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SGL to divest performance products by year-end

August 11, 2016
Chemical Value Chain

SGL Group said today that it hopes to divest its performance products (PP) business, which has been classified as discontinued operation, by year-end. SGL said in June that PP is a non-core business.

The company tells CW that it is in talks with several potential buyers but declines to reveal their identity on confidentiality grounds. ChemChina (Beijing) was reportedly interested in acquiring the assets. SGL has mandated Deutsche Bank and HSBC to help with the sale. Proceeds will be used to reduce SGL’s debt.

The PP business had sales of €533.4 million ($594.4 million) in 2015. Its performance this year is characterized by a significant price decline in graphite electrodes mitigated somewhat by slightly higher volumes. The cathodes, furnace linings and carbon electrodes business, also part of PP, developed well, the company says. Additionally, burdened by a one-time deferred tax impact of minus €14 million due to the legal carve-out, PP sustained a loss after taxes of €47.9 million in the first six months of this year.

SGL’s remaining operations showed solid development in the first half-year of 2016. Continuing operations’ sales were down 1.5% to €379.4 million and Ebitda before non-recurring items advanced 44.2% to €33.6 million. Consolidated net loss, including discontinued operations, narrowed to €73.2 million from €85.0 million in the year-ago period.

Composites–Fibers & Materials made a particularly strong contribution with recurring EBIT rising to €12.2 million from €3.9 million a year ago, reporting the best result since inception. Adjusted for one-time effects from the previous year, EBIT of the Graphite Materials & Systems business also saw an increase. SGL, following the separation of the PP business, has adjusted its guidance and now expects group sales from continuing operations slightly lower than last year, accompanied by a slight increase in recurring EBIT from continuing operations.

“We’ve intensified our review of strategic options for performance products since the completed legal separation in early June,” says Jürgen Köhler, CEO of SGL Group. “It became apparent that a sale of the business unit is the most sustainable route, both for SGL Group and for PP. Our aim is to sell PP by the end of this year. We are now focusing on growth-driven industry segments. Our business units Composites–Fibers & Materials (CFM) and Graphite Materials & Systems (GMS) enable us to drive developments in the megatrends mobility, energy supply and digitization. CFM’s new lightweight and application center is already in its initial phase and has attracted attention of customers and prospects alike. At GMS we will expand the capacities for coated graphite components used in the production processes of the solar, semiconductor and LED industries.”

CFM sales decreased by 2.8% in the first half to €156.5 million. While sales in the carbon fiber business recorded favorable growth, the acrylic fiber business despite higher volumes posted substantially lower sales based on lower raw acrylonitrile prices on the back of the depressed oil price. The highest earnings increase was recorded by the joint ventures with BMW Group, SGL Automotive Carbon Fibers, which have completed the start-up phase. In addition, the group’s own carbon fiber production facilities had a high level of capacity utilization. As a result, the EBIT margin increased from 2.4% to 7.8%.

GMS sales, at €218.9 million were flat. In particular, customers from the solar, LED and semiconductor industries in Europe and Asia had higher demand for isostatic graphite and fiber materials. In contrast, the business in North America was negatively impacted by lower demand from energy-related industries. Demand for anode material for lithium-ion batteries developed at a stable level. Recurring EBIT decreased by 18.7% to €13.5 million mainly due to the non-recurrence of positive one-time effects in the prior year. Excluding these one-time effects, the operating result improved by €2 million due to cost savings. The EBIT margin amounted to 6.2% down from 7.6% in the year-ago period.

By Natasha Alperowicz

Source: Chemical Week

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