SGL Carbon SE

XETRA:SGL

Earnings Call Transcript 2021-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the SGL Carbon Conference Call 9M Results 2021.[Operator Instructions]I now would like to turn the conference over to Claudia Kellert. Please go ahead, ma'am.

[Claudia Kellert]

Thank you. Welcome to our conference call about the first 9 months 2021.First, some technical remarks. You can follow the presentation also on our web page, but let's start right now. So following the publication of our 9 months report, the Board of SGL Carbon will provide you with further details about the first 9 months of our business year. On behalf of SGL Carbon, our CEO, Torsten Derr; and our CFO, Thomas Dippold, will join the call.Now I hand over to our CEO, Torsten Derr.

[Torsten Derr, Chairman of the Management Board & CEO]

Yes, thanks, Claudia. Good afternoon.This is Torsten Derr.I would like to start the presentation directly on Page 4, where we give you some highlights of the first 9 months 2021. we have good figures to report.Our group sales are up by 8.8%, and I'm very proud to say that our EBITDA increased by almost 60%. Our equity ratio is up from 17.5% to 22.7%. And we were also able to reduce our net financial debt to EUR 191 million, which is 33% down. On the business side, we have our restructuring program running, which runs pretty successful. We have encouraging market developments in almost all areas of our business; and I want to highlight the LED and semiconductor, which are performing best. We initiated price increases in all business units to compensate for the challenges from raw materials, energy and transport. And there's also a challenge from the chip shortage in automotive, which is currently on a very, very low level, but I want to mention the risk.Our outlook is also good despite the increasing challenges, which is energy, logistics and raw materials. We are going to confirm our earnings and sales forecasts. Our guidance remains unchanged: EBITDA pre will -- between EUR 130 million and EUR 140 million for the full year and sales on a level of approximately EUR 1 billion.And with this, I would like to hand over to our CFO, Thomas Dippold.

[Thomas Dippold, CFO & Member of Management Board]

Thank you, Torsten. Ladies and gentlemen, good afternoon also from my side.This is Thomas Dippold, and it's my pleasure and honor to guide you through the financials of this presentation.On Slide #6, you can see our top line and our bottom line. And as Torsten already mentioned, our sales for the first 9 months of the year went up by almost 9%, reaching EUR 743.5 million compared to EUR 683.5 million in the first 9 months of last year. This means an increase of EUR 60 million, and also Q3 was fully in line with the 2 strong quarters we had beforehand. Q1 had EUR 241 million. Q2 had EUR 255 million; and Q3 now in line with EUR 246 million, another 8.7% up versus Q3 last year.Our EBITDA pre rose, as Torsten already mentioned, by almost 60%, totaling at EUR 108.5 million compared to some EUR 68.2 million in the first 9 months of last year. This means an increase of EUR 40.3 million on a like-for-like basis. And also Q3 itself was very strong. We have reached EUR 36.8 million in the third quarter, which is only a little bit below the second quarter which was the best so far in this year reaching EUR 38.7 million.So who contributed the most to the sales development? This was composite solution, as we have [ to mention the first ]. And they really grew by more than 50% and they could increase sales by EUR 31.3 million. Next in line is Graphite Solutions with almost EUR 25 million, and to come with carbon fiber business unit with EUR 21.4 million. On the next slide, you can see a look at our markets and how they develop.The market for Graphite Solutions. The best one or the best market for Graphite Solutions business, so far, in this year is the semiconductor business, which is not surprising. And due to the high demand we see there and the strong growth of our sales there, we also see a decline in [ our solar ] activities. Both products go more or less the same, but at the moment we focus to semiconductor business much more because it's growing stronger. And therefore, we declined our solar business. Automotive also remains very strong, so far. We have seen a lot of growth in the first 9 months, so far, but at the moment we see some minor cancellation and delays due to production shortages and shutdowns as a consequence of the chip shortages. The battery market remains very vivid and dynamic. We see a lot of potential in the mid-term basis, but this won't be realizable in short term. Industry remains late cyclical. We see some order intakes all over the place, but they, hopefully, can be turned into sales beginning of next year.For Process Technology, we see some slightly increasing sales, especially in the third quarter. And there is more to come in Q4, but still it's a late cyclical recovery that we see and it all depends on the chemical or petrochemical industry. We do see some booming order intake in Europe and -- or -- Asia, but North America remains weak. Carbon fiber is very strong in automotive, even much stronger than we probably expected it to be as we wanted to offset a lot of the automotive sales, especially in '22, with some wind businesses. You know that the BMW i3 contract is about to expire mid-next year. And we already plan to have some stronger sales in wind at the moment, but as automotive is very strong and we do have to respect the contract, automotive is booming until the very last day of this car model. Textile and industrial applications are on a regular level that we expected. Last but not least in this line, Composite Solutions. They are highly dependent on the automotive business. This is where all the dynamic growth comes from. We see a lot of large-scale solutions. That means really serious production with new projects out of the automotive business. Aerospace and industrial applications are on a much lower level there. I'm coming to the look at the individual business units, starting from Slide 8, onwards.Graphite Solutions grew by 8% or almost EUR 25 million to EUR 332.7 million compared to EUR 308 million in the first 9 months of last year. So semiconductor sales boosted the sales growth. And battery material sales increased on the level as it has been last year, but there's a lot of potential once the European battery market really established and is set up. Industrial business remains weak. However, we see some order intakes; and the recovery is about to come, especially in 2022.The profitability of Graphite Solutions really developed very, very positively. In the first 9 months of last year, we were slightly below EUR 50 million in EBITDA pre, and we are now up at EUR 67.5 million in the first 9 months of this year. This means an increase of 36.4% or EUR 18 million, which is marvelous, that we achieved out of EUR 25 million sales growth an improvement in the bottom line of EUR 18 million. This is a margin that we have reached again of 20.3% EBITDA compared to sales. This is a very strong growth compared to 16.1% we had at the same time last year.Where do the profitability increase come from? Mainly from the savings of our restructuring and transformation program, together with the sales growth. We see some higher utilization of our assets and therefore also some economies of scale. We do have some slight negative effect, so far, in this year due to higher labor costs which we needed in order to fill the capacities completely and are on a full shift model in many sites. And we also see some increasing raw material prices for pitch and coke.The next business unit, Process Technology, on Slide 9, declined by almost 5% to EUR 62.1 million in sales compared to EUR 65.3 million in the first 3 quarters last year. What has happened there? We do see some COVID-related sales decline all over the year. We see a recovery. Especially in the third quarter, we saw some promising sales development. And we also expect a stronger fourth quarter compared to last year, so that we are catching up in the sales development. We are still highly dependent from the demand in the chemical industry, and it still remains on a low level compared to the highs we've seen in previous years. We do see a strong order intake mainly in Europe but also Asia, but this can't compensate the decline that we see, so far, also still in North America. At the moment, we see some partial delays in our projects, especially due to the availability and supply mainly in steel.The EBITDA pre, the bottom line, recovered compared to the development we had in -- at half year. However, we are still EUR 400,000 short compared to the first 9 months of last year, reaching EUR 1.4 million as EBITDA pre in the first 9 months of this year, which means 22.2% lower than the previous time frame. This is a fact, despite all the savings that we have initiated and all the improvements, [ we lack obviously ] utilization of our assets. And we have to face also some raw material prices which go up, mainly in steel.For Carbon Fibers, we have sales growth of almost 10%, reaching EUR 21.3 million. And with that, our sales in the first 9 months of the year reached EUR 244.7 million. We see a strong top line due to the high demand in automotive, which is a high-margin business for us, but we also see a potential risk of some production slowdowns due to the chip shortage, as I mentioned before. We also see a rising demand, especially from the wind industry, but we can't serve it the way we want to because we reached our capacity levels, so far, and they're filled with wind. And all the remaining capacities are filled with -- yes, with automotive. Coming to the bottom line, there we see also a strong development. We reached EUR 43.8 million as an EBITDA pre figure for the first 9 months of this year. This is an increase of over 50% or EUR 15.4 million compared to the EUR 28.4 million we saw for the same time frame last year. Out of the increase of EUR 15.4 million, roughly half of that comes as a contribution from our joint venture BSCCB, where we sell together with our joint venture partner Brembo our carbon brake discs.With the bottom line, we have to see that we are really a high-energy business. So we need a lot of energy and gas to convert our acrylonitrile into acrylic and carbon fibers. And with that, we suffered, especially in at -- in the late months of the third quarter but especially now going into the fourth quarter, from the really booming energy costs. So the spot market for gas, for example, has quadrupled at the moment. And it still remains on this high level, so we have to work on that, that we, on the one hand side, can, well, get the gas prices at a lower level, but also in order -- we have to work on passing the costs through to our customers in order to keep our margins where they are.Last but not least, Composite Solutions. In Composite Solutions, our sales went up by more than 50%, reaching EUR 92.1 million in the first 9 months of this year. This is an increase by over EUR 30 million compared to EUR 60.7 million we saw for the first 9 months of last year, and this is all due to automotive business. We see a strong demand in leaf springs but also new projects for battery cases for automotive. These are mainly the booming sales developments we see there. This is all project business, so it's not [ what we had some small tiers ] businesses. It's really large-scale business where we really have some new platforms. And we serve those customers for many over years, as long as the models run in the market.Our profitability developed very positively. We saw an increase of EUR 14.1 million, coming from minus EUR 5 million last year to EUR 9.1 million in the first 9 months of this year, so this is really a huge turnaround we saw there. And this is a very good development which is due to the high capacity utilization we see there with the automization of our production lines, especially when it comes to the large-scale business projects, but also the cost savings we initiated there boosted also the bottom line.Last but not least, another look at our Corporate, where we consolidate all the corporate functions and also do the business -- other businesses which are not directly related to the mentioned business units. The sales declined by EUR 14 million in our Corporate business unit. What does it mean? We reached EUR 26.1 million in the first 9 months of last year, and then this year, we couldn't even reach EUR 12 million, so far. This is due to the fact that, in the last year, we have received some monies from our former tenant, Showa Denko, in our Meitingen site because they left the plant premature and which was not in line with the contract we previously had. They had to pay a termination fee to offset the missing rental payments and also some restructuring costs. And this is what we accumulated into the sales last year, and this is missing in this year. And once a tenant in our Meitingen site has left, then we also cannot charge our services to them. This is also why we have some lower service sales to divest businesses.And last but not least, we have sold some no-longer-used land and buildings in our operations. And the more we sell, the less we can charge for rental income. And all the 3 effects come together, so our sales is down to EUR 12 million. And in fact, this is not operational. This is just where we, well, got some costs -- or some sales without having a real operational business out of our business units before. And you just have to bear in mind that we lost for the total top line 1.5 percentage points just with reduction of our Corporate sales which in fact are noncore.Our profitability developed negatively. You can say now we lost another almost EUR 7 million compared to the same time of previous year. We have now reached minus EUR 13.3 million of EBITDA pre. And now you can say it is a terrible development, but you have to take into consideration that we lost EUR 14 million in our top line, which is 100% profit, the same money. And this could only be offset by 7.4% (sic) [ EUR 7.4 million ] savings in the [ transformation ] in our corporate functions, respectively. So in fact, we saw some huge savings, especially in the corporate function and corporate services, with EUR 7 million, but this could not offset the shortfall in our top line.Last but not least from my side, a look at our net results, free cash flow and net financial debt on Slide #13.For the first time in many years, we have reached a positive net result after 9 months of the business year. So we've reached quite a high number of EUR 42.6 million. We still consider that as slightly positive, as described in our guidance, because our operative net result is EUR 21 million that we have reached, still a strong increase compared to minus EUR 4 million as we had for the first 9 months of last year. And the other EUR 21 million are one-offs which affect our net result. And this mainly comes, [ again ], from land sales of unused land and buildings in the United States but also our Meitingen site. In total, we see an increase of our net result of EUR 46.5 million. This is a strong development. Maybe also, as we described in our report for the first 9 months of the year, we do expect another increase in net result due to the introduction of a capital option in our pension schemes. This addition of this capital option will also -- well, in fact, there's accounting or technical effect of another low double-digit amount that comes with it, just as I remarked, that this -- we are trying to implement that. And we are quite sure that we can do that until the end of this business year.Free cash flow went up by roughly EUR 60 million from EUR 62.4 million last year to EUR 122.5 million this year. This is a very strong development. Where does it come from? Our operative cash flow went up by almost EUR 14 million compared to the same time last year. Our investing cash flow, this is maybe something I need to explain a little bit, is positive. You normally expect a negative investing cash flow. Ours is positive compared to the same time last year. Where does it come from? We do have some land sales, some cash in for land sales. We do have our dividend from our joint venture BSCCB. And last but not least, our CapEx, compared to last year, for the first 9 months, respectively, is lower compared to last year. And all 3 effects make it happen that our investing cash flow is positive with EUR 21.2 million, EUR 46.3 million up versus last year.And especially, the strong cash flow [ also ] contributed to bring down our net financial debt by almost EUR 95 million, coming from EUR 286.5 million down to EUR 191.6 million. This is also something we consider a very good development. And with that, our equity ratio increased by 5 full percentage points from 17-point-something to 22.7% after the first 9 months of the year. And our ROCE developed quite positively, now reaching 6.4%, significantly improved up to from -- coming from 0.9% in the same period last year.With that, I hand over to Torsten again for the outlook of '21.

[Torsten Derr, Chairman of the Management Board & CEO]

Yes, thanks, Thomas.To bring our company back on track, we have started 1 year ago a restructuring program. And I can say right now the transformation program, after 1 year, is fully on track and will be continued. The transformation program consisted out of business measures, cost measures and also cultural initiatives. And you can see on this slide how we are tracking our transformation program. First, the transformation program consists out of 700 -- or more than 700 individual measures. Every measure has a dedicated responsible person, and we have weekly steering committees to track the full project. Out of the 700 initiatives, we have realized 75% and are fully on track.We intended to have savings of more than EUR 100 million and we have already reached our target. We are at EUR 100 million, and we increased the target by 15%. This shows that we are continuing the transformation process. And a big part was a head count reduction program. We wanted to reduce 500 permanent positions and we have realized 93% of this. More head count reduction is already initiated. So all in all, we are very good, [ on track ], but there are also some challenges to tackle because our input costs are rising strongly. And I have collected here 3 examples.On the left side, you can see the coke and the pitch price. You are going to mix coke and pitch to produce artificial graphite. So these are, for our business unit GS, the 2 most important raw materials. And you can see over the years which are depicted here this is a little bit more than 5 years. The price trend is going up, but you can see on the right side of the curve how sharply the prices for pitch and coke increased in the last 6 months. Here we benefit from quite some long-term contracts which helped to mitigate this price effect, but we have to approach our customers here with price increases. In the middle, you can see a global container freight index where the price for a container increased from USD 2,000 per container 2 years ago to almost USD 10,000 right now. And I can tell you it's not only a question of price. It's more a question of availability. And our procurement department and our logistics department are doing an excellent job. Right now all of our plants are running at full capacity, and we had to reduce capacity due to a shortage of freight or raw material.Last, I want to talk about natural gas price. And Thomas already mentioned it a little bit. And please look at the right-hand side. This is a natural gas price index for Europe, the petrol curve. And you can see it increased from EUR 10 2 years ago to EUR 80. And EUR 80 is not even the peak level we saw. 4 weeks ago, we have seen a peak level of EUR 120 per megawatt hour for gas. And you know this is due to Russia, due to the high Chinese demand, but we are very confident that these high prices will go down by second quarter of next year. I also depicted here in gray our -- the U.S. curve for natural gas, which is much below the European prices. And this is important because one of our most energy-intense plants is running in Moses Lake in the U.S., where we get green power for electricity but also very, very beneficial natural gas prices. This also helps to mitigate our natural gas exposure.On the next slide, you can see that we have a lot of countermeasures to tackle the challenges. And on this slide I summarize the 4 main challenges I see for the fourth quarter and also for the next year, and first is automotive and the chip shortage. Currently we are very low affected. Our utilization went back a little bit, but it's still on a pretty high level. And this is the case because we produce carbon fiber composites and they go to the rather high-end side of the automotive market. For example, for our brake discs which we produce, Lamborghini and Ferrari are on our customer list. And you can imagine that these high-end cars are served preferably. And this is why the chip shortage effect is in Q3 very low, but it is worth to mention that there is a risk.Second challenge is raw material prices and availability. Availability for almost all raw materials which we have is critical, and our procurement department really has to work to secure the supply of our plants. And I already said it. We had to shut down none of our plants to -- due to raw material shortage, so far, but we are facing price increases in all business units, and this is why we induce severe price increase measures in all business units. And the effect was so good that we could compensate most of the price increases with price increase measures at our customers.Energy, and this is electricity and gas and it's our third challenge. There I can say we are very, very well equipped with energy price hedges in the year 2021, so the effect is, in most of our plants, a very, very small effect, with one exception. This is our acrylic fiber plant in Lavradio, where we also produce a precursor for the carbon fiber production. There our main energy source is natural gas. And you have seen in the previous slide that the price increased by a factor of 10, and we reacted. First reaction was price increases at our customer. Second was that we idled 50% of our capacity. We are running 8 spinning lines there and we idled 4 of the spinning lines. Currently we are only producing the precursor for the carbon fiber production. We are not selling any more acrylic fiber to the low-margin apparel market. You can see we are running a clear margin-over-volume strategy.Fourth challenge which I want to mention. This is expiry of the BMW i3 contract, and this is affecting only the business unit Carbon Fibers. And the contract for the i3 will expire by mid of next year and this is as expected and as planned. And I mentioned it several times, that we are going to lose these contracts. This gives us time to prepare for it. And we have 3 countermeasures: First, currently we are in negotiation for new automotive products to refill the capacities, especially in Wackersdorf. Second will be a restructuring program which we run in Wackersdorf to bring our costs to a better level. And second (sic) [ third ] is that we are going to replace the carbon fiber which went into the i3 by the lower-margin wind energy business. And I just want to say we still have 8 months time to introduce countermeasures for the loss of the i3 contract.Yes, having said all this, we are confirming our sales and earning outlooks for 2020 (sic) [ 2021 ]. We increased recently our outlook in sales to a level of approximately EUR 1 billion for 2021 and we are confirming this level. Secondly, we increased the outlook for the EBITDA pre, our main KPI, to a range of EUR 130 million to EUR 140 million. And our guidance is exactly in this range.Next slide, yes. I come to the summary of the first 9 months. Our transformation which we introduced is supporting our positive earnings, and our EBITDA pre increased by almost 60% compared to last year. With a pickup in demand, especially in the automotive segment, but highest increase comes from semiconductors and our business unit Graphite Solutions, the higher demand leads to improved capacity utilization and cost degression. And this helps our bottom line. Third, we are seeing higher prices for raw materials, energy and also for transport; and they impacted Q3 and will impact Q4. And we introduce a lot of countermeasures and try to pass on as much as we can to our customers, and we were pretty successful until now to do this.We are running a clear margin-over-volume strategy. And you saw in Lavradio, in our acrylic fiber plant, we could not pass on the prices, the raw material prices, in the apparel segment. We switched down within 7 days our capacity and countered the energy and raw material price increase and safeguarded our margin. And last but not least, we improved our liquidity and lowered our financial debt. Our debt is down by EUR 95 million compared to year-end 2020.With this, I would like to hand back to Claudia.

[Claudia Kellert]

Yes. Thank you.Now you have got the possibility to ask questions. So at the moment, I don't see any question here, but don't be shy.

[Operator]

Yes, yes. And we do have a question, and that comes from Andreas Heine with Stifel.

[Andreas Heine, Managing Director]

Actually I have already 4 and then I put myself back to the line. I would like to start with what you said on the automotive industry in Carbon Fibers. Looking on what your largest customer has reported in Q3, yes, which showed that the i3 was down 24% which is about 2,000 cars -- and in total, business was down 10% year-on-year in Q3. You haven't seen this, according to what you have reported. Is that to come? So is there risks that BMW with these lower sales might cut the orders for the i3? And then also on the Carbon Fibers, could you give an update on these battery casing contracts you have? Have you started with deliveries? And how -- what can we expect from this business in 2022? And then on the acrylic fiber plant, what you said: So my understanding is where it is now is kind of worst case when you close the lines for the textile fiber and concentrate on your precursor production. In this environment, is then Lavradio producing losses? Or is, let's say, that -- the [ internal ] earnings contribution from the PAN good enough to keep it at least at breakeven?And the last point, more on group level on CapEx. You reduced the CapEx guidance from EUR 60 million to EUR 50 million. These EUR 10 million, is that something which is just shifted to 2022? Or is that what you really need less in CapEx? I stop here and wait for your question -- your answers.

[Torsten Derr, Chairman of the Management Board & CEO]

Okay. No, thanks a lot for those questions. I start with the first question, and you asked for the BMW i3. And what you read is absolutely true, but as far as we know, the order book of BMW for the i3 is pretty good loaded. And they will end the production definitely by next of this year, and they have to fulfill all orders for the i3 and we have to deliver the material. And as far as we know, they need all the material we produce, and it is unexpectedly high. We expected a little less volume. And we were surprised about the high order volumes for the BMW i3 because we intended to shift the volume to the premarketing in wind energy. Now we withdraw the volumes from the wind energy segment and deliver it into the BMW i3 market. So I know that the figures are right, which you mentioned, but I cannot see any decline from the orders for this car.

[Andreas Heine, Managing Director]

Okay, good.

[Torsten Derr, Chairman of the Management Board & CEO]

Second, you ask for the battery enclosure. And the battery enclosure is for an SUV- or truck-type car and electrical vehicle. I'm not allowed to give you the name of that customer, but it's a huge Tesla competitor, I would [ phrase it ]. And it was launched some weeks ago. The launch of this car was postponed month by month, but now it is finally launched. And what I know, the car is already sold out the whole year 2022. And our order books are filled almost at capacity and we expect an increase in volume, yes.

[Thomas Dippold, CFO & Member of Management Board]

It's -- to be a little bit more precise: It's going to be a double-digit increase next year with [ that, yes ].

[Andreas Heine, Managing Director]

Double-digit increase. That is in euro millions, what you're saying...

[Thomas Dippold, CFO & Member of Management Board]

Say it again, please -- in euro terms in our top line, yes.

[Andreas Heine, Managing Director]

Yes, okay.

[Torsten Derr, Chairman of the Management Board & CEO]

Yes. For Lavradio: Lavradio consists out of 8 spinning lines. We use 2 spinning line for precursor production. Another 1 or 1.5 is used for PANOX, which goes into flame retardants. And a little bit produces a -- special grades for acrylic fibers, and they are accretive and we make money with it. The other 4 lines, we just utilize them with acrylic fibers, and we sell them to the apparel business. And this business is plus, minus 0. In some months, it is accretive. In other months, it's around 0. It's just to utilize the plant and to dilute the fixed costs. In terms of energy costs -- and natural gas is our main source of energy which we have there, which went up very sharply within days. And in times of very high acrylic nitrile costs, we are not able to pass on the costs with the apparel markets. They switch to other polymers; for example, polyester. And our answer was we ask the customers, "Are you willing to accept the higher prices?" They said no. We switched down the capacity. Now I think, this week, we restarted 1 out of the 4 idled lines because some customers came back. They were willing to pay higher prices, and everything what we sell is accretive. And this plant is the first which follows our margin-before-volume strategy. If we don't get a margin, we idle the capacity. I hope this answers your question...

[Andreas Heine, Managing Director]

Yes, very much. Is that -- Lavradio, in these very adverse conditions, is that contributing losses? Or is that still on the EBITDA and cash flow level...

[Torsten Derr, Chairman of the Management Board & CEO]

[ Yes ], we are not regarding profits on a plant level because you have to look at the whole chain. We start with acrylonitrile and produce a precursor. And then it goes to our own carbon fiber plants, which we have the Muir of Ord, Scotland and Moses Lake, U.S. And we look at the whole value chain; and the whole value chain, of course, is accretive. You have seen it in the figures which Thomas presented, but to look at single plants within a chain -- it's to think of transfer prices which we apply, so it makes no sense to look at profitability on plants level.

[Andreas Heine, Managing Director]

Okay.

[Thomas Dippold, CFO & Member of Management Board]

Coming to your last question, Andreas, regarding the CapEx. And you're completely right [ there ]. We adjusted our prognosis, saying that in this particular year we'll be below our depreciation level and we will reach around EUR 50 million. We are not going to do any unreasonable or stupid things in the last 1.5 months of the year, so wherever we can invest into some additional CapEx, then we do it in the right way but same as last year. And this was always the message we try to bring across. We try to do no stupid things with our cash flow when it comes to investments, so we try not to do any fancy stuff where we have a new project with a new customer that nobody has ever seen before, no. We rather stay in existing markets. We look at our supply chains. We look at our production lines. And each and every machinery, we will try to utilize it to the maximum. Wherever we see some constraints or bottlenecks, we're trying to debottleneck. And with that, we maximize our output with a minimum of CapEx and investments. And with that, we think we are very responsible with our cash flow and what -- yes. And this is the reason why we only invest EUR 50 million, roughly, in this year.So will this be the new normal for SGL? On the one hand side, Torsten mentioned that, or also in the beginning when we were looking at the markets. So whenever we see chances in the markets that we already are in and we see opportunities to come up which are profitable business cases, of course, we will invest. And of course, we will take the chances that we see, but we will still, as a kind of a policy, won't overinvest with the current conditions. You know that we're also going into a refinancing phase to come somewhere in -- during the course of 2022 or beginning of 2023, so we try to stay at a reasonable level with our CapEx, but certainly we won't miss any chances in the market.

[Operator]

The next question comes from Benjamin Pfannes-Varrow with Berenberg.

[Benjamin Pfannes-Varrow]

A couple from me as well, please; and maybe starting with price increases on your end, just to get a feeling of how that develops. I mean [ obviously ] in terms of the time line of you increasing prices. I mean, is there a big step up into Q4 or next year? [ Or has the bulk ] been done already? How do you see that developing in -- yes, in order to offset cost inflation?

[Torsten Derr, Chairman of the Management Board & CEO]

Yes, thanks, Ben, for the question. We started very early with a project which we called "raw material pass on" in our company; and we started this already in June, July this year. And start means we develop tools that we can analyze how raw materials are going into our final product and what's the need for price increases. And this was a very good preparation. And then prices started to increase. We are a little bit surprised about energy, electricity and especially natural gas. And yes, this -- most of the energy costs were not indexed in our prices, while most of the main raw materials are included in our price contracts to our customers. And for example, Carbon Fibers, most of the big contracts contain [ a clause ] which directly takes the acrylonitrile, which is the main raw material, in. And when acrylonitrile increases with a certain time gap, we are allowed to increase the price for exactly the same amount. So this is kind of a natural hedge we see here. With the other contracts, we approach in all business units almost every customer and try to forward everything. I'm not sure the series of price increase is coming to an end because what we do are also our suppliers doing. And every day, new suppliers are knocking on our door and confront us with new price increases and we [ start the cycle from new ]. And I expect in Q4 we will see a next round of price increase. I'm a little bit more optimistic for the energy prices. You know electricity prices are following natural gas. As soon as Nord Stream 2 will open, gas price will decrease significantly. And I saw futures for natural gas which are below EUR 40 already in Q2 next year, so there I expect a mid-term price decrease. I hope this answered...

[Benjamin Pfannes-Varrow]

Yes, yes. That's very helpful. I mean, yes, I guess a lot of moving parts into next year, but I mean net-net that you have a feeling on whether you can comfortably pass through the majority of costs, but do you think you have to absorb some of the pressure that's going on?

[Torsten Derr, Chairman of the Management Board & CEO]

Yes. And Benjamin, the first thing I do every day is to look at EEX, which is a energy spot market database for electricity and gas. And the fluctuation is high currently. There are movements of 10-or-more percent every day. And we expect that fluctuation of energy pricing will remain with a decreasing trend.

[Benjamin Pfannes-Varrow]

Okay. And then on to the cost initiatives, I see you -- yes, you're ahead of the EUR 100 million target now, so yes, where does that -- how should we think about next steps in terms of your -- the structuring program with regard to costs?

[Thomas Dippold, CFO & Member of Management Board]

Benjamin, this is Thomas Dippold. Well, actually, yes, we are reaching our targets, as we said. And we have reached EUR 100 million at the moment, but as Torsten already mentioned also in previous calls, we are not leaning back once we have set up an initiative to save some costs but we're continuing with that. As we has -- as we have always told you, our restructuring will last at least until end of 2023, and we said that for a good reason. We have to somehow digest and find some new ways, and we are on a good way to do that, to compensate also the loss of the i3 business. And everybody knows that this is going to expire mid of next year. And we need to have the transformation into the wind business with the capacities that are going to be freed up with that one. So with that, we -- our transformation, our restructuring will, anyway, continue until end of 2023. And there are more initiatives and more savings to come.So when we did the initial definition of all the initiatives in the meantime, more than 20% additional initiatives have been identified and added to the scheme. And we'll just continue working on that. And in the end, this needs to be a perpetual development that we're having, so we cannot just say, well, this was a onetime effort. And then everybody leans back, and then we say, well, we just relax and recover because we are through with that, no. We need a permanent development cycle. And in the end, it's also a cultural thing that we are trying to establish into the organization, and I think we are on a good way to install that.

[Torsten Derr, Chairman of the Management Board & CEO]

And Benjamin, one good example for an additional initiative which we developed is BMW i3. We are not developing -- or not delivering carbon fibers into this car. We are delivering textile carbon fiber stacks, and they are produced in Wackersdorf. As the contract runs out, we first have to dedicate carbon fiber volumes to the lower-margin energy market. And secondly, we have to restructure Wackersdorf. And this restructuring is an additional initiative which we developed and this will be done by mid of next year. And so we are finding more and more initiatives as the time comes, but in 2022, we have to balance out restructuring and growth again and shift the whole strategy a little bit more to growth. This will be done in the course of 2022.

[Benjamin Pfannes-Varrow]

Okay. And then very last one, just on the battery business in the graphite side. Can you give an update, firstly, on the Hyundai GDL business, how that's developing; and then secondly, on the anode material?

[Torsten Derr, Chairman of the Management Board & CEO]

Yes. So Benjamin, again that -- I get it. You ask for GDL and GAM, for both....

[Benjamin Pfannes-Varrow]

Yes, exactly, exactly.

[Torsten Derr, Chairman of the Management Board & CEO]

Okay. So for GDL, this is called the gas diffusion layer. And this is a membrane which is a very, very important part in a fuel cell. And there are 2 car companies in the world which sell right now larger amounts of fuel cell cars, which is Toyota and Hyundai. And our GDL is used by Hyundai. So every Hyundai car which is sold uses gas diffusion layer produced by SGL. The main car, which makes up 90% of the Hyundai fuel cell cars, is Hyundai NEXO. And the sales of the NEXO car stagnated somewhat. And Hyundai is moving from the NEXO 1 to the NEXO 2 in the next 2 years and we will see an increase. So our business in GDL is more or less flat compared to last level, but this is a pretty good-margin business. Second, GAM: GAM stands for graphite anode material. And in a battery for an electric car, you have an anode and a cathode, and the anode is produced out of copper coated with graphite. And we are 1 of the 2 larger producers of graphite for this battery. And Thomas and me just granted an investment into our site in Poland. It's called Nowy Sacz, where we produce a new -- or construct a new facility for this graphite anode material of -- and the capacity will be above 1,000 tons. We will start up this capacity in second half of next year. Right now we have a big graphite and battery laboratory in [ Meitingen ]. We are producing samples and we are sampling the whole European battery industry, and the feedback is pretty encouraging. And next step will be to open the new facility in Poland and to sample or to give to the potential customers bigger industrial samples for the battery production. So this is the status currently. All our strategy is pretty well on track.

[Operator]

And we have another question from Andreas Heine with Stifel.

[Andreas Heine, Managing Director]

Yes, I'll try again, smaller ones only, starting with graphite. As it is, you have a long lead time from getting an order to delivery. Maybe you can share with us what your orders are in comparison to sales so we have a hint that this growth we see right now is continuing going into 2022. [ That's the ] first question. Or maybe we'll start with that and then I'll ask a smaller one.

[Thomas Dippold, CFO & Member of Management Board]

Yes. I mean normally we don't disclose any order intake figures, but our book-to-bill ratio is certainly above 1. This is what we can clearly say. And we expect some further growth, yes, especially on our largest business unit, which is graphite solution, also in the -- in next year. We do expect a positive development there.

[Torsten Derr, Chairman of the Management Board & CEO]

And Andreas, it's worthwhile to mention our order entry and also the order backlog in the 2 graphite business units which we run, which is GS, Graphite Solutions, and PT, Process Technology, is on a very, very well level. So order backlog is high. And order entry is on a very, very satisfactory level compared to the last 24 months.

[Andreas Heine, Managing Director]

Good to know. And then smaller ones: You sold quite some property. Is that all, or is there more to come what you will -- sale in property? And linked to this, as the income from this property is booked in corporate costs, would you be able to give, let's say, kind of quarterly run rate with, after all these changes in corporate costs, what you expect going forward?

[Thomas Dippold, CFO & Member of Management Board]

Yes, that's a question I can answer. So far, there is still some land left that we can sell, but the -- most of it already has been done. We rather choose the option, especially with -- when you look at the prices for real estate at the moment for land and buildings, I think -- or we think it's a good time to sell. And as it's idle land and we are not going to -- investing in those anymore, then we rather choose to sell it. So what we sold was a rented part, yes, of our Gardena site in the United States. And this is the most effect that we saw in Q3, what we've done there. And we -- together with a smaller part of our Meitingen site which we, anyway, couldn't use for our plant, this all totaled up to EUR 30 million that we have reached in cash in this year. And this helped a lot in order to offset our net debt and this is why we do that. We still do have some pieces of land that we are trying to sell and we are in negotiations with that, but we rather choose -- same with our business, we rather choose a reasonable price. And this is far more important than having a quick deal which we maybe could anyway do, but we'd rather go for a reasonable and attractive price tag rather than a quick solution. And so we don't do any fire sales, but once we have reached -- there's maybe 1, maybe 2, more land, pieces of land, that we can sell, but we won't reach that amount of money that I've just told you. We see outstanding ones which are, yes, maybe to come beginning of next year, but so far, we think the big chunk has been sold, so far. And this helps a lot in order to support our liquidity.And our run rate in our corporate costs shall be -- on a monthly base, on a like-for-like without any one-offs shall be below EUR 5 million. This is at least what we target for.

[Andreas Heine, Managing Director]

Monthly, [ you said ]....

[Thomas Dippold, CFO & Member of Management Board]

No, quarterly. I'm sorry for that. Thanks for asking. Quarterly. I'm sorry [ for that ].

[Operator]

And there are no further questions at this -- I'm sorry.

[Claudia Kellert]

Yes -- no. I see another question here, so...

[Operator]

Yes. We do have a question from Richard Phelan with Deutsche Bank AG.

[Richard Phelan, MD & Head of the European Credit Research]

Yes, just picking up on the point you made regarding an upcoming refi in 2022 or early 2023. Is it too early to talk about plans on that front, in terms of how you might look at that?

[Thomas Dippold, CFO & Member of Management Board]

Yes. To be honest, it's -- at the moment, it's still too early. We have a decent level of liquidity. We see how the year-end goes. And once we have our 2021 figures audited and -- then we make up our mind, also seeing what the course of next year then might be and also the cash requirements we might have, depending also on the chances that we might see in the market. And then we look for the best option how to move on with our refinancing, but at the moment, it's too early. I mean we have that in mind. We evaluate internally all the options, what is possible and feasible, but I think with our figures we see, so far, in this particular year, when we see how our liquidity develops, I'm not worried about a solid refinancing in due course.

[Operator]

Thank you. And there are no further questions at this time. I hand the call back to Dr. Torsten Derr for closing comments.

[Torsten Derr, Chairman of the Management Board & CEO]

Yes. Thank you very much for your attention and attendance in this call. And I would like to hand over to Claudia Kellert, our Head of Investor Relations.

[Claudia Kellert]

Yes. Thanks for your participation and interest in SGL, from my side as well. So if you have further questions, maybe after reading the Q3 report, please call Jürgen Reck or myself, and we are happy to answer your questions.So thanks once more for your attendance, and have a nice afternoon. Thank you. Bye-bye.

[Torsten Derr, Chairman of the Management Board & CEO]

Goodbye.

[Operator]

Thank you. Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.