CommerzbankGerman Investment Seminar
Robert J. Koehler, CEONew York
12 January 2011
2
Agenda
• Carbon: our material
• Introduction to our businesses
• Growth opportunities resulting from fundamental trends – examples
• Summary and outlook
Carbon:Our material
4
Synthetic Carbon & Graphite
– resistance to heat– electrically conductive– resistance to corrosion– environmentally
compatible
Natural Graphite
– conducts heat– dense– energy storing
Carbon Fiber
– light– strong– stiff
Our MaterialWhat is Carbon ?
6C12,01
5
No material is lighter …
1.62.7
7.9
Steel Aluminum CFRP
Our MaterialHas Strategic Competitive Advantages
… nor stronger and stiffer
Specific Stiffness (100 km)
Other ceramics would break … … or fail at temperatures > 1.500 °C
SpecificStiffness
(km)
100 2000
Density(kg/l)
500
200
100
400
300
0
AramidFiber
SiC
Carb
on F
iber
Steel
GlasFiber
Al-alloy
Introduction to our businesses
7
SGL GroupBusiness structure
Base Materials Advanced Materials
Performance Products(PP)
Graphite Materials & Systems (GMS)
Carbon Fibers & Composites (CFC)
• Graphite & Carbon Electrodes (GCE)
• Cathodes & Furnace Linings (CFL)
• Graphite Specialties (GS)• Process Technology (PT)• New Markets (NM)
• Carbon Fibers & Composite Materials (CF & CM)
• Composite Components (CC)
Technology and Innovation (T&I)
Six Sigma (SGL Excellence)
8
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
Steel Making – An Electric Arc Furnace (EAF)
BM AM
CFCGMSPP
9
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 efficiency gains GE demand growth only 1 – 2% p.a.
• GE critical to EAF furnace efficiency but only ~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)
BM 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
10
Performance ProductsCathodes for the aluminum industry
Source: SGL Group
Cathodes
4
4
4
1
3
2
Special glue
Cathode blocks
Ramming pastes
Sidewallblocks
30 – 70 cm
30 –50 cm
100 – 350 cm
Aluminum Smelter
BM AM
CFCGMSPP
11
Performance ProductsCathodes for the aluminum industry
• Aluminum demand driven by- 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 shelf life)- New smelter construction leads to higher relining
demand long term
BM AM
CFCGMSPP
Source: SGL Estimate, CRU, King, IWF
47 %
53 %
24 26 28 30 32 3438 39
3641 43 45 47 48 51 53
56 59 6265
6871
75
10
20
30
40
50
60
70
80
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
e
2011
e
2012
e
2013
e
2014
e
2015
e
2016
e
2017
e
2018
e
2019
e
2020
e
2021
e
2022
e
2023
e
in M
io M
T pe
r ann
um
Rest of World Near Middle East China
2010/2011 Al Capacity
2020: Pre-crisis 64 mmt
2020: Post-crisis 65 mmt
Investments needed now to meet Al Demand growth 2012 ff
Source: SGL Estimate, CRU, King, IWF
47 %
53 %
24 26 28 30 32 3438 39
3641 43 45 47 48 51 53
56 59 6265
6871
75
10
20
30
40
50
60
70
80
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
e
2011
e
2012
e
2013
e
2014
e
2015
e
2016
e
2017
e
2018
e
2019
e
2020
e
2021
e
2022
e
2023
e
in M
io M
T pe
r ann
um
Rest of World Near Middle East China
2010/2011 Al Capacity2010/2011 Al Capacity
2020: Pre-crisis 64 mmt
2020: Post-crisis 65 mmt
2020: Pre-crisis 64 mmt
2020: Post-crisis 65 mmt
Investments needed now to meet Al Demand growth 2012 ff
Investments needed now to meet Al Demand growth 2012 ff
- Existing smelters upgrading- amorphous graphitized cathodes- only three established producers of graphitized cathodes- SGL Group largest producer worldwide
• Cathodes essential for aluminum smelting but representing only 1% of production costs for 1t aluminum
12
Graphite Materials & SystemsMajor customer industries and market shares 2009
25%15%Energy: Batteries & Nuclear
30%29%Chemicals
3%
4%
5%
6%
9%
16%
% of TotalGMS Sales 2009
Global MarketShare 2009
15%Automotive
15%High-temperature Processes
15%Tool Manufacturing
20%Metallurgy
20%Semiconductor
25%Energy: Solar
Source: SGL Group‘s own estimates
BM AM
CFCGMSPP
13
Graphite Materials & SystemsInnovation driving new product portfolio
Examples:• Graphite for Li-Ion batteries• Crucibles and molds for solar production
and LEDs• Consumables for semicon production• High purity expanded graphite for
thermal management (electronics, climate) and environmental needs
• Specialty graphite for nuclear power(PBMR)
• Graphites for particle filter for diesel engines and exhaust systems
GMS 2009 sales: € 365 m
1/3 of sales based on new products introduced over the last 4 years
1/3new
2/3established
BM AM
CFCGMSPP
14
Carbon Fibers & CompositesComplete Carbon Fiber Value Chain
PANPrecursor CF Fabrics Preforms
Prepregs CFRP CFRC C/SiCStages
Applica-tions
–Wind–Industrial
applications–Automobile–Aerospace–Defense–Sports
–Aircraft/ F1 Brakes
–High temperature furnaces
–Chemical industry
–Semi-conductor
–Car Brakes–Armoring
Techno-logies
EngineeringCompetence
Polymerchemicals
High temp.technology
Textiletechnology
Produc-tion
MaterialsSGL Group core competences
ComponentsJV with OEM / Tier-I-supplier
BM AM
CFCGMSPP
15
Carbon Fibers & CompositesGlobal Carbon Fiber Supplier Structure
Established Carbon fiber producers
North America AsiaEurope
SGL Group: only integrated European producer
BM AM
CFCGMSPP
16
3531
34
41
48
58
66
73
2008 2009 2010 2011 2012 2013 2014 2015
21 19 20 23 2734
40476
4 57
8
10
11
13
65
66
7
7
7
7
2008 2009 2010 2011 2012 2013 2014 2015
2831
3642
33
51
58
67
Updated forecast
Forecast 2009Sports
Aerospace
[in thousand mt p.a.]
Growth delayed 2-3 years due to crisis, yet long-term growth drivers are intact Demand reduction between 2010 and 2009 esp. due to Aerospace and Wind
Carbon Fibers & CompositesAnnual Carbon Fiber Consumption by Application
Industrial
Source: SGL Group market research
BM AM
CFCGMSPP
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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– > 600 Green Belts– > 100 Black Belts
Ensuring the FutureSGL Excellence – enables productivity and growth
InnovationExcellence
CommercialExcellence
OperationalExcellence
PeopleExcellence
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Ensuring the FutureSGL Excellence savings
Since 2002 continuous cost reduction of €210 million in total
55
2116 15
25 27 2823*
2002 2003 2004 2005 2006 2007 2008 2009
Annual Net Savings (€m)*excluding Brakes business
Growth opportunities resulting from fundamental trends
- Examples -
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Fundamental Trends Opportunities for SGL
• Scarcity of resources
• Climate change(CO2 reduction)
• Energy efficiency
• Mobility
• Digital lifestyle
• UrbanizationLightweight construction
Alternative Energies
Energy efficiency
Growth opportunities resulting from fundamental trends
21
Our Carbon-based Products Offer Sustainable Solutionstowards less CO2
€1.226 m*
€736 m*
67%
22%
11% Light Weight
Alt. Energies
EnergyEfficiency
Scrap Recycling
Wind
Aerospace60% of
Group SalesAutomotive
Solar
Batteries
Cooling Systems
Automotive
*Based on 2009 sales
2222
Infrastructure build up in emerging economies has only just begun …
Growing demand for resources due to ongoing industrializationrequires carbon and graphite for the production of steel and aluminum
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 World Steel in Figures 2009 Source: Alcoa analysis
2008 Aluminum (kg/capita)2008 Finished Steel (kg/capita)
597 582
502452 441
316281 247
160125 120
58 44
124
250319
0
100
200
300
400
500
600
700
Japa
n
Italy
Ger
man
y
Can
ada
Spai
n
Chi
na
USA
Turk
ey
Rus
sia
Fran
ce
Mex
ico
Sout
h Af
rica
Braz
il
Arge
ntin
a
Oth
er A
sia
Indi
a
1715
2 24
810
0
5
10
15
20
25
Nor
thAm
eric
a
Euro
pe
Chi
na
Rus
sia
Braz
il
Asia
w/o
Chi
na
Oth
er
23
Carbon Fiber Composites• Reduce weight
• Increase safety
• Lower emissions and conserve resources
1. JV with BMW Group for production of carbon fibers and fabrics
2. JV with Benteler Automobiltechnikfor development of lightweight components from carbon fiber composites
3. JV with Brembofor carbon ceramic brake discs
Growth MarketsExample: Lightweight Construction for Automotive
24
SGL Group / BMW Group Joint Venture
PrecursorOtake, Japan
Carbon FibersMoses Lake, USA
FabricsWackersdorf, D
CFRP-Comp.Landshut, D
BMW MCVLeipzig, D
SGL Automotive Carbon FibersJV w/Mitsubishi BMW
MegacityVehicle
25
SGL Group / BMW Group Joint VentureNew carbon fiber plant in Washington State (USA)
• Most cost efficient carbon fiber plant globally
• $100 million cap ex in first investment stage for 3.000t p.a. carbon fiber production
• 80 new jobs in first investment stage
• Groundbreaking on 7 July 2010
• Competitive energy prices – maximum 1/3 of German prices
• Environmentally friendly energy from hydropower
• Favorable infrastructure and logistics
26
Growth MarketsExample: Lightweight Construction for Aerospace
Components from carbon fiber composites
• substitute traditional materials (Aluminum)
• share of carbon composites increases to 50% and more in new aircraft generations
• subsidiary Hitco is leading Tier-II-supplier for aerospace industry
• Hitco supplies commercial aircraft programs (e.g. Boeing 767 and 787 „Dreamliner“) aswell as military programs (e.g. F-35 „Joint Strike Fighter“)
27
Growth MarketsExample: Energy Efficiency - Graphite for High Performance Batteries
Graphite for lithium ion batteries allows
• reduction of CO2 emission for hybrid vehicles • no CO2 emission for electrical vehicles • storage of energy from renewable energy sources
28
Growth MarketsExample: Energy Efficiency - Expanded Natural Graphite for Cooling Systems
Expanded Natural Graphite embedded in cooling systems for• an optimal air conditioning• low energy consumption• efficient energy storage
29
Growth MarketsExample: Alternative Energies - Carbon Fibers and Composites for Wind Energy
Carbon Fibers
• enable big offshorewindparks
• increase wind turbineperformance
30
Growth MarketsExample: Alternative Energies - Graphite and CFRC for solar applications
Graphite and carbon fiber reinforced carbon (CFRC)
• enable the production of products for the solar industry
• are indispensable for thesemiconductor industry
31
Global growth potential for carbon fiber andgraphite related green technologies
2010 2015 CAGR
Carbon Fibers (kt) 34 73 16%
Photovoltaic (GWp) 7 24 28%
Acc. Wind Turbine Installations (GW) 186 407 17%
Li-ion Batteries (Mio cells, only 3c) 3800 6000 10%
Share of Composites in Airplanes (%) 1 (B 747) ~50 (B 787) >50 (A 350)
GW: Gigawatt = 109 Watt; GWp:Gigawatt peak; kt: 1000 tonsSource: Public available surveys, client information and own estimates
To summarize…
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Chemical
• Sealing materials• Equipment for HCl
synthesis• Heat exchangers
Iron & Steel
• Graphite electrodesfor electric steel
• Furnace linings made from carbon and graphite
Established business in basic industries
New businessin growth markets
• High purity fine grain graphite for polysilicon and mono crystal pulling
Solar
Wind
• Carbon fibers, prepregs and rotor blades for wind turbines
Automotive
• Ceramic brake discs• Carbon fiber fabrics for
composite materials
Air Conditioning
• Air conditioning systems made from expanded graphite
Aircraft
• Structural components made from carbon fiber composite materials
e-Mobility
• Graphite anode material for lithium-ion batteries
Portfolio
Emerging countriesinfrastructure build up
Industrialized marketstechnology step changes
34
Present Future
Portfolio:Core Areas for Growth
Carbon/Graphite Natural graphite Carbon FibersC/SiC
AircraftsA380, A350, B787
Wind
Car brakes
LED
Automotivecomponents
CNG tanks
NuclearHTR
CFCdamage
Heat recoveryAir conditioning
LIB for CCCmarketsScrap-
recycling
Solar
DefenseF 35 Project i
Energy efficiency
AlternativeEnergies
LightweightConstruction
BatteriesMaterials for
HEV/EV
LIB: Li-Ion-Batteries; CFC: chlorofluorocarbon; HEV/EV (Hybrid) electric vehicles; HTR: high temperature reactors; CNG: compressed natural gas
35
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, undrawn (maturity 2012)
SGL Group 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: 0.50
• Total liquidity: €275 million
SGL Group has solid balance sheet ratios and cash on hand at end of September 2010
Followed by a supplemental debt instrument in June 2009
• € 190 million Convertible Bond at 3.5%, conversion price of € 29.39 (maturity 2016)
36
Outlook2010 will show a moderate but better than expected improvement over 2009
2010
• Sales growth of ~10% vs. 2009
• EBIT growth of almost 20% vs. 2009 to up to €130 million(compared to guidance of flat EBIT at beginning of 2010)
• Net financial costs higher than in 2009 (including results from at equity companies)
• Key KPI: Gearing level to remain around 0.5 based on today‘s portfolio
• Gearing ~ 0.5 defines capex level
• Capex up to 10% lower than 2009
2011
• 40-50% improvement possible in 2011 compared to original 2010 guidance of an EBIT close to the 2009 (recurring) level of €110 million
• Earnings improvement driven by GMS and CFC• Capex approx. flat compared to 2009 – exact level defined by gearing target of ~ 0.5
37
Mid term Minimum Targets Over the Cycle Unchanged …… Once normality returns after transitional post crisis years
To deliver profitable growth!
Group • Sales growth: 5 – 10% p.a. CAGR organic• ROS: > 12%
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
Thank you for your attention !
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
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