Ladies and gentlemen, thank you for standing by. Welcome to the SGL Carbon conference call, year-end results 2021. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press * followed by one on your touch tone telephone. Please press the * key followed by zero for operator assistance. We'd now like to turn the conference over to Claudia Kellert. Please go ahead.
Thank you. Good morning, and welcome to our conference call about the business development and the financials of the past year, 2021. Furthermore, we will give you an outlook on the financials 2022 and our expectations for the further development of our operations and of course, on the possible impact of the terrible war in Ukraine. On behalf of SGL Carbon, our CEO, Torsten Derr, and our CFO, Thomas Dippold will present the financials and the outlook today and will answer your questions after the presentation. Now I can hand over to Torsten Derr.
Yes. Good morning, everyone. I have fantastic figures to report. Last year went pretty well, and our sales is above EUR 1 billion. This is a + of 9.5%. Our EBITDA developed even better. We are at the upper end of our guidance, and we have EUR 140 million EBITDA pre to report, which is +50.9% or +EUR 47.2 million. Our equity ratio is now at 27%. As we reported last time, it was at 17.5%, and Thomas will elaborate on this a little bit more later on, and this gives us much more resilience. Our financial debt is down now at EUR 206.3 million.
You know the basis of our whole operation last year was our restructuring program, and we are fully on track. We are even ahead of track. We are able, because the price elasticity is pretty high, to increase prices and to forward most of the energy exposure and raw material exposure we have. Especially helpful was the LED market, which runs pretty well, and semiconductors. We are hardly affected by the chip shortage in our automotive segment because we serve the more expensive part of the automotive sector, and this was hardly affected by chip shortage in 2021. Everyone is talking about the war in Ukraine, and of course, we also did our mitigation measures, which we will elaborate later on.
Our guidance for the next year, sales on this year level, EBITDA pre between EUR 110 million and EUR 130 million. With this, I would like to hand over to my colleague, our CFO, Thomas Dippold.
Yeah. Thank you, Torsten. It's my honor and my privilege to guide you through the full year figures 2021. We can summarize it. We have achieved our increased guidance. For many years, SGL has for the first time increased the guidance on the thirteenth of July with EUR 1 billion in sales and EUR 130 million-EUR 140 million in EBITDA pre, and this is exactly what we have delivered.
On this slide number 5, for those who can't see it, on the screen, but have a printout from our website, you see a two years comparison or a three years comparison from 2019 to 2021, and you see the sharp decline in our top line from 2019 to 2020 by over 15%, coming or resulting from the COVID impact, but also from the loss of the GAM business, the graphite anode material business, which we had still in 2019 with a Japanese customer. Since then, we recovered almost in double-digit growth rates to EUR 1.007 billion in this particular year that we are just reporting. Our EBITDA pre grew even higher.
We lost 22% from 2019 to 2020, coming down from EUR 120 million to EUR 93 million, and now showing EUR 140 million straight, which is exactly the upper end of our given guidance. This also results or comes in line with a very strong free cash flow of EUR 111 million, another 18% up compared to the year before. This then contributes to the strong decline in our net debt, which we could lower by 28% from EUR 287 million to EUR 206 million. If you translate it into a leverage ratio, which we report, then the leverage ratio would have been halved, coming from 3.1 to 1.5. Where does the profitability and the sales really come from?
On this slide, you see the growth compared to last year, and on the right side, slide number 6, the breakdown per business unit. Then you can see we have two strong and big business units being Graphite Solutions and Carbon Fibers, and two smaller ones. You remember last year when we split the former GMS and CFM business unit into two pieces. This was a very good decision because everybody contributed and improved with a clear focus to dedicated markets and the distinct management behind it.
When we look at where the sales growth comes from, this roughly EUR 80 million that we report, then Graphite Solutions contribute the most, being also the biggest business unit that we have, is EUR 36 million, followed by one of the smaller business units being Composite Solutions, which grew by almost 40%, up EUR 33.9 million, and followed by Carbon Fibers business unit with a strong sales growth there as well, with EUR 33 million. All this contributed to strong sales. The profit, the profitability mix, where we really put our focus on profitable business and profitable growth, contributed very much together with the savings from the transformation and restructuring program, which Torsten already pointed out, contributed to a profitability increase of over 50% from 93 to EUR 140 million.
We're having a look at the business units, themselves. Graphite Solutions, slide number seven. The main contributor to the strong sales growth of 8% is the semiconductor and LED business. This is also a very profitable business that we have there, and the margins are comparably high in the, anyway, a very strong or very profitable business unit at Graphite Solutions. Automotive business and chemicals were also supportive and followed with growth rate slightly below that. Industrial business had a very sluggish first half but is recovering in H2 of 2021. All this contributed, together with the savings, very much to the strong EBITDA improvement of almost 40%, coming from EUR 63 million up to EUR 88 million in 2021.
When we look at Process Technology, we see a rather flat development in our sales figures. They remain at EUR 88 million top line. However, they contributed a lot with the savings and the internal realignment of the structures that they could increase the EBITDA pre on this level by almost 40% and now reaching EUR 4.7 million. We're still not happy with that development. There's a lot more where we can improve, but still, this is an important step in the right direction. We have a lower utilization. We are fighting with increasing raw material costs. However, this all could be overcompensated with cost saving initiatives. On the next slide, you see our Carbon Fibers business.
There we see a very strong development in the top line and an even more remarkable development in the bottom line. Our sales went up by 11% and now reaching EUR 337 billion, and this comes from a demand from almost all market segments. The strongest of it is automotive. There we have the contract, the take or pay contract, which you're all aware of, which is anyway expiring end of June this year, but it contributed very much to the sales of last year. This rising demand and being fully sold out, we cannot even serve the demand that we see from the wind industry. Which will anyway be the successor of the automotive business in the second half of the year.
Our EBITDA pre went up by EUR 13 million, now reaching EUR 54 million. This strong improvement, this 13 million increase, can be halved into two pieces. One is the at-equity contribution from our joint venture with Brembo, with the BSCCB, where we sell carbon ceramic brake disc. They improved by EUR 6 million, and the other EUR 7 million come from operational performances, price increases, and cost savings, and higher utilization. Last but not least, from all the operative business units, maybe the one with the most remarkable development. Our Composite Solutions business unit shows a very strong growth, which is mainly driven by automotive orders and contracts, which we could work on in 2021. Our top line developed by 38% and now reaching EUR 122.5 million.
You see that leaf springs projects and also battery case projects being made out of composite materials really boosted the sales. We made sure that this is in large scale or serial production and not just in a manual production application, how we do it. This really boosted our bottom line very much, where we could improve by almost EUR 17 million coming from roughly -EUR 5 million and now reaching +EUR 12 million. A remarkable development given the size of the business unit. Last but not least, you see our corporate business unit, where we sum up all the corporate functions and corporate services which we incorporate. Our sales went down almost by half. This is not a bad development because we don't want to do sales in corporate for anybody else.
We would rather be an internal service provider and just distribute our internal costs to the business units, and contribute to their strong development. However, in the past, we had quite remarkable sales also in our corporate development, coming from services to Showa Denko, you know that, and others. But also we received quite a bit of rental income. We rather now sell the unused land and make use of the liquidity which we could gain in this market and development, and therefore, sales went down by EUR 15 million. This also hit our bottom line by -EUR 9 million, which we deteriorated there, now having -EUR 19 million as an EBITDA pre there.
when you look at the difference between that also shows that our corporate cost, despite an increase in our top line by 9.5%, as Torsten pointed out, we could reduce our corporate cost by EUR 6 million, which is exactly the difference between the top line development and the bottom line. When we look at the structure or the more bottom line in the P&L and also how the balance sheet main KPIs develop, I think this is something we are very proud of when you see these key figures here. We have reached a net result, so the very, very bottom line of EUR 75.4 million. You see that on slide number 12.
Coming from a disastrous EUR -132 million in the year before, which was highly affected by the impairment of our carbon fiber business of in total EUR 106 million, which we incorporated there. This is a very strong development, and half of it comes from one-off effects, but the other half is really our operative performance. This is the first positive net result that we have achieved since three years. Our free cash flow, which was strong already also in last year with a few one-off effects, even improved further to EUR 111 million, coming from a very strong operative cash flow. Investing cash flow is even negative or only slightly negative, because there also the land sales and the dividend from our joint venture came in.
Our net financial debt could be brought down by this development by almost 30% and now totaling EUR 206 million. As Torsten already pointed out, our equity ratio improved by almost 10%, full percentage point to 27%. This is due to the strong performance in our profitability, but also due to some effects where we adjusted our pension scheme. We can maybe elaborate a little bit further in the Q&A session. With that, keeping the capital employed on a constant level of roughly EUR 1 billion despite the growth of 10%, our ROCE could improve to 8% coming from 1.8% in the year before.
Maybe as a kind of transition to help you a little bit with the non-recurring and one-off effects that we had in last year, we have added this slide number 13, where we try to reconcile a little bit between reported EBIT and EBITDA pre. When you look at the columns, EBITDA pre, we have roughly EUR 60 million depreciation, amortization, and this year only depreciation. Then our EBIT pre is accordingly roughly EUR 80 million. In that, there are EUR 40 million non-operating one-off items, which you could see on the right side. We have sold land in the United States, but also in our site in Meitingen, some pieces which we could easily sell, and we made roughly EUR 20 million out of it.
We added a capital option that our pensioners, when they go to their retirement age, they can choose. In the past, they only had a pension, a lifelong pension. Now they can choose for a capital option that they can take a one-off payment. This helped our profitability at the bottom line, but also the equity with another EUR 18 million. We also got some insurance proceeds from damages which we had the year before. These were the one-offs which are not directly attributable to our operative performance, totaling EUR 40.7 million. We have a purchase price allocation and restructuring expenses of EUR 10 million. This adds up to an EBIT reported of EUR 110 million.
With that, I can summarize this chapter with our figures for 2021. We are very happy, and we are really proud of our 4,800 employees who really worked hard and contributed, that everybody can see that we have achieved what we said. We've adjusted our targets during the year. Our initial guidance, which we gave under a COVID situation, was EUR 920 million-EUR 970 million, and we increased it at half year to EUR 1 billion, and we reached EUR 1.107 billion. This is really a perfect fit. In EBITDA pre, in 2020, we reached EUR 93 million.
We aimed for 100-120 in our initial guidance that we gave exactly one year ago. We added it up to 130-140, and we exactly reached the upper end. This is really a very strong development for SGL in 2021. With that, I hand over to Torsten, who will guide you a little bit through the efforts and the progress we made in the restructuring program, which is the next chapter.
Thomas, thank you. With our transformation program, we are fully on track or even ahead of track. You know, as Thomas and me started at SGL Carbon in 2020, we directly started with a transformation program of our company and every business unit, every country, and also corporate was affected. In total, we defined 700 initiatives, and you can see 85% of the 700 initiatives are completed. We promised you to reduce our costs by more than EUR 100 million, and we already overachieved this target. We are right now as we talk at EUR 120 million savings. We also promised you headcount reduction, more than 500 people. Today as we talk, we realized 115% of it. Also overachieved this.
Currently we are at roughly 600 people, which were reduced during the transformation. Our operational challenges, which we see are manageable, but the geopolitics, and I mean the Ukrainian war, are very difficult to predict. I will guide you through the challenges which we are facing. On the left-hand side, you see our raw material costs. As an example, we put two core raw materials, pitch and coke, which are our core raw materials for the production of graphite in. You can see, especially in Q4 and also in Q1 this year, prices are increasing. But so far, we managed to achieve availability, and we can produce full out in every unit.
We benefit here, especially for our key raw materials, pitch, coke, and also acrylonitrile from long-term contracts where we concluded or where we defined supply security and also very competitive prices. The price elasticity towards our customers is pretty good, and currently we are able to pass on most of the raw material price increases to our customers. Second is the transportation and the logistics. We have depicted here the container freight index, and you can see that the container price exploded from around $2,000 per container to $9,500. It seems to be stable on that level. Due to the Ukrainian war, there was also a secondary effect. Our transportation from Europe to China and backwards, we use the Trans-Siberian Railway.
This is now blocked, but fortunately we found enough container space to use this as an alternative for the Trans-Siberian Railway. Price is increasing and still on very high level, but manageable. What concerns me most is the natural gas price, and here we have shown you two natural gas prices. One for Europe, which is highly volatile and increased pretty much. You can also see in light gray the U.S., gas prices. Approximately 30%-40% of our operation is located in U.S., and there we benefit from pretty stable and low natural gas prices. I will show you in the next slide what we did to handle the European volatility. You can see here our exposure in the two energy sources, which is natural gas and electricity.
Thomas and me decided to secure the energy and to secure the prices. As we talk, 84% of our natural gas exposure worldwide is hedged. We secured availability, and we secured the prices. For electricity, 83% is hedged, and every day we close more and more countries. Yesterday, we closed our exposure in Poland and in France. Because we have decided to go this way? Our order entry is fantastic. We are fully booked out, and we can run at capacity. Our duty is to secure the production, and this is why we hedged 85% of the energy and secured our production. All this is included in our guidance for this year and in our figures. Next slide, please. Here you can see the drivers, and I already said this.
We have a very strong demand in all market segments. Every business unit, every one of our four business units is running at capacity, and our order books are full. In one of the business units, we even went into sales control because we had too many orders and had to select the best one. The growth drivers are semiconductors and also renewable energy. We also have interesting orders coming from automotive, and this guarantees us sales for five to six years. The price elasticity is pretty high, and the cost increases, which we see from logistics, from energy, and also from raw materials, we can pass on to our customers. What really helps is our transformation program. This is giving us resilience. Coming to the right side of the slide, raw material prices and availability.
We have multiple sources for all our core raw materials, and we think this secures for the time being our production. Energy price development is still very volatile and the prices are high, but we decided to mitigate it by hedging 85%. We secured availability of energy and also the price. Just, I repeat it, that you know, the BMW i3 contract, which is pretty important for our carbon fiber business, expires by mid of this year, but we already find mitigation also for this. We are shifting the capacity into wind energy, and the demand of wind energy is so high that we cannot satisfy all the orders which are coming into our books. Mitigation on all three major risks. What we cannot control are geopolitics.
If there are secondary effects on our customer side, for example, in automotives, where we have no indication so far, this is not included and also a slowdown of our global economy. Prior to this meeting, we talked to our largest customers, and all confirmed the orders which we have in our books right now. Here you can see the effect in sales. We guide you for the sales around EUR 1 billion on prior years level and including the Ukrainian war effect and all the energy hedging and the effects where we secured our raw materials will lead to an EBITDA pre between EUR 110 million and EUR 130 million. Good news is that our midterm planning remains unchanged.
We are pretty bullish on what we see on the customer side. Our sales went up from 2020 to 2021 by 9.5%. We already reached the EUR 1 billion area, and we will increase our top line in a range between EUR 1.2 billion and EUR 1.3 billion in 2025. In the same timeframe, we will further improve our EBITDA pre-margin from today's 11%-13% to 15%-18%. We confirm both our top line growth plan and we are also going to improve our profitability. On the next slide, I'm going to repeat the key messages. 2021 was really fantastic, and it was above Thomas and my expectation, and I think also above your expectations.
The BMW i3 contract runs out by mid of this year. This is planned, and we will find a very, very good substitute in wind energy. This market is booming right now, and we cannot satisfy the demand which is coming from our customers. The prices for raw materials, energy, and transport are high, but we can pass on most of the price increases to our customers, and we have secured everything which is important for our production. Of course, there are still uncertainties. Maybe our customers slow down. We have no indication right now in our books. The best is the medium-term outlook is unchanged, and we are still bullish with our business. With this, I would like to conclude my remarks and hand over to Claudia.
Yes. Thank you. Now we can start with the Q&A session. Stuart, maybe you can explain the handling once more. Thank you.
Thank you, Claudia. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press * followed by one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press * followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press * followed by one at this time. One moment for the first question. First question is from Lars vom Cleff from Deutsche Bank AG. Please go ahead.
Thank you very much. Good morning. Many thanks for taking my questions. I've got three, and if you agree, I would ask them one by one. I still struggle to understand your flat sales guidance. I mean, you say that you are able to pass on most of the input price inflation, which tells me you're able to increase prices. You're saying that you expect to benefit from a further increase in demand in almost all market segments, but nevertheless, you're guiding for flat revenue. Maybe you could help me understand that a little bit better.
Yes, Lars, this is Thomas Dippold. Well, you are right. The demand is high, however. We have to make this very clear. We are losing the BMW i3 contract, which is not just very profitable in the bottom line, but also price-wise in the top line. Therefore, this also affects the top line accordingly in the second half of the year. As the prices are definitely not so high, even if they're increasingly attractive in the wind market, we cannot fully compensate that. This hits the bottom line, but also affects the top line.
With all the uncertainty that we have around that and the capacity constraints which Torsten pointed out, that in many businesses we are coming to the capacity limits, especially where we have this high profitability business, and we need to expand our capacities accordingly, which we are planning to invest further on. This is why we give you a rather maybe conservative outlook, considering our top line.
Understood. Many thanks. I mean, the spread between European and U.S., gas prices has become enormous, as we can also see on your chart. Is it easy for you to shift production to the U.S.? Are you relatively flexible with that, or does the current European production have to stay in Europe and is hit by the European gas price?
Thanks for this question, Lars. No, we will stay at our current set of sites. We have 29 production sites, and I think we have nine production sites in the U.S. Fortunately, the high energy consuming sites are in the U.S. For example, our site in Moses Lake, where we buy hydropower energy between $0.02 and $0.03 per kWh, which is a fantastic price for green energy. You cannot shift the heavy assets which we are operating, and the setup will stay as it is, and we have to keep our chains intact, which are sometimes from Europe to U.S., and back, you know. Hope this answers your question.
It does indeed. Thank you very much. A last one, if I may. I understand it's very difficult to predict how business year 2022 could look like, but would you be able to break down your guidance a bit more? Could you maybe share one or two sentences per division on your guidance, what you're expecting for the various divisions?
Yeah. This is what we can do for sure. I mean, in Graphite Solutions, we expect a moderate increase of our top line and a further improvement of our profitability. This is what we can see. Why is this only a slight increase in our top line? Because we are coming to the capacity limits, as I just pointed out. In our Process Technology, we see a further increase in demand, at least from the chemical industry, and therefore we see some growth there. At least our order book reflects that. Also EBITDA pre, as I pointed out, that we are maybe not 100% happy with the current profitability of this business unit. We expect to see also some further increases there.
In Carbon Fibers, our sales look rather flat, but flat means it can also slightly go down. We do expect that because of the impact that I just mentioned with the first question, with the expiry of this take or pay contract, and therefore also our profitability will be hit significantly, especially in this business unit, which is also the most affected business unit which is affected by the energy prices by far. Last but not least, in our Composite Solutions business, we also coming to capacity limits there. All the projects which we set up in 2021 are now fully up and running, and therefore our sales can only maybe stay flat or even a slight increase that we see there.
The profitability has really come to a level which is totally fair for automotive business. We don't see a further relative improvement of our EBITDA pre in our Composite Solutions. I hope this helps to understand a little bit how we see 2022 per business unit.
Maybe Thomas, let me add a little bit. I would like to talk about price increases. Lars, what we see right now, I have not experienced in my career. From last year to this year, we see an energy price increase, I think, of 78%. Some of our raw materials are just doubling. We have to knock on the door of our customers, and we are very successful in passing on this price increases in raws, in transportation and in energy, which we haven't seen so far. We are pretty successful in doing this. Just to pass a doubling on, raw materials on to the customer, I tell you, is not an easy challenge, no.
That is great. Much appreciated. Thank you very much.
As a reminder, if you'd like to ask a question, please press * followed by one on your touch tone telephone. Next question is from the line of Andreas Heine from Stifel. Please go ahead.
Yes, thanks for having the opportunity to ask questions. I would like to dig in a little bit more in this, what you said on the outlook by segment. I would basically in trends have come to the same conclusion what you just mentioned, but going then into the numbers, it means that the Carbon Fiber has really an issue. Because if three divisions are increasing in earnings, only one declining, and that one is where you consolidate Brembo, where I would assume that earnings will not decline, then there is basically nothing left. If I go to the lower end then, excluding Brembo, then the Carbon Fiber is at very thin margins. Maybe you can elaborate on this a little bit more.
As you have mentioned it several times that you're working at capacity, what does it mean for your CapEx program? My understanding is that you still work on improving the mix, so not necessarily going for larger upstream investments. How can you adjust, align the capacities, especially in the fast-growing areas, so in Composite Solutions and semi and LED and Carbon Fibers? Then I go back to the line, but I have more questions. You were quite successful in selling non-operating assets. In the Q3 call, I asked about that's all or whether there is more to come, and you said that a little bit could come. Maybe you can expand a little bit what your plans are in selling non-core assets in 2022.
Yes. Andreas, you are right. I can maybe catch up with that point again. What we may not forget, you are completely right. Graphite Solutions operating at the capacity limits, at least in many of the markets and businesses that we're having. Therefore, we see a slight increase, but this slight means really slight. It's the same in Composite Solutions and in Process Technology, being the smallest of the current business units. A significant increase is still can still be only a single digit million top line figure that we see there.
We may not forget, and this is probably something which I didn't mention in the question of Lars vom Cleff . We also have a business unit called Corporate. As we want to purely concentrate on being an internal service provider and not having external sales, which are also reflected in the top line, you can expect also a further decrease of our top line in the business unit Corporate accordingly. If you sum up everything together, we say it's a rather flat development in our top line. That's maybe the only comment that I can add on to this.
When we're talking about the PCCB JV, it's an equity joint venture which is not affecting our top line. You may be right, and we don't see any problems in our joint venture with PCCB, and we expect the same profitability contribution there. Just as a reminder, it's not reflected in the top line, only in the results.
I was more referring to the earnings, so
Yeah, yeah. Right. In the earnings, you are right. Therefore, still it's a significant decrease. Significant means larger than 10%.
In Carbon Fibers line.
In Carbon Fibers. Yes. Yes.
Well, if all the segments were covered, I don't know how much it means. Maybe a couple of million EUR will not be too much.
Yeah.
If you look at, let's say, from what you delivered in 2021 to take the worst case, which is EUR 1 or 10 or 30 million. If I look on what you have delivered in Carbon Fibers, and I extract the at-equity business, which is run by Brembo, which is EUR 60 million and three of the segments might increase earnings as you have outlined. Then Carbon Fibers, despite the fact being working at capacity, has quite some issue on the margin side. Is that all on the textile side, which is in heavy loss-making? Or how can you explain the weak profitability of Carbon Fibers you expect for 2022?
It's mainly the energy that we are having. You said that our site in Portugal is very much driven by gas and the gas prices, which is in Europe, and the gas price is really hiked, as Torsten pointed out, to some peaks. We have hedged that on a what we think reasonable level, but it's definitely a level where we can produce. I think this is the most important, as this is the beginning of the value chain of our internal value chain, where we produce a precursor and other fibers and materials. We want to secure our production on a level where we can profitably produce.
For sure, not as profitable as it was when the gas prices were down at EUR 10-EUR 20 per MWh. Definitely on a level where we say, this is something which we can pass on to the customers, and this is something where we can produce. This is exactly what we hedge. This is definitely an impact, and this is also reflected in our guidance.
Yeah.
which we give.
Andreas, I would like to answer your second question. You talked about growth limitation and our CapEx program, and this is pretty simple. Most of our CapEx is going into our business unit, Graphite Solutions, and there we are benefiting from the semicon market. We receive very positive feedback from our customers and also customer commitments for investments. And this we support with the major share of our CapEx. In the Carbon Fibers, the story is different. We are not investing in capacity expansion. You know, we are operating an acrylic fiber plant in Lavradio, and we are selling acrylic fibers and also produce in Lavradio in Portugal precursor, which is the basis for our carbon fiber chain.
There we have a lot of room to optimize everything and to shift acrylic fiber capacity into the carbon fiber chain and improve our margin without capacity expansions. Capacity expansions we are planning right now at the end of the time frame we are planning 2025, where we plan to enter the aerospace market, and there we will do something in Moses Lake and also in Lavradio. We also changed the head of the business unit one and a half years ago, and he brings businesses to the table which are much more profitable than the businesses we had before. I think we will have quite some fun with carbon fibers in the future. Then, Andreas, your last question on non-operating assets. Yes, we plan to continue with that.
We are in talks with potential interested parties. We still have a few businesses or some idle land which has been used in the past which we are about to sell. It's too early to give you an update on that. We're working on that.
Thanks. I go back in the line.
Thank you.
There are no further questions at this time, and I would like to hand back to Claudia Kellert for closing comments. Please go ahead.
Thank you. I see no further question here. If you have a question, then right now or later you can ask the IR team. I see an additional question from Lars.
Okay, we have one more question, follow-up question from Lars vom Cleff from Deutsche Bank. Please go ahead.
I'm sure Andreas will also have some follow-up questions. I just was curious to hear a bit more about your new idea to enter the aerospace sector again. I mean, last time, please correct me if I'm wrong, it wasn't that successful. Could you talk a bit more about what you're planning there and why it should be more successful this time?
I think last time as we communicated on this, we planned a development JV together with Solvay. This is not anymore the case. It's more a buy or sell business where we produce a special carbon fiber which can be used in aerospace. To enter aerospace business is always a long-term exercise, and we will have fun with this starting 2025, 2026, and at the end of the decade. We made very big promises, and we will further comment on this in our Q1 session, which is in May, I guess.
Got it. Thank you.
Mm-hmm.
We have another follow-up question from the line of Andreas Heine from Stifel. Please go ahead.
Yeah. Maybe you can talk a little bit about Q1. It's almost over. So is Q1 progressing in line with what your guidance is? Or, what I've seen from other companies is that they basically prepare for a very good first half and do not extrapolate this into the second half, meaning that most of the companies reporting are over-delivering in the first quarter and have some cautiousness then for how it progresses. Is that might be similar at your end? One thing on the free cash generation. If you look at the low end of your guidance, EUR 110 million, and that, with all the price increases, might see an additional need in net working capital.
Is it still fair to assume that even at the lower end of the EUR 110 million, you would have a positive free cash flow?
Well, coming to the last question, this is easy to answer. Yes. This is our clear target. We of course want to have a positive free cash flow. This is what we're working on, and this is exactly how we manage the businesses full stop. Coming to your first question, I mean, we anyway have this kind of seasonality, as we pointed out, because the expiry of the i3 contract, which is exactly at half year. So the first six months we still have this i3 contract and afterwards we don't. This is the case. What we can say, and we don't wanna give too much of a kind of a sneak preview of Q1. Let's see how much now really closes.
Up to now, we were just working heavily on finishing 2021 until yesterday with the supervisory board meeting. We started really okay into the new year. Again, give us the patience or please be patient for another five weeks, and then we report beginning of May on the Q1 how it looks like. Then we can maybe elaborate a little bit further. We see how much the development in Ukraine has progressed.
What the visibility of Q2 and also subsequently for the second half of the year is how successful we can be with price increases with the customer, as Torsten was pointing out. So far, our guidance is 110-130. And again we will have this question, I'm quite sure at the beginning of May when we present our Q1 figures.
Perfect. Thanks.
Thank you so much.
We have another follow-up question from Lars vom Cleff from Deutsche Bank. Please go ahead.
Sorry, I had too much coffee this morning to act this. I just received a question from Harvey T. O'Malley, an investor that is listening to your webcast. He's interested in learning more about your cash use with your currently very high cash balance. Maybe you could tell us a bit more what you're planning with your cash and how you would like to invest that.
Well, when you look at our cash position, then you also have to look at our debt position. It's not that we have an RCF in place, but it's completely undrawn. The way we are financed so far is through capital market financing instruments. One is a convertible and one is a bond. The convertible expires September 2023, which is in one and a half years, so enough time to look at that. The current status, if you look at the annual report, it runs with 150 or 151 million EUR to be precise. The bond is EUR 250 million, which expires exactly one year later.
What we have there, I mean, we cannot make use of the cash in total and just invest the money and do something else. We run into refinancing issues, and our balance sheet structure looks as it is. So far, what we're trying to do, we safeguard the cash that we have and maintain it on the level, which is also gives you a lot of security and confidence that we maintain our cash position as it is. What we try to invest, as Andreas and also Lars were pointing out, we try to achieve a positive free cash flow to show that we can run the business in a profitable manner. We don't invest monies which we don't make.
This is maybe the most guiding principle that SGL is having in the nearer path. We first have to make the money and then we can spend it. This is a clear position that we have. When we spend it only in profitable businesses, which we hopefully know and expand existing ones rather than going deep dive into some new adventures where we have never done before and in some businesses which we maybe are dependent on one sole customer. This is the guidance and the principles we follow there. We are very cautious with our CapEx.
We are very cautious with our cash flow, and we rather safeguard the cash that we have and for goodness' sake, and then refinancing shouldn't be a problem.
Thank you very much.
My pleasure.
There are no further questions at this time, and I would like to hand back to Claudia Kellert for any closing comments. Please go ahead.
Yes, thank you. Thanks for your participation in our call today. If you have further questions, do not hesitate to contact Jürgen Reck or myself. We are pleased to answer additional questions also from Lars and Andreas. Thanks so much and have a sunny afternoon. Thank you. Goodbye.
Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.