Abraham Landa

Abraham Landa of Bank of America inquired about the impact of Indian tariffs on the U.S. contracting process and the expected effects of the newly adjusted Indian trade deal on the U.S. market. He also asked about the supply/demand environment and pricing in Europe, given GrafTech's plant locations, and the current situation with China's graphite electrode supply, capacity, and exports. Finally, he questioned GrafTech's involvement in Project Vault or other government support programs for synthetic graphite.

Answer

CEO Timothy Flanagan explained that the U.S. market largely contracts in Q3/Q4, and while the reduction of Indian tariffs is 'a step too far,' GrafTech is comfortable with its 2026 U.S. position, anticipating volume growth. For Europe, he noted it remains a key market despite overall steel production declines, with European buyers valuing quality and service. Flanagan detailed China's significant steel and UHP electrode exports, which pressure global markets, and highlighted the irrelevance of new Chinese capacity given existing oversupply. He declined to comment on specific government discussions but affirmed ongoing advocacy for GrafTech and the industry regarding synthetic graphite as a critical mineral.

Abraham Landa from Bank of America asked about the impact of Indian tariffs on the U.S. contracting process and how the newly sized Indian trade deal might affect the U.S. market. He also inquired about the supply and demand environment in Europe, particularly regarding pricing and capacity movements, and discussed the supply picture of graphite electrodes from China, including exports and future capacity. Lastly, he asked if GrafTech International is engaging in conversations regarding Project Volt or other government support programs and if the opportunity within synthetic graphite could be quantified.

Answer

Timothy Flanagan, CEO, stated that while the reduction of Indian tariffs was 'a step too far,' GrafTech is comfortable with its 2026 U.S. position, expecting volume growth driven by quality and service. For Europe, he acknowledged it remains a key but challenged market due to power pricing and competition, despite trade actions like CBAM, and GrafTech's value proposition differentiates it. Regarding China, Mr. Flanagan highlighted its dual impact of steel and graphite electrode exports, noting China's significant overcapacity. He declined to comment on specific government discussions but confirmed advocacy for fair trade and educating constituencies on synthetic graphite's critical role in steel and anode powder.

Abraham Landa questioned how GrafTech plans to accelerate sales volume to meet its low double-digit growth guidance, what portion of that volume is already committed, how discussions are progressing in Europe, and the reason for the Q1 production volume exceeding sales.

Answer

CEO Timothy Flanagan explained that Q1 is seasonally slower and that the sales run rate will increase through the year to meet the guidance, with over 75% of the guided volume already committed. He noted that European customers are showing marginally more positive tones. Regarding the production disconnect, he stated it was a planned inventory build to level-load production, minimize costs, and prepare for higher sales in the back half of the year.

Abraham Landa asked for clarification on the lower-of-cost-or-market (LCM) inventory adjustment's impact on 2025 COGS, the potential effects of Mexican tariffs on the supply chain, and the company's plans for its delayed draw term loan.

Answer

CFO Rory O'Donnell stated that inventory valuation adjustments will benefit 2025 cash COGS by approximately $17 million. Regarding potential tariffs on Mexican imports, he emphasized the situation is fluid but GrafTech has supply chain flexibility to shift production from its Monterrey plant to European facilities to minimize impact, and that the 60% of 2025 volume already committed will be honored. He also noted there are no plans to draw the remaining $100 million of the delayed term loan in 2025 and that the company can operate comfortably with cash balances below $50 million.

Abraham Landa of Bank of America requested the underlying assumptions for price, volume, and cost per ton that support the EBITDA and free cash flow guidance provided in the company's 8-K filing. He also asked for clarification on new subsidiary guarantors and the potential impact of future tariffs.

Answer

CEO Timothy Flanagan provided a framework for the 5-year outlook, explaining it is based on near-term market views, long-term EAF growth, and an eventual return to historical average pricing, all based on the existing asset footprint. CFO Rory O'Donnell clarified that the new collateral package now includes the majority of foreign operating assets. Regarding tariffs, Flanagan noted that while trade protections in the Americas and Europe are beneficial, the key long-term factor for industry health is structural reform and EAF growth within China.

Abraham Landa of Bank of America asked about the nature of the startup and maintenance costs, whether they were added back to adjusted EBITDA, and for more detail on the drivers behind the lower free cash flow guidance. He also inquired about the path to 2026 performance and if tariffs were impacting the metal sourcing strategy.

Answer

CEO Keith Harvey and CFO Neal West addressed the questions. West confirmed the startup and maintenance costs were not added back to adjusted EBITDA and were not expected to recur at the same level. West explained that the free cash flow guidance was lowered because the working capital benefit from reducing inventory pounds was offset by the rapid increase in metal prices. West also reiterated that the impact of tariffs remains neutral to positive for the company's earnings.