GrafTech International (EAF, Financial) is navigating a complex landscape of geopolitical uncertainties affecting global trade and tariffs, which continue to influence the steel industry broadly. Despite these challenges, GrafTech is optimistic about achieving a modest year-over-year increase in its sales volume by 2025. This growth is attributed to its robust customer value proposition and efforts to regain market share.
The graphite electrodes sector, where GrafTech operates, is facing persistently difficult pricing conditions, which remain at unsustainably low levels across many regions. Aiming to optimize profitability, the company plans to adjust its order book and shift its business focus to regions offering better pricing opportunities. A 15% price increase for uncommitted 2025 volume was also announced earlier this year as part of these strategies.
On the cost front, GrafTech is implementing initiatives to enhance its cost structure, projecting a mid-single digit percentage reduction in cash cost of goods sold per metric ton for 2025. This, along with proactive supply chain strategies, positions the company to mitigate the impact of existing trade tariffs. Additionally, GrafTech expects positive cash flow from working capital along with capital expenditures of around $40 million for 2025.
Looking ahead, the company is optimistic about the steel industry's shift towards decarbonization, which is likely to boost demand for electric arc furnace steelmaking and consequently graphite electrodes. Further, the growing electric vehicle market is expected to increase demand for petroleum needle coke, as it is crucial for producing synthetic graphite used in lithium-ion batteries. GrafTech's vertical integration and competitive advantages, notably its Seadrift facility, are poised to capitalize on these long-term growth prospects.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 4 analysts, the average target price for GrafTech International Ltd (EAF, Financial) is $1.63 with a high estimate of $2.00 and a low estimate of $1.50. The average target implies an upside of 148.74% from the current price of $0.65. More detailed estimate data can be found on the GrafTech International Ltd (EAF) Forecast page.
Based on the consensus recommendation from 5 brokerage firms, GrafTech International Ltd's (EAF, Financial) average brokerage recommendation is currently 3.0, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for GrafTech International Ltd (EAF, Financial) in one year is $2.08, suggesting a upside of 218.38% from the current price of $0.6533. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the GrafTech International Ltd (EAF) Summary page.
EAF Key Business Developments
Release Date: February 07, 2025
- Sales Volume Growth: 13% year-over-year increase in 2024.
- Cost Reduction: 23% year-over-year reduction in cash COGS per metric ton, exceeding expectations.
- Liquidity: Ended 2024 with $464 million in liquidity.
- Net Loss: $49 million or $0.19 per share for Q4 2024.
- Adjusted EBITDA: Negative $7 million in Q4 2024, improved from negative $22 million in Q4 2023.
- Production Volume: 25,000 metric tons in Q4 2024, with a capacity utilization rate of 55%.
- Sales Volume: 27,000 metric tons in Q4 2024.
- Non-LTA Sales Price: Approximately $3900 per metric ton in Q4 2024.
- LTA Sales Price: Approximately $7700 per metric ton in Q4 2024.
- Cash Flow: Negative $21 million adjusted free cash flow in Q4 2024; full year 2024 adjusted free cash flow was negative $56 million.
- Working Capital Reduction: $40 million reduction in 2024, following a $108 million reduction in 2023.
- Debt Maturities: Extended to December 2029.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GrafTech International Ltd (EAF, Financial) achieved a 13% year-over-year increase in sales volume despite flat global steel production and graphite electrode demand.
- The company successfully launched its 800-millimeter product offering, which is expected to be a significant growth platform in the coming years.
- GrafTech reduced its cash cost of goods sold (COGS) per metric ton by 23% year-over-year, exceeding its initial expectations.
- The company improved its liquidity position, ending 2024 with $464 million in liquidity and extending debt maturities to December 2029.
- GrafTech has over 60% of its anticipated 2025 volume already committed in its order book, indicating strong customer engagement and confidence.
Negative Points
- GrafTech reported a net loss of $49 million for the fourth quarter of 2024, with adjusted EBITDA remaining negative.
- The company faces challenging pricing dynamics, with a 19% year-over-year decline in non-LTA sales prices in the fourth quarter.
- Geopolitical uncertainties, including potential tariffs related to Mexico, pose risks to GrafTech's North American supply chain.
- The current level of graphite electrode pricing is deemed unsustainable, impacting profitability and future investment capabilities.
- Safety performance in 2024 was not satisfactory, particularly in the fourth quarter, highlighting the need for improvement in operational safety.
