EAF - Earnings call transcript Q3 2021 | GrafTech International Ltd.

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David Gagliano

Thank you, Adam. Good morning, everyone and thank you for joining our Third Quarter Earnings Call. I hope you, your families and your colleagues are all well. We begin, as we always do with safety, health and safety excellence is a core value of GrafTech and a fundamental element of our success.

Our year to date total recordable injury rate is 0.47 through the end of the third quarter, continuing our meaningful improvement over the last few years and tracking ahead of our record low from 2020. on on team health everyone focus your to vigilance and and you the for GrafTech continued Thank safety.

Our and ultimate day. every injuries employee going goal home safely is zero every

discuss to a like succession I'd on, announced CFO moving moment Before to our recently plan. take

recently Flanagan, Quinn staying of our us Financial years years two alongside during in we've the of continuing the thank on who year. Quinn has will of look service announced in retire a great made senior his be to to seamless Tim and experience including Chief were over Officer over fortunate previously significant XX his I through working identify to of May that financial a to to that replacement next ensure supplier informed industry. As steel number for like intention Quinn's We a in progress as positions, and Tim Meeting of decades last to I'd the transition. tenure. leadership. Annual Quinn forward

demand year steel XXXX the XXXX. China steel some types to utilization the XX% and third second pricing slide Conditions XX% industry increased steel compared Now the to turning third this graphite the and quarter of or XX% highs to The in near improvement year continued of to pricing be steel rates. XXXX, priced for strong in rates quarter at industry's global US from in to quarter. US I'll as consistent continued compared electrodes. are solid of a the in industry was hot market. the of quarter comments a during and utilization driving at Most quarter capacity the gaining four, in levels. was improved the utilization quarter XX% in pricing second on and of quarter, the both of all-time improve to utilization provide rates in The outside manufacturing rate result of XX% third record demand. XX% third high remains coil rolled global steel The prior

also seeing are for needle coke. We petroleum market rising prices

to significantly in XXXX. prices these higher support graphite expect We trends electrode

demand the recovered to inflationary graphite While global being and many impacted electrodes expect like continue electrode strong has demand supply the graphite chain industries, industry and for we pressures. steel is industry by challenges

As prices for Costs for a are are rising and locations. rising, result electricity European natural of conditions, these in particularly seeing we also our gas freight.

used also the In addition, electrodes prices graphite raw of for production in materials are rising.

this in our environment. As we inflationary feel through manage ability we look confident to forward,

as superior to on slide to and the commercial supply products greater five importance has our and the demand services improved outlook, rising and conditions site Turning strengthen demand. times, customers our providing is tight even to market stabilize, during these solutions conditions given continue for

on and prices commercial indicator Our key momentum clients our A rising servicing graphite demand. to a and in is well-positioned for continued market team is delivering market the products focused electrodes. for meet the

the Our compared the quarter to XXXX, rose XX% second quarter. in non-LTA price third of

to X% X% the fourth prices over additional to our increase quarter. non-LTA expect third We an quarter

We expect later in which in to the larger in address XXXX, price come I'll increases more call. detail

competent We demand for sales and driving balance products. is our the electrode LTAs have slightly and graphite outlook XXXX healthy left reflecting our for remains have under unchanged increased the industry our our estimates that

in quarter, sales XX% the are remain metric our third robust quarter we pleased the the we volume. with third graphite Now in with turning to experienced at tons third up volumes year. electrodes of Sales to last continuous the quarter compared strength XX,XXX Slide of Six,

price provide in report To the as quarterly an an reflects ton. ton electrodes quarterly of negotiated and under metric fourth metric $X,XXX metric of XX,XXX price mix well LTAs non-LTA our earlier sales quarter in shipments annual approximate the at average tons XXXX, XX,XXX non-LTA third tons metric insight, a Our of of graphite agreements agreements XXXX, at quarter of price were per comprised $X,XXX negotiated average of as of further approximate per agreements. spot

than Our the annual they continue when time year at were remainder trends volume, has into and are and through this to pricing under than to non-LTA improved currently. a we that non-LTA these agreed our sales, XXXX. steadily quarters of three of prices This the QX lower where at means expect spot. By non-LTA the electrical business and less prices than agreements more one graphite quarter then year for our was of quarterly

third sales XXXX in to to $XXX million. of XX% the compared increased quarter the net Lastly, third quarter

the I'll progress operating over over the our items to turn ESG to quarter. discuss and Now past call Jeremy

Jeremy Halford

XX,XXX Thanks the compared quarter produced We quarter tons electrodes XX% of Dave. third up third in metric the XXXX. of to

second the we our compared As lower quarter in XXXX. shutdowns facilities maintenance European in planned our annual during the throughput as third quarter, of executed resulting to production

our operational we we've year. line enhancing footprint across discussed capabilities up facility last and production. production St. now I been this is ramping our manufacturing pin Pennsylvania As quarter, Mary's are The at our

production us this Importantly, provides with two facilities. connecting pin

to our focused improving on of efficiencies continue be All further strong given for graphite production and very our sites electrodes. demand the maximizing manufacturing

report, September, on in second So available website. turning our to is published our sustainability Slide which we seven, annual

in review report develop progress We material the and during ESG and term feedback. our XXXX. your encourage you key We seven, with We discussing continuing highlights some overview We're our slide ESG quarters. to goals past initiatives an look to topics forward on to also of includes our and our longer provided which you ESG report. future welcome progress from are our pleased over year with the

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

Quinn Coburn

strong Net a to Okay. or Thanks, our and of share. financial with $X.XX per increase GAAP performance which us pleased another million the operational third We're totaled Jeremy. is sales of $XXX profitability. in income achievements, earnings allowing quarter, result

margin quarter third million than EBITDA of Third million higher XXXX quarter an was $XXX with adjusted of adjusted XX%. EBITDA $XX of

operating We of $XXX of million strong. and free million flow Third cash $XXX flow. generated adjusted cash was flow quarter cash also

We adjusted to free free XX% adjusted with cash EBITDA achieve cash strong, converting continue flow flow. of to quarters conversion third

we nine, a with our slide reduction further quarter. term third to turning our loan capital in strengthened structure $XXX during million the Now

to through total quarter and debt the of to now adjusted year EBITDA debt third $XXX reduction total million X.X Our date is end our the is times.

As facility. of million credit XX, was consisting liquidity approximately and $XX cash total of our $XXX September under our $XXX available million revolving million of

strong Now earnings pleased we cash three have turning through flow to of with XX, quarters the we're the Slide delivered and XXXX. that first very

through of the also third that this of million an to of shares million use balance to in quarter, plan death While reduce repurchase cash our to we continue year, $XX the have we average majority and $XX.XX. flow of do used at so price to X.X stock the

$XXX and In to has as approved to board repurchase our We're reduce directors our up The allocation investing now returning deaths in stock, our capital year the disciplined of while return sheet. we maintaining to global million low a the million capital We're in committed open addition, to program. shares operating program has new a quarter delivering of high repurchase to business announced, expenditure company's full repurchase improvements. third end this our authorized assets our of as prior target shareholders the of $XX year. market our company previously the balance through outlook operational cost to $XX XXXX million continuing million and $XXX common to million. to We're our inclusive quality, includes of $XX remaining using capital high to further strengthen of the under stock This to support value these funds strategy. shareholders stock

us with strategic Our and continued focus flexibility. provides significant structure on financial, capital a strong operational

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

David Rintoul

Quinn. Thanks

you the by electrode driven furnace heard, the arc demand making. strength large in part the by in we electric pricing encouraged trends As steel be continue in industry to global graphite and

Over steel electric furnaces their will share the market. long-term, of global expect we continue grow to arc the

higher We results our graphite are impact of continue graphite electrode into increase, to well prices to seeing in on we now impact the and as our electrode prices results expect continue XXXX. reported the

stock our approved new discussed, Quinn market has As open program. board repurchase a

industry strategy enhances allocation value to flexibility disciplined committed profile, operate the while through shareholder us are also that giving to cycles. successfully GrafTech's improving We a financial capital

our flow in well-positioned the supports solid We quality one continues be for of track significant graphite GrafTech Our proven strategy. to further believe electrodes the record world. as that and growth cash powered earnings of long-term high allocation capital ultra-high largest generation of producers

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

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

We'll remarks. today long-term. continue and With advantages, people to our for This questions. the and of commitment now deliver up well-positioned strongly open competitive to significant the over results our we concludes the call believe prepared GrafTech is our

Operator

David first instructions] question with Markets. go Gagliano BMO from [Operator Capital your Please And come will ahead.

David Gagliano

thanks Hi, my questions. for taking

to retirement I'd for you well. years Quinn all as over all, the help of congratulate like his First and on the thank

get turning said a the the couple hear the you more XX% while little questions total I Just I wondering ish was of were we on interesting you could emphasis back. that could I a volumes said a of what's to piece? quarter in a acceleration couple was the priced color, near term XX% questions, thought think if X% and I pricing, but quick on from I be increase that give fourth of I'm you XXXX the you here, on us X% for increase -- the just embedded quick commentary of to to wondering think mentioned, the he it if of everything and XX% wrong on lags expect And

Quinn Coburn

We So your thanks I actually referencing. for was Dave. QX. was actually It interest, -- were

the been about, were quarters is for non-LTA the space reporting about in the third we've non-LTA arrangements XXXX took everyone third trying some quarter. that, as provide is of year the for fall early as is, an late larger we're based fourth additional negotiated early questioned program transparency for XXXX, that's and three our pricing over and it you're business and what that to percentage or the deals place stress in and either this rationale in was that quarterly the why, what in talking is the upon last year, annual and reason negotiations of why XX% quarter that those increase well part in was in than year as of So your

change. with that won't So and pricing those are us all

So we're Is that that about reflecting true than only environment. XX% a business. spot little business That's today's and helpful? having of less

David Gagliano

saw you what exactly current It of priced tell I And to closer ask if XX% to we want just flowing quarter, question if is. that or was sort increase through a is. way. you great, here, makes The just in in would was be overall if third maybe if that us could that that the that's not, prices, It sense. price, roundabout that percentage to trying XX% up was, follow that that the what, tell a us the increase

Quinn Coburn

to need in from transparency at we some issues you a nauseum. effort Well, that we careful we when be used provide provide position out -- to an of to in competitive had the without to information causing 'XX

I you happening only currently that quarter. it guess, the in mathematically happening third So, upon that, based of the was what's back into, some XX% know what in currently the in it you of third,

So the in it was price material the rest quarter. as second same the of the at

can date, right? do you can calculation you and So actually, that -- I actually

David Gagliano

was to So if XX% was due to of XX% the over the the Is that seventies, XX% flat reasonable kind assume to quarter was everything quarter other increase and that that that all reasonable assume? we, so repriced. it's was

David Rintoul

but so. get number. much not pretty of you within perfect, spitting the a distance it'll XXX% It's It's

Jeremy Halford

you're numbers Dave. there, the you're because heading in QX and the would've in little an is Yeah, beyond direction the -- of right but there, been just QX, it bit increase QX a

David Gagliano

All and the, for on us right, expectations in you on about similar, And increases you fourth that's and the costs prices the sort other side, helpful. my range then the obviously just the quarter. industry-wide expectation Thank of fourth the give of cost overall cost realized you. overall pressures commentary Can question quarter? in improvements a gave us

Quinn Coburn

last had that increase well, last we a is said quarter, Dave, we remind quarter. we cost had X.X% Quinn. this quarter last My as I Yeah. of think you

per kind quarter to maybe over where X% little excuse Dave. This on the cost, X%. obviously be past an two in a X.X% similar to quarters the in increase of to it quarter would to a see would total I basis we expect X%, me, fourth fourth was of X.X% the it on quarter, unit

David Gagliano

it. Got Understood. Thanks.

Okay.

Operator

The Woodworth Please from with Suisse. Credit next Curt question ahead. go is

Curt Woodworth

Yeah. Say good morning.

next on deals duration about spot? a and to, you you Are First Can talked you year, year significantly you much X% annual of kind sense to on the is how guess, give of then X% you and how book to to first question to maybe non-LTA next had relative X%. trying comment said up us to right? of acceleration sold sequentially with So strategy the for year, respect relative respect with said order year, get half your I shorter to almost an the the a contracts. X% then greater quarter, is and your pricing that some this next ago were commercial entering sequentially, that spot your

should we your range that sequentially, for up on So based commentary? should non-LTA XX% think pricing in that be XQ the more

David Rintoul

address So commercial let the strategy me first. item

options that annual we're we the agreements, ones go from agreements, scope LTAs. the biannual only market, as to agreements, offer of So can quarterly commercial full and

depending the in those have companies. our in And non-LTA they various opportunities people some way their that cases, particular preference, upon sales to their LTA. operate own of have all some And so are of customers to choose exist

portion their to with. So they've like buy tied begin in already got a of hedge up mechanism

all those of So of all play. in things are them factor in but

for based that upon of year adding are that some based a mixture some on formula two thoughts. up and of order semi-annual are annual deals, next one LTA some in quarterly a Our of or a deals, that to, has the some a couple are signed book

or us year those is the big are issue go all year LTAs are but next course for customers utilizing, we that of into our of us. big and year options next So for the But as year was for lot the while reset uncertainty last last to steel about a future. to year, from beginning you was if back think industry get November when October, we improve, is the the there of

not seen a place that had trickle November. So taking the on negotiations set these circumstances and We of whole get October a down market as uptick been electrode here yet that the have graphite in through reset supplier.

improvements that's good on because of reset language portion we that's are what we helpful. annual big year, So significant news, basis kind that's were customers us that of a to to and be get around more a allows and using the next for tonnage on a

nailing number of not terms finished we're that down, yet. completely In

early competitors. can't with of information as might give the what some happened number completed, because some out back I that an exact you problems when that as influence negotiations of give alluded well to that we I So, the to aren't in 'XX used our

suggesting nail there's quite influence it that think I So you're complete yet yet, because scare just would us, nothing I can cases, some but about want we down what that don't to aren't negotiations in that

Curt Woodworth

close I demand as they're demand, top the order well. the very and on expectation ramping given is all you've book And your to the of EAFs that, and going got strong, be then which guess or there Penn new outlook, the given Is a in thought you of capacity right St. now the outside should at to you next Mary's And that the any machining? like be to outside is full of year. feel running -- have restarting you -- productive any

David Rintoul

tonnage evaluating next that, we're around it's or a be, running of to range run manufacturing, in resources for the Recognize to we how can. at ability our plant whether to that the a steel year. in doesn't electrode graphite or look, run a on sustained options you any year happen may the as whatever maximize for our the large case XXX% as to unit, and XX% and basis plant a have never hard somewhere expect by utilize permanent we but basis, but as whole a at on Sure.

provides determine as of the that we'll and whether our that's there there's do studied speak. we up this time, same hand to to being need Mary's, over more terms some at machining In we addition of as operation a are critical finish pin and as want opportunities and something plans we well flexibility look us the St. ramping as other

with we yes, it. along hard can ways and we'll looking throughput, that that industry grow AAF as increase so the grows So, global capacity as be to to

Curt Woodworth

and being Great. at doing demand well coke, then hearing when theoretically is of And somewhat in synthetic has Europe production become the it's other an of EVs, graphite what increase some the look availability big Nevada needle made rate. on issue. we've just X of investments anode needle one a as the coke been PSX with for pretty And that you the in around last

Do your have the So in on seeing non-LTA as commeasured I'm just needle change and what coke of any that. curious you're you thoughts around concerns on availability the pricing. the rate spot market with

to unit still that you would basis. expect mark, Thank on your margins you. improve So

David Rintoul

improve move to the including, situation, Well, I'll the last. margin of you're would coke do inflationary all a start perspective, XXXX. but with From expect your needle continue despite we we as Yeah, we that have pressures coke, perhaps the particularly come ago. demand into than there's as world even factors EV even begins a as correct faster as year play lot projected up been late of in ramp to needle through a

require of have what are get all of think suppliers and I about needle question we coke there'll that I and crew we pressure think making working for the So year. with think coke. his to that in of outcome But sure that taken will don't hard and is I are consideration Jeremy be those they no -- all correct, be that that. on next There's needle upward

Operator

from Our RBC instructions] come Viswanathan Markets. go Capital will next [Operator Arun ahead. with question Please

Arun Viswanathan

question my for retirement. and your help Quinn. taking Congrats for Thanks Great. your thanks all on

little guess about just a wanted spot I to So pricing. ask bit

I the so still of and of away ways it sounds X% would contract from of, like kind put fives optimistic you're X%. increase your kind So pricing. to would a in you, mid quite But about that sequentially another imagine,

Are not how of imagine their that? now? contracts? the level so, customers be it So with could in objectives seeing if between as think somewhere kind you pricing contracting is about at they and would fair And to you we comfortable environment the a extending where come you just a spot you of from see describe maybe previous, it's necessarily level, on or $X,XXX that standpoint? with but should I assumption that your

David Rintoul

LTAs into when XXXX, end of or mature, in existing items, like quarter until conversation next with from LTA we third expect and, the get that going mechanism folks so about much some about and hedged in have your September when they is steel probably be the those are which hedged more look, that are you of thinking actually advance start to in deals So unusual a until not because other year hedging don't year, would I we the it gas years unless was a favor. the was etcetera number I it's it whether and it suspicion electricity, to had to be

that not year electrodes, people upward advance. looking expect would right to be graphite is in pricing given So mode in would I up an on ante now a that

I think that would be unusual.

or they're make go. going their from demand XX terms out and the how they months think XX supply and I so, and months want side, a where see to to play as wait to decision or in of next the then

I'm -- couple don't market I happen And of that new and priced the hedge of come would it about would any just hedge, be time talk what point discussions I the bulk like that But the players in a is the at point, other So until those then. bearing applied. at is expected that have not we've a in not had new think would completely LTA. at

otherwise, It'll expect to negotiations for very that's So that pricing. or me tool on both a but market customers away. the in our and we next wherever question want are still gets what of time to a extent a be of to hedge bulk the people almost September impossible year, it's those still for to terms answer by and which, I that year your point valuable think us the say bit which in to

Arun Viswanathan

Okay. Thanks that. for

on And topic. so, again, this just another question

roll a actually or roll lot to the you've that couple pricing of hot sequential market rise, when pricing, seen half now, over think at at had times. potentially electrode quarters that So a the pricing, seen hot But roll ton plateau. momentum. impression a to a kind started roll slower tripled of we a to year and and and increases, We've regain pricing, would times hot I ago steel pricing now been follow $X,XXX start has eclipse electrode year

or is of to So over your of sequential it high gains have in electrode digit, or electrode expectation ramp single continue we kind months? missed the on the see we next that pricing kind pricing XX mid

David Rintoul

there will and word use be, So significant. we the

since I've about So when I drive or time the public, think used I QX. chosen I I'll speaking to am QX adjective first that that we your never that that went attention to pricing adjective with use

for So pricing do expect attention. the best for to I can significantly you is your I XXXX. that draw to increase Yes,

about had play, really Now this inventory a ground. year. for the lot dynamics on we've lag the until, the there the graphite worked came past of the talked reason and which to in supply electrode Arun, And be didn't demand into until quarter the actually of was through second happening that start

two So really only we're taking supply into dynamics demand quarters true and place.

Arun Viswanathan

this similar then And I could also ask you. question needle coke. around Got

do of coke it So of like increases tightening electrode as a spike And, the say so, utilization $X,XXX cycle utilization needle And electrodes think over needle more mid-XXs you how in the cadence, so needle ton an well? be of year are and or ratable the and that if you or a you we to up. kind it what's on Thanks. $X,XXX so rates the market where that should inflationary similarly as expecting and of well, -- kind about you're range. would or indicating coke, next per kind then utilization into or industry the get back say kind rates are expect, in the rates with across coke is we are electrodes, would market sounds to

David Rintoul

release are, or intelligence. from of our call market all it competitors rates, not in share operating you terms So rates their what utilization I'll our are of know,

point in market hard report going as industry some Our you're cause how get in belief anywhere in some from in that and running public of we, to and is they're time. find contacts through, outside anecdotally a they not we that through of as know don't the about this But cause they, obviously at the China, its all anyway, this our of they report customers. they're,

our China. inside steel some four domestic their that of less China is and is issues over I than No, they've to months electricity of can as within belief last anything taken electric it We industry graphite probably So on hard both think the everybody think of add electrodes and as Jeremy, maybe as we to they running caused China, had more would I the run you know really outside quarter, that with pretty terms everybody's kind Coke. that's you've at capacity graphite we tell best capacity? in everybody's, hit as can it. hard natal They,

know, the are making needle know are, at there our extra would to as found China needle -- and from perspective, no and running that is they is appear You outside moment. coke those not much no how, be -- it of coke there's there's

Arun Viswanathan

XX or to expect well do prices rise needle months over coke to next as you so? So the XX

Jeremy Halford

would something, what towards last we've would, $XXXX pricing tightness some would quarter, that, in lines. look that the we is of we've data, the in said seen to we $XXXX, If course $XXXX. $XXXX pricing. were I to the at we guess see past we I expect the more And the range those range that maybe about high in and availability trending of And, recent would I the and continue data prices of trend say we in we seeing think that, over range. end talked that the if of continued there's we the ranges last up Yeah, the time import-export to this, we've about that of talked along seen I something on the guess I

David Rintoul

I referencing think trade the data, it's always that which data lagging. that Right. Jeremy's to important is acknowledge is his

that a based is data on always those of contracts. available, roughly publicly quarter one Right. but it's So there

Arun Viswanathan

lot. Okay. Thanks a

Operator

question go Hacking from Alex is with next Citi. The ahead. Please

Alex Hacking

Yeah. clarification two let okay. me or three to and Quinn. that's got I wishes best add just if Morning my

non-contracts starting at next look be last we in as this seeing, into all heading three with, your you year XXXX, lower or the more referenced firstly, this recently and the prices in of over pricing, you levels really will that So pricing sort months any year Thanks or in that price, from so. we're quarter carry there reset to next

David Rintoul

and bullish Thanks kind there. carry the reset, we January and reset that's words why and no we're there. for your as question Alex are. using optimistic the Everything of They're really over. gets for there's

Alex Hacking

great. of Okay, of Or terms it it's price, here. still it in And in ago? then or the than it trajectory higher of moving was Is months three today the view? two is your plateaued higher Thanks. spot kind

David Rintoul

today two higher pretty It's We're than it months was be heavy into in we're ago. and soon completed. or three or much

the been first takes of improve. to continuing it's so dotting a So improvement. see of a the few, quarter We'll a and it's during few far phases next year if we're been where nearing I's final yeah, crossing us, few T's you but steady But will.

Alex Hacking

And for on if availability to be coke. there was as challenges you material it Thanks. needle needle need you, next any year, push to, you there needed? run Okay. obviously in to fairly you as straightforward your then potty or on hard Were you're coke, finally going just much going to you're get up

David Rintoul

comments, no know I needle to earlier my anywhere. there's extra coke

it's So the market tight. would I -- it's a situation classify that being needle describe as coke becoming the

Alex Hacking

in tight as XXXX. it as was It's Okay.

David Rintoul

different few numbers. XXXX created a had components we're some pretty to some very some supply for lofty reasons that it demand and approaching situation. Perhaps really special aggressive

lofty but good kinds not projecting careful a that, those we're suggest numbers be now. to to want I return, to to certainly be needle it's So of coke right producer

Alex Hacking

much. good. you All Thank right. Very so

Operator

for further would to Mr. questions. over Rintoul I are there to time turn conference this like at back And closing no the any comments.

David Rintoul

good and you and opportunity operator questions. much day. you speak very today thank in a with to of and And wish some months. Thank investors we you all and everyone address great health the their coming their have of the interest Thank for

Operator

Ladies and in gentlemen, today's thank you for participating conference call.

may You disconnect. now

Wendy Watson	Vice President of IR and Corporate Communications
David Rintoul	President & CEO
Jeremy Halford	SVP, Operations and Development
Quinn Coburn	CFO & Treasurer
David Gagliano	BMO Capital Markets
Curt Woodworth	Credit Suisse
Arun Viswanathan	RBC Capital Markets
Alex Hacking	Citigroup Inc.

GrafTech International (EAF) 5 Nov 212021 Q3 Earnings call transcript