UBS Pan European Small & Midcap Week - SGL Carbon€¦ · UBS Pan European Small & Midcap Week 19 May 2010 . Introduction to SGL Group’s Businesses. 3 SGL Group ... In tmt BM AM

UBS Pan European

Small & Midcap Week

19 May 2010

Introduction to

SGL Group’s Businesses

3

SGL Group

Business structure

Base Materials Advanced Materials

Performance Products

(PP)

Graphite Materials & Systems

(GMS)

Carbon Fibers & Composites

(CFC)

• Graphite & Carbon Electrodes

(GCE)

• Cathodes & Furnace Linings

(CFL)

• Graphite Specialties (GS)

• Process Technology (PT)

• New Markets (NM)

• Carbon Fibers & Composite

Materials (CF & CM)

• Composite Components (CC)

Technology and Innovation (T&I)

Six Sigma (SGL Excellence)

4

GMS 30%

CFC 18%

Base Materials

Performance Products (PP)

Business Units

• Graphite & Carbon

Electrodes

• Cathodes & Furnace

Linings

2009 Group Sales PP Sales & EBIT Margins

Key industries served

• Steel

• Aluminum

• Ferrous and non-ferrous

metals

Characteristics

• Supplying the metal industries

• Leading competitive position

• Ongoing growth in eastern world

PP 52%

563644

713836

966

642

19%

24% 24%31%

15%

29%

2004 2005 2006 2007 2008 2009

• High ROS & ROCE

• Strong cash flow

• Stable growth

Sales €m EBIT Margin

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Graphite & Carbon

Electrodes

71%

Base Materials

Performance Products (PP)

Sales – 2009

Highlights 2009

• Production adjusted to reduced demand

• Investment into 60kt Malaysian carbon &

graphite plant continues

Medium-term targets

• Volume growth: 2 – 3% p.a.

• ROS: > 20%

Strategic priorities

• Continued cost reduction projects

• Major initiative to increase customer value

through product quality and consistency

• Full integration of GE production in

Malaysia

Cathodes &

Furnace Linings

29%

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Graphite electrodes (GE) for steel production in EAFs

• Growth in steel production fuelled

by infrastructure demand from

emerging countries

• Scrap availability limits EAF growth

in emerging countries

• Due to continued efficiency gains

GE demand growth only 1 – 2%

p.a.

• GE critical to EAF furnace

efficiency but only ~3% of

steelmaking conversion cost

An EAF (electric arc furnace) is a furnace that heats charged scrap steel material (also known as mini mills)

BOF (blast oxygen furnace) is the steelmaking route that uses iron ore and coking coal to produce primary steel (also known as integrated steel)

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0

250

500

750

1.000

Source: WSD, IISI, own estimate

Blast oxygen furnace

Worldwide steel production: blast oxygen furnace/electric arc furnace [in tm]

Electric arc furnace

1970 2010 1980 1990 2000 1975 1985 1995 2005

7


Graphite electrodes

Source: steeluniversity.org

Graphite Electrode

100 – 300 cm

35 – 80 cm Connecting Pin

Graphite Electrodes

Molten steel

Eccentric bottom

tapping (EBT)

Teaming ladle

Furnace shell

Rocker tilt

Tilt cylinder

SECTION VIEW TROUGH EAF

Steel Making – An Electric Arc Furnace (EAF)

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• GE critical to EAF furnace efficiency but only ~ 3%

of steelmaking conversion cost

• GE is a consumable – replaced every 5 to 8h

• GE usually sold mostly in annual contracts

• Needle coke requirements sourced on basis

of multiyear contracts

Production process takes up to 3 months


Graphite electrode production process

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North/Middle East,

Africa, Australia 8%

Americas 22%

Asia 42%

Europe 28%


Graphite electrode market

Capacity by competitor in 2010* – UHP/HP-quality

* Russia and China: Potential UHP capacity dependent on equipment,

technical capability and needle coke availability

Source: SGL Group„s own estimates (as of February 2010)

Regional Demand in 2009

0

50

100

150

200

250

SGL (DE) Graftech (US) Showa Denko

(JP)

Tokai Carbon

(JP)

Graphite India

(IN)

HEG (IN) SEC (JP) Nippon

Carbon (JP)

CGE (US)

In tmt

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10

20.000

30.000

40.000

50.000

60.000

70.000

2003 2005 2007 2009 2011 e 2013 e 2015 e 2017 e 2019 e

kt


Cathodes for the aluminum industry

Aluminum

Global Production Scenarios 2003 – 2020/New

Source: IAI, King, SGL Group„s own estimates, Hydro; Alcoa , CRU

• Aluminum demand driven by

- industrialization of BRICs

- weight/ strength/cost advantages in

higher energy cost environment

• Cathodes essential to aluminum smelters

Existing smelters relining

Investment good (5 – 7 years shelf life)

New smelter construction leading to

higher relining demand long term

• Existing smelters upgrading

amorphous graphitized cathodes

only three established producers

of graphitized cathodes

SGL Group largest producer worldwide

• Cathodes essential for aluminum smelting

but representing only 1% of production

costs for 1t aluminum

Fundamentals for Al production growth remain solid – leaving the

original long-term outlook unchanged. Additional momentum expected

triggered by various stimulus packages.

36 mio. tm

39 mio. tm 48 mio. tm

67 mio. tm

World Primary AL Prod 4.1 % CAGR

Pri

mary

AL

Pro

du

cti

on

in

kt/

a

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Cathodes for the aluminum industry

Source: SGL Group

Cathodes

4

4

4

1

3

2

Special glue

Cathode

blocks

Ramming

pastes

Sidewall

blocks

30 – 70 cm

30 –

50 cm

100 – 350 cm

Aluminum Smelter

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Alcan 3%

CIS 3%

Carbone Savoie 25%

SGL 21%


Market shares in cathodes 2009

Market Shares in Cathodes 2009

Bawtry 4%

NDK 1%

SEC 15%

Source

SGL Group‟s own estimates, market shares based on volume excluding Chinese

capacities

China 27%

Others 1%

• Western world further concentrated (Alcan exit 2009), Chinese expected to follow in long term

• Destocking of cathodes and adjusted reline schedules impact 2010 cathode demand. Ramp up of cathode business expected 2011

• Continued substitution with graphitized cathodes where SGL Group‟s market share is higher (> 30%)

• Double digit growth for graphitized cathodes due to higher efficiency and yield advantages

• Graphitized cathodes industry highly concentrated (only 3 – 4 established players) – graphitization capability a bottleneck

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GMS 30%

CFC 18%

Advanced Materials

Graphite Materials & Systems (GMS)

Business Units*

• Graphite Specialties

• New Markets

• Process Technology

2009 Group Sales GMS Sales & EBIT Margins


• Chemical

• Energy –Solar

• Semiconductor

• Energy-Battery

• High-temperature

processes

• Mechanical Applications

Characteristics

• C-parts supplier of investment good industry (GS/NM)

• Broadest product portfolio

• Global footprint

• Sustainable growth potential in Solar Energy and Battery markets

PP 52%

287 300340 364

412365

8%

14%11%

8%7%

13%

2004 2005 2006 2007 2008 2009

2004-2005: (Graphite) Specialties Business Unit incl.

Expanded Graphite Business Line


*Beginning 2010, Expanded Graphite

integrated into Graphite Specialties, and New

Markets spun out of Graphite Specialties

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Graphite

Specialties

66%

Advanced Materials

Graphite Materials & Systems (GMS)

Sales – 2009 Medium-term targets

• Sales growth: 6 – 8% p.a.

• ROS: >10%


• Catch market opportunities in fast growing

solar energy markets with timely

investments.

• Maintain leading position in all other

product technologies

• Further improve business position in Asia

by strengthening local investments and

skills.

Expanded

Graphite

8%

Process

Technology

26%

Highlights 2009

• Sales in Asia increased to 22% from 18%.

• First step of capacity expansion to accompany

increasing demand of photovoltaic industry on

stream (iso-graphite).

• Business with process technology maintained at

high earnings level despite recession.

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Major customer industries and market shares 2009

% of Total

GMS Sales 2009

Global Market

Share 2009

Chemicals 29% 30%

Energy: Solar 16% 25%

Energy: Batteries & Nuclear 15% 25%

Semiconductor 9% 20%

Metallurgy 6% 20%

Tool Manufacturing 5% 15%

High-temperature Processes 4% 15%

Automotive 3% 15%

Source: SGL Group„s own estimates

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Graphite Specialties – feedstock production and machining

Raw Materials (Pitches & Cokes) Pressing Pre-pressing Processes

Graphitizing 2,800°C – 3,000°C Baking 850°C – 1,200°C

Machining Finishing

High quality raw

materials from

reliable sources

Breaking, milling,

sieving, binding,

mixing, homoge-

nizing

Formation of

graphite structure

and densification

Carbonizing,

Densification

Isostatic pressing Extruding or

Machining of the feedstock:

Sawing, turning, milling, sanding,

boring, lapping, polishing

Impregnation, coating, purification

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Graphite Specialties – semiconductor application

Extremely pure graphite heater for the semiconductor industry

Reaches 99.9995% C

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Feedstock production isostatic graphite

Rest of the World 2%

North

America 24%

Asia 48%

Europe 26%

Capacity by Competitor in 2010

Source: Own estimates (as of Feb 2010)

Regional Demand in 2009

0

2,000

4,000

6,000

8,000

10,000

12,000

Toyo Tanso (J) Tokai Carbon

(J)

Carbone

Lorraine (F)

SGL (GER) Ibiden (J) Nippon Techno

Carbon (J)

In tmt

Source: Own estimates (as of Feb 2010)

Isostatic graphite

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Process Technology – product portfolio

Overview

Systems

• HCl Synthesis

• Sulfuric acid

• Porous burner

• FCHC destruction

Equipment

• Heat exchanger

• Columns

• Pumps

• Quenches/Vessels

Services

• Parts

• Diagnosis

• Repairs

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New Markets – applications in thermal management

• High thermal and electrically conductive graphite material - “Ecophit”

• High-performance heat storage systems for industrial and solar processes

• Smart gypsum plaster board “Climafit” and “Protekto” for cooling ceilings and EMI shielding

Solutions

• Wall/floor air conditioning systems

• Heating/cooling ceilings

• Thermal storages

Objective

• Plaster board improvement

– Raise thermal conductivity of gypsum board (x3)

– Protect rooms from EMI radiation

Objective

&

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Innovation driving new product portfolio

Examples:

• Graphite for Li-Ion batteries

• Crucibles and molds for solar production

and LEDs

• CFRC-Heaters for the semicon industry

• High purity expanded graphite for

thermal management (electronics,

climate) and environmental needs

• Specialty graphite for nuclear power

(PBMR)

• Graphites for particle filter for diesel

engines and exhaust systems

GMS 2009 sales: € 365 m

1/3 of sales based on new products introduced

over the last 4 years

1/3

new

2/3

established

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GMS 30%

CFC 18%

Advanced Materials

Carbon Fibers and Composites (CFC)

Business Units

• Carbon Fibers &

Composite Materials

• Composite Components

2009 Group Sales CFC Sales & EBIT Margins


• Energy

• Aerospace & Defense

• Automotive

• Mechanical Engineering

• Sporting Goods

• Medical Technology

Characteristics

• New applications in auto-

motive, energy, aeronautics

• High earnings improvement

potential

PP 52%

93122 131

163193 208

-3%

-11%

4%

-3%

2%

2004 2005 2006 2007 2008 2009

• Complete value chain in house

• Only EU carbon fiber company

2004-2005 SGL Technologies Business Unit excl.

Expanded Graphite Business Line

2004-2007 include Brake Disc business

SGL Rotec consolidated from September 2008 onwards


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Composite Components

34%

Composite Materials

27%

Advanced Materials

Carbon Fibers and Composites (CFC)

Highlights 2009

Medium-term targets

• Sales growth: > 15% p.a.

• ROS (mid term): > 10%


• Become supplier of choice for our focus markets

– Automotive

– Alternative energies

– Aviation/defense technology

– Construction

• Expand Carbon Fiber and Composite capacities

• Support organic growth with targeted partnerships

and acquisitions

• Safeguard own raw material supply

• Carbon Fibers & Composite Materials (CF & CM):

Own precursor development

JV with Mitsubishi for precursor

New carbon fiber lines in UK, USA

Continued growth from wind energy

JV with BMW for automotive materials

• Composite Components (CC):

Integration SGL Rotec

Investment into automation technologies

at HITCO for aerospace & defense business

Sales – 2009

Carbon Fibers

10% Aero Structures

29%

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Core Competencies Core Competencies

• Materials

• Technology

• Processes

• Development of final use/applications

• Design of finished parts/

manufacturing techniques

• Marketing

• Promoting substitution

Composite Components Carbon Fibers & Composite Materials

PAN

Precursor

Carbon

Fiber

Prepreg

Preform

Industrial &

Energy

Aerospace &

Defense

Automotive

Carbon Fiber

Composite

Materials

HITCO (100%)

SGL Rotec (51%)

Benteler SGL (50%)

Brembo SGL Carbon

Ceramic Brakes (50%)

Raw material

• EPG (44% JV

with Lenzing)

• JV with Mitsubishi

Rayon (MRC, 33%)

• Prod. capacity

~ 4kt in UK

~ 2kt in USA

• JV with BMW

(51%)

• SGL epo (100%)

• SGL Kümpers

(51%)

• JV with BMW

(51%)

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Unique offering of the complete value chain

25


Carbon fiber capacity

Toray (JP)

Zoltek (US)

MRC (JP)

Cytec (US)

Formosa

Plastic (TW) Hexcel (US)

SGL

Group (DE)

Toho/

Fortafil (JP)

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

20.000

Source: SGL Group„s own estimates, company websites (as of March 2010)

Capacity in t

Precursor Own Own Own Own Partially own Own Own Own

Product LT LT HT LT HT LT LT LT

Markets Aero/Ind. Aero/Ind. Ind. Ind. Ind. Ind. Aero/Ind. Aero/Ind.

Name plate capacities* carbon

fiber (excl. oxidized fiber)

LT = Low tow fiber 1 – 24k

HT = High tow fiber 50 – 300k

* Actual production tends to be 20 – 30%

below name plate capacity

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Composite Materials

• Carbon fibers can be woven or braided and are often impregnated with resin before component production

• We aim to have a broad range of technologies for prepreging/preforming

Impregnation (e.g. prepregs for wind turbine blades or aircraft parts)

• SGL epo

Weaving (e.g. sporting goods, automotive, medical industry)

Preforms (e.g. auto industry)

Braiding (e.g. car bumpers)

• SGL Kümpers

SGL Kümpers

SGL epo

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Composite Components – HITCO

• HITCO: California based composite component

manufacturer for aerospace & defense industry

• Historically, the prevailing process in carbon fiber

based aero structures was hand lay-up – very slow

and expensive & no competitive differentiation

• Investment into automation technologies AFP

(Automated Fiber Placement machine) & ATL

(Automatic Tape Layer machine) substantially

improves competitiveness of HITCO

• Won Gold Level Preferred Supplier Certification for

100% quality & delivery performance from The Boeing

Company

• Supplier of the Year 2007 award in Structures

Commodity category from The Boeing Company

• Recent contract wins/extensions:

– Composite floor beams for Boeing 787 “Dreamliner”

– Boeing 767 flap track fairings

– Wing skins and nacelle skins for F-35 Lightning II

Program

AFP

ATL

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Composite Components – SGL Rotec

• SGL Rotec: German based manufacturer of rotor

blades for wind turbines of multi-MW classes

• Built-to-print manufacturing based on fiber composite

technology since early 1990s

• High reputation as

- manufacturer of high quality rotor blades

- specialist in manufacturing of large size rotor

blades for onshore and offshore turbines

- innovator in process and technology development

• Composite Technology:

- process: vacuum infusion

- main materials: epoxy, polyester and vinyl ester resin, glass fibre, carbon fibre

• PowerBlades

- JV with REpower for the development and manufacturing of large size rotor blades for

5 and 6 MW offshore turbines

• Long-term contracts with major players in on- and offshore area (REpower, BARD)

• Development of a “Competence & Development Center” for next generation rotor blade

manufacturing

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Composite Components – Automotive

Benteler-SGL:

• 50/50 JV between SGL Group and Benteler AG to

develop composite based automotive components

• February 2009: acquisition of Fischer Composite

Technologies GmbH in Austria

• Leading position in developing structural automotive

parts and modern, automated production technologies

Brembo- SGL:

• 50/50 JV between SGL Group and Brembo SPA for

carbon ceramic based automotive brakes.

• Leading global position, supplying most of the high-end

car makers, with production sites in Germany and Italy

SGL Group’s strategic objectives in automotive:

- Driving the metal substitution process in automotive

to become a major automotive parts supplier by 2013

- Ensure that SGL Group‟s materials are at the forefront

in the automotive industry

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http://upload.wikimedia.org/wikipedia/commons/f/f1/Air-ftd-md90-02-ar-8.jpg

Fundamental Long-term Growth

Drivers for our Businesses

31

Fundamental Global Challenges

Financial and

Economic Crisis

Climate

Crisis

Energy

Crisis

PROBLEM

„Towards an ecologically sensitive World“ APPROACH

Light Weight Alternative

Energies

Energy

Efficiency SOLUTION

PROVIDER

32

Our Carbon-based Products Offer Sustainable Solutions

towards less CO2

€1.226 m*

€736 m*

67%

22%

11% Light Weight

Alt. Energies

Energy

Efficiency

Scrap Recycling

Wind

Aerospace 60% of

Group Sales Automotive

Solar

Batteries

Cooling Systems

Automotive

*Based on 2009 sales

33

Energy Efficiency

Graphite for high performance batteries

Graphite for lithium ion batteries allows

• reduction of CO2 emission for hybrid vehicles

• no CO2 emission for electrical vehicles

• storage of energy from renewable energy sources

34

Energy Efficiency

Expanded natural graphite for cooling systems

Expanded Natural Graphite embedded in cooling systems for

• an optimal air conditioning

• low energy consumption

• efficient energy storage

35

Alternative Energies

Carbon fibers and composites for wind energy

Carbon Fibers

• enable big offshore

windparks

• increase wind turbine

performance

36

Alternative Energies

Graphite and carbon fiber reinforced carbon for solar applications

Graphite and carbon fiber

reinforced carbon (CFRC)

• enable the production

of products for the solar industry

• are indispensable for the

semiconductor industry

37

Light weight

Carbon fiber and composite materials for automotive

Carbon Composites

• reduce weight

• increase safety

• will significantly enlarge its

share in cars of the future

JV with BMW

• Production of carbon fibers and composites for use in the “Megacity Vehicle“ currently

being developed by BMW

• Milestone for the application of carbon fibers in automotive serial production

• Sustainability along the whole value chain

38

Light weight

Composite components for aerospace

Carbon Composites

• substitute other materials

• reduce weight for less emission

39

Fundamental trends support the carbon and graphite industry

Growth opportunities for SGL Group as its largest player

• Carbon and graphite industry uniquely positioned to benefit from fundamental trends

• SGL Group as the largest global carbon and graphite player to participate in growth

opportunities resulting from these trends

Fundamental Trends

Demand for Resources:

•EAF steel

•Aluminum production

Substitution & Innovation:

•Automotive

•Civil aircraft

Alternative Energy:

•Solar energy

•Wind energy


(PP)


(GMS)


(CFC)

Base Materials Advanced Materials

40

Mid term Minimum Targets Over the Cycle Unchanged …

… Once normality returns after transitional post crisis years

To deliver profitable growth!

Group • Sales growth: 5 – 10% p.a. CAGR organic

• ROS: > 12%

Performance

Products (PP)

Graphite Materials

& Systems (GMS)

Carbon Fibers &

Composites (CFC)

• Volume growth: 2 – 3% p.a.

• ROS: > 20%

• Sales growth: 6 – 8% p.a.

• ROS: > 10%

• Sales growth: > 15% p.a.

• ROS: > 10% mid term

Forward-looking statements:

This presentation contains statements on future developments that are based on currently available information

and that involve risks and uncertainties that could lead to actual results deviating from these forward-looking

statements. The statements on future developments are not intended as guarantees; rather, such developments

and results are dependent on a number of factors, they contain various risks and uncertainties and are based on

assumptions that may prove to be incorrect. These risks and uncertainties include, for example, unforeseeable

changes in political, economic and business conditions, particularly in the area of electric steel production, the

competitive situation, interest rate and currency developments, technological developments and other risks and

unanticipated circumstances. We see other risks in price developments, unexpected developments relating to

acquired and consolidated companies, and ongoing cost optimization programs. SGL Group does not intend to

update these forward-looking statements.

Important Notice

Documents

UBS Pan European Small & Midcap Week - SGL Carbon€¦ · UBS Pan European Small & Midcap Week 19 May 2010 . Introduction to SGL Group’s Businesses. 3 SGL Group ... In tmt BM AM