U.S. GE Major GrafTech posts Weak Quarterly Performance amid Poor Market Conditions

U.S. based graphite electrode producer, GrafTech has announced its third quarter (Jul-Sep) 2019 results, the highlights of which are as below:

Sales volume down by 11% Q-o-Q basis: GrafTech third quarter sales volume have plunged by 11% q-o-q basis from 45,000 tonnes in Q2 2019 to 40,000 tonnes in Q3 2019. On a y-o-y basis, the company have registered a fall of 2.5% as the same stood at 40,000 in Q3 2018.The company's sales from Jan-Sep 2019 stands at 130,000 tonnes against 126,000 tonnes in the corresponding period of previous year.

Net sales plunged by 12% Q-o-Q: The fall in sales volume and also in realizations have taken a toll on the company's net sales as the same have registered a plunge of 12% q-o-q basis from USD 480 million in Q2 to USD 421 million in Q2 2019.The company's net sales in Q3 last year stood at USD 455 million. In first nine months of 2019 i.e. from Jan-Sep, company's net sales in 2019 stood at USD 1,376 million against USD 1,363 million.

EBIDTA recorded a fall of 14% Q-o-Q: GrafTech's Earnings before Interest Depreciation and Tax (EBIDTA) for Q3 have been recorded at USD 245 million against USD 284 million in Q2 2019. Last year in Q3 2018, the same stood at USD 277 million. During Jan-Sep'19, the company's EBIDTA stood at USD 814 million against USD 879 million in the corresponding period of previous year.

Other important information:

o In the investors call, the company's management highlighted that the sales volumes in third quarter usually reflects planned annual maintenance outages. Also, the decline in sale volumes in Q3 CY19 can be attributed to the bankruptcy of couple of the company's LTA (Long Term Agreement) customers.

o The company expects full year production capacity utilization to average approximately 85% and expect demand to rebound later next year as customers will work through theri inventories. GrafTech's Q3 weighted average pricing was a bit higher than the prior period whereas as expected Q3 spot pricing was down relative to Q2. Approximately 79% of its third quarter revenues were to customers with long-term agreements.

o Its net income suffered in Q3 2019 sue to poor sales volume and higher raw material costs specifically related to third-party petroleum needle coke cost. Lower Q4 third-party petroleum needle coke pricing is expected to translate to lower cost of sales in the second half of 2020.

o The company is undergoing a series of operational improvement projects at their Monterrey and St. Marys facilities. These projects are intended to optimize the company's manufacturing footprint while improving environmental performance and increasing production flexibility. The projects are expected to be completed in the first half of 2021 by which the company will shift additional graphitization and machining from Monterrey to St. Marys.