EAF - Earnings call transcript Q3 2020 | GrafTech International Ltd.

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Operator

Ladies and gentlemen, thank you for standing-by and welcome to the GrafTech’s Third Quarter 2020 Earnings Conference Call and Webcast. 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] Thank you. I would now like to hand the conference over to your speaker today Wendy Watson. ahead. go Please

Wendy Watson

welcome call. and International's quarter third Good to conference XXXX morning, GrafTech

On Dave Officer. today Executive me the with call is Quinn our Officer Coburn, Rintoul, Chief Financial and Chief GrafTech's

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

We reconciliations. measures. In will these non-GAAP non-GAAP relevant the also discuss certain slides financial include

find turn website available to also can section be slides A the Relation Dave. our call Investors of at I’ll website. call will You on our over now in replay these the www.graftech.com. of the

Dave Rintoul

and you, always Excellence become and your you important pandemic. thank and for morning, priority. joining value colleagues you, during safety a of key even We'll health your as core Good are well. Thank and third hope GrafTech which is families the has call. with and safety, a begin, Wendy. I everyone, more quarter and our do, healthy we

end total the XXXX. of Our at work decrease area. this your hard in team was rate recordable continued XX% year-to-date for Thank X.XX, a injury GrafTech QX to the from you diligence and

is plant Safety on business number with employee safely is every correct success for only X to that foundation the of fundamental the is and the our our a day. a However, Health metrics. going home balance belief every safe

COVID-XX pandemic. continue to we manage Slide the through to X, Turning proactively

member to meet work developments to changes make executive to safety. our team COVID-XX and to playbook three per times week team and monitor Our lead response responsive safe facilitate customer continues

and their Our in plants and the audits. diligent thorough controls associated COVID-XX pandemic been throughout have

communication and exacting facilities. team for education designed social member cleaning, ongoing. and of Regular safe and our operation adhere critical continue to PPE, and Our other team members protocols to distancing measures is

to During and providing also an XX% time we service on focused customers our these of third of level times, maintaining on quarter. the rate challenging are in the highest delivery

we're to inaugural September. our Turning in very have X, launched sustainability pleased to Slide report

efforts environmental are monitor our to ESG to initiatives. advancing on our continue progress and We committed

aluminum, globally, focus of stewards, combined. arc year industry XX% furnace that we steel on blast in a being glass As are production. traditional less paper, more than mindful The recycled furnace environmental leader production and we emission good steel every steel than North plastic overall been electric has recycling carbon and in is yields America

fully sustainability proud are of across committed our We and report efforts our inaugural are to organization. these

issue We an annual report expect to on our basis. sustainability

measured with are industry, to X, Moving regions the quarter in rates. improvement we Slide global recovering the second seeing different at steel from

in from quarter. hot-rolled global XXX European to a tons to second XXX the to tons quarter metric also the quarter. and per outside Association, Steel quarter US$XXX in $XXX new bullet XX%. been XX% estimated steel steel third over the Black XXX per pricing second quarter. at $XXX improved third ton metric over the China million rate According over up metric Sea at ton ton for also Global at Euros increasing steel In U.S., second utilization over all these approximately of have with in billion of is coil World expected XXXX. hot-rolled per quarter ton, US$XXX achieve North in high or stands in Steel rates tons Third the per production utilization now production, prices just USA just the values the the coil from XX% million China just outside China of to X at improved manufacturing approximately at

of remainder destocking electrode steel is in for improving XXXX. industry, efforts we expect graphite demand customer to the the While continue

expect graphite electrode to quarter. furnace favorable improvement industry the We steel electric demand third in mix arc in due as a the recovers measured

sales electrodes for third Our of improved quarter graphite non-LTA in average per slightly the price metric to ton. $X,XXX

we electrodes to the during lower as graphite price continue believe general quarter. of spot trend However, anticipated, the

has X, under Turning serve and environment who working hard solutions beneficial Slide develop to our been they to commercial in current LTAs. have volumes for take team to to customers committed the customers struggled have mutually our to the our

and commitments providing substantial our and them have with progress We LTA of contractual customers, exchange for near-term going modifications made relief several forward. negotiating additional

to of months. these more the continue coming mutually finalizing beneficial negotiations We expect in

midpoint XXX,XXX year XXX,XXX the XXXX, expected of tons. of LTA tons full For anticipate range we the to be metric metric our above will volumes sales

progress negotiations in range XXXX be LTA to metric the volumes electrode Given we XX,XXX effort will we This tons. graphite metric metric sales In customers, to in our XX,XXX our sales that of tons metric to we GrafTech the of the XXXX, good XXXX XXX,XXX in the tons XXXX, tons. range with for XXX,XXX base. partnership metric will represents LTA the XX,XXX are metric has estimate be tons. making we our And with estimate LTA XX,XXX tons customer the of through in volumes the years

over Now third Quinn discuss on I'll X Slide quarter to financial results. our turn to it

Quinn Coburn

Thanks Dave.

the Third quarter XX% from of net quarter X% third were a sales second XXXX. million, improvement quarter sequential and of X just the XXXX $XXX from over down

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

tons which for we utilization quarter XX% total have metric XX,XXX capacity a XX,XXX Our metric tons in year-to-date. third of was the

LTA of quarter metric year-to-date XX,XXX Our metric LTA XX,XXX our for accounted third bringing tons deliveries tons. deliveries to is

to diluted earnings turning was share third diluted or X, Now $X.XX. are quarter per year-to-date XXXX income net per Slide $XX million share, $X.XX

million. $XXX free $XXX $XXX quarter adjusted free million. was third million was quarter cash and Year-to-date flow is flow cash EBITDA Third

the of see Slide XX, on XXXX flow free to we used have cash majority you'll As our debt. repay

the fourth the $XX earlier and [Indiscernible] was This the to noted we in due payment COVID-XX of relief. related tax first As payment approximately we deferred a in make million will quarter. year, from quarter

million and sheet flexibility. through debt million. additional quarter, during quarter to our in financial to reduced third XX, XXXX $XX the maintain Slide $XXX reduce our balance we October, on by in approximately execute Now bringing third the October reduction our our continued and debt to We $XXX million to debt an commitment

continue of consistent year through disciplined with be our $XX the XX% full business by approximately spend expenditures managing pandemic, the expecting conditions the We million to capital with year-on-year. created and reduction near

was also credit third working facility. levels capital, and including the end of We managing our and are million, approximately million available the $XXX demand our closely total customer cash $XXX our aligning controlling under costs. million consisting of with of revolving At our $XXX quarter, liquidity inventory

expect the majority of financial to reduction cash use continued position debt to continue strong flow and with Our liquidity we balance debt significant further maintain free reduce provides liquidity. to sheet us flexibility, and

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

Dave Rintoul

of integrated better highly services flexibility steel ability position solutions to are idle furnace steelmaking. with customers Thanks manufacture long-term. and electric largest component Quinn. significant arc to producing advantage the three produce. restart and operations This provides quickly the over GrafTech of The a the help GrafTech as manufacturing facilities effectively one and traditional process the and operating inherent cost future. for the including drive over to challenges. engineered high are facilities. manufacturers The a growth was steel EAF need mission the the quality months electrodes for global pandemic addressed the in industry. evident the advantage our graphite several related flexibility will industry, industry past we world, and critical as electrode that for over help And electrodes The require largest EAF both a electrodes of extensive a knowledge Graphite the is ourselves this

global and cost competitive and sustainable environments challenged from long-term a petroleum structure second provides footprint should material raw become key low pandemic. In flexibility a advantage have our any vertical due coke. our a to us of into our We integration wave operating needle

generation us believe industry and record cycles. significant long-term. over we the to strength proven of commitment cash GrafTech concludes is advantages, and remarks. sheet positioned to our With through gives people well continue our balance the competitive strongly and flow Our That track to prepared today our manage

open We questions. now will call the up for

Operator

Credit from first Your Instructions] Curt question Woodworth from Suisse. [Operator comes

line open. is Your

Curt Woodworth

Yes Hi. morning. Good

Dave Rintoul

Curt. morning Good

Curt Woodworth

all the you the the had some tons off. I seems Dave far permanently initially when XXXX, off the yet guidance. we level of company from too really tons includes go have LTA and you're look baseline clearly at like if add not those updated It established your up new

renegotiation backend have to the So Is function -- of LTA the of the on actually part preserve a been you where add contracts of I'm process that that just help to this wondering you pursue. the on argument kind tons additional NAV trying

Dave Rintoul

of Curt. that an arrangement in for to the customers Yes, place Thanks of your up we provide to challenging having the years. a exchange some win-win near-term. consideration some come And with are times in the that assistance in some where some question, find we with a for get effort it's

that I But value And arrangements and for customers few think think over I number preserves preserve are looking our challenges we're we the there's weeks, come. can I accomplishing helps the closed a see these more in shareholders. of for today last So near-term And of people. some to and the terms a more -- does of we've it that. what us think the it several with more

Curt Woodworth

simply XXXX? some book to it And LTA, your outcomes is a accretive the just or of the LTA would pushing about, you talked that just maybe be XXXX

Dave Rintoul

accretive it's Quinn. think I

Quinn Coburn

X,XXX be this we'd could up year. little mind, we've be. our those other disclosures, the the And in tons that One vary indicated contracts we a previously disclosure, and view few that were Curt -- what per of fixed end contracts, Yes. been in or down that put a And previous had volume. in thing stated was, had conservative that low in keep those taking is midpoint, those could more previously could we to at share in

tons. So that's XX,XXX

little that overall for into the once taking that see than bit adjusted actually, account, higher can that you numbers. we're previous a So

Curt Woodworth

that where spot And what price able the in were guidance any to you on profitable I given thought. has seeing it and sales kind to point? be see down you you comments the today, in obtain at the you non-LTA then, in coke would a pricing trended what to where And, market? that's you're -- range needle quarter, value come spot would spot that the this given can respect give of the with the down Yes, higher say of

Dave Rintoul

disclosing your know, early what found time and that that past, disclosing competitors viewing careful we've in was Sure. your challenges sure I'm data. and a also publicly we to point relative pricing the as thought I that the recognize you our in this in about and thought careful as been But because us a company worked we what traded spot of against That's challenges our at question, company. colleague’s using about difficult experiences,

as try So around much here possible. our color we'll as to do subject and best provide that

QX and the trend has been one has happened from absolutely, that things said it of in that, today have is pricing lowered clear. having QX, downward what be a So to was spot

the deviation, However, and or the will, distribution world the same at disparity pricing time, has the around standard if grown. you

disconnect to So from region those somewhat what a were. region, about numbers there's to of region

I the different If in it would U.S. if etcetera. Korea, a it in one an of price come another EU East and wouldn't disparity and thought change of you would gave price and and in you again be yet has for price region-to-region as terribly the because the the the has Middle a So be, where grown today, useful price candidly distribution different from be, not in would down. Japan average different it we the be price

the is available that, way you that as numbers needle publicly find information few at think a it's Now, number, that a help coke, can X,XXX anywhere well, low about you I the export that trades, as think a look the is that range is is as level. recently more we many, the import on and about not but that if X,XXX. has would few that And but you from best

take So a numbers back we've lot of cost into to information structures. the of think about in and past, translate I kind how given those

I coke and if for the going given And that a range, counsel that's right incremental facing that that think graphite so, cost have number. that's can I what people that be the electrodes practicable. pretty on bottom not And think that so use think be to probably you out you knowing prices won't tell are the you electrodes, hope previously would of for close now graphite helpful. and in come are context needle to about we're our we on reasons that electrode, stated I've

Curt Woodworth

Yes, very, thank you.

I of regional Now, variation. lot there's a understand

with respect U.S. online is any that Thank new talk the that capacity? million question move fair. the So call needle then tons market, months. able think price? new Have to you at when And with last about, been is to next respect you? do Can to going just it tons of X you all coke million to that X in business arc the there's with you XX capacity electric to coming

Dave Rintoul

fundamentals Yes, the sure, and obviously, supply it's demand. of

certainly demand other say And market side. as help so our on the But, situation. steel will the lags off, just that comes it production lives would what as I it is also

So at testament $XXX market as about in to we're steady seeing that steel rebar coil strength pricing. ton the hot-rolled pretty has bucks. been And XXX is

lot recent that the earnings steel there's add certainly positive the and in a settlement. of signs a some would mills in So releases U.S. country by market to of

running came have along help and online the utilization to steel more, realistic will over XX% Recognize be obviously in So utilization. that we just American good. coming we're was optimistic that of to be it the percent understand industry facilities that the will and But COVID is also XXish helpful. before increase

a new the yet the while no key matter Black about help. that, way think progress good optimistic metrics further and all United not And even to States, prices are inevitably prices, the Asian you is in generally back think to of certainly it, facilities our I bullet Europe still steel or speaking, the and will I behind look on So moving the whether we're Sea pre-COVID we're direction. in little related obviously But right that. hot-rolled at maybe,

are we of the optimistic will what bring the throw electrode ultimately graphite which equation, will that triple the demand So side industry. into about to

Curt Woodworth

Dave Great. and Thanks very much, Quinn.

Operator

from comes Arun Markets. Your from next Capital RBC question Viswanathan

open. is line Your

Arun Viswanathan

Great, thanks, morning. good

Dave Rintoul

morning. Good

Arun Viswanathan

Good morning.

some to steel back fundamentals markets could maybe electrodes. the near-term square kind get help you of were those on you wanted seems here do have, yet, different you of like us to coke dynamics needle improvement so, end, some discussing Just one just in and the it maybe

pricing Your going way. and electrodes other the reference spot

maybe in inventory So, case, needle guess, and comments you I on and on tie some why both electrodes? is Thanks. coke just that can supply the

Dave Rintoul

transacting our will in lag industry. always Well, industry is whatever Sure. steel first of recognize all, that the

So later. little we'll a little And a later. we'll the the see decline increase see

see in surprise expected while that So I as the quite way at all a made the would don't it began think it yet. And see world an just eventually into as quarter yet. to third uptick, in it make our it our its should I as world. have come long we'll it steel hasn't into industry that have it wouldn't continued,

right, entered In addition we to that, and you're quite pandemic. into the

my of about the And about year. our the earnings place. this beginning think point, that were taking at you took the back Now before release third in year, that quarter we into the comments destocking at pandemic talking of was through to

So, that we again, where time as up, anything because happen the starting steel picking that, a was relative is of happening now that the we had but destocking much to is think industry of period not destocking to of about pandemic. because

the comments continue earlier, of that through So, as balance to my year. I said in we this destocking expect

with see that graphite about had some I'm where finish. our why that's natural combined you industry, And So a there's a the talking still in situation of in to you always a pricing. combine decline fact that the lag electrode destocking

is steel continues anybody our then, move need on any it we'll that than Year, to in into the So saying better recent assuming the get not positive developments the else in we're COVID New And market hope crystal a direction. to world a But doesn't. we disrupt balls don't that that.

try the help the electro of not So market pull trend, coke from But predict continues out. start see into the there going the in needle will year, interrupted that that because we pandemic perspective, we'll mean, we're there to think I And demand that. to its and get side like on everything. I the world, I electrodes coke a from once assuming were graphite on needle I will your on be answer just graphite perspective; think inventory question. some

So that has also that a they're And advanced fortunately, course where of time, coke is some We all overhang. plants some China of making of there'll year. our -- of like on tons they've they'll steel going make billion needle be of know industry. in on in periods X this then, strongly to looks construction be this, of over their recovered top

But time will don't find little think bit some a ourselves I at views this that complicated steel on supply so now, for balancing the of think And time. in Year. pandemic bit opaque that side, the that. tell I has generally we'll that's a it's demand And place. from speaking, from better into And still comes graphite point as will demand electrodes New the up pull get in the we a

Arun Viswanathan

Thanks for that.

to transpired when maybe you're to question I think I maybe a you're own I XXX,XXX clear, went be to you think guess when lengthened see quarters when now work and Maybe little year, your I of a you of had expecting started got destocking. inventory, that XXX. COVID. you guess the was And here out, the debottlenecking you through your to just some -- three close just, also So what's other tons the levels, bit. with and project the production through capacity, capacity you had starting started

that see it supply on a any it well, have you thoughts think other idle now as How So, capacity your next Thanks. gets could to is if it I the that all you mean, best for couple be coming ton the LTAs range. well? offer for around is you you or XXX,XXX closings the contemplated? standpoint, from as shutdowns there industry control? is do just GrafTech’s within leave demand permanent years could about any And spoken if the

Dave Rintoul

We the in quarter first not until long. So correct a about thing part little just quarters one of I question. good three think The taking third it's statement. your destocking bit a talked I the to want

end through have June. would time, So at the that in to point of January been it

in length, six would it we said months pretty the once length, quarter. much got be nine not months but because So to complete in we third

that. still think we have another nine months go. want don't So I currently to We imply to

that think to see the address United will relative steel it's environmental arc world industry to in I they So expansion a yet are as, inevitably decline. plants have so to knowledge Integrated the and the a will that good with States, early the and that look electric in capacity, such somewhat inevitably of production furnace belief in grow. factors and the little question much the the

takes place, electrode increase that as in the So a growth it. and graphite long-term for industry there's place

as even we to people fact on And will steel. has and that to one on along, the just in going and to and make some we’ve system talking influence the is time that credits thought carbon So growth that And unique exit methodology kind thoughts the to well. of that Chinese we developing -- what Europe them the think they're and about this do same is curve it hear front. has how their similar when not pandemic, around you having and forward comes about now process emission same decisions one as situation about carbon and assess alive truly that trading policy

jump can time, what of these I tell be how we us And pandemic, we things just world the exit a the arc arc in to electrode and conclusion. that so point appropriate or steelmaking will time all that graphite what when too once the So to capacity? up furnaces? think early triangulate that decisions and electric and it’s yet growth that's would that determine, And shape grow, bit is pattern furnace does the expand against at the electric

Arun Viswanathan

the here? dynamics, contemplate dynamics? side, do that feel is Thanks. cash maybe yes, of important. use Thanks. But priorities could lastly, given just know I these cash how be And cash I will on deleveraging from thinking again, using the you you just you still how can about when you're reiterate that if then these

Quinn Coburn

Yes. its Quinn. Thanks Arun,

majority comments, is and Directors. always a thing in as position indicated we our want our that for would release, an with expect cash to the flow strength use a First reduce in very that's of say we of you said good this ongoing and continue and sheet to review And is, that the Management debt. Board be of earnings I as before, Arun, we to We we in the on to think basis noted, the in the topic near-term shareholder. balance

our plan. So that be will

in $XX And Now continue as we options, obviously, would and priority continue will that the repurchase But reduction. in be the continue all you to be program. will available our million to an examine near-term, noted evaluate the know, to all share debt we'll option. have that we as

Arun Viswanathan

Thanks.

Operator

[Operator Citi. comes next Hacking Your question from Instructions] from Alex

Your open. is line

Alex Hacking

Yes, the and for thanks morning, time. good

a cut apologize, you my don't buy little you So, that say $X,XXX earlier. you out a phone I but needle it, around Did coke I was estimated bit spot know ton?

Dave Rintoul

said available. export Yes, the you look what publicly data we if in import that's

the a do you you'll If low of as trades as the find were were that XX. Most range. in that few research, are them there $X,XXX

Alex Hacking

I am fairly represents when ago the that they a mean, that correct were were we I range? to substantial months where three X,XXX of X,XXX sort from more decline in

Dave Rintoul

class -- if you're think months or the provide the -- back, gender. I I be -- I a four in range few as want back think like Yes, months right but more might it five you yes, you're I you mean, mean,

Alex Hacking

Thanks.

that's -- that surprised, extremely helpful. market And then is stronger. Thank given Just checking, just little But I'm how you. steel a

Dave Rintoul

But guy. world Alex, don't forget the everything steel in lags our

where think were things seeing back measure guys what So etcetera, steel declaring you're when Everybody now to bad. March, force in really May, were is April, etcetera. like the was

coke little industry they the needle guys like and bit. further -- our because guys of all even coke and needle a like So, us

Alex Hacking

mean, I Yes. think and assess, two moment? UHP you. potentially graphite just do capabilities there sort maybe changed all, bit you about guess, western a supply. you've Chinese you the I or how manufacturers electrodes could I thank export quality has spoken at at Chinese the I three your like Thanks. talked I those, from broad guess, of at to electrode a do view produce China competition electrodes question, little past, Chinese about the taken, before And assess Point mean, how in you then, moment?

Dave Rintoul

Chinese they little their arc understand metal because the standards bit steel the number in purposes. for would or the Sure, most making our up to qualify say, country Japanese, the fed And in that system. quite a for of them same a of into with We've in less ourselves of bit are them, so the respectable way the EAF that a believe larger demanding probably the of charged, a lot type most industry a small, to trying debt for to spent a are still obviously, actually thanks, there many new. say why Alex. they're we are that's handful months, furnaces suppliers effort don't are of ourselves, conveyor are And know with certain than quite fed need there last traditional own are electric of that system. business with many you that to this lot have space That hot of and there. of way. part, through brand launder UHP of Most application and you Tier smaller There bucket their operations many a is the And call X Not a much I but that be. would scrapped developing, level in operations aren't like as have understand it, preheat electrodes. are should the I'll

domestic applications. operations to smaller those may serve -- their the need own have to to serve they'll be many be able not So as able of

advance you of believe careful and That of that, XX% by trajectory, ton the of said and about EAF that, to production and electric respectful about by of continuing be believe that mean still XXX,XXX we are that well. I’ve X billion transparent China be the there to earlier, we would steel their Chinese be the to and so grow they're still number talked in that and want production furnace arc if alive objective furnace Chinese EAF we the XXXX. while growing So be is about having XXXX government think would tons in

Quinn Coburn

million. XXX

Dave Rintoul

million. XXX

thanks, million. XXX Sorry, Quinn.

the the we and three tons XX, capacity, in EAF the United have mammoth of have million that almost think So, have where this arguably currently a that when years you million production It's context China change. about in XX States, will of country. we five in times XX EAF

need our to That's own we said, And be And as and I exit well. fact, clearer clearer believe will that. get to that to exacting some they graphite and in working again know are on of industry the we So and at we building they pandemic, an domestic clear this information dig, be a in service most the Once what's what trying around the we geared to as to vision think electrode maybe able that's and we supply on continue and for towards know what big get during more and there's pandemic I know of in smaller. world are what out. purposes these point, happening in been about opaque that that supply We'll some know where that economy likely area as many at be demand. point. the facilities, we of will would this to going it that on China careful saying them, we is it is do work we try

Alex Hacking

very Thanks, question. for Thanks the this again helpful. is

Operator

at time. There Rintoul. over Dave back further turn this to I are call questions no the

Dave Rintoul

health a the in have day. you look to quarter. thank forward you Once Take much. this appreciate you in to good everybody's care coming joining take Thank safety and today. months. very our next the And us. call focus you again, I'd We to we the and speaking with on wish us. attention opportunity like to and call everyone for Thank joining for

Operator

Ladies call. this conference today's and Thank gentlemen, concludes you for participating.

You may disconnect. now

GrafTech International (EAF) 3 Nov 202020 Q3 Earnings call transcript