Ladies and gentlemen, thank you for standing by. Welcome to the SGL Carbon conference call on the full year results 2022. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a Q&A session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Claudia Kellert. Please go ahead.
Thank you, Zafar . Good morning and welcome to our conference call about SGL's business development and financials in fiscal year 2022. Today, we will also give you an insight on our expectations for 2023 and the upcoming year. On behalf of SGL, our CEO, Torsten Derr, and our CFO, Thomas Dippold, will present the financials and the outlook, and will answer your questions after the presentation. Now I can hand over to Torsten Derr, our CEO.
Claudia, thank you very much. Good morning, everyone. I'm really proud and so happy to be standing here today after the successful completion of our company's restructuring program. Do you know I joined the company three years ago. Thomas came one year later, two years ago, and Thomas and me really turned over every stone in the company. You can see here what we have achieved in the last two years. Sales is up by 23.5%. We were able to improve our EBITDApre even stronger with 86.2%, and this is a combined effect of utilization, cost down, and top line improvement. We were able to lift up our EBITDA margin by 5.1 percentage ponts.
Thomas was very busy on our debt structure, and we were able to reduce our debt by 40.4% to now EUR 170 million, where I'm very satisfied with. We were able to increase, at the same time, our equity ratio by 21% and also our ROCE is double- digit again, + 9.5%. I think with this, we can say SGL has been successfully restructured, and we laid the foundation for further growth. This year is going to be a stabilization year. We want to keep our margins stable and want to invest into further growth. With this, I would like to hand over to our CFO, Thomas Dippold.
Thank you, Torsten. I have the privilege to guide you through our figures for the fiscal year 2022. What have we achieved now, not in the last two years, but in particular, in the last 12 months. When we look at the group and the profitability of the group, we could increase our sales from previously EUR 1.007 billion in the fiscal year 2021 to EUR 1.136 billion, if I round it up, in 2022, which is an increase of 12.8%. If we exclude currency effects, we still have 9.5%.
I think it's, it shows what Torsten was saying, that we are really on a growth path and that we really grow in almost double-digit figures even without currency effects. When we look at our profitability, where our KPI is the EBITDApre, there we grew even stronger from previously EUR 140 million in 2021 to EUR 172.8 million, which is an increase of 23.4%. Without currency, it's still 16.4%. You can see in fact, the profitability is growing twice as much as our top line. We really were able to improve our EBITDA margin from 13.9% to now 15.2%.
This is, I think a remarkable development. All business units contributed to the profitability increase except Carbon Fibers. We come to that later when we talk about Carbon Fibers in particular. When we look at our biggest business unit on the next slide, slide number seven, for those who haven't the presentation online or can't follow us here in the call in the presentation. Graphite Solutions grew by 15.5%, now reaching EUR 512.2 million in top line in the sales. Where does it come from? The main driver is semiconductor and LED sales. They have a growth ratio of almost 50% year-on-year. Also, thanks to the fact that we neglected our solar business quite a bit.
Solar sales went down by 23% as we have a higher margin when we shifted to semiconductors. We still like the solar business, and we still want to be in there to a certain point. We respect all the contracts that we have, but wherever we have the chance to shift some of the production, some of the output, some of the sales into semiconductor, we try to make use of it because there the margin is really the best one. Our capacities are fully loaded in Graphite Solutions.
We are investing in capacity expansions there, and we make really use of a full utilization of all our capacities. Thanks to that, to the product mix and to the strong pricing power that we have, we were able to increase our EBITDApre from EUR 87.9 billion in the year before to EUR 118.5 billion. It's a very strong increase of almost 35% profitability increase. We reached a margin of from 19.8%, which was already high the year before, to now 23.1%.
This really shows that we were able to pass through all the cost increases that we saw in raw material and in energy to the customers, despite the delay that we have in the cash conversion cycle as we have a quite long value chain in the Graphite Solutions business. Coming to Process Technology. Process Technology grew from EUR 87.2 million in the top line to now EUR 106.3 million, which is an increase of 21.9%.
The reason for that is we have a very strong order books there, and we were able to have some catch-up effects, who now really come in place after the COVID pandemic, where the chemical industry didn't expand the capacities or did some maintenance projects in that extent as we are probably used to in the past. We are now able to make use of it as the customer demand is very high. We see a sales growth throughout all the regions where we are active, be it in Asia, be it in North America, or be it in Europe. In the profitability, our development is quite remarkable. In previous years, in 2021, we had a margin of...
We had a EBITDApre that we achieved of EUR 4.7 billion, we could more than double it in 2022, now reaching EUR 9.9 billion in EBITDApre. Now we have reached almost a 10% margin based on EBITDApre versus sales in our business there, whereas in last year, 2021, it was around 5%. We were able with some EUR 20 million growth in the top line to double our EBITDApre. This is really a very strong development. Again, we have set up this small business unit with a very competitive cost structure. We make use of high utilization rates. Again, here we have a very strong pricing power.
We were able to pass on all the cost increases that we saw, be it for steel, for raw material and energy. We don't need so much energy in Process Technology, but still we were able to pass everything on and to be very successful there. Coming to the aforementioned Carbon Fibers, the top line still grew by 3%, now reaching EUR 347.2 million in 2022, coming from EUR 337.2 million the year before. This is remarkable because as you all know, the BMW i3 contract ended as planned, end of June. We only had half a year of this very attractive project in our 2022 books and therefore also in the top line.
With the expiry, we had to place all the quantities that were freed up now into the wind energy and other industries, but mainly in the wind energy. The margins in wind are definitely not as high as in automotive and in general, in this contract in particular. This also affected our top line quite a bit, but still we were able to reach a 3%, a moderate 3% growth there. Our profitability, however, suffered and went down by 20.7%, coming from EUR 54.5 million to now reaching EUR 43.2 million . Maybe as an explanation, what's in there.
Again, we are missing the profitability of the BMW i3 contract in the second half of the year versus the wind energy margin. This is one effect. Second, we had a one-off effect in Q1, and that was in a combination with the energy hedging, which cost us some EUR 9.2 million. It helped us through the year to be able to produce through the whole year despite all the energy hikes that we saw there. We are very energy-intensive business unit with carbon fiber and the hedging in the end benefited quite a bit. However, this was a one-off effect in order to secure the hedging throughout the year.
Last but not least, you have to bear in mind that in this business unit also the at equity result of our BSCCB joint venture that we have together with our friends from Brembo in Italy contributed there, and their profitability reached 16.3 versus 16.0 the year before. This is all in our EBITDApre for this business unit. Finally coming to our last operative business unit, Composite Solutions. They also had a very strong development in 2022. They grew by 25%, coming from EUR 122.5 million in the top line in 2021, and now reaching EUR 153.1 million in the fiscal year 2020. Where does it come from? Mainly from automotive projects.
Composite Solutions consists of in the year 2022, roughly 80% of the sales is coming from automotive projects. You've probably read beginning of the year, we have announced that in our throughout February that we sold the business of our Gardena site, which was coming from Composite Solutions. This was a site of Composite Solutions. We've sold the business in Gardena. With the sale of this business, we will lose about EUR 25 million-EUR 30 million top line in the future. However, we also sell everything that's non-automotive with that site. In the end, you can say Composite Solutions is almost a pure play automotive supplier.
We were able to win a couple of very attractive projects for battery cases and other car composite components, and they really boosted the sales by 25%. Our sites in Austria, but also in the United States, in Arkadelphia, are getting more and more loaded, and we're happy to serve the automotive industry with this, especially the e-mobility, with this very attractive project. When you look at our EBITDApre, you see an increase coming from EUR 12.1 million in 2021, now reaching EUR 20 million in 2022. It's an increase of 65.3% in our profitability increase. We are very happy with that. What contributed to that, first, very attractive projects that we were able to win.
Second, a high capacity utilization that we have there. We maintain our stringent cost management there, and we really have high margin products that we acquired there. All the raw material increases we were able to pass on there. When you look at the margin itself, at the moment, the margin is almost 13%, 14%. However, you have to bear in mind there's an operative positive one-off effect. We don't show it as a real one-off because it happens in the automotive industry, that projects can be canceled and then you get a compensation payment. This is considered operative, and we discussed it also with our auditors, and they agreed to that.
We have a EUR 3.7 million effect in our profitability because one of our automotive customers decided in a different way and he compensated us for this non-taken project with EUR 3.7 million. If you deduct it, we still have a higher than 10% margin in Composite Solutions in the year 2022, and we are very happy and satisfied with that, given the industry we're in and also the business that we do there. Our fourth business unit, which is non-operative, is corporate. In corporate, in the end, we only rent out some land and buildings to a third- party.
For example, our joint venture, BSCCB, is on a rented site from us, so the rental income will be shown on corporate level. I think the most remarkable thing there is to mention that our EBITDApre the cost structure has even improved there. Why is that? We maintain our strict cost management also on corporate. All the corporate functions where the costs are to a large extent here in the corporate business unit, maintain the cost on a very, well, competitive level. Whereas, as you remember, our top line for the whole SGL Carbon Group grew by almost 13%. This also shows that we have a high kind of deleveraging of indirect costs that we can show there.
Also corporate is somehow contributing to our profitability increase by maintaining the cost on this competitive level. On this slide number 13, no, 12, sorry, we show you a kind of a transition or reconciliation of our EBITDApre to EBIT reported. Depreciation stands for EUR 60 million. We'd like to give you a small breakdown of the one-off effects and the non-recurring items which we consider as pre. You can see on the right side, we have a net positive pre result. Normally you see pre results to be all the one-off effects to be negative. Here in SGL for the second time, we show positive one-off or non-recurring items. The main one is the restructuring of our Griesheim site.
It's an idle site that we have in Frankfurt. We've idled it somewhere in the 2010s. It was based on a heritable building right. We had a huge provision in our books, and we were able to sell the site, and therefore also to release the provision. That contributed to a large extent to our EBIT reported, but also then subsequently to our net income, which really went up quite a bit. We still have the PPA, the purchase price allocation, and other impairments of EUR 5.7 million. With the expiry of the BMW i3 contract, this will also go down in the future. We don't expect non-recurring items to appear in the future to a large extent.
If you exclude, now with the expiry of the BMW i3 contract, the PPA will go down to EUR 2 million and remain for the next seven years on that level. The one-off effects also get lesser and lesser. With the sale of the Gardena business that we have announced and published, we had some write-offs and some classifications to assets held for sale. Some effects from the divestment amounted some rough EUR 9 million. We had some estimation changes in our pension obligation, which stand for another EUR 5.5 million. Last but not least, we could release some termination lease contracts with our former tenant, Showa Denko, in our Meitingen site, which contributed with EUR 5.7 million to that.
In the end, we achieved a EBIT reported of EUR 120.9 million, which is standing for a little bit more than a 10% EBIT margin of our business, excluding all the one-off effect or including them. I think this is a remarkable development, as Torsten was highlighting at the beginning of the presentation, as a result of our transformation and restructuring. Last but not least, a look at our bottom line and balance sheet. Bottom line, the net result went up from EUR 75.4 million in 2021 to now EUR 126.9 million. What contributed there?
The main effect, besides the profitability of the business units which we published or which I introduced in this presentation so far, and beside also the Griesheim effect, which contributed to the net result, was that we had some valuation adjustments for our deferred taxes. We have a lot of losses carried forward, especially in the United States. Now that we have a profit history of three years in the United States and also a very positive outlook, we were able in a close discussion with our auditors to reevaluate our deferred tax assets, we could make an adjustment on the valuation of EUR 41.8 million, this is also included in the net result.
Yes, we have a profitability increase, but not almost a doubling. In the end, there are two one-off effects. One is a deferred tax valuation adjustment, and second is the release of the Griesheim provision of some EUR 26 million, which is now in the net result. This really boosted the net income to almost EUR 127 million. Our free cash flow went down by roughly EUR 40 million compared to last year. You can see the breakdown here on the right. The operative cash flow is down by EUR 20 million compared to the year before. What happened in 2021? With our restructuring and transformation, we were able in 2021 to release or to lower our net working capital by EUR 20 million.
With the growth that we saw in 2022, this was, however, not possible to again reduce our net working capital. Instead, our working capital increased also because a lot of costs were also incorporated in the semi-finished goods and finished goods. This went up, and the EUR 20 million is exactly the shift in the working capital part of the operative cash flow. The investing cash flow, our CapEx was roughly on the level of the year before. However, another component in the investing cash flow is the dividend that we get from BSCCB and also the proceeds that we get when we sell something. In our investing cash flow in this year, 2022, also benefited only from the sale of the Griesheim site.
Last year we had some land sales of over EUR 30 million in there, and of course you can't repeat that. One-off effects in the cash. Those two main factors led to the fact that our free cash flow has deteriorated by roughly EUR 40 million from 2021 to 2022. However, w e think a cash flow or a free cash flow of EUR 67.8 million is still quite remarkable for a company that has been loss-making and cash burning for so many years in the past. With that strong cash flow, we were able also to pay down our net financial debt quite a bit.
We started into the year 2022 with a net debt of EUR 206.3 million, and we were able to lower it to EUR 170.8 million. In fact, our leverage ratio, so if you take it, and compare it to the EBITDApre, is 1.0. Our equity ratio, thanks to the strong net income, went up, as Torsten already pointed out, to 38.5%. It's really a very healthy equity ratios that we have achieved. In 2020, some of you might remember our equity ratio at the end of the year was at 17.5%, a nd we were able to increase it by over 20 percentage points without a capital increase.
Yes, we've done a convertible in the last two years, and that contributed a little bit with the equity portion. The rest comes from restructuring from profitability increases, but also from the interest rate increases, which offset the pension liabilities. Last but not least, our ROCE reached now 11.3%, which is also a clear improvement compared to the 8.0% that we reached in the year before. Capital employed remained flat, EBIT increased drastically. Last but not least, here the target for 2022, how did we start into the year? You all know that we increased the guidance twice throughout the year.
In our top-line guidance, we first said we will reach EUR 1.1 billion. We increased it in September again to EUR 1.2 billion. In the end, we finished the year with EUR 1.136 billion. Somewhere in between those two top-line figures that we gave you. Why is that? Our business in general remained really very strong. Only in Q4 we saw a little bit of headwinds that affected the profitability but also the sales in the fourth quarter. Why is that? Carbon Fibers mainly contributed to the maybe not so strong performance when you look at the profitability.
We reached EUR 173 million in the end, which was at the lower end of our September guidance from EUR 170 million -EUR 190 million . We were able to produce throughout the year, and we had an exceptional Q3, where a lot of our customers idled their production because of the high energy costs, and we really had a very strong Q4, Q3. However, we couldn't repeat it in Q4 because all the competitors were back in the market. The prices lowered quite a bit. We also shut down our production, especially at the end of the year, for the anticipated maintenance that we conducted there. With that, we are still in our guidance, but, as I just said, at the lower to middle end as we anticipated.
With that, I'd like to hand over to Torsten Derr again, who will present you the outlook for this fiscal year, 2023.
Thank you very much, Thomas. I continue with 2023, and I would like to start with the sales. We are going to guide you on a sales level in 2023, which will be on prior years' basis. Why that? We have two negative effects. One, Thomas already has mentioned. This is a planned termination of the BMW i3. We will see this in our top line. Second is the first step of our site cleanup. We divested one site which we have in Gardena. Gardena is a city close to Los Angeles in California. There we had very high burden from future CapEx and negative regulatory effects. This is a cleanup. There we will lose approximately EUR 30 million top line.
These two effects will be compensated by selective expansions in our core segments. As you know, we want to grow in semiconductors, electro mobility, and renewables. We will be able to compensate the two negative effects which I just mentioned. The effects on the profitability, our EBITDApre, we will guide you to a range of EUR 160 million-EUR 180 million EBITDA in 2023. We expect that the factor costs remain on a comparable high level like in the prior year. Personal cost even went up. We have the same effects which I already mentioned on the top-line side, the exit of the Gardena site in California and the loss of the BMW i3 contract.
We continue with the margin over volume strategy, which we started already two years ago. On the next slides, you see the effects on graphite on our business units, and I start with the biggest business unit first, our business unit Graphite Solutions. We will see a slight increase in the top line and a significant increase in the bottom line. Why this? First, we have a very good position with our isostatic graphite products in the whole semicon area, especially in silicon carbides, and we expect growth over there. We have a very special site situation because we own sites in all regions of the world, in China, in Europe, and also in the U.S. We will benefit from this because we will be able to serve all semicon customers in all regions.
Second business unit is our Process Technology, so equipment for the chemical industry. Here we expect a slight increase in sales and a significant increase in EBITDA. Here we benefit from a very, very good filled order book, which will carry us through the year 2023. We are regarded as a quality and technology leader and also now our order book is still growing. Third business unit, Carbon Fibers. Carbon Fibers, slight decrease in sales and slight decrease in EBITDA and the before mentioned effect of the termination of the planned termination of the BMW i3 will affect exactly this business unit. We are going to try to shift the volume which are released from the BMW contract into wind energy, but at much low lower levels of profitability.
The future drivers are still intact. We want to shift the wind energy to more profitable niches, for example, pressure vessels to store hydrogen in our aerospace business. These effects will come down, will come in the years to come. We expect stronger growth by the mid of the decade. Last business unit is Composite Solutions. Sales, I'm going to guide stable EBITDA, a significant decrease. Here the divesture of our Gardena sites with EUR 30 million top line, we expect to compensate this a little bit by growth into automotive. Right now we are in the pitching process of very interesting programs in automotives as well, in the U.S. and in Europe.
This I would like to hand over to Thomas again.
Yeah. Maybe also say a word on our refinancing. You all know that in second half of the year 2022, we refinanced our convertible and we replaced the old convertible with a new one. However, there were some EUR 30 million, EUR 31.9 million still open and outstanding. We were, or we are able to squeeze them out, and this is already what we announced recently. We will repay these outstanding EUR 32 million end of the month. The convertible, the old one, which expired anyway September 2023, will be completely repaid. The new one, as you can see here on this slide, has a expiry or maturity in 2027.
We are well-financed with that component. Today we can also present you that we also agreed with our financing parties and financing banks that we successfully refinanced our so far undrawn RCF, our revolving credit facility successfully. We had the old one would have expired beginning of 2024. Being very early in our refinancing activities, we were able to agree with the financing parties on a prolongation or a new RCF, which is again undrawn, with a maturity profile to 2026. We reduced the RCF to EUR 100 million coming from EUR 175 million.
As it was anyway undrawn, that was simply too big for us, and EUR 100 million is sufficient for a business that we run there. We take the other EUR 75 million as a term loan facility, which at the moment is still undrawn but also has a maturity profile to 2026. This is something that we would like to inform you about, that also the second step of our refinancing has been successfully conducted. The next one that we have to talk about is the corporate bond, which expires September 2024. Throughout the year 2023, we make up our mind on how to refinance that one. This is the task for this year or maybe the second half of this year.
Maybe also worthwhile mentioning is that our refinancing of the RCF and the term loan has a link also to some ESG components, and we choose two there, which also affect our interest rates that we pay. If we fulfill our targets in those two KPI, we pay lower interest and also vice versa. The environmental KPI that we choose is the reduction of our carbon dioxide emissions intensity. We have set our clear ESG targets how to lower our CO2 emission profile. If we achieve that, we pay a lower interest on that. If we don't achieve it, we don't. The other one is a KPI that we call LTI.
It's a lost time injury, or others know it as a frequency rate. It depends on how many accidents you have per 1 million working hours, where an employee of us really has to leave the work and cannot return the next day. This is what we take as a social KPI from our ESG portfolio that we guide very much as we put a lot of focus on safety. We are very happy to present you that we are in this challenging market environment, we were able in last year to refinance our financing instrument successfully, and we continue doing so beginning of 2023.
Yeah, I will present you our new mid-term planning. As we were so successful in the two years of restructuring, we have revisited our five-year growth plan. This started in August, where we had a big strategy meeting and collected all of our growth ideas. What you see here on this slide is a summary of the ideas we had, which we want to bring into the future. I start with the sales. We want to grow from 2023 level with a CAGR of 8% per year and want to reach a top line between EUR 1.5 billion and EUR 1.6 billion. Everything is backed with concrete investment ideas, and a huge part of this investment ideas will be financed by our customers. We are pretty confident to be able to reach this.
If we come to the right-hand side of this slide, you can see that in the same time frame, our EBITDA will grow from this year guidance EUR 160 million-EUR 180 million to EUR 270 million-EUR 300 million in 2027. This is a CAGR of +14% every year. The investments will take place for 2/3 in our most profitable business unit, the business unit Graphite Solutions, and most of it will be backed by our customers. This you can see on the EBITDA margin level. We think that we will be able to boost our EBITDA margin from currently 15% to a target value of 18%-19% in 2027 by shifting the portfolio in the direction of our Graphite Solutions business.
Yeah, this is a summary of what we just said. We expect for this year that the factor costs remain on a pretty high level comparable to last year, and that pricing elasticity will go down a little bit. Last year, we were able to push most of the price increases into the direction of our customers. This year it will be a little bit more difficult. We will still benefit from the same mega trends which helped us the last two years, and this is digitization, renewable energies, and climate friendly mobility, and we have the perfect portfolio for this. We have a well-established market position and an excellent reputation in the market. This combined with competitive cost structures.
Thomas and me visited a very big semicon customer in the U.S., I just asked him, "Why are you buying from us?" He said, "You have the best quality and the best people, and this is why I want to go the next five years together with you." This is where we really benefit from. Yes, having said this, we will benefit from increased demand in our special graphite components, especially in the silicon carbide industry. They need our isostatic graphite to achieve growth. This will result in higher investments to increase our production capacities, which were running end of last year at full capacity. This is what we prepared. Next slide, please, Thomas.
We have excellent growth perspective on a stable and solid cost basis and a solid financial structure. This is a summary of what we presented. With this, I would like to hand back to Claudia.
Thank you. Now we can start with our Q&A session, and we are looking forward to answer your questions.
Ladies and gentlemen, at this time, we begin the question- and- answer session. Anyone wishing to ask a question may press star followed by one on their touch- tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using a speaker equipment today, please lift your handset before making your selections. Anyone who has a question may press star followed by one at this time. The first question is from Sven Sauer from Kepler Cheuvreux. Please go ahead.
Yes, hello. Good morning. I hope you can hear me well. I have two questions. The first one, I was wondering what your thoughts were on the announcement of the partnership of your French peer and Wolfspeed. I was wondering if such a cooperation would be interesting for your company. If yes, how would you consider to finance this, given the significant amount of capital that will be required? That would be the first question.
Yes, Sven, thank you very much. Very good question. Meitingen has announced to do a partnership with the customer Wolfspeed, the main player in the silicon carbide industry. Parts of the investments which Meitingen is doing are financed by the customer Wolfspeed. I can just say expect the same from us. We are in very close contact to this customers. This was a customer I spoke about with my example from the U.S. trip. We have a very, very close contact to the customer Wolfspeed on every levels, and expect something similar from us.
Okay. Very interesting. Good to know. Thank you. The second question would be, last year in the first quarter, you had this one-off amount of EUR 9 million for hedging energy costs. Should we expect a similar amount in Q1 this year?
Not as a one-off cost as we in this year, or for the energy hedging, we did our homework already in 2022, which to a certain extent, well, kind of dilutes the current energy costs that we see nowadays. As we all always said, we would like to make sure that we can produce. Therefore, we were very precautious and already hedged a large extent of the energy cost already throughout the year. Now I have a second voice somewhere in the call, but I'm just continuing. We already hedged a large extent of our energy costs in 2022 for the year 2023.
Therefore, there shouldn't be any one-off effects in Q1. Don't expect that.
Okay. Thanks a lot. Thanks.
Sure.
The next question is from Lars Vom Cleff from Deutsche Bank. Please go ahead.
Yes. Thank you very much. Lars Vom Cleff, Deutsche Bank. I would have three questions and ask them one by one, if I may. Starting with a backward-looking question. you already said that last year's revenue growth would have been 9.5% excluding FX effects. Are you also willing and able to share the split by volume and pricing effects with us?
I can. It's roughly 50/50. The, the rough EUR 1 million sales, if you take out the FX effects, then it's 50% price, 50% volume. As Torsten was saying, in many businesses we are at the edge, really reaching our capacity limits. We were able in the last two years with very intelligent, well, debottlenecking, as we always called it, to overcome the theory of constraints and really the hurdles where we can squeeze a little bit and edge the production to the maximum. This is where we are. We could have grown stronger, but in this particular case, this won't work.
Also bear in mind that there's a negative price effect with the expiry of the BMW i3 contract. You lose a certain part of the margin, and as sales is always price times quantity, if you have the same quantity but lower prices, it also affects your top line. This is also in there.
Perfect. Many thanks. Then maybe forward-looking, starting with your Graphite Solutions division, as you mentioned it several times, running close to full capacity utilization, planning investments. How fast can you ramp up capacity, and what are we talking about then for these special graphite material? Is it a doubling, a tripling, and how long will that take?
No, no, it's not a doubling or a tripling. It's a pretty long value chain with a lot of steps. When you look into graphite, this is not a single product like in the chemical industry. We sell isostatic graphite. We sell soft and rigid felts, and these are completely different production processes. The ramp-up times of new capacity are between one and three years. For example, for the felts business, we just engineer the equipment, double the line, and this needs one to 1.5 years until we come up with capacity. With isostatic graphite, it is much more complicated. These are really heavy investments, and there we are more in the range of three years, no? Depends on...
The good is we sell all the graphite products, extruded graphite, vibration graphite, isostatic graphite, soft and rigid felts to the same customers. We are the only one-stop shop in the industry which is able to sell all, and this is why we have to invest in different, areas of the world, because we are bottlenecked in, almost all of our graphite products. I hope this answers your question a little bit.
Indeed, it did. Many thanks for that. Lastly, Composite Solutions and your outlook. Yeah, you're guiding for a significant decrease of profitability while revenues are envisaged to be stable. Is this because your targeted growth with new automotive programs is lower margin business, or what's the major reason for that?
No, Lars, thanks for giving me the chance to elaborate a little bit on that and to answer this question in particular. As I said, we sold the Gardena business, which is a EUR 30 million top-line business. When we say, as Torsten was saying, that our top line remains stable, this also means that we can compensate the sales that we sold with organic growth. In fact, that our sales remain stable in Composite Solutions is a very good thing because in one year, we can compensate a sale of a niche business completely with our organic growth there. It's a success. However, the sale of this business had a certain profitability.
What I also said, there's an operative one-off effect of EUR 3.7 million in 2022, which we can't repeat. With that two effects, the sale of the Gardena business and, well, so far we haven't heard of any another one of effect from a termination of a project that can contribute in 2023. We see a decline in the profitability. Given the result of EUR 20 million in 2020, significant is more than 10%. In the end, you come very fast to negative impact. For the whole group, this won't affect the profitability too much. For this business unit in particular, it is significant.
This is the kind of bridge or explanation for the development of Composite Solutions in 2023.
Thomas, I would like to add so two negative one-time effects. I would call it the fundamental business behind is running very, very stable. Most of our parts go into high-end cars. I don't know how many Ferrari and Porsche drivers are in this call, but all the customers, this market is growing by 8%- 10%, it's expected to grow further, they all cry for carbon parts. This is the business we are doing in CF. The fundamentals are really good in this business unit.
C lear. Many thanks.
The next questions come from Andreas Heine from Stifel. Please go ahead.
Good morning. Thanks for the opportunity to ask question. I would do it as the same that I asked one question after the other. I would like to learn more about the CapEx you have to spend to get to your 2027 targets. I do understand that customers will pre-finance this, but you have to pay back them with deliveries. What we have to have in mind in CapEx spending over this period to get to these sales level?
Andreas, a very good question. We stick to our philosophy here in SGL, that we will always try to have a positive free cash flow of on a organic or operative level. Therefore, we stick to our well, rather conservative approach to have CapEx on the level of depreciation, because this is something that we have as a financing power ourselves. However, as this special market, semiconductors in general or silicon carbide in particular, and we, this is where the customer down payments to a large extent come from.
As they require and want us to grow further in this high margin applications, high margin business, we expand our capacities on top of our organic CapEx, with the monies that we receive from the customers to. We can say in general, this is interest free and it doesn't also need some guarantees. In the end, it's a very attractive model. However, we also would like that the customer not just gives us the money, but that he also, once we ramp up the capacity, really also buys from us. This is. That, well, the link that the customer is somehow depending on us is something which shows the intensity of our partnership that we have there, that we have this mutual agreement to grow together.
We have found a mechanism that repays the customer down payment with the quantities that he buys from us. In the end, we make sure that we always remain cash positive or cash neutral to the maximum out of the transaction that we have over a three-year timeframe. Normally, the customer... I mean, it varies by customer, and it varies by down payment. In the end, we have up to now a couple of them, and they all vary depending on the parts of the value chain and everything that we said. As Torsten was saying, we have so many graphite projects which are being sold into the silicon carbide business, and each of them varies a little bit.
In a general term, you can say the customer gives us the money today, and over the course of the years we invest, and then whenever we make the sales that we agreed upon, we repay a certain part of it. Over a three-years timeframe, you normally can expect he gets the money back, 1/3 , 1/3 , 1/3 , throughout the years. This is how we can ramp up the capacities plus the ramp-up of the net working capital with the inventory and the raw materials that we need in order to make this happen.
Andreas, the charm of this mechanism, which Thomas explained is, if you look at it from the marketing and sales point of view, this is an embedded take or pay contract. We are giving the customers some time to take the volumes which we agreed upon, and we pay back the down payment. If the customer is not taking the volumes, we can keep the down payment. It's a very attractive model for us.
Very interesting. Thanks a lot for that. The second question I have is on taxes. You have increased your deferred tax assets in the U.S., and you have enormous loss carryforwards in Germany of, I think EUR 670 million. Looking on the tax bill you have, let's say, over this time period until 2027, could you outline what we will see in the P&L and what tax payments might be? Because it cannot be that much if you have these strong tax loss carryforwards.
Andreas, the thing is, we pay taxes in various countries. Of course, we have losses carried forward. It varies country by country. Some of them expire after a certain period of time. Some of them are unlimited, and legislation for that can change overnight. What we can say is we pay taxes in countries where, of course, where we make money, and it's definitely in Asia. In China, we pay taxes. We also pay taxes in Germany or Europe. In Germany, we also have a kind of a minimum taxation that comes in place. Regardless of the amount of losses carried forward, we always pay a kind of a minimum tax there.
In the U.S., this is where we have huge losses in the past, and this is where the revaluation of the deferred tax assets now comes in place. We have developed a model for a conservative revaluation of the deferred tax assets. This also apparently, because I mean, we have some, some approved figures for the year 2022, was apparently also well approved by our auditors. This is the background behind it. For 2027, in that timeframe, we think that we can make use of that to a large extent, but it depends on the ramp-up of the business and also the change of legislation and everything that comes with it.
It would be still fair to assume that from the EUR 11 million you had last year and the year before, despite the strong increase, that will not escalate too much over this timeframe.
No. This is the really paid taxes, I think.. We, if that was your question, sorry for that, Andreas. Now I understand you correctly. Expect it to be on the same level for sure, yeah.
Okay. The next question would be on the energy bill. Would you be able to share with us how much the energy costs have finally increased from 2021 to 2022, and what you expect the increase to be from 2022 to 2023? If not absolute numbers, then maybe kind of percentage increase, if you have some flavor.
Well, in 2022, what we can say, the energy bill, despite the hedging that we did, still went up by roughly EUR 25 million-EUR 30 million for gas and electricity, on a worldwide perspective. Apparently, we have been very successful in passing it on to the customers and to the market. We had apparently a broad understanding that this is affecting our value chain, and this is how we pushed it through. For 2023, we are hedged, it depends on where we make the sales and how our budget looks like.
We are hedged to a large extent, you have to bear in mind that we did it on a month-by-month basis, starting, let's say, beginning half year 2022. We hedge always a portion for 2023 on the level that we have because we don't want to speculate. At the moment, this is very true, and this is not a secret. The costs that we see on the spot market nowadays are lower than the ones that we hedged throughout the year 2022 for the year 2023. How much in the end, this will affect our P&L for the year 2023, we cannot foresee so much.
For the unhedged part, it's still good to have the lower prices. The year can still be long. We just finished the first quarter. I think all the energy price hikes that we saw throughout the year 2022, nobody expected it at the beginning of last year. We're still a little bit reluctant in somehow foreseeing how it could affect the year. We still have then the pricing power that we try to put in place in our close contact with our customer, let's see how far we get there.
Thanks for this as well. The last is on the free cash flow, free cash flow guidance for 2023. Can you help me a little bit with the bridge? Looking on a cash flow statement, you had still EUR 24 million outflow for restructuring, which I would assume comes close to zero in this year. You had outflow for net working capital. EBITDA, if I take the midpoint, is roughly flat. And CapEx will not increase too much. What I'm missing that free cash flow is not going up.
Andreas, it's just that we are conservative, to be honest. This is why we say that this is where we are. Bear in mind that we also sold some businesses. So far, I think, as you know us in principle, we try to be conservative and we feel comfortable with free cash flow guidance that we give you. Again, as last year, we in case we have to adjust it, we will be the first ones to do so. From today's perspective, we would say that free cash flow remains on the level as we've seen it.
Yeah. These were all my questions. Congrats on your progress in the last year and hopefully also this year. Thanks.
Thank you so much.
The next questions come from Lukas Spang, from Tigris Capital. Please go ahead.
Yes. Hi, good morning, gentlemen. I would first like to come back to the CapEx topic. You now mentioned CapEx will be in the same range of depreciation, but SiC capacities will come on top. From a cash flow perspective, what should we expect? Is it more than the EUR 60 million-EUR 70 million in CapEx spendings or will you then have these capacity expansions within this range so that we still see the depreciation level in CapEx? What should we expect in particular?
Thanks, Lukas, for this question. I think it directly follows the question of Andreas Heine, which we just previously saw. I think you both stumble a little bit with the following thing that we have in our guidance. We also received some of the customer down payments end of the year 2022, affecting our free cash flow for the last year, which was just published with the roughly EUR 65 million which we've shown. This is affecting our net working capital already in the year 2022. Now we start to invest the first monies in 2023.
If you get some down payments in end of the year, 2022, you can't invest it anymore because as Torsten was describing a little bit the process of the capacity expansion, it's not that you just, you know, buy a machine and just switch it on and it works. No, it requires a lot of pre-engineering. Sometimes you have three to four suppliers that have to come together and install the oven or the capacity expansion. Again, in the same timeframe, we negotiate and hope for the next customer down payment to come. It's a kind of a overlap of. Also the timeframe or the years, the fiscal years come in place.
Some of the monies we received end of the year 2022 will be invested in 2023, and there will be monies that we receive in 2023, which will be invested already in the same fiscal year, but some can also be subsequently be invested in the year 2024. Over the timeframe and over the whole quantity of the customer down payment, which we have already received in negotiation or we hope to get also in the future for continuous expansion. There is a kind of a model that we have here internally that we are never cash negative out of it, and that we can pay and repay and invest in the same course of the year. This is what we have in there.
All the effects amount in our free cash flow guidance, where we say for 2023, it's on the level of the year before. You also mentioned the total amount of CapEx expected to be up to 50% higher in this year, compared to the levels that you normally know, and which are based on the depreciation. It can really go up quite a bit.
Yeah. It will be just for this year.
We give you a guidance for 2023 and nothing beyond. There we have our midterm guidance. We are working on that, but of course, nobody gives us a contract already for a customer down payment in the year 2024 and subsequently.
Okay. In terms of your revenue guidance, you now mentioned that you can compensate the sale of the business in the U.S. What should we expect in terms of pricing and volume effect? Will this also be in the range of 50/50, or will it be more volume effect or more pricing effect? What, what is your view on this?
At least what Torsten was saying a couple of words on that, it's gonna be difficult. That's what our estimation is. We have increased prices to a large extent last year. Some of the raw materials, some of the transportation costs, and also, at least when you look at the spot markets, the prices have gone down quite a bit. Of course, we tell our customers that they don't expect us to speculate on always having the lowest energy costs and making use of that. They want us to be a solid and reliable supplier, this is why we hedge on a level where we can produce in order to be precautious.
But of course, now, everybody's looking at the spot prices, everybody's looking at the lower freight rates and so on. Of course, these are good arguments for the customers to not accept at least increasing prices. When we come with I mean, everybody expects higher raw or understands higher raw material costs because there somehow our purchasing power comes to an end. When it comes to labor cost increases, where we've seen quite a bit, everybody's arguing, you have to compensate it with productivity, rationalization, and stuff like that. Luckily, we've done our homework in the transformation and restructuring phase where we, you know, really streamlined our, also our cost structures quite a bit.
Some of the personal cost increases that we see in 2023, we at least anticipate that we cannot 100% pass it through to the customers. This and we, of course, also see higher financing costs. This is another argument that we see. The capital costs go up quite a bit and the margin requirements from the banks. We think that the quantity will be higher than the price portion of our compensation effects for the Gardena sales and the part that's missing from the BMW i3.
Mm-hmm. Okay. In terms of seasonality, should we expect any special seasonality this year, or will it be more normal?
No. As last year, there's still no real Christmas season or holiday season that we have. We have as always, weaker Q1, a weaker Q4, but in the end, it's not so significant seasonality.
In terms of the one-offs, as I understood you right, you expect also in 2023 some one-offs. Can you already quantify them?
No. In fact, it's more or less over. As we have formally finished our restructuring and transformation program, be it internally, but also externally to you guys. We clearly said that our restructuring program has stopped end of the year 2022. This is also the clear communication that we have with our employees. Of course, we follow some of the, you know, severance payments are still negotiated or early retirement agreements come in place also in the year 2023, and some of the monies will be paid out there. You saw the reconciliation and the EBIT bridge that I showed throughout the presentation of the fiscal year 2022 figures. Also the purchase price allocation and everything.
Unless we find another land or building that we could sell, so far, we are running out of them. I would say in both ways, be it cost saving and having special programs for that. On the other hand, also special extra profits for sale of one-off businesses. We run out of ideas at the moment. We concentrate really on our operative business and would like to grow them into the right direction.
Reported EBITDA should be close to the EBITDApre?
Yes. From today's perspective, this is absolutely true. Again, bear in mind, the last two years, the positive effects in the, in the one-off overcompensated the negative ones. It's not that we dilute the pre-result. It just should show you what is really our operative run rate and how strong is our profitability there.
Yeah. Okay. Thank you.
Sure.
Ladies and gentlemen, if you would like to ask a question, please press star and one on your telephone.
Okay.
Oh, sorry. Please go ahead, Claudia.
I see no more question here. Last time to ask, do you have additional questions to ask for the full year or the outlook? No, thanks for your participation. You can find the today's presentation and the annual report on our webpage. If you have further questions, do not hesitate to contact Jürgen Reck or myself. We are delighted to answer your questions. Thanks, have a nice day. Goodbye.
Thank you very much. Bye-bye.
Thank you.
Ladies and gentlemen, the conference is now concluded. You may now disconnect your lines. Thank you for joining, and have a pleasant day. Goodbye.