Yeah, a very warm welcome from our side as well to our nine-month figures. As always, our CEO, Torsten Derr, and our CFO, Thomas Dippold, will present our financials and give you a little bit more insight about the business development. After the presentation, we will have enough time to answer your questions. I hand over to Torsten Derr.
Yes, Claudia, thank you very much. Good afternoon, everyone. We are very happy to report that both parameters, our group sales and our EBITDA pre, are in the expected range. Our group sales are at EUR 821.7 million. Our EBITDA pre is at EUR 130 million, and this despite a significant decline in the wind market, which is heavily affecting our business unit, Carbon Fiber. The business unit, Carbon Fiber, we had to impair some months ago by EUR 44.7 million. All our other BUs are on record level, especially our biggest business unit, Graphite Solution, driven by a strong semiconductor market, is on record high, and this is driven by customers out of the silicon carbide segment. In this segment, we are running with two graphite types, porous graphite and isostatic graphite, at capacity.
This is why we expanded our CapEx by one-third to, to expand the capacities and meet the strong demand. Our guidance was set on previous year EBITDA between EUR 160 million and EUR 180 million, and we confirm both the sales and the EBITDA guidance, but EBITDA on the lower end of the corridor. Having this said, I hand over to my colleague, our CFO, Thomas Dippold.
Hello, everybody. This is Thomas Dippold, and I have the pleasure to explain a little bit more in-depth how our business unit and our overall business is developing. On this slide number 5, you can see how sales and also EBITDA performed. Torsten already mentioned that we confirm our stabilization year, as we have always called it, the year 2023. Why is that? Because we knew going into 2023 that we no longer have the first six months of the year with a BMW take-or-pay contract in our Carbon Fiber business unit. And in our Composite Solutions business unit, we've sold our business in Gardena beginning of the year, and therefore, also the top line and also EBITDA contribution will no longer be in these relevant business units, and this is something that we have to compensate.
In fact, we did. On a group level, our turnover went down 3.8%. If you take into consideration some FX effects with the currencies, it's less than 2%. So, we are perfectly in line to what we've said and what we guided to you. Our EBITDA pre is, however, 4.5% lower, but after nine months, I think this is also a tiny deviation that we see there. In fact, we confirm a stabilization year. I think it's worth mentioning that our Graphite Solutions business unit, as Torsten called it, the most important pillar of our portfolio, now stands for more than 50% after nine months of the year 2023. So, the importance of this business unit, which is developing very nicely, is gaining more and more importance.
Carbon fiber, in the meantime, is coming down from 30% to a little bit more than 20%. So the importance and contribution of this business unit is decreasing by far. The smaller ones are catching up and now stand for 11% or 40%, respectively, and corporate remains just a remainder for all other businesses that we have in the group. On slide number 6, you see the development of Graphite Solutions, and this is an ongoing success story coming from EUR 382.5 million after nine months last year, we now reach EUR 418.4 million, which is up almost 10%, 9.4%, to be precise. And this is mainly attributable to a very strong increase in semiconductor business.
We went up by 38.5% in this respective business, and this is mainly driven by silicon carbide sales, as Torsten already pointed out. This is also where we focus to increase our capacity, and this is really going very much up and contributing to our growth. We are running on full steam in our capacities. The capacity almost fully utilized for graphite components. Automotive and industrial applications, the business that we conventionally have in older existing businesses, so to speak, so-so. We call it stable, but there are also some products which are even deteriorating. But this is all overcome by the very strong semiconductor industry and also solar battery materials and chemicals are decreasing even.
But again, in fact, everything can be fully compensated and ten percent on top with mainly strong semiconductor sales. As we always promised, our profitability grows twice as much as our top line. EBITDA went up by 18.5%, now reaching EUR 99.5 after nine months of the year, 2023. Where does it come from? Mainly the very strong silicon carbide sales that contribute with a high margin to this development. We are fully loaded. This also, we are diluting, so to speak, the fixed cost on the product. And if you neglect businesses like solar and maybe also even conventional semiconductor business for the sake of higher silicon carbide products, then this result can be achieved.
In fact, we have now reached a 23.8% margin, EBITDA pre sales. This is a record high. Some 3 years ago, we were at 15 point something, and now, we are reaching almost 24%. A good development as promised. Slide number 7, you see Process Technology, another very strong development, and as Torsten already pointed out, another business unit reaching all-time highs after 9 months of a year. So Process Technology went up in the sales by almost 25%, reaching 24.3% increase, and now, standing at EUR 95.7 billion after 9 months of this year. Where does it come from?
As we always said, we have a very strong order book as we went into the year 2023, and we are continuing in acquiring good, good, good and profitable orders. So also for the next couple of months, normally, you have an order book that lasts for 6-9 months. We are not worried about the top line of Process Technology. That really looks promising, and we are standing also regional wise on three legs. We have growth in all three regions where we are active: in the United States, in Europe, but also in Asia, and there mainly mainly China. Our profitability was unexpectedly high. That's also something that we like very much how Process Tech is contributing, coming from 7.5 after 9 months of last year to now reaching 17.5.
So it's an increase of more than 100%. Where does it come from? A very strong parts and service business. We know exactly that chemical industry is partially down and deteriorating in Europe. And what do the Process Tech guys do? They approach our chemical customers. They say, "This is now the time for maintenance and refurbishment," and they overhaul, and they do some service business to make sure that the heat exchangers and the synthesis plants are working properly. And in fact, we're making some good money with the service business. I think we are fully loaded, we have very positive mix effects, and we continue in our margin over volume strategy.
In fact, this is the outcome, what we see here. We reach an 18.3% margin in this business unit. This is something we've never seen, and this is good business, and we like it very much. Our problem child, as Torsten already pointed out in this year, is carbon fiber. We knew it's gonna be that we might have some deviation because last year, for comparison, in the first six months of the year, we still had the profitable take-or-pay contract on the BMW i3. We knew that this can't be repeated after this model expired at half year. And we went into the wind industry for that, and it went extremely well in the second half of last year.
However, especially since beginning of the year, the wind market came to a especially offshore, came to a complete standstill, and you see that our top line went down by 33%, which is EUR 90 million less sales than last year, and we still confirm our sales and profit guidance. That also shows how strong, on the other hand, all other businesses are. And you see that our EBITDA pre is hardly positive with EUR 3.2 million, and we say it very clearly, this includes the contribution of that equity result of our joint venture that we have with Brembo, our so-called BSCCB, which contribute with EUR 14.1 billion into this result.
So if you deduct it, we would be at roughly -EUR 10 million, -EUR 11 million in this business unit, respectively from our operative performance. Why did it deteriorate compared to half year, especially in Q3, so much? Because we idle capacity. We don't want to ramp up or build up a working capital in inventories in that respect, and we really adjusted our production levels to the sales that we can make on this very low level, and there will be idle and mothballed quite a bit of production, and we have to cope with the fixed costs that arise from that. So but, I mean, if you have a technical problem, you can solve it. If you have a cost problem, you have to restructure.
But if your market simply is missing, there's hardly anything you can do against, except idling capacity, and this is what we do. You can, you can be very sure that we try to optimize the cost, cost position as much as we can and also try to, yeah, work on solutions. But you also have, have seen that at half year that we had to do an impairment of EUR 44.7 billion based on the triggering event, which we had with rising capital costs and the poor performance that we had in the wind market at half year. Another very good business unit that we have in our portfolio, and this is three to one as it stands now, is Composite Solutions, and you see the development on slide number 9.
Sales went up by 3%, and this is overcompensating the sales that we had last year in our Gardena site. So despite losing the Gardena business, they overcompensate the sales growth and they go up from EUR 111 million-EUR 140 million in the top line, which is fantastic. When we go to the bottom line, the development is even more remarkable. We almost go down by go up by EUR 2 million, and now reaching an overall margin of 13.3%. However, you have to bear in mind, last year, Gardena was in plus a one-off effect from a canceled project, which is to be dealt in our operative result of EUR 3.7 million. So this is non-recurring.
If you deduct it and take out Gardena, I know it's a little bit complicated, and I have to make all this bridge calculation and transitions, but I just want to highlight that the EUR 16.6 million EBITDA in the first nine months of this year is very remarkable when you compare it to last year's performance. Who's the driver behind? Mainly the large CRS business. We know exactly that we are dependent on certain projects in automotive industry. We are, in the meantime, a pure-play automotive industry, and we have good projects in our portfolio. But there also will be some variances. These projects change every year. But at the moment, we are very happy with the development that we have.
Last but not least, and also for comparison, just to make it complete, our business unit, which is non-operative corporate, they stand for roughly EUR 14 million in sales, and however, half of it is coming from the Gardena sales and also Pune sales for the first couple of weeks of this respective fiscal year. We had a technical effect last year, where we had a one-time effect of EUR 6.6 million. In fact, you see that the sales in corporate is not really, really relevant for us. Our EBITDA pre, however, has improved or has been cut to half, so to speak, as it is negative figures, as this is the remaining cost position. This is positive for the overall performance of the business unit. So where does it come from?
Overall, or generally speaking, a very good cost and cash management that we have. The other thing, we have lower provisions with our result that we currently have, which is at the lower end of the guidance. So the variable compensation and the provisions we make through the course of the year for that is significantly lower than the variable compensation provision we had last year, and this is mainly driving these results. So having said that, maybe a small look at our bottom line and also the balance sheet. You see that our net result is very tiny if you compare it to the nine-month figure of 2022. Why is that? Because of the impairment that we had at half year.
If you put the EUR 45 million, roughly, on top of the EUR 5 million that we have in the first nine months of 2023, then there would be roughly EUR 50 million and 50 compared to 70. Also last year, we had some one-off effects in there. Then we are on a very good way. However, there was an impairment, and our net result is very tiny at the moment, and we don't have a net result pre. So in fact, this is really at the bottom line, and the bottom line is the bottom line. However, another positive quarter in SGL with a positive net result, and this is also just the case for the last three years. In the years before, situation looked far, far, far different.
Our equity ratio, despite the impairment that we've just mentioned, rose by a full 4 percentage points and are a super healthy 42.5%. And our net financial debt, despite the heavy CapEx that Torsten already mentioned, could be, yeah, kept stable, so to speak, or even lowered a little bit. CapEx is worthwhile mentioning. CapEx has reached almost EUR 60 million in the first nine months of the year. This is more, almost 20% more than what we have invested in the last year, 2022. And this shows very clearly that we follow our path, which we always mention to you guys, that we invest into this very profitable Graphite Solutions business, and there, especially the expansion of our silicon carbide capacities.
This will contribute to the sales growth and also profitability of SGL in the next months and years. With that, I hand over to Torsten, who will explain a little bit more our silicon carbide business and what it means for us.
Yeah. Thank you very much, Thomas. It's not only silicon carbide. I talk about our business unit, Graphite Solutions, and the semiconductor business. This is one of our fastest-growing markets in the company. What you see depicted here is the turnover by quarter in our segment, Semiconductors, and this comprises the typical silicon market, silicon carbide, and also LED. And you can see over the last three years, it has almost tripled, and the CAGR of this business is 42%. And with that, we have beaten all the market reports which were out there. And for us, the most important market report is from Yole, a market research institute. They were predicting the SiC market to grow with a compounded annual growth rate of 34%. Ours, the last three years, was 42%.
What is remarkable is what we have shown here on the lower slide. In the same time where we have tripled the market, we lifted up our EBITDA margin. It was on average at 19.8% in 2021, and we lifted it up to 23.8% in this year. So you can see in the semicon market, both up, sales up and EBITDA margin up. I think this is a good result. I have to admit, we are running for the two most important products at full capacity, and the most important products are isostatic graphite and porous graphite, and both are used in the hot zone of silicon carbide production. And if you run at full capacity, you have to expand your capacity, and this is why we ask our customers to support this growth.
We collected down payments in 2022, we got EUR 27 million from our customers, and year to date, this year, already EUR 40 million. On the next slide, you can see how this customer down payments work. We were approached by almost every customer on the silicon carbide industry, and they asked for a certain amounts of isostatic and porous graphite. And we were running at capacity. We asked them to finance an expansion by down payments, which are, for us, interest-free and cash friendly. With almost every customer in this area, we discussed this and ended up in strategic partnerships and received the money I showed on the slide before. Having collected the money, we go into the building phase, and we already started to expand our capacity end of 2022.
With expansion of the capacity, we also assure the customers, which gave us a down payment, a certain share of this expanded capacity. The asset also paid or pre-financed by the customer is owned by SGL Carbon, and we connect it to contract, which is, I always call it a soft take-or-pay contract. So the sales and the repayments of this down payment are bound to an offtake of the respective material. So this is why I call it a soft take-or-pay. Mid of this year, we started a second round, again, an investment phase with customer down payments, which are again, interest-free and cash friendly, for the next round of expansion. The first round of expansion were focused on graphite purification and machining.
The second round is focused on wafer carriers and will focus on our semiconductor site in St. Marys in the U.S. Here you can see where we invest the money from the first phase, and you see it's a global debottlenecking and a global investment. In Bonn and St. Marys and also in Shanghai, we are investing into purification, so making the graphite, which we have cleaner, to use it in semiconductors, and also in machining to machine the parts which are later on sold to the customers. In Meitingen, we started a soft felt project. This is used for insulation of the hot zone in chip manufacturing. In Morganton, we are going to double our porous graphite capacity because the demand is very high at almost every semiconductor customer of ours.
I want to give you a summary, and we are doing it in a different way. So first of all, the good news, our guidance is confirmed, and three out of our four business units are at all-time high. And I go through the business units, business unit by business unit. Graphite Solutions, all-time high, and the growth is driven by silicon carbide customers, and the growth trend is intact. We see no softening of demand, and customers are coming to us and ask for more graphite, especially isostatic and porous. The remainder business unit, for example, automotive, is stable for the time being, and our graphite units are running at full capacity. What is the way forward in Graphite Solutions? We follow our growth path, which we explained to you some months ago.
We expand our capacities; we are now in the second round of collection of customer down payments and second round of capacity expansion, and Graphite Solutions is a growth driver of our company, SGL. Process Technology is also running pretty well, also a business unit on all-time high. Thomas pointed it out, chemical industry is running everything else than goods, and we see a softening, a softening here in demand by 20%-25%. But we were able to compensate this lower demand by our systems business. And in systems, we sell synthesis systems for phosphoric acid and hydrochloric acid, which are used, for example, in the semiconductor industry. You need large amounts of highly purified hydrochloric acid, which we can produce with our synthesis equipment.
Our phosphoric acid synthesis equipment goes to China into the production of lithium iron phosphate batteries, and they need highly purified phosphoric acid. So this system's business was able to compensate the softer demand in our chemical business, especially in Europe. Order entry is very healthy, and we have an order backlog, which will also support the first half of the next year. We continue here in the way forward, our strategy as a quality leader, and we continue our high margin strategy. Third business unit, carbon fibers, and here we are really trapped in the wind energy market. The demand is simply not there, and I think most of you have heard of Siemens Energy. They asked for state guarantees this week, and the whole business came to a standstill.
But all market studies we read, they confirm the long-term trends of wind energy. The energy transition, the European Green Deal, is not possible, especially with offshore wind energy, and this market will come back. And the European Union this week supported the wind energy in Europe with a wind power action plan, and this is a bundle of measures. For example, they give easier access to finance to wind park developers. They promise faster permitting, and also improve the auction system to prevent to fall again in situations where we suffer from right now. As Thomas said, capacities, especially in the carbon fibers, are idled. In Moses Lake, we have 5 carbon fiber lines, and we idle 2 of them. In Muir of Ord, Scotland, we have 3 carbon fiber lines, one is currently idled.
Where Thomas and me are very good in is cost cutting, and you can imagine we do everything we can. We are cutting the cost. We have a spend control tower. Every spend above EUR 2,000 is checked, and we are on hiring freeze and reduce the headcount because of idling some of our lines. And on the marketing side, we are going into alternative applications, which is, for example, hydrogen pressure vessels, which is growing pretty nicely, but on a very, very small basis. 2024 will be better than 2023, but don't expect a fast recovery. We expect a recovery in the second half year of the next year.
Last of our business units is Composite Solutions, and before you ask, the third quarter was a little bit weaker than the second quarter, but this is a typical effect which we observe every year. We have two very weak months, which is usually August, where automotive industry and Composite Solutions is more or less an automotive supplier business, is in the summer vacation, and also December is expected to be weak. So Q3 and Q4 are usually weaker than Q1 and Q2. We still have a pretty good utilization, and this is driven especially from the luxury car segment, which is still running very, very well. And Porsches and Ferraris like carbon fiber reinforced parts, and we are running there at capacity. In Composite Solutions, we continue our current strategy, and we have quite some nice projects in the pipeline.
Again, summary: guidance confirmed, EBITDA on the lower end of the corridor. Three out of our four business units are at all-time high, and carbon fibers is only suffering from the weak wind energy market. With this summary, I would like to hand back to Claudia.
Yes, thank you. Now we can start with our Q&A session, and I think the moderator will give you some more details to dial in.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star, followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star, followed by two. The first question comes from the line of Andreas Heine, Stifel. Please go ahead.
Yeah, good afternoon. Some questions on the Graphite Solutions, if I may, and then I go back to the line and come later on, again, hopefully. In Graphite Solutions, I'm curious on these. You called it soft take-or-pay contracts. What we see now is that Tesla reduced the production, and that's probably the largest consumer of silicon carbide. And onsemi came with a profit warning, not least due to that, and we learned that Panasonic had also reduced the battery production. So if you put this together, it might be that there is, let's say, a pause in the growth in silicon carbide demand. So you were talking about this soft take-or-pay, which gives you some better visibility and security.
Maybe you can outline a little bit more what it would mean if there is no growth in the silicon carbide market next year in this expansion. And secondly, also on, the graphite, the mature markets there, could you outline how in this industrial, end market, the chemicals end market, your order book looks like, going into 2024, please? These are my two questions on graphite.
Y eah, Andreas, thank you very much for your question. You mentioned several times batteries. Our silicon carbide business is not related to batteries; it's an inverter business. So, an inverter converts AC to DC and DC to AC, and especially EV cars have this kind of inverters. Also in renewable energies, for example, solar panels, there also the power is inverted. This is where our graphite goes in, and producers like Wolfspeed or SICC produce with our graphite silicon carbide chips. So it's an inverter business. And, this is still running very well because the adoption rate of silicon carbide in inverters is very low. I think it's around 10%-20% adoption rate, so still 80% of adoption to go.
Still, the inverters are produced for 80% based on silicon. And so we have two growth levers. One growth lever is the silicon carbide market itself. Second is the adoption rate, and this is why the demand is still very strong. How does the soft take-or-pay contract works? So a customer comes to us and asks us to expand our capacity and gives us a down payment to this for this. We invest into capacity, assure the capacity to the customer, and when the customer takes the volume, we pay back the prepayment, which the customer gave to us. So it's bound to the offtake of volume. And usually, the contracts run over three to four years, and in this three to four years, we pay back the customer down payment by 100%.
Sometimes there is a grace period of several months, but after four years, 100% is supposed to be paid back. If the customer is not taking volume, we don't have an obligation to pay it back. So if the four years are over, the investment is owned by us, and if the customer takes no volume, there's no take back of us. This is why I expect that the customers will prefer our material, even in a soft market, before the material of the competitions, because the payback procedure is bound to it. I hope this answered your question for what I call soft take-or-pay.
May I ask on this? The customer has therefore a flexibility on this timeline. So if he buys less in the first year and more in the fourth year than you originally thought, that would be a flexibility-
No, no, no.
-your customer would?
No, no, no, no. It's, we have pretty straight contracts on it-
Okay.
and it's an evenly paid because we don't have the flexibility. Even after expansion, we expect to run at full capacity, and
Okay.
We cannot deliver more or less in one year. So there are concrete volumes agreed. If something very bad happens, some of the customers can get an extra few months to catch up for the volume if they have not taken all of it.
Very good. Thanks.
Yeah. Okay. So, second question, Andreas, was on industrial volume, and yes, there is a softening in the market. And we have a lot of different types of graphite, and the industrial market is almost a one-to-one connection to our extruded graphite market. And this is an asset we run in Morganton, in the U.S., and there we saw a weakening between 5% and 10% of the market. The business which we have there is, for example, oven construction; it's glass and aluminum industry. We produce graphite drill bits, which are used for oil exploration, and as you see in the market, those business are softening a little bit, but we were able to overcompensate this by the semicon business. Okay, Andreas.
But it's completely different products, so nothing of these products you do not produce in Morganton as graphite, you cannot use in the digital market, right?
No.
It's a different product. Yeah.
Different, different product, but in Morganton, we also produce porous graphite, which goes into the semicon market.
Mm-hmm.
But industrial business is extruded, and this has no relation to semicon.
Mm-hmm.
Okay?
Thanks a lot.
Mm-hmm.
The next question comes from the line of Sven Sauer, Crédit Suisse. Please go ahead.
Hello, ladies and gentlemen. Thank you for taking my questions. The first one is regarding the strategy that you announced over the last quarters of allocating resources from specific segments into the Graphite Solutions segment, specifically on the Composite Solutions and Process Technology segment. I was just wondering if going into 2024, you are going to continue this strategy. I mean, obviously, you're not going to share any absolute figures, but maybe if you could provide some info on if you are still reallocating these resources into Graphite Solutions next year, and how the growth would maybe relate to if you were not doing this, if these segments were running without reallocating resources. Thank you.
Yeah, I think this can be answered very easily. And to a large extent, you have answered the question, I would say, by yourself. What we do in Graphite. In principle, we say we want to have a positive free cash flow by all means, and therefore, we don't over-invest over the level of depreciation. This is true since the last three years, and it worked quite well, and we always can prove a decent positive free cash flow, which I think we all, and you also, we all like very much. And we like to continue with this strategy, and we clearly say everything that comes on top of the depreciation level needs to be financed from other ways and means.
What we do at the moment is, as Torsten just explained in Andreas's question, we are collecting, to a large extent, EUR 40 million just in this year. In the first nine months of this year, we collected in round one and round two, customer down payments, and these are all silicon or semiconductor customers, and in particular, silicon carbide customers. And this money, of course, is what we spent on top of the depreciation level of a business unit to invest it there. We also have that automotive customers for composite solutions. They also invest in the tooling, in the machines, in the presses for specific equipment, which is made or dedicated for the car models, for the lines that they have, and the automotive projects in composite solutions as well.
And they do it. It's not by far not in the dimension as Graphite Solutions is now doing it with all this, let's call it soft-take- or- pay, as Torsten has just explained, but they also have it. Process Tech is something which is this is why I, in particular, like it so much because it's a project business, and they hardly need CapEx, and they only have a depreciation level of EUR 2 million. Therefore, I mean, they make roughly EUR 140 million top line without any depreciation, which is marvelous for us, and this is also a good cash flow driver, as they're just working in projects and not so capital intensive as the other business units.
The only one we neglect, at the moment, for good reason, because the capacity is anyway idled, is carbon fibers, but I think this is self-explanatory.
Okay, thank you. And just a follow-up question on the process technology segment. You mentioned, in your presentation that you have a high order intake or high order backlog, and it's looking good for the first half of the year in 2024. I was wondering, this order backlog, is there a similar, waiting or exposure of the service business for the order backlog as in 2023?
We don't disclose this particular, at least not going forward. We explain it always respectively when we explain the results. But as Torsten was saying, we continue with the strategy. As you can see here, we consider us quality leader and the customer also treasure our capabilities in making high-quality key products. But this has a margin, that's for sure, and this is what's exactly about to continue. And in our systems and equipment projects, we still charge high margins, but the customer can rely on our good quality.
Thank you. I'll go back in the line. Thanks.
Thanks.
Hello? Hello.
Thomas, are you on, online?
Yeah. Yes. Sorry, I had some technical difficulties. Yeah, good afternoon, first of all. I have two questions left, all others were, currently or, said already. What is the current book-to-bill ratio and process technology?
It's healthy, but we don't disclose.
Okay.
Precisely. I do apologize.
Yeah. Then the second one is with respect to Graphite Solutions. After growing with above 50% in semiconductor and LED in the last two quarters, the sales dropped down to 19% in Q3, despite the fact that you almost doubled CapEx and Graphite Solutions. Probably, this is related to the capacity constraints, I think. Why are these investments not yet reflected in sales and profits? Are you buying machineries and are waiting for delivery, or do you have to still set up the machines? And how long will it take, yeah, for these increased CapEx to be reflected in the P&L?
Yes, Thomas, thank you very much for this question. So, when we invest, especially into Graphite Solutions, the paybacks are pretty long, and it depends on what we invest. If we invest into a purification unit-
paybacks might be in the region of 3-4 years. If we go into isostatic graphite green production, which is the first step, it takes pretty long to build up such an asset. It's a high or a low triple-digit EUR million figure, which you have to invest there. So, until you can operate the assets, until you have approval from the customers, this might take quite some months or even years until we come with this into the business. It's not so fast that we order a machine and have business right away.
Okay, got it. Thanks for answering my question.
Mm-hmm. Okay.
I think the next question is Lars. Lars from Deutsche Bank.
Yes, thank you very much. Can you hear me?
Yes.
Sure.
Loud and clear.
Ah, perfect. Yeah, good afternoon. Thank you very much for taking my questions. 2, if I may, I would ask them one by one, and the first one, admittedly, is very short, and it's because I'm a bit lazy. When you talk about all-time high, with 3 of the 4 divisions being at all-time highs, are we talking about absolute profitability or, or relative profitability in this regard?
I'm also lazy in answering. Both.
Both. Excellent. Okay, perfect. Thank you. And then I would be interested I mean, I discussed it with your IR team already, but I would be interested in your view of any potential impact of the Chinese graphite export restrictions that are currently reported for natural graphite flakes and synthetic graphite, and what that would mean for your business.
Yeah, currently, we see no impact, and there was already a kind of an approval procedure as we imported or exported special graphite types to China or from China. And this might be more difficult in the future, but the extent of volume which travels to China or from China is pretty low. So even if there is a 100% stop of those deliveries, it will not affect our business that much. But we are not so negative. We read it several times, asked a lot of experts in the industry, and it's pretty likely that you get for civil applications an approval as you got it the last years already.
Understood. No direct implications. Indirect implications, i.e., do you think it will impact your competitors or price levels for certain graphite products?
We don't know and don't think so.
Okay, perfect.
Because there are not this big volume streams from China or to China. China is more or less less a closed market, and this is served local for local, and this is why the effect is rather minor. I talked to Chinese officials, and they said this rule for graphite is more focused on batteries. So EV batteries have an anode and a cathode. The anode is with metals, the anode is with graphite, the cathode is with metals, and this needs graphite powder. And I guess even in European EV batteries, 80%-90% of the graphite powder comes from China, but this is not SGL business. We also have this business, but a very small and tiny business.
Most is exported from China, and as in Europe, discussions came up to put a punitive tax on EV cars, which are imported from China to Europe, the response of China was this graphite restriction, and it was meant to hurt the battery producers in Europe. This is the main target, not our business, not our isostatic porous graphite and so on.
Excellent. Many thanks for the explanation and clarification. I'll go back into the line.
Thank you. So and now the second round, Andreas Heine, you have listener questions?
Yes, please. I would like, I think this time I ask them one by one and wait for the answer, and then ask the next one. First is the outlook on Q4. If I do the math and go exactly to the lower end, then after three quarters of 40+ million EUR EBITDA, the last quarter would be 30 million EUR. Is that mainly explained by the corporate line, which goes from rather low expenses or even an income in Q3 to more normalized expenses of 6-7 minus, or is that something else? That's the first question to understand what the Q4 outlook means.
Andreas, when you say at the lower end, doesn't mean we at least that we're not aiming at 100% on the 160, but there's maybe also a lower end means somewhere in the nearby 160. It can be also a little bit higher. It doesn't have to be, but you're right. We expect Q4 to be the weakest quarter of this year. And certainly we can't have lower provisions at least not in Q4 after the first nine months have been adjusted in corporate. And as we have idled to a la-- to a really
A mount, the lines in carbon fiber, although this contribution will also affect our Q4 quite a bit. And the rest is just the December that we expect at least from the twenty-second onwards, the last 10 days of the year, you won't see production and sales in most of our businesses. Also, with our customers, they just close their books and wait for January.
Three segments are at all-time high, and I would just extract the seasonal factor, then you're pretty happy with those three in Q4 as well?
Yeah, confirmed.
Okay. Confirmed. Then I would like to discuss the free cash flow. If I look on the 35, and I do the following adjustment, I take out the Brembo dividend of EUR 10 million, the proceeds from Gardena of some EUR 8 million, and then I do a net effect of the increased CapEx. I think it's EUR 20 million higher than last year, year to date. With the EUR 40 million you had in down payments in the first nine months, then, if I do all this adjustment, the free cash flow of the underlying business would be close to zero. Why is that?
It's not I mean, I like the way you calculate. This is simple math. You just forgot one effect, which we didn't disclose, maybe so openly. We already started to pay back, as Torsten explained, the customer down payment to a certain extent, and the first EUR 10 million have already been paid back. And if you add this to your math, and to your calculation, then that doesn't mean that the free cash flow of the operative businesses looks super-duper nice, but it at least shows it in a different way.
I think when we look at, it's mainly working capital where we have to look at, because CapEx is, on the one hand side, on our operative cash operating cash flow. It's based on the operating cash flow and the depreciation, plus the customer down payments, as you perfectly pointed out. But the working capital is an issue. I think it's explainable, the working capital, and we have to look at two business units. Graphite Solutions, I mean, they're growing with roughly 10% in the top line, and we are investing heavily into a capacity expansion.
That also means that the beginning of the value chain, where we make the blocks, the so-called green production, has to work already until the purification ovens and the additional capacity and machining and everything comes in place, so that these new materials can be processed at once as the capacity is running. This is explainable, and this is also. So as a CFO, I have nothing against. Well, well, don't quote me in the business unit, but I think it's healthy, what they do, because it's also the basis for the growth of 2024.
Where we have an issue is mainly in carbon fiber, because there, especially in the first quarter of this year, we said, "Okay, there's a temporary slowdown in wind," and we were producing on full steam, and we were producing on stock in the first quarter of 2023, until we said, "Hey, wait a minute, this is not just a three-month issue. This is about to continue the slowdown of the wind market." And then we idle capacity and based it on the level of our of what we can sell. So this is an issue that we have three months in a deteriorating business, where the sales is going down, down. We piled up a little bit of inventory in the first three months of the year.
This is something you can say, "Okay, this was a wrong estimation that we had beginning of the year," but as we said, we budgeted completely different figures. Yeah, let's say some one year ago, when we were finalizing our budget for the year 2023, and we were super surprised by the slowdown of the wind market, as so many others. Again, this is not to blame it, but there is an issue out there, and it's difficult for us to tackle that because we can't embrace it, really. We can't force the market to buy from us.
Very fair. Then one question on the dividend of Brembo, the joint venture with Brembo. The joint venture is on a good path and prepares for growth with investment, which might be sized. But what does that mean for 2024, 2025 dividend you can expect from this joint venture?
No, Andreas, sorry, we cannot disclose forward-looking statements about this dividend. But what we can say, we are going to invest EUR 150 million into the expansion of Brembo, and this will go to the Italy side. We are running two sides, one in Stezzano, Italy, the other is Meitingen in Germany. Roughly three-quarters goes into the German assets. One-quarter goes into the expansion of Italy, of the Stezzano side. It will take roughly two years and a few months until the assets come into stream, because we have to build up production halls and so on. We already ordered the equipment.
2 years, or 2.5 years from now until the assets come into stream and generate profit and turnover.
But they will be so financed that they don't affect the dividend policy, or is that?
Andreas, Andreas-
Nothing.
Andreas, in the end, there's always a joint venture partner, and we have to decide in due course how we do that.
Uh-huh.
It's simply not fair if we state something on how the dividend policy looks like, because in the end, I think we have a good relation. It's a perfect joint venture, and we do things in a very mutual way. But we cannot anticipate things where we haven't discussed this with our JV partner.
Okay, understood. The last point is, but was very interesting what-
Yeah, sorry to interrupt you. I see that we have three additional participants of the call, who have questions. Maybe we can answer your question at the end of the call?
Of course. Of course.
Yeah, that would be great. Thanks so much. So, the next question is Lucas Spang from Tigris Capital. Thanks for your question.
Yes. Hi, good afternoon. I have just one short question, also concerning the seasonality. As you still expect, revenue on previous year's level and now be some 4% down the previous level. So is this still in your definition of previous year's level, or do you expect growth again in Q4?
Maybe I didn't get the question 100%, Lucas, but we are 3% down after nine months of the year compared to last year. And I explained the issues, no more take-or-pay contract, no more Gardena business. And by the way, also, if you take it literally, no Pune business, which we also sold. And I think Q4 last year was also not super strong and maybe also not this year. And when we say on previous year's level, normally you say 5%-7% deviation from what you have in the top line is still on the level. But from this perspective, we would say probably end up a little bit lower than last year.
But we consider this still, at least in our definition, on previous year level.
Yeah, that's what I asked.
Okay. Thank you.
Okay, and the next questions are from Mr. Pierre D from Amundi.
Yes. Hello, thank you for taking my question. I would like to just to come back on the carbon fiber business. So if understood well, you said that 2 units out of 5 is not running due to the low activity. When we see the mix of activities that serve carbon fiber, okay, wind industry was one of them, the GV was another one, and others was also explaining this activity. But at the end, we have the impression that there is overall a reduction of activity. So even if the wind industry come back, is it not a way for you to close one of these units because you won't be able to reabsorb all these idle activities, even in a good time?
No, the answer is pretty simple. We want to revamp all idled assets when the wind market comes back, and the sales issue we have is coming on the level of carbon fibers and is caused by the wind market. It's as simple as I say. We have other products also in this segment, for example, Panox, which goes into the aerospace industry. We have chopped fibers, which goes into floor coverings or reinforcement of plastics. We have acrylic fiber, and these businesses are less affected than what you told you with wind. We expect that if the wind problems are solved, everything goes back to normal.
Because, yes, there was also the automotive business that is, has stopped, with the end of the BMW contract, so.
Yeah.
Well, this capacity has normally, you hope that the wind industry will take this capacity. So the capacity for the wind industry is much bigger than in the past, so this, you w e need a very bright prospect in order to absorb all this, this capacity that is now for, for the wind industry.
Yeah, and this is, you already phrased it pretty right. We lost the BMW i3, and as Thomas explained, we took this capacity and sold it in the last year to the wind industry.
Mm.
So what was formerly the BMW i3 is now wind, plus, plus a little bit of wind business, which we already had before, and maybe it's one-third of our capacity.
Mm.
Yeah, but... Have we answered your question?
Yeah, yeah. So we wait for the recovery of the wind industry. If it won't come next year, other action could be taken.
Yes, help, help us, buy a wind turbine.
Mm. Gotcha. I cannot afford. Okay, thank you.
Thank you very much for the question.
Now, it's the third round is Andreas Heine. I think you have additional questions, and-
Yeah, I got only one.
Perfect.
Only one left.
Because you just-
Because I feel like it was.
Only one left. I found it very interesting what you said about process technology, that it does not only deliver into the chemicals industry-
...or my thing is that it's not very well covered.
In the semiconductor industry.
Uh,
Is that already a larger part or is that still tiny, what you deliver in this market?
They cover the same-
Sorry, Andreas, I could not understand what you asked. There is a woman talking. No?
Okay. Okay, I'll try again. So, what I wanted to ask is the process technology I had also business with, is not within chemicals, but with the semiconductor industry and the lithium-ion battery. Is that just starting from a very low level, or is that also already decent volume?
We can find it here, and the other company that I would-
Andreas, it's easier than this. We produce in our business line systems. We produce equipment to manufacture hydrochloric acid and ultra-pure phosphoric acid, and we sold it to every kind of market. And just because in China, this new EV battery generation is developing based on lithium iron phosphate, there was a special need for ultra-pure phosphoric acid, and we sold it in this. If tomorrow a customer from other segment ask for the same equipment, we sell it to them. Same was true for hydrochloric acids in German, Salzsäure, which is used for the etching process in semiconductor industry. And with the growth of semiconductor industry, more hydrochloric acid was needed, and we sold quite a lot of systems to this industry. Yeah.
It's just that the demand which we had in GS was mirrored in this year also in the process tech business unit.
Thank you.
Andreas, do you have additional questions, or...?
It was only on this again.
Okay.
If this is one or two projects, or whether it's like a series of projects in this market?
Because they already achieved EUR 330 million.
Andreas, as we said, order entry is good, order backlog is good, and we still have some projects in our pipeline.
Okay.
Thank you.
Thank you very much for the question.
I see no more question here. Thanks a lot for your participation. If you have further questions, please call the IR team, Jurgen Reck or myself. Thank you, and have a nice afternoon. Bye-bye.