Graphit Kropfmühl AG: Turnover jumps to EUR 60.7 million in the 1st half year; EBITDA of EUR 8.9 million; Investments of approx. EUR 2.5 million

Kropfmühl, Germany, 10 August 2011 --- In the second quarter of 2011 the Graphit Kropfmühl group (DEUTSCHE BOERSE: 'GKR') was able to confirm the positive course of business at the beginning of the year. Demand proved stable in both business segments, even though the performance ratios of the first quarter could not be reached again.

Compared to macroeconomic growth rates the group turnover in the second quarter increased disproportionately by 19.0 % to TEUR 29,773. After the record turnover of the first quarter, the total first half year compared to the same period of the previous year still showed a remarkable jump in turnover of more than 30 % to TEUR 60,671.

Higher sales proceeds in the most important product fields and efficiency increases resulting from excellently utilised production capacities more than compensated increased costs on the procurement side. Despite higher selling, general and administrative expenses in relation to project costs for the exploration of raw material deposits in Mozambique and Brazil, and higher personnel expenses, the development of earnings therefore is highly satisfying.

¹ Adjusted EBITDA before restructuring measures and impairing losses, expenses for recultivation and foreign exchange result

Silicon-metal segment
Despite a five-week maintenance-related furnace downtime the silicon-metal segment in the second quarter compared to the previous year reached a clear turnover increase of 21.8 % to TEUR 19,305.

In the first half year 2011 this segment through higher sales volumes and higher sales prices generated a turnover increase of 28.5 % to TEUR 39,478. Altogether the sales volumes of silicon-metal increased by 3.2 % to 14,883 t. With RW filler products, by-products of silicon-metal production, a sales volume of 12,200 t means a 13.8 % increase compared to the previous year.

Earnings ratios in the silicon-metal segment again clearly increased.

¹ Adjusted EBITDA before restructuring measures and impairing losses, expenses for recultivation and foreign exchange result

Graphite segment
Conditions on the raw material procurement market have noticeably changed in the last two years. The graphite segment also could not avoid these external influences that for example resulted from export limitations of the Chinese government, and had to accept clearly increased prices or less favourable payment terms on the procurement side. In the second quarter necessary price adjustments on the customer side despite lower sales volumes compared to the previous year resulted in a turnover increase to TEUR 10,468. In sometimes difficult negotiations since the beginning of the year 2011 the sales prices had to be increased step by step and adapted to the higher raw material purchase prices.

The demand for natural graphite products still remains at a very high level. As a consequence, production capacities mostly were excellently utilised, which resulted in efficiency increases that, however, only partially compensated the effects of higher procurement prices. The gross profit clearly increased compared to the previous year, but the achieved gross profit margin remained lower than in the previous year despite the clear increase in turnover.

Expenses for the securing of future raw material supplies relating to the projects in Brazil and Mozambique also burdened the earnings and resulted in an only disproportionately low increase of the adjusted EBITDA.

¹ Adjusted EBITDA before restructuring measures and impairing losses, expenses for recultivation and foreign exchange result
 

Investments
In the first half year the Graphit Kropfmühl group used TEUR 2,512 for replacement and expansion investments in property, plant and equipment. Compared to the same period of the previous year investment activities thus increased by almost 50 %. In the silicon-metal segment the major part of the investments of TEUR 889 was used for equipping a furnace at the Pocking plant with a composite electrode system. The modernisation of another arc furnace has been initiated and will increase the capacity of the furnace and at the same time reduce its specific energy consumption. Modernisation work is planned to be completed by the middle of 2012 with a total investment volume of approx. EUR 6 million.

The graphite segment in the first half year 2011 invested an amount of TEUR 1,623 in new capacities to be able to meet the future demand resulting from the considerable growth potential in the field of construction chemistry. At the Kropfmühl plant the construction of an additional micronising line was therefore started in the first quarter to further increase competitiveness. Furthermore, additional micronising capacities were created in China, and the acquisition of a lubricant production line was concluded in Sri Lanka.

Outlook
Despite the lowering of individual early indicators that already indicate a flattening of the presently still very strong economic development, the outlook and expectations of our company concerning the possible course of business in the second half year are positive.

Based on the development in the first half year, on the current business situation, and on the forecasts for 2011 the group has raised its turnover forecast for the total year to more than EUR 110 million. Earnings ratios are expected to rise in line with the development of turnover, provided that the general economic environment remains stable. In the silicon-metal segment the price adjustments reached for the year 2011 should result in clearly improved turnover and profitability ratios. The graphite segment still remains under the impression of strongly increased procurement prices. Depending on the future development on the relevant markets, further adjustments may be necessary on the selling side, which would lead to a disproportionately high increase of the segment turnover. However, the profitability development of the graphite segment will not be able to keep pace with the development of turnover.

Financial calendar
9-month report 2011                           09 November 2011
German Equity Forum, Frankfurt      23 November 2011
Annual General Meeting, Munich     20 June 2012

Forward-looking statements
This press release contains statements about future developments that are based on currently available information and may involve risks and uncertainties, the result of which may be that the actual results may differ from the forward-looking statements. Statements about future developments must not be understood as guarantees. Future developments and events rather depend on a variety of factors, they contain various risks and imponderabilities and are based on assumptions that might turn out to be incorrect. For example, these include unforeseeable changes of the general political, economic, and social conditions.

Information on the company
Graphit Kropfmühl AG is a specialist for the production of silicon-metal and a globally leading supplier of refined natural graphite, with locations in Europe, Asia and Africa. The company that is listed in the Prime Standard (ISIN: DE0005896005) provides its customers with silicon-metal and graphite solutions for the most versatile applications. Silicon-metal is used in the chemical, aluminium, semiconductor and solar cell industries. High-quality graphite among others is used in lubricants, carbon brushes for electric motors, and in the chemical industry, for example for thermal insulation and energy saving programs.