SGL Carbon SE Annual Report 2019 Annual Report 2019 Key Figures 2019 Ŷm Footnote 2019 2018 Change Financial performance Sales revenue ƇƐƎƌƍ ƇƐƊƍƋ Ɖƍ thereof outside Germany ƌƏ ƌƌ - thereof in Germany ƉƇ ƉƊ - EBITDA before non-recurring items Ƈ ƇƈƐƐ Ƈƈƍƈ –Ƌƍ Operating profit/loss (EBIT) before non-recurring items Ƈ ƊƎƊ ƌƊƌ –ƈƋƇ Result from continuing operations before income taxes –ƍƉƈ ƋƇƉ >-ƇƐƐ Consolidated net result (attributable to the shareholders of the parent company) –ƏƐƐ ƊƇƉ >-ƇƐƐ Return on sales (EBIT-margin) ƈ ƊƋ ƌƈ -Ƈƍ-points Return on capital employed (ROCE EBIT) Ɖ ƉƏ ƋƊ -ƇƋ-points Return on capital employed (ROCE EBITDA) Ɗ Əƌ ƇƐƋ -ƐƏ-points Earnings per share, basic and diluted (in Ŷ) –ƐƍƊ ƐƉƊ >-ƇƐƐ Net assets Equity attributable to the shareholders of the parent company ƊƇƎƌ ƋƉƇƌ –ƈƇƉ Total assets ƇƋƐƊƎ ƇƋƎƋƇ –ƋƇ Net financial debt ƈƎƎƋ ƈƊƈƈ ƇƏƇ Equity ratio Ƌ ƈƍƎ ƉƉƋ -Ƌƍ-points Gearing ƌ ƐƌƏ ƐƊƌ ƋƇƉ Headcount ƍ ƋƇƈƍ ƋƐƉƇ ƇƏ Financial position Payments to purchase intangible assets and property, plant and equipment ƏƋƇ ƍƎƇ ƈƇƎ Depreciation/amortization expense ƍƇƌ ƌƈƌ ƇƊƊ Working capital ƊƐƌƎ ƊƇƏƇ –ƈƏ Free cash flow Ǝ –ƇƍƉ –ƋƎƋ ƍƐƊ 1) Before non-recurring items of minus Ŷ82.7 million in 2019 and Ŷ16.3 million in 2018 2) EBIT before non-recurring items to sales revenue 3) EBIT before non-recurring items to average capital employed (total of goodwill, other intangible assets, property, plant and equipment, investments accounted for At-Equity and working capital) 4) EBITDA before non-recurring items to average capital employed (total of goodwill, other intangible assets, property, plant and equipment, investments accounted for At-Equity and working capital) 5) Equity attributable to the shareholders of the parent company to total assets 6) Net financial debt to equity attributable to the shareholders of the parent company 7) As of Dec. 31, including employees with fixed-term contracts 8) Cash flow from operating activities (continued operations) minus cash flow from investing activities (continued operations) SGL Carbon Geschäftsbericht 2018 3 Key Figures 2019 Table of Contents Key Figures 2019 ................................................................................... 2 Table of Contents .................................................................................. 3 Letter from the Board of Management ................................................... 4 Report of the Supervisory Board ............................................................. 6 Corporate Social Responsibility ..............................................................11 SGL Carbon in the Capital Markets ......................................................... 27 Group Management Report ......................... 33 SGL Carbon – the Group ....................................................................... 35 Economic Report ................................................................................. 41 Opportunities and Risk Report ............................................................. 65 Outlook ............................................................................................... 73 Remuneration Report ........................................................................... 79 Information according to Sections 289a and 315a of the HGB ................. 86 Corporate Governance Declaration, Corporate Governance and Compliance Report (unaudited) ........................................................... 88 Consolidated Financial Statements ............ 98 Consolidated Income Statement ......................................................... 100 Consolidated Statement of Comprehensive Income .............................. 101 Consolidated Balance Sheet ............................................................... 102 Consolidated Cash Flow Statement ..................................................... 104 Consolidated Statement of Changes in Equity ..................................... 106 Notes to the Consolidated Financial Statements ................................. 108 Additional Information .............................. 160 Independent Auditor’s Report .............................................................. 161 Responsibility Statement ................................................................... 167 Corporate Bodies ............................................................................... 168 Glossary ............................................................................................ 170 List of Acronyms ................................................................................ 173 Financial Calendar ..............................................................................174 Five-year Financial Summary ............................................................. 175 4 Letter from the Board of Management Dear Shareholders, Employees and advanced carbon fiber composite materials in the future for Friends of SGL Carbon: primary structure parts such as wings, empennage, and fuse- lage. Intelligent solutions in the field of sustainable energy are another significant driver for our growth. Last year's decision to Our two business units experienced widely differing develop- expand our collaboration with the Hyundai Motor Group is there- ments over the past fiscal year. While Graphite Materials & Sys- fore perfectly in line with our strategic orientation. Whether as a tems (GMS) performed above expectations in terms of sales drive system in vehicles or as a stationary energy source, fuel revenue and earnings and reached record levels, Composites – cells are one of the most environmentally friendly technologies Fibers & Materials (CFM) declined substantially. Although sales and offer enormous potential for SGL Carbon. In the medium revenue increased slightly, EBIT before non-recurring items term, we plan to quintuple sales revenue with our components dropped significantly compared to last year’s level. This de- for fuel cells to approximately Ŷ100 million annually. cline was primarily caused by the deterioration in the market segments of Textile Fibers, Wind Energy, and Industrial Appli- We have laid a solid foundation for the profitable growth of SGL cations. For consolidated net income, this meant that we re- Carbon. Therefore, we are confident that consolidated revenue mained appreciably below the very good results of the prior can grow on average in the middle to high single digits annually year and our original plans. Despite excellent performance in between 2020 and 2024. The market segments Automotive the GMS business unit, this was and is a disappointing course (particularly electromobility) and Aerospace are the drivers for of business overall. growth in the CFM business unit. In the GMS business unit, we are benefiting from positive market developments in Semicon- The financial performance in fiscal year 2019 conceals the fact ductors, LEDs, Fuel Cell components, and the Automotive sec- that our strategic orientation is correct. This is evident from our tor. Thanks to our higher capacity utilization throughout the growth and the increasing number of projects in our strategic Group and an improved product mix that is oriented toward core markets. We experienced more than proportional growth higher-return applications and solutions, we are expecting in our business with specialty graphites, particularly the mar- above-average improvement in earnings and anticipate that ket segments for Semiconductors and Automotive & Transport. we will reach our Group ROCE target. The structural growth drivers in our strategically relevant mar- kets also remain intact with respect to our business in fibers Supply chain changes in our lithium-ion battery business in the and composite materials. In the Automotive segment, we are GMS business unit will continue to be an issue in fiscal year 2020, seeing an increasing number of projects worldwide, notably however, so we expect consolidated revenue to be slightly be- driven by electromobility. Following the development of proto- low the level of 2019, and a consolidated EBIT before non-recur- types for a Chinese customer, we obtained orders that included ring items of 10 to 15 percent below the level of the prior year. a major order from a North American automotive manufacturer Following approximately Ŷ95 million last year, we are limiting for the development and serial production of battery cases. capital expenditure in the current year to Ŷ70 to Ŷ80 million, and Driven by the growing global demand for electric vehicles and thus approximately at the level of amortization and deprecia- the associated need for new flexible chassis platforms, our tion. This is due firstly to the shift of investments from the cap- battery cases made of fiber-reinforced composites are a very ital-intensive business of anode materials for lithium-ion bat- promising new application within our product portfolio. We also teries to the less capital-intensive expansion of our activities for expanded our product portfolio and our global presence in the fuel cell components. Secondly, given the anticipated decline in market segment Aerospace last year. Aerospace is the largest consolidated EBIT, we are striving for conservative management and most profitable market for carbon fiber based composite of our free cash flow. Thanks to the syndicated loan for Ŷ175 mil- materials. Against this background, the successful develop- lion taken out in January 2019 and the refinancing measures un- ment of our large-tow IM carbon fiber and the joint develop-