May 8, the world's leading large tow carbon fiber manufacturer - Germany's SGL Carbon announced the first quarter of 2024 revenue, the first quarter of 2024 the company's sales of 272.6 million euros, compared with the same period last year 283.7 million euros, a small decline of 3.9%, but the adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were €42.1 million, up 5.0% compared to €40.1 million in the same period of 2023. However, weak demand in the carbon fiber business unit negatively impacted the company's sales and earnings performance.
SGL Carbon's Graphite Solutions, its largest business unit, reported sales of €141.3 million in the first quarter of 2024, almost unchanged from €140.9 million in the same period of 2023, while the Process Technologies business unit reported revenues of €33.0 million, compared with €31.9 million in the same period of the previous year, representing an increase of 3.4% in sales and profit improved by 40.8%. The Carbon Fibers business unit reported sales of €57.6 million in the first quarter of 2024, down 9.6% compared to €63.7 million in the same period last year, with the decline mainly due to the continued weak demand in the wind power industry and the related capacity adjustments in the Carbon Fibers business; Carbon Fibers segment Adjusted EBITDA declined by €9.5 million YoY to minus €5.2 million (first quarter of 2023: EUR 4.3 million). The Composite Solutions business unit generated revenues of €37.1 million in the first quarter of 2024, compared to €39.8 million in the same period of the first quarter of 2023, a decrease of 6.8%. The decline was due to the expiration of a project-related supply contract with an automotive customer.
1.Detailed revenue of the Carbon Fiber business unit
In the first quarter of 2024, SGL Carbon's Carbon Fibers business unit generated revenues of €57.6 million, thus down from €63.7 million in 2023. The decline was mainly due to continued weak demand in the wind power industry and related capacity adjustments in the carbon fiber business.The textile fibers, industrial applications, and automotive markets also saw lower double-digit percentage declines in revenues in the first quarter of 2024, while the aerospace market remained stable.
Wind energy accounted for approximately 20% of the Company's carbon fiber sales in the first quarter of 2024. Due to the diversity of applications, industrial applications are the largest segment for carbon fiber with a revenue share of approximately 29%, followed by customers in the automotive industry with approximately 27%. Overcapacity in almost all product segments, coupled with high price pressure on these commodities, is putting increasing pressure on the Carbon Fibers business unit.
The Company has responded to the continued weak demand for carbon fiber in the wind power industry and has adjusted its production capacity starting in the second half of 2023, with line closures reflected in particular in the earnings performance of carbon fiber.
Adjusted EBITDA in the Carbon Fibers business unit declined by EUR 9.5 million sequentially, from a profit of EUR 4.3 million in Q1 2023 to a loss of EUR 5.2 million in Q1 2024. The temporary closure of production lines led to an under-absorption of fixed costs, which further led to high costs for idle capacity and a corresponding negative impact on adjusted EBITDA.In Q1 2024, activities accounted for using the equity method (mainly BsccB, the joint venture with Brembo for the production of carbon fiber ceramic brake discs) contributed €4.4 million to the Carbon Fibers reporting segment's adjusted EBITDA EBITDA contributed €4.4 million (€5.2 million profit contribution in the first quarter of 2023). Without the contribution of earnings from Brembo SGL carbon-ceramic brakes (on an equity basis), Carbon Fiber's adjusted EBlTDA would have been a loss of €98.0 million (€0.9 million loss in the first quarter of 2023).
As demand from the wind power industry is not expected to recover in the coming months, in addition to reducing production capacity, the company has initiated a restructuring program for carbon fibers. The restructuring measures initiated resulted in an expense of EUR 1.8 million in the first quarter of 2024, which was classified as a non-recurring item. Taking into account non-recurring items and lower depreciation and amortization based on impairments carried out in fiscal year 2023 (minus EUR 2.2 million), EBIT in the first quarter totaled minus EUR 9.0 million (Q1 2023: EUR 0.2 million).
The dynamic market development of Carbon Fibers led the Company to announce on February 23, 2024 that it is evaluating all strategic options for Carbon Fibers, including a possible partial or full sale of the business unit.
2.What is the root cause of the carbon fiber business' tumbling revenues?
Earlier in this article, "Losing Two End-Markets, Revenues and Profits of World's Leading Large-Thread Carbon Fiber Maker 'Collapse'," we looked at the root cause of the steady decline in SGL Carbon's Carbon Fiber business unit over the past three years: a succession of high-margin downtown end-markets in the automotive industry and wind power (read the original article). As mentioned above, the company has shut down some of its carbon fiber production lines due to the wind power business restructuring, which has led to an increase in the cost of idle capacity.
In terms of carbon fiber product types, all of SGL Carbon's current carbon fiber products are 50k-size large filament tow carbon fibers, and the significance of the company's carbon fiber product models is exemplified by the newly developed and successful C T50-4.9/235 (Extended reading ), where C-carbon, T-Continuous tow, 50-the number of tows, 4.9/235-continuous tow strength and modulus, so its meaning is 50K. modulus, so the meaning is 50k tow size carbon fiber with tensile strength of 4.9GPa and tensile modulus of 235GPa. Large tow carbon fiber has its cost advantages, but also has performance limitations, and the company's carbon fiber strength is generally below 5.0 GPa or less.
Overall, due to the performance of the company's large tow carbon fiber compared to other companies such as Japan Toray, the United States Hexcel has a larger capacity of small tow carbon fiber has certain application limitations, so as mentioned above, in the first quarter of 2024, the company's carbon fiber products in the wind energy, industrial, automotive and other revenues accounted for close to 80%, and according to the company's introduction of the carbon fiber production capacity of these sectors are in excess of the company! .
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