How does Japanese GE Major Tokai Carbon perform during Jan-Sep'19?

Amid all the negative sentiments that have encompassed the global graphite electrodes market throughout the ongoing year (due to change in market dynamics originating from China), the Japanese GE giant, Tokai Carbon has managed to register increase in its GE sales during the first nine months of 2019.

The company business is majorly divided into three key segments which are GE, Carbon Black and Fine Carbon. In case of graphite electrodes, the company's net sales increased by 5.5% y-o-y basis from 69 billion yen during Jan-Sep'18 to 73 billion yen during Jan-Sep'19 whereas its operating income plunged by 5% y-o-y basis and stood at 36 billion yen during Jan-Sep'19.

The U.S.-China trade friction and the European economy deceleration caused a decline in its sales volume Y-o-Y whereas higher sales price Y-o-Y brought the increase in net sales amount by 5.5% Y-o -Y.

With regards to the earnings forecast for the GE division for FY19, the company had announced revision in the same in August month. As per the new forecasts, the net sales forecast in the Aug'19 month have been revised to 90 billion yen for FY19 against previous forecast of 115 billion yen, down by 21.7% and the management has attributed the same to sluggish demand and high needle coke costs.

Just three months ago, Tokai Carbon had hinted about 20% production cut to accelerate inventory adjustments at EAFs. However, steel production decelerated even further in Q3, and the company decided to expand production cuts to -40%-50% below capacity. The management plans to keep output at these levels in Q4 as well which explains the majority of revisions in this segment. The company's average selling price of GE is also taking a hit, falling 15% H-o-H in H2 CY19 from USD 13,000 per tonne in H1 2019 to USD 11,000/MT in H2 2019.

The company's consolidated net sales during Jan-Sep'19 have been recorded at 198 billion yen against 155 billion yen in the corresponding period of previous year, thus recording a change if 27.8% y-o-y basis. However, company's operating income declined by 1.5% YoY to 49 billion yen against 50 billion yen, majorly due to the volume decline in Graphite Electrodes.