GrafTech International (EAF) Q3 2024 earnings summary

Executive summary

• Q3 2024 sales volume rose 9% year-over-year to 26.4 thousand MT, despite a challenging steel market and planned European shutdowns.

• Net sales declined 18% year-over-year to $130.7 million, with a net loss of $36 million ($0.14 per share), driven by lower realized prices and a shift from LTAs to spot sales.

• Achieved a 28% year-over-year reduction in cash COGS per metric ton and generated $20 million in free cash flow.

• Announced new financing transactions, including $175 million in new term loans, a $100 million delayed draw facility, and an exchange offer for $950 million in senior notes to extend maturities.

• Cost rationalization and footprint optimization initiatives reduced global headcount by 10% and are expected to yield $25 million in annualized savings.

Financial highlights

• Q3 2024 net loss was $36 million ($0.14 per share); adjusted EBITDA was negative $6 million, down from $1 million in Q3 2023.

• Net sales were $130.7 million, down 18% year-over-year, with a negative gross margin due to an $8 million inventory valuation adjustment.

• Cash provided by operating activities was $24 million; adjusted free cash flow was $20 million in Q3 2024.

• Liquidity at September 30, 2024, was $253.8 million ($141.4 million cash, $112.4 million revolver availability), expected to rise to $529 million post-transaction.

• Gross debt as of September 30, 2024, was $950.1 million; net debt was approximately $809 million.

Outlook and guidance

• Near-term demand for graphite electrodes expected to remain weak due to global steel industry uncertainty and pricing pressure.

• Full-year 2024 sales volume growth outlook is on track, with low double-digit percentage growth expected in 2025.

• Full-year 2024 cash COGS per metric ton guidance improved to a 20% year-over-year decline (~$4,400/ton), with further declines expected in 2025.

• Q4 2024 sales volume expected to be in line with Q3; profitability expected to be around break-even at current pricing and cost levels.

• Long-term demand growth anticipated from steel decarbonization and electric vehicle battery markets.