Integration of SGL GEʼs Graphite Electrode Business and Our New Strategy

Transcription

1 Integration of SGL GEʼs Graphite Electrode Business and Our New Strategy October 6, 2017 SHOWA DENKO K.K. Kohei Morikawa, President and CEO Hidehito Takahashi, Director (Managing Corporate Officer and General Manager, Carbons Division)

2 Agenda 1. Transfer of SGL GEʼs U.S. business 2. Our new system for running the Carbons business 3. Forecast of the business environment /Strategy after the integration of SGL GEʼs graphite electrode business 2

3 Announcement on Oct. 20, 2016 SDK to acquire SGL GEʼs business (worldʼs Number 2*) Agreed with SGL Carbon SE (SGL Carbon groupʼs holding company) that SDK will acquire all shares in SGL GE Holding GmbH and make it a fully owned subsidiary; concluded a sale and purchase agreement Enterprise value: EUR 350 million (agreed) Price of share acquisition: 15.6 billion in total** (including advisory fees, etc.; as of the date of announcement) Closing: middle of 2017 (planned) *In terms of production capacity **Based on the exchange rate of 115 to the euro; actual price of acquisition will be finalized after price adjustments at the time of closing in accordance with the provisions of the agreement. 3

4 GE business integration to be realized U.S. authorities approved the transaction on condition that two production sites should be sold. SGL GEʼs U.S. business to be transferred to Tokai Carbon Co., Ltd. Europe/CIS/ Middle East/Africa Wiesbaden La Coruna Meitingen Steeg Capacity in EU 90 KT/Y Japan/China/ Asia Pacific Omachi Sichuan Banting Tokyo Capacity in Asia 85 KT/Y North/Central/ South America Hickman/Ozark Transfer Ridgeville Capacity in USA 75 KT/Y (30 KT/Y) Head Office (SDK) Head Office (SGL) Plant (SDK) Plant (SGL) 4

5 Influence of transfer of SGL GEʼs US business Positive effect on the integration of SDK/SGL GE business Initial goal Integrate SDK/SGL GE assets and generate synergy Achieve best quality; maximize synergistic effect After the transfer Full-capacity operation of SDKʼs US plant (75 KT/Y) Quick realization of cost reductions Focusing on integration and synergy of the sites outside the U.S. 5

6 SGL GE integration - Summary Enterprise value* Share sale / purchase price Total: EUR 350 million (Approx. 40 billion**) US site transfer: $150 million ( 16.5 billion**) Total purchase price: 15.6 billion (incl. advisory fees) US site transfer: $117 million ( 12.9 billion**) Schedules BOD decision (SDK/Tokai): Sept. 28, 2017 SGL GE share acquisition: Oct. 2, 2017 Business transfer agreement: Oct. 2, 2017 US business transfer: Early Nov (planned) Influence on performance B/S, P/L, CF: Consolidation as from 4Q, 2017 Influence of SGL GE integration and transfer of SGL GEʼs US business: Influence on SDKʼs fiscal 2017 performance will be disclosed after asset evaluation. Goodwill will be disclosed after it is finalized. *Total enterprise value was announced on Oct. 20, Value of US business was announced on Sept. 28, **Based on exchange rates of 115 to the euro and 110 to the dollar 6

7 Agenda 1. Transfer of SGL GEʼs U.S. business 2. Our new system for running the Carbons business 3. Forecast of the business environment /Strategy after the integration of SGL GEʼs graphite electrode business 7

8 Showa Denko Groupʼs GE sites Obtain new sites in Europe to cover the whole world Becoming the leading company in the GE industry Meitingen Steeg Sichuan Omachi Ridgeville Wiesbaden Tokyo Approx. 250 KT/Y La Coruna Global share after integration 13% 32%* Head Office(new SDK) Banting Plant(new SDK) *Of the worldʼs estimated GE production capacity in 2018 (excluding Chinese makers) *SDK estimate 8

9 Carbons business operation system Aiming at functional and globalized operations President / CEO (GM, Carbons Div.) Management Committee members Integration Executive Coordinator LEAN/SCM/Purchasing & Planning CHRO CFO/Central Planning/Legal CMO COO IMS/ESHA Excellence CTO Production/Mainten ance/engineering SCM/Procurement Managers for respective functions, at each site (Tokyo/Omachi/USA/China + Germany/Austria/Spain/Malaysia) 9

10 Agenda 1. Transfer of SGL GEʼs U.S. business 2. Our new system for running the Carbons business 3. Forecast of the business environment /Strategy after the integration of SGL GEʼs graphite electrode business 10

11 Market environment forecast 1 GE demand will recover, hitting the bottom in (Mil. t) 500 Production volume & share of electric steel (%) 0.35 Percentage of electric steel in total crude steel production (right axis) ($/t) 700 Rolled steel price trends Electric steel share hitting the bottom Impact of excessive production by Chinese blast furnace steelmakers (World Steel Association; for 2016 and after, based on WSA s short-term forecast) Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul U.S.A. China Western Europe World Export Price (Steel Benchmarker TM ) 11

12 Market environment forecast 2 Continuous improvement in supply-demand balance along the GE value chain Customers World: Slowdown in steel demand and crude steel production China: Excessive steel production & export Sluggish electric steel demand Customers N. America: Steady steel demand China: Environmental control and ban on production of low-quality steel Rise in the share of electric steel ASEAN: Recovery in operating rate of electric steelmaking plants Raw materials Needle coke: Low crude oil/coal price and excessive production capacity Fall in price Raw materials Needle coke: in tight supply Competition Reductions in production capacity worldwide Penetration into the U.S. market by benefitting from the exchange rate situation Competition Rationalization of production capacity (950 KT/Y in KT/Y in 2017) 12

13 Our Integration Vision Integration Goal Become the Strongest and most Profitable GE Company by achieving Number - 1 cost and quality leadership. Place 1 st priority on Safety and Compliance. Integration Principles Establish an excellent and resilient company by pursuing SDK/SGL Best Practices with a fair and transparent process providing stable and positive cash flow over the cycle. Combine SGL/SDK manufacturing and process technology to supply global Number. 1 Value in Use. Complete integration initiatives by FY 2018, thereby realizing financial benefit in FY 2019 from all identified synergies. Strengthen win-win relationship with customers and suppliers through quality, service and reliability. Integration Plan Plans for the next 30, 60, and 90 days have been established.

14 Disclaimer Regarding Forward-Looking Statements: Any statements made in this communication that are not descriptions of historical facts, including those relating to the anticipated timing, closing conditions, completion and success of the proposed transaction, and the potential effects and benefits of the transaction on SDK and any other statements about future expectations, are forwardlooking statements that are based on managementʼs beliefs, certain assumptions and current expectations and evaluated as such. Forward-looking statements are based on, among other things, opinions, assumptions, estimates and analyses that are inherently subject to significant risks, uncertainties, contingencies and other factors that may cause actual results and events to differ materially from those expressed or implied by the forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements. These risks and uncertainties include, but are not limited to, general economic and market conditions and the satisfaction of the conditions to the consummation of the proposed transaction. Further, forward-looking statements speak only as of the date they are made, and SDK does not undertake any obligation to update or revise any forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, except as required by laws. 14