On May 8, the world's leading manufacturer of large tow carbon fibers, SGL Carbon of Germany, announced its revenue for the first quarter of 2024, with sales of 272.6 million euros in the first quarter of 2024, a slight decrease of 3.9% compared with 283.7 million euros in the same period last year, but adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of 42.1 million euros, an increase of 5.0% compared with 40.1 million euros in the same period in 2023. However, weak demand in the Carbon Fiber business unit had a negative impact on the company's sales and earnings performance.
SGL Carbon's largest business unit, Graphite Solutions, reported sales of €141.3 million in the first quarter of 2024, almost the same as in the same period of 2023 of €140.9 million, while revenue in Process Technologies increased by 3.4 percent and profit by 40.8 percent compared to €31.9 million in the same period last year. Sales in the first quarter of 2024 were €57.6 million, down 9.6 percent compared to €63.7 million in the prior-year quarter, mainly due to continued weak demand from the wind power industry and related capacity adjustments in the Carbon Fiber business. Carbon Fiber's adjusted EBITDA decreased by EUR 9.5 million sequentially to minus EUR 5.2 million (Q1 2023: EUR 4.3 million). Revenue in the Composite Solutions business unit was €37.1 million in the first quarter of 2024, down 6.8 percent compared to €39.8 million in the same period in the first quarter of 2023. The decline was due to the expiration of a project-related supply contract with an automotive customer.
Detailed revenue of the Carbon Fiber business unit
In the first quarter of 2024, SGL Carbon's carbon fiber business unit generated revenues of EUR 57.6 million, which is therefore lower than the EUR 63.7 million figure in 2023. The decline was mainly due to continued weak demand from the wind power industry and related capacity adjustments in the carbon fiber business. In the first quarter of 2024, the textile fiber, industrial applications, and automotive markets also saw low double-digit percentage declines in revenue, while the aerospace market remained stable.
In the first quarter of 2024, wind energy accounted for about 20% of the company's carbon fiber sales. Due to the diversity of applications, industrial applications are the largest segment of carbon fiber, with a revenue share of about 29%, followed by customers in the automotive industry with about 27%. Overcapacity in almost all product areas, combined with high price pressures for these commodities, is putting increasing pressure on the Carbon Fiber business unit.
The company has responded to the continued weakness in demand for carbon fiber in the wind industry and has adjusted its production capacity from the second half of 2023, with the closure of production lines being particularly reflected in the profitability of carbon fiber.
Adjusted EBITDA of the Carbon Fiber business unit decreased by €9.5 million sequentially, from a profit of €4.3 million in the first quarter of 2023 to a loss of €5.2 million in the first quarter of 2024. The temporary shutdown of the production line resulted in insufficient absorption of fixed costs, which further led to high idle capacity costs and had a corresponding negative impact on adjusted EBITDA. In the first quarter of 2024, activities accounted for using the equity method (mainly BsccB, a joint venture with Brembo for the production of carbon-ceramic brake discs) contributed EUR 4.4 million to the adjusted EBITDA of the Carbon Fibre Reporting segment (Q1 2023 profit of EUR 5.2 million). Without the earnings contribution (on an equity basis) from Brembo SGL's carbon-ceramic brakes, the adjusted EBlTDA for carbon fibre would have resulted in a loss of €98 million (Q1 2023: a loss of €0.9 million).
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 also initiated a restructuring program for carbon fiber. The restructuring measures initiated resulted in an expenditure of €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 made in fiscal 2023 (minus EUR 2.2 million), EBIT totalled EUR 9 million in the first quarter (Q1 2023: EUR 0.2 million).
Carbon Fiber's active market development led the company to announce on February 23, 2024 that it is evaluating all of Carbon Fiber's strategic options, including the possible partial or full sale of the business unit (extended reading: [Shishuo Xinyu] heavy!). Intensified competition in the market has led the world's leading manufacturer of large tow carbon fibers to sell its carbon fiber business).
What is the root cause of the continuous decline in the revenue of the carbon fiber business?
In the previous article of this article, "The Loss of Two Major End Markets, the Revenue and Profit of the World's Leading Large Tow Carbon Fiber Manufacturer Have "Collapsed"" has sorted out the root cause of the continuous decline of SGL Carbon's carbon fiber business unit in the past three years: the two major end markets of the automotive industry and wind power in the urban area (extended reading: [Shishuo Xinyu] The loss of the two major end markets, the revenue and profit of the world's leading large tow carbon fiber manufacturer have "collapsed"). As mentioned above, due to the adjustment of the wind energy business, the company has closed some carbon fiber production lines, resulting in an increase in the cost of idle capacity.
From the perspective of carbon fiber product types, SGL Carbon's current carbon fiber products are all 50k large tow carbon fibers, and the significance of the company's carbon fiber product models is based on the newly developed C T50-4.9/235 as an example (extended reading [Enterprise Focus] Subversive breakthrough!). SGL's new 50K large tow carbon fiber has the performance of small tow fibers), in which C-carbon, T - Continuous tow, 50 - number of fiber tows, 4.9/235 - continuous fiber strength and modulus, so its meaning is 50k tow specifications of tensile strength of 4.9 GPa, tensile modulus of 235 GPa carbon fiber. Large tow carbon fiber has its cost advantage, but also has performance limitations, the company's carbon fiber strength is generally less than 5.0GPa.
In general, due to the company's large tow carbon fiber performance compared with other companies such as Toray of Japan, Hexcel of the United States has a large production 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 accounted for nearly 80% of the revenue of wind energy, industry, automobiles, etc., and according to the company's introduction, there is a surplus of carbon fiber production capacity in these departments.