GrafTech International(EAF)2024-11-12 21:27Financial Data and Key Metrics Changes - In Q3 2024, the company reported a net loss of $36 million or $0.14 per share, with adjusted EBITDA at negative $6 million compared to positive $1 million in Q3 2023 [42] - Net sales decreased by 18% year-over-year, driven by lower pricing and a shift in the business mix from long-term agreements (LTA) to non-LTA volumes [39] - Cash costs per metric ton decreased by 28% year-over-year, with cash COGS per metric ton at just under $4,200, leading to an updated full-year guidance for a 20% year-over-year decline [20][45] Business Line Data and Key Metrics Changes - Sales volume increased by 9% year-over-year and 13% year-to-date, despite a soft demand environment [14][12] - The company sold 26,000 metric tons in Q3 2024, with approximately 23,000 metric tons from non-LTA sales at an average price of $4,100 per metric ton, and 3,000 metric tons from LTAs at $7,700 per metric ton [37] - Initial trials of new 800-millimeter electrodes were successful, indicating potential for future growth in this niche market [18] Market Data and Key Metrics Changes - Global steel production outside of China declined by 2% year-over-year, with North America seeing a 5% decrease in steel production [32][33] - The global steel capacity utilization rate outside of China fell to 65%, the lowest in seven quarters [32] - The company expects a slow recovery in global steel market demand, with projected growth of 3% for steel demand outside of China in 2025 [60] Company Strategy and Development Direction - The company is focused on improving liquidity through a new financing transaction, which includes a $275 million delayed draw term loan and an extension of existing debt maturities [24][49] - The strategic flexibility gained from the financing will allow the company to pursue growth opportunities, particularly in the Seadrift asset, which is critical for long-term growth [13][28] - The company aims to capitalize on the transition to electric arc furnace steelmaking, which is expected to drive demand for graphite electrodes [63][64] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current challenging environment in the steel industry but remains optimistic about long-term growth opportunities [59] - The company anticipates low double-digit sales volume growth in 2025, driven by market recovery and customer engagement strategies [16][40] - Management emphasized the importance of a healthy pricing environment for the sustainability of the graphite electrode industry [62] Other Important Information - The company ended Q3 2024 with total liquidity of approximately $254 million, consisting of $141 million in cash and $112 million available under the revolving credit facility [48] - The anticipated demand growth for petroleum needle coke, a key raw material, is expected to benefit the company due to its vertical integration [66][68] Q&A Session Summary Question: Near-term environment and pricing dynamics - Management noted a steady decline in spot pricing, with current weighted average pricing at about $4,150 per ton, while needle coke prices have remained stable [75][76] Question: Cost control and growth expectations - Management highlighted significant progress in controlling costs, with expectations for continued cost reductions and increased volumes in 2025 [80][83] Question: Production and sales strategy - Management confirmed that production and sales will align moving forward, with plans to rebuild inventory in line with growth expectations [101][102] Question: Outlook for global steel utilization rates - Management expects a gradual recovery in sales volume and demand, with low double-digit growth anticipated for 2025 [104][106] Question: Footprint and asset management - Management expressed confidence in the current asset portfolio and indicated that any changes would depend on long-term market conditions [114][116]