SGL Carbon SE

Yes. Thank you very much, Jamie.

Good afternoon and welcome to our today's conference call on the results of the full year 2020. Thank you very much for joining us today.

Here with me today is our CFO, Thomas Dippold. He will also support me in the Q&A after our presentation.

So, please, go to next slide. Next slide, please.

Yes. Can you see the next slide?

Okay, next slide, please. Internet seems to be a little bit slow today.

Okay. And this is a slide I would like to start with.

And this concludes our business environment. Of course, we were affected by COVID.

And our sales went down by 19%. But we are pretty much active in China and in the semiconductor segment.

And this safeguarded our results in 2020. Also, our carbon fiber segment, which goes into the wind industry, went pretty well and it's still going pretty well.

So our highlights, of course, at SGL Carbon, we were also affected by COVID. But we had strict anti COVID measures, and currently only eight active infection cases are known to us.

And in total, we only had two people which had an infection cost during the work time. So our anti-corona measures worked well and we didn't close down any of our operations during the COVID time so far.

Thomas and me changed the organization and we will allude on this later on in the presentation. And we also started a restructuring plan.

And I would say, we are ahead of our plan right now. Our financials, we lost 15% on the top line, and we had an over proportional loss on EBITDA.

But our cash flow, our free cash flow improved very nicely. Our net financial debt is unchanged, despite larger payment of €62 million to BMW for a share of JV which we did.

We did an impairment of the carbon fiber business of €107 million last year and our guidance for next year, we will grow in a mid single digit percentage range, our EBITDA will grow by between 10% and 30%. And the net result we expect between minus €20 million and breakeven.

Next slide please. So this slide shows the development of our share.

And Thomas and me, we are pretty satisfied with developments. I joined the company 1st of June, last year.

Thomas joined SGL, 1st of October. And see -- you can see, our strong story.

We worked on a restructuring and transformation program of the company. And we went public end of October last year, as you can see a first jump in the share price, in October.

Then we had Christmas. We had New Year.

And we went beginning of January to several conferences and explained our transformation story in more detail. And you can see another hike off the share price beginning of January.

And we reached share price of around €7, which is more than double of what we achieved. And I have to admit today, it went a little bit down.

This might be profit taking. But this performance was more than enough to join the SDAX on Monday this week.

SGL went back into the SDAX. And Thomas me we see this, as a big success after half a year of restructuring.

Next slide, please. Thomas is now continuing and will explain you the full year 2020 results.

Thomas, please go ahead.

Thank you. Could you please jump to slide number seven?

There you can see our key figures for 2020. As Thorsten already mentioned, our sales dropped by 50% from formerly €1,087,000,000 to €919 billion.

Now in 2020, this is a dropped by €167 million. Two that contributed the Carbon Fibers & Materials, the CFM business unit contributed about 9%, but they recovered the second half of the year.

So it's only 9% for them. But mostly it was our GMS business unit with Graphite Materials & Systems, they lost 20% overall in the top line, half of this was expected because we lost, as you know, and if you follow our conference regulatory, then you know that we also expected a drop in the so called a GAM business, is a Graphite anode material.

This is something we expected and the other half contributed the COVID pandemic. Due to several countermeasures, we made it that our EBIT before non-recurring items could save on the level of last year and could even be slightly increased by 4%.

However, our operating EBIT, which includes non-recurring items and one off items, this dropped dramatically to 20 million overall, this is exactly what we forecasted that our operating EBIT still remains slightly positive this reflects 2% our margin. Next slide please.

On slide number eight, you see the transition bridge of our various results components. On the -- starting from the left, they will see our net result which is minus 132 million.

This is at the upper end of our guidance, which we gave or adjusted end of October, where we said, net result shall be in a range of minus €130 million to minus €150 million, we ended up at the upper end of that. EBIT reported is at minus €94 million and the EBIT before non-recurring effects is €50 million between those two figures is on the one hand side the purchase price allocation, which is more or less a technical effect.

We have some provisioning and cost for our consultancy firm who helps us in the restructuring program is €25 million. We have some other restructuring effects, some minor ones, and we have a huge impairment loss, which we announced via the ad hoc message in October when we wrote down the assets and the goodwill of the ATF [ph] business, which is Moses Lake and Microsoft business, which we formally hedge in the joint venture with BMW.

Between the EBIT before non-recurring item and the operating items, there you see all the positive countermeasures, which are -- well, offset the result to a large extent and the impact, which is on the top-line. On the one hand side, we have made a termination agreement with Showa Denko, they wanted to opt out earlier than agreed -- formally agreed upon from our plans in Meitingen, and therefore, they paid a certain compensation for the breakup of the contract.

On the other hand, we have some land sale, we have some land, which we don't use for our operations is something, which we sold. We have some one-off personal items, which went in the right direction like reduction of extra time hours.

And we had some insurance compensation from damages from former years, which also contributors to that. So overall, our operating EBIT ended up a €20 million, which is slightly positive exactly also what we announced end of October.

Next slide please. On slide number 9, you again see that our net results for the last two years, they simply look terrible.

In 2020, you see minus €132 million, largely impacted by the restructuring provision plus the impairment of the assets as just mentioned, and also 2019 in the minus €90 million, also about €75 million due to restructuring -- another restructuring impairment, which we had also in the carbon fiber business. The good thing in 2020 performance is definitely our free cash flow.

We achieved a free cash flow, a positive free cash flow for the first time in seven years. And not just a tiny one, but with €74 million, I think it's a remarkable figure and what contributed to that free cash flow; on the one hand side, there are several one-off effects like the Showa Denko agreement and the land sale.

But on the other side, also, the strict networking capital Management, we were very strict and cautious in our CapEx and invested far less than our depreciation rate was, and of course, and this contributed even the most, we were very conscious on our spending money. And the savings also contributed largely to the €74 million.

So again, this is the first positive free cash flow in seven years. And this also made it possible that we could pay the purchase price, the deferred purchase price for Moses Lake, for the former to adventure with BMW, there was a deferred payment agreed upon that we paid end of 2020 and we could pay down this €52 million in time full and nothing more happened, which you can also see on our net debt figure, it even got slightly down, and we could reduce our net debt at least by €2 million compared to last year.

Next slide, please. And I'm coming to the business units, how they developed, our business unit graphite materials and system.

As I said at the very beginning, graphite sales of 20%, we could offset this impact from the topline to the bottom line, not to -- not at all. So, our EBIT before non recurring items almost half and our operating EBIT even go down by 60% in that result, numerous countermeasures and strict cost discipline effects, otherwise drop of 20% in this very capital intensive business unit would have hit the bottom line even harder.

So, what we saw is that our semiconductor business could offset the topline quite a bit. This was the only business and the only market segment we had in this business unit, which grew even in double digits last year.

And this is going to continue also in this year. Same with our China overall business, they are the guarantors that this topline of GMS also will rise again in 2021.

Next slide please and coming to slide number 11 to the business unit composites fiber and materials. They overcame the market drop and really achieved a remarkable turnaround.

So despite the sales going down by 9% from €432 million to €390 million, they made it that the EBIT and also the operating EBIT really improved very strongly. How did it come?

We have lower material costs due to the overall recession and due to the COVID pandemic. On the other hand, we have far better production processes and the idle two lines for textiles; we converted another line into precursor and might happen that we also could industrialize our precursor to a large extent and also lower energy costs that contribute to that.

So, in the end, we really achieved operative turnaround there. And regarding the capacity, which we have, we are now at full steam and all capacities are fully loaded, because we shifted our capacities into the wind business, where we really penetrated the market and gained a large market share versus the downturn which we saw in automotive and also aerospace plus industry.

In the wind business, which is normally also not so margin rich business compared to automotive aerospace, we could manage it, that we could increase the prices and all these effects contributed to the bottom line development as I just described. Coming to the next slide, number 12.

There you can see our business units corporate where which is everything else is incorporated as a kind of a shared service. And the shared services is also what is reflected in the sales, because some of the shared services, we could charge to our, well, colleagues or former colleagues, as we call it in Showa Denko, plus our joint venture, which is also in matching with the BSCCB.

Our EBIT, which was planned and also in prior year at minus €29 million, in the EBIT before non recurring items, could be improved to minus 11. What is the reason for that?

We have, of course, the Showa Denko payment, which I just mentioned and also the land sale contributes to that improvement. If you look at their operating EBIT, there you see the improvement overall, so all the countermeasures and savings that we have on our natural space.

On slide 13, the next slide there you see our complete P&L. And maybe just, I described all the results as EBIT figures, maybe just as a summary.

There you can see in the middle about €30 million one-off effects, about €144 million of non-recurring items and also a financing result improved compared to last year by almost 10 million due to lower interest rates And in 2019, we also have the cost for refinancing in prior year. Coming to slide number 14, there you see our balance sheet ratios.

Due to the huge loss that we saw as our net result with minus €132 million also our equity ratio got hit quite substantially. Our equity ratio went down from 27.8% to 17.5%.

This is a clear contribution from the profit. Also the lower interest rate affected our pensions and they also got offset in the equity plus also some currencies effect contributions there.

However, our total liquidity even improved despite the -- over €50 million payment to be BMW by €4 million as you can see in the next -- on the next slide here in total liquidity. And as I just mentioned, our net financial debt went down by €2 million.

Coming to the cash flow on slide number 15, the next slide. There you can see our cash flow from operating activities amounted €104 million.

Again what contributed to that our working capital management where we could gain compared to prior year about €35 million and also the Showa Denko paid off for that and our cash flow from investing activities there you see also that they were quite reluctant in spending money. We invested only €55 million compared to €95 million the year before and the depreciation was about €70 million for 2020.

So again, there you see our free cash flow is €74 million, the first free cash positive free cash flow in seven years in SGL last history. And after presenting the figures of the 2020 annual report in a nutshell to you now, I would like to hand over to Torsten who's guiding you through the restructuring program.

Thanks Thomas. Please go to -- go onto slide 17.

Okay. So, slide 17 is about our restructuring program as Thomas and we came in, we saw it is necessary to transform this company.

I have to admit the people are excellent and very technology driven, but not business focus. So, this is why we started cultural change initiatives at the very beginning of our start in this company.

And what you can see on this slide, the guidelines which we defined and they are business first, keep it simple, deliver on promises and act fast, think difference. So this means, that we focus on projects where we make money with, that we focus on projects with short return on investments, and that we think twice when we spend money.

And this poster is in every meeting room, every employee in SGL knows it. And we really want to transform the culture in this company.

And this is always the case at the very beginning of a restructuring program. Next slide, please.

As I came into this company, we renegotiated the covenants of syn loan to protect our liquidity in the year 2020. And to be honest, after now, half a year later, it was not necessary.

Today, our liquidity is at the very comfortable level. We closed the year 2020 at a liquidity level of 140 million and an undrawn syn loan.

But, Thomas and me, acted with immediate actions. We impose a hiring freeze, and if a department in SGL wants to hire someone, either in production or in administration, they need Board approval.

We installed something, which we call Spend Control Tower. This is about purchase orders.

Every purchase order above €5,000 of value has to pass this Spend Control Tower. And third is CapEx discipline.

We have an investment committee, and we challenge every new investments within SGL Carbon, in terms of return on invest -- in terms of predictability and the risk. And I think these three immediate measures really helped us to improve significantly our liquidity position.

So this is what we did as a immediate action. Next slide 15 please.

On slide 15, you can see how we transformed or changed the organization of our company. The old set up we had two business units depicted on the left side.

And we had countries and we had sites which were managed individually. What we did, we slice the company in a different way.

Now we have on the right hand side four business units, which we call companies, in the company. We integrated all the units, the R&D Labs from central innovation, the source central innovation also the central analytics were dissolved and allocated to the new business units.

The business units own the sites where they produce. This means we have companies in the company focused on profitability within own P&L statements.

And we also changed our SDI scheme, which is now 100% focused on EBITDA pre-exceptionals of the respective business units. So, this is what we did with the business units.

On the bottom part of the slide, you can see the corporate functions. As I came in, we had 20 corporate functions.

We reduce the headcount in the corporate functions by 20% to 30%, and also reduce the number of corporate functions to 10. So, we cut them by a factor of two and reduce administration costs.

Next slide, please. Now talking about the restructuring program and the figures.

We have over 700 individual initiatives. And all together are our transformation program, every initiative is owned by initiative owner and he signs fully responsible for this initiative.

We completed already by end of 2020, 70 -- 37% of all the initiatives. When we go to a headcount reduction on the bottom, we said that we want to reduce the headcount by more than 500 FTE By end of 2020, we realized already 53% of the headcount reduction, but talking today, we already initiated 85% of the reduction.

What is the difference between initiated and realized? Initiated are a contracts, which were signed by the employees going to leave later.

Realized means, the employee already left as a company. So you can see our initiatives are very much front end loaded.

And we already did quite of -- of the project already today. For the recurring savings, which is the middle part of this slide, we realized 40 millions of our total recurring EBITDA savings, 56 are initiated and we materialized in the next month.

So, we are pretty satisfied and are ahead of plan and today we can confirm that we will deliver at least what you can see here at least 100 million recurring EBITDA savings, and at least 500 people reduce in our headcount. Next slide, please.

And now I would like to hand over again to Thomas for our outlook.

Yes. Coming to the outlook, please go to the next slide.

For outlook, because what I think at least in the various talks I addressed with you guys over the last couple of months since I joined. So, we know exactly that is somehow confused you to certain extent with our EBIT before non-recurring and operative EBIT.

And we want to get rid of this to EBIT definitions, we just closed the year 2020 and stick to the old format not to confuse you completely, but for the reporting for 2021 onwards, we would like to go to EBIT or EBITDA pre-exceptionals. And these exceptionals are now in anticipated phase, we defined you and explain you what we define as an exceptional.

There's on the one hand side, a, one of depreciation, which is due to impairments, purchase price allocations or any depreciation on asset held for sale, all our restructuring expenses because we define them as non-recurring, any be it positive or negative proceeds from land of sale and buildings. So, we also honest with you and also show our positive impact just in case we do something in this direction.

Same with insurance claims, which are not counterbalanced in the same year and other material one-off impacts, which we cannot foresee, but we clearly define them just in case they happen. So this will be our key figure, how we manage also our business unit heads which we installed and they have in the STI and the bonus agreements.

They get measured clearly on our EBITDA pre-exceptionals result and this is how we run the company and hope to scale successfully.

And next slide, please. So what's Thomas explained you is that we give you transparency on exceptionals and recurring business.

This new structure, which we are going to report you from today onwards, will also give you transparency. In 2020, we had two business units, Graphite Materials & Systems, which we call GMS and we are going to split it in two separate business units, Graphite Solutions around 500 million top-lines and Process Technology around 100 million top-line.

Same we do with business unit Carbon Fiber & Materials - CFM. We are going to split it to two business units Carbon Fibers, which contains Carbon Fiber Chain and Composite Solutions, which contains our composites business.

The business units are -- the business models are distinct. The customer base is very homogeneous and we have almost no customer overlap between the business units, which you can see here.

And as I said, we allocated all assets and all production sites to the business units. From now on, we are going to report top-line and also EBITDA pre-exceptionals for the four business units and this will give you much more transparency than before.

Thomas, please go.

On the next slide you see our outlook for our newly defined business unit Graphite Solutions. There you see also for comparison, the relevant sales figure for 2019.

In 2019 Graphite Solution on a standalone basis would have achieved €516 million in sales. They dropped in 2020 to 408.

And we predict a slight increase for 2021, which we expect. How is that?

The business is slight cyclical. Though we started into 2020 a Graphite Solutions and they almost has nothing when corona more or less started in the first couple of months, but in the second half of the year, then they also got impacted because of the long lead times that this business has.

They suffered in the second half of the year. Only semiconductor could offset quite a bit because this is really a strong booming business, especially, in China, but our industrial business is still weak, but we expect a recovery due to the course of 2021.

EBITDA got due to the high fixed costs and the high margin business, then over proportionally impacted. And we expect that EBITDApre, which is now the new key figure, which we report here will increase significantly in 2021 because overall cost effects will be become effective.

We got the battery funding, which we describe a little bit on the next slide. And of course we have huge growth opportunities, which we also fuel in like Graphite anode materials for lithium-ion batteries for the immobility, but also the gas diffusion layers for the fuel cell business.

Okay, next slide, please. And this slide I will explain a little bit deeper.

And if you look at the picture on the right-hand side, what you can see here? This is graphite powder.

And it's a very special graphite powder. We call it graphite anode material.

And, I think, you will followed the press. There are several battery projects for electron mobility announced in Europe.

In total, there are 25 announcements. And last week on the Power Day of Volkswagen first one in announced alone in Europe six new battery plans for EV.

And in total, they announced 600 to 700 gigawatts of capacity until 2030. And you need in each battery, you have an anode and a cathode which is plus and minus in the battery.

And for the anode, you need graphite in those materials. It's impossible to build a battery without this powder, which you see on the right hand side.

In total, if the 60 to 700 gigawatts in Europe materialize, you need 300,000 to 400,000 tons of this material. And we own two plants, one in Poland and one in shed where we can start right now with the production of this material.

And there's almost no competition. Of course, there are some competitors which announced palpitation projects, but there is no real backward integration for this whole industry.

And now, I come to the project itself. So the European Union wants to have a standalone set up for the EV batteries in Europe.

This means battery production and also the backwards integration. And they started in IPCEI project which means Important Project of Common European Interest.

That means the European Union is supporting and fully integrated value chain for batteries. And this includes, graphite anode material.

And we SGL was selected to get a €43 million funding of this IPCEI grant to set up a production chain or improve R&D and also our knowledge on recycling for exactly this powder, which you see on this slide. Until 2028, we receive this €43 millions.

This sits pretty well, because we opened one and a half years ago in making our own battery lab and our knowledge about EV batteries is already pretty deep. And I have to say to you now later on we show you the midterm planning, everything which I eluded in the last five minutes is not included in our midterm planning.

So this is an upside, not including into figures. You will see later on.

And, I hand back to Thomas.

Thanks for the explanation, Torsten. Coming to the next business unit on the next slide our process technology.

The process technology is more or less a cop out of the formerly GMS unit which GS and PT were together. Our process technology, you can match in like a plant construction.

They are working for chemical and petrochemical companies. And they produce graphite equipment like heat exchanger, but also synthesis systems.

And due to the slow recovery of our overall economy, all the chemical companies have it capacity and not -- none of them, or hardly anybody of them is really investing in new plants. They only do refurbishment and maintenance and this is the business, we are also currently in.

But there's no real growth. And this is also the reason why we as an outlook for this business, you want to put the sales and also the EBITDA pre on a stable term.

We expect the recovery in 2020 and 2021 will be for this person here is a kind of a transition here. We have a new management in place.

And they are dealing with a restructuring and the overall setup and the global footprint of this business unit. And they will come up stronger than ever before.

On the next slide, you see our business unit, carbon fiber. This is the former CMS -- CFM, sorry for that, CFM business unit, and because it’s more or less not in the middle, but we cut it halfway.

And the larger portion is the carbon fiber business, which is roughly €300 million. So you see all the sales in 2019 amounted €341 million and it dropped in 2020 to €304 million.

And they also got a stable outlook. We have a new business management in place.

And we expect the business to be rather flat due to the drop that we saw in aerospace, but also automotive, and the huge market share that we could win in our wind business. We are now on a conservative base regarding the top line, we expect it to be rather flat maybe a little bit growing, but the overall definition will be stable.

And we work on further optimization with a new management. For example, our precursor Lavradio and protocol in our plant there can be further industrialized, and the ramp up of our own production can be can be speeded up.

And then we don't need to buy so many other precursors from competitors and the market overall. So in looking to the EBITDApre figure and the bottom line results, we expect, even on top of the big improvement that made compared to last year, another slight increase in our EBITDApre.

And last but not least of the next slide, you see the outlook for our Business Unit Composite Solutions, which is the second half and the lower part of the value chain in this former CFM business unit. They amount for €91 million sales in 2019.

And they dropped only a little bit in 2020 on just 2%. And there we expect a significant increase in the top line and the turnaround on the EBITDA level.

So why is that? We have one -- well, first of all, we also have a new management in place there.

We expect that opportunities turnaround there. And that we want to contract and they should guide us into a serial production of a battery cases and battery enclosures for eTruck.

So we have the components in Ried/Ort, which is in Austria, and then we ship it to Arkadelphia in the United States where we assemble everything, and then we can ship it to our customers. So we see a certain top line growth, which is a significant increase.

And the bottom line on the EBITDApre level should be slightly positive, but compared to the minus €5 million, which we had in 2020. This will be a positive figure for the first time since many years in this business unit.

So on the next slide, you see our overall outlook. So coming from 2020 with 990 -- €919 million, we expect the top line growth, up to €970 million, which is up to 5% growth which we can offer.

This is just the organic thing and the rebound from the market. We don't expect a V-shaped recovery.

But as Torsten said, we only promise what we really can deliver. And our history in over promising is quite long.

And this is something we would like to turnaround on. We rather focus for next year.

Of course, we take every chance in the market and that’s something where we can grow profitably. We take it, but this is our top line outlook.

Our EBITDApre outlook is however far more aggressive. We expect that our EBITDApre levels shall be in a range of €100 million to €120 million in 2021.

And this should reflect all our efforts in ramping up our bottom line, generating our own cash flow and really be far more profitable than what we've seen in the past. Next slide please.

Yes. In the next few weeks, we are going to announce the Q1 figures for you and this is just a heads up for you guys.

What you see -- you can see here on the picture our graphite tubes and they contain powerful rods for nuclear power plants, and we supply this exclusively to one customer for power plants in UK and the company operating this power plant decided to discontinue the operation of the power plants by end of this year. So, we settled in agreement with our customers and we will have the one-off in March of this year in the low double-digit mEUR area and the majority will go into the Q1 earnings.

So, adjust your models because we will have to compensation due to lower sales and lower earnings in the next quarter of this year. This is a one-off effect, which will be compensated in the next three quarters, just a heads up for you now and we will have a pretty good March.

Next slide please. Please go to slide 32.

We are now coming to our mid-term planning and I would like to start with our roadmap on slide 32. You can see the years 2020, 2021 and up to 2025 and this is a timeframe we are going to plan as you can see our three step transformation approach.

First step, this year and ending next year, it’s a transformation. We are focusing on cost reduction and are focusing on profitability and cash.

And also I talked a little bit about changing the culture and we are pretty much ahead of what we planned. And we will advance beginning of next year to the second phase.

We are already busy with an analysis of our production sites. For a company of our size just a €1 billion, we are operating 31 production sites and we are analyzing the profitability, the position in the value chain of every of our sites and we will come up with the planning of our production footprint in the year 2022.

We are also focusing on selective organic investments and our cash position is -- our liquidity position is pretty comfortable. So we can afford investments with low return on investments, this will be to selectively.

And we will also come up in 2022 with ESG commitments, SGL has not done much in this field, but we are currently working on this and we are prepared for the year 2022. The third phase, which we consider if our performance improved significantly, we are going into large investments.

For example, we are planning to invest into a graphite notes materials plant as a Greenfield investment. And we will do other large investments.

This we will do when the performance is improved and it's not included in our five years plan. You have seen the four business units.

We can do every portfolio effect you can imagine. We can do acquisition which will go into one of the four baskets or we can divest.

We did all the preparation, but I've emphasized we are not planning right now to divest anything, but we did the slicing in four different buckets and every strategic option is possible. Next slide please.

This is our five year's planning and you can see from 2019, the COVID-19 dropped to €919 million. Thomas already gave us the guidance.

We will grow in the single-digits range to an area between €920 million and €970 million and we will have a compounded growth of 6% until 2025 to a level of €1.2 billion to €1.3 billion. And I have to emphasize, this is only based on our current portfolio and only contains organic growth.

It is not including a Greenfield investment into graphite node material and no other large project. What is most important for me is bottom row, you can see our EBITDApre margin in 2020 was on the level of 10%, but it included some one-time effect.

We will go to 11% to 12% this year only based on our operator business, we are going to increase our margin to 15% to 18% until 2025. So, next slide please.

I think -- sorry for the delay. This shows you our key performance indicators for our mid-term planning.

We are planning with ROCE of more than 10%. Our leverage ROCE is planned smaller than 2.5%.

You have seen the sales growth is expected to be single-digits round 6% per year. Our consolidated net result will be positive.

We plan from this year onwards with a positive free cash flow and the EBITDApre margin on sales will be more than 15%. So, this concludes our prepared remarks.

Operator, would you please initiate the Q&A session?

Yes. Good afternoon gentlemen.

First question would refer to your midterm guidance you just outlined, wonder why the margin target has a relatively wide span of three, four percentage points 15% to 18%. What is the reason behind this?

And the second question would be you mentioned I think already that rising material prices played also a roll and hurt you as the material supplier last year and I think CFM. What is the perspective for the current year going forward?

Are you yourself affected by rising material prices? And can you pass on these without any delay to your customers or should we be prepared to see a certain burden for the operating performance from the side?

Thank you.

Yes, Mr. Schramm, Hello, this is Thomas Dippold trying to answer your question.

The first question, if I'm not mistaken, I couldn't understand you 100%. Well, but if I understand it correctly, your question was about the EBITDA pre margin a percent of sales regarding our target for 2025, where we have a range of 15% to 18%.

What we can say that we at least want to achieve 15% and the maximum in our scenarios would be 18% depending on the mix of our businesses. You know that our businesses have quite different margin range, especially GS business being very profitable and having a high margin, where as our CS business is just trying to develop into that business.

And it depends on the mix that we have into 2025 this is why we gave this range. Personally, we say 15% is something we promise for sure, 18% is possible and this is what we're heading for.

This is how I would answer the question knowing exactly that for you as an analyst, this gives you quite a range in your Excel spreadsheets sorry for that.

Yes. And so maybe Thomas to add to your explanation, we are active for example, in the gas diffusion layer, which is a core element in the fuel cell and we have one very large customer for this who supplies 50% of the cars with fuel cells worldwide.

And you know, this is a technology which is at the very beginning and there is a pessimistic planning, a base case planning and then optimistic. And as we are active in this business with a gas diffusion layer, this can surprise us nicely, or this technology cannot develop.

This is always the case if you work on the forefront of technology, which we do. So Richard, you also asked a question according to raw materials, and yes, it's true, we saw increasing raw materials for example, acrylonitrile is one important raw material, which we buy for the carbon fiber chain, which doubled in the last six months.

Fortunately, most of our contracts are either on a spot basis that means we can directly increase the prices to the customers, which are true for our textile business. All other contracts are containing raw material clauses, where the prices are based on the raw material and with a certain delay we can forward some of the increases.

And this is already included in the guidance which Thomas gave on the raw materials. I hope this answers your questions.

Yes, thank you. And just maybe a follow up on this material issue.

We have seen that some materials have signs of scarcity and in some areas we see real supply chain issues. I mean, you are not affected quite obviously by this chip supply issue, at least, not directly.

But I have heard that, for example, in the chemicals industry, also some materials are becoming problematic, and that supply becomes difficult. Do you see any volume problems here?

Or is this not the case in your business at the moment?

Yes. First of all, a clear no.

We have no supply shortage which forced us to postpone deliveries to our customers or forced us to reduce production. And we did a pretty lucky punch.

At the beginning of this year, we have a big tank for acrylonitrile, which secures our supply chain and we fully loaded our tank and have quite good security of supply right now, despite the biggest supplier of this raw material is INEOS, which is in force majeure, but it's rumored that they lift the force majeure by end of this month. So to answer your question, no effect on our business so far.

Okay. Thank you very much.

Hello, it’s Andrew Simons from Stifel. Two, if I may.

The first is on these battery anode material. Could you elaborate a little bit more on what the entry barriers are?

So why is it that you think you can get most of this business in Europe? Technically, is it capacity wise or got other reasons?

That's the first question. And second one, on windmill, you outlined, that's a strong gross business, but on the other hand, not that favorable on margin.

Maybe you can highlight a little bit what the competitive situation for this business is.

Okay. Mr.

Andrew, thank you very much for this question. Very good question.

I start with graphite anode material. So, first of all, the graphite is a mixture of natural graphite and synthetic graphite and SGL Carbon is active in the field of synthetic graphite.

If you distinguish two types of batteries, low cost batteries and high class batteries, the high class batteries have a 100% share of synthetic graphite. So, if you buy a Porsche, for example, 100% synthetic graphite will be in.

We -- in our planning, we took the gigawatts and for the 700 gigawatt, you need three to 400 kilotons of synthetic graphite and this already contains a split of 70 to 30, which we expected for the mix of synthetic and natural graphite. And I can tell you, it's not easy.

We installed our battery technology centre in Meitingen, and we are able to produce our own batteries. That means we take our graphite anode material from production.

We put it on copper foil and build our own batteries to several 100 charging and discharging sessions with it. And sometimes it's not logical and you need years to build that business.

We are in this business for more than five years, because before we started to enter the graphite anode material ourselves, we had one big Japanese customer and we produce graphite bricks, which we supply to the Japanese customer. He put this to a milling process coated it and sold it to the battery industry.

Now, we are moving one step forward. We produce battery anode materials ourselves.

So that means our experience is five to six years. We have the plants.

They are there and we have the capacity. Our capacity -- our competitors announce several projects, but they have publication equipments or very limited experience.

I see ourselves really in a full position and we send samples to 25 projects. I think 80% to 90% received already the samples from our production plants in Poland.

So, I hope this answers your question on the battery anodes materials and the trend is going to artificial graphite not to natural. The wind mill story, yes, what you said that the margin is lower than, for example, in our automotive business, it’s totally right what you said.

For the Carbon Fibers, our main business right now is a BMW i3 and it goes to the outer body panels for the i3. But, unfortunately BMW decided to discontinue this project in the next -- within the next year.

So, we have the capacity of Carbon Fibers and we have to utilize the capacity. And in outlet, which is growing very nicely, is the wind energy segment.

Of course, the margin is lower, but the business of wind energy is growing nicely. For the onshore installations, we see a 2% compounded annual growth, for offshore we see 14% until one fall, until end of the decade.

And as a good is which pushes the business into carbon -- in the carbon fiber direction is that this solution, which is used today, as the blades of a windmill are today reinforced with less fiber. This will not work from next year onwards, because the blades are getting longer and longer.

This year with a sea blaze of length of 90 meters, 200 meters end of the decade or 2027, we will see blades of a length of 150 meters, and it's only possible to build them with Carbon Fiber reinforcement. So the market will grow and we see a very healthy market and also an option to increase prices.

Hi, team, thanks for taking my questions. Just two for me please.

One on the carbon fiber division. You mentioned now that it’s almost fully utilized, if I understood correctly, but you’ve obviously got a mix just towards lower margin wind business as the i3 is phased out, have you expect to -- to increase the margin then in the carbon fiber division?

Am I missing something? Or how does that increase over time in your forecast?

Yes, this is -- we will increase the prices as much as we can, but the main effects will come from the backwards integration Benjamin. Today, we are buying the precursor molecule, which is then converted to carbon fiber and two of our plants in Moses Lake in US and Muir of Ord’s in the UK.

And we acquired a precursor production plant, which is a peak for the carbon fiber plants in Portugal, Lavradio and step by step, we are going to replace the externally purchased precursor fiber and you make the money with the precursor and not with the carbonization step. So by replacing the externally purchased precursor, we are going to increase the margin and this is planned in our five years planning, only a fraction is the price increase, as the front end.

I hope Benjamin, this answered your question?

Yes, that's helpful. Thanks.

So do you also have a timeline on how many lines and by when you expect to convert the whole precursor plant in Portugal?

Yes, in Portugal, we have -- Portugal, it’s a former textile fiber productions and we currently have eight lines, which can produce, two of the eight lines we converted to precursor lines, and six are still busy in the textile fiber segments. And really this neat experience and we are sampling with improved precursor fiber, our -- our carbon fiber production line in Muir of Ord’s every four weeks and we are making large improvements.

When we have figured out how to produce a perfect precursor fiber for us, we are going to convert more of the fiber lines and we'll increase the captive use of it. This might take up to 24 months I would say.

Okay, okay, and my next question would be on CapEx to get to your current mid-term guidance, do you have a rough estimate, which you can provide and perhaps the split between maintenance and the growth?

Yes, this is something we can maybe give you a little bit more flavor on that. In fact, this is also something what we wrote in our annual report.

Our investments in general, on the level of or depreciation, that's what we can clearly say, we have idle capacity as you know, if you see the drop that we -- that we saw from -- coming from roughly 1.1 million, down to 919, where we are now. This means in many of the businesses we have idle capacity.

On the other hand, as Torsten and myself, we pointed out during this investors call. We take a far closer look on investments than maybe it has been done in the years before.

This is not to blame anybody and things in the rear-view mirror appear always little bit, you know, you can judge easier when you have the facts rather than when you have to decide beforehand. But we make sure that we are not investing into fancy stuff in 5 or 10 years.

And this is also the reason why we cancelled our central innovation and allocated all the resources to the business units to make sure that they're far more closer to the market that we have a far more business driven approaches rather than ground-breaking research which pays-off in 20 years time. So we invest selectively in growth, especially in the battery business.

This is where we reserve a lot of our CapEx budget for and the rest is maintenance, but not to forget, we of course invest in all the EFC efforts which are necessary. And this is something we covered in 2021.

So hopefully also including in Q1 and Q2, you will see a lot more than that. We take this very seriously.

We are high energy driven company. There's a lot to gain for us.

We do a lot, but we don't talk about so far, this is something we want to change. This is a clear commitment from our side and we also invest in energy saving investments.

And we will explain to you within the next call. Please be a little bit patient with us on that.

Okay, thank you. And my last one maybe just on the larger CapEx bodies which you mentioned they're not included, then in any of the guidance.

Does that -- how do you think about the timing of those? I mean, presumably if something -- if an opportunity and dam, for example came through sooner, would you pursue a larger project already, quicker than your kind of roadmap suggests by ’22 to ’23 or will it really only be post when you've achieved these other steps?

First, maybe I have to take a little bit deeper in. If we have to one order of one battery project, this needs a full plant capacity.

One graphite nodes plant capacity is around 20,000 tons. And as I said, end of ’20 -- end of this decade some 300 to 400 kilo tons are needed.

So we need in Europe several of this graphite node material at plants. We need around two years to build a new one.

But the good messages we have two; one in Sacz and one in Poland, and they are ready to produce. So we can start Brownfields approach and don't have to invest from scratch.

This is why investment will come late. The investment costs are plus/minus around €200 million for one in Greenfield approach.

You need two years to build it up. And I think we are going to see the first turn over at the end of our planning period, minus two years for a building up everything.

Yes. I hope your questions answered.

But it's difficult for us to cooperate already in the budget. And in our plan.

This is why we just said well, what we show to you is something we can promise on. This is the something thing we can deliver and this is a promise from us.

Everything that comes on top is something we can just you know describe as an optional thing we have the employees and the capacities, we have the knowledge, and we apparently dedicated by the EU, the Bundesland Republic Deutschland [ph], and all the Federal State of Bavaria. And the garages are €43 million as a sole graphite anode material producer in Europe to research and to develop this material in order to have a sustainable European supply chain.

So I mean, it's up to us, it's really up to us to make it happen. And once now after we receive this grant and the subsidies, we go full steam.

But we hope to surprise you on that. This is all what we can say.

And we promise to you as soon as we have signed the first take or pay contract, we will come back to the markets and announce it, but right now it's not included in our plan.

Okay. Thank you.

Yes, thank you. Just a quick one on this European innovation project you just mentioned.

I was just curious that how the bookkeeping for this funding you receive does this mean, you will book every year, kind of, €5 million income in your P&L from the side, is that correct expectation?

I can explain. Unfortunately, they don't just transfer the money and say just spend it wisely.

But the thing is, of course, this is tax money in the end, and of course they also want to have a confirmation that you use money in a proper manner. So that means, we have a subsidy grade, or quote of ratios, ratio is right word of 95%.

That means for every expense, which we can prove that we have undertaken on this special research or development, we get reimbursed by 95%. And if it comes to investments, then we get the depreciation of 95% once the investment is taken.

This is how it is set up. And -- but still a very, very comfortable range.

So in the end, we need to invest if you make use of the full €43 million until 2028, you need to invest only €3 million or €2.5 million of our own money and we get a subsidy of all the rest. This is a huge boost of all the developments what I can tell you.

And Richard this shows how high importance level of graphite anode material is for the European Union. And if you have read the press, Volkswagen is going to discontinue parts of their supplies from China for several reasons.

The European Union is going to set up an integrated supply chain and they selected us for the graphite anodes business and we get this funding, we are really proud to have achieved this.

Okay, understand. And the timeline, you say until 2028, it's a bit up to you how fast this is proceeding or do you know, it depends on your partners here?

Yes, it depends on the partners. So if Volkswagen opens that way, then they need graphite anodes materials.

Just look at their announcements and I can tell you we talked to all of them. Most of the projects are currently delayed even Tesla, you can read it in the press and to our estimate the big business will start in 2024, 2025.

Yes, but this depends on the big battery projects, they have to buy, if they want to produce.

Okay. Thank you.

Yes. Please go to the next slide.

Number?

A slide number 36 please. Slide 36, please.

Excellent.

So thank you very much for the good questions. And I want to summarize and give you the key takeaways which are not better.

I think first, Corona year 2020 was very much impacted by restructuring with this impairment of €107 million. And we also paid our 49% stake in the JV with the BMW.

That means, we cleaned the ship in 2020. Seconds, we had to protect the liquidity in the year 2020.

And we did some one-offs effects. This year we are not continuing with one-offs.

We are improving the underlying business. And we'll at least deliver the same EBITDA as in last year, even little bit more.

The transformation project and this is point three is on track. Today we confirmed 100 million.

We confirmed the reduction of personnel and the savings confirmed. We are very well on track and even ahead of our planning.

We talked also in the Q&A session a little bit about the IPCEI grant of €43 million. We are one of the major European graphite nodes players.

And the business will grow because 25 batteries are announced in Europe. And last but not least, point five, we have a solid liquidity which is different than half a year ago.

Our liquidity level end of last year was €140 million today it's even a little bit higher. We still have an undrawn syn-loan of €175 million and no maturity of financial instruments, in the next 1.5 years.

So our position is sound. Our mid-term plan which we presented is on the conservative side.

And we are looking forward to meet you in the next conference and in the Q1 call. Thank you very much for your attention.