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Press Release: GrafTech Reports Unaudited Fourth Quarter and Full Year 2020 Results

· 02/05/2021 06:45
2021 2022 2023 through 2024 ----------- ----------- ----------------- Estimated LTA volume(c) 98-108 95-105 35-45 Estimated LTA revenue(d) $925-$1,025 $910-$1,010 $350-$450(e) (c) In thousands of MT (d) In millions (e) Includes expected termination fees from a few customers that have failed to meet certain obligations under their LTAsFor the Year Ended ----------------------- December 31, (dollars in thousands, except per share amounts) Q4 2020 Q3 2020 Q4 2019 2020 2019 ----------------------- -------- -------- -------- ---------- ------------ Net sales $338,010 $286,987 $414,612 $1,224,361 $1,790,793 Net income $125,096 $ 94,234 $174,922 $ 434,374 $ 744,602 Earnings per share (a) $ 0.47 $ 0.35 $ 0.61 $ 1.62 $ 2.58 Adjusted EBITDA(b) $175,538 $153,105 $234,586 $ 658,946 $1,048,259 (a) Earnings per share represents diluted earnings per share. (b) A non-GAAP financial measure, see below for more information and a reconciliation of EBITDA and Adjusted EBITDA to Net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.-- Reported net income of $434 million, or $1.62 per share -- Adjusted EBITDA1 of $659 million, for a 54% margin2 -- Generated cash flow from operating activities of $564 million -- Strengthened the balance sheet with debt reduction of $400 million -- Extended our debt maturity profile to further de-risk the balance sheet -- Maintained excellent customer service levels with 97% on-time delivery rate -- Significantly improved safety track record with 46% reduction in recordable injury ratesBROOKLYN HEIGHTS, Ohio--(BUSINESS WIRE)--February 05, 2021--

GrafTech Reports Unaudited Fourth Quarter and Full Year 2020 Results

Generates sequential fourth quarter improvement across key financial metrics

GrafTech International Ltd. (NYSE: EAF) (GrafTech or the Company) today announced unaudited financial results for the fourth quarter and full year ended December 31, 2020.

2020 Highlights

CEO Comments

"We are pleased with our overall performance during a challenging year for the industry," said David Rintoul, President and Chief Executive Officer. "We made good progress managing our business through the pandemic as we adjusted our production to changes in demand, while being highly responsive to our customers' needs and maintaining excellent service levels. During the fourth quarter, we achieved sequential quarterly improvement in key metrics such as production, sales volumes, net sales, earnings per share, adjusted EBITDA, and cash from operating activities."

"As we look forward, the environmental and economic advantages of electric arc furnace steel production position both that industry and the graphite electrode industry for long-term growth. We believe GrafTech's leadership position, strong cash flows, and advantaged low-cost structure and vertical integration are sustainable competitive advantages. The services and solutions we provide will position our customers and our company for a better future. As we move through 2021, we believe that the improvement in steel industry metrics will subsequently result in improved demand for graphite electrodes," Mr. Rintoul concluded.

Key Financial Measures

Full Year and Fourth Quarter 2020 Financial Performance

Net sales for the year ended December 31, 2020 totaled $1.2 billion compared to $1.8 billion in the prior year. Net sales for the quarter ended December 31, 2020 were $338 million compared to $415 million in the fourth quarter of 2019. Lower net sales were driven primarily by lower sales volumes.

Net income for 2020 was $434 million, or $1.62 per share, compared to $745 million, or $2.58 per share, in the prior year. Net income for the fourth quarter of 2020 was $125 million, or $0.47 per share, compared to $94 million, or $0.35 per share in the third quarter of 2020 and $175 million, or $0.61 per share in the fourth quarter of 2019.

Adjusted EBITDA was $659 million in 2020 compared to $1,048 million in the prior year. Adjusted EBITDA was $176 million in the fourth quarter of 2020, a 15% sequential increase from $153 million in the third quarter of 2020. Fourth quarter 2019 adjusted EBITDA was $235 million. Year-over-year financial results for the fourth quarter and full year 2020 were primarily impacted by lower net sales.

Full year cash flow from operating activities was $564 million in 2020 compared to $805 million in 2019. Cash flow from operating activities was $147 million in the fourth quarter of 2020, a 14% sequential increase from $129 million in the third quarter of 2020. Fourth quarter 2019 cash flow from operating activities was $221 million.

COVID-19 and Operational Update

GrafTech continues to proactively manage through the COVID-19 crisis to support the health and safety of our team. Our plants have remained operational and maintained a 97% on-time delivery rate in the fourth quarter. Our global footprint gives us the flexibility to move or adjust production as needed going forward.

In 2020, production volume of 134 thousand MT decreased from 177 thousand MT in 2019. Production volume of 36 thousand MT in the fourth quarter of 2020 decreased from 41 thousand MT in the fourth quarter of 2019 and was a sequential improvement over 32 thousand MT in the third quarter of 2020. Capacity utilization was lower as we aligned production with reduced year-over-year sales volumes.

Commercial Update

Late in 2020, we began seeing a measured recovery in the global steel markets with improvement in steel pricing and capacity utilization rates. In the fourth quarter of 2020, both the global (ex-China) and U.S. steel market capacity utilization rates improved to over 72%(3,4) .

The commercial team reported solid results in the fourth quarter of 2020, with sales volumes of 37 thousand MT, consisting of long term agreement (LTA) volumes of 31 thousand MT and non-LTA volumes of 6 thousand MT. Full year 2020 sales volumes were 135 thousand MT, consisting of LTA volumes of 113 thousand MT and non-LTA volumes of 22 thousand MT.

During the fourth quarter, our average price from LTAs was approximately $9,600 per MT and our average price for non-LTA business was approximately $4,900 per MT.

During the challenging market conditions in 2020, we were able to work with our valued customers to develop mutually beneficial solutions to their challenges, including volume commitments. We are pleased to have successfully negotiated LTA modifications with many of these customers. We also continue to work to preserve our rights under the LTAs in a few arbitrations that arose from some LTA non-performance and other disputes during the year. The estimated shipments of graphite electrodes for the final two years of the initial term under our LTAs and for the years 2023 through 2024 are as follows:

Capital Structure and Capital Allocation

As of December 31, 2020, GrafTech had cash and cash equivalents of $145 million and total debt of approximately $1.4 billion.

During 2020, capital allocation included $400 million of debt repayment, $36 million of capital expenditures, $31 million of dividend payments, and $30 million for share repurchases. In 2021, we expect capital expenditures to range between $55 and $65 million and our primary use of cash to continue to be debt repayment.

On December 22, 2020, we issued $500 million aggregate principal amount of 4.625% senior secured notes due December 2028 (Notes). The proceeds of the Notes were used to repay a portion of our secured term loans due February 2025 under our existing credit agreement.

Outlook

Mr. Rintoul continued, "The current market for graphite electrodes continues to be competitive, as our industry lags the improving fundamentals in the steel industry. If the strength in the steel industry continues, we would expect the graphite electrode market to improve as we move further into 2021. We remain encouraged with the long-term growth opportunity given the benefits of electric arc furnace steel production, and we believe GrafTech is well positioned for success."

Conference Call Information

In conjunction with this earnings release, you are invited to listen to our earnings call being held on February 5, 2021 at 10:00 a.m. Eastern Standard Time. The webcast and accompanying slide presentation will be available at www.graftech.com, in the Investors section. The earnings call dial-in number is +1 (866) 521-4909 toll-free in the U.S. and Canada or +1 (647) 427-2311 for overseas calls, conference ID: 8956898. A replay of the Conference Call will be available until May 5, 2021 by dialing +1 (800) 585-8367 toll-free in the U.S. and Canada or +1 (416) 621-4642 for overseas calls, conference ID: 8956898. A replay of the webcast will also be available on our website until May 5, 2021, at www.graftech.com, in the Investors section. GrafTech also makes its complete financial reports that have been filed with the Securities and Exchange Commission (SEC) and other information available at www.graftech.com. The information in our website is not part of this release or any report we file or furnish to the SEC.

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February 05, 2021 06:45 ET (11:45 GMT)