SGL Carbon's 1H Drop: €69.8M EBITDA Shows the Reset Is Continuing-Not That Recovery Is Proven

Sales are down, but margins and the balance sheet are telling a more nuanced story

SGL Carbon's first-half update still reads like a company in transformation rather than recovery. Sales fell to €394.2 million, down 13.0%. Adjusted EBITDA was €69.8 million, only slightly below the prior-year period, while the adjusted EBITDA margin improved to 17.7% (H1 2025: 16.0%). Management also confirmed sales and earnings forecast for 2026.

The core tension is straightforward: revenue is still contracting, but the margin profile is improving as management keeps pushing through restructuring and contract adjustments.

Two kinds of shrinkage are happening at once

This was not a single problem. According to the half-year release, the sales decline reflected both the discontinuation of unprofitable business activities and lower demand in the Graphite Solutions business unit and the challenging order situation in Process Technology. Investors should not read "sales down" as only a cyclical demand story or only a restructuring story; both forces were active.

The tougher question is whether customer pressure is easing

The earlier reset matters, but it does not explain everything. A simple cyclical downturn can recover when demand returns. A tougher situation is when customers still hold more leverage through inventories, contract resets, or price pressure. On the evidence so far, that shift is not yet clear.

Process Technology remains the clearest pressure point

In the first quarter, Process Technology saw sales -30%, EBITDA pre -62%. That helps explain why the group can post a better half-year margin yet still struggle to convince investors that normal earnings power is back.

Bulls can interpret the weakness as temporary order slippage in a lumpy business. Bears can argue it signals a customer base that still has the upper hand. The more cautious reading is that even if volumes stabilize, pricing power and contract terms may take longer to recover.

Compensation payments helped, but they are not the same as recurring demand

The half-year results also showed a useful offset: compensation payments of €28.7 million recognized in income, related to contract adjustments with semiconductor customers. That likely improved both cash flow and margin performance, but it is still different from healthy, recurring demand.

The broader 2025 picture looks similar. Sales fell 16.5%, adjusted EBITDA fell 14.9%, and the adjusted EBITDA margin improved only modestly to 16.6% (9M 2024: 16.3%). That is more consistent with restructuring and discipline cushioning the slide than with a fully self-sustaining recovery.

Graphite Solutions still carries the main watchpoint

Management's earlier commentary pointed to a gradual reduction in our customers' inventories rather than a clean reset. By itself, that wording suggests the inventory and renegotiation process is still underway in Graphite Solutions, while Process Technology still faces a challenging order situation.

So the real question is not only whether sales stop falling. It is whether inventories normalize, pricing holds, and contract terms stop reflecting customer leverage.

Balance-sheet strength buys time, but it does not replace proof of a cleaner earning base

SGL Carbon does not look like a balance-sheet stress story. At the end of 2025 it reported net financial debt of €98.9 million, an equity ratio of 39.2%, and free cash flow that remained positive. That gives management room to work through the reset without an immediate financing emergency.

The same caution should apply to upside talking points. Management has highlighted SiC customer negotiations, a growing defense project pipeline, and an X-energy ramp expected to deliver about $100m over three years. Those are relevant potential upsidesthey may help later, but they do not by themselves prove that the core business has returned to a normal demand rhythm.

What to watch next

The next scheduled update is the statement on the first nine months 2026 on 5 November 2026. In the meantime, the more decision-useful signals are:

• whether compensation payments stop becoming necessary as contracts normalize
• whether Graphite Solutions shows a firmer inventory and pricing backdrop
• whether Process Technology moves from challenging orders to better earnings durability
• whether the confirmed 2026 outlook starts reflecting organic recovery rather than a smaller, cleaner base

If those signals strengthen together, the turnaround case becomes easier to underwrite. If they do not, the market may be right to treat the current recovery narrative as premature.