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SGL Carbon SE: Corrected Earnings Guidance, and more
SGL Carbon was never suspected of being a particularly profitable company. But the earnings guidance usually proved to be reliable information. Similar expectations apply to the outlook for the full year 2019, which was confirmed in early August 2019. But just a few days later a sharp correction became necessary.
SGL claims that the correction was due to lower than expected results of the business unit Composites – Fibers & Materials (CFM) in July 2019. As a consequence, the company took a closer look at the actual results and the plan of CFM and concluded, that the guidance for the unit and the Group needed to be corrected. The deviation to the preciously expected recurring EBIT of CFM can be attributed to two factors. Half of it is due to erroneous planning assumptions within the framework of a high-volume contract in the market segment Wind Energy, while the rest reflects a more cautious view of the outlook for the market segment Industrial Applications. Consequently, SGL lowered its recurring Group EBIT and net result guidance for 2019 and clarified that the guidance for the following years was no longer sustainable.
As a consequence, the CEO Dr. Jürgen Köhler informed the supervisory board in mid-August about his resignation, effective August 31st, 2019. The supervisory board decided to fill the vacant position externally. However, recent news about continued weakness in the CFM segment is not helpful in this respect. The further earnings deterioration at CFM, which is caused by a weaker outlook for the Textile Fibers and the Industrial Applications units, also triggered an impairment testing, resulting in a non-cash impairment charge of approximately 75m EUR.
CECONOMY AG: Where is the Strategy?
For several reasons, CECONOMY is going through a difficult phase. Apart from the challenging business environment, the most obvious obstacle is the group´s corporate governance structure. How can you create a solid business strategy if you do not have full control over a substantial part of your business?
Jörn Werner met high expectations when he took over the CEO position in March 2019. And indeed, a few months later a series of positive signals regarding the critical relationship with the minority shareholder in its main operating subsidiaries emerged. This found an abrupt end a few weeks later when CECONOMY informed the public on October 15th, 2019 about the agenda of a scheduled extraordinary meeting of its Supervisory Board, which included the discussion of early termination of the appointment of the CEO. Two days later the company informed that the Supervisory Board and Mr. Werner decided by mutual agreement to part with immediate effect. At the same time, the Supervisory Board appointed Dr. Bernhard Düttmann, member of the Supervisory Board, for a term of twelve months as CEO. Jürgen Fitschen, Chairman of the Supervisory Board, explained the decision as follows: "We would like to thank Mr. Werner for his commitment and the work he has done. He played an active role in the strategic development of CECONOMY. With regard to managing the company, however, there are different views between him and the Supervisory Board, so that the separation is a logical step".
No CEO, no strategy, no plan in sight, but just another interim solution.