Q2 2021 GrafTech International Ltd Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to <unk> second quarter 2021 earnings conference call and webcast. At this time all participants are in a listen only mode. After the Speakers' remarks, there will be a question and answer session to ask a question. During the session is simply press star followed by the number.
And 1 on your telephone keypad.
Please be advised on today's call is being recorded if you require any further assistance. Please press star zero.
I would now like to hand, the conference over to Wendy Watson Vice President of Investor Relations. Please go ahead.
Good morning, and welcome to graphic International second quarter, 2020.1 conference call.
And with me today is Dave Rintoul graphics, Chief Executive Officer, Quinn, Coburn, Chief Financial Officer, and Jeremy Halfords Senior Vice President operations and development day.
And we'll begin with a review of our safety performance.
Current industry conditions, and our demand and production levels.
And we'll discuss operational matters and give an update on our ESG initiatives.
Glenn will cover financial details and day.
I will close with final remarks, and open the call to questions.
Turning to our first slide.
As a reminder, some of the matters discussed on this call may include forward looking statements regarding among other things results performance trends and strategy.
These statements are based on current expectations and are subject to risks and uncertainties.
Factors that could cause actual results to differ materially from those indicated by forward looking statements are shown here.
We will also discuss certain non-GAAP financial measures and these slides include the relevant non-GAAP reconciliation.
You can find these slides and the Investor Relations section of our website at Www Dot grass Tech Dot com.
A replay of the call will also be available on our website on.
I'll now turn the call over to Dave.
Thank you Wendy.
Good morning, everyone and thank you for joining our second quarter earnings call I Hope you your families and your colleagues are all well.
We'd begin as we always do with safety.
Our year to date total recordable injury rate is 0.43 through the end of the second quarter, indicating a continued focus on the safety of each and every team member.
Health and safety excellence is a core value and graph Chuck.
As you can see from this chart, we have made meaningful improvement over the last few years and our ultimate goal is zero injuries with every employee going home safely every day.
Our team continues to be diligent and thorough and our COVID-19 controls and protocols.
And I am proud of the graph tech team and thank each of you for your continued focused and vigilance.
Now turning to slide 4.
Interest rate conditions.
Main positive across key indicators, we continued to see improvement and both pricing and capacity utilization rates and the global steel markets during the second quarter.
Steel industry pricing continues to increase with most types of steel at or near all time highs U.
U S Hot rolled coil values are currently over $1875 per ton up $375.
Over an additional 25% since we reported first quarter 2021 earnings.
The global steel manufacturer and utilization rate outside of China, with 75% and the second quarter compared to 73% and the first quarter of this year and 56% and the second quarter of 2020.
And the U S steel and registry utilization rate improved to 80% and the second quarter from 77% and the first quarter of this year and continues to move upward.
Global steel production outside of China was approximately 221 million tons and the second quarter of 2021 compared to approximately 216 million tonnes and the first quarter. According to the World Steel Association.
The continued improvement and the global steel industry utilization rates.
Along with the normalization of steel producer inventories from graphite electrodes is driving increased demand for graphite electrodes across geographies.
As a result of the increased demand we are seeing a steady improvement and graphite electrode pricing after bottoming and the first quarter of this year.
We are also seeing rising and market prices from petroleum needle Coke.
The strong graphite electrode demand and rising prices continue to provide us with confidence and our outlook for higher realized non LTA prices and the second half of 2021, and our expectation of continued improvement into 2020.2.
As I mentioned, we are experiencing strong demand for our products and our commercial team remains focused on providing superior services and solutions to our valued customers and this improving environment.
We have not changed our estimates for graphite electrodes sales and volumes under our L. T A's.
Now turning to slide 6.
We are pleased with the sequential and year over year approval and we delivered on our second quarter production and sales volumes.
And in response to strong demand for our graphite electrodes, we produced 44000 metric tons of electrodes and the second quarter up 22% compared to the first quarter and 33% compared to the second quarter of 2020.
Sales volumes of graphite electrodes Rose 43 rose to 43000 metric tons and the second quarter up 16% compared to the first quarter and 39% compared to the second quarter of last year.
Our second quarter shipments were comprised of 23.27000 metric tons of graphite electrodes under our L. T. A's had an average approximate price of $9500 per ton.
And 16000 metric tons of non LTA sales at an average approximate price of $4100 per metric ton.
As a reminder, the pricing will be recognized and sales and income lagged negotiated prices. Thus the second quarter $4100 per ton average of non LTA pricing represents price negotiations that actually took place and late 2020 and early 2020.
1.
Net sales and the second quarter increased 18% compared to the second quarter of $2000.20 million to $331 million.
I'll now turn the call over to Jeremy to discuss operating items and our ESG progress over the past quarter Jeremy.
Thanks, Dave during.
During 2021, we've been enhancing our capabilities across our manufacturing footprint. For example, we're investing and a pin production line at our St. Mary's, Pennsylvania facility that will be online and the third quarter.
This diversifies, our pin capability and provides production flexibility.
Also with increased demand for our graphite electrodes, we continue to be very focused on further improving efficiencies and our manufacturing facilities and staffing appropriately to meet the demand.
Turning to slide 7.
We continue to make good progress with our ESG efforts along several pads.
Notably and the second quarter, we completed a full materiality assessment with the assistance of external experts to identify and prioritize the key ESG issues for our business and our stakeholders.
The process allowed us to objectively determined the ESG topics that will drive our sustainability strategy reporting and actions moving forward.
The assessment included peer and industry benchmarking and a robust series of interviews with internal and external stakeholders and a full validation of the assessment by our executive team.
Slide 7 shows the current key material topics, the graph Tex business, and stakeholders, including climate and energy innovation and material sourcing and product quality.
From here, we plan to set the goals that will drive our performance relative to each of the material topics.
So we plan to publish our second annual sustainability report during the third quarter.
We hope you will find it useful and informative and welcome your feedback as we continue on our ESG journey.
Now, let me turn it over to Quinn to discuss our second quarter financial results on slide 8 okay.
Okay. Thanks, Jeremy we're very pleased with our second quarter financial performance. We earned net income of 28 million or 11 and sense of GAAP earnings per share.
Which included the impact of a 1 time pre tax change and control charge of $88 million.
That was triggered when the ownership of our largest stockholder Brookfield fell below 30% of our total shares outstanding.
This charge is comprised of a $15 million noncash expense related to the acceleration of certain previously granted equity awards.
And a $73 million cash charge triggered triggered under a long term incentive compensation plan.
Of the 73 million cash charge $61 million was paid and the second quarter. The remaining 12 million relates to employee and employer payroll taxes and will be paid and the third quarter.
Excluding these change in control items and other typical quarterly adjustments, our adjusted EPS was <unk> 43 cents.
And adjusted EBITDA was $160 million.
Our cash flow also continued to be strong and the second quarter.
We generated $86 million of operating cash flow and $74 million of free cash flow.
These amounts included the 61 million and cash payment triggered by the change in control.
Excluding this payment our adjusted free cash flow was $136 million.
We continued to achieve strong free cash flow conversion with 85% of second quarter's adjusted EBITDA converted to adjusted free cash flow.
Now turning to slide 9.
We continued to strengthen our capital structure and the second quarter with a $50 million reduction and our term loan that matures in 2025.
Through the end of the second quarter, our total year to date and debt reduction is 200 million and.
Our total debt to adjusted EBITDA improved to 1.9 times.
Notably over the past 2 years, we have reduced our long term debt of approximately 800 million from approximately 2 billion and the second quarter of 2019 to approximately $1.2 billion and the second quarter of 2021.
At the end of the second quarter, our total liquidity was approximately $360 million consisting of $114 million of cash and 246 million available under our revolving credit facility.
Now turning to slide 10.
We're very pleased with the strong earnings and cash flow, we delivered and the first half of the year, we expect a significant cash flow generation to continue through the balance of 2021.
As we have previously reported we plan to use the majority of that cash flow to further reduce debt.
Our continued focus on a strong capital structure provides us with significant financial operational and strategic flexibility as we position the company to capitalize on improvements in the market.
We are maintaining our full year 2021 capital expenditure outlook of 55 to 65 million.
We will use these funds to support our high quality low cost global operating assets and to target high return and operational improvements.
And then I'll hand, it back to Dave on Slide 11.
Thanks Gwen.
I will wrap up with some comments on our favorable positioning and the market.
Grab tech is 1 of the largest producers of ultra high powered graphite electrodes and the world.
Graphite electrodes are mission critical component to the EIF steel industry and there is no substitute for our product.
We haven't and enviable customer base comprised of the lowest cost producers of steel or some of the largest recyclers in the world producing steel was 75% less carbon emissions compared to traditional integrated steel producers and.
And the EIF steel industry is committed to taking our leadership and sustainable steel production, even further innovating to increase efficiency reduce greenhouse gas emissions and reinforced material reuse and recycling as we look forward, we are committed to helping our industry further advance these sustainability initiatives.
And its leading position, we expect the EIF and steel industry growth to continue to outpace global GDP over the long long term positioning our products for solid long term growth.
Recovery and strength of the steel industry is having a positive impact upon demand and pricing and our business and we expect increasingly to increasingly benefit from these favorable trends and the second half of this year and into 2020.2.
Have a sustainable and long term competitive advantage from our low cost structure and vertical integration into our key raw material petroleum needle coke.
Our graphite electrodes are highly engineered and require extensive process knowledge to manufacturer.
And the services and solutions that graph Tech provides help position, both our customers and our company for a better future.
Our commitment to balance sheet strength, and our proven track record of high quality earnings and significant cash flow generation gives us flexibility to successfully manage through industry cycles.
With the commitment of our people and our significant competitive advantages. We continue to strongly believe graph teck is well positioned to deliver results today and over the long term.
This concludes our prepared remarks, and we'll now open up the call for questions.
Thank you at this time, if you would like to ask Antonio question Press Star followed that day number 1 on your telephone keypad and Canada.
Starwood for questions.
First question comes from the line.
And with RBC capital markets.
Great. Thanks for taking my question and if you guys are well. So I guess you know first off I'm just wanted to ask about pricing here. You noted you know obviously very robust hot rolled prices.
You know well over 1800 mm.
We're reading that possibly could even get to 2000 next month.
But if you look at the production and sales volumes for for Ah graph Tech and you know volume was up 39% and the last year and and net sales are up 18%. So that would imply that pricing is.
As negative.
I guess, you know, what's it going to take for for graph graphite electrode pricing here to start to turn around and I know that there is typically a lag from that.
Steel markets.
And it seems like conditions are pretty tight you know you've mentioned very strong demand.
You know what is the outlook for pricing and and and when when pricing does start to turn positive do you expect them, you know and environment, where we could potentially tests. The highs that we saw in 2017 and 18 or is it going to be more measured.
Yeah.
Oh and rune and.
Thanks for your question.
I think the best way to think to think about this is to remember.
And setting the base here that.
As we progressed into the first quarter of this year, we at that time, and I think share with everybody that there was inventory on.
On the ground and there was a bit of and inventory hangover that had to be worked through which by the end of the first quarter.
We had done that.
<unk> stated that and shared with people that we felt that the pricing mechanisms and the and the industry. It bottomed out you know on early in that quarter.
Our experience has been exactly that we absolutely expect the third and fourth quarter pricing to be.
And all higher than what we experienced in the first or second quarter. The only reason you see that small decline is that some of the products that were delivered and the second quarter or negotiated and January when we were at the bottom so they influence that average.
Weighted price and please also recognize that the.
And the mixture between LTE as we sold more non LTA business and the second quarter. So that has an impact on lowering the average weighted price because of the impact of the mix between the number of tons of of LTE, a and then the increased number of tons of spot and that's all good it's.
Referencing the fact that the market has been improving so.
Please be rest assured that the comments, we've made earlier will come to fruition and the second half of the year.
Our reported pricing and realized pricing of non LTA pricing will absolutely be higher on the second half of the year and.
And we think that the.
Supply and demand relationships that are evolving this year will lead to continued improvement as we move into 2020.2.
And I actually can't be more positive about that.
And without health care and we're not.
As we always we don't provide guidance so I can't go there, but we.
We are quite happy about the way the market is unfolding.
And just to and thanks for that I guess.
And follow on here. So it looks like your spot prices are kind of and that you know as you'd noted and 4100 dollar range, but that was you know based off of earlier discussions.
Have you seen momentum on the spot side have you seen a willingness amongst customers to you know potentially moving to a long term area or you know a willingness to pay a little bit more for for spot business and I'm. Just again just to clarify so it looks like you're you're L.
T as we're in the $10000 per ton range would you consider.
And what's the strategy here are you are you more interested and getting more of your customers onto some of those LTA volumes or are you interested and are broadening out the spot, but given what you just said as far as and you know that you're very optimistic on on the upward momentum and pricing. Thanks.
So.
Just 2.
And I'll reiterate.
And you know the LTM numbers that were reported and are more like and a $9500 range just to.
Set that table, but to answer your question directly on where we're heading.
Recognize that most of the LTA is that we're talking about today don't mature until the end of next year.
So our perspective it is it's a bit premature.
Premature to begin discussions about something that won't come to.
Fruition until the end of 2020.2 it would be more natural for us and our expectation is that as we get into.
Late August September next year.
So 12 months from now 13 months from now there'll be more discussions about.
Our portfolio of products that we can bring to our customers of which 1 of those products is absolutely L. T X and our expectation and our belief is that there'll be some customers and it.
We all want to do that and we'll do the same thing as we did and 17 and I'll be 3 and 4 and 5 year arrangements.
And we'll see how the market goes in and here, you're absolutely right and call it something.
Wouldn't normally go there until that time next year, but we're in a rising market right now and I think both us and our customers will want to see well where does life take us over the next 12 months and what makes sense and.
And and <unk>.
Got a hundreds of.
Customers. So they know what may and they'll all have their own view on what best fits their future. So I expect.
It will have a as we've had in the past a mixture of both LTA and non LTA business.
And sorry, 1 last 1 if I if I may I'm just wanted to get your thoughts on needle Coke you know, there's obviously been strong demand on the EV battery side as well. So do you think that the needle coke market is tightening up as well and and you see that as a likely and <unk>.
Inflation and.
Now, it's coming in that market as well and and is there any opportunity for for grass Tech to participate and you know businesses that are outside of electrode manufacturing. You know is that something that you know it is an opportunity for you at all and.
And our you'd contemplate even thanks.
Our room night.
You hit it.
And the nail right on the head there theirs are.
Our belief would be yes, the growing.
<unk> and the graphite electrode market as well as the movement.
Movement towards EV and you saw the announcement here in the United States that.
The President has signed an order that.
Policy. This by 2030 half the vehicles sold by the automotive industry, you know need to be non carbon emitting which implies EV.
So those pressures are all.
Good from our perspective, because it will and should have the.
Effect of putting some pressure on the needle coke market and I'll remind you that we're 2 thirds and dependent on needle Coke and this is an absolutely positive development and progressive attack.
Increasing prices on needle Coke and we are quite flying with largely because as you would know you know translates into pressure for our competitors to increase graphite electrode prices, which were quite fine with and then it increases our margins.
Across particularly on across the 2 thirds that we're self sufficient on.
To that and.
In terms of branching out into other needle coke applications on our experience has been is that we like our space and the margins, we make on our needle coke and our core product and believe that.
And the optimal place for us to provide the best returns to our shareholders.
Great. Thanks.
Your next question comes from the line of David Gagliano with BMO capital markets.
Hi, Good morning. Thank you for taking my questions. So I wanted to drill down a little bit and just try to give a little more detail. If possible. Please first of all third quarter, you've talked quite a bit about improving price and you've talked about.
All contracts are or prices were negotiated back and late 2020 early 2021from second quarter. So obviously you know the price of third party can you just tell us what the price is going to be for the on spot.
Volumes that are committed for the third quarter. That's my first question and then the second question, which is related and if you could talk about volumes themselves and.
How we should expect a you know as long as the compared to the second quarter and as we move into the fourth quarter as well if you could talk about the volume expectations and that's my first set of questions. Thanks.
Thanks, Dave.
You're absolutely right.
And given that the dynamics of that.
You're spot on we we know today what are.
And third quarter and.
Numbers are going to be and you know.
On a reasonable portion even on the fourth quarter and.
And we've always tried to be on this call and our interface with all of you.
Transparent, but I'm very clear in terms of guidance et cetera.
And I've got to provide it.
But that's 1 of the reasons why when you hear me say, we are very clear and are happy about where we think the second half will be in terms of pricing.
It's not because we're estimating that we know that.
And because of that confidence and the knowledge of it we can say quite confidently.
We are.
Pleased with where the second half of the year is going to be with pricing and as well as the development we start to see 4.
The new year and not just in terms of what we've done but the improved behavior.
Some of our competitors in that respect.
Yes.
Okay, well I appreciate first of all I.
And if you could just also give me a sense on the volumes, but just to come back on the on the on the pricing commentary again I appreciate the fact that.
And your confidence and I'm not trying to you know confident and I'm not trying to question and confidence I'm, just really trying to help investors get a sense as to order of magnitude of improvement and pricing, which is very important to frame valuation and you know.
Share price so from a visibility perspective, it's important I think to at least give a sense as to where you think prices are going in terms of order of magnitude. For example, 4100 Bucks of time should we assume over $5000 a ton for the second half of this year for the third quarter and into the fourth quarter is that a reasonable assumption or.
And just at least help give us a framework on order of magnitude would be very helpful. And then if you could also again comment on volume as extra volume expectations.
On an outright basis or relative to the second quarter. Thanks.
Sure well, let me give you the last 1 first.
On the volume side.
We had a pretty sizable increase and our volume and the second quarter and running at a pretty high utilization rate.
And so as we.
Moving into the second half of the year I should point out and we normally do this every year and the third quarter, we have a.
Sure.
Repair schedule every year and the third quarter repair outage at our our and our European facility. So that that's no secret.
And.
And then fully that's only.
10 days or so long.
10, and 12 days long tenor and 1 planned 12 and another and.
And then we go back into the fourth quarter.
No.
Patterns on the metal so.
I think you'll see this and fit these higher volumes for the balance of the year and.
Net good utilization rates and our facility I would I would point out that we are seeing.
Increased demand for larger size electrodes that take a little bit more processing time.
And I think thats.
As the world is evolving to more.
And I'll call it Green and yeah, yes, that's probably not a surprise because these furnaces tend to be larger furnaces, you think through the new furnaces that are coming online and the United States all of them on larger furnaces with larger graphite electrodes sizes.
And so it's not.
Not a surprise as the world is improving and demand is improving and theres more eas going towards flat roll applications that require larger furnaces that have and the larger furnaces by default have larger electrodes.
So I think all of this is good part of the.
As you think about it post COVID-19.
Unexpected.
Development as we move on.
Through the next.
12 months' herself.
On the pricing side.
Yes.
And fifth.
I've got a check here.
And if they.
And using your numbers would constitute a 20% increase and price and 1 core.
[laughter].
And that that's a pretty big that's a pretty big jump.
So.
And there's you know I recognize the steel guys have moved heaven and Earth and that.
Some.
If successful on price increases that none of us ever imagined okay.
I am I'm not.
While I am quite optimistic about where our performance on pricing is going on.
I think.
20% jumps a quarter or a little bit.
I asked them a little bit much.
So.
I think.
We're gonna do darn good.
And what I'm trying to.
Help calibrate just somewhat without getting too far over my skis.
Hopefully that helps that's helpful.
Yeah, even that is helpful. Thank you very much for that and calibration and then just last question from me you mentioned, obviously higher flow needle coke prices and maybe perhaps you can talk about order of magnitude on you know cost increases for the you know non <unk>.
Self sourced.
Petroleum needle coke as.
As we move through the second half of the year as well.
Yeah.
Oh sure.
This is quinn.
Yeah, we've talked about you know the needle Coke price is we expect them to increase over time, they have increased over time and over the last numbers. We gave it was kind of a range of 1300 and 1800 and we were at the higher end of that range. We continue to see pressure on those prices and and continue to see and an upward trajectory and we expect to continue to see.
That.
Into the first quarter or first half of next year. So absolutely we're seeing upward pressure on on those needle coke prices.
And we'll we'll know more when.
And when the when the contract and when the period the contract for <unk> for the first half of next year comes around.
Okay. That's it from me thanks.
Your next question comes from the line of Curt Woodworth with credit Suisse.
Thanks, Good morning, Dave and Glenn.
Morning.
Yeah.
And in the past you have referenced some data points with respect to needle Coke pricing I think maybe it's been important data is there any color you can provide on.
You know where you see needle coke today.
And for our models.
So.
You know it's there.
Interestingly, we're having discussions about.
And to have discussions about next year, but nothing is completely firmed up yet I.
I think on the last call Quint and correct me if I'm wrong, we talked about 1500 ish, yeah, we talked about the high end of the range of of our range, which was 300.1800 and and we were in the high end of that range and that was on the last call. We made a few purchases and all earlier this year, Jeremy you might want to talk.
And both out of it a little bit yeah. Thanks, Dave.
Kurt.
All of our commitments for this year are have already been sourced and so pricing on those were set a while ago. So we don't have direct feedback in terms of in terms of pricing that we're seeing and the market. We will say that and we are seeing tightness, we know of the.
On to winter storm that day that affected us earlier in the year and we think that that may have had some impact on the industry in total.
But oh this is really kind of pointing us and the direction of tightening supply and so as we look as we look to the future.
And so being at the high.
And the range.
Last time, we made some purchases.
I don't see anything that's driving that would drive that down.
Okay.
And then back to the pricing discussion and I.
And I appreciate you don't give guidance, but.
But when you publish the 10-K you did provide guidance of I think 4100 and for the first half of this year.
Back in February so there.
On giving guidance to the street and.
You know I think people really struggled with the OPEC cuts and.
And transparency of this market.
So I think it would be helpful to think about giving more specific guidance as it pertains to non healthy and third quarter, but I accept.
You know it is what it is at this point you know 1 of the questions I have.
As you know clearly pricing is going up for needle coke and electrodes and so to some degree it's what matters is that the spread between the 2.
Because theoretically the coke and go into a SaaS and the electrode, which hypothetically negative. So I'm. Just curious can you kind of talk to how you see relative scarcity value between electrical and first Coke and would you expect your.
The spread to widen into the back half of this year.
We were non op yet yes.
Yes, so low.
Yeah.
And so let me try again on the pricing.
To give everyone.
And as much as we can without you know [laughter] seen over this.
Guidance line.
I said to Dave earlier that 20% increase and a quarter.
<unk>.
Pretty awesome number than any industry would probably get.
And what not.
And I'll likely the ore and that genre, but.
I will tell you like coastal forest and tell you we've crossed over the double digits.
Hmm.
Area, so that should narrow it for you a little bit and I'm, sorry, that's a zone.
And as far as I think we can go without.
Yeah, and getting too far over our skis on pricing for the second half.
That's helpful.
I'm sure you don't charge to that spread.
And again.
And.
On a bit of a unique position because we have so much of our pearl and needle coke.
That.
And we're in no danger zone.
And you know net net of having our our spread jeopardized by.
Mike needle Coke this year and as Jeremy referenced earlier, we're just we're just not far enough along and the 2022.
Either graphite electrodes Nick.
Negotiations on needle Coke and I don't expect that to be problematic candidly.
Okay, and then just just 1 last 1.
Detroit and have gone up a lot and just stupid.
Steel industry has I assume a lot of your.
Electric peers have as well do you have a sense for where the global utilization rate is today and the electric market.
And are you seeing any change and kind of competitive behavior from China.
Yeah, I think that.
Everybody is running pretty hard.
I can share with you and I won't say, who it is.
Just this morning.
And my.
And a weekly session with the commercial team and Oh, we've got a couple of requests 1 from a free.
Substantial customer that.
As you know.
Asking for some help because of 1.
And 1 of our competitors and stuff.
And having a tough time staying with.
And we already supply themselves.
Got it.
You know there on them.
And move Heaven, and Earth to give them a hand here. So to me that's good news not that I wish that on any of our competitor. Just tells me that everybody is running pretty hard and.
And that others and there's not a lot of room for you.
And all.
Or any issues or difficulties in terms of the Chinese you I think we see the Chinese domestic market moving forward.
So I would expect.
Always slow to react to these kind of things but.
I think we will see that that we see it and their home market.
And we certainly see.
Our broader competitive.
Competitors their behaviors are changing.
And the marketplace.
So theres no Theres no question on our mind about that.
Great. Thanks, very much vessel on okay.
Once again, if you'd like.
A question Press Star followed that's number 1 on your telephone keypad.
Your next question comes from the line of.
And with Citi.
Yeah morning, Quintin day, if not not to beat a dead horse on on the price and but.
How have price has been effectively going up steadily since January and you know we're in August now is it sort of been a steady increase going up every week every month.
And and any sign of that upward pricing momentum stalling out yet thanks.
Yeah.
It's fair to say that I wouldn't go so far as to states and perfectly linear.
I would suggest that.
And all the light, it's probably at a higher rate of change and it was held back and.
March and April but yeah. It did.
I think as soon as we got that inventory number in line at the end of the first quarter. We saw you know.
Pretty much on ongoing.
Moving and it's picking up.
And his team.
Okay. Thanks, and I was going to ask about the inventory. So you know your view with inventory today is it's fully normalized.
Oh, yes, it was pretty much.
Fully normalized at the end of the first quarter.
Okay. Thanks, and then just 1 final 1.
On accounting question, maybe on being dumb here, but.
The 88 million of change of control costs, how much of that was in Cogs and how much was in SG&A and if I.
Look at SG&A of 76 million, it seems like $55 million would be and SG&A and the recipe and Cogs, but.
You can specify that would be helpful for our models. Thanks, Yeah sure Alex.
And right on its 55.5, and SG&A and $32.5 and Cogs.
Perfect. Thank you so much about.
Okay.
Your next question comes from the line of David Gagliano with BMO capital markets.
Hi, Thanks for taking my follow up I, just wanted to ask about other cost pressures aside from from here, but can you just comment on.
Again, some sort of framework around.
You know other other input cost pressures, if there are and and and just order of magnitude what youre, saying there. Thanks.
Yeah sure Dave It's Glenn So we talked a little bit about this last quarter and 1 of the things I mentioned was we were seeing increases in freight that's no surprise freight costs and increased I think globally for everyone and shipping anything.
So we did see headwinds with regards to freight cost and the quarter.
That was probably the biggest single headwind with regards to cost too.
To a lesser extent some headwind on other raw materials.
And then of course with a higher volume we are using more third party needle coke. So those were all cost headwinds on the other hand, we were able to benefit from the higher volume and the.
We had a lower fixed cost per metric ton, we can spread our fixed costs out over over and over more.
Volume and that helped offset some of the headwinds that I just mentioned so all in all our cash cost for the quarter were about 1.5% higher than Q1, and we felt good about our ability to maintain those and we'll continue to see headwinds going forward certainly with freight.
And that tends to be a bit of a wildcard.
Certainly with the with them with higher usage of third party needle Coke, we'll do our best to continue to offset those are higher cost and those headwinds and in the coming quarters.
Okay. That's helpful. Thank you so order of magnitude and if there's a reasonable assumption moving forward outside of the petroleum needle Coke line and sort of a 1% and 2% cost the quarter over quarter cost increase on a per unit basis, a reasonable expectation for them and for each of last 2 quarters or is it going to stabilize and your view.
And I said, it's afraid there's a bit of a wildcard, but based on what we know it's it's not.
Probably not an unreasonable assumption with the caveat that our freight.
Freight really is a wildcard.
Seeing some.
No unusual increases there, but again, we're working very hard to manage and stuff.
Okay, great. Thanks very much.
Thank you I would now like to turn the call back over to Mr. David Rintoul for closing remarks.
Thank you.
Hillary and thanks to all of that participated for your questions and interest.
And I'd like to take this opportunity and wish everyone on the call, our health and safety and they come in coming months.
We thank you for your interest and graph Tech International and we look forward to speaking with you and the next quarter.
Thank you very much and have a nice day.
This does conclude today's conference call you may now disconnect.
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