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SGL Carbon Grabs €267 Million Lifeline

SGL Carbon struggling to compete with low-cost Chinese rivals. Here a Chinese steel factory in Handan in Hebei province in China in August. Source Reuters
SGL Carbon is struggling to compete with low-cost rivals from China, such as this factory in Handan.
  • Why it matters

    Why it matters

    The capital increase required by SGL Carbon to stay competitive against Chinese rivals was a distress signal.

  • Facts

    Facts

    • SGL shareholders Susanne Klatten, BMW and VW participated in the €267 million capital increase.
    • Together, the three own more than 50 percent in SGL Carbon.
    • SGL Carbon booked a record €400 million loss in 2013 on €1.5 billion in sales.
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    Audio

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The struggling chemical group, SGL Carbon, has raised funds through a share capital increase, backed by Germany’s wealthiest woman, Susanne Klatten, and a range of banks.

Jürgen Köhler,  SGL Group chief executive, said the company had raised just over €267 million ($339 million) on Monday, in a move that would “return SGL Group to a sustainable, profitable growth path.”

Ms. Klatten, who owns over 50 percent of SGL as well as being a major shareholder in BMW and Volkswagen, backed the move.

The increase, however, may not move the company back into the black. In 2013, SGL posted record losses of €400 million, with sales of almost €1.5 billion.

Susanne Klatten took over as chairwoman of the SGL supervisory board in spring 2013, and Jürgen Köhler became CEO at the beginning of 2014.

 

SGL Carbon corporate hq in Meitingen, Germany. Source DPA Tobias Hase
Some 300 employees will go through these doors for the last time. Source: DPA

 

SGL has two core business areas: graphite electrodes for the steel industry and carbon fibers for automobile manufacturers.

BMW and Volkswagen both fought for influence over SGL in 2011. In the end, Munich-based BMW prevailed as Ms. Klatten and BMW held a majority 43 percent of shares in the company. Volkswagen, by contrast, held just under 10 percent.

But the move turned out to be a pyrrhic victory. SGL’s graphite electrodes business has declined sharply in the last two years. The Chinese steel industry has flooded the world market with cheap steel from blast furnaces, making it uneconomic to melt down scrap with graphite electrodes.

SGL is attempting to adjust. The company said it will close two plants in Canada and Italy, and cut 300 administrative positions, in addition to selling some subsidiaries. SGL has already disposed of rotor blades producer Rotec and is about to sell its armaments subsidiary Hitco. The company aims to cut costs by €200 million by the end of 2015.

At the same time, SGL intends to upgrade its carbon fibers business with an exclusive partnership with BMW.

Both companies are maintaining a factory in the United States for the production of carbon fibers, which BMW uses in its electric cars “i3” and “i8,” and soon will also use in its 7-series.

 

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Markus Fasse covers the auto and aerospace industries for Handelsblatt from Munich. To contact the author: fasse@handelsblatt.com

 

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