Earnings call transcript Q2 2023

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Operator

Good day ladies and gentlemen and welcome to the GrafTech Second Quarter 2023 Earnings Conference Call and Webcast. At this time, all lines are in a listen only mode.

Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Friday, August 4th, 2023.

I would now like to turn the conference over to Mike Dillon. ahead. go Please

Mike Dillon

and morning XXXX Good Marcel to International's Operating GrafTech Chief Financial Thank call. and On quarter Officer; Chief Halford, earnings Officer; are Flanagan, with second Chief Executive Officer. you. Jeremy welcome Tim me Kessler, today

begin financial Jeremy will with our close comments details. and Marcel safety, then quarterly our outlook. comments. will on Tim will matters. review opening results will discuss sales, Marcel operational and other with

questions. We will open then to call the

Turning next to our slide.

the of forward-looking to some current As discussed other on performance include reminder, a are strategies. risks on may call matters are statements things subject this uncertainties. expectations and based among regarding and These trends and statements

shown to actual could Factors here. materially that are results differ those indicated from cause by statements forward-looking

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

slides available website our call You the can at will our of find on also website. replay www.graftech.com. these section Investor the Relations of be in A

I'll now turn the Marcel. call over to

Marcel Kessler

Thank today. GrafTech's key points everyone. for four get on discussed morning joining will highlighting earnings call our second call. will by we you Good I begin quarter

First, a our and key well improvement on a a the performance This basis. consistent sales metrics. sequential in quarter-over-quarter sequential included growth in in adjusted expectations and EBITDA quarter recognized costs with volume was our for as reduction represented as second per ton

the the of business point towards indicators remainder in further market we steel while our see in production to Second, for improvements continue softness year.

our for XXXX more are the resulting the of half With the tempered. second graphite on for expectations impact demand electrodes

XXXX recovering to However, levels we demand. improved about remain of optimistic

response environment. about the long-term fourth, we challenges strategies the we remain manage execute for successfully to to Third, And we continue and plans outlook in as the short-term in the business. optimistic the business our

to medium value. benefit We will actions longer-term position and tailwinds shareholder we believe to from deliver industry that GrafTech optimally are taking

Steel more second detail constrained industry second the current will Tim quarter economic environment. the uncertainty. to on business topic let by me global As turn Jeremy our production and provide results, remains

has to global the confidence production remaining steel a macro the ongoing softness most contributes At with near-term showing low in six-month declines. level, continues levels in July business consumer subdued. turn This manufacturing as and has year demand to This regions be industry output for reported fallen prior below our to in resulted for PMI products. and

as a previous the second of to XXXX. As the volume XX,XXX metric sales estimate for now our XXXX for in tons of be lowered We XXX,XXX of estimate have to result, we to of full the range expectations compared our volume year XXX,XXX our will metric XXX,XXX half tons.

the be Sales second demand for a volume line in and volume in is year. the quarter recovery levels to third this for of with We in remain of quarter sales sales XXXX. improve volume electrode optimistic expected to broadly

the World Middle increase from in Based This X% on America, increase growth global in Association graphite which to regions Steel recovery all we projected for a of key steel a increase East is European X% demand, the projected X% in outlook in Year-over-year X% North in demand year-over-year includes a the of and drive in all should increase demand is steel expected electrodes. outside latest participate. which China XXXX.

conditions. performance recognize on We steel be will dependent industry natural

our near-term our align continue those to we production includes market with volume are uncertainties. such, to within near-term control reducing that manage outlook. As demand to our focus This on things proactively

support costs long-term investments and competitive growth. working operating capital expenditures positioning and further targeted capital to our managing improve Closely our levels and making

the with our pleased be plans to progress and to execution continue of advance our the We business.

with Let our manufacturing several since me last our starting highlight accomplishments briefly operations. call,

run to expected. continues as Mexico Monterrey in facility Our

mitigation progress and operational initiatives pins to increase significant to on continue our flexibility. related our connecting make strategies risk We to

production restart second quarter, the approval Pennsylvania. to will St. facility in Marys you recall, our As received regulatory activities early at we in the

this coming activities our with in to expected we further to operational the increase ramp began the up plant at months Following milestone, flexibility. operations production

in Turning this a operate technical region. commercial to our the office of commercial a our presence increasing key front, we in sales with during the our Dubai important footprint second the It announced supports quarter, in capabilities strategy expand as sales new we to service global and opening geographies.

time. North entered Europe. and in to deliver sales GrafTech's certain multiyear products ability confidence we electrode addition, with In new reflects high-performing America their into agreements This customers over reliably in

companies. the to also leading the We the of the you excited our future. sustainability Global that stakeholders encourage our and on sustainable and our better we alongside in joined look important many Compact To be recently sustainability initiative to We and benefit upon front. are we to forward building continue the this make United business to strategies shape made We more latest progress other Nations end, participating report our on that read website. as our we for available environment, ESG help

we secured quarter second offering. million senior $XXX a Finally, completed notes during the

further, discuss offering years. and the will position via working initiatives. industry tailwinds maturity management Tim shareholder take focused GrafTech our time, to loan deliver to about of value. related capital the and same we our remain as This actions that believe other flexibility As we we maintaining our financial will navigate and on the benefit repayment environment supports by current our four liquidity optimally from term debt expenses At this profile sufficient

me a our moments call over spend of remarks. Jeremy. on let first I to prepared those tailwinds at will turn end But the few the

Jeremy Halford

my and update Marcel, start morning, at comments a brief performance I'll you, our with Thank on a safety everyone. GrafTech. is value which good core

broader among rate incident operators our level substantial the in industry. the continues year us that pleased improvement manufacturing the are reflects We to and recordable top from prior place for XXXX year-to-date

area and to remain continue ultimate seek we injuries. in this improve toward will zero this highly as of We goal diligent metric further our working

now the an industry context outlook me quarter a turn our slide for and Let second additional for on to and trends few update next our results commentary.

industry steel of has the performance remained overall the somewhat indicated, constrained. Marcel As

sequential the certain indicators. quarter, saw During further we second market improvement in

the the steel remain below Global tons. but million improvement first a quarter, China levels. metrics production was the to same compared XXX of the However, decline. prior through steel X% the in production outside year-to-date a year. On second down reasons basis, X% global of with quarter ago China a showing from decline in production year is quarter represented second approximately outside X% most sequential period This these

capacity global to utilization of China. Turning outside

in second quarter, alongside second points steel year. other of the steel looking a a For basis to market quarter XX%, on regional basis sequential pricing term. basis And a approximately Europe, second XXX global remained and was down On pointing to last at market quarter persisted the near during inflation with the weak projections subdued the demand most rate demand soft to steel on by fundamentals confidence. a the rates in have flat continue the impact continuation indicators market macro but compared that declined pricing high construction of at and including

their to European that picked US, year. significant be the on they Last increase the of XX%, issued latest outlook construction Association previous the steel a expect in levels. in week Overall, for XXXX in decline the X% continues they This term. global in Steel overhang a the full X% up this rates economic utilization the decline. continued used the projection compares noting demand industry the The In an reflects low second ago be year US uncertainty to strength demand averaging near sequential center. may although quarter

longer remain we've on graphite the supporting for industry However, previously in thereby the bullish electrode we indicated medium steel and future fundamentals term, demand. reasons

next the second to Turning slide and performance. quarter GrafTech's

sequential utilization on in decline, combined Our a our first up the XX% capacity was three a basis just compared This XX,XXX XX% quarter. for a XX% first quarter. the rate second year-over-year approximately production nearly primary but resulted volume facilities metric to below XX% representing electrode to the compared tons, for quarter in

continued conditions production rates in expect to our align focus to half levels. facilities to This at demand half market of we reflects XXXX to utilization on proactively managing Subject outlook. with manufacturing first the volume evolving second compared our increase our

to Turning sales.

with on outlook Our we sales was of last second tons XX,XXX the approximately quarter line the in provided call. volume metric

the on continue quarter basis XX% sales of was to the first a representing Monterrey impact from we XX% as recover decline, While up sequential compared the year-over-year a suspension. to volume

a X,XXX $X,XXX LTAs non-LTA of metric of metric average Shipments at and price of XX,XXX nearly second weighted tons metric at tons price sales realized sold ton a average quarter for metric realized included ton. approximately weighted per the per under our $X,XXX

price non-LTA was weighted for first below sales average anticipated, level. the the quarter As

the the to sales Net XX% in XXXX. second quarter XXXX second quarter of decreased compared of

from In contributed the the lower the of shift year-over-year to to addition business LTA volume, non-LTA volume our decline. in to mix ongoing the sales

through the softness the XXXX, discussed that our expectations. third environment proceed we tempered As we quarter commercial of have the has in

down drive outlook rates utilization production revised ability Association Specifically, to the the seasonal in European Further from and significantly typical year-over-year customers outlook Steel is slowdowns typical steel the electrode in cautious. the with near-term decline levels. of European demand steel the global the limited inventory our for to our Europe have electric constrained their and considering recently

anticipate the Given with second in we quarter. volume for sales be these third broadly line dynamics, the will quarter our

will sales for quarter, we fourth sales as a a his XX,XXX Factoring in the XXX,XXX the sequential Marcel For all metric remarks, we in to volume expect volumes. be tons this on in full estimate mentioned increase basis of range XXXX. in of year

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

Tim Flanagan

Jeremy. Thanks,

business a $X.XX had we Adjusted $X per the or was The EBITDA the reflected a quarter million million, year-over-year in per quarter, of from decrease metric second $XXX quarter. second of shift For in the loss our primarily of decline net XXXX. and in volume, Adjusted was $XX share. the towards million on the margin sales XX% costs higher EBITDA mix non-LTA volumes. lower continued a basis the ton second

COGS reflected as documents Expanding noncash and our factors. posted sales provided associated as earnings reconciliation in cost per and well of to depreciation the the other metric as on goods amortization website ton in we with cash costs, byproduct excludes

the of energy XXXX, continue increases year Reflecting higher-priced sell second that occurred cost the impact full we during and of throughout raw to inventory XXXX. freight quarter material

fixed normal have are $XX been otherwise the In our costs cash would production at levels. we during of inventory if included costs that addition, approximately quarter million operating

for metric all the XXXX. to of were in ton COGS first $X,XXX This high quarter approximately with watermark expectations. our Factoring of X% of decrease compared sequential per second our quarter the XXXX cash represented $X,XXX our of line in in this a

of color half will in second COGS level expectations here half above some Looking ahead more previous our recognized I'll the the metric to we ton in our but below moment. provide continue in will be year, that of XXXX the cash and on expect be the first per a

of we've elements we're tar of anticipated, inflationary for our the from pitch energy, some structure oil, pressures including cost starting see As coal decant relief certain freight. to key and

half second and the where meaningful the a current year we're in of levels impact inventory with fiscal XXXX. costs at on However, our have won't our this given in

volume COGS the our the per Furthermore, ton effect the second that metric of year. will cash on a decline in in two-pronged outlook this half recognized has be

lower the time on extends sheet. inventory with work sales to higher-priced the takes it through First volume our this balance

Secondly, production operating at that are continue be with the volume, to we in will decline corresponding inventory otherwise recognize would fixed we costs that production normal levels.

on working As we result, costs a levels. inventory bring our focused managing to and our down controllable remain

look continue As medium of market cost term the in ahead key to our elements certain we to further structure. we for expect pricing longer decline to

cost reasons current levels beyond ton in that as our these and move improve the will XXXX, our increase optimistic metric and we year. with in sales remain For improve capacity anticipated the we utilization volume per

in we second cash used Now essentially cash activities, flow. breakeven $X while operating the million adjusted quarter. turning to quarter, for of cash was free the flow In

free second swaps. rate quarter of the included the related $XX cash approximately of settlement Our adjusted to benefit interest flow million

anticipate expect capital on would the continues we in expenditures to cash low to XXXX cash watermark and our second swaps repayment and the connection benefit represent this rate speak expectation. I'll flow was which in in to million With loan result be free terminating $XXX adjusted positive continue at of for levels, our XXXX. the be working term of our the more moment. of a that for flow end managing We quarter a focus of majority capital balance about with our The the our quarter interest that costs,

Moving to the next slide.

the quarter, maturity During million due notes. $XXX second the $XXX completed our December a senior secured coincides existing with million private XXXX, senior we of of offering notes which secured

years. XXXX. the was of extended loan this profile by used offering in four the first As maturity due were term quarter repay our proceeds net to the effectively debt that This of nearly

on net compared two to reflecting at debt XXXX as X.X gross times X.X XX Our end adjusted was the first the of of a to ratio times X.X times. debt ratio ended On a basis. June in EBITDA EBITDA at quarter a year-over-year the of basis, quarters decline for a XXXX, of we

$XXX was of our our borrowing This of that XX, $XXX covenant circumstances. June As the available million availability reflects cash million, our limits and in $XXX revolving facility. under of million financial credit consisting under certain revolver liquidity

anticipate against and cash do we on our conditions to borrowing the make remain to availability in targeted the ample revolver current we have However, XXXX. confident investments. we between to not to the need the navigate hand continue borrow market and Further, liquidity

year, full expenditures capital the the $XX continue be For we'll expect our million to of to in million. range $XX will

Marcel I'll turn to for now it closing back some comments.

Marcel Kessler

you, Thank Tim.

remain in near-term overcome to confident we ability that reiterate headwinds. our me Let

will and the We believe are taking We sustainable industry plans environment remain are position current our continue about to outlook our from that executing long-term business encouraged actions our and by optimistic to ultimately we the benefit successfully the make. to tailwinds. GrafTech navigate are progress teams for

transition arc expected steel XX% accounted growth furnace are continuing anticipate increase electric steel total accelerating efforts graphite continue, share XXXX. electrodes to production. decarbonization of With EAF global we which in trend with to Specifically, of growth. demand steel for half this China, driving of production In for EAF experience XXXX, approximately in increased outside from steelmaking of share to the

than more tracking currently producers around the are EAF We additions capacity steel planned announcements XXX world. of by

of annual in of production to these of EAF at demand metric increases along approximately by estimate outside China with of XXXX metric electrode incremental result electrode compares XXX,XXX We annual demand plants tons. This additions, XXX,XXX graphite could that tons in China outside global XXXX. graphite existing

into over tons metric in On a and follows. and translate these graphite XX,XXX industry Middle electrode XX,XXX incremental Africa. demand XX,XXX basis, Europe, the reflecting this could metric tons announcements, in as North regional East tons metric America in

by electrodes accelerate. needle the use lithium vehicle graphite synthetic material to to the In This key its also ion expected produce used batteries portion for used of driven electric graphite coke, rapidly growing for demand addition, the to raw petroleum anode produce in is is market. the

and increasing Based at coke, annual growth we demand sales in use growth higher rate needle through battery the result demand of pack trend, the We projected XXXX. for EV use on positive XX% should another compound elevated result estimates analyst in regarding as demand over vehicle growing global as the electric needle sizes, long-term for pricing. this could coke in in estimate applications,

needle trend electrode market between this higher petroleum for should the translate coke Given graphite high historical pricing to correlation electrodes. pricing and pricing,

world. We highest We well industry capitalize on positioned are manufacturing to favorable these in electrode capacity tailwinds. operate three the the facilities of

With St. we proximity global us these recent of facilities and and regions. EAF the strategic large to steelmaking Marys, flexibility footprint that have gives restart a

critical sustainable to only substantially foundational is our are vertically we customers. Further, into the remain integrated competitive advantages graphite through needle production facility, our large-scale Seadrift producer electrode that These coke. petroleum ability our differentiators electrode for and serve

business. the on opportunities discussed we call, electrode creation As existing our see also last long-term beyond we value

ways potential the anticipated in EV the the avenues. battery two growth of which market study we continue to we via in participate Specifically, can

our raw needle given demand know-how for to a the production the leveraging at by have petroleum this To significantly we Seadrift. capacity the that growth expected coke in material. and permit expand filed end, technical recently production of key First, application area assets

graphitization commitments, battery for third test we leveraging and firm quality resources meet produce any and have our our not battery to the by continue are synthetic parties in with and expertise applications. and graphite for yet made capabilities coke graphitization we our while specifications ability we material anodes, several required confident needle Second, to to

excited sharing we look of can. market to forward growth about more battery the possibility the the in of are and as We participating EV

to I entire to executing current and plans want our their manage the team and thank the effectively environment In closing, GrafTech continued we efforts for are commitment.

thesis long-term Our remains intact.

the We of outgrowing capabilities method consumable product a set furnace industry-leading for of arc a are is We steelmaking. that provider competitive and an possess advantages. electric mission critical distinct of

we disciplined near ample sheet our to a Lastly, the have allocation strategy, capital term. navigate result of strong balance a liquidity as and

I our ability For to shareholder in value. remain these reasons, deliver confident

concludes our That prepared remarks.

call open now will We questions. for the

Operator

question-and-answer now BMO ahead. [Operator the Please will Ladies Instructions] from Jancic Markets. first session. The question and go begin comes of you. Capital gentlemen Katja Thank we

Katja Jancic

off color pricing for decline expect spot you Hi, the prices my expecting? taking magnitude of the Can spot you starting environment, you provide with on mentioned I decline you're thank you to question. sequentially. think Maybe more the

Marcel Kessler

Yeah. Thank you for your question Katja.

Tim some So expectation second given I anticipated as quarter below desire further and fully in beyond. on softer I non-LTA expectations the clarity quarter as as more into levels the environment. our And the of the noted, that second we further there's may price And pricing our first half was have understand for think year. side is we for noted, see the XXXX declines

this going our impact from out. visibility providing I've For However, pricing the I to reasons and are we and further before limited know on said near-term expectations refrain right? pricing competitive have on

Katja Jancic

Maybe expected higher that Understood. XX% side. how Previously on be then I'm the or full about the year-over-year. year to moving think XXXX now, it? about we up should is you assuming cost cost

Tim Flanagan

Yeah, you're absolutely right.

said we increase. XX% we that to XX% expected So a

think the high I guided of end basis. that quarter a to range we year-over-year last on

we'll below expect that So, for -- of be the end but north we half high year. of what first fully we somewhere the up still to averaged and end

is half a first average $X,XXX COGS cash year of So about on the basis.

XX% that we'll So to level you give be some and increase above somewhere $X,XXX parameters.

Katja Jancic

much. you so Perfect. Thank

Operator

Arun Capital Thank ahead. Viswanathan next go you. RBC Markets. question The Please from of comes

Arun Viswanathan

Thanks for taking my question.

a of couple things. to wanted clarify Just

would similar say sales you QX? that to did volume So be QX the

Tim Flanagan

Arun. That's correct,

Arun Viswanathan

Thanks for great. Okay, that.

about So first of in given $XX that half. EBITDA the million then done you've

on some get slightly half, QX. similar some little guess QX, little in as maybe is a There's slightly your benefits seasonal volume maybe leverage will have well QX. second costs And so but a are more and volume The lower. bit fixed energy in sequentially in you you bit that? better EBITDA I cost Would higher

So how maybe should in QX? we think EBITDA about

Tim Flanagan

Yeah.

leverage volume as some be And continue and commercial our reflecting think third we'll line quarter. the in directly to our to of in overall fixed have starting with about inventoried So we again costs we demand the fixed the is sales cost levels that anticipate with expensed our P&L managing are this would otherwise and that expectations. intention production

much have some of on half inventory back the that of first of sales we've as is, Kind support anticipate half in released the what during releasing we using we the the the layering year while more top of to as well as of inventory forecast year, on hand and well.

expect what in would at the still we not levels. cost as the leverage year year some running normal of we'll half So, be as the well. or have target running be plant than first challenges the half to would we they have They'll but consider we commented, the of back harder fixed still in

Arun Viswanathan

that. sales of your capacity. overall given $XXX,XXX And for about $XX,XXX Thanks of That that you're XX% of sales implies volume. of volumes, Is Right. utilization then, to guiding $XXX,XXX to that kind a going more I industrial better that Europe, environment? really number And take maybe factors normal to to right? it, what get better guess, a backdrop. Is some a is it to including of a back

I there's out ask, factors because conflicting there. some

pretty mid-XX that to you utilization and and There the steel again, one reshoring for steel is infrastructure market. seem projects the be supporting On a we cited better automotive hand, XX. rate robust US have some utilization

So I electrode guess is utilization the question? why so are overall rates low,

Tim Flanagan

Yes.

start take will more XXXX. on impacting volumes. to perspective, volume back really XXXX, in if think to a factors by what volume from you I asked normalized you sales reflecting there's it two So right, get And

us. world that's you've on First which of of of macro is of of regions Monterrey differently, right? got kind environment, each kind then got of you've overall situation, the unique the the the weighing kind And to all,

that's infrastructure it I construction not spending a more the still there's with continuing you're then same a as performing some robust level You broadly to at seeing And is of anticipated see US $X automotive year market be spending but front. ago more And plus strong billion optimistic pretty performance noted. on you a was outlook the that in for strong. think

year world, what the Association's Jeremy the kind to macro little the X% was outlook other mentioned, Conversely, in in the regions think you Steel a more of challenged. if previously think it's I reduction European of I they year reduction. current for look a down at versus environments being bit a revised X% thought

I by region and things the So, affecting you demand. to go of dynamics really understand combination region think that's how those electrode have to the

Monterrey, have the we and of and year second as operation I we the our as XXXX. we the we're to that process engaged to customers expect largely think with the moved inventory negotiation taking year, challenge the strategy we be far, pin the continuing this think off half in into of commercial the on strong plant work here with mitigation fully fact the through head thus table pin rebuilding in our that

determination return the see really where recovery. So, the each macro more is and things levels, those and environment of you regions normalized to of things of how how

World of optimistic Association, demand all of again better for of will each pretty think a overall Association, year. be in XXXX this I Steel to predicting are the world, than magnitudes orders different which electrodes perspective an us European gives of from the outlook the recoveries Steel regions

Arun Viswanathan

Thanks for this just But further. Okay. to again understand that.

have putting of -- those aside rates. still I following utilization Monterrey, much -- So, why just electrode not a the global been half versus mean kind lower there you say would would steel absorbed? some and I'm imply your utilization are being capacity still rate additions that and second I'm

potentially are I'm XXXX. just exactly following utilization not So electrode in low rates so why even the

Tim Flanagan

Yes.

more going these the electrodes. plants people to that down and buying utilization factor as in pull not inventories, first the this to the situation of about broadly for demand time at right? actively some to working our extent that then XX on forward call caused other the we our carrying. what yet, same months. impact electrodes levels the on that, Monterrey think of I we're graphite that's So inventory to talked and is out foremost customer also, we've the well, over again, seeing utilization And that's on and last inventory the the that rates going built weigh last utilization our rates we're But work and we're

Arun Viswanathan

And Okay. one last then. one That's just helpful.

you'll kind As you it, look then leverage here, appears you see commercial is how Would profitability running, fixed Monterrey there? other is the so and of of of characterize and renegotiations. improve half bottom. out then look challenging that out you coming you're up XXXX XXXX. utilization through through attention also also pretty at your slowly kind and volumes and some to you've as that XXXX some cost as and back thus EV it a a And gone into and out you're world? side into time of And that improve that and of first allowing looking I maybe some you the you're the initiatives of to if going future mean, markets on redirect is the your potential

Marcel Kessler

Yeah.

So we I too. evolving see exactly that's how how think the we the situation situation see

by can the we clearly think today key worked as lingering primarily XXXX. has half the far first this of as driven year this driver low right? the bottom that here for may fact will be through the the is half, in effect And second half I see there the some by second while completely been be of performance Yes. the Monterrey

we agree completely with your So assessment that.

Arun Viswanathan

there? And some the on? working of elaborate about provide you on the update EV you're on what And what initiatives maybe an Could side.

Marcel Kessler

agreements significant potential capacity. firm any to expand or So as I we terms speak have that of to investment in customers can my remarks, commitments mentioned made in with not We prepared right?

Seadrift However, two we we with continue ways, third is battery use are anode at testing in right? One work for coke to the needle material. several parties as

end, this suited of we well prepared Seadrift confident very And also at forward. produce the an going we we per very my as application filed are here expand can remarks have that And application. Seadrift just to is for that I to capacity

findings. third production by to assets we encouraged Secondly, our graphitize to exclusively currently electrode very use be well we in for that that materials. parties case use material And that graphitization for battery the as with working are

applications. the and the graphitization functionality can Given that the the produce for quality suited we very in of capability furnaces power battery well is our

So about be to fronts. can. are we to more on And they're share as both going happy very we progressing this

Arun Viswanathan

Thanks.

Operator

from question Bill ahead. next comes of The you. Peterson Thank Please JPMorgan. go

Bill Peterson

Good Hi. that revenue taking step down my but based Thanks on flat would morning. annual LTA The with guidance half question. imply for we increased fair a and both assumption. so volumes in cadence it about Yeah. quarter-on-quarter the think should your if volume And pricing the for in and the how a year? of Is half year. the back back of LTA the the

Tim Flanagan

Yeah.

the So guidance the year. full we haven't changed for

extend worked right contracts I those that's price. the a suggest all mix the have of would of A blend these the you're with contracts we math do math when going customers, you right? lot to lower think kind are of out. And slightly and Not are be customers extended really those and LTA to same. driven by that contracts been over time

provided fall think I LTA we'll within that side. on ranges well So the we've the

Bill Peterson

I generation dividend the this cash for some we're flow assuming looking rationale year into can free you But suspension. need should that. trying and at get of I for Okay. to rationale. the you I'm at? provide maybe in Thanks bottom understand use for reinstated a see cash. And to feel would additional look that what the color next the as improve to And guess, we have capital or I allocation at guess, improvement

Marcel Kessler

Yeah.

$X.XX the the is also headwinds, liquidity making think navigate current I short-term with capital the the on on consistent our targeted and maintaining business sufficient to to one suspension per hand of for So, focusing position right? our investments allocation priorities, It's dividend share growth. long-term

future, dividend declarations are you Regarding the Board. always as in reinstated the know discretion dividend being at of possibility the of the

speculating from happen. refrain will I So might point at what that

Bill Peterson

Okay. forward the following to Good for look the I'll Thanks color, progress. and luck.

Marcel Kessler

your for question. you Thank

Operator

Curt you. of Suisse. next comes Woodworth Please ahead. question Thank The Credit from go

Curt Woodworth

pricing fixed Yeah. mentioned on under in cost terms a you tar about Thanks. some structure a inventory, normalized assume if could should can of respect how you kind utilization and normalized the us of Good run coal give absorption cost to So look stuff you like the that decant spot were of what oil of the like your basis? think of With look pricing today? should to sense and more morning. and some the we what

Tim Flanagan

thanks mean, Curt. question, for I and -- Yes. so the

think I ton that if basis. on $X,XXX been a we've in cash of you look years couple back historically COGS a a

our commodity prepared I improvement of that seen that as able you remarks markets number should some the decant coal helping structure our so we're we've drive kind certainly, price be will seeing think fact is into beneficial We mentioned market. movements tar of to in given to as the move the we that much and see towards of oil just continue normalization market-driven. I us And back us XXXX. cost help areas those are a of as

Other structure, elements stickier be tend inflation those you work of in costs particular all out. the that so labor, to won't in of cost

-- likely not So, while to back that aspirational get going without we'll or investment. we're any get to the -- level there time to soon $X,XXX

a as and manage with volume, we'll we'll head fixed some year better, continue seeing the better. of to in reduction of significant So, period costs to leverage return we see our work, the the diligently costs, get as or we've variable as done. fixed on costs, again The we're into next benefit gets stuff

continue keep to and year cost-effective efficient plants as and our possible. as this So

into the heading all good level. that we'll we back get may see movement $X,XXX So, but year, next to not way

Curt Woodworth

does higher the what rate question at data. production And kind global steel looking of of decline much then, Arun's utilization. more volumes consistent sales your in we're just seem Okay. with seeing It versus

at well. you more Monterrey, industry or your like Do China people of your of thinking comment one Do market of have you've position feel recovery higher? this think the like and from intact, and you are with and import XXXX share? and gyrations feel the the as all type that still as just I is industry your on you So, lost market recycles benefit contract all share? there's to in relationships respect arguably Can probably India, in should the pressure generally about you terms questions

Marcel Kessler

Yes.

ability talked we've of don't last enough I in I and market that late have XXXX, worst even XXXX, for we we that thoughts. second of was that can the the half, to During So, We first the to couple on suspension. half the and possible a volumes regards time right? directly especially, about in I around right? some on right? think, the think, in of detail transparency extent impact some negotiate the two for maybe shares. So, lost that. suspension that to think calls, In Monterrey, don't comment

So steel electro that and underperformance the rate. the utilization driver and the versus here, plant is the what really utilization disconnect key you're between highlighting rates the impact of

time, Monterrey, of XXXX. that window in think impact it's late critical the loss during most I indirect the negotiation the of negotiation

Curt Woodworth

investment. Understood. to million is just would operate a how subscale more you exactly would the at today? but potential then get -- a you do in that maybe $XXX how thing, would I look there CapEx try comment, past think of on of fee I Seadrift, facility, it to a expansion like? Okay. where and given actually your the type I would structure, investment for asset. that think the can't you just capital remember JV then get or And But work the with there's to can that replication kind of some Is

Marcel Kessler

we're So, we right? replication commented have the in what expensive That's Seadrift, That not a very of right? a on that, past, undertaking be here. will

way, We a filing in relatively Western most with significant of we are one are such of capital-efficient way existing in set modest for facilities can And of is, that this So, the facility. Seadrift we is a that get add world, two investment, the only capacity an capacity. needle believe expansion as providers to our know, in increase right? we a permit coke. up the a And application you the essentially capital Western

nameplate a XXX,XXX of a Seadrift of tons bit specific, more metric needle coke. currently has capacity be XXX,XXX to So

manufacturing would of the which needle and coke others With what increase the rabbit by expansion, of electrodes. into go graphite green that and coke. needle is we we anticipated to we calcined hole, is but call a typically technical don't approximately XX%, want I combination use a for calcined what

And battery cases. with -- done, material all battery materials coke, is needle but not green manufacturing in often

production the much would of the to of capital. that needle how production much modest actual expansion or will it's with depend we here an asset electrodes. additional increase battery be on reputation go of are So, actually point blend about coke to But Seadrift out multi-hundred not versus that a million existing would what that the talking of be, relatively facility the materials calcined green how versus would but important of

Curt Woodworth

you. Thank Okay.

Operator

question you. comes next The ahead. go Thank from of Alex Citi. Please Hacking

Alex Hacking

if Yes. aren't market that have Good the buying. right in the I morning. Could sense some But prices you maybe discuss now? really helpful. be I mean will in where guys are you you think you market needle understand coke

Tim Flanagan

premium below rather it we're right It's over a dollars super been of volatile few more $X,XXX now hundred a about for years. premium coke the for seeing that range Sure. the grades. couple for commodity the last normal in Yes. But maybe of needle

that in it's the trends range pretty low that seen. somewhere we've on historical So

a the trended that we was A that well some down year the anticipate And lately approaching it as but the looking were at up a ago, market. EV ton slack the in for office strengthening electric below $XXXX things of $X,XXX ton. we've year picks before from market

Alex Hacking

Okay. Thanks. circling couple different that And kind times, a slightly maybe a asked That's helpful. of guess a way. but question been in ask on around I then of I'll

running low. running rate to at little the Like entire utilization Monterrey XX% XX% seems the seems at ability the than that is I rate the others as like are a contract. year, now running rate? mean, going at. to right of in look it think originally is industry a I and your It you to some your half do utilization half of first think utilization If was for electrode XX% second XX% was lower what implied be you it it's really to your issue

Tim Flanagan

going to market, as into various they've competitors Yes, in on calls Alex, I recent publicly specifics XX% in that not utilization well. below of capacity running said our their the or point but would regions at are

I at now. utilization right electrode as low a is rate whole think industry a running the whole So fairly

Alex Hacking

Okay. many you to too that want may. tariffs ask just I I don't one That's then on prospect? that? of benefiting Is how impact Thanks. and discuss market U.S. the something I that more the see see you And if then helpful. guess Thanks. questions. Could maybe you

Marcel Kessler

Yes.

various And of limiting but imports Chinese, the these European import the levels it's both the volumes tariffs significant. Indian regions. there tariffs effective In case imports. and of well think as depending are the provider, the I in against are place in electrodes as Union case they they both Chinese quite from have the have of on the the as as covering U.S. well So, the and European it's been size of market Union U.S., imports. quite do In

So both for are GrafTech. important quite

Alex Hacking

I mean imports have a the decline kind material tariff in the you unfortunately seen we track have Chinese -- place? but put in was a I of data don't seen since

Tim Flanagan

Yes.

Chinese an low imports those they time look immaterial are when what I don't tariffs into to think like place. relatively frame in I basis. the know on or U.S. XXXX were overall put prior

Marcel Kessler

Yes. But way there these supply market result of no much years as And -- is its has into recent not change a there's finding U.S. there in the that. Chinese tariffs. on really

Alex Hacking

Okay.

that in have for the some thought the change I'll offline. Thanks there tariff mistaken right. for was I with been reason a structure. question. I discuss Sorry All you

Marcel Kessler

Thanks.

Operator

Thank you.

Bank ahead. Landa Please last from go America. of Our of Abe question comes

Abe Landa

taking the Good morning. for question. Thanks

of I volumes to could operating Just maybe like want lower in everything the that, kind where and know well. maybe is of but over be terms maybe of year on I there we of like approvals efficiently finalized the last given are that verify noise it the -- all kind update the to quarter not saw now pushed you just in Monterrey I all on as want as as right just fourth

Jeremy Halford

Yeah. Thanks.

way suspension. is in the site was So yes, regular that the prior it to production Monterrey same running the

levels. As operate the emission always, we required in continue to

we're with increasing -- significantly In frequency emission interactions to addition focusing of the agencies. regulatory the the on also our levels compliance with

neighbors community we've where, pillar our for over in surrounding the as community years. XX an of economic well been that As

that And happy to all, so plant legislative to way running for I'm it continue of is the with the requirement. and say to we need comply

Abe Landa

other would following other those of share? timeframe, from longer-term And well. going cetera on running Monterrey of it's but just how early go? I others up typically little as fourth more, type up different early any I imagine, graphite got -- of kind that early given know It returning and recapturing just indications sources. do of some some of -- of electrodes on LTA guess, back back to discussions discussions more you have there kind maybe people I are of could is be customers et contracts. Are quarter-ish that some a questions your

Marcel Kessler

into which highlighted as we out. agreements we are have several five typically call, the agreements, service call of I well call on we this to entered multiyear as have on years So what previous three think electrode

several United States customers the have and We in Europe. in both

they the from of different Now, more They quite are are right? obviously in the terms their LTAs to different structure in pricing. closely and pricing, current very spot tied

a at the premium it. long-term are given we Now nature of

the includes us. protections and structure is for price over that the some So typically current inflation spot essentially premium

continue of relying take them. or service through agreements XXXX. Now, in reliable our We be material a us light be for customers as these But we to that supplier ESAs will it material expect we overall they of challenges the electrode volume yet of -- on high-quality had not Monterrey we've call with great comfort in as terms are XXXX. we in multiyear don't do actually

Tim Flanagan

start and just the at is Jeremy And our of we here third out start add we But end just look sit where to specific quarter. of that I that Monterrey today commented, XXXX, the standpoint fourth as well. bulk the it's would quarter the into from negotiations running fact the as the probably fact volumes about talking those to to given premature that

rebuilt our pin We've inventory. stock

plant well. XXXX up years to at St. engaged process in execute We plans continue Marys the that get We as be and cycle. to we as absent on in past to fully expect have operational the been that

into good heading pretty feel we So negotiation window. that

Jeremy Halford

else have the supply day now of producers only Company. provide nobody only We've And to can. company fact surety continue the the our only X the we I pin customers think got at the end that Tier a one can will value right? at electrode We're and -- of so the of makes multiple sites. appreciate in world that proposition in

as as the product. through our And both technical regions. service -- service customer industry-leading have architect our in We their representatives present we're well

commercial in We operating only an several presence have a not regions. also but

our So commercial we into that support support negotiated we -- that as to season. our head expect efforts

Abe Landa

we the kind into call, how of that during next XXXX? around of should negotiations and kind those we expect going expect an early more are And color should into -- look and like

Tim Flanagan

Yeah.

better I environment macro sense at well. and XXXX have will to it of as closer the a be quarter think, we'll understanding time that an one and

Abe Landa

Thank you.

Operator

over Mr. This you. will concludes Thank to call for session. back Kessler, I the remarks. now hand our question-and-answer closing

Marcel Kessler

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

Operator

for Ladies call and participation. the your We And you your this conference please for does thank you that today. conclude gentlemen, ask disconnect lines.

GrafTech International (EAF) 4 Aug 232023 Q2 Earnings call transcript