GrafTech International(EAF)2024-02-14 18:44Financial Data and Key Metrics Changes - Net sales in Q4 2023 decreased by 45% year-over-year, primarily due to a shift from long-term agreements (LTA) to non-LTA sales, along with lower overall volume and pricing [61][94] - Adjusted EBITDA was negative $22 million in Q4 2023, compared to positive adjusted EBITDA of $80 million in Q4 2022, reflecting the impact of lower sales volume and pricing [64][94] - The company reported a net loss of $217 million or $0.85 per share, which included a goodwill impairment charge of $171 million and a lower of cost or market inventory valuation adjustment of $12 million [94] Business Line Data and Key Metrics Changes - Production and sales volume for Q4 2023 were approximately 24,000 metric tons, with 5,000 metric tons sold under LTAs at a weighted average realized price of $8,500 per metric ton, and 19,000 metric tons of non-LTA sales at approximately $4,800 per metric ton [38][61] - The company anticipates a modest year-over-year improvement in sales and production volume in 2024, which is expected to positively impact cash costs per metric ton [68][97] Market Data and Key Metrics Changes - Steel production in the Americas was down 3% in 2023, with the U.S. steel production remaining flat year-over-year [37][59] - Capacity utilization in Europe ended the year at approximately 50% to 53%, indicating a more challenging economic environment compared to the U.S. [11][12] - The weighted average price for non-LTA sales represented a more than 20% year-over-year decline, reflecting ongoing pricing pressures in the market [92] Company Strategy and Development Direction - The company is implementing a cost rationalization and footprint optimization plan, which includes suspending production at the St. Marys facility and reducing corporate overhead, expected to drive $25 million in annualized cost savings [33][54] - The company remains optimistic about long-term prospects, driven by decarbonization efforts in the steel industry and anticipated growth in electric arc furnace (EAF) steel production, which is expected to increase graphite electrode demand [34][70][102] Management's Comments on Operating Environment and Future Outlook - Management noted that the current economic environment is characterized by uncertainty and geopolitical conflicts, impacting industrial production and demand for graphite electrodes [27][50] - The company expects continued softness in the commercial environment into 2024, but remains confident in its ability to navigate these challenges and capitalize on future market recoveries [30][70] Other Important Information - The company ended the year with a liquidity position of $289 million, consisting of $170 million in cash and $112 million available under its revolving credit facility, with no anticipated need to borrow in 2024 [69][99] - The company has proactively reduced inventory by over $100 million in 2023, resulting in positive free cash flow for the year [30][99] Q&A Session Summary Question: What is the outlook for cash costs and realized pricing in 2024? - Management indicated that cash costs are expected to decline towards the lower $4,000 range as volumes pick up, aligning with current spot pricing [80][111] Question: How is the company managing working capital and inventory in 2024? - The company anticipates a balanced approach to working capital, with opportunities to further reduce inventory levels, although some negative impact is expected as sales and production volumes increase [112][132] Question: What is the status of customer relationships following the transition from long-term agreements? - Management expressed satisfaction with customer relationships and engagement during the negotiation process, emphasizing the value proposition offered to customers [114][134] Question: How does the company view its market share in the U.S.? - While specific market share figures were not provided, management noted successful negotiations with customers and a positive outlook for the U.S. market [148] Question: Are there plans to shut down additional plants beyond St. Marys? - Management stated that the current actions taken are deemed sufficient to navigate the market conditions, with no immediate plans to shut down other plants [150][124]