A short introduction to SGL Group Dr. Jrgen Khler, CEO Commerzbank - PowerPoint PPT Presentation

A short introduction to SGL Group Dr. Jürgen Köhler, CEO Commerzbank German Investment Seminar, January 2015

Unique materials and process know how Based on carbon, graphite & carbon fiber as well as the management of high temperature technologies High temperature products Mechanical Mechanical strength Graphite Furnace electrode linings Carbon Cathode electrode graphitized Properties P ti Battery Battery CFRC graphite of Expanded Carbon carbon & Iso graphite graphite felt graphite Ceramic brake disc brake disc Carbon fibers 1,000 ° C 3,000 ° C Thermal resistance We operate more than 300 high temperature furnaces globally We operate more than 300 high temperature furnaces globally Page 2 | Investor Relations Presentation

SGL offers “enabling” materials and products for attractive growth markets g Segment Market positions Growth markets Example  GE: one of two  Excess scrap from China Excess scrap from China Steel recycling Steel recycling Performance Performance largest to drive EAF steel Products manufacturers production enabler for New aluminium  40-50 new smelter builds worldwide smelter expected until 2030  CA: 20% market construction globally** share (ex-China)* Li-ion batteries  Li-ion batteries: 14% Graphite  Leading positions CAGR from 2013 to for mobile Specialties in variety of 2019*** enabler for applications  LED: market forecasts customer range from 25% - 38% industries LED CAGR**** Carbon  Exclusive supplier  Carbon fiber fabrics for Automotive in specific BMW i-Series Fibers& enabler for lightweight automotive  Carbon ceramic brake Materials trend products & discs applications  CFRP for Audi MSS * Source: SGL estimates ** Source: The Global Aluminium industry, Dr Carmine Nappi, February 2013 *** Source: Research and Markets, "Global Lithium Ion Battery Market - Forecast to 2019“, February 2014 **** Source: Commerzbank July 2013, Compound Semiconductor, Volume 19, Issue 5, July 2013 quoting IHS’ research report “Q2 GaN LED Supply and Demand” Page 3 | Investor Relations Presentation

Strategic realignment and capital increase Page 4 | Investor Relations Presentation

New management implementing tighter financial discipline. p Changing key performance indicator from ROS to ROCE Introducing stronger financial and capital deployment discipline, particularly with respect to capex and potential mergers/acquisitions Will also be guiding principle with regard to portfolio decisions in strategic g g p p g p g realignment Cash will only be invested with minimum ROCE expectations: businesses have to “earn the right to grow” the right to grow ROCE orientation reflected in long term incentive scheme of Board of Management and the next management layers the next management layers Page 5 | Investor Relations Presentation

Right size. Improve performance. Enhance shareholder return. ROCE Combination of capital increase and proceeds from  right-sizing the business will strongly delever the Enhance shareholder return company and thus improve leverage ratios 3 Stabilize financial position by achieving positive net  result and free cash flow Healthy balance sheet and stable earnings provide  ROCE flexibility to execute on strategic repositioning hurdle 15% rate 2 Capital discipline, defined by minimum ROCE of 15% , is  new overriding guiding principle and management new overriding guiding principle and management Improve Improve performance 1 culture for strategic repositioning and future Right size investments Generate accretive returns or distribute cash to  shareholders to enhance shareholder return shareholders to enhance shareholder return Invested capital Page 6 | Investor Relations Presentation

1 Right size. Relentless restructuring of underperforming activities Relentless restructuring of underperforming activities Rationale Progress Closure of Lachute (Canada): 30kt graphite electrode  Adjust asset base to changes in market demand Adjust asset base to changes in market demand capacity/110 employees capacity/110 employees   Optimize global production network Closure of Narni (Italy): 30kt graphite electrode capacity/ −  Asset (relocation, consolidation, closures) dismissal plan for all employees (~120) implemented restructuring Improve capacity utilization and fixed cost base Streamlining production facilities in GS −  Cost competitive assets only Further measures under evaluation and subject to price/   demand development Disposal of rotor blade activities (Rotec) Focus on materials competence and strengths in all   businesses Portfolio HITCO sale initiated – reclassified to discontinued  Ongoing review of portfolio considering target ROCE g g p g g − restructuring t t i g Assessment of strategic options for activities which do Further selected disposals could follow as a result of −  not reach mid to long term targets strategic review SGL Group is progressing well with focusing its business and asset portfolio resulting in a stronger, more profitable company Page 7 | Investor Relations Presentation

2 Improve performance. SGL 2015 efficiency improvements well ahead of plan SGL 2015 efficiency improvements well ahead of plan Progress as of Measures Exp. Savings November 30, 2014 SGL X SGL Excellence 2013 &  ~ €55m 100% Raw material cost savings g  other savings th i Energy cost savings  SGL X  SGL Excellence 2014, 2015 & ~ €50m ~ 70% Raw material cost savings  operational improvements Energy cost savings  Organisational Headcount reduction  ~ €60m ~ 90% restructuring Indirect spend  ~ €15m ~ 50% Divestments SGL Rotec, HITCO  Closure GE site in Lachute, Canada  Asset restructuring ~ €45m ~ 40% Closure GE site in Narni, Italy  Targeted cost savings of more than €200 million exceeding initial objective of €150 million Targeted cost savings of more than €200 million exceeding initial objective of €150 million Page 8 | Investor Relations Presentation

3 Enhance shareholder return. Stringent resource allocation Stringent resource allocation Performance Products (PP) Graphite Specialties (GS) Carbon Fibers & Materials (CFM) Selective Investments in graphite anode est e ts g ap te a ode Expansion SGL ACF (BMW JV) pa s o SG C ( J )   growth materials production for Li-Ion investment - capacity increase to batteries 9,000t p.a. investments Long-term market potential from New graphite based applications Ramp up of BMW i3 / i8 production    Structural high Chinese scrap availability resulting from new technologies Significant growth in automotive and  increasing steel production in increasing steel production in growth from growth from Structural growth in selective end St t l g th i l ti d industrial carbon composite use i d t i l b it  electric arc furnaces (EAF) existing assets markets significantly above GDP Own low cost and high quality  precursor (Fisipe) Well positioned to benefit from Cyclically depressed markets to   potential price and volume potentially recover Cyclical Cyclical recovery in graphite electrodes recovery in graphite electrodes I d Industrial t i l − recovery Supported by cost and capacity Solar  − adjustments Semiconductor − Only limited investments required for further growth O l li it d i t t i d f f th th Page 9 | Investor Relations Presentation

Divisional strategy Performance Products (PP). Short term turnaround by improving cost position further y p g p 2013 Group sales Strategy & Outlook Growth opportunities Key management focus is on turnaround in  Worldwide steel production (in mt) GE profitability 1.600 Blast furnace Significant restructuring measures  1.400 implemented in context of SGL 2015 “Wave of 1.200 Electric arc furnace €1,477m scrap” PP 1.000 expected Well positioned for cyclical recovery with  in medium 800 53% term electrode plants in all key regions 600 400 200 0 1975 1985 1995 2005 2015 PP Business Units Source: WSD, IISI, own estimate Price stabilization in last months  Low profitability in GE and needle coke  Graphite & Carbon Graphite & Carbon Cathodes & Furnace Cathodes & Furnace Future high Chinese scrap steel Future high Chinese scrap steel  industry limits further downside i d li i f h d id Electrodes (85%) Linings (15%) availability to trigger strong increase in Expected near term margin improvement – EAF production mid to long term  even in flat pricing environment – due to Resulting in substantial GE demand  upside Cost benefits of capacity closures - Well positioned with new facility in Additional SGL 2015 cost savings  - G Graphite electrodes for hit l t d f C th d Cathodes for aluminum f l i Malaysia l Ramp up of low cost Malaysian facility - electric steel production production Page 10 | Investor Relations Presentation