GrafTech International (EAF) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales were $137.3 million, down 26% year-over-year, with a net loss of $15 million ($0.06 per share) and adjusted EBITDA of $14–$14.5 million, benefiting from a $9 million arbitration award.

• Sales volume decreased 3% year-over-year to 25.5–26 thousand MT, with non-LTA prices down 23% to $4,300/MT and LTA prices at $8,300/MT.

• Cost rationalization and footprint optimization reduced capacity and headcount by 10%, with $25 million in expected annualized cost savings and an 18% year-over-year decline in cash costs per metric ton.

• Liquidity stood at $232 million as of June 30, 2024, with $121 million in cash and $111 million revolver availability; no debt maturities until December 2028.

• Long-term optimism is driven by the ongoing shift to electric arc furnace steelmaking and anticipated growth in graphite electrode and needle coke demand.

Financial highlights

• Q2 2024 net sales: $137.3 million (down from $185.6–$186 million in Q2 2023); net loss: $15 million (vs. $7.9–$8 million loss in Q2 2023); adjusted EBITDA: $14–$14.5 million (down from $26 million in Q2 2023).

• Adjusted loss per share was $0.05 in Q2 2024, versus $0.02 in Q2 2023.

• Net cash used in operating activities was $37 million in Q2 2024; adjusted free cash flow was negative $44 million, including a $34 million semi-annual interest payment.

• Gross margin compressed to approximately 3.9% due to lower realized prices and a shift from LTA to non-LTA sales.

• Cash cost of goods sold per metric ton was $4,315 in Q2 2024, down from $5,252 in Q2 2023.

Outlook and guidance

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

• Q3 2024 sales volume expected to be in line with Q2; modest year-over-year improvement in full-year sales volume anticipated.

• Full-year 2024 capital expenditures expected at $35–$40 million.

• Full-year 2024 cash cost of goods sold per metric ton expected to decline by a mid-teen percentage compared to 2023.

• Long-term demand outlook positive, driven by steel industry decarbonization and EV battery growth.