EAF - Earnings call transcript Q3 2019 | GrafTech International Ltd.

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Operator

Ladies and Gentlemen, thank you for standing by and welcome to the Q3, 2019 GrafTech International Earnings Conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to handover the conference over to your speaker today, Meredith Bandy, Vice President of Investor Relations, please go ahead.

Meredith Bandy

morning, to good XXXX third Kenzie, call. conference you, and GrafTech’s welcome quarter Thank

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

some actual to First based expectations as cause on our that on to call forward-looking strategies current performance include risks and materially Factors from regarding may matters could These among to Turning other this a reminder, things. and we differ of uncertainties. slide, results indicated are discussed results, and subject forward-looking by statements are shown the statements are here. those statements

We slides. measures for The will the website which these posted non-GAAP are in in our on reconciliations also discuss slides at the you'll section. financial www.graftech.com find Investors

replay on this be a also of our will available call For your website. reference,

pleased to call over the turn to Now Dave. I'm

David Rintoul

steelmaking. Meredith. cash you, the arc thank growth joining to us Good GrafTech you free integrated generate long-term from contracting for EAF and low morning positioned electric strategy long-term benefit today. Thank and GrafTech production to With of meaningful continues cost flow. a well vertically is everyone furnace

are deploying that cash sheet improvement. for We committed returns and shareholder to balance

a slide and our and we safety. as Turning safety let's of success. considered organization's value normally with excellence do X, to a begin fundamental of is core GrafTech Health requirement

an our everyone team the recordable can every all achievement. A year-to-date this every goes be we zero and vigilant from like goal us more year. that prior that and safe time effective of means for improvement locations. of total same of injury strive XX% and I day. we our at remain to ultimate safely our plant Our thank both rate so must plant of has is reach X.XX home improved harm At than to one each to the all

steel coupled of with and a On in conditions that business year Slide resulted last through. early in excess market play the production inventory reduced Overbuying a late year has results delivered cyclical we in number solid and seeing the despite electrode operate. GrafTech working in this X, we that are today. markets quarterly is in challenging customers are which some regions Steel out

continue expect half destocking first to electrode inventory XXXX. the of to We graphite

and builds market we Longer-term move States. into by manufacturing share the Inventories United difficulties evidenced improve XXXX. electric half work steelmaking out. conditions excuse Short-term decline seeing as we're of should continues arc second me, in as will take to the the rebuilds themselves EAF and furnace new steel

remains long-term reduce As a preserve reminder volume on our sales help the contracts volatility which earnings the and of majority GrafTech of margins.

We thanks are these substantial long coke. our contracts, stable petroleum able vertical offer integration to needle into term to

needle Our wholly meaningfully a owned at costs of market are high-quality coke provides current secure supply Seadrift pricing. facility petroleum below that

operational release our These footprint intended projects we manufacturing Monterrey flexibility. and projects earnings X, production improving at environmental Now turning a slide series to are while St. performance to our increasing and our improvement in of announced Marys facilities. optimize

graphitization in these which XXXX time subject of capital and board. the will as well the We to these estimate be machining our first we maintenance able of expect includes be additional projects as capital which Monterrey levels, at to current Marys. be approval completed projects shift would projects We near St. from to the spending half XXXX to

under majority as slide contracts. X, of of capacity long-term to take-or-pay and visibility on These contracts earlier the I long-term mentioned earnings. provide sold Moving production GrafTech profitability our has

a blended tons XXXX by GrafTech the changes couple also XXXX of to seen year pursue steel industry, addition LTA health in have such a we per bankruptcy. to softness shown customers. as the in this commercial have approximately recent the in certain slide Volumes through customers strategy. reduced our financial of declare global on X,XXX continues In reflect to been

majority our are contracts. of under The sales long-term

also meaningful spot We volumes sales. and under agreements have short-term

commercial multiple is key a offer for to our advantages element to and customers contract customers. ability long-term our Short for contracts strategy. different Our formats offer different

an forward. part our to important commercial of We strategy going expect both continue to be

turn for more results. Quinn X details to on I'll on Now slide financial over our

Quinn Coburn

Dave. Thanks

As Dave financial relatively some solid quarter highlighted, third conditions. softening economic results of despite remained

of Third sales were quarter $XXX XXXX XXXX volumes. net down sales X% from million on lower

metric and electrodes. quarter, the tons we During produced sold graphite XX,XXX of

quarter to were volumes year that able This performance. As annual planned usual, cost production production in we downtime with while to maintaining recent line to sales be maintenance outages. leverage third more reflect volumes manage

customer conditions We to spoke as we full utilization the earlier. XX% chain demand to now overhang expect year production supply inventory Dave to specifically average match approximately and production capacity that

We rebound average work pricing to than was prior QX through next expect weighted as period. higher bit customers inventories. later a demands the year

As down agreements. expected, third relative to approximately our of to QX QX, customers pricing XX% was were revenues quarter with long-term spot

for related XXXX adjusted X financial per prior cost and is in million down higher needle from $XXX slide Lower third specifically second income share. due lower results, diluted QX of half the expected of to to third-party pricing year. year was cost raw sales EBITDA materials petroleum sales Turning translate QX net or third-party to next $X.XX period totaled cost. coke quarter petroleum needle coke volumes million to XXXX to $XXX lower

working increased capital operational $XXX free cash QX million partially as results. flow changes offset lower Third XXXX favorable quarter from of

part higher recall, QX was In change the shipments latter may working that towards as of June weighted receivable the were accounts last XX. largely reversed. you resulted capital As which of quarter, quarter in

XX% which to shareholders XX, flow slide generated nearly more repaid remain of GrafTech dividends free free in has past uses has record GrafTech than months, cash and $XXX strong three XX billion through also generation. and million cash. debt a that share returned a time. to-date to Turning debt been track of cash quarters of has of of returns the over of the repurchases. for during priorities We've Shareholder key flow repayment dollars

focus is page and on on high increase products investments returns value. discussed ahead develop customers’ Dave reduce to our our productivity to to projects future Looking with strategy XX, payback operating costs, as on

we continue and in addition, invest will In health, performance. environmental to safety

for flow To-date XXXX dividends the balance including appropriate to as with share approximately earmarked million XX% target have utilized Shareholder and continue buybacks under include program. we cash the we XX% that We program are last announced returns XX share primarily debt quarter. to shareholder returns XXX to repayment. expected of repurchase free of about million

future The timing volumes conditions. traded share on other of repurchases share market price, depend will and

to our million with earlier by will our debt cash this further to visibility also that year have year $XXX manage end. we levels of We repayments align anticipate We free flow. repaid making and debt the debt

it to turn now slide back I'll Dave XX. on

David Rintoul

mills. will shares with downs producers. its outlook the electric XX% advantage arc growth arc of up ups furnaces overtime. integrated make relative China environmental to flexible steel market of furnaces lower almost remain share is making to is to steel better integrated cost Globally Electric steel and for production performance. The Electric continue that doubt take including have and Quinn. capital from and market furnaces structure, are long-term share a Thanks EAF to arc grow continue There no strong. expected intensity

addition electric to low flow. long-term Increased needle the to pricing. in competitive petroleum needle In to contributed advantage. expect batteries cost we needle offers for The vehicle long-term free a sustainable, coke coke cash elevated integration has contracting strategy, coke demand integrated for continue into vertically generate GrafTech's production vertical meaningful

returns we Quinn committed cash for to improvement. sheet and shareholder deploying that balance are discussed, As

remarks. our concludes This prepared

for the now call questions. will open We up

Operator

[Operator Instructions] Markets. question with of comes first line BMO Our Gagliano from David the Capital

line is open. Your

David Gagliano

calls on It's thanks we these Hi, when of will questions. some my asking that for standard questions -- be current ask conditions. the the related taking I mortgage I guess to

the see pricing was remarks comment contracts. XXXX of all, First to in now ton a spot you related just to you for XXXX also alluded you if somewhat drop it then and where could and X,XXX prepared there

in X,XXX other I a a and decline, that think prompted bankruptcy a year. was it that actual an contracts similar situation? was there specifically renegotiation are What or are

David Rintoul

for Good will start with I spot pricing. your morning the Thanks one on first Dave. questions.

and spot I translates everybody are on aware, an we then cyclical way pricing think a normally I in certainly provide a market. influencing currently referenced, our industry and spot such as that don't steel as as the forward into certainly and declining on market it's certainly is impact guidance

I'm and negotiations. overall, give midst and those that on today Given to influence we're specific business negotiations numbers QX in of the inclined not XXXX

do effects to those I it say cyclical as suffice said, of we're sure. to we a market service and that However, be some as seeing such

that contracts On It's bankruptcies. that tons, than the that be where in that customer believe we're we of adjustment other we and appropriate the because could specifically not seeing. is to to problematic represented liquidity that thought situation so a was imply anything of the to financial us X,XXX a aware we be to be areas made been or that of may question there's have everyone in the difficulties make couple intended about reduction renegotiation the it slide, what or had led

David Gagliano

you. helpful, That's thank

in terms should I mouth, expect put additional for point, at mouth, in changes your this guess. those contract am words we to book that not your words changes? in So not I of putting but to expectations

David Rintoul

are I'm be your our globe makers going Dave bankrupt. on that's than go sake, crystal certainly look steel this Well, terms that any and are the hoping not to mine of, the ball case. both sake might in better their for actually plan in there I'm other

David Gagliano

you more bit actually directly, those renegotiate to that the I other existing you that of, in a approach was quite in I asking are more topic No, place? up customers about guess having are contracts comes terms

David Rintoul

and So the our the flexible that needs to GrafTech of outcome about, long that of are stood. whole end are initial our approach the contract that at as our in customers day the approach shareholders their with to the way we're inquire such as

be were speak remiss business would significant kept the customers not a good haven't of is allow there LTA to in to with be to would of situation the changes any them be if we I our been partying might to where be intact. us But in fact that -- we things to. open as people that heretofore to be value still So value

that's our on that So position subject.

David Gagliano

much. very Thanks

Operator

of comes question the next line with Alexander Citi. Hacking Your from

open. Your line is

Alexander Hacking

for thanks the question. Hi,

assuming an willing up volume just you're sense, existing [Indiscernible] guys follow future? those of potentially lower to saying as last Would of that that as cut LTAs you but of are flexibility correct getting Am out? be potentially that customers a there about? So prices long talking to So the I those example that kind to more the what are price, in are on extend locking that were you on the in into you willing is comments. customers in

David Rintoul

that that this make not in obviously Alex, mean of I NPV. present so we to changes intact be quite. discussions those whatever would that if of the net that time kept in saying very to in have value the to is at shareholders look the preserve existing of of you LTA would was the deliberate the want interest value have point LTA the our at would outcome

not simple it's So suggest. as quite example might as your

Alexander Hacking

or more give example Could talking guess to about what you it? of specific being you give want don't an you're I

David Rintoul

think I the marketplace I out modifications. Well, on into such on in don't call this put want that to suggestions

and and LTA net combinations of customer that LTA. one-on-one, to customers in day just of to the the we'll I leave request and assist present of place. preserve a to of we think discussions said, allow through a at that it's number had certain can the in think us end no There a near-term are with value decided an the individual them the others some permutations

exist the view or customer-by-customer combinations don't I to one might and for and us might to what that. it's and of try It's another in to on how really call good a personal preference in business matters customer terms that. align they matter not So think that this permutations conducive

great our always of So I that works expect will but be work we people are customers both as to an things transpire, to optimal parties. good a for don't with number find those business that there solution willing

Alexander Hacking

just color, others the guess okay. couple of appreciate I if it's I a that's helpful.

process? that you're business You guess destock at you to you you that out be the and the going much certain second there mentioned I pick Is year there? what there's then think is looking another this six of tonnage that month through expect next seven amount a makes half. XH to think to to continue normal up too in that

David Rintoul

anyway we're a year graphite XXXX that the happen So inventory is return as I more we're levels. looking said, that one normal on the as think, electrode to begin In as two-fold of the that that steel business new will. we will buys to healthier business the and the into second you inventory they'll recovery thinking to our at estimating steel part of the as will I the returns burn that we accounts down broader state that get it's half the and first that if and ground in component transpires think group major a

estimate as doing combination the believing of math on So all estimate inventories most second there's the a and year. they of of as trying and that industry in burned the steel through our return well have to of half, that half little the the first of on a this inventory should

Alexander Hacking

Thanks more and it's then one okay. just if

you, to had that? buyback I authorized. assumed how of X that deploy this I would XXX out spent Just bit guess, been a the guess color you're are aggressive how on I planning on million that the only quarter I you have more think you any was

Thanks. So there? any comments

Quinn Coburn

Alex, Sure Quinn. Yes. it's

do creating believe cash we in future for in Obviously, and plan repurchases that are the we believe flow. opportunistically remaining million repurchased shareholders to continue We our we quarters. repurchases do the of use and have attractive to we our very during XX share value quarter, continue very

So provide. level of detail can I the about that that's probably

Alexander Hacking

you. Thank

Quinn Coburn

Thank you.

Operator

Your the Viswanathan. next question line of comes Arun from

Your line is open.

Arun Viswanathan

your morning. the level a good see question market? I of in a of share or is or maybe even level thanks, the maybe I just supply, utilization of producer days or now customer industry that level little guess guess the first you rate more and tons right you situation. on inventory Great, this kind Can details bit

David Rintoul

Good morning, Arun.

bag a I keep of a the attempt what our in inventory handle standard regions we answer across ability it's degree I very customers that would different large think terms deviation. our best is inventory in of on with pretty board mixed of the to and to the different that and in world the a to

have XXXX reason be to I'm than I'm that working and we think fact that half say as inventory for expect going we our players through inventory. to burn rates that people spot expected down of going know see ground opposed inclined current that we first run in think provide our exact number So we the burning begin to go the year the on that not, to as into next inventories don't the we're I inventory had to And where that say reflecting the we to an to down. that of these think that process enough that building demand other are

Arun Viswanathan

there, are you and what Yes the coke thanks. just coke increased some on how are provide Thanks. needle color, And thought needle prices year? side, you next could trending cost into expectations some your

Quinn Coburn

to us on BXX doing. in disclose others comment companies other i.e., We're not what case say this or Sure. careful to they're numbers whether or it's probably they're for doing not what

right. seem read of not will However, back couple pricing we we in that and the have and the about that knowledge sure seen or can that's I'm you public become same reports number it in that needle direct reports hasn't the that last weeks public to more public and something dropped I've less hasn't places in you have coke read about a to you've

Arun Viswanathan

capital deployed the XX% capital side. free Thanks. of into projecting cash be XX% to to flow on lastly around return shareholders? still to just And return Are you

David Rintoul

absolutely target the debt used to to have Absolutely plan to remains do our debt return, the by don't Repay regards the or but any remains year. the XX% we of balance timeline end that as repay year. deadlines, of our with XX% debt we mentioned. Yes. additional the specific the by to We end the capital target. With repay

Arun Viswanathan

Thanks.

Operator

today's call now turn for remarks. David session Q&A for will the concludes closing This to call. Rintoul back the I

David Rintoul

highly services very engineered GrafTech EAF products Thank a the to much. In market. electrode provider is solutions of conclusion you leading steel and graphite

to our vertical long-term continue and visibility. contracts advantage profitability significant competitive and is provide a Our integration sustainable

generation of to cash cash flow record returning and have proven We shareholders. a track

in your and forward next thank for you GrafTech to speaking Again, with tech you look we interest quarter.

Operator

today's you concludes your This for conference call. participation. Thank

You disconnect. now may

GrafTech International (EAF) 7 Nov 192019 Q3 Earnings call transcript