can be adapted dto requirements Thermal shock resistance Purity Mechanical strength Main properties of carbon and graphite Electrical and thermal conductivity Resistance to high temperatures Corrosion resistance Page 19
Graphite Specialties. Fine grain graphite production is complex and requires up to six months Coke & graphite Binder pitch Grinding Mixing Pitch impregnating 800-1,200 C Shaping Extruding, vibration / die molding, isostatic pressing Carbonizing 4-5 months 2.500-3,000 C Graphitizing Finishing Machining, purifying, coating 2-4 weeks Page 20 Tailor made product Source: GS Production
Graphite Specialties. Enabling innovation Examples: Graphite anode material for Lithium-Ion batteries Graphite foils and felts for stationary energy storage 3D filament wound susceptors for semiconductor industry Extra large carriers for photovoltaic Advanced silicon carbide coated carriers for LED CFRC charging carriers for high- temperature applications Target approx. 1/3 of sales based on new products introduced over the last 4 years established new Page 21
Graphite Specialties. Major customer industries and market shares 2014 % of total Global market GS sales 2014 share 2014 Energy: Batteries & Nuclear 23% 35% Semiconductor (incl. LED) 12% 15% Chemicals 12% 35% Tool manufacturing 11% 10% Energy: Solar (including Polysilicon) 10% 15% Metallurgical applications 10% 25% Automotive & Transportation 8% 15% High-temperature processes 4% 15% Other industrial applications 10% - Page 22 Source: SGL Group s own estimates
Reporting Segment Carbon Fibers & Materials Page 23
Reporting Segment: Carbon Fibers & Materials (CFM). Business units* Carbon Fibers / Composite Materials 51% SGL ACF (JVs with BMW) Key industries served Automotive Energy Industrial Recreation Medical Technology Pressure Vessels CFM 22% 2014 Group sales CFM sales 2014 Characteristics i New applications in automotive, energy, industrial High earnings improvement potential Complete value chain in house Only EU carbon fiber company SGL ACF 20% Strategic priorities i i Carbon Fibers / Composite Materials 80% Develop innovative customer solutions along the value chain Optimize i carbon fiber and composite capabilities along the value chain Convert Fisipe acrylic fiber lines into PAN precursor production * Former Business Unit Rotor Blades sold as of December 31, 2013, former Business Unit Aerostructures reclassified to discontinued operations as of June 30, 2014 Page 24
Carbon Fibers / Composite Materials. Carbon fiber demand growth delayed but all growth drivers intact CF market forecast [July 2014; in thousand mt p.a.] 28 32 41 43 50 57 62 67 75 2010 2011 2012 2013 2014 2015 2016 2017 2018 Page 25 Source: SGL Group market research
Carbon Fibers / Composite Materials. Carbon fiber capacity Capacity [in mt] 35000 30000 25000 20000 Name plate capacities* carbon fiber (excl. oxidized d fiber) LT = Low tow fiber 1 24k HT = High tow fiber 50 300k * Actual production tends to be 20 30% below name plate capacity 15000 10000 5000 0 Toray** (JP) Toho / Fortafil (JP) SGL Group (DE) MRC (JP) Formosa Plastic (TW) Hexcel (US) Aksa (TR) Cytec (US) Product LT/HT LT HT HT/LT LT LT LT LT Markets Aero / Ind. Aero / Ind. Ind. Ind. Ind. Aero / Ind. Ind. Aero / Ind. Page 26 ** Including Zoltek Source: SGL Group s own estimates, company websites (as of March 2015)
Carbon Fibers / Composite Materials. Composite Materials 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 Weaving (e.g. sporting goods, automotive, medical industry) Preforms (e.g. automotive industry) Braiding (e.g. automotive industry) SGL Kümpers Impregnation (e.g. prepregs for wind turbine blades or aircraft parts) SGL epo SGL Kümpers SGL epo Page 27
Carbon Fibers / Composite Materials. SGL Group only integrated European carbon fiber producer Carbon Fibers & Composite Materials Composite Components Refocused on materials & automotive / other industrial components* Raw Material Carbon Fiber Composite Materials PAN Precursor Carbon Fiber Prepreg Preform Automotive & other industrial Fisipe MSP: JV with Mitsubishi Rayon (33%) Prod. Capacity ~ 4kt in UK ~ 2kt in USA SGL ACF: JV with BMW (51%) ~ 6kt in USA SGL epo SGL Kümpers (51%) SGL ACF: JV with BMW (51%) Benteler SGL (50%) Brembo SGL Carbon Ceramic Brakes (50%) * Former Business Unit Rotor Blades sold as of December 31, 2013 and former Business Unit Aerostructures reclassified to discontinued operations as of June 30, 2014 Page 28
Carbon in Automotive. Stringent CO 2 Emission Restrictions Globally Global approach to reduce CO 2 emissions Progressively more comfort and safety features on bord Driver for lightweight Page 29
Example EU. CO2 reduction targets cannot be achieved without lightweight construction Page 30
Carbon in Automotive. Lightweight materials offer significant weight advantages especially CFRP eight for in % omponent we me functions Relative co the sam 100 75 50 25-5 to -25% -40% -15% -20% -60% 0 Steel Lightweight steel construction ti Aluminum Magnesium CFRP quasiisotropic CFRP unidirectional Source: N/EK-L; EKP Page 31
SGL ACF. Milestone in serial application of carbon fibers in automotive industry Market launch of BMWi3 in November 2013, the first serially produced car with a CFRP passenger cell; market launch of BMW i8 in May 2014 SGL ACF produces carbon fibers in Moses Lake (USA) which are then converted into composite materials (fabrics) in the second joint venture production site in Wackersdorf (Germany) These fabrics are sold to BMW who manufactures carbon based automotive parts for the BMW i3 and i8. Extension of usage of carbon fibers to existing BMW models such as the new 7 series. October 2009: 90 million combined investment volume for initial capacity of 3kt carbon fiber and corresponding fabric capacity Source: BMW Group May 2014: further combined investment of approx. 145 million to expand carbon fiber capacities up to 9kt BMW guarantees certain minimum purchasing volumes at contractually agreed conditions and provides debt financing Page 32
Equity accounted JVs in automotive. Complement our carbon fiber product offering 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: 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 Page 33
Reporting Segment Corporate & Others Page 34
Reporting Segment: Corporate & Others (C&O). 2014 Group sales C&O sales 2014 C&O 8% Corporate 10% Process Technology 90% Business units + corporate Process Technology (PT) plus Corporate T&I Corporate Costs Key industries served by PT Chemicals Pharmaceuticals Environmental Page 35
Process Technology. Process solution provider for chemical and related industries Product portfolio Systems Syntheses Distillation, purification, concentration, dilution i Absorption, desorption Reactors & converters Steel pickling Equipment Heat exchangers Reactors and internals Quenchers and vessels Pumps and piping i Accessories After sales services Spare parts Maintenance / Repairs Training Chemicals Pharma Metals & Mining Energy Solar Environmental Core industries served Core applications i Hydrochloric acid (HCl) Phosphoric acid (H 3 PO 4 ) Sulfuric acid (H 2 SO 4 ) Hydrofluoric acid (HF) Oxidizing acids Isocyanates Epichlorohydrine (EPC) Vinyl chloride (VCM) Polysilicon Page 36
Process Technology. Business model and 3D growth strategy Engineered process solutions lead to high value leverage on graphite Idea Graphite SiC PTFE Engineering Production Ex. Metals 1 st Dimension: Regional roll-out Value chain Process Solutions: Systems Process Solutions: Equipment 3D growth strategy engine for sustainable profitable growth Leading to higher sales, ROS and ROCE 2 nd Dimension: New products 3 rd Dimension: New industries Page 37
SGL Excellence SGL2015 Business Process Excellence Page 38
SGL Excellence. Drives efficiency and customer focus SGL X is more than savings started in 2002 ongoing and company wide program integral part of our culture continuously questioning the status quo strives for sustainable improvements provides the right mind and toolset to reduce net working capital sustainably important cornerstone in the development of our people empowers our employees with skills and tools: > 190 trained Black Belts > 200 trained Champions > 900 trained Green Belts > majority of employees SIX SIGMA trained Innovation Excellence New ideas and solutions for profitable growth Operational Excellence Continuous improvement of our manufacturing, administrative and supply chain processes Commercial Excellence Sustainable partnerships with our customers to secure our future People Excellence Well educated employees as foundation of our success Page 39
SGL Excellence savings. Since 2002 continuous cost reduction of 335 million in total Annual Net Savings ( m) 55 21 16 15 25 27 28 23 23 24 26 27 25 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Page 40
SGL2015 cost savings program. Three pillars for improving profitability and market positioning Organizational Asset Portfolio Restructuring Restructuring Restructuring Simplify processes and streamline management structures Review all workstreams and identify redundancies Adjust organizations and Corporate and Service Functions Reduce personnel costs and indirect spend Adjust asset base to changes in market demand Optimize i global lproduction network, relocate production Improve capacity utilization Reduce fix costs Use synergies between the Business Units Consolidate sites Carbon fiber business: focus on materials competence Analyze our business portfolio Concentrate portfolio on core activities Investigate options for businesses Page 41
SGL2015. Organizational restructuring A Reducing personnel costs by streamlining corporate and service functions Board of Management Upper Management Middle Management Other Employees -40% -22% -14% -14% Affecting approximately 300 jobs Primarily at management levels B Substantial reduction in indirect spend 1 Cost management 30 million Cost reduction through adjusted guidelines 2 Review of purchasing savings Transparent monitoring i 4 structures and processes 3 Page 42
SGL2015. Asset restructuring Adjusting production network to changed demand and market environment Closure of Canadian facility in Lachute completed end Q1-2014 Reduced 30,000 t graphite electrode capacity 110 jobs cut Discontinuation of our graphite electrode production in Italian facility in Narni Production discontinued in H2-2014 Reduced 30,000 t graphite electrode capacity Dismissal i agreement signed by unions all employment contracts t (~120) terminated t in December 2014 Further projects to optimize production structure Page 43
SGL2015. Portfolio restructuring Focusing our business on core competencies and target return on capital Disposal of rotor blade activities Sale of all shares in SGL Rotec to a strategic investor as per December 31, 2013 Strong cooperation in carbon and glass material supply to continue Agreement on sale of aerostructures business of HITCO in July 2015 Decision to sell HITCO in Q2/2014 triggered reclassification of BU AS to discontinued operations as of June 30, 2014 Decision to terminate JV with Lindner Group in Q1/2015 Next steps Focus on core competence material development and production Page 44
Challenge. Levers to improve ROCE ROCE = EBIT(DA) Capital Employed Lev vers to imp prove ROC CE NEW! Commercial process optimization Improve EBIT(DA): Increase price Increase sales volume Reduce costs (raw materials, indirect spend, ) Reduce Working Capital (short term): Inventory: Receivables: minimize inventory level ONGOING: SGL Excellence, SGL2015 improve customer payment terms Payables: longer payment terms with suppliers NEW! Working capital process optimization Reduce Asset Base (mid term): Limit investments: use existing assets, outsourcing, ONGOING: SGL2015 Asset and portfolio optimization Page 45
Business Process Excellence (BPX). New Groupwide program introduced Target is to streamline and standardize cross-bu processes Utilization of standardized IT solutions (SAP) After implementation phase BPX will become part of SGL Excellence Focus on procurement, supply chain and sales organization Procurement - ongoing procurement optimization project launched under SGL2015 to be integrated and continued. Initial savings already achieved in transportation, packaging, office supplies and maintenance. Target: reduce procurement costs and improve profitability Supply chain improve alignment between all stages of the supply chain, from sales to procurement to production, etc. Target: improve supply chain process to further reduce net working capital Sales organization implementation of uniform CRM system, development of new Groupwide standards and best practices for optimized customer and market approach. Target: generate additional, profitable sales External consultant appointed for outside-in view and for project set up phase Recently implemented: more stringent investment process see next page Page 46
More stringent investment process. We have introduced more discipline in capex spending Budgeting Budget decided on by the BoM (strategy defines investments) Project tplanning Approval Execution & Monitoring Review Professional project manager from Central Engineering BUs remain in charge of Business Case Approval by the BoM Stronger challenging of business assumptions Project execution by Central Engineering Independent project controlling Quarterly Monitoring and review by the BoM Post project audit intensified to capture learnings and evaluate performance Page 47
Technology & Innovation Page 48
Technology & Innovation. Foundation for profitable growth Technology & Innovation: SGL Group s centralized R&D organization Market driven R&D ensures best-in-class support for current and future customers. Industry networks with suppliers and customers are an essential part of our development strategy thus ensuring close contacts to our markets. Global networks with leading universities cover the basic research. Material, process and application know-how is the platform for our development clusters: synthetic graphite, carbon fibers and composites, energy systems, and ceramic materials. Strategic IP management safeguards our products and processes and is a driver of our long term market success. Page 49
Technology & Innovation. Activity areas of T&I in 2014 Raw materials & synthetic graphite development for steel and aluminum industry Reduce graphite electrode consumption in EAF by optimizing i i raw materials, oxidation i resistance and GE-joint. Increase energy efficiency of aluminum production process with improved cathode recipes and advantageous cathode designs. Elongate lifetime of furnace linings by improved microporous carbon-ceramic recipes and advanced lining bloc designs. Strengthen carbon fiber based value chain Operate carbon fiber pilot line and improve carbon fiber production processes. Develop new carbon fiber grades based on own precursor. Develop new composite system based on Thermoplastic matrix as well as SnapCure thermoset resins for automotive applications. i Energy systems Low cost graphite based anode materials for Li-ion batteries. New carbon & graphite based composite anode materials with enhanced energy density for 3 rd generation Li-ion batteries. Develop carbon felt with enhanced surface characteristics and improved electrochemical behavior for stationary energy storage systems such as redox flow batteries. Advanced gas diffusion layers for PEM fuel cells for automotive and stationary applications. Improved dceramic Materials Develop new C/SiC materials and manufacturing methods for complex shaped ceramic structures. Page 50
Strategic Realignment Page 51
September 2014. Transformation of SGL Group guidedby clearly defined targets Create flexibility for restructuring and repositioning with capital increase and required disposal (HITCO, etc.) Stop loss makers and Capex for selective Return on capital is cash drainers by growth opportunities key management restructuring or subject to minimum principle for strategic disposing hurdle rates realignment and future investment Gearing ~ 0.5 Equity ratio > 30% Net debt/ebitda < 25 2.5 Positive net result Positive free cash flow* ROCE 15%** * Excluding disposal proceeds ** ROCE defined as EBITDA/Capital employed Page 52
September 2014. Transformation process defined with cornerstones of strategic realignment 15% ROCE* 2 Improve performance Generate shareholder return 3 Minimum return on capital Right size 1 1) Right size SGL2015 asset and portfolio restructuring 2) Improve performance SGL2015 organizational restructuring SGL Excellence savings BU streamlining Process excellence initiatives 3) Generate shareholder return Define selective growth areas *EBITDA divided by capital employed Capital employed Page 53
Analysis of business model of GMS and CFM. Many similarities GMS/CFM Meaningful exposure to end markets growing above GDP driven by global mega trends High share of customer-specific products, tailored applications and solutions High potential for innovation since products typically serve as key enablers of innovation in target industries and/or provide vital products for their customers value chains In depth knowledge and control of the complete graphite and carbon value chain provides opportunity for product customization i Specific application requirements allow to leverage knowledge and technology as competitive advantage Continued process and cost optimization as well as R&D investments necessary Page 54
Analysis of business model of PP(GE). Market requirements increasingly differ from GMS and CFM PP(GE) Global steel markets in structural oversupply, thus EAF steel development cannot be expected to drive GE demand in near and mid term despite reasonable long term perspectives from increasing scrap availability in China Therefore supply-demand imbalances remain, industry becoming increasingly commoditized with customers focusing predominantly on price Consequently, GE in particular and PP in general have to be managed in a different way than before and also different to GMS/CFM Optimization efforts will have to continue to lower costs, improve processes and thus further increase competitiveness Continued overcapacities and low profitability will trigger the need for industry consolidation, in which we want to participate Page 55
Business models of GMS and CFM share similarities, whereas PP(GE) has become distinctively different Separation will enable the businesses to progress without constraints associated with the plans of the other business GMS/CFM PP(GE) SGL Group has unique strengths and depth of GE/PP is increasingly becoming knowledge to drive forward the development commoditized where the most required skills of GMS and CFM are capacity control, cost effectiveness and In our perception, the majority of the current customer value (quality, supply reliability, etc.) investors of SGL Group are more excited PP needs to adapt its business model to about the innovation i and growth hbusinesses changed market fundamentals and prepare GMS and CFM for participation in potential industry consolidation scenarios Page 56
July 2015: Path forward for SGL Group. Dedicated business models for different market requirements Accelerate growth mode by adapting processes and launching growth initiatives Implement commodity business model and prepare for strategic options Graphite Materials & Systems (GMS) Graphite specialties Process technology Carbon Fibers & Materials (CFM) Carbon fibers Composite materials Performance Products (PP) Graphite electrodes Carbon electrodes Cathodes Furnace linings Page 57 DC3 Streng vertraulich - (henselerch)
Target for GMS and CFM. Profitable organic sales growth of 50% by 2020 1200 1100 1000 900 ~ 1.1 1 billion 800 sales at or 700 above 737 million Moderate organic Accelerated organic min. 15% 600 sales growth and growth phase sales at ROCE process optimization EBITDA 500 8% ROCE EBITDA phase 400 2014 2020 Augmented by potential selective and accretive bolt-on acquisitions to complement our portfolio in terms of region, technology, etc. Page 58
GMS and CFM are the basis of an innovation driven, high growth SGL Group. Summary GMS and CFM materials and solutions enable several of the fastest growing economic trends including energy storage, digitalization, mobility and urbanization. Based on strong positions, GMS and CFM target t to further improve their position in the value chain with particular emphasis on innovation, high value-add products, services and engineered solutions. Until 2020, GMS and CFM together aim to grow sales by 50% through profitable, organic growth potentially augmented by selective and accretive bolt-on acquisitions. EBITDA level is expected to increase significantly, thus exceeding the minimum EBITDA ROCE margin of 15%. Organic growth can be financed by own operating cash flow. Page 59