Ladies and gentlemen, welcome to the SGL Carbon conference call, nine-month results 2026. I am Vicky, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star then zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Claudia Kellert. Please go ahead.
Thank you. A very warm welcome from SGL side as well. Since our last call, a lot of positive things happened. Today, we want to talk about these developments, our nine-month figures, and our SGL Growth strategy. Today, Andreas Klein, our CEO, and Thomas Dippold, our CFO, will lead the presentation. Now I can hand over to Thomas Dippold, please.
Hello, everybody. It is my pleasure to guide you through the development of the first nine months this year. I jump directly on slide number five, where you see the development of the group. Our sales have reached EUR 595 million so far in the first nine months of the year, compared to EUR 653 million, if I round it a little bit, in the same period last year. We are almost 9% down, or in other words, roughly EUR 60 million down. This can be directly attributed to the discontinuation of the unprofitable carbon fiber businesses, which we closed last year in the course of the year. You remember probably that Lavradio has been closed end of the second quarter in June, and then subsequently, our site in the United States in Moses Lake, we talk about that later, has been idled end of August 2025, to say it correctly.
Of course, these sales cannot be repeated, and like for like, then we are EUR 60 million down through this structural effect. On the other hand, if you turn it around, like for like, our businesses, at least overall, we will see some deviations in both directions when we go to the business units, stay on a flat level, so to speak. All in all, this was expected, and this is really the development which we have foreseen, and this is what is in our figures. We see a continuation. As I said, this is a difference between last year. We see a strong nuclear ramp-up in Graphite Solutions, which boosts our sales and especially the profitability.
We see very challenging developments ongoing in our Process Technology business unit. We see especially high profitable carbon fiber business or the Fiber Composites business, but we will come to that in the individual business units. When we look at our EBITDApre, you see that it remains almost on the level that we have seen last year. Last year, we had EUR 108.6 million in the first three quarters of the year, and now we reach EUR 106.3 million. As a consequence, when the profitability deviates less than the sales, that means that the margin must go up. We now reach almost 18% sales margin on an EBITDApre basis. This is more than one full percentage point higher than last year, and this clearly shows how good and how important it was to restructure these businesses and how healthy our existing ongoing strategic businesses are.
The good margin development come from, on the one hand side, from the product mix in Graphite Solutions, mainly with the increase of the nuclear business. We see also in Fiber Composites good margin effects, and this is a little bit offset by the lower contributions from Process Technology, which we can compensate so far. You have to bear in mind that in sales and EBITDA, this is also affected by the one-off payment where we restructured our take-or-pay contracts with our silicon carbide customer. If you remember that, in first quarter, we had about EUR 7 million compensation payment. In the second quarter, it was EUR 21 million. All in all, after six months, it was EUR 28 million, if I round it a little bit. Now we have reached EUR 30 million, so less than EUR 2 million were coming in the third quarter.
This has come to an end for this year, I would say, when it comes to this operative one-off effects. When I jump into the business units on slide number six, you see Graphite Solutions, our biggest business unit, growing by 10%, now reaching EUR 358.3 million in sales compared to EUR 325 million last year. Where does the increase of EUR 33 million come from? As I said, EUR 30 million are coming from the termination of the take-or-pay contracts as a one-off effect. You have to bear in mind, they also include some sales which would have been done in the second half of the year. Some of the things have been anticipated until the termination of this take-or-pay contract, and they include some one-off payments, but also some compensation for the sales for the whole year.
This also goes through the EBITDA, and now we have roughly EUR 72 million EBITDApre in the first nine months of the year, compared to EUR 58.2 million last year. This is an increase of EUR 23.5 million, which helps the margin to go up above 20%. We are very happy that we see the two as the first figure of the margin again. You know that we have seen that when the silicon carbide products were really hyped in 2022 and 2023. We have seen that for the last time, and now we recover back into these regions. Again, where does the sale and especially the profitability boost come from? Mainly the start of our nuclear graphite business, which we start producing on the contracts with X-energy, which we informed you about since Q3. We also see an increasing demand for semiconductor components, mainly in China.
You know that we produce big parts of the value chain in Germany, in our Bonn site, and then ship everything over to China. This is where we machine it and then subsequently also sell it to the customer. There we see a recovery of the demand in the semiconductor business, not so much in the other areas. That is pretty much for Graphite Solutions. On Process Technology, slide number seven, there you see a continuation of the development we have also seen in the first two quarters of the year. Also, no real improvement in the third quarter. Sales have reached now EUR 74 million compared to EUR 102.4 million in the first three quarters last year. This is, I think at half year we were 30% down, now we are 27.7% down.
There is an ongoing weak market situation and very much of uncertainties in the chemical industry in the areas that we serve. We see a lot of postponements and pushouts of the projects. They are delayed all over and sometimes even new awards that we see. And those projects that really are being started do not have the profitability and the margins or have not the size that we are used to or have seen before. And this as a consequence, when you lose in a project business sales by roughly 30%, this also affects your bottom line. And there you see that our EBITDApre in the first nine months of 2026 reaches EUR 11.2 million compared to EUR 28 million, which we have seen in the same period of time last year.
This is a decline by 60%, but again, the ratios, if you have these experts and all these engineers who can construct and engineer these projects, then it is difficult to adjust the workforce in the same manner as sales decline. Our margin still reaches some very healthy 15%. We were just maybe, say, a little bit spoiled over the last three years where the margin reached significant higher figures than 20%. But 15%, also to be fair, in a project business is not too bad. But of course, we hope that this will recover the soonest. Last but not least, our last operative business unit, Fiber Composites. There, as we said, the restructuring is over. There you see also this technical sales effect. We have reached EUR 147 million sales in the first nine months of the year compared to EUR 210 million last year.
This, again, the EUR 60 million decline, which is structural because of the discontinuation of the business in the two idle or terminated sites last year. And this explains that. Now you can say, apparently the rest of the business is not growing. Overall, this might be true. The sales remain then on the same level. But please have a look at the profitability at our EBITDApre. There you see an improvement of EUR 10 million coming from EUR 17.8 million last year to now EUR 28.7 million this year. This is an increase of 60%, whereas the sales go down by 30%. And you see that our joint venture with Brembo, the BSCCB, contributes EUR 10.9 million. This is almost doubled compared to last year, where we have reached EUR 5.6 million. So we see a strong improvement also in our carbon-ceramic brake business.
Also our operative business in Fiber Composites is doing very well. Then you see that the operative business must have also made a big, big, big jump in the profitability, and we now reach a margin of 19.5% if we include the contribution from our BSCCB business. So we are very happy with that development. This also contributes after nine months of the year, and I also come a little bit later what happened in the course of October. This all contributes, and now you see nine months or end of nine months figures. Our net result now reaches EUR 31.3 million after nine months compared to the year where we restructured 2025, where our net result was a loss of EUR -51.3 million. So you see an EUR 80 million turnaround compared to last year, and I think this is remarkable and quite impressive.
Our free cash flow more than triples compared to last year, coming from EUR 12.5 million to now EUR 38 million. And our net financial debt subsequently went down from roughly EUR 100 million, end of 2025, to now EUR 78.5 million. These are big improvements which are directly attributable to our strong cash generation, which our group conducted in the first nine months of the year. This also leads to a reduction of net financial debt, a very healthy leverage ratio of 0.6x, and an equity ratio now again above 40% with 41%, and subsequently a return on capital employed with 10.1%. So we are super happy with the development so far. As a consequence, when we saw these figures and a very strong third quarter, which was beyond our initial expectations, you see that on the next slide, number 10.
On 6th of December, after we have had our initial view on the nine-month figures, we informed the capital markets and you guys via ad hoc message about our guidance adjustment. We have said that, or informed you, that we have increased our sales coming from, which were initially guided EUR 720 million-EUR 770 million. Now that they are at the upper end of the range, we now say EUR 770 million will be reached in our sales, and subsequently also our EBITDApre will reach the upper EUR 130 million-EUR 140 million, coming from EUR 110 million-EUR 130 million, which we initially guided beginning of the year. So we see a big improvement in profitability and the upper end of the sales range.
The reason for that, I think we also made this very clear also in the presentation, is on the one hand side, a very successful ramp-up of our nuclear graphite business, which goes to the small modular reactors for X-energy. We see very positive product mix changes in Fiber Composites. Last but not least, the higher earnings contributions from our joint venture, BSCCB, and that compensates even the shortfalls that we see in Process Technology. So we are very confident that we can reach these targets. There was a second ad hoc message in October, which we informed you about some three weeks later, on 23rd of October. We were very happy to inform you about the sale of our carbon fiber site in Moses Lake in the federal state of Washington in the United States.
This site had been idled one year ago in August 2025, and this site has been sold for $ 70 million, which comes in three tranches. $45 million we already received, and some other $25 million we will receive in the course of the year 2027. The disposal gain from this transaction is $46 million overall, and I think the team has done a very great job to sell this site. On the one hand side, we reduced our capital employed on a site which we have no use internally for it anymore, and we could convert it with a big gain into cash and profit, and we are very happy about that. Having said that, I hand over to Andreas, who will guide you through the development of our strategy so far.
Thanks, Thomas. After this positive update on our current trading, I am happy to update you on our SGL Growth 2030 activities, which are gaining more and more momentum. First and foremost, in the area of nuclear, already mentioned by Thomas, we are successfully ramping up the value chain and our own production for the nuclear graphite, already contributing significantly in Q3 this year, but of course, a very important development looking into the future and fostering our nuclear growth ambitions. Adding to that, we secured our second X-energy order recently, as announced in the $90 million press release, and this is a great step further and, of course, a very important pillar reaching our 2030 targets. On top of X-energy, we are also expanding our nuclear customer as well as product portfolio, and this is also running well, and we expect some contribution already in 2027, 2028.
In the area of defense, we have meanwhile first orders for 2027 secured from what we call new defense customers, so going back to the development in the context of our SGL Growth 2030 activities. This will still be a smaller contribution from what we expect as of now. Nevertheless, it is ahead of our plan, so the progress we make here is really good, and we are really confident that this will deliver on the Growth 2030 targets. Also, and that is the momentum in the defense area, we continue to receive various composite prototype parts requests, and the development of these parts is running successfully, so we build up further capabilities. Also, there is ongoing strong interest in the serial production capabilities we have, especially in our automotive-based composites business.
In the area of semiconductors, we can confirm what we mentioned in our last update call, that there is increasing demand for semiconductor components requiring graphite, especially in China, and that demand has confirmed meanwhile, also looking into the next year. We can clearly say that we are benefiting and that we are very competitive in that development to take our shares, but also develop additional customers with our diversified high-performance portfolio and solutions. On top of that market development for semiconductors, the introduction of our new coating products is running well, and this is fueling the top of our growth pyramid, the innovation part, which is also a very important contributor to expanding our high-performance material portfolio going into the future.
In the area of space, we have been successful in increasing our supply share and supply volumes of heat-resistant materials for rocket nozzles for the space industry, and that's especially affecting our insulation solutions portfolio. On top of that, our cooperation with various space startups is progressing, and that's mainly affecting the development of rocket nozzles themselves, building on our reinforced heat-resistant material solutions. To summarize today's call, we are really happy about the update and the increase of our 2026 guidance, and at the same time, we successfully built up our SGL Growth 2030 future. Many thanks for your attention.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star then two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question from Sven Sauer, Kepler Cheuvreux. Please go ahead.
Yes, hello, everyone. Thank you for taking my questions. I just have two. The first one is on the higher semi demand from China. I was just wondering if you have any explanation as to why this is a higher regional demand coming from China, but not from the rest of the world, especially the U.S. The second question is on Process Technology. What do you think is required for a re-acceleration of demand and higher margins? For example, for the SiC business, of course, you would need higher demand for semis and for EVs, but what exactly would the Process Technology segment need to see higher demand again?
Yes, Sven, thanks for both questions. With regards to semicon or silicon carbide semicon we are talking about in China, and why they are out of the situation earliest, from our perspective, it's mainly two reasons. The one thing is that China went into that situation earliest. So, in terms of digesting the inventory levels, which was always the main reason for the slowdown, they are now out successfully faster. Also, it's the growth momentum, the growth trajectory we see in China. It's the biggest growth area for that kind of SiC substrate wafer production. It has been over the last couple of years already, and this is the second reason why they are out of the situation first, returning to growth mode. The second question on PT. The driver for PT, for the situation to recover, is really chemical industry demand, chemical industry situation.
We need to get rid of these question marks and the chemical industry slowdown so that our chemical industry customers are confident again in pushing projects further, expanding capacities, but also going back into normal maintenance and upgrade cycles again. This will then immediately bring back the volumes and the demand for our Process Technology business.
Great. Thanks. Just as a follow-up, I would assume to get into another maintenance cycle in the PT segment will take a while, right? I mean, we just got out of one one or two years ago, I guess, huh?
Yeah. Of course, there's also many other question marks, regional shifts, application developments that need to be taken into account. But in general, I would agree with your hypothesis. For 2027, also on the base of our order book, at the moment, we cannot expect any relevant recovery yet.
Great. Thank you.
The next question from Lars Vom Cleff, Deutsche Bank. Please go ahead.
Yes, thank you very much. Good afternoon. Lars Vom Cleff, Deutsche Bank. I took notice of your comments on Chinese semi and SiC demand. However, it seems that your major French competitor is very optimistic with regard to SiC customers' demand, saying it helped its advanced materials division return 6% organic growth. Why are you not yet seeing this in the same magnitude? I mean, when I deduct the compensation payments you received year to date, and despite you talking about positive effects from nuclear graphite business, the division sales are barely up year- on- year.
Yeah, Lars, well noted. Of course, it's always difficult for us to judge on how business of competition develops. The businesses are very different in size and also in reach. Also, that's the reason why in our figures you cannot see it earlier. I think in August in our update call, we mentioned that positive momentum first time, and it's contributing now into our business and transferring into sales and invoices. That effect just started as far as our business is concerned. It's something that will bring us into Q4 developments and 2027, but we have not seen it much before the summer break or the September, October period.
Okay, thanks. Looking ahead, looking at your guidance, I mean, excellent that you were able to increase it. Now looking at the EUR 770 million, roundabout EUR 770 million, working with my model, it looks even conservative to me. Could around EUR 770 million also be, I don't know, EUR 780 million or something like that?
That could be. We set at the upper end of the guidance, and of course, we have another two months to go. We do not know how November and December develop. But I think on the verge of 6 October when we adjusted the guidance to say it is the upper end, this can include EUR 780 million, it also can include EUR 760 million, but we say around EUR 770 million, I think then you are on safe ground.
Okay, perfect. Helpful. Then I might have overheard it or got sidetracked. Did you also comment on potential additional compensation payments you expect for Q4, or was that it with regard to the EUR 30 million?
You have not overheard it because I did not say it. But I can now say that there is nothing major to come in Q4. I think with what you have seen after nine months, that is pretty much it. Also in the third quarter, Lars, I think with less than EUR 2 million, this was almost neglectable what came out here for the third quarter of 2026.
Yeah, definitely agreed. Then another neglectable figure, but helpful for my housekeeping. EBITDA of the corporate unit, I mean, nine months was roundabout EUR 5 million-EUR 6 million negative. Is that a run rate we should also work with for Q4, or could there be a higher negative EBITDApre in that division in the fourth quarter?
I wouldn't say it's a neglectable figure because I also get paid in this segment. I think your assumption is fair.
Perfect. Excellent. Thank you very much. I'll go back into the line.
Thank you, Lars.
The next question from Uwe Hillgärtner, SdK Schutzgemeinschaft. Please go ahead.
Yeah, good afternoon, everybody. First of all, thank you very much for taking my questions. A big congrats to the much improved business results of SGL after nine months. This is, of course, highly motivating. You can read on various sources that the demand for indium phosphide material for semiconductors has increased quite a lot in this year. It is used for very fast optical data transfer, particularly for AI data centers. Here my question, which I think I had asked before, one more time, do you see any demand from this application for your high-purity graphite materials? That would be my first question. Second question, also about the situation of SiC. You mentioned that the compensation payment or payments is much reduced in Q3 and will probably be zero in Q4. Does that mean that the demand has finally picked up?
If I remember correctly, you were saying in one of the previous meetings that you expect a recovery in 2027. Okay, second question. Then I have a question regarding the business with X-energy. This is, of course, also very, very positive. You reported a second order about EUR 90 million. Will that order be delivered in one shot, basically, or will it be stretched over a longer period of time? Regarding the first order from beginning of this year, has this been delivered in the meantime to a large extent, or what is the timeline there? My last question is about the business for Brembo ceramic brakes. You had quite a huge expansion, which was completed last year. Has the demand developed as expected? Thank you very much.
Thank you, Uwe, for the questions. I will start answering with regards to the indium phosphide, which is clearly a new application also for the semiconductor players involved there. We are part of the development work there, and yes, it's a demand carrier for high-purity, high-performance graphite. Nevertheless, it's still early in its market development, even though the momentum is really impressive at the moment, but it's a rather small share of the market compared to established Si and SiC markets. Also, the demand of graphite in producing indium phosphide is significantly smaller, and also the rates where you need to substitute used graphite are much smaller. There's a lower frequency of substitution in the production processes of our customers.
So in total, the demand we see from that application for SGL is on a relevantly smaller scale, but it's a very nice momentum, and we are participating in that. The SiC compensations, I think that was a part of one answer already given earlier. Yes, for this year, we don't expect any further relevant compensations, and for us, these compensations were part of working on the established contracts with our customers, guiding our partnerships and these businesses into the future. So for us, it was also preparing the ground for sustainable future growth. So in that sense, it was important to find these solutions together with our customers. As I mentioned earlier, in general, we think the whole inventory management phase, and with that, the slowdown is coming to an end.
In some market segments, we can already say it obviously has come to an end, so that gives much better boundary conditions for 2027. In total, we expect, for sure, significantly lower level of these kind of contributions, if any, in 2027. Due to all the ups and downs we know from the semiconductor world, we could not say there will be no at all. For sure, the biggest part of that exercise has been completed with the 30 million settlements we have seen. The third question on X-energy, for both almost $100 million POs we have received, which are each for four reactors, so-called four-pack of our customer X-energy, we talk about execution periods of more or less three years for SGL. These almost $100 million we received per four-pack will be distributed for us over a three-year period each.
Uwe, your fourth question was with regards to our JV with Brembo, the so-called BSCCB, joint venture on the carbon-ceramic brake discs. Yes, you are right. One to two years ago, we finalized our expansion on both sides in Meitingen, in our main site near Augsburg, but also in Stezzano near Milano, where we increased the capacity by almost two-thirds. This is utilized to a large extent now with the increase of our machinery that we installed there in the meantime. You may be right, we are a little bit behind the development which we initially anticipated in the business case. This is fair to say. On the other hand, it gives us the chance to participate in every new awarded project which our customers now install.
This is very important because in the old given capacity, we were at 100% capacity utilization, so it was very difficult to squeeze in additional products and demands and new projects. You know, in this automotive Tier 1 supplier environment, you have to be ready for production, and they need also security that you can really deliver in the way they also ramp up their production. We suffered a little bit with the downturn of the Western luxury cars in China. We clearly can say that this affected our profitability mainly last year. I think we are on a good way in finding new markets or the OEMs for the luxury and sports cars find new attractive markets where they can sell these cars. All in all, we are very happy with the expansion and the development.
As a reminder, if you wish to register for questions, please press star and one on your telephone. There are no more questions. I would like to turn the conference back over to Claudia Kellert for any closing remarks. Thank you.
Yeah, thanks for your participation. You will find our report, the press release on our webpage. If you have additional questions or need more information, please call the IR team, Laura, or myself. Thanks a lot, and have a nice afternoon. Goodbye.
Ladies and gentlemen, the conference is now over. Thank you-