- Earnings call transcript Q3 2022

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Operator

Good morning, ladies and gentlemen and welcome to the GrafTech Third Quarter 2022 Earnings Conference Call and Webcast. [Operator Instructions] This call is being recorded on Friday, November 4, 2022. I would now like to turn the conference over to Mike Dillon, Vice President, Investor Relations and Corporate Communications. Please go ahead.

Michael Dillon

Good morning and welcome to GrafTech International's third quarter 2022 earnings call. are Officer; Chief Financial and today Halford, Officer; Officer. me Operating Chief Tim with Marcel Executive Kessler, Jeremy On Flanagan, Chief Monterrey, Marcel Tim will Marcel our our our quarterly discuss comments outlook. with other review close sales Mexico; financial with and in on details; safety, matters; will then then Jeremy operational related and results will will begin operations to comments

open the call then will We questions. to

slide. to next Turning our

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

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

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

Marcel Kessler

Good third quarter morning, earnings joining GrafTech's for call. Thank you everyone.

to into Before like I would Monterrey, discussion with operations a quarter detailed performance, dive GrafTech's about Mexico. third our we begin in

understanding. thank for to customers the on our GrafTech on particular, the entire thank employees a business our ongoing status. want ahead. here to In our and situation current moving nutshell, also efforts team in to in for would and I First, and like the the focus is Monterrey their the address all continued I support update And their

will reopened. don't all the we suspended operations avenues possible to know resume. At remain point, site manufacturing this Monterrey's pursuing we and when operations First, get are

our this ultimately in resolve situation. to However, we remain confident ability

electrodes. capacity the our produces is total site our stock utilized annual Second, that of for XX% and all currently production the pin only Monterrey

our implemented. strategies needs other in of working St. as produce are restart to to pin when as Pennsylvania, mitigation fully well We Marys, XXX% facility pursuing our

for in to before impacted Fourth, volume And quarters Monterrey XXXX be of reopens, in more XXXX. performance year. half liquidity of challenge. in Monterrey optimistic the back LTA able Fifth, situation business sixth, this our the Third, with to be recovering first outlook a we very the ample while will us expect significantly or unless about see sales XX% we the meet unfortunate, reduction we X through for with to have longer-term is the GrafTech. remain commitments our of

petroleum talented team. We and have competitive needle substantial tailwinds sustainable experienced vertical into long-term and advantages the including demand integration coke,

We will emerge stronger from challenge. the short-term

of on detail me points. X more Let provide these each

been represents products, has over operating annual metric XXXX, since employees electrode or broad including of a Monterrey in electrodes sizes capacity. various portfolio and of of XXX produce pins. facility grad operations and total tons has Monterrey's Our XX% production can approximately our XX,XXX

improve effective point immediately. inspectors that authorities September reported after Other the the of Mexico efforts from on previously the history state measure including exceeded state area. Mexico's that to program. inspection, licenses this industry or suspend The the the in we down XX, the standards. suspension suspension operating In part to applied notice of the and strongly we have Apart our notice. million to we on it years, movement to certain operations related legally halted has with since These this any continuously is way been that activities, suspension to to certain Also, As inventory the invested do $XX relevant clean I environmental all the conclusion time were in safe We activities, Further, wind believe no that that this the and In clarification Monterrey. during it important of At out has our the performance. been our have community we in for October, these believe that notice our from of demonstrated nonproduction our is permitted certification with of visited have obtained findings for participation inspectors situation. permitted to operations to conclusion disagree previously at its over environmental was a a operations, allow believe inspectors temporary issued we findings in by GrafTech continue. facility voluntary are have commensurate than the initiated early visit, permits. in the our errors on several authorities believe the operations of we long time. this procedural our past should no federal a focused inspectors. of be upgrading the not emission existing res we side alleged commitment

While involved with authorities with vigorously and the pursuing we matters. state end, are the operations. respective dialogue engaging we are we legal notice, to local are our as in remedies rights complying as well suspension that To in defending resume these available all

mentioned in the Monterrey that my for requires customers. pin Each our to needed produces electrodes. only by I As X site our is all electrode introduction, pin stock currently the be utilized

potential pursuing alternatives it Marys, Pennsylvania mitigation of restart of and actively strategies sourcing multiple external relates pin stock. include as and These production accelerating facility. our are to We internal a St.

at in you previously Production of St. and pin production a know, at of Marys electrode time facility. the our rationalized was Marys was lower industry. many full-scope the site St. As electrode demand

resumed operation the St. functions last certain Marys. we of at years, few Over

restart pursuing now to actively production. the pin are permits We facility operating for for approvals

and to electrodes. supplying With permits the GrafTech million, of of investment these for pins be able operations, about $X will XXX% incremental an St. resume Marys

St. including will any half implemented. potential XXXX Marys activities, the first of of that to be mitigation fully MAX restart take this expect We

resumed be to term. customer is Monterrey the supporting our fulfill into as inventory less we ability significant stock successfully impact our other quarter are near or for fourth operations pin year. facilities ability most next get are operational as to activities However, The orders be our impacted, the St. until or in fulfill implemented, particularly will will the significantly existing customer our Marys mitigation needs

XXXX more by will the first For in after sales half volume if the recover year, that. but or be next half remains of compared XXXX Monterrey first will to of suspended, XX% reduced

to our meet able XXXX. to LTA expect throughout commitments be We

all today, hand borrowing on ability reasonable costs see liquidity we to our us been Also, borrow existing as needs. As mitigation pin of we assuming sales on that our of impact scenarios. million cash on With activities facility, related we into through implemented XXXX, half anticipate no ample conditions, on or move are levels has our there recover. depending will under to in market the fully our production over have to our borrowing $XXX second and on volume

rule law While we with facility has will Monterrey believe and situation and resume our it are reason the prevail of caused, deeply we the disappointed operations. current that the ultimately, will and the that uncertainty

I longer-term As the outlook business. said optimistic the about our at start, forward, we for looking remain

competitive We and sustainable advantages. have team great a

commentary the by We to industry's these competitive first comments decarbonize. will efforts end able at will me be prepared performance. by to to of now we industry our as over quarter on remarks but the followed provide be our to I long-term capitalize outlook Jeremy our further third steel leverage on on provide will call turn Tim let advantages tailwinds who generated the

Jeremy Halford

people which with everyone. important I'll at on good is GrafTech you, core as our update Marcel asset. brief are value comments start safety and a health my Thank most morning, excellence a and

area performance in the continues year-to-date While top broader incident our not place standards. us of overall manufacturing high quartile our to rate operators the does our this in industry, in reportable meet

in this improvement emphasize as continue remain in steadfast need area to will of we further be must goal the for We X toward everything working our fundamental to do. We injuries. safety

now our quarter turn to trends me X for on an industry Let steel context Slide results. as for third update

in representing third industry. of million indicators In production, year. was production industry. key represent softening quarters for lower the same past quarter such third declined Global rates XXX further utilization China, These period for third levels the to in quarter, data the the production. of the with lowest utilization the X steel XX% saw XXXX, and steel a points X% global performance excluding compared to a prior global we decline During quarter commensurate capacity tons, steel the the

steel macroeconomic utilization although rates ongoing in between large diverging the Conversely, weakness the see conflict U.S. industry in somewhat stable, trends includes geographic as to This to trends further have due Russia. part and in regions. in more continue Ukraine deteriorate Europe conditions and We periods. remain softened different recent healthier comparatively most

performance, third Turning to quarter starting on our Slide X.

XX% third metric production second was approximately decline X% decline representing Our a sequential and the from quarter. a volume XX,XXX year-over-year tons, quarter

of sold approximately our of our During planned suspension X quarter an macroeconomic softening the modest European our impact sales our suspension contributed decline quarter Along annual the which to the The XXXX. sequential conditions, tons production quarter, Monterrey our maintenance Monterrey for current we the work a in decline. XX% on of had We is only operations from volume. the quarter. facilities volume in decline electrodes third metric demand operations at of the drove electrode graphite with year-over-year third the third XX,XXX the executed driven by which

X,XXX of delayed in customer orders quarter of from Specifically, were tons the that our metric approximately predominantly third began the scheduled non-LTA September. to at that facility were suspension end the location Monterrey to ship

of per foreign on This our the consistent during and This slight weighted most compared the represented in third in increase performance metric U.S. LTA with metric sales realized Third by reflected higher impact on as yen, compared at quarter, non-LTA expectations an our to euro of and call. XXXX. Japanese third our a quarter to line tons net also average XX% LTA business, metric under the partially and the had half strengthened XX,XXX lower pricing offset the portion XXXX other of $X,XXX average of shipments at dollar non-LTA first to the of with included the pricing. sold ton. XX% sales are than price non-LTA per in FX shift and denominated a price the more provided unfavorable we non-LTA these third Net in of volume of a tons earnings versus realized currencies. reflecting and weighted was sales decreased the XX,XXX from quarter recent sales the a quarter mix quarter a $X,XXX metric our ton of XXXX

euro-denominated by COGS the spending to However, than top offset benefit on a in line European headwind to related our line the operations. FX more bottom was

the average of year-to-date through move approximately we metric weighted to comparable fourth per non-LTA ton. we $X,XXX expect remain quarter, pricing As to the level our

our anticipate we in decline dynamics volume in due market the current graphite we demand further to a quarter, for However, have the discussed. fourth sequential sales softness electrode reflecting

capabilities, and orders. certain In Monterrey constrain impacting the customer our our ability pin production electrode will operations suspension addition, our to fulfill of

of range release the constraint morning, the expect this tons. press range our quarter on will quarter we of XX,XXX this the impact XX,XXX XX,XXX our in metric to we to volume our volume all for an referenced sales in sales of electrode be in, XX,XXX total this tons. As Factoring have will anticipate fourth metric fourth in graphite

Let details. the me now Tim rest to over cover it turn of our financial to

Timothy Flanagan

$X.XX $XX of or volume EBITDA and XXXX, decrease of Thanks, reflecting compared share. $XXX quarter the the in Jeremy. higher year-over-year third XXXX. XX% XX% of the third Net totaled was costs. margin earnings of third per Adjusted sales quarter million a income the quarter million, Adjusted to in EBITDA was lower

Let me costs. expand on briefly

pressures, and to by inflationary raw continue notably We materials, most energy impacted certain for global freight. be

For recognized COGS a ton, metric year-over-year increase of approximately XX% we amortization. depreciation and the excluding per quarter, experienced and third

XXXX, to compared X% this increase of sequential the second X% a was of below estimate quarter a our represented increase. this previous Although

As cost factors the ton inflation in during basis related as the quarter. a sequential persist ahead, certain at on a to inventories we operations higher also our fixed in in Monterrey. per cost X% similar priced sold expect quarter the of absorption rate metric This look we fourth costs

least Monterrey of to if strategy in to due of anticipated primarily as pin anticipate certain execute further half cost reflecting related at decline cost costs incremental to XXXX, significant remain increases the will sales previously the stock, For fixed absorption year, producing XXXX we first for volume. mitigation suspended, the discussed well the as

our managing environment. we and near-term the prudently discretionary operating navigate spending continue as challenges in operating We on to focus the

measures In flow. cash to to Both quarter, of flow. million $XX compared we of quarter from decreased free operations and XXXX, accounts working working Turning $XX third of in increase used The primarily by higher income. reflected costs. in timing-related and driven capital lower cash decline increase in reflecting net year-over-year a and inventory for payable capital higher the third generated the million cash adjusted cash

Slide to Turning X.

navigate financial During to near-term continue a challenges cash we flexibility retain done free on our the term we to as opted not support Monterrey suspension loan. third the and voluntary of flow quarter, to make This including prepayment our was our did operations. the

to compared a XX X.Xx. X.Xx XXXX. of Our was X.Xx September ratio a ended as basis, On the the as debt gross end ratio we to net at third of at of debt adjusted quarter EBITDA

to facility. During and consisting the $XXX cash quarter, $XXX million, our under available total million million approximately revolving liquidity credit of increased on of $XXX our hand

our is and today, total of now liquidity As further over million. now $XXX has increased

previously Marcel our cash we as hand credit and challenging ample existing this under we on facility As indicated liquidity availability forward, the between look to have and situation. navigate

Now stockholders turning reducing to our to debt capital investing X. support flexibility disciplined priority. our long-term our This our remains Maintaining prudent balance returning and capital strategy Slide sheet while allocation includes business. strengthen strategic to in also a further and a

been significant our has loan our portion utilized by stock. and these X/X basis. of common for In year, repurchased X of balance pay the our first year. these generation not our elected to the stock $XXX the million million purposes $XX of year-to-date quarter, flow cash of term months a reduced the first we flow through on activities down for we cash nearly our account Combined, the we debt in generation repurchase of a or While half third free

previously we range changed of composition million, reflect continue to acceleration $XX our expect the spend somewhat expenditures to to $XX the of current of an as has to restart the addition, million in support XXXX to Marys, capital priorities. In St. be our includes investment This although our discussed. Marcel of

with return highest investment. projects on our CapEx prioritizing We those will spend managing the in prudent remain

Now, let his it outlook. me perspective the to back for Marcel on turn

Michael Dillon

Tim. Thank you,

global have we retreat declined China, indicated, influx production, to remains the for steel steel compared has current industry As environment XXXX. and excluding prices year-to-date X% steel recent Global the continue [ph]. highs from to

softened geographical see for steel our different call. continue last Jeremy As regions since in nearly industry working but all we indicators the trends have indicated, earnings to regions

demand outlook Tim spoke As XXXX. during while over which more is the the a business for cautious. term, bullish we long expect result, our near-term outlook remain that is to The the graphite XXXX by challenged pressures on electrode further for to peak cost we

to headwind. the addition LTA operations, in mix suspension ongoing from current of non-LTA Monterrey shift near-term creates the In to business our another

outlook While we ability confident our these headwinds significant, are business. for overcome and to our the the clearly challenges are near-term remain in about longer-term optimistic

of avenues resumption to mitigation and all and multiple in aggressively at We same confident working our operations are are pursuing time. ability the strategies toward a remain we achieve our Monterrey

be Given the my I part comments. during least that the provide able Monterrey suspension information in is laid at to more in beyond what of matter, Q&A out we won't much opening

However, situation soon to clarity provide possible. detail more on and hope be as to able as the we

electrodes. will to maintaining align industry's the to will electric drive challenges. sheet furnace with continue remain capital we term, us see arc the expenditures the we we As steel to to supporting the shift progress, Longer decarbonize to to growth environment. could of an to globally, capacity balance ample committed result electrode near-term The continue EAF XXX,XXX steel are to producers actions optimally XXXX. position service for demand The in metric demand will in excluding that recent announcement product us of capabilities growth. by graphite China, long-term benefit tons additions over planned we from incremental annual demand taking by and operating and our We current strong steelmaking efforts liquidity have a expect through and invest continued our graphite

GrafTech. closing, production facility electrodes. needle first spoke critical when is petroleum vertical to graphite ability foundational advantages from shared a a and It's capabilities customers. our you our to Our to deliver I competitors Seadrift team high-quality reasons talented differentiator serving integration a to dedicated I our distinct committed position, industry-leading is that excited coke for competitive of join a I and into through and our and ago, set In quarter the was

is still this today. of All place in

results am GrafTech value In team. of have concludes months term. our the That me past fact, part the couple I our I to seen shareholder over the over the proud ability be remarks. prepared employees in deliver long of to our makes confident in

We the for open call will questions. now

Operator

Gagliano question Markets. at [Operator comes BMO Capital Instructions] David from First

David Gagliano

had clarification So just few I a questions.

the all, volume of to was pin change graphic situation, in on if Monterrey. every XX% First electrode commentary and down don't pin needs things the

So being pins third from that I'm party, that assuming the are is correct? a purchased

Marcel Kessler

prepared the do indicated I existing we because as modest for be So have will in a remarks, impact my bit of QX quite inventory.

Beyond various that, mitigation we actually exploring strategies. are

So I talked of about restart the Marys. St.

we also are pin looking procure third-party We producing are facilities stock. and at looking pins European at to

David Gagliano

Okay.

so of what pins if how that of being produced produce the happen to that is where to out I'm trying capable much to much versus volumes get for you down out half makes XX% to first for -- to So do options, figure already going you're the what any figure in only those have actually needs how it? of to sense? be

Marcel Kessler

one? you Jeremy, do want to that take

Jeremy Halford

Yes. Thanks, The inventory Sure. form of David. Marcel one are to achieve already or about in that the pins question, in another. for and are we're substantial thanks talking majority what required the

So this parties for is going we about. source level of or to are not the something on other achievement that that dependent Marcel third some achieving be talked

have inventory. a amount substantial We of

a have and was the pins substantial what of in all other along of facilities stock amount Marcel we processing through will order achieve and to that pin the kept talking inventory way about. be We

David Gagliano

here. restart the I Okay. -- And for there's a was St. a commentary production. pin well, -- then follow-ups there What Marys of just on have just around -- few

should from then restarts that improve cost in the 'XX? And assumption what St. in restart second much the whatever not issue St. of was I is, second that capital Marys a permits all, volumes 'XX? or in whatever is in What's the there Marys how an at well? of other difference the volume That's of the improve graphite commentary don't and least, question, seat and Marys And volume doesn't restart third production that the one this everything? should the half. why my electrode the second on is if restarting as question questions. regarding half why -- First that's half then permitting St. and of And reason, happen of and for Marys, of would terms that St. know

Marcel Kessler

back and So let the get the X tackle question. we'll then third me first to

be half, lead strategies recovery. will regards in the we of our volume that production that a second to with will and place feel So sales combination confident mitigation to

restart of pin and/or of So one at and/or it will securing sufficient European production Marys the St. starting the our of facilities be the third-party of pins.

it so not to the restart. reopen. think And reiterate Monterrey our we dependent So on Marys' I St. we confidence is also would that that will believe then like will

David Gagliano

Okay. Marys? regarding And restarting St. all

Marcel Kessler

St. spending. regards set So will Marys, require of see go to track think will that's we restarting all something to would to XXXX. additional there on investigating. are before clearly a permits require But come implementation are that It as that able take with be to but won't incremental longer we probably different we likely I of and clearly also well

David Gagliano

in a absorption to And gears XXXX the the of for domain per of are expectations question versus costs. XXXX, speaking, shut what's the cost half the my unit that, say, of and Monterrey switching in a for like traded. is the pins for increases quarter-over-quarter. first we increase given for what unit fixed reasonable range XXXX? cost XXXX, pin fourth cost first generally have all or just the quarter there no if idea the In XQ example, public half just things I say whatever Okay. then the domain got in costs But X%

Timothy Flanagan

Dave. Yes,

the cost vary to mitigating because we'll on do each continue through obviously, through strategy. says. the have continue those they of we Marcel side, work strategies economics that just of by work to So the right, to And

we fixed on a X% at we're cost I well right? kind down our more we fourth look in we the any to that time So costs volume, XXXX. that starting I will inflation over I'm price into inflationary into So at thing seeing the flip But provide some absorption, Certain beyond run probably some to other we're side, materials business, is about to pricing on as some fixed starting our that sales not talking second, show to the just inflation volume moderation with key operations costs quarter. But starting that more consideration areas about which to on this some impact is, the brent are take we'll favorability raw what existing oil, the think XXXX it's normalized that D routes longer-term talking some see us see The think well areas, talked broadly, But of are as the to going that rate continue, important we guidance of for the like. being point look the in whether rates. CAN would underlying see into about the an are downward like. we trends costs for spread pitch think of freight to expect on of as a we're in have past. think we've

Operator

Next RBC Arun Markets. question Viswanathan comes Capital from of

Arun Viswanathan

first I developments. of some questions set market is the just around guess the of

hovered Steel is So now lower of evolving coke? have from move modestly lower. I kind spot have or guess, the range. to here? do kind And prices move $X,XXX also needle Where spot around how you per ton see continued the prices of price consistently

price how the yes, of here? we electrode and markets should evolution the think kind -- in needle coke from So about

Jeremy Halford

the pretty -- import seen high in continued Arun. statistics. Yes. needle really somewhere $X,XXXs. thanks, We've We've really We've tracking We transaction prices resilient. seen be seen coke the

vehicle ton. a a as had $X,XXX continued lithium-ion know, forward, you times, used by, rapid on use as electrode we put battery maybe for one $X,XXX, demand range still of expect around of EAF from range, where industry, electric that And small still But material amount steelmaking. think coke graphic in spoke. in moderation the couple of the last key hand, growth see the needle $X,XXX in anodes the in needle demand to We're look in growth for we in a but we of the as time demand graphites very more we I driven that we've acceleration high a talked coke end about

Arun Viswanathan

Okay.

continue like modestly to it higher move coke should So strong of because sounds demand. needle

And Okay. mind be the it think is electrode that rule excess does keep again, translate so how supply? how of should X:X should that we we unlikely resilient that just side? of would as because electrode maybe I Or about electrodes how there's should kind mean, then in to thumb? some prices trend? Or

Timothy Flanagan

Arun, look of I I demand well. you Yes, or electrode think hold trend think those on upward prices rules probably coke pricing longer true forward, upward thumb upwards, as see term. And an needle as would as push we

in in near don't I market thumb it, have I term. think of, always hold in now, the the those a very think short because of that's bit of where term, particularly Europe, in dislocation right rules true global you uncertainty call a the the

pricing you over drive So bit term, pricing electrode upward will dislocation. short-term of a have may in little coke needle the But higher. trends I think long

Arun Viswanathan

Unfortunately, Monterrey help could get then understand Okay. is or full not the maybe just out. contracting. perspective And you facility us your on running

volumes your be to are down So the half. first in going

you? couple setting the thinking the other to kind there more up kind X Or months at your of how that next X time maybe Is frame, now you put true? kind periods commercial about front of book? of And is the of order visibility? options can that are for you you of in of so And opportunities maybe are you a of forward customers, that operating to shorter limits

Jeremy Halford

the And strategy. things that of to that I our changes an want commercial we clear situation, Yes, is constraints to none Monterrey the need Arun. question, thanks. this important the of consider to related one near-term supply make while It's

offer our the different unique have to market all. our a the And not our vertical We by continue and ability it's are to term, our this Monterrey that supported customers. in in contracting terms in we at we provide the our of near that's believe differentiator, to confidence a current we're ability key to strategy that's variety customers. ability changing our we're and that to in with dealing our absolute resolve while to certainty in environment commercial situation, very integration

Arun Viswanathan

options regions in to just just lastly, you've continue, Europe how Okay. And given What lot Or has there of you are some going just worsen are even that couple that you potentially to more for sounds of your have a shift is And production then guys starts quarters of it do for to like is over a your of -- think main for improve? some out and things or other a take And and does continued the other bit little facilities quicker important? if this you to, and And in it in QX again, What's to start-ups your improve? there outlook curious do QX. now market there? footprint, that this Europe it there? one about when are called weak kind own of watching? weakness remain some and are production

Marcel Kessler

with electro European Ukraine. easing European that predictions the right? resolution medium in obviously, for short think regards we production point think the the resolved, able much sites. the And in for manufacturing the I the that for resolution to in be in Ukraine. Western It economy will And would much and how or Europe, conflict uncertainty I Europe be changes in So creates an the outlook as particular, With overall. conflict restart not around hopefully, prices our to key energy so to to able I have are in of we on term, dependent well. are in pin footprint, Until St. for any then term, think first been and we make production that. obviously our Marys regards operating on

the energy-efficient most some in some in of are solace do electrodes the we Europe ones take that and out fact our Now there. factories especially efficient

Operator

from Citi at Hacking Alex Next question Research. comes

Alex Hacking

Thanks the Monterrey. quite for on That was all color helpful.

overall cost today Dave's ask of question a your structure is different variable? cost Roughly versus slightly me what Let fixed maybe way. percentage

Timothy Flanagan

Yes. Alex. Thanks,

X/X you I roughly consider broad So strokes, would think about is that. in it about if the way think

kind do of obviously, But structure, cost brush that the to time fixed way of I that's over opportunity from about perspective. we Now extended the it right? would periods have adjust broad a think

Alex Hacking

Okay. That's very helpful.

XX% excess marketplace? coke correct the selling into you that and if Seadrift have you're in would needle On sell Like Can theory, math is my electrodes coke. you side. needle the

Marcel Kessler

Short something are we at Yes. we point. that that this answer can't considering. but any specific It's give estimates you around

Alex Hacking

pricing And on moved another may. around remember kind I the one cost And correct? the sure. that next I hedges decant to -- What's I of year, as what's off correctly, if oil of end spot incremental the Okay, the impact think. just Seadrift, roll then year? is this If

Timothy Flanagan

Yes.

the year effect So the stopped the midpoint first next roll and quarters hedges through current at this of -- we'll the P&L the of year. in hedge see X effect

looking a probably year. give that at quarter ton, be on about $XXX after benefit will second gone next will be of hedge take, the the You're or somewhere

Alex Hacking

couple Okay. for apologize I your peppering more. A questions.

market, tightening you're your market, market if this ex-China, annual tonn-ish electrode down the the because their from my XX,XXX expressing this? to On scenario? this up It's electrode in to Is market ton of customers of XX%, potentially memory electrodes that's that's are is rate I about electrodes source correct. gone if mean, right? XXX,XXX ability concern

Marcel Kessler

So it's an excellent question.

spoken world in especially the Europe with also that -- weakness markets we've broadly in the more but given to. Now around steel the

see I short-term think any don't that we tightness. really

up the the in industry, significantly, slowdown that a seen quite gives which buffer. given bit In inventories that of addition, actually are many our have customers the of so we them

add the anything the XXXX. don't market to unlikely be there's could think I a you of in that? half shortness to first So Jeremy, in

Jeremy Halford

see key will term. our that be inventory reasonable that you of they've tightness creating I customers No, the bridge held given by near any softness The we being think would amount the and that a been experiencing right? through in -- points, hit we the

Alex Hacking

helpful. it. And just are all Okay. And very appreciate final these one. then I answers then

the debt tied are any on that? no. any covenants think is EBITDA there your anything answer But like of here I -- to or

Timothy Flanagan

Yes.

Just back of to what going cost today, in exists opening no our as it of on reiterating commentary, ability borrow borrowing. kind impact and said our the Marcel

good in liquidity from in at this So we're point a time. perspective shape

Alex Hacking

to or be covenants no there's just like anything But clear? that, right,

Timothy Flanagan

haven't mean XX-Q. the laid and those got in we've I we covenants are out some

time. our covenant jeopardy springing a point revolver this have isn't We on in at in that

Operator

of Credit Curt comes Woodworth question Next from Suisse.

Curtis Woodworth

I outcome where, us the you like the of fine process, just more to we in say. have more of an if around timing to the issue. of about And type little Or issue, or to through a of maybe help this and how issues is any could of can just legal should resolve precedents in it case time bit this you sort some there's understand a realize dynamics, Is just out think you Monterrey the color would respect a depending maybe pay it? With walk things can on limitations But the thing to just line for like say? there terms the restart? procedural and you what

Marcel Kessler

Yes.

don't I lot we provide are to Curt, on So more a path. the legal think detail able

legal pursuing focus I I with out path think through near and authorities in to able pointing reopening -- important jointly it's term, priority any plan that that take Mexican our the the discussions think regulators. are think hopefully be And be I hopefully here longer. we will that right? agreed-upon this parallel for resolve in is likely we'll which developed through will

think their to say. authorities we agree all is can engagement a that a plan I on active and we are sure that, ongoing to with can priority regular doing The that's reopen. conversations the active basis I on make

Curtis Woodworth

think Okay, of about last that. your understood. of energy respect that with And with to most understanding my position, then I COGS XX% was year

power power next curves be for year? fixed-price any us what X color to think the you provide into year. cost of believe the so entered power next year? be goods exposed spot are contracts, you for and and where entered you price of I relatively Can have going energy into you impact sold agreements hedged sense for annual you're would give Can any Are I energy you potential year-on-year to on on today? your the given more X/X just

Timothy Flanagan

Curt. power of Thanks, past is the total your about of cost XX% and in is natural X/X of Yes. what we've Yes, said on terms our versus spot gas. of in recap that

we that fixed than were move into head So as we previously we less and is. next I year into commented we year next do think

needs to those in in So about opportunities we and next year continue power further XX% and XX% work some sit our of facilities on through needs where today, to gas on our and lock heading we we're fixed fixed about our Pamplona power power into last, we over prices. a And more down peak look now. probably megawatt I the hour broadly, $XXX in market, saw or so European and we that we're and significantly have call think around it, come days here back at as prices XX August natural sitting

it's to improvement it. long continue with manage where power to we from in an Europe But So way respect to we there's were. Certainly, a prices. still go

third as we try and that of with can. work parties to lock to as vendors to up continue much our We

Curtis Woodworth

calibrate perspective the not given cost give just us you today, magnitude increase to dollar just on can models, where is of And help -- price any spot us dollar our if

Timothy Flanagan

guess of year's without in a what into locked have we mean, year. what we've that this I specifics rate projecting is what I next with cost, getting commensurate out I would offer

Operator

question comes Jefferies. Matt The from next Vittorioso at

Unidentified Analyst

flow the being on you got for XXXX. parts some capital our cost moving all do Just Obviously, thinking work cash just given models to about spending, EBITDA thinking for we've that. talked able to of on XXXX about about some potentially but flex the side

Monterrey? to CapEx restart XXXX. cold cost thought Monterrey, of half we wanted And could facility some in first Or out a ahead with you you in of are that restarting got what see those the go Is if bring to to sometime there there lines, do take to bringing So of capital down costs associated along you perspective? about idle? to from sort online how that think back 'XX

Jeremy Halford

Tim bringing The of that it out talk there back that take Maybe of costs over balance a idle the mode. be answer I'll no, amount I'll from the to of question Monterrey half Thanks. cold bringing it to your to hand bringing restart then which is of idle it, shouldn't associated was it. -- first fully a quick its disproportionate of it out current with about about

the We expected have would to and to they that them were as restart way them we we assets were. look that exactly behaving

that, asset capital in extended businesses. see anything other large no there's like you or might as so warm-up And period

any anticipate substantial wouldn't I So cost increases associated with that.

Timothy Flanagan

just Yes. that this about going in up $XX We're Maybe capital, we've add of past. to spend right? million year, on the more talked million would makes what we're kind I $XX and saying broadly to

we within on talked to think into million we cost we Jeremy beyond need about of input got have capital maintenance natural year. as to is that normal sustaining we've in or continue capital to our St. some are and to forward certainly, think Mary's kind further probably significantly $XX and of and as particular, run of projects will a million down Pamplona important make I overall we'll right, rate that extent move number, investments our basis, flex that in in gas move But it's kind the continue do I -- what consumption ability range. both $XX And that that. ongoing the And we those key forward. our in in will our just projects that projects reduce now next lower to

well. ROI balance balancing a what the those spend need cash keep to well manner, needs as it's a running just to as So big money of in as that and efficient and we on, safe plants an generate

Unidentified Analyst

at going priority. share did Wondering I on coming at back clearly, think, that bonds helpful. debt the a of your into forward, be a given side, the have capital makes mid-XXs. in traded times, being. shelf see sense, then over pursue just will reduction consider? earnings a volatility something least buybacks maybe is on And And That's an the months you big if time that that buying avenue XX the we're would I to But discount, on would the at you highlight might going reduction debt to for guess picture bonds allocation that remain the debt reduction the lot

Timothy Flanagan

best we at when discount. if to there's and our broadly, allocation, more for the at think an look shareholders large. organization opportunity I Yes. certainly, we about debt mean I capital And think out broadly at take a is what

at the that maturities. nearer-term but benefit pulling of you look You cost forward weigh

important what's shareholders disciplined to we have a and our think I So stockholders is approach. commitment that for

balance to You said going on sheet. the it, focus continue to we're

past. I think the done that in we're right over done and that's maneuver the frankly, we've facing the and gives the last the work X we've confidence we've work to challenges way our us why what through done years now

any right I there's change So don't plan now, strategy think that a longer-term to basis. on

Unidentified Analyst

a have target a guys over debt you general, how you what amount reduction is participate for industry in. in priority. picture to long do for is a just maybe think about this a Steel, do of volatile Like saying And you're right the debt run? enterprise big the

Timothy Flanagan

now, a target past in basis. is been think I gross our -- pretty leverage again, Yes. or is to And more we've consistent I X net on current our X.Xx mean, basis a leverage than no X.Xx right X.Xx we've the X.Xx. when said on

of industry us in target. we like a So feel We going we're balance cycles that forward. of well kind work the that sheet think stick through we with any to that with strong spot. positions Longer steel allows term, has good and us kind a

Unidentified Analyst

one. one more Great. just And quick maybe

coming XXXX, necessarily of hard think I flow from negatively way or jumps the we any out you? flow, as in from at course, either lots these about not the to positively But the working volumes pin anything normal its disruptions down. under one cash or impacting off that implications capital operating understand On for things business parts. it's again, meaningfully moving cash front and just -- other, that

Timothy Flanagan

Yes. I in don't this want at time. XXXX to comment point on

given directional quarter. they quarter, that when we're up are the pick first half look have year, of an back think as I shaping the on the indicators right, of 'XX decrease talked out the capital. volume and the the then will some the fourth Monterrey. we've of we certainly, absent in up in If we in about year, the the we restart working kind fourth expecting that way half But of to down we think is volumes think impact

to quarter. going we're be carrying additional half or some So the in the fourth in inventory back

fourth relatively capital is say working through So quarter. the would I as we flat head

Operator

our question-and-answer for closing now the call Kessler to Mr. comments. concludes I will session. This turn back over

Marcel Kessler

on operator. forward Thank your everyone. with quarter. everyone GrafTech and speaking great interest like Have a to we look thank you, weekend, would to for this you in next I the call

Operator

lines. today. may please for Ladies and your you your and you ask that gentlemen, disconnect you this concludes We for participating thank call

Michael Dillon	Vice President of Investor Relations
Marcel Kessler	President & Chief Executive Officer
Jeremy Halford	Executive Vice President & Chief Operating Officer
Timothy Flanagan	Chief Financial Officer, Vice President of Finance & Treasurer
David Gagliano	BMO Capital Markets
Arun Viswanathan	RBC Capital Markets
Alex Hacking	Citi Research
Curt Woodworth	Credit Suisse

GrafTech International (EAF) 4 Nov 222022 Q3 Earnings call transcript