SGL Carbon : Annual Report 2023

Annual Report 2023

2 SGL Carbon Annual Report 2023 Key Figures 2023

Key Figures 2023

€m		Footnote	2023
Financial performance
Sales revenue					1,089.1
thereof outside Germany					74%
thereof in Germany					26%
EBITDApre		1)			168.4
Operating profit/loss (EBIT)					56.6
Result from continuing operations before income taxes					22.4
Consolidated net result (attributable to the shareholders of the parent company)					41.0
EBITDApre margin		2)			15.5%
Return on capital employed (ROCE EBIT pre)		3)			11.3%
Earnings per share, basic (in €)				0.34
Net assets
Equity attributable to the shareholders of the parent company					605.3
Total assets					1,472.6
Net financial debt					115.8
Equity ratio		4)			41.1%
Leverage Ratio		5)			0.7
Headcount	6)		4,808
Financial position
Capital expenditures in intangible assets and property, plant and equipment					87.1
Depreciation/amortization expense					58.9
Working capital					306.0
Free cash flow	7)		95.6

1. Before one-offeffects/non-recurring items of minus €52.9 million in 2023 and €8.9 million in 2022
2. EBITDApre to sales revenue
3. EBITpre to average capital employed (total of goodwill, other intangible assets, property, plant and equipment, investments accounted for At-Equity and net working capital)
4. Equity attributable to the shareholders of the parent company to total assets
5. Net debt to EBITDA pre
6. As of Dec. 31, including employees with fixed term contracts
7. Cash flow from operating activities (continuing operations) minus cash flow from investing activities (continuing operations)

2022		Change
1,135.9		-4.1%
74%		-
26%		-

172.8-2.5%

120.9-53.2%

94.6-76.3%

1. -67.7%
   15.2% +0.3%-points
   11.3% +0.0%-points

1. -67.3%

569.36.3%

1,480.3-0.5%

170.8-32.2%

38.5% +2.6%-points

1.030.0%

4,7601.0%

52.964.7%

60.8-3.1%

345.3-11.4%

67.841.0%

Content

Key Figures 2023	2
Letter from the Board of Management	4
Report of the Supervisory Board	7
CSR Report	13
SGL Carbon in the Capital Markets	55
Group Management Report	62
Group Fundamentals	64
Economic Report	75
Opportunities and Risks Report	102
Outlook	112
Disclosures pursuant to Sections 289a and 315a HGB	116
Corporate Governance Declaration, Corporate Governance and Compliance Report
(unaudited)	118

Consolidated Financial Statements	129
Consolidated Income Statement	130
Consolidated Statement of Comprehensive Income	131
Consolidated Balance Sheet	132
Consolidated Cash Flow Statement	133
Consolidated Statement of Changes in Equity	134
Notes to the Consolidated Financial Statements	135
Additional Information	194
Independent Auditor's Report	195
Responsibility Statement	202
Corporate Bodies	203
Glossary	206
List of Acronyms	211
Financial Calendar	212
Five-year Financial Summary	213

4 SGL Carbon Annual Report 2023 Letter from the Board of Management

Letter from the Board of Management

Dr. Torsten Derr (Chief Executive Officer)

Thomas Dippold (Chief Financial Officer)

Dear Shareholders,

2023 was a year of crises and the associated economic consequences. The Russian war of aggression continues, there is fighting in the Gaza Strip, the impact of the climate crisis are becoming increasingly more visible and geopolitical tensions are on the rise. Economically, we are seeing an environment of high inflation, rising interest rates and unsatisfactory economic development in many parts of the world.

This is an environment in which SGL Carbon has performed well. Despite partially restrained demand from some customer industries, persistently high prices and wage agreements and increasing uncertainty about future economic developments, we achieved our objectives for 2023. We can be proud of this result, considering the market environ- ment, the industrial sector and the overall economic situation in which we operate.

Following revenue growth of approx. 23% in 2020 to 2022 and an increase in adjusted EBITDA of approx. 86%, the 2023 fiscal year was a year of stabilization and investment in the future. At €1,089.1 million, Group revenue in 2023 was slightly below the previous year's level (minus 4.1%) and adjusted EBITDA, a key operating figure, was in the middle of our expected range (€160 to 180 million) at €168.4 million. Free cash flow was €95.6 million at the end of 2023 (previous year: €67.8 million) and therefore significantly higher than originally forecast (outlook at previous year's level).

We achieved our Group targets despite the fact that demand from one of our most important sales markets, the wind industry, came to an almost complete standstill in 2023. Revenue and earnings in the Carbon Fibers business unit were also unsatisfactory (sales: €224.9 million, minus 35.2%, adjusted EBITDA: €7.2 million, -83.3%). By contrast, our other three business units performed better than expected. Revenue and earnings in Graphite Solutions, Process Technology and Composite Solutions are at an historically high level.

The Graphite Solutions business unit achieved an increase in revenue of 10.4% to €565.7 million and an EBITDA margin of 23.7% (previous year: 23.1%). This development is based on the targeted expansion of business with graphite components for the semiconductor industry. This is a market segment with estimated growth potential of more than 30% per year on average over the next few years, and a market in which we are already established as one of the leading suppliers. We will explain later how we intend to take part in this development. First, let's take a quick look at our two smaller business units.

5 SGL Carbon Annual Report 2023 Letter from the Board of Management

The Process Technology (PT) business unit has had an incredible success story over the past three years. While PT generated adjusted EBITDA of €3.4 million in 2020 with an EBITDA margin of 3.9%, adjusted EBITDA in 2023 amounted to €22.4 million with a margin of 17.5%. The Composite Solutions (CS) business unit showed a similar trend, even though posting a loss in 2020. The current high degree of automation of our production in Austria and the specialization in individual composite components for the automotive industry led to sales of €153.9 million in 2023 with an adjusted EBITDA margin of 14.4%. It should be noted that CS had to cope with the loss of revenue from the sale of the business in Gardena (USA) in the amount of around €30 million in 2023. Further details on Group and business unit level developments can be found in the Group management report in this annual report. SGL Carbon's balance sheet structure also continued to stabilize in 2023. At the end of 2023, we had an equity ratio of 41.1% (previous year: 38.4%) and net debt of €115.8 million (previous year: €170.8 million). We used 2023 to realign our financing structure, improve our maturity profile and thus further expand our financial ability to act.

In addition to stabilizing our business model, 2023 was a year of important investments and changes for the future. We invested a total of €87.1 million, almost two thirds of which went into the Graphite Solutions business unit and in particular into expanding production capacities for specialty graphite products for the semiconductor industry.

Innovative products for future-oriented markets

SGL Carbon has undergone a transformation in recent years. Not only are we in a better financial position, but our business model has also become more resilient. We want to help shape the future in industries that are important for the challenges ahead, such as climate change and digitization through innovative, cutting-edgecarbon-based products.

While the automotive industry was our most important sales market in the past, it still accounts for around a quarter of our revenue, but our product diversity has increased. The Carbon Fibers (CF) business unit still supplies carbon fibers and fabrics to our automotive customers, but this is increasingly being supplemented by customer-specific composite fiber components such as battery boxes or leaf springs from our Composite Solutions business unit. There is demand for our products especially in climate-friendly vehicles. We also supply graphite gas diffusion membranes for hydrogen-powered vehicles with fuel cells.

In the second half of 2022, we successfully compensated for the available production capacity in the Carbon Fibers business unit due to the scheduled expiration of a supply contract with BMW with orders from the wind industry. Because of external factors within the wind power value chain, demand for carbon fibers from wind industry customers came to an almost complete standstill in 2023. High raw material and energy prices, increased interest rates combined with slow approval procedures currently impede construction of new wind farms. Sales and adjusted earnings of our Carbon Fibers business unit fell significantly in 2023 due to the low demand (see also the comments in the Segment Reporting section). A rapid expansion of offshore wind power is essential for the success of the energy transition and the European Green Deal. Since offshore wind energy is the main driver of the energy transition, we assume that our customers' demand for carbon fibers will pick up again once inventories within the value chain are reduced.

However, we cannot rely solely on the wind industry regaining strength. We are developing new applications with innovative carbon fiber products in the construction industry and in the area of green hydrogen storage in pressure vessels. For example, carbon fibers can replace steel products in the construction industry. Carbon fibers are more durable and significantly less concrete is required for the same stability, which also reduces CO2 emissions.

In the future, the most important market for SGL Carbon will be the semiconductor industry. Over the past five years, the share of sales generated by these customers increased from around 7% to 24.0% at the Group level and will continue to grow over the next few years, especially in the silicon carbide-based semiconductor segment. These are primarily needed in electric vehicles because of their higher performance. Our Graphite Solutions business unit supplies customized graphite components for the production of silicon carbide wafers, which creates the basis for these high-performance semiconductors. In the 2024 fiscal year, we will invest around two thirds of our investment volume of up to €150 million in the expansion of production capacities for this market segment on a global level. As in previous years, we receive significant advance payments from our customers used to secure future production capacity in our plants - a win-win situation for both partners.

The Process Technology (PT) business unit, which manufactures special systems especially for corrosive production processes, also supplies systems for high-purity acids production for the semiconductor market thus establishing a new market segment. However, the

6 SGL Carbon Annual Report 2023 Letter from the Board of Management

chemical industry remains the most important customer for Process Technology's products and services.

In the long term, our goal is to use our innovative and customer-oriented products to serve the markets that will significantly reflect future trends such as climate-friendly mobility, renewable forms of energy and digitization.

Outlook

Three out of four business units are performing well. The Process Technology and Composite Solutions business units delivered an outstanding performance in the 2023 fiscal year with an adjusted EBITDA margin of 17.5% and 14.4% respectively. We expect to confirm this level in 2024. We anticipate continued growth in the Graphite Solutions business unit. The constant expansion of our production capacities for customers in the semiconductor industry creates the basis for future development.

Due to the ongoing weak demand from the wind market, we do not expect any improvement for the Carbon Fibers (CF) business unit. The newly developed applications for the construction industry or pressure vessels with carbon fiber sheathing are still under construction and cannot compensate for the lack of sales from the wind industry. This means that 2024 will be a challenging year for CF.

What do the different potentials for development in the individual business units mean for SGL Carbon? If economic conditions remain unchanged, we expect sales in the 2024 fiscal

year to be almost on target with 2023 (2023: €1,089.1 million). Because of the expected negative earnings contribution from CF, we anticipate to generate adjusted earnings at Group level of between €160 - 170 million, despite the forecast growth of GS.

Fiscal year 2024 will certainly not be an easy one for SGL Carbon. The management and workforce work hard every day to achieve our goals and implement our growth prospects. We would like to take this opportunity to express our sincere thanks to all employees for their commitment and willingness to perform for our business.

Also, we would like to thank the Supervisory Board and the employee representatives for their support and continuous fair cooperation. Last but not least, thank you, dear share- holders, for your trust even in challenging times.

Kind regards

Dr. Torsten Derr	Thomas Dippold
Chief Executive Officer	Chief Financial Officer

7 SGL Carbon Annual Report 2023 Report of the Supervisory Board

Report of the Supervisory Board

Strengthened by the transformation of the last two years, SGL Carbon has confronted the challenges in 2023 and can look back on a successful fiscal year. In a difficult economic environment, the company confirmed its performance and achieved the targets set for 2023.

The ongoing war in Ukraine and the conflicts in the Middle East, the impacts of climate change and the geopolitical alienation between the US and China characterized 2023 socially and economically around the world. Economic consequences included persistently high inflation and price levels, further increases in interest rates and unsatisfactory overall economic growth in many regions of the world. Trade barriers between the US and China also made global trade more difficult. The use of artificial intelligence and the transformation towards a more sustainable industrial society presented additional challenges and opportunities for companies in many sectors.

The Supervisory Board closely monitored the financial development as well as the company's operational foundation. In addition to stabilizing financial performance, the focus in 2023 was on expanding business in attractive growth markets. By expanding its global production capacities in the graphite components area for the semiconductor industry, SGL Carbon secures the opportunity to participate in the future growth of this important industry for the global digitization process. Environmental and climate protection is one of the most important tasks of our time. The Supervisory Board supports the management's strategy of increasingly providing products for industries that support this mission. The Supervisory Board also promotes the company's own sustainability

Prof. Dr. Frank Richter, Chairman of the Supervisory Boardambitions and goals. In 2023 for example, we built a CO2-neutral biomass plant at our site in Lavradio. The aim is to reduce CO2 emissions by 50% by the end of 2025 compared to the base year 2019.

Dear Shareholders,

With the resignation of Dr. h.c. Susanne Klatten as Chairwoman of the Supervisory Board, I took over this important position on the Supervisory Board of SGL Carbon SE on May 9, 2023, by resolution of the Annual General Meeting. As the Managing Director of SKION GmbH, which holds 28.5% of the shares in SGL Carbon, I have more than three years' experience with the company and its development. I am happy to continue Mrs. Klatten's successful work as the representative of the company's largest single shareholder and to support the company on its future path.

On behalf of the entire Supervisory Board, I would like to take this opportunity to thank the Board of Management of SGL Carbon and all employees for their successful and dedicated work. I look forward to accompanying the further development of our company with my colleagues on the Supervisory Board.

8 SGL Carbon Annual Report 2023 Report of the Supervisory Board

Cooperation between the Board of Management and the Supervisory Board

In the reporting year, the Supervisory Board duly performed the duties incumbent upon it under the law, the Articles of Incorporation and the Rules of Procedure. Dr. Derr, as CEO of SGL, Carbon SE and Mr. Dippold, as CFO, were in close contact with the Supervisory Board.

In the reporting year, the Supervisory Board supported the Board of Management in an advisory capacity in six full plenary sessions and in meetings of the various committees, while carefully and continuously monitoring the conduct of business. In doing so, the Supervisory Board was always able to convince itself of the legality, practicality and propriety of the activities of the Board of Management. The Board of Management informed the Supervisory Board regularly, promptly and comprehensively in writing and verbally about the situation of the company and the material business events and projects. When law and the Articles of Incorporation stipulated that decisions had to be made by the Supervisory Board regarding individual transactions and projects of the Board of Management, the Supervisory Board passed a resolution after being involved at an early stage.

The Board of Management held talks with representatives of shareholders and employees in the run-up to the Supervisory Board meetings. The chairs of the committees also spoke to their colleagues on the Supervisory Board and members of the Board of Management in preparation for the committee meetings. During the Supervisory Board meetings, the Board of Management provided comprehensive and timely information - both verbally and through documents - on the items on the agenda. Deviations in the course of business from budgets and targets were explained in detail. The reasons for the deviations and the corresponding measures were discussed intensively. The members of the Supervisory Board and the committees had sufficient opportunity to critically examine the submitted documents and draft resolutions in the Supervisory Board and its committees. In addition, the Board of Management reported regularly on material business transactions, key financial figures during the year and how SGL Carbon was perceived on the financial markets.

Dr. Klatten, as chairwoman of the Supervisory Board, maintained regular and close dialog with Dr. Derr, as chairman of the Board of Management, and with Mr. Dippold, as CFO, regarding business development, planning and specific company-related issues. I

seamlessly continued this exchange with the Board of Management after taking over as Chairman. The chairman of the Audit Committee also maintained close and regular exchanges of information with the Board of Management between committee meetings.

Topics covered in the plenary sessions of the Supervisory Board

The company's economic situation and the outlook for the fiscal year were discussed at the Supervisory Board's meetings in March, May, July, September and November. The regular topics of these meetings included the performance of operational and financial key figures, opportunities and risks as well as risk management including compliance risks. Regular and intensive discussions also focused on the strategic positioning, sustainability issues and the growth projects of the business units. Meetings were generally held in-person, with one Supervisory Board member joining the March meeting virtually. An additional meeting in June was held virtually and dealt in particular with the refinancing of the company by issuing a convertible bond as well as the performance of an audit review of the first half of 2023.

In the March meeting of the reporting year, the Supervisory Board discussed the final version of the Annual Financial Statements and the Consolidated Financial Statements for 2022 with the auditor and approved the Annual Report. The Board of Management also reported on the key events that shaped the good annual result for 2022 and the expected challenges for the 2023 fiscal year. The planned refinancing of the existing credit facility was one of the focal points of the meeting. A report was also made on the sale of business activities at the Pune (India) and Gardena (USA) sites. The emerging problems in the wind business were also the subject of the Board of Management report.

In addition, the Supervisory Board adopted the Board of Management's target achievement for 2022; details can be found in the remuneration report. Finally, the items for resolution for the Annual General Meeting scheduled for May 9, 2023, were approved.

At this meeting, the Supervisory Board also discussed the Nomination Committee's proposal to elect Prof. Dr. Richter as a new member of the Supervisory Board to succeed Dr. Klatten at the Annual General Meeting in May and, if elected, to propose him as a candidate for Chairman of the Supervisory Board. This proposal was unanimously approved by the Supervisory Board.

At this meeting, it was also decided to propose to the Annual General Meeting that an adjustment be made to the remuneration system for the Supervisory Board. The

9 SGL Carbon Annual Report 2023 Report of the Supervisory Board

remuneration of the Supervisory Board has not been adjusted since 2014, and the Chairwoman commissioned an external review of its appropriateness.

At this meeting, Dr. Klatten also reported on the extremely positive results of the efficiency audit conducted at the end of 2022.

At the meeting following the virtual Annual General Meeting in May, the first item on the agenda was the election of the new Chairman, and I gratefully accepted the election. In addition, the committees were constituted. Their composition can be found in the annual report. The Board of Management provided the Supervisory Board with an overview of current strategic projects and presented the results of the first quarter of the fiscal year. The positive financial figures and the improvement in the Group's equity ratio to 39.5% were highlighted. Only the Carbon Fibers (CF) business unit was unable to meet expectations due to the continuing weakness of the wind business and the loss of the BMW i3 sales, while the other three business units exceeded expectations. Gross debt decreased as a result of the repayment of a convertible bond. The Board of Management also presented initial thoughts on refinancing the corporate bond maturing in 2024.

At the virtual meeting in June, refinancing and, in particular, the possibility of issuing a new convertible bond was discussed. The Supervisory Board also authorized the Audit Committee to decide on the issuance of a convertible bond if there is a suitable market window and a corresponding submission by the Board of Management to the Supervisory Board.

At the July Supervisory Board meeting at the Meitingen site, the Board of Management provided an update on the business position and especially regarding the situation in the wind market, which still showed no signs of a quick recovery. Increasing energy prices also had a negative impact on the result; despite the circumstances, the Board of Management assumed that it would be able to remain within the communicated forecast.

At this meeting, the Supervisory Board had an in-depth discussion about the Board of Management's strategy in Asia and also heard from the heads of several regions. The Board of Management also presented expansion plans in the brake disc business (JV BSCCB) and discussed the results of an employee survey.

At the September meeting, the Supervisory Board focused on business development and the report on the first half of the year as well as the situation at the CF business unit and the measures taken by the Board of Management for the wind business. The impairment loss recognized in the Carbon Fibers business unit at the end of July was also discussed.

The situation in the silicon carbide business was a key topic as well. Due to the high demand and customer prepayments, this business is developing extremely positively and is leading to significant capacity expansions at various locations to meet customer demand. Finally, a new skills matrix was approved for the Supervisory Board.

At the final meeting of the fiscal year in November, business development in 2023 was discussed. As in previous months, business development in the CF business unit was characterized by the challenges in the wind market, while the other business units continued to develop extremely well. The key financial ratios and, in particular, equity have improved further and reached a very good level. The Board of Management presented the new five-year plan at this meeting.

The updated declaration of conformity was adopted, and the company's corporate governance principles were confirmed. The Supervisory Board also approved the financial targets in addition to the personal targets for the Board of Management for 2024 and for the long-term incentive plan. The blackout periods for 2024 were also approved.

Activities of the committees

The committee chairs reported extensively on the work of the respective committees at the Supervisory Board meetings.

The Audit Committee met in March, September and November in the year under review. The auditor also attended all meetings that were held in person. In addition, the Audit Committee held a conference call in June in which it discussed, among other things, the current market environment and the placement of a new convertible bond. It also approved the issuance of such an instrument to the Supervisory Board based on prior authorization by the Supervisory Board.

The financial statements were also discussed in three telephone conferences with the Audit Committee prior to publication of the quarterly figures and the figures for the first six months of the year. Business development and the Group's risk position were discussed at all meetings of the Audit Committee.

The main topic at the March meeting was the discussion of SGL Carbon SE's Annual Financial Statements and the Consolidated Financial Statements for 2022, as well as the auditor's reports on them. In addition, the Audit Committee dealt with the non-financial

10 SGL Carbon Annual Report 2023 Report of the Supervisory Board

Group statement ("CSR Report"), the internal control system, significant compliance issues, the CSR Report, the status of implementation of new ESG reporting requirements and the non-audit services provided by the auditor. The Audit Committee also recommended to the Supervisory Board that KPMG be reappointed as auditors in the 2023 fiscal year.

By resolution of the Committee on June 5, 2023, the engagement of KPMG to review the interim consolidated financial statements and the interim Group management report of SGL Carbon SE for the first half of 2023 was approved.

One topic of the September meeting was the status of the implementation of the CSRD Directive. KPMG also presented the external perspective on the company's general CSRD readiness. The meeting also reviewed the audit of the financial statements for the past fiscal year based on defined criteria for measuring audit quality. KPMG presented a status report for non-audit services provided. The auditor described the status of planning for the audit of the annual and consolidated financial statements for 2023.

At its November meeting, the Audit Committee dealt in detail with the audit of the financial statements for the 2023 fiscal year. Likewise, an overview of non-audit services both rendered and proposed in 2023/24 was provided in order to ensure compliance with the fee cap and the independence of the auditor. The Internal Audit department reported on the results of audits, the implementation status of measures and the audit plan for 2023. From a compliance perspective, relationships with major shareholders and Supervisory Board members were also reported, and the Related Party Management Policy was explained. A status on material transactions with related parties (beyond material major shareholders) was provided. KPMG also explained the scope and results of the CSRD assurance readiness check.

The Personnel Committee focused on personnel issues in a total of four meetings (virtual in January and otherwise in-person). In the January meeting, the Board of Management members' preliminary target achievement was discussed, including in particular the fulfillment of personal targets. The March meeting of the Committee dealt with the Board of Management members' final target achievement with regard to their variable compen- sation, and a proposal was resolved for the full Supervisory Board. In view of the upcoming decision on the extension of the two Board of Management mandates in 2024, the September meeting generally discussed further cooperation and, in preparation, discussed an expert opinion on the appropriateness of the Board of Management remuneration

commissioned by the Committee Chairman. There were no specific decisions to be made. At the November meeting, the financial (for the variable short- and long-term salary components) and personal targets for the Board of Management for the 2024 fiscal year were discussed with the latter, in particular the selection of the financial key figures appropriate for the 2024 variable salary components.

The Nominating Committee met once in person in March in the reporting year. The content of the meeting was the resolution to propose to the Supervisory Board that Prof. Dr. Frank Richter be proposed for election by the 2023 Annual General Meeting. The committee also confirmed its intention to propose Prof. Dr. Richter as a candidate for Chairman of the Supervisory Board in the event of his election by the Annual General Meeting.

In the reporting period, no conflicts of interest were reported by Supervisory Board members that would have been necessary to disclose immediately to the Supervisory Board.

Annual Financial Statements and Consolidated Financial Statements 2023

Both in the Audit Committee and in the plenary meeting in March 2024, the Supervisory Board verified that the accounting, the separate financial statements of SGL Carbon SE prepared pursuant to the German Commercial Code (Handelsgesetzbuch, HGB) and the Consolidated Financial Statements as of December 31, 2023, prepared pursuant to the stipulations of the International Financial Reporting Standards (IFRS) (as applicable within the European Union) as well as the Management Report of SGL Carbon SE and the Group were audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, and provided with an unqualified audit opinion. The Supervisory Board had previously assured itself of the independence of the auditor and the persons acting on behalf of it, and commissioned the audit pursuant to the resolution of the Annual General Meeting on May 9, 2023. The audit reports on the Consolidated Financial Statements and the Annual Financial Statements were sent to us in good time. The Audit Committee dealt at length with these documents, as did the full Supervisory Board. The auditors attended the meetings of both the Audit Committee and the Supervisory Board, in which they provided advice on the Annual and Consolidated Financial Statements, reported on the audit and made themselves available for additional questions and information. Following presentation of the final results by the Audit Committee and our own review, there were no objections. The Supervisory Board approved the financial statements prepared by the Board of Management and thereby