The decrease in sales was primarily due to the continued strong destocking activities and dramatic production cuts in the steel industry. Accordingly, sales in the Business Unit Performance Products declined disproportionately by 31%, while sales increased in the Business Units Graphite Materials & Systems and Carbon Fibers & Composites by 8% and 36% respectively. EBIT decreased by 58% to EUR29.2 million (Q1/2008: EUR70.1 million) and corresponds to a group return on sales of 10% following 20% in the comparable quarter of the previous year. Cost savings of EUR8 million from the SGL Excellence Initiative could only partially compensate for the cyclical earnings impact from sales and production declines as well as from the high start up costs associated for the new production facilities.

Robert Koehler, chief executive officer of SGL Group: “The first quarter of SGL Group was also effected by the massive global economic crisis, which became more severe in the course of the first months of this year. Nevertheless, we have achieved a positive quarterly result as announced. The world economy is in a recession and the end can not be foreseen yet. Against the background of ongoing weak demand, further production cuts and continued high start-up costs for new production facilities, we expect the second quarter 2009 to be on the level of the first three months 2009. We continue to expect the dramatic destocking in the steel industry to end and a technical correction to follow in the second half of 2009.”

Profit after taxes despite economic crisis

Compared to the first quarter 2008, net financial costs deteriorated by EUR7.2 million to -EUR15.8 million primarily due to the non cash mark to market valuations of intercompany loans and the lower interest income (Q1/2008: EUR8.6 million). Profit before taxes decreased substantially by 78% to EUR13.4 million (Q1/2008: EUR61.5 million). The transitionally higher tax rate of 34.3% in the first quarter 2009 is mainly attributable to individual tax losses for which SGL has not capitalized deferred tax assets.

Equity ratio further improved, Gearing target of 0.5 is complied

The substantially lower earnings level is reflected in the cash used by operating activities which amounted to -EUR9.4 million in the first quarter 2009 compared to cash provided by operating activities of EUR57.0 million in the first quarter 2008. Due to continued high investments, the negative free cash flow achieved -EUR48.8 million compared to EUR22.5 million in the first quarter 2008. Net debt increased due to investments in Malaysia and decreased cash and cash equivalents by 14.5% to EUR380.8 million (Dec 31, 2008: EUR332.6 million). Equity ratio improved to 43.4% (Dec. 31, 2008: 42.5%). Gearing increased from 0.44 by end of the year 2008 to 0.49 in the first quarter 2009 and remains within the company’s target of around 0.5.

Segment Reporting

Performance Products (PP)

Due to the ongoing global economic and financial crisis, the steel industry also continued its expected destocking activities and expanded production cuts. This led to a substantially reduced demand for graphite electrodes. Accordingly, sales in the Business Unit Performance Products decreased by 31% to EUR142.1 million in the first quarter 2009 (Q1/2008: EUR205.2 million) despite all product lines being able to achieve higher selling prices. The sales development corresponds to a currency adjusted decrease of 33%. The cathode business continued to develop positively due to the ongoing satisfactory demand from the aluminum industry.

Earnings impact from lower sales and production levels could only partially be compensated by higher selling prices and cost savings of EUR3 million. In conjunction with expenses relating to the commissioning of the new Malaysian production facility, EBIT recorded a disproportionate decline to sales by 40% to EUR39.4 million (Q1/2008: EUR65.1 million). Return on sales achieved a high level of 28% (Q1/2008: 32%) based on the ongoing satisfactory cathodes, furnace linings and carbon electrodes businesses.

Independent of the construction of the new Malaysian plant the company has promptly adjusted graphite electrode production to the reduced demand. Currently annual demand is estimated to be approximately 40% below last year’s level. Because SGL Group is expecting that destocking in the steel industry to come to an end in the second half of 2009, the company expects the decline to mainly take place in the first half of this year.

Graphite Materials & Systems (GMS)

Sales in the Business Unit Graphite Materials & Systems increased by 8% to EUR98.3 million in the reporting period (Q1/2008: EUR90.7 million). Adjusted for currency effects, sales increased by 2%. Besides the positive currency translation effects, the sales increase was primarily driven by the Business Line Process Technology. New applications such as for lithium-ion batteries or the business with the solar industry were able to largely compensate for the decline in the semiconductor and automotive industries.

Despite largely unchanged gross margins and cost savings of EUR3 million EBIT declined by 26% to EUR10.6 million (Q1/2008: EUR14.3 million) mainly due to currency losses from hedging transactions. The EBIT corresponds to a return on sales of 11%, which also remains above the mid term minimum target of 10%.

Carbon Fibers & Composites (CFC)

In the first quarter 2009, sales in the Business Unit Carbon Fibers & Composites increased by 36% to EUR49.6 million (Q1/2008: EUR36.6 million). This corresponds to a currency adjusted increase of 35%. The strong sales increase is attributable to increased unit sales in Composite Components relating to the consolidation of SGL Rotec.

The earnings of the Business Unit Carbon Fibers & Composites were impacted by increased depreciation and start up costs for the new carbon fiber lines, high research and development expenses as well as acquisition related writedowns from purchase price allocation and integration costs. This led to an EBIT decline to -EUR7.7 million (Q1/2008: EUR2.6 million). Cost savings from the SGL Excellence Initiative amounted to EUR1 million in the reporting period.

Composite materials particularly continue to be in demand from the growing industries of wind energy and aerospace and have led to strong sales growth in the first quarter 2009. The target is to continue to grow sales by more than 15% for the remainder of this year.

With the announcement of April 2009 to transfer the brake disc business into a 50-50 joint venture with the Italian company Brembo, SGL Group has retroactively separated the Business Line Brake Discs from the Business Unit Carbon Fiber & Composites. The combination of the brake disc activities adheres to the composite strategy to partner with successful OEMs or tier one suppliers in SGL Group’s target markets aerospace, energy and automotive. The closing of the deal is expected by end of May 2009, subject to the finalization of the contracts and the approval of the relevant authorities.

Outlook

Due to the worldwide financial and economic crisis and the resulting lack of visibility the company has had to abstain from the usual practice of providing a quantitative outlook at the beginning of fiscal 2009. On the occasion of the annual press conference on March 18, 2009, SGL Group was only able to guide to lower sales and a corresponding disproportionate decline in EBIT. Since then, demand has not materially changed, so today SGL Group remains unable to further substantiate the outlook for fiscal 2009. Due to the current order backlog the company expects second quarter 2009 on a comparable level to the first quarter 2009.