EAF - Earnings call transcript Q2 2020 | GrafTech International Ltd.

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Operator

Good afternoon, everyone, and welcome to the GrafTech International's Second Quarter 2020 Earnings Results Conference Call and Webcast. [Operator instructions] Please note that this call is being recorded today Thursday, August 6, 2020, at 4:00 Eastern daylight Time. I would now like to turn the meeting over to your host for today's call, GrafTech's International's Chief Executive Officer, Dave Rintoul.

You may begin.

Dave Rintoul

Yes. to Second welcome Call. XXXX and afternoon, GrafTech Quarter International's Conference Good

Vice Relations. the is Relations her Watson, the over and new today with professional, call who hand the GrafTech of Coburn, our On excited me to Officer; and Quinn we call to seasoned is Wendy a Chief are Financial is team. Wendy. President Investor now Investor welcome to Wendy I'll

Wendy Watson

GrafTech's a It's forward pleasure to community. and here, looking with Dave. be to I'm working you, investment Thank

Before matters call to among could materially statements cause by of forward-looking and we current and I you remind to on and from results want those shown actual regarding, indicated based performance expectations begin today's risks discussed uncertainties. call, are strategies. Factors that some are to are forward-looking differ These here. other statements may that the things, results, this statements on include subject

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

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

Now the pleased to to over am call I Dave. turn

Dave Rintoul

afternoon, Wendy, joining today. you, you the value Health safety, with core of hope even important thank Thank and become more us We'll finds your and everyone, during a your pandemic. we this for call colleagues GrafTech. and is do, always you, I families safety healthy. good as and begin, which excellence has

of XX% improved from decrease Our total rate first to significantly XXXX. recordable injury a X.XX, the XXXX for half

just the between mobile actions such name tasks COVID-XX. a focused response this as as has on practices, actions it safety We few. to machines, and achieved This the been are addition team to was with in hands-off planning, and interface especially to particularly in pretest people taken involving year, the pleased

extremely and improvement. to are culture safety quarter results the committed with for of pleased our We a continuous

the going awareness work leading a expand this to enhance indicators going in forward. I diligence team awareness their improvement, want safety we and to forward continued of continuous to -- will for part take thank our area. safety As this moment hard

only the the However, and our provides achieve Health number safety success foundation plant belief here is of to to a that X. the business safe on the fundamental balance metrics. correct is

Slide to X. Turning

We pandemic. the proactively are managing COVID-XX through

Our to X at executive per situation locations. to the all Travel COVID-XX led by of response our team remains members meet continues times team restricted. assess heavily week

place operating of being mandatory for Personal We our facilities. personnel at is including equipment have protective our utilized, workforce in XXX% for use temperature checks facilities. entering glove

Okay.

taken Turning actions X. protocols we to enabled safely The that plans have Slide and operating continue effectively. have around our our to COVID-XX

adapted environment. quickly the new has to organization normal Our working

and European North plants were new practices prior as to implement the Our Europe America. hit to first pandemic the adapt

infections, with currently date. both able say States the plants of dealing the American to North surge free that in to are be Mexico. and United Our our in to COVID-XX remain recent COVID-XX employees I'm XX% pleased

running Our the our and meet plants have at customers' are levels pandemic operating remained COVID-XX through requirements. to

level of highest we to rate have an delivery the service achieved these the quarter. on-time in our efforts XX% are times, customers to During our challenging second increasing provide and of

biannual recently maintenance planned scheduled This Seadrift X regularly weeks. outage Our lasted its facility outage. completed

and Our July. of on in the end team the on turnaround completed time operations back the safely at budget facility with

been steel quarter COVID-XX the at the to and began. generally from outside volatile decreased significantly down of approximately second World reduced are impacted has the Steel steel industry Moving the The electro States, efforts that global goes Steel rates in Association X. in It XX% have that the China demand. as XX% period in an example also stands from pandemic recently currently Utilization operating more and same and impacted Slide steel since XXXX. production was as have reported utilization rates without consumption. saying have fallen, United XX%. declined QX in have prices the Customer rate destocking

We of continue to remainder expect graphite electrode demand soft for to remain XXXX. the

X. Turning to Slide

our on industry. steel with facing associated are experiencing call, impacts we currently challenges last we As the said the

received approximately force have We XX majeure claims.

are take under committed customers our the of struggling Some they've to LTAs. volumes our to

Additionally, perform few a we've customers had their contracts. to fail on

We are our mutually customers beneficial with working solutions. hard develop to

ensure in while modify the expect contract. appropriate additional to we our some volumes securing able to have by to of take contracts relief are under our While to been the measures near-term the we fulfilled, contracts extending obligations provide

range to tons. anticipate continue to metric of XXXX We our XXX,XXX that will the XXX,XXX in be sales LTA

Now on to financial results. more Slide quarter Quinn I'll on it X detail for turn over our second

Quinn Coburn

Thanks, Dave. Okay.

with the XX,XXX which electrodes, the we last is tons produced quarter, line in quarter. graphite metric During of

XX,XXX Our by electrode tons capacity impacted was as We of XX%. demand shipped the utilization operating rates steel COVID-XX. lower and metric was impact

of brings Our and deliveries LTAs metric electrodes in QX. spot accounted the X,XXX for year-to-date sold tons. We of XX,XXX our tons to these XX,XXX tons in metric deliveries market metric LTA

expected, we second declined spot prices the As quarter. in

realized ton. Our price sales LTA was average $X,XXX metric non per for

Given the third decline that prices quarter. current the continue will to likely expect market environment, spot in we

million, Now we per $XXX strong Adjusted earnings in quarter second flow Slide was cash share. to $X.XX Net turning the flow. X. EBITDA to $XXX continue million million. cash as totaled income generating was $XX Free of generate

XX. Slide to Turning

We by production electrode strategic current at plants at key electrode match eliminated financial our pandemic. execute expenditures capital XX% reducing forecast roughly to second on We our our to the discretionary target to successfully and our our year executed workforce address costs And we our achieved of reduced fixed levels. our on the commitments the plants spending rightsized XX%. while initiatives. our for quarter, by continuing COVID-XX During

quarter ended the position. Turning XX. again a We with strong to Slide liquidity

cash amortization facility. not until was liquidity and $XXX us levels consisting with until million, This is liquidity XXXX. debt term on significant the revolving quarter. of our our And this due loan mid-XXXX. is due not $XXX our million next of provides Our million flexibility $XXX approximately reducing while total by achieved credit $XXX financial million in our We as payment

the flow to sheet and use free our debt cash continue balance will XXXX of majority reduce in to our We liquidity. maintain

XX. to I'll on Now hand back it Slide Dave

Dave Rintoul

Quinn. Thanks,

facing economy, remain steel global electric electrode industry significant in about industry the and advantages EAF is wake of the the pandemic, arc industries. the the The confident of including several furnace has While strengths over the graphite we long-term current steelmaking. challenges traditional

example, idled For recent able and operate. more cost be this EAF restarted facilities effectively. flexible And to to quickly during are downturn, we're and

a And continue an short the Additionally, downturn the furnace achieve and emissions this critical than position to weather environmental advantages to environmental become considerations term. These and run production in solid operations. in the operational XX% over growth blast issue EAF less put industrial economic, yields EAF facing will the companies. traditional carbon increasingly to type long strong industry continued

to XX. Turning Slide

grow, we engineered to graphite grow well. that extensive and of knowledge will manufacture better continue As Graphite the highly both the customers and industry. our use process as provides electrodes The help electrodes are are produce. a electrodes EAF EAF position to GrafTech the continues will and a to that solutions mission-critical industry us to component services require The future. for

manufacturers to the Slide largest electrode in XX. world. Moving the GrafTech one is of ahead

through taken have to decisive manage the We pandemic. COVID-XX actions

further flexibility outbreaks. Our due environments any challenged should global provides operating us to footprint become

managing cash We flow and have of a sheet a track strong balance industry record cycles. through generation and proven

environment. our weather normal, we believe we remarks, up return concludes the well open While current difficult the now to and current of when GrafTech be for macroeconomic positioned is challenges That we'll cannot the certain questions. conditions to call prepared very will

Operator

Our first BMO [Operator Capital Gagliano David Instructions] question from comes with Market.

Your line is open.

David Gagliano

try want try to if question, to just and turn I and then one keep Okay. a X-part question, it and it into I'll possible.

spot wondering, in are near In falling, the quarter. I'm spot terms of were the obviously and there rates term, second sales

-- price spot you And have continuing longer market? part in my third question. to And are into into third market the -- into of part sell So, is the my first what a question longer-term then the of also I is spot quarter? second sell the no the first spot -- would question you

and tons of $X,XXX my price now? were XXX,XXX, What of fourth contracts forward. results, That's ton. are 'XX the those question. long-term sold numbers As XXXX quarter XXX,XXX as Average figures for metric a was for

Dave Rintoul

Okay.

in in appropriate. presence in terms question as to there's maintain we intend your selling of We be So question third Absolutely. spot spot, marketplace the our the no that business on will quarter.

many solid and both maintain as with. by relationship that we'll we means be that relationship And as our customers good a competitive into to remains have that positive we the intend which We move to ensure future.

Quinn Coburn

those and Yes, for the Dave. And contracted the are numbers second on referenced question, XXXX. you that XXXX

We haven't guidance contracted beyond those any actually numbers. given

tons at assess in point to actually of and XXXX haven't this We that we realize number the will XXXX. tried

that doing have, we're We this good estimate internally. at to a course, prepared point we're not just to give publicly. have Of

out. and years, did we year years some be in in will the this before, future tons some back of that talked should we've of As potentially pushed not future come realized the tons

So that, that. working we're monitoring

in proactive and years, that we publicly on way As we the full we release our any mutually a couple of how in on are over next customers exactly that continue these yet. contracts, beneficial haven't to will filled volumes indicated work ensure out roll but the here, given information to with

Dave Rintoul

I good that the have future, partner, which of customers same with We're can a And of any this into working LTA while hard ensuring find is our of partner, an think number very to we're both assisting most shareholders answer the being acceptable in experienced parties pandemic. stewards of we're well-being. as that our last the difficulty part trying find ways at as path that the result a part. good time, business our important

David Gagliano

where is helpful. to if just I'm that to And maintain Okay. then of and level that those is last too a asked, what I And price one relationships? the just the spot low questions level? so, sure there sell is That's

Dave Rintoul

our and for of and been years are for expect servicing do around to to time, Well, partnership in a business business a on continue long the good many that because in in we've we this focus we with look, point, spot been the with market, evolution is the -- that. customers at has

So out I value. don't it's me for think a this on to put call such prudent

that. to So I'll leave go that with

Operator

with question next Arun is from Viswanathan Our RBC.

Arun Viswanathan

to they to of industry, than like guess, question, kind are going lower how a future first Are renegotiating you It just I through and some lot How contracts any are ending your customers can about financial you up? think give on the more they out going? guess, looks able you ing your are do kind some securing closer think years. here? thoughts potentially difficulties prior about starting guess, discussions of of Yes, the of are are contracts? for to kind where I maybe when this difficulties. referenced spot? we're contracts volumes us materially those those with Are environment we I you've there. discuss

Dave Rintoul

their has remember no important us to the circumstances think the of that that driving own So one set thing that of the unique important come is Every is has components to there's I that solution. one-size-fits-all are customers to them.

speaks So up is the one both this but Every work them that cookie-cutter that I it, that ensuring cookie efforts our it's partner parties. cutter. fact, not we're come unique. to are we and And solutions like And a through is being not just in receptive we, think working to I good complication, a that for exercise. of with said,

important, able In issues very I'm give near-term is bit shareholders. customers, that work question and say terms something through But seriously I our we as -- of solve our that think of take a to them to for is one because a so answering different. I therefore, in fiduciary also previous the our responsibility you we in each strive no did specific there's to

to come navigate trying near-term solutions with the up we're we shareholders responsibility not win-win solutions for So to where work our the while forgotten to to hard try are customers.

Arun Viswanathan

more. areas And Okay. X maybe then

you've the some certain presumably, So cost seen relief raw first, on materials. side, in

cost should discuss How both to costs So can taking, would that. we about guys speak And maybe other and 'XX? those you're there structurally? you out earnings are again, you the think if in that benefit temporarily actions to that are you could a that just structural, And taking are those? be

Quinn Coburn

Arun. Sure,

with which in we comments, fixed costs costs our the our to able very electrodes reduce pleased those by as quarter. in are production and were we noted XX%, for our So we were manufacturing

benefit quarters. the costs quarter current reduced and the so in inventory And future of would go would those roll to through in P&L the

in the coke So needle a volumes, And over coke of you're then and improve on that third-party raw less softened there a with materials used accrue. third-party we've to needle had time. the somewhat average bit that our so has right, of in electrodes, the over should will coke time. and And also lower of continue benefit we've side, cost terms

our factors favor So we've got in going working forward. X those

Arun Viswanathan

you're thinking in how And I the have on, quarter. then about did event capital lastly, an just guess, structure? You the

to consortium? capital thinking you and/or sale the And maybe majority you also, owners by what deleveraging? guess, that imply, maybe How going for your shareholder preference that So cash then return are free I discuss does of forward standpoint a down about flow? that using just from can your

Quinn Coburn

Sure.

doesn't from So increase does the first, obviously, Brookfield, XX%. XX% long-term on float think Brookfield's is did impact which control public XX%. to XX% It in we in the approximately the result public stock. us our conversely, flow, enhancing directly, from to that increasing that distribution it from consortium increase except reduced position in positive the a And liquidity

way talked and other debt on long than really line general, have. question as debt we flows specifically think, not that. manage have to our the that over are increase level overall overall our in So agreements than structure in visibility the those to to that directly structure, for think impact we your we've in the shareholders by levels But is previously, we To liquidity, capital our capital positive the not involved and cash our directly our we that long-term is about the impacted that we in we that, second And a to with term. want decisions. the overall other

We something quarter At to the X X.Xx. be ratio ratio a not exceed have that the leverage to of X.Xx. here, end leverage would net our was set target

to indicated prudent slightly in financial So to plan strength we're we range. plan below balance being that was ensure and as range, We that below range. would We and sheet be before, our management. want we're And that flexibility. to exceed comfortable

length the industry. this overall it pandemic I economy steel important during more on the think of and with and that's impact time of even uncertain period the uncertainty and the the the around

of balance of the to strength, cash and pay absolutely continue year. flow ensure use our therefore, rest over we'll So plan financial majority to sheet we prioritize down flexibility debt to and the the

to press release, on an we basis, and be will ongoing continue of in As opportunities repurchase sheet Board discuss to as examine with indicated, priority Directors, our note structure capital we balance but we've will do, strength. our stock the we

Operator

turn the will is concluding it That time for today. have for to we questions remarks. all I back speakers the

Dave Rintoul

like with committed health service operator. GrafTech you to for positioned providing Thank these lay you, macroeconomic we this our and to be interest on current to everyone speaking ahead. any look that coming forward well months. we wish quarter. through thank take resilient call in Okay. In safety continued conclusion, opportunity through is And customers Again, are this the with conditions. reliable Thank challenges to you. your you next and in GrafTech, I'd to

Operator

This participating. all. you conference, today's conclude thank you for Thank and does

great You Thank Goodbye. may now calling. disconnect, day. you and a for have

GrafTech International (EAF) 8 Aug 202020 Q2 Earnings call transcript