Navigating Market Headwinds: SGL Carbon's Resilient Q1 Performance

Strategic Divestitures and Revenue Impact: A Closer Look at Group Results

In the initial quarter of 2026, SGL Carbon experienced a significant reduction in its overall revenue, which saw a drop of 21.3%, bringing sales down to EUR 184 million from EUR 234 million in the previous year. This decline was predominantly a consequence of the company's strategic decision to exit unprofitable carbon fiber operations in Lavradio and Moses Lake, which were finalized in 2025. Chief Financial Officer Thomas Dippold highlighted that these discontinued activities alone accounted for EUR 28 million of the revenue decrease. Further reductions were observed in the Graphite Solutions and Process Technology divisions. However, despite the substantial decrease in sales, the company managed to limit the impact on its pre-EBITDA, which saw a more modest decline of 11.6%, settling at EUR 29.6 million. This indicates an effective management of costs amidst challenging market conditions.

Segment Performance: Divergent Trends Across Business Units

The first quarter showcased varied performances across SGL Carbon's business units. The Graphite Solutions division reported sales of EUR 106 million, an 8.8% decrease from the prior year, primarily due to subdued demand from silicon carbide clients facing high inventory levels. The company is proactively engaging with these customers to renegotiate contract terms and has reached a settlement with one major client, which included an adjustment that factored in future sales and a 'breakup fee' to mitigate the impact. The EBITDA margin for this segment, despite the challenges, remained strong at 17.3%, a testament to the division's cost control measures. Conversely, the Process Technology unit faced the steepest downturn, with sales plummeting by 30% to EUR 25.5 million. This was attributed to project delays and uncertainty in the chemical sector, which halted significant investment projects. The EBITDA pre for Process Technology saw a sharp decline of 62%, reaching EUR 4 million, although the margin of 16.1% was still considered within a healthy range historically.

Restructuring and Reorganization: The Genesis of Fiber Composites

The first quarter of 2026 also marked the official integration of SGL Carbon's remaining carbon fiber operations with its Composite Solutions business, forming a new combined entity named Fiber Composites. This strategic merger followed extensive restructuring efforts in 2025 aimed at streamlining the company's operations and focusing on profitable ventures. The new unit reported sales of EUR 47.7 million, a decrease largely due to the previously mentioned discontinued carbon fiber activities. Management views this as the division's 'new normal,' characterized by a focus on the profitable aspects of the carbon fiber business coupled with a stable and robust composites operation. The contribution from the BSCCB joint venture was noteworthy, adding EUR 4 million, which significantly bolstered the unit's operating margin to 18.9% when included, highlighting the positive outcomes of the recent restructuring initiatives.

Financial Health and Stability: Net Result, Cash Flow, and Balance Sheet Review

SGL Carbon's financial health demonstrated considerable improvement in the first quarter of 2026. The net result saw a significant turnaround, moving from a loss of EUR 6 million in the previous year to a profit of EUR 5.9 million. This positive shift was mainly due to a substantial reduction in restructuring and one-off costs, which were a hefty EUR 60.6 million in Q1 2025 but decreased to EUR 1.4 million in Q1 2026, confirming that the major restructuring phase is largely complete. Free cash flow also remained positive, increasing to EUR 6.4 million from EUR 5.1 million, reinforcing the company's confidence in achieving its full-year cash flow targets. The balance sheet reflected stability, with a slight reduction in net financial debt, a leverage ratio of 0.7, and an equity ratio approaching 40%, alongside a steady return on capital employed (ROCE) of approximately 10%.

Future Trajectories: Reiterated Guidance and Market Uncertainties

Chief Executive Officer Andreas Klein affirmed the company's previously issued guidance, projecting sales between EUR 720 million and EUR 770 million, and pre-EBITDA ranging from EUR 110 million to EUR 130 million. This outlook is grounded in two key assumptions: persistent global economic weakness coupled with geopolitical instability, intensified by ongoing conflicts and trade disputes; and the expectation of no significant recovery in the semiconductor and automotive industries during 2026. Klein noted that these assumptions have been consistently reaffirmed through recent market developments and direct customer engagements. Despite these headwinds, the company is strategically managing raw material and energy costs through hedging and customer negotiations to mitigate adverse impacts. The company's strategic focus for the near term includes managing silicon carbide customer inventories, expanding into the defense sector with a potential impact by 2027, and ramping up operations for X-energy related projects, which are expected to contribute significantly over the next three years.