EAF - Earnings call transcript Q4 2020 | GrafTech International Ltd.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the GrafTech Fourth 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] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to turn the call over to Wendy Watson, Vice President, Investor Relations. ahead. go Please

Wendy Watson

Financial welcome conference and Rintoul, fourth and our quarter Chief Good On to with XXXX Chief Coburn, Quinn call. Officer; Dave me full-year Executive morning, and our Officer. today GrafTech's is

We locations the are call conducting different today. from

us with experience you quality. bear mixed minor please or audio if So delays

Turning to our first Slide.

current regarding subject of These uncertainties. results, things, performance, risks and strategies. some the this reminder, other discussed a on are may among call are expectations based and on statements As to matters include and forward-looking statements Factors trends actual ended discuss year unaudited cause The are could from our those results the we materially that shown December to XX, indicated today results statements on for differ are XXXX. based by forward-looking results here.

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

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

David Rintoul

everyone, your Thank and fourth I families you, your Wendy. Good and hope you, XXXX and thank and well. year-end quarter for are call. healthy our colleagues joining you, morning,

will with begin do safety. as We we always

and over diligence year. of response the improvement by total our keen improvement years, decrease, organization. is increase rate hard recordable the pandemic continuous safety proud their excuse safety well demonstrates full-year am excellence Continuing and the by and as challenges to trend health as value on our focus improvement XXXX. past X.XX, created our team area, XX% across GrafTech me core work the very a the global XXXX in I Our over of injury the three – from our – last a is

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

team manage members continued GrafTech the response personally to XXXX. our I proactively we exacting team to thank want and your the to for efforts to pandemic. Our continued in protocols, to adhere

employee reach of safe is going Health day. plant vigilant to ultimate and XXXX, an home As fundamental our safety a remain every every plant. we we that must are goal efficient to enter safely belief our

are areas, a As safety global other XXXX. customer of comes our our delivery improvement quarter metrics performance focus the our into in efficiency of and the on-time continuous continuous of of XX% fourth That improvement proud the including team, spirit culture strong we highest level we in and service. reported [indiscernible] on of

X. Moving to Slide

focus water globally. As sustainability quarter, conversation of place you material only strategy, of relations, our compromises community The wastewater senior quality, know Quinn and waste follow employee Committee. begin greenhouse sourcing where a is in or in those management. and who gas but I, safety, and management, emissions, oversees company not each which committee our and and steering involvement participated air and as and efforts and The health management community encompasses health on we strategy comprises ESG ESG our of activities energy as Monterrey, our our as efficiency, safety Mexico. our cornerstone rather the varied Steering our executives [indiscernible]

Coke emission facility of all equipment sources for and sites. Seadrift that area to the reduction our generated of capture Our our and on create installation our the of energy technology control include additional of efforts electricity

across are our improving Our environmental centered our goals footprint on operations.

annual our decisions We conduct and and code operate citizens ESG ethics. continuing are day are dialogue with We publishing to to year. this later forward where working every hard report our we second and by corporate communities good our of you the and guided sustainability in be look actions business our

metric Global steel utilization Now China steel Association. third outside tons including quarter, million XX% $X,XXX with for time steel are improved from World near XXX up in steel manufacturing values of of approximately quarter and continued markets, in from the quarter. outside highs. recovery we million the types approximately pricing improve third of USA hot-rolled began XX% turning Slide quarter in pricing tons improved fourth over measured we ton XX% to capacity to fourth in up we to quarter. rates to and production global $XXX Late XXX just Steel X. at are seeing $X,XXX or in quarter. utilization to Sea were most the $XXX in Fourth fourth to currently billet industry XX% global rates. Steel over XXXX, in steel according per improvement in over fundamentals China the Black coil the to prices and are per at all ton, the

strength steel electrode positively the industry later We expect XXXX. impact market graphite continued to in

the our position know, recovery in our steel you due in steel producers industry lags supply to demand industry chain. the As

from is steel our we fourth is electrode In was increasing the steel the sales Each utilization first LTA per industries sales $X,XXX price which by was As graphite pricing $X,XXX for and demand. ton, to average products. ton. the our for increasing approximately demand at our capacity quarter, lag these producers higher price a chain non-LTA electrodes, metric see improves, of enfold movements in average graphite graphite approximately electrodes from supply the per of metric

Turning to Slide X.

service challenges to team year, including to hard commercial beneficial faced Our customers worked the mutually they throughout and our solutions develop during commitments. volume XXXX to

the customers. providing LTA the XX,XXX of for LTAs XXXX, our through for on XX,XXX the metric In to XXXX, and results. XXXX to be of and metric turn to our superior not have estimate in Quinn? estimates to in be over XX,XXX The electrode will remain the sales LTA XXX,XXX Slide volumes to last quarter will graphite range solutions focused expected tons. valued tons. and financial I'll call under to now on fourth we we XXXX volumes discuss years XXX,XXX of full-year our metric estimate Quinn tons, our XXXX X we changed. announced volumes forward, range we sales sales Going November XX,XXX services

Quinn Coburn

Thanks, Dave. Okay.

volumes In we our key financial across with fourth the sequential third We metrics. fourth are quarter improvement XXXX quarter, XX,XXX metric quarter full-year sales metric Fourth shipments seeing million, a the and Fourth improved $XXX shipped. produced of electrodes production and XX% pleased of tons of and quarter graphite sales XX,XXX were quarter. graphite XXXX electrodes our steady shipments LTA tons net metric XXX,XXX are improvement from metric graphite sequentially results tons of sequential were XX,XXX LTA electrodes were to and tons.

sales consisted Our metric the metric non-LTA bringing quarter of tons tons. X,XXX sales fourth non-LTA XX,XXX full-year our in electrodes, to of

challenges able million of share flow. up of to Sequential million with improvements $XXX net cash of $XXX up Slide $XXX and were to turning quarter X. XX% the quarter quarter. the million free full-year with XX% adjusted of cash of million EBITDA in Despite both free third adjusted continued fourth and $XXX quarter fourth third of $XXX year EBITDA EPS, over XXXX, up were Now income $X.XX EPS. of the flow for solid the earnings results per the third we deliver Fourth quarter XXXX quarter XX% million of from $X.XX diluted and of from

free will you debt. majority Slide the As flow XXXX on see X, cash used of repay to we our

record continued $XXX million flow. flow mentioned As with in its free strong previously, cash GrafTech of cash track XXXX of free I generation

payments for included allocation dividend capital and Our repurchases. million debt of $XX share $XX $XXX million repayment, million XXXX of

to to flexibility. sheet and our maintain commitment XXXX Slide strengthened reduce We our balance Now to moving capital significantly XX. debt structure pursuant in

extended by our maturity the effectively available $XXX facility. loan. we we due secured of $XXX term million total by We of debt issued Over of flexibility. of the approximately repay million, credit the $XXX our liquidity proceeds of At to senior end used In debt million. XXXX, our million in transactions course $XXX These our million X.XXX% further the of the notes year, $XXX XXXX. December, was revolving consisting years, reduced portion approximately the four a under $XXX financial and long-term million, our cash enhancing of a

flow we anticipate Slide year Now another generation. cash on XXXX, XX. of significant In

to majority use that of cash the flow reduce expect debt. to further We

on focus us strong a significant sheet maintaining and balance strategic financial, with operational Our the flexibility. structure, capital and provides

high cost customers look productivity operational our into deploy assets We our to through return to in that low our We improvements. develop also both plan projects high-quality, operating increased costs, to operating invest and products global business reduce value. targeting and designed maintaining cash

capital XXXX million. to $XX million $XX expenditures range the full-year expect We of in

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

David Rintoul

GrafTech facilities. is Graphite global Quinn. electrodes of largest graphite the of component and electrodes the largest no producers ultra-high-power product. one the there EAF the Thanks, are to for industry, is in our three mission-critical of operating world, steel substitute

largest producing the integrated lowest producers are of the XX% world steel carbon of the steel, of traditional are the recyclers some customers Our steel in and of producers. emissions they cost with

needle sustainable our structure key have competitive our and We integration into vertical raw and cost a from petroleum advantage coke. low material long-term

services The engineered Our require a graphite and are our better GrafTech both and that help for highly knowledge manufacture. positioned provides and customers process solutions extensive us to future. electrodes

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

Operator

And your Markets. from first Capital Instructions] RBC with [Operator comes question Viswanathan Arun

is open. line Your

Arun Viswanathan

pricing as improvement referenced provide morning, in for electrode on Good you first Thanks needle pricing an needle that coke? in guess, on on I just question started and and a coke the is, there's nice you Great. utilization the steel Have you see and XXXX. maybe taking rates. in electrodes question. through congratulations spot flow performance Obviously my could been and to side? update

David Rintoul

in question for interest and Sure, the Arun. your Thanks company. your

started and is the bottoming once as So believe but pick through we've into first as have to out there up. the we I is transferred volumes pricing referenced quarter, earlier, lag, that a –

On So and of as pricing increase we was we're negotiating think needle today see orders needle through we that We late go see start to we'll also. prices QX, pricing. that those improved starting an that – influence and that through filter coke, those and expectation XXXX. delivering trend impact in we're to optimistic into as the similar the – the I that year, think about a are QX of we're coke are will year remembering that's why

Arun Viswanathan

the the electrode in in range. And position Okay. your customers? months size steel some past, still still also the I so. referenced the inventory And with kind has six-month inventory something things shortened utilization How that the Is now past, of of on now would you'd industry the thanks couple you'd referenced for the or guess, the where in that. you that you a see think in more I rates? guess improvement side. in I with

David Rintoul

Sure.

continuing is because the to the down people orders start the placing they before you in – obviously, be trend. work of there see that have One sure lag that as reasons market shifts new they is inventory as

seeing are end on amount that And quarter. both would worked the I has we So a inventory. we think approaching time said expected at significantly by the been what the as we we – would approaching of and stock that completed be down normal that inventory we this that this call last call of

is that still I trajectory. a think hard

the think is I nicely. place that down inventory had worked been has build taken

Arun Viswanathan

XXXX Great. out What I you've as merchant some the spot volumes? volume year? looking expect you the that LTA of for Do years. of volumes as you of far how then of next laid those the then, where the scenario Okay. spot get spot maybe book kind And and see guess for maybe How just back the sales? ahead do you does expect levels couple guys? you to in Or through XXXX do evolve a your evolve you'd

David Rintoul

to go So we increase be what today is would certainly compared going we bring. optimistic what business that enough through I did But order predict think XXXX. spot to to XXXX brave optimistic year we a book XXXX as don't amount sure. be are see current the we about trying do of and in we that are in be the we in this spot sizable to to

in see I we seeing remains the steel any time, And anything the point we in future, believe at forward. to are rebound industry So think are different. continued the that assuming don't we about going cautiously of course, optimistic reason this

Arun Viswanathan

how then XXXX, cash, when I guess you in lastly capital Okay. And in focus maybe just of priorities uses And in Quinn, guess. at this to position for think I can you're the about a layout XXXX, used you return case? kind that for in XXXX, shareholders maybe just seeing cash Is me, slightly deleveraging the was but of a better you're to obviously point?

David Rintoul

Quinn, you. I’ll that leave to

Quinn Coburn

Yes.

in assets, our So continue investments as high in I our focus we Arun, business, and first mean, appropriate the we in noted I high comments, on making a I our projects, $XX foremost, to we maintain improve plan have invest quality million as will think CapEx of million. to a return return. mentioned, anything operations our $XX on and high would that And

So be that would first priority. the

philosophical is on a we had from just as do we for priority standpoint have couple balance strong last Second the emphasis have sheet an of a years.

I to operate and operational think interest our think the are strength. sheet for from of appropriate balance and a us best the in very is position financial in best appropriate and in. it's we interest gives shareholders industry that We that flexibility

So we will our priority. be on focus strength. will in one XXXX, to sheet balance continue number That

our our open to Our reducing in we've repurchase number we our cash to And and will one million continue returned share past, – continue on as shareholders dividend debt be you $XX program. our priority market forecast have we on the with level. remaining note,

continue our will option. be and debt sheet will to an balance priority course, that we So first be But reduction. mentioned, as strength of

Arun Viswanathan

Thanks. Great.

Operator

next Your BMO from Instructions] David Markets. Gagliano question with [Operator Capital comes

open. line is Your

David Gagliano

taking questions. right. Great. All Thanks for my

substantially, think hit bit to could I coming obviously direct Obviously in the what there, just a substantial be to to further vast debt them. cash follow-up will on challenging balance of levered had philosophy But the reduction. of year. lot Arun I the continue majority argue and a progress debt last down drill comment. And sheet the a that's that allocation want if one the we policy, the levels under was reducing capital on especially

example, on to of outright on normalized initiatives? debt as as cash capital basis, So level for net an there a even start the comfort an whereby is actually of shareholders would optimal net more you or that even directing basis of debt debt-to-EBITDA level reduction structure, well the

Quinn Coburn

that. thanks David Sure. for Yes.

and a before. ongoing consistent, have no And at XXXX, that range level – we're characterize note our been of So than at managing the as in is, just X.Xx, around is and as operating level, way quite an more we're as with X.Xx the to to we very consistent comfortable target well currently know, you we've do basis, we of a of we for level a XXXX, that level bit on regards and Board communicating have it as level leverage as to Xx I said, maximum operated at below X.Xx. the target fairly X.Xx. would to most And discussed a at debt management of I the discussion level, we

we're comfortable below operating again, level. So that

in through what decisions key I be with exactly key and think of hold to on that our mentioned, much to business flexibility like long-term what debt also the we But priority how the we've depend regards the conditions will the terms the as in are future contracts maintain will brings future. cycle.

and interest and we strategic in operate operational that company believe flexibility So the best to we the financial, is for the with. the have shareholders

David Gagliano

Okay. Understandable.

of cash the GrafTech a XX-XX capital generation – sort a in did the probably years to on to think run rate out one that a to the similar XXXX. I if allocation, one though, if of and basic shifted kind math apply even

effectively million. on normalized be would $XXX a X.Xx leverage of You EBITDA below

I So right. think that's

curious assumption too else that So something that about we thinking should is or is normalized be I'm high EBITDA here? there

David Rintoul

I – on. think it's Dave, just I spot think you're

levels right ongoing and think, we continue comfortable to an we'll management time time, as below, when down drop to we more I the on make to And absolutely. at and assess appropriate at and Then shift the shift I shareholders. to that. we'll discuss could the that and to Board again be basis Xx with cash return continue the noted, is

David Gagliano

us we're for weeks just five perfect. Thanks. – expectations can from one quarter just into for first first give the on volume Short-term, That's me. more your on that your one little quarter. a then given the color you And Okay. That's last me. it

David Rintoul

David. Thanks,

of. good we I which we were I people at were quarter the trying We of given think a that – LTAs, spot LTA the Again, move have we us. some think some in increase that. cycle. appreciative as years we And came quarter, think few we saw improvement three business clean fourth as obligations, some some see as into new start out and some for on I guidance the were of drop-off late we'll and we've to which a was year, the an up

trying see of improvement, as optimistic are an the first people think excuse are And year I year. think, the is to So will Usually about for sort – the where steady I us. we be. take bit going they're quarter – where a the out quarter quarter-over-quarter the adjustment to where me,

where but have in I don't quarter. from So I off quarter, quarter-over-quarter – third big second, left won't – have I think grow a the increase we QX and will there, the think in an think we'll fourth fourth

David Gagliano

very Thank great. That's you much.

Operator

comes question from next Hacking Your Citi. Alex with

Your line open. is

Alexander Hacking

question. a Dave already Yes. of my taking them for Good couple. Thanks I and But asked. morning, were Quinn. have Most do

Firstly, some the you point yourself know, Are And would really projects current excess don't $XXX this foreseeable see what looking have million capital in or in level, obviously materially? future? at relatively Thanks. in that, like that that capacity Marys. would reinvesting or your be of something for doing you kind future being there you operations the I raise talked we about the CapEx St. remains business, low. in the priority CapEx at CapEx above is could

David Rintoul

is this of sustainable a Alex, I think level CapEx.

came certainly, we market million that a you, the over up. flexible to of vision tell best was take terms if in we today we can it servicing us visions that that don't suggest. With of, But – we're $XXX remain anything have as an you that's do any number in I the have opportunity would a there

view that's the So way it. we

the the that as time remain flexible opportunities add? to aware of think that we're of value. might not in would call. a I we to business, sustainable that's this come that Quinn, anything along In future terms ongoing But

Quinn Coburn

No. That's absolutely right.

the, of view $XX And CapEx XXXX, think, level sort that we I it, for to in of as XXXX, CapEx. level operated good we million call of at million us. $XX a

As a shape reinvest, low continue to the we we allows good but demonstrated keep our marketplace. assets again, needed, is continue as position reduce in cost maintain in this level, this us to, to and can good our year, very

Alexander Hacking

long-term we into of months start much. get to do long-term going are of question, see a asking And do second the original approach effect? would you Do to you philosophically, when do it, XX contracts to matter it of price, Like just have at the the overlap. the at see see business wanting to to customers I'm again, so end rolling customers those would least and Thanks And yourself off. contracts wanting sign yourself question price XXXX, this ranges too pricing two as early. your see again? But five-year some price, at then – simply it, some you in you do do if or wanting is it Thanks. contracts

David Rintoul

Sure, in I that only one of to do the providing Alex. that's particularly contracts way. and we're a ways provides capable business GrafTech variety that I of think a which leg things sustainable we our think proud longer-term up in because of Look, integration, of, a the offer do we're of because and the vertical with us one

call in spot. and offer expect type forward opportunity we – we to continue our to then do So even longer-term customers agreements one-year, short-term arrangements, we the two-year shorter-term, and to what move as

on a So degree around will. customers with I we've ideas we've few and – of think some if that you worked indexing interesting some

think base. So for to things are that we table bring that these the good our are customer all we

will availability. specifically, provide LTA In that terms the of continue we to

the into course. bit and we have it's that electricity more little hedge this of referenced a that's people those natural hedging kinds XXXX, I've think of valid that a that into And instrument But think I place. and still before like has we'll all as I things insight and their an get gas time.

the it's be at be price So matter certainly tool in it'll said, our And markets. as customers. a of to in that what that offering we'll time point you

So I advantage to offer we others think are an these that our can't tools customers. provide that can

Alexander Hacking

side on the sheet. congrats particularly balance And success much. your all so year, and improving last generating the and safety Thanks cash Thanks. Okay. on

David Rintoul

Thanks, Alex.

Quinn Coburn

Thanks, Alex.

Operator

for no questions there I will remarks. And to at up further are back this David over queued time, the turn closing Rintoul call

David Rintoul

on take care And you, you. for with I'd the next the in you to health forward Thank good look and day. this we to safety like you at coming your Denise. wish call Take opportunity quarter. Thank speaking and GrafTech. this to have Thank interest months. a everyone in

Operator

This concludes today's conference call.

You may now disconnect.

GrafTech International (EAF) 5 Feb 212020 Q4 Earnings call transcript