GrafTech International(EAF) - 2025 Q2 - Quarterly Results

Report Overview Highlights GrafTech achieved strong Q2 2025 results with 12% YoY sales volume growth, 13% YoY cash cost reduction, positive EBITDA, and robust liquidity Second Quarter 2025 Summary | Metric | Q2 2025 Value | | :------------------------------------ | :------------ | | Sales volume (thousand MT) | 28.6 | | Net sales (in thousands) | $132,000 | | Net loss (in thousands) | $(87,000) | | Loss per share | $0.34 | | Adjusted EBITDA (in thousands) | $3,000 | | Net cash used in operating activities (in thousands) | $(53,000) | | Adjusted free cash flow (in thousands) | $(53,000) | | Total liquidity (in thousands) | $367,000 | - Sales volume grew 12% year-over-year for Q2 2025, reaching GrafTech's highest sales volume performance since Q3 2022[4] - Sales volume in the United States grew 38% year-over-year for Q2 2025, reflecting a strategic shift towards this key region[4] - Achieved a 13% year-over-year reduction in cash costs per metric ton (MT) for Q2 2025[4] - Generated positive EBITDA in Q2 2025, indicating continued progress towards normalized profitability[4] CEO Comments CEO Timothy Flanagan highlighted strong execution, driving volume growth and market share, and expressed confidence in long-term graphite electrode demand from steel decarbonization - The Company continues to deliver on key commercial, operational, and financial objectives, reflecting strong execution of strategic initiatives and focus on managing controllable areas[5] - Driving strong volume growth and expanding market share in key regions, despite a challenging commercial environment, demonstrates the strength of the customer value proposition[5] - Longer term, decarbonization efforts will continue to reshape steelmaking, driving long-term demand growth for graphite electrodes due to the shift toward electric arc furnace steelmaking[5] Financial and Operational Review Second Quarter 2025 Financial Performance Net sales decreased 4% YoY to $132 million due to lower prices. Net loss widened to $87 million, impacted by a $43 million non-cash tax expense. Adjusted EBITDA declined to $3 million Key Financials (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (YoY) | | :-------------------------------- | :--------------------- | :--------------------- | :----------- | | Net sales | $131,840 | $137,327 | -4.0% | | Net loss | $(86,886) | $(14,752) | -489.0% | | Loss per share | $(0.34) | $(0.06) | -466.7% | | Adjusted EBITDA | $3,471 | $14,493 | -76.0% | | Net cash used in operating activities | $(53,236) | $(36,855) | -44.4% | | Adjusted free cash flow | $(53,337) | $(43,834) | -21.7% | - Net sales decline primarily reflected a year-over-year decrease in weighted-average realized price, partially offset by higher sales volume[6] - Net loss for Q2 2025 included a $43 million non-cash income tax expense related to the establishment of a full valuation allowance against the Company's United States and Switzerland deferred tax assets[7] - Adjusted EBITDA decline primarily reflected lower weighted-average realized prices, partially offset by a 13% reduction in cash costs on a per MT basis[8] Operational and Commercial Update Sales volume increased 12% YoY to 28.6 thousand MT, the highest since Q3 2022, driven by a strategic shift towards the US market, with production volume also growing 10% YoY Key Operating Metrics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (YoY) | | :-------------------- | :--------------------- | :--------------------- | :----------- | | Sales volume (MT) | 28.6 | 25.5 | +12.2% | | Production volume (MT) | 29.4 | 26.8 | +9.7% | | Production capacity (MT) | 45.0 | 45.0 | 0.0% | | Capacity utilization | 65 % | 60 % | +5 ppts | - Weighted-average realized price was approximately $4,200 per MT in Q2 2025, a 12% decrease compared to Q2 2024 but a sequential increase of 2% compared to Q1 2025[9] - The year-over-year decline in realized price was partially mitigated by the initiative to actively shift more sales volume to the United States, which remains the strongest region for graphite electrode pricing[9] Capital Structure and Liquidity GrafTech maintained a strong liquidity position of $367 million as of June 30, 2025, with gross debt at $1,125 million and no substantial maturities until December 2029 Liquidity and Debt (as of June 30, 2025) | Metric | Amount ($ millions) | | :------------------------------------------ | :------------------ | | Total liquidity | $367 | | Cash and cash equivalents | $159 | | Availability under revolving credit facility | $108 | | Availability under senior secured first lien delayed draw term loans | $100 | | Gross debt | $1,125 | | Net debt | $966 | - The strong liquidity position continues to support the Company's ability to manage through near-term, industry-wide challenges[11] - Gross debt was $1,125 million with substantially no maturities until December 2029[11] Outlook GrafTech anticipates a 10% YoY sales volume increase for 2025, driven by market share regain and US demand, alongside a 7-9% YoY decline in cash costs per MT, while managing challenging pricing dynamics - Expect an approximate 10% year-over-year increase in sales volume for 2025 on a full-year basis, continuing to regain market share[13] - Project a 7-9% year-over-year decline in cash costs per MT for 2025 on a full-year basis, exceeding previous guidance of a mid-single digit percentage point decline[15] - Challenging pricing dynamics persist, leading to actions to optimize the order book and actively shift sales volume to regions with higher average selling prices, particularly the United States[14] - Longer term, decarbonization efforts in the steel industry are expected to increase adoption of electric arc furnace steelmaking, driving long-term demand growth for graphite electrodes[17] - Anticipate full year 2025 capital expenditures to be approximately $40 million[16] Company Information About GrafTech GrafTech International Ltd. is a leading manufacturer of high-quality graphite electrode products essential for electric arc furnace steel production, uniquely vertically integrated into petroleum needle coke - GrafTech International Ltd. is a leading manufacturer of high-quality graphite electrode products essential to the production of electric arc furnace steel and other ferrous and non-ferrous metals[20] - The Company is the only large-scale graphite electrode producer substantially vertically integrated into petroleum needle coke, its key raw material, providing competitive advantages in product quality and cost[20] Conference Call Information Information for the Q2 2025 earnings call held on July 25, 2025, including webcast and dial-in details, and where to find archived replays and SEC filings - Earnings call held on July 25, 2025, at 10:00 a.m. (EDT)[19] - Webcast and accompanying slide presentation available on the investor relations website: http://ir.graftech.com[19](index=19&type=chunk) - Complete financial reports filed with the SEC and other information available at: www.GrafTech.com[19](index=19&type=chunk) Non-GAAP Financial Measures Non-GAAP Definitions and Limitations This section defines various non-GAAP financial measures used by GrafTech and outlines their limitations as analytical tools, emphasizing they should not be considered in isolation from GAAP results - Non-GAAP financial measures include EBITDA, adjusted EBITDA, adjusted net loss, adjusted loss per share, free cash flow, adjusted free cash flow, net debt, and cash cost of goods sold per MT[30] - Adjusted EBITDA is the primary metric used by management and the Board of Directors to establish budgets and operational goals for managing the business and evaluating performance[31] - Non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of results reported under GAAP[33][38] NON-GAAP RECONCILIATIONS Provides detailed tables reconciling non-GAAP financial measures to their most directly comparable GAAP measures for Q2 2025, Q1 2025, Q2 2024, and the six months ended June 30, 2025 and 2024 Reconciliation of Net Loss to Adjusted Net Loss (in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :------ | :------ | :------ | :--------------------------- | :--------------------------- | | Net loss | $(86,886) | $(39,351) | $(14,752) | $(126,237) | $(45,621) | | Total non-GAAP adjustments pre-tax | $968 | $6,563 | $1,762 | $7,531 | $9,041 | | Income tax non-GAAP adjustment | $(42,624) | — | — | $(42,624) | — | | Income tax impact on non-GAAP adjustments | $(1,047) | $1,367 | $574 | $320 | $2,145 | | Adjusted net loss | $(42,247) | $(34,155) | $(13,564) | $(76,402) | $(38,725) | Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :------ | :------ | :------ | :--------------------------- | :--------------------------- | | Net loss | $(86,886) | $(39,351) | $(14,752) | $(126,237) | $(45,621) | | EBITDA | $3,435 | $(4,874) | $12,731 | $(1,439) | $5,646 | | Adjustments | $37 | $1,202 | $1,762 | $1,238 | $9,041 | | Adjusted EBITDA | $3,471 | $(3,672) | $14,493 | $(201) | $14,687 | Reconciliation of Cash Cost of Goods Sold per MT (in thousands, except per MT data) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :------ | :------ | :------ | :--------------------------- | :--------------------------- | | Cost of goods sold | $129,885 | $110,765 | $131,970 | $240,650 | $267,174 | | Cash cost of goods sold | $107,354 | $90,206 | $110,021 | $197,560 | $220,763 | | Sales volume (in thousands of MT) | 28.6 | 24.7 | 25.5 | 53.3 | 49.6 | | Cash cost of goods sold per MT | $3,754 | $3,652 | $4,315 | $3,707 | $4,451 | Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED BALANCE SHEETS Total assets decreased from $1,224.3 million at December 31, 2024, to $1,112.0 million at June 30, 2025, primarily due to reduced cash, while stockholders' deficit significantly increased Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $158,543 | $256,248 | | Total current assets | $566,451 | $636,797 | | Net property, plant and equipment | $488,354 | $482,699 | | Total assets | $1,112,026 | $1,224,274 | | Total current liabilities | $114,426 | $139,929 | | Long-term debt | $1,090,811 | $1,086,915 | | Total stockholders' deficit | $(168,435) | $(78,902) | | Total liabilities and stockholders' deficit | $1,112,026 | $1,224,274 | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For Q2 2025, net sales were $131.8 million, a 4% decrease YoY, with gross profit significantly down to $62 thousand, and net loss widening to $86.9 million, or $0.34 per share Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------- | | Net sales | $131,840 | $137,327 | -4.0% | | Cost of goods sold | $129,885 | $131,970 | -1.6% | | Gross profit (loss) | $62 | $3,976 | -98.4% | | Operating loss | $(14,553) | $(2,679) | -443.2% | | Interest expense | $25,418 | $15,609 | +62.8% | | Loss before income taxes | $(35,679) | $(15,344) | -132.5% | | Income tax expense (benefit) | $51,207 | $(592) | N/A | | Net loss | $(86,886) | $(14,752) | -489.0% | | Basic loss per common share | $(0.34) | $(0.06) | -466.7% | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Net cash used in operating activities increased to $53.2 million in Q2 2025, while net cash used in investing activities decreased to $3.9 million, resulting in a $57.2 million net decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------- | | Net cash used in operating activities | $(53,236) | $(36,855) | -44.4% | | Net cash used in investing activities | $(3,905) | $(6,902) | +43.4% | | Net cash used in financing activities | $(27) | $(19) | -42.1% | | Net change in cash and cash equivalents | $(57,168) | $(43,776) | -30.6% | | Cash and cash equivalents at end of period | $158,543 | $120,726 | +31.3% | - Capital expenditures for Q2 2025 were $3.9 million, a decrease from $7.0 million in Q2 2024[45] - Net change in working capital resulted in a cash outflow of $39.7 million in Q2 2025, compared to an outflow of $36.4 million in Q2 2024[45] Legal Disclosures Cautionary Note Regarding Forward-Looking Statements This section advises that the press release contains forward-looking statements subject to risks and uncertainties, cautioning against undue reliance as actual results may differ materially due to various factors - The press release contains forward-looking statements reflecting current views on financial projections, future operations, economic performance, and liquidity[24] - These statements are subject to various risks and uncertainties, including dependence on the global steel industry, cyclical business nature, economic conditions, and supply chain disruptions[24] - Readers are cautioned not to place undue reliance on forward-looking statements, as actual results may differ materially from expectations[27]