EAF - Earnings call transcript Q4 2018 | GrafTech International Ltd.

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Operator

Good morning. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the GrafTech Full-Year and Fourth Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. you. Thank Instructions] [Operator President Relations, Vice your may conference. of Bandy, you Investor begin Meredith

Meredith Bandy

Lisa. welcome morning, quarter Thank Good Alright. you, and conference to call. fourth GrafTech’s

Officer, Financial On Rintoul; call with today Chief the me and Quinn Officer, Executive Chief Coburn. is David

Turning to Slide. first our

cause the some subject Factors other may on among indicated discussed on results, current results are to based performance uncertainties. and actual expectations As include of this could are materially Statements are Forward-Looking risks differ a and from that forward-looking matters by reminder, statements shown and regarding things call to here. strategy. These those statements

We Relations in measures, these financial section. will www.graftech.com on for reconciliations slides These will at are posted find certain also slides. discuss our Investor which the non-GAAP website you in

reference, also of over website. your to a our on I'm will call turn with the available call And the be that, to Dave. pleased replay For

David Rintoul

will discussion XXXX Thank on mission Coburn of everyone. attending and results. call thank the financial like take home worker financial I drive I morning, this our in performance must the rate safety ultimate the X.XX plant. our aspects business. going would the you, safety will opportunity good focus highlights. improvement every on injury on remain lows. to injuries. performance with then while toward conclude our near focus exception, remarks team their our zero cover safely with begin of with that continuous safe will that our Without Meredith, total Quinn to for our We open an market a GrafTech's XXXX the we all XXXX every I goal recognize time discussion our That of of day. excellent call safety questions. steel the for overall means our is our plant We after prepared furnished which efficient in will of

record the Turning GrafTech's current update over financial results in in XXXX. results our of delivered business of an to operational for environment. XXXX Slide and X

of operations million, and GrafTech Our tons the $X.X of needle throughout cash tons continuing of adjusted graphite electrodes high free million. $XXX hundred XXX,XXX income generated $XXX XXXX, from and EBITDA extremely at of XXX,XXX operations of In ran billion levels flow earned net year producing coke.

return We $X,XXX on buying introducing shares our to our shareholders, QX delivered million also weighted paying price promise special back for to dividend Market quarterly year-end. a cash million per dividend at a business was $XXX metric and of fundamentals approximately solid, remains average our $XXX ton.

Demand spot positive. $XX,XXX business remain remain the the reaching metric steel power electrodes, primary high-quality strong. market at During ton. per spot ton, metric approximately Currently At fundamentals product remain graphite for time, of the highs, averaged prices $XX,XXX were contract quarter, we GrafTech's market prices off fourth that while same ultrahigh sold approximately receiving and per the electrodes short-term for solid.

which Greenfield are production $XX the per was with total projects our of of capacity, underway,. completed represents above cost debottlenecking ramp-up well debottlenecking million replacement. now Our just The tons. about ton of capacity cost increased to capital this XX% the over $XXXX XXX,XXX or annual a of We annual

operations involved and As on would flexibility to at are footprint. Mary's delivering in all The plants opportunity congratulate of range. growing of our and currently we this utilization for mid-XX% St. manufacturing I support the to of want time on the we operating our them rate wrap-up, to the take employees thank these levels expect budget. overall in finishing projects

announced tons. position subsidiaries of Seadrift will equivalent that Seadrift competitors, our high-quality integrated substantially plants required needle St. metric is needle production or be at production about project, operate gives by petroleum to vertically and of approximately of peaking will of of fashion. our us the point produce with in the market We a coke. will The Mary's at in we will coke us coke any XXX,XXX thought can future. previously the into XX% St. run if our ramp-up Mary's wholly-owned essentially a subsidiary XXXX increased our unique Including improvement facility. petroleum long from differentiates needle low-cost, competitive supply efficiency and secure, Seadrift's from production requirements. GrafTech

our commercial the sell to this results contracts. point, provides earnings This graphite I These aligns from and contracts exposure long-term over fluctuations. We our turn suppliers. Quinn X, for purchased integration have spot on XX% Slide electrode and price electrodes financial to visibility strategy on remaining vertical update. graphite with reduced strong At will it to our

Quinn Coburn

Okay, thanks Dave.

another mentioned, we $XXX Fourth Dave double quarter reflecting quarter, higher million As were volumes pricing. performance. year prior financial than strong are more of sales report of pleased the quarter higher and to revenues

volume our to During be and we changes be inventory from we electrodes, would due sold to of graphite the seasonality. year tons period lower benefits expect volumes from the quarter, debottlenecking. tends QX quarter, highest lightest. while prior QX XX,XXX sequentially due typical to to sales Historically, QX to up tends Therefore, our be our

fourth average ton. was As GrafTech's price mentioned, realized quarter Dave metric $XXXX per

our the As reflects were contract to of fourth with a quarter pricing, a long-term realized combination long-term year from spot Approximately contracts carryover price agreements. volumes. reminder, XX% customers net and last short-term average of sales

X. Now turning to Slide

quarter. period Fourth four net totaled year $X.XX translated than or million higher prior the in $XXX the share, results. revenues quarter flows earnings cash diluted into higher income per more and times Our

free will EBITDA EBITDA raw from in $XX cost impact million, to year, coke the quarter QX provided impact flow earnings, cost $XXX to cash and of cash flow third This compared cash of higher of approximately prior volumes continuing adjusted operating During higher the by the to pricing. sales estimate than to from XXXX These XXXX. of cash of all benefited continue coke third-party needle increased $XXX QX flow million, Compared quarter sold, to related cost our we needle million, XXXX, third-party costs. coke to specifically higher offset excess million. more will that's materials free operations increased and fourth our goods cost that third-party activities needle increased and $XXX free by net consecutive with

Now turning quickly shareholder. with of related majority of add-back will million adjusted through agreement disclosed amortization, income, million income previously from EBITDA with net began interest to $XX XXXX depreciation continuing net Slide and of $XXX I and million taxes million $XXX to walk operations. add-backs the tax receivable X. We and $XXX our expense you

about Finally, million largest we expenses. related back million expenses, which other was non-cash and $X of million of the of of $XX add pension million, write-offs, of fixed $X asset IPO $X adjustments

for balance items for valued TRA. positive liability sheet GrafTech Tax were GrafTech record during our majority of with improved value will recognized at Brookfield. or a of retain the At of these entered tax a tax TRA business XXXX. were no assets, offset. benefits and able profitability assets with TRA directly and benefit. zero are these This time the the Under As Receivable reminder, Agreement to asset our to time pre-IPO on of Due the at the These two the TRA, for XX% our shareholder triggered Brookfield the the IPO, of tax XX% will corresponding while values assets the largely a certain related into liability. conditions, we receive a IPO,

rate XXXX, all-in in expense to to the is ahead mid-to-high-teens. Looking depreciation be interest and should similar expected be XXXX, to tax and our

that a ended for line just with including $XX policy. and over X Slide represents to nearly liquidity $XX $XXX review total XXXX, and QX equivalents million. in of cash capital previous expenditures of guidance, turning operating GrafTech's cash with of were In of We our financial million, X% flow. Now our million

with are our This XXXX details amortization and cash the million our a yield. more designed efficient XXXX, in return on since shareholders, shareholders. accretive to cycle debt liquidity In managing quarterly return Page since all in the included overhang finally, repurchase, shareholders GrafTech $XX cash risk portion of to free designed shares. shares. Now represents dividend, be our and to free of over our allocation for repayment, flow turning to approximately our in shareholder representing a to to IPO typical was regular to in-line million in shareholders, And IPO. preserving required while our flow XXX sustainable XXX be million significant XX% XX term and way million our returned X, loan. returns. while of preserving cash liquidity Capital April special dividend to market share this these

repayment Moving of in in Board We forward, approximately also repayment Yesterday, to debt will debt million will shareholders, first of focus quarterly further continue we on cash million. but returning $XXX repayments. increase the XXXX. debt to XXXX, $XX plan quarter make repayments a required to addition approved to our our

to us free our We have manage cash significant prudently. allow to flows, visibility debt future our to levels continue which

a has continued GrafTech customers X. to long-term turning with value sign Slide supply. strategic that contracts Now number to additional secure

effort, for recent aggregate GrafTech this added amount tons of XXXX. XXXX of through result has approximately an a XX,XXX As metric

our We the disclosure X. the Slide on number have updated side right-hand of chart in the

production ton. under XX% pricing, have our over We metric sold long-term above take-or-pay per contracts averaging capacity $XXXX of at XXXX

it Dave. back turn will I to Now,

David Rintoul

furnace customers and delivered prepared GrafTech open electrodes the slack and give to and business plants GrafTech making operations This strong also our exports Graphite furnace Capacity exports. of in Quinn. We in robust scale improvements competitive remains to model. remains as engineered secure and remains China vital positive. due key end the trends particularly economies for Chinese environmentally steel the integration our steel are where reduces we and to us EAF the strategy and now questions. deliver from blast resilient EAFs markets. to offer strong market. Thanks products highly provider EAFs and contracts steel in will long-term growing graphite markets. electrodes outside arc turn XXXX our our markets continue subdued a steel call our the steel are and long-term is take in This steel to earnings making more making execute to and continue share electric remain is visibilities. have growing customers results Demand utilization China growth in vertical China solutions to picked-up structure. of production of our EAFs Chinese Ongoing operational In now falling steel enables cost remarks, consuming up leading we particularly Global steel value. sustainable key services, to concludes strong a and high for steel friendly for summary,

Operator

first Thank of comes you. [Operator Instructions] from BMO capital from our David markets. line the question And Gagliano

open. is line Your

David Gagliano

increased Okay, It’s my you and great. visibility thank taking the current market. questions the on Thanks helpful. for for very

terms all, there - my - CapEx, didn’t questions, a is of quite number. I pick-up get XXXX I didn’t that expected first In of

David Rintoul

CapEx expect as XXXX sure be We Yes, Dave. the XXXX. to same would roughly

David Gagliano

tease to terms the XX,XXX the try signings Can versus then quarter? I metric XXXX, tons had just prices. out of that to average in And price contract the price us chance old for XXXX great. a during average the signed you what to Okay, comparing from time tell haven’t XX,XXX to was

Quinn Coburn

just you is to Yes, I'm pleased current and we LTAs, like sure of can prices, good exact current the very of have back kind line we of that the that with give bottom I competitive did not that. said, reasons attractive than sure and initiative they are to higher were prices. were outcome the try those giving you approximation mean price, the table table, definitely view we were Dave. an The but into for they attractive we updated were update and we the

David Gagliano

we real this quarter I one whatever. quick, second. I and just was get then special worries, a after buyback, did as no special earnings, buyback will quarters, one Okay, said do last dividend was two in a And

it is higher, expect looks not quarter? should we special quarter even any flow cash This another like and/or free buyback this reason

Quinn Coburn

Yes.

absolutely repayment. cash are we shareholders, mentioned, on will increase to returns focus but quarter, the as this debt So continue we to initiating

this have million dividend repayment probably quarterly same the million repayments in continue like have debt as and I going said that we would future the the we continue of quarters a forward, to the So paid. course, in additional expect top to we will And $XXX $XX quarter. amounts of mix future of we on roughly then normal required both,

David Gagliano

Okay. Thanks. that’s helpful.

Operator

comes the Markets. RBC Arun Capital from Our from next line question Viswanathan of

is Your open. line

Arun Viswanathan

morning. good guys, Hey

you wanted contracts, you bit still $XX,XXX seen tons, this well as acceptance or the of just XX,XXX spot Thanks. that. customers I longer as willingness know sense do have well Just I'm the we good up contracts. that little are you to couple term you above that is the guess, to accept What a near-term And decline price both the signed last asking, because a spot contracts. say sense average more that understanding prices but driving months? the level XX,XXX price, do in is your reduction seeing get I remain will amongst spot because the in on to market long-term development. think price the

David Rintoul

always Well look, think spot XX% of the we smaller business, that in contract what in that's is think been market I a this of regards to good the strategy. it’s spot product recognize important a to do actually market in long-term our and we is portion

In commenting, be. where think supply I and might terms ebb particular of flow market dynamics demand upon based all and

happy into maintain LTAs where is we terms remain financial taken and coke things have every arrangement this pleased side that up where with nicely this we the are recognizing that the try increase themselves with our of we our in regarding any increase capacity. and where us them. not match we outcome call time, have And to of morning to on We with Obviously have the LTAs what But of the because future. point aware integration has this a big prospers for vertical makes whether that that will and nice in of for it equation, And that the as that would in in integration. are we we us a our judge slight are hope it's again, for sense in point try at on time, matches front, vertical might customer reiterate go to matches to with are some at ended-up our predict surprise. we needle that

Arun Viswanathan

detail debottlenecking a maybe that $XXXX ton and on or some other additions a comments comment more XX% your (Ph). your understand to little you Mary's, range us the of additions thinking a can per actual you little come you on just $XX,XXX $XX,XXX I market, seen kind guess capacity, into I bit addition, thanks. we give is right Great, STK I guess your new just that more well for around also cost then wanted that have [SandGraf] as Greenfield noted I maybe debottlenecking then and guess in St. ton of the including and bit have And Ridgefield Greenfield range. about as that's

supply, when and Mary’s as restart are and about as how you to demand thinking make So idled it the plant? St. the potentially well would replacement sense cost Thanks.

Quinn Coburn

the were two $XX,XXX were So approximately yes little per and ton on STK right is SJL Brownfield last Greenfield number, by the think the actually metric Arun, that done about than Greenfield, bit a we $XX,XXX big expansion and more per ton.

as So number. the we see right that

David Rintoul

we variability, the analogy which us a unlike allow in the we try your St. we use of our to not Mary's upon peaking degree that an peaking script flexibility to On move-up based Mary's down on we in a run That and plan. and of - the that analogy plan that to the expect dynamics, market again will to of will the front. state question, assist St. bit thinking of

Arun Viswanathan

options it secure in more one you to side there if on vertical add relatively that ask increase lose resulting may I needle more there. there forward? up a a at still coke is And just continued coke that's any higher needle petroleum or so, to should some that or coke. if in integration want think market do any appears upon And at some we attractive would potentially would about there pricing market or you needle going capacity there, tight are constraints and see things developments on your how prices least coming and Any see needle on thanks. additions there coke that the you Great, tight needle touch do coke,

David Rintoul

coke position from we were is can perspective. on needle need you of pretty Well, at the debottlenecking, with I our changes what higher can have improvement we going matches we reliability our Relative that coke tell side. and where we XX% where and the that needs I secured for the are our tell supply comfortable look that what in to even our XXXX, nil XXXX you are is make produce with know needle with to coke comfortable on we laid graphite strategic increases we and debottlenecking marketplace, in that can the the and needle can only electrode

others aware capacity they on brining more the comment to at are that, have what whether of point. this are anything Beyond in in not is or we would on business not, beyond media public the

Arun Viswanathan

thanks guys. Okay.

Operator

line next Our question comes the Michael JPMorgan. from Gambardella from of

Your line open. is

Michael Gambardella

morning. good Yes,

long-term sourced that put about that that is captive your tons ask to needle wanted on just Just to XX,XXX wanted you being coke? the be incremental all with there, contracts of

David Rintoul

coke, would sourced majority the needle captive say with would be Mike So, yes. I

we were our production nicely - Seadrift to up increase that needle the As XXX so mentioned to year XXX debottlenecking that was the then contracts. the good to a increase of increase - portion in coke due of at this script, that bit from part long-term little we the of in able with and and matched-

Michael Gambardella

of exposed contracts needle are on coke the side the now? kind of Some long-term

David Rintoul

the there. repeat a question were bit breaking You Mike? you could little Sorry, up

Michael Gambardella

Yes.

Just in what captive contract coke. long-term this the match the past could with your supply following with you anymore? on you petroleum Is said case that needle

David Rintoul

correct. that's No,

maybe just Seadrift than tons bit, LTAs, see we little and production LTAs largely the we matches-up. there coke a the is bit there in did captive You on it then little little the of two a bit but of supply at more regular higher a the a repot little than speaking is that, bit just

Michael Gambardella

to margin coke have for and production past in produce and petroleum captive needle of kind and Okay. what coke needle you on you how does In merchant of numbers XXXX your general that you the do pricing have commented allow electrodes XXXX? much

Quinn Coburn

breaking But got question the I me again think let a - you bit. up little right. I so are Yes,

believe capacity mentioned between And XXXX? coke coke around have you we our now we procured much to for question that for have How mentioned that needle would captive to run that is a how couple adequate that us a do that we expect and I mid-XX% things will of needle of coke Dave our range. have I XXX,XXX, capacity in we the would just in So allow production XXXX. what procured level we asked. repeat the So produce needle much

Michael Gambardella

Okay. mentioned procurement cook that? you the needle And pricing

Quinn Coburn

did do. given are that try going question, our competitive what of quarter-over-quarter price the quarter-over-quarter for Keep coke you it in for rolls has will for about now goods reasons we half that quantify of there out a year mind I forward. have that needle in we lag been of cost increased is sold. Good increase when to pricing to the a to cost the sold from Right. time goods But the increasing to and of six impact choosing three the not on past, months to do or of

here. will have continue for but that, impacted to would on sold goods exact so we Yes, guidance cost So quarters reasons for price. competitive backed the of given I from see to away few try give gain a we

Michael Gambardella

impact year? should the So first over million assume quarters the of in the four we the equal not $XX that's quarter,

Quinn Coburn

think And will will see give you bit we that. after insight I QX. it increase will QX versus depends, little more it then additional a

Michael Gambardella

a Okay. lot. alright. Thanks

Operator

Capital of final Markets. the will Our come today from question David line from BMO Gagliano

Your line is open.

David Gagliano

follow-ups have I hopefully. three quick great. Alright, just

quarter? like first - be from fourth all the we any in the Just we inventories first near-term quarter in of expecting should any saw sales

Quinn Coburn

you typical our about is as David to customers. No, just XX our if and There - look QX total it's year. of back on be buying over QX typically is year, for of wouldn’t total XX% go and no reason XX% that our I our the of call, I past that, is mentioned patterns tends years QX a about expect absolute the

we expect a like seasonality QX, did we nice inventories, would drawdown so on had see inventories not And that I typical on demand, expect we would to QX. on in drawdown to said we

David Gagliano

Thank of helpful. you. Okay, just picture questions. a that’s couple bigger And then

that kind talk thing. Is or kind you here anywhere looking for a of of all seen electrodes affecting of America? of in graphite India had have some North in your inventories that home, First there excessive all been at that business

David Rintoul

number the among electrodes bring and Indians to a of then in producers certainly So there the world is that market those. are

issues issues of We related of areas bit India are within we some seeing think QX, The to belief. tariff little as well of presence the a their as say is sanction issues. sanctions Middle-East are in and are our issues that the impacts tariff beyond

we all zero think net temporary do net-net a of that out close Now, the of what a we work to dislocation itself is coming the of in because gain. think the quarters, it's

there momentary because will in we near-term will longer places dislocation, is term, it the that think out over So supplied believe they settle be left but somebody. by some

David Gagliano

the that case Okay, are it the and within in correct? prepared February now, we just I still commentary that spot comment this market so remarks prices even around are Is challenge. think is that $XX,XXX with inventory was context holding the the

David Rintoul

that The to you going careful we maximum transacted in To to be very try is and if are be to future going. where earlier speculative Quinn's will. at the or predict pricing weeks, not recent point we

communicating upon the limited on we are information with put spot best have that that fact of into in amount marketplace. the So that we we the

David Gagliano

over a me, six That U.S. is of your making last the with minimal And in that did Thank question wanted has you to business years. your Okay. expect any see there longer-term I up benefit next Greenfield you start very the than for and in expansion obviously bit still then anybody early last and opportunity? been growth quite that months, to of numbers just over our adds looking thoughts think three minimal discussions in you. potential over XX% some get announces had to have When the just to regarding helpful.

David Rintoul

to which assets this us I online is they of of NewCore] expeditiously. week have have track I XX particularly we that. we our a track that in know out industry months, record thing [SDI you have good any again, (Ph) wouldn't reason SDI, expansions, pretty in kind and why of these record didn’t something read before announced Well we a all see or the of folks talking initiated those XX do were past we believe this for don’t bringing done

an would in because so leave electrodes to to XX off as we and about supply discussions XX they do cases need they arc So then well. in I and some my have plans had have friends got strike and months, they BlueScope shouldn’t some

of us those plants. and those good So I are - for in for look, as said, they have needs case all new if some would

David Gagliano

Okay, great. very Thank helpful. That is you much.

Operator

call I will closing turn Rintoul now the Mr. to back for remarks.

David Rintoul

In Lisa. positioned you to our leverage unique structurally is well a conclusion, in position competitive Thank GrafTech improved and execute strategy our industry.

We provide will and and to your services, to speaking of continue customers. integration next value our day. the to production and vertical in with GrafTech low-cost products maximize good we quarter. a for Have solutions our look industry-leading Thank you forward base interest to you

Operator

today's call. Thank concludes joining. you This conference for

now disconnect. may You

GrafTech International (EAF) 8 Feb 192018 Q4 Earnings call transcript