Yahoo Finance GrafTech International Ltd (EAF) Q1 2024 Earnings Call Transcript Highlights: Navigating ...
Net Loss: $31 million
Earnings Per Share (EPS): -$0.12
Adjusted EBITDA: Breakeven, compared to $15 million in Q1 2023
Production Volume: 26,000 metric tons
Sales Volume: 24,000 metric tons, up 43% year-over-year
Weighted Average Realized Price: $4400 per metric ton for non-LTA sales
Net Sales: Decreased 2% year-over-year
Adjusted Free Cash Flow: Negative $11 million
Liquidity Position: $275 million
Anticipated Annual Cost Savings: $25 million from cost reduction initiatives
Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Could you help us understand the relative profitability differences between your U.S. operations and the facility in Mexico? Also, are there discussions around potentially taking more permanent capacity actions in Europe to accelerate fixed cost reduction? A: Timothy Flanagan - GrafTech International Ltd - President, Chief Executive Officer, Director: In Europe, the market remains stagnant with steel demand down about 15% from 2021. We've taken steps to align our production capacity with demand and will continue to rationalize production. We're taking normalized summer outages in Europe to match production with demand forecasts. We consider our production network globally, not just regionally, focusing on cost control and plant efficiency.
Q: Regarding the cost guidance for a mid-teens decline, could you elaborate on how byproduct benefits this year and the impact of the arbitration settlement? A: Timothy Flanagan - GrafTech International Ltd - President, Chief Executive Officer, Director: The by-product credit is backed out of our cash COGS per ton, so it doesn't factor into the cost numbers we're putting out. Catherine Hedoux-Delgado added that the expected cost decrease is due to overachievement in Q1 and ongoing initiatives to rationalize our fixed cost structure. Regarding the arbitration, all claims against GrafTech were dismissed, and we were awarded reimbursement of legal fees and expenses, expected to be about $9 million.
Q: How do you reconcile the weaker price environment in the U.S. given relatively stable utilization trends? A: Timothy Flanagan - GrafTech International Ltd - President, Chief Executive Officer, Director: The U.S. market is stable from a demand perspective, but increased competition is evident as manufacturers from weaker markets push towards the U.S. This competition affects pricing, despite stable demand.
Q: Could you comment on the heightened level of competitive activity in the U.S. electrode market and the quality of products coming out of China? A: Timothy Flanagan - GrafTech International Ltd - President, Chief Executive Officer, Director: The competition is not primarily from Chinese producers but from Tier one competitors. We maintain a significant differentiation in the quality of our electrodes and our comprehensive value proposition compared to Chinese products.
Q: What are your expectations for Seadrift's utilization and how does it compare to market pricing today? A: Timothy Flanagan - GrafTech International Ltd - President, Chief Executive Officer, Director: Seadrift's utilization aligns with our internal demand for needle coke. It operates competitively in the current market but does not provide as significant a cost advantage under current conditions as it would when needle coke prices are higher.
Q: Are there any updates or thoughts on the timing of initiatives on the EV side? A: Timothy Flanagan - GrafTech International Ltd - President, Chief Executive Officer, Director: We continue to progress with the permitting process at Seadrift and expect the permit by the third quarter of this year. Decisions on capacity expansion will depend on market development and customer alignment, with significant production expected to start around 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
