Graftech Intl ((EAF)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for GrafTech International revealed a mixed sentiment, showcasing notable operational improvements and strategic momentum. The company reported significant sales volume growth and cost reduction achievements, contributing to a positive EBITDA. However, these positive aspects were overshadowed by ongoing pricing challenges, a reported net loss, and cash flow difficulties, indicating persistent market headwinds and financial pressures.
Sales Volume Growth
GrafTech reported a robust increase in sales volume, with a 12% rise year-over-year in the second quarter and a 16% sequential increase compared to the first quarter. Year-to-date sales volume is up 7% compared to 2024, highlighting the company’s successful efforts in expanding its market reach.
Cost Reduction Achievements
The company achieved a 13% year-over-year decline in cash COGS per metric ton, surpassing its initial cost reduction guidance for the full year. This achievement underscores GrafTech’s commitment to enhancing operational efficiency and cost management.
Increased U.S. Market Share
GrafTech significantly increased its sales volume in the United States by 38% year-over-year. This growth provided substantial support to the average selling price, boosting the weighted average selling price by $80 per metric ton in the second quarter.
Positive EBITDA
For the first time since the second quarter of last year, GrafTech generated positive EBITDA, marking a significant milestone in the company’s financial recovery and operational performance.
Safety Performance
The company is on track for its best safety performance ever, reflecting the team’s vigilance and dedication to maintaining a culture of safety.
Pricing Challenges
Despite operational improvements, GrafTech faced challenging pricing dynamics across nearly all regions, with a 12% year-over-year decline in average selling price. These persistent industry-wide pricing challenges continue to impact the company’s financial performance.
Net Loss
GrafTech reported a net loss of $87 million, which includes a $43 million non-cash income tax charge for a valuation allowance against deferred tax assets, highlighting the financial pressures the company is facing.
Cash Flow Challenges
The company experienced cash flow difficulties, with $53 million used in operating activities. This reflects significant cash interest payments and a $45 million build in net working capital, indicating ongoing financial challenges.
Global Steel Production Decline
A 1% year-over-year decline in steel production outside of China has impacted global utilization rates and market demand, presenting additional challenges for GrafTech.
Forward-Looking Guidance
GrafTech’s forward-looking guidance emphasizes strategic growth and cost efficiency. The company anticipates a 7% to 9% year-over-year decline in cash COGS per metric ton for 2025, with expectations of rising cash costs in the second half due to seasonal factors and tariffs. Despite a competitive pricing environment, GrafTech remains focused on strengthening its market position and achieving performance improvements.
In summary, GrafTech International’s earnings call presented a complex picture of operational success tempered by financial challenges. While the company has made strides in sales growth and cost reductions, ongoing pricing pressures and cash flow issues remain significant hurdles. The forward-looking guidance reflects a commitment to strategic growth and cost efficiency, aiming to navigate the evolving industry dynamics.