SGL Carbon SE

Robert Koehler – Chairman and CEO Juergen Muth – CFO

Glen Liddy – J.P. Morgan Cazenove Gunnar Cohrs – Berenberg Bank Sebastian Ubert – UBS Glen Liddy – J.P.

Morgan Cazenove Christian Obst – Baader Bank Alexander Hauenstein – MainFirst Bank

Good afternoon. Hello, thank you for joining us in our half year results.

I’d like to use the time available in a slightly different manner because, I believe you all are aware of our announcement which we made on redefining our guidance on the 27 of June. I suppose you have seen our applications today on the internet on the website or in public.

And therefore I would like to actively spend a bit of time giving you some background as to the unusual development and to the rapid development which may be helpful in understanding what has actually happened. Unusual to the extent that for the first time after ten years of relatively steady development and growth in terms of our traditional carbon and graphite businesses in PP and PMS, we are facing a downturn rather a distinct downturn even in the period of the financial liquidity crisis.

In 2009, we didn’t have any serious problem except for the short-term stoppages which existed. So, after these ten years, which in the case of PMS actually had 2012 has the record year and in PP it was 2008 and had a steep recovery after the financial crisis.

We for the first time face a significant downturn for very different reasons, one is structural and one is cyclical. The PP downturn is more structural in relation to Asia.

In GMS it is more cyclical related to the rapid growth in the new technologies of LED, solar, lithium ION batteries, semiconductor and other new applications in the GS area. That they all came together, at the same time, whilst also our CFC development and commercialization in many areas is still suffering from delays and hiccups, the issue of Boeing, the issue of offshore wind, the issue of industrial programs and developments and last but not least the world is talking about the eminent launch of the i3 BMW.

But this car will come at the earliest in the fourth quarter and we will really see in terms of volume and revenue only in 2014 results for us. So, having had a steady growth of a 10 years being allowing us to finance the build-up of the CFC business, we are now facing in all three areas with the first downturn in those two areas in ten years.

And secondly, the delay of CFC situation which forces us to react relatively quickly and I will come back later on to the restructuring program which we are now in the process of defining. Now, rapid from the point of view that there is this structural issue in graphite electrodes which is essentially related to Asia.

I mean, Europe is in a slight recession as everybody knows. The US is in still somewhat improving a little bit in the second half but the main issue is in Asia.

In Asia, huge overcapacities in China of steel which is essentially BOS iron ore based big steel produced which is at the moment dumped in many markets in Asia which has led to the traditional EAS producers in many Asian countries to reduce their production or even stop them and while supplying for anti-dumping and protection duties. And as a result, for the first time in 10 years, if you eliminate the 2009 as a financial market, the actual demand for EAS steel or EDAF production has been reduced by approximately 4% this year coming mainly from Asia at the moment.

Now, at the same time, the Japanese devalue their currency by approximately 25% and the Japanese rules also are on the upper anyway to use the German expression, use that opportunity to pass the currency advantage into the market. So the combination of a shrinking EAF production relates of our electrode demand in Asia due to the export – the dumping exports of the Chinese coupled with the Japanese trying to regain some markets as a result of the currency situation led into second quarter to a rapid price deterioration for the rest of the year which clearly impacted the order book and the outlook for the second half resulting in the situation we are in.

So that’s a structural part on graphite electrodes Cathodes are in a very clear, very stable according to the original plan going back to last year position. In GMS, the problem is not structural, in GMS it’s cyclical.

It has to do with a boom faced over the last few years in all the new applications and technologies, which has now come to a temporary end with a typical cyclical trough which pipelines being emptied, the demand levels going down since this is a business with high fixed cost absorption the lower volumes are hitting the results very rapidly for these reasons. But in the same time, as we are confident that the calamities, the damage which it has done on the price situation will recover again in graphite electrodes.

As you know, we have already announced that we would like to recover in 2014 some of the lost pricing for our graphite electrodes, the volumes in Asia are beginning to show some improvement in graphite electrodes. So from that point of view, there is recovery in the same way that's cyclical issue in the GS business is likely to come to an end at some stage as well in the course of next year.

Now as cathodes are performing according to plan very stable as expected, et cetera, the same way we have in the PT business which is performing extremely well in the chemical applications and in the environmental protection. Now in CFC, delays are happening, the subjects have already touched upon, the consequences on the profitability for this year are not significant and the main impact is, as I said, from the structural effects on the temporary basis of graphite electrodes and the cyclical effects in the graphite specialties.

So this is little bit of the background as we see the market at the moment and what has happened in this unusual way and in this rapid way. Now that led to the announcement we have made in terms of our correcting our guidance for the year operationally on the EBITDA where we're announcing we will be down by 50% to 60%.

But we also used the opportunity and this is probably a chapter, which needs a bit of explanation of clearing up our books on some of the fair market values and other aspects, which are non-cash relevant and this I would actually like to have my colleague Juergen Muth explaining to you a little bit more in detail.

Good afternoon, good morning. Coming to the CFC situation since the last assets evaluation which we did for the financial statement 2012.

The short and mid-term development of our sales and profitability in all areas of CFC and all three business units have been delayed, postponed into the future. In CFCM, slower than expected economic recovery coupled with existing overcapacities in industrial fiber led to these postponements in rotor blades we are still suffering from strong price pressure very low prices in rotor blades.

And in Aerostructures, our business predominantly with Boeing and Lockheed, we have seen some project shifts. We continue to have high development cost and most of all than expected order entry and volumes for new businesses happened in the first six months and it’s still ongoing.

All these postponements and delays led to a situation that the business plans for the three areas are less favorable than they were before. This resulted in a total 153 million impairment on CFC in total thereof 77.6 million are related to goodwill impairment and 75.6 million are related to asset impairment and write-downs of fixed assets.

This was the extraordinary effect in CFC. In the Tax area, we had additional effects from the decline in the businesses of GS and graphite specialties and graphite electrodes as a consequence of the reduced full year guidance as well as short and mid-term lower earnings.

This led to a write-down of deferred tax assets on tax losses carried forward amounting to €33 million particularly resulting from lower earnings expectations in Germany and the USA where we have the tax losses carried forward predominantly. Additionally, we booked a provision of €36 million for tax audit risks related to a number of ongoing tax audits.

As these tax audits are ongoing it’s a matter of this nature that we cannot comment any further on those things. However, this was the overall effect which we evoked in the half year results.

The regular taxes were only approximately €10 million in the first half year 2013. This is a consequence of the special situation that some tax losses and some legal entities and especially the equity accounted investments cannot be considered for tax purposes so as a consequence, from those entities which earn money, we had to show a €10 million tax effect on the normal business and overall €69 million extraordinary tax effects in the first half year 2013.

With this explanation, I may give back to Robert Koehler. Thank you.

Okay, I thought it might be worthwhile under the given circumstances to go into these details, so that you know exactly where these non-cash correction impairments are coming from. Now as to the outlook, I touched already some of that before.

PP it’s continuing to show some mild improvements in volumes in the second half. The market seems to be at (inaudible).

However, the severe pricing situation which I have described earlier on is clearly impacting the second half of the year and will be reflected in the margins of graphite electrodes and PP as that cathodes are performing fully in line with expectations. In GMS as mentioned before, plant protection and PP is performing in line with the all the plans similar to the record year 2012.

The graphite specialty markets end-markets showing very little signs of recovery in the second half into the long production lead times et cetera. So that means that there will be no earnings recovery also in the second half.

However, for the year 2014 we are a bit more optimistic that we have seen or will see to trough in the second half. As a result, the EBITDA margin in 2013 will be below our target minimum of 14%.

Now in carbon fiber and composites in the fully consolidated area, the carbon fiber and composite materials side and HITCO will be impacted by current overcapacities and project delays. Boeing 787sends greetings in due contrast rotor blades is starting to improve the losses have shrunk considerably due to some new orders and higher productivity on land turbines and wind energy.

Very poor offshore situation. Overall, CFC is expected to improve the losses somewhat over 2012.

As far as our equity-consolidated activities and CFCs are concern to be at the joint venture with BMW and with regard to the launch of the i3. We are beginning to ramp up production for deliveries in the fourth quarter and in the New Year.

And also, Brembo SGL and Benteler-SGL are showing clear improvements. Now for the Group, we will therefore expect sales slightly below 2012 due to the reduced PP and GMS expectation.

The group EBITDA before extraordinary effects will be approximately as we already communicated, 50% to 60% below the comparable this year EBITDA of $240 million. Despite the substantially lower EBITDA our free cash flow has improved dramatically from 172 million to negative 46 million.

Partly this is due to the acquisition of last year but we are seeing also a considerable improvement this year on the net working capital. Our gearing has worsened a little bit for the time being as a result of this to 0.65.

However, we are still keeping our target of 0.5 on the mid-term with the planned restructuring measures in mind which I will come to in a later minute. CapEx for the year as a whole is now limited at €100 million and so from that point of view, I think we are in line with what has been communicated in the last few weeks as a result of this particular development.

Now, a few words on our planned cost saving program. We are in an advanced process of defining a substantial cost saving program which we are expecting to be able to communicate publicly by the end of September.

Now this cost saving program is based on our structure as it existed in 2012 and it will be related to some rapid restructuring. And the reason why we are in a position to react so rapidly is that many of the items have been ready in the drawers.

I perhaps can remind you that when we built Malaysia, we said, we will see how the market develops and depending on the market development, we may actually close one or two high cost plants in Europe and North America. As the situation is developing now – expected to ramp up to full graphite electrode production next year.

We will accelerate in the current climate and market situation as described. We will accelerate the closure of one or two high cost plants in Europe and in North America relocating the production to our existing nine sites in the PP areas hence creating cost synergies as more flexibility and how we want to run it.

Now, in GMS, similarly we are going through as you may remember a major investment in our isostatic graphite situation in Germany and in China. Additionally, we have been investing into machining operations in low-cost countries like Poland, China or India and as with the buildup of the key graphite capability of isostatic in – and in China in Germany and in China, we are now in a position to relocate and consider relocating machining activity which are fairly labor-intensive into lower cost countries as I said, China, Poland and India.

So this is also was part of our investment program. In CFC, we would be pushing ahead with converting acrylic fiber lines in to precursor lines in order to become fully integrated and independent in the 24K and 50K fiber production which will provide a backup or an alternative sourcing to our currently joint venture with Mitsubishi Rayon in Japan, and it will reduce our cost substantially.

So this is also part of the program here. Furthermore, some of you will remember that we have always said the finished component and fabricated parts production is not our core business.

We come from the material science side. So, typical examples are already Brembo SGL and Benteler-SGL, making these components and fabricated parts.

And we believe we are now in a position where we can also put hit goal for our aircraft components and rotor blades manufacturing into joint ventures and take them out of the fully consolidated picture. So this – or also steps which will be taken in the whole restructuring project.

Now, with that streamlining of our activities, we also need to look at the organizational structure streamline business units streamline corporate functions, bundle activities and reduced in the SG&A a significant amount. So all of these items had been in the drawers ready for being activated as in how our investments and progresses are being made and dependent on the market situation.

This is why we can react so quickly and have a situation where the program as it’s going to be finalized in the next few weeks. We’ll have sort of layout that most of the significant cost savings will be materialized by the end of 2014.

So that the bulk of it can become essentially, P&L effective in 2015 already. But the final details we are currently in the process of defining, and we will communicate probably by at the end of September when everybody is being and every project is being designed so that we can give very concrete information data on the situation.

Overall, the company despite this situation at the moment is in terms of balance sheet still in a healthy position with an equity ratio of 37%, the gearing whilst have investments from our target of 0.5 plus minus to .65, but we still have 200 million undrawn syndicated facilities. We have repaid our convertible of 145 million out of existing cash.

We still have a cash position of almost 150 million and the free cash flow as you have seen and as I already mentioned has improved dramatically from negative 172 from last year to currently negative 46 and would have, if the situation as described in the EBITDA on a good path to be actually free cash flow positive. So, from that point of view the overall figures and the overall structure is looking still quite solid and we are hopeful that the situation in 2014 will show already signs of the benefit of our restructuring program on the one hand and hopefully the markets are beginning to turn out of the cyclical trough – structural situation.

Thank for listening and we are now ready to take your questions.

Yes, good afternoon everybody. Thank you very much for taking my questions.

First question would be concerning goodwill in the relevant CFC business areas, it is how so much goodwill basically is left and second would be on financial covenants. If you take your net debt, you had financial net debt by the end of June and also take in your average of your guidance – EBITDA guidance for the full year; I calculate net debt to EBITDA of 4.8 times, so it’s pretty high.

That’s a kind of affecting anything of your financial covenants you have at the moment? And then on – finally basically on your result of your equity business could you give us some guidance what you kind of expect as a result in your P&L for this year and particularly also for next year?

Thank you very much.

Hello, hi Cohrs, Juergen Muth here. The goodwill remaining in our books on CFC is round about €22 million.

Concerning that your question concerning covenants, our loan is not drawn at all and so far we had no problems with this. We have smaller Malaysian loans where we’ll settle the situation investigate and settle the situation soon.

And at equity business, after some of our weaker first half year in the equity results, we will see improvement in the second half of this year as a consequence we will have a significantly better equity result than the full year of last year. And I think, at the moment, this is all I can say to the questions.

And maybe if I follow-up, I mean, last year obviously you had equity business and impairment – so if I take this out, I have to kind of a figure of around minus €10 million. Is it right, so €10 million would be kind of your comparable figure and do you expect this year, this moving with all this minus €10 million?

To say it correctly, we have now at the half year a €10 million round about negative and equity results and we expect an improvement in the second half year, however it will not be positive the second half year.

Okay, thank you very much.

Yes, gentlemen, the question from my side is regarding the potential restructuring program SGL 2015, do you have any kind of indication how much restructuring charges might hit your P&L this and next year and how much you can assume to be non-cash and cash out? That’s my first question and then the second question is with regards to some units like the rotor blade unit and HITCO that you put those entities into kind of the joint venture structure, what should we think of, whether it be 50-50 that you still keep control of those assets or will you even participate in joint ventures where you get a minority stake only.

Thank you.

Very good questions, but unfortunately squarely. As I said the restructuring program is in the process of being fully agreed, fully aligned in the top management talking to workers’ council, talking to the people et cetera, et cetera defining the projects in detail as I indicated we will be able to communicate on this by the end of September.

We have exactly those details you are asking. So I have to ask you for a little bit of patience bearing in mind that we have been ramping up this fairly rapidly between end of June and now.

So that’s the first place and the same applies also for your question related to HITCO and Rotec. I mean, we are now in a situation where we believe the position of HITCO in terms of its forward business for Boeing and some other customers using such a position that it is now of great interest to a tier-1 supplier where he possibly fits much better into the portfolio and with us we are prepared to participate.

But what the exact these sales are, it depends on the concrete issue and the same applies for Rotec. I mean, we have been developing on the ground for making sure we can pull carbon fiber, or push carbon fiber instead of glass fiber and develop the technology for large rotor plates et cetera.

All of that is now; ends and we are now in the situation where this technology including hybrid structures is probably fitting much better into tier-1 or an OEM in the wind energy business. So, again a little bit early hopefully in the quarter for the second half can be exact on the situation.

What I can say is, on the program we will be obviously working all these details into our budgeting process in the second half for the budget 2014 and following. So all of these figures will be reflected as and when we come out with our plans for the following years.

And it indicated we hope the bulk of the cost savings will already materialize in 2015 and therefore the program is called SGL2015.

Okay, thank you.

Afternoon, the pricing pressure that you’ve seen in TP and GMS, can you give us an idea of where it’s more severe and the scale of the pricing pressure? Secondly, the low cost manufacturers in the electrodes business are they gaining a bit of market share helped by their aggressive pricing and is it just restricted to the smaller electrodes, or are they beginning to enter the high energy electrode market?

Thank you.

Glen, the most severe as I try to outline, is in Asia. It has to do with the Asian producers, the Japanese and their currency.

Indians and also some Chinese producers now they’ve – and the fact that the EAF production is as I said to you 4% down as a result of Chinese POS still dumping in Asia. Now this is a very short-term development.

It is not, it has not led to any real change in market share positions, people have defended their positions. The only thing that price has gone down and I think particularly for the second half in what is the approximate number?

High single-digit.

High single-digit percentage, Glen.

Thank you.

So that’s the situation but I sincerely hope that everybody is seeing the damage which is being inflicted by that. There are signs already that the electric steel production for next year will be recovering as these are pretty unusual situations here with the dumping and the Chinese situation.

And, therefore we are hopeful that our price increase for next year will provide some measure of improvement. Now, what was your second question?

Whether the, low cost manufacturers are entering the higher energy electrode market.

No, I think from that point of view, we feel quite comfortable how we are set up. I don’t think there is any changes – structural changes in that score.

Are customers beginning to buy cheap electrodes, because they are under cost pressures, so it’s affecting your mix as well as your headline prices?

No.

No, okay.

So, rather temporary short-term situation with dumped Chinese POS deal outside China and the consequence is that some of the local EAF producers out there for reducing their production or even stopping production altogether until this phenomenon has disappeared and there are signs that it is beginning to disappear because the Chinese are incurring huge, very huge losses.

Okay and for GMS also, and you’ve got on a, global basis a lot of excess capacity for isostatic graphite? And how long do you think it would take for that to be eroded so you get back to normal prices?

Or is it more a question of just end-market demand returning to normal levels.

It is predominantly market demand. The pricing issue is not so severe there.

It is really a reduction in demand, because the pipeline is full. The equipment has been ordered, customers have covered their demands and their stocks and their inventories and this goes now into a typical cyclical adjustment.

And since this business has a much higher fixed cost structure than, say, by the electrodes or fiber production, lower volumes are impacting the fixed cost absorption dramatically and then having an over proportional effect on earnings. Now this is a temporary cycle.

Because the markets for solar, for LED for lithium ion batteries for semiconductor, et cetera the typical cyclical businesses will continue to grow again. The question is when will it start?

Will it be beginning next year, will it be mid-next year.

Okay then, thank you very much.

You are welcome.

Yes, hello. First of all, you still have high net working capital at this point of decline of activity some prices.

So why haven’t we’ve seen more relief from net working capital and what can we expect going forward? Then the – as a fact, that you said, okay you cannot say much more concerning the tax audit, it was €36 million and still the high number.

How reliable is that for the second half? And then again on the portfolio measures, you mentioned Rotec and HITCO going into a joint venture.

But I am right, remember it’s right, you talked about the complex management of joint ventures often in the past. Now bringing Rotec and HITCI also into a joint venture, doesn’t it make the entire structure or the entire management even more complex?

That’s the one question and the second one on that issue is, do you have some kind of a framework of multiples or cash do you like to achieve when you are bringing all parts of Rotec or HITCO or even some other obsolete parts of SGS? And in that kind of framework, you are talking about how many parts of SGL are in the framework or under this cash to spin-off to put in a joint venture to sell or whatever.

Is it only Rotec and HITCO or is there five or ten sub-divisions in this kind of portfolio? Thank you.

Let me answer the HITCO and Rotec and general questions on cash multiples and framework et cetera. HITCO and Rotec are the only assets being considered to being joint ventured.

No, we don’t have any clear cash multiples in mind. At the moment, this depends on who the partner is, and what is the common strategy.

Thirdly, management complexity we feel is going to be reduced, why, I mean, these fabricated parts business which are getting very close to Tier-1 structure is not our core business. We do not have the management capability for that.

This is far better in the hands of other tier ones or OEMs depending on who the partner will be and we are looking towards them to take the potential entrepreneurial leadership even if we maintain perhaps a 50% share or whatever the situation is. So that’s in a nutshell the picture on Rotec and HTCO and what our current thinking is.

Now the other aspects I would like to leave to you Juergen Muth.

Yeah, hello, Obst. Concerning net working capital, I agree partly and partly I disagree in absolute figures, net working capital is still high.

It is on the level of year-end 2012. However, following the normal seasonal pattern, we normally had a huge increase until mid of the year.

So relatively we have already an improvement. For the rest of the year, we expect a significant decline in net working capital, improving the free cash flow in the second half compared to the first half, significantly too.

So, we are aware of our potential which we have in the net working capital and we are working on it. On our tax question, the €36 million have been accrued.

For all the tax audits which we have at the moment around the world in times of debt crisis, more and more and states that’s do click tax audit perhaps to get some cash in. So we have accrued a significant amount for all those things which we see at the horizon at the moment.

However this should be sufficient or more than sufficient for the second half of this year. We don’t expect any additional increase in those accruals from today’s point of view.

I think the other questions have been answered by Robert Koehler already or have we forgotten anything?

The time of these KPIs concerning the portfolio management measures going forward, because I ask the 5% that I am re-understand what you like to do going forward to streamline the company, I don’t really understand the connection between the current weakness of performance products and GMS. And then to say, okay, now it’s the right time also to move out HITCO and Rotec and we talked a lot about on the HITCO and the possible joint venture going forward.

And also in the past, and why isn’t all of these kind of connection in a time when the underlying, maybe the underlying situation of these parts are not that favorable to get the best price for a part of that?

I don’t necessarily give you an assumption here Christian. The HITCO situation has been on our book actually been delayed in its evolution because of the Boeing delays.

Now, we have developed now in certain areas a very substantial relationship for certain components and fabricated parts going forward. And this is clearly then an element which we will find its way into calculating a potential value of it so.

And being a value to a potential partner or Tier-1 or even OEM producer. So this has nothing to do with the downturn, which we are going through for different reason structure PP Asia as I described in cyclical in the GMS.

This is now the further evolution and buildup of the HITCO which as you have said yourself, we have indicated for a while that we are going to do that and it will take, it is the same thing, making rotor blades is not our core business. However, we wanted to make sure that the carbon fiber technology be it in hybrid structure, be it in sole carbon fiber bases and whatever finds its way into rotor blades.

This technology we have developed and we have an interesting asset now which we potentially could sell, we will see whether the current wind market which is not as buoyant as the aircraft market, commercial aircraft. And so is going to go in a boom phase, yeah, and hopefully Airbus and Boeing and others who start getting their planes out and then creating revenue streams in many areas of supply as of – in the wind energy, it’s a different situation.

As you know, we are lacking a government policy on wind energy be it in the net speed, in storage speed and how we deal with subsidies and the whole question of the (inaudible) et cetera, et cetera. So from that point of view, a little bit critical to few.

But something will have to happen post German elections in these fields. And therefore we are preparing the case, because this is not our core business but we have something interesting to offer here.

Okay, maybe a last question on – also on HITCO, we have seen some write-downs concerning HITCO and the contracts with Boeing before and is there a reliable chance that we see a positive effect because you are saying you are now close to a tier-1 supplier which in the end means that you are close to an agreement with Boeing, going forward. Can we see some positive effect, valuation effect going forward when it comes to HITCO?

In terms of making a prediction, this is too early, but clearly we have orders in hand. We have a very good relationship and as and how the huge stockpile of 787s and other things are being actually manufactured, we or HITCO should benefit from that.

But in the meantime, as you heard, our goodwill has now been written down to a very, very low figure. We use this opportunity of being getting our operational business to really clean slate to a large extent.

So from that point of view, we are in a reasonable position.

Specific to the write-offs of €55.2 million on the Boeing 787 projects and maybe there is something which will reverse?

Yeah, on POC there cannot happen a recovery. This is not flexible and we have written off six assets.

These six assets potentially can be reevaluated at higher value in the case that the business environment improves and that the overall business plan is better and producing more cash flow. Goodwill and POC cannot be reversed.

I don’t mean this kind of POC, but if you get an additional project for Boeing and maybe we see then a positive effect. Thank you.

Hi, this is Sebastian Ubert from UBS again. One question, can you just remind me what was the reason that you have taken on Rotec fully into your books in 2012?

I mean, that was a joint venture until then just to get the reason what was the reason to take that into the books in full now to joint venture it again?

Can you hear me okay, because – your question is, this was always planned. We both – the partner here was a shipbuilding company, Abeking & Rasmussen, yeah.

This was not a strategic supplier or participant in the wind energy. He had the land and he developed some early ideas and he wanted to stay with it.

So we step-by-step bought in and had the option to buy how to be essentially 100% independent in terms of strategic direction which will not, when you have a partner in there who is not strategic to involve, but has purely a financial interest. Then you very often can run into difficulties on the strategy versus financial interest.

So, this was a clear plan anyway with the idea once we have developed the technology and strategies for our carbon fiber and composites involvement here to then find a partner.

Okay, thank you.

That’s different issues.

Good afternoon. Thanks for taking my question.

Now coming back to PP, regarding the electrode pricing and how is this and the competitive situation evolves in July, August compared to May, June, did I understand you right that there is a slight improvement on what or is that wrong? Second question also to PP, how should we think about your input cost development over the quarters and maybe over into 2014, is it possible…

What was your last question again, sorry, didn’t hear you.

The first one or the second one?

The second one.

In PP, how should we think about the impact of your input cost development over the coming quarters, maybe even into the next year, is it possible that you get some small cost release into Q4 already? And last question a quick one, could you please provide some more color about your plans with the Samsung JV.

Thank you.

Well, let me answer the last one. The Samsung JV is a marketing and sales joint venture to develop and supply products into the Samsung Group in all sorts of areas of applications and technology.

So this is at a very early stage. The strategic background is that Samsung has a major Korean company did not want to be dependent on the Japanese.

This is our reading of the situation and we are very pleased that that shows us a partner in this field. But it is essentially at the moment a framework to supply Samsung’s growing demand in many areas of fiber and composite applications.

Second as far as prices are concerned, we hope that they have talks about, obviously are effecting the second half as I said. The slight improvement is not on pricing and for the second half the slight improvement has to do with the restocking or the volume picking up in some Asian markets and a little bit in the US and there also cautious signs that maybe the Western Europe is over.

But this is all very early day on volume not on price. Price is set for the second half and has resulted in the calamity or in the damage which it did.

Hopefully everybody as I said will see the consequences and we have taken the step to – already say very clearly that we have to recover some of this damage next year and we’ll a strong attitude towards that. In terms of raw material input costs, can’t give you any indication at this moment in time for next year this is too early.

Not on up for Q3 and maybe in Q4.

No, they are relatively stable in this end. There is not a great deal of difference.

Okay, thank you. That helps.

Well, ladies and gentlemen, thank you for your time. As I repeat, go back to my initial statement.

This is a very unusual compilation of circumstances that happen very rapidly for totally different reasons in the three areas. We believe that they are temporary that these are cycles which can happen after ten years of almost unabated stable growth and development.

I remind you of the peak performance of PP not so long ago and the top performance, the record results seen as last year and delay of CFC for all the reasons which we have discussed. But our balance sheet looks quite strong as I indicated; our free cash flow is improving further dramatically.

So from that point of view, we are confident that with our restructuring program which we had in part ready in the doors following our substantial investments over the last few years reminding you Malaysia or Isostatic graphite or other investment in carbon fibers Moses Lake and for the supply of BMW that we will benefit from that and we will adjust our structure to the changed market circumstances. So from that point of view, we are fairly confident looking forward, 2014 will be execution and implementation hopefully, in 2015 therefore the program will be called SGL2015.

We will reap the benefit. Thank you for listening and if you have any further questions, our colleagues Raj Roychowdhury and Jürgen Reck obviously be available to answer any further detailed questions.

Thank you for your interest.