GrafTech International(EAF)2021-02-05 19:31Financial Data and Key Metrics Changes - Fourth quarter 2020 net sales were $338 million, an 18% sequential improvement from the third quarter [19] - Full-year EPS was $1.62, with fourth quarter net income of $125 million, up 33% from the third quarter [21] - Fourth quarter adjusted EBITDA was $176 million, up 15% from the third quarter [21] - Free cash flow for the full year was $528 million, with fourth quarter free cash flow of $142 million, also up 15% from the third quarter [21][22] Business Line Data and Key Metrics Changes - Production and sales volumes of graphite electrodes improved to 36,000 metric tons produced and 37,000 metric tons shipped in the fourth quarter [19] - Fourth quarter LTA shipments were 31,000 metric tons, while full-year LTA shipments totaled 113,000 metric tons [20] Market Data and Key Metrics Changes - Fourth quarter global steel production outside of China improved to 211 million tons from 191 million tons in the third quarter [13] - USA hot-rolled coil values were approximately $1,160 to $1,180 per ton, up over 75% in the fourth quarter [14] - Black Sea billet prices were approximately $540 to $560 per metric ton, up over 30% in the fourth quarter [14] Company Strategy and Development Direction - The company aims to maintain a strong balance sheet and reduce debt while investing in high-return operational improvements [25][36] - GrafTech focuses on providing superior services and solutions to customers, with a commitment to health and safety as a core value [6][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in the steel market and its positive impact on the graphite electrode market later in 2021 [14][30] - The company anticipates continued cash flow generation in 2021, primarily directed towards debt reduction [25][36] Other Important Information - GrafTech reduced its debt by $400 million in 2020 and ended the year with total liquidity of approximately $392 million [23][24] - The company plans to publish its second annual sustainability report later in the year [12] Q&A Session Summary Question: Update on spot pricing in electrodes and needle coke - Management noted a lag in pricing improvements but expressed optimism for 2021 as pricing is expected to improve [30] Question: Current inventory position with customers - Management indicated that inventory levels have been significantly worked down and are approaching normal levels [31] Question: Expectations for merchant and spot volumes - Management is cautiously optimistic about an increase in spot business in 2021 compared to 2020 [32] Question: Capital allocation priorities for 2021 - The focus will be on maintaining a strong balance sheet and reducing debt, with potential for returning cash to shareholders later [36] Question: Optimal capital structure and potential for shareholder returns - Management is comfortable operating below a leverage level of 2x to 2.5x and will assess the timing for returning cash to shareholders [40][41] Question: Volume expectations for the first quarter - Management expects steady improvement quarter-over-quarter throughout the year, with no significant increase in Q1 [46] Question: Future capital projects and CapEx levels - Management views the current CapEx level as sustainable and does not foresee significant increases in the near future [49] Question: Long-term contracts and customer interest - Management plans to continue offering long-term contracts and believes there is still demand for such arrangements [51][52]