Q4 2021 GrafTech International Ltd Earnings Call
Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to the GraphPec International Fourth Quarter and Year End 2021 conference call. At this time, all participants' lines are in the listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. To withdraw your question, press the pound key.
Ladies and gentlemen, thank you for standing by and welcome to the graph Tech International fourth quarter and year end 2021 conference call. At this time all participants lines are in a listen only mode.
After the Speakers' presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one on your telephone to withdraw your question press the pound key plays.
Speaker 1: Please the advice that 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 your speaker, Adam Diable. Thank you. Please go ahead. Thank you.
Please be advised that todays call is being recorded if you require any further assistance. Please press star zero.
I would now like to hand, the conference over to your Speaker Adam Dible. Thank you. Please go ahead.
Thank you.
Speaker 2: Good morning and welcome to GraphTech International's fourth quarter and your end 2021 conference call.
Good morning, and welcome to <unk> Internationals fourth quarter and year end 2021 conference call.
Speaker 2: On with me today is Dave Rintul, Grat Text Chief Executive Officer, Jim Flanagan, our Chief Financial Officer, Jeremy Halford, our Chief Operating Officer, and Senior Vice President, Quinn Coburn.
With me today is Dave Rintoul Draft text, Chief Executive Officer, Tim Flanagan, Our Chief Financial Officer, Jeremy Hallford, Our Chief operating Officer, and senior Vice President Quinn Coburn.
Speaker 2: They will begin with a review of our safety performance, current industry conditions, and demands for our product.
Dave will begin with a review of our safety performance current industry conditions and demands for our products Jeremy.
Speaker 2: Jeremy will discuss our sales, production, and operational matters as well as giving an update on our ESG initiative.
Jeremy will discuss our sales production and operational matters as well as give an update on our ESG initiatives.
Speaker 2: Tim will cover our financial details and table closed with final remarks and open the call to questions.
I will cover our financial details and Dave will close with final remarks, and open the call to questions.
Now turning to our first slide.
Yeah.
Speaker 2: As a reminder, some of the matters discussed on this call may include forward-looking statements regarding, among other things, results, performance trends, and strategies.
As a reminder, some of the matters discussed on this call may include forward looking statements regarding among other things results performance trends and strategies.
Speaker 2: These statements are based on current expectations and are subject to risks and uncertain.
These statements are based on current expectations and are subject to risks and uncertainties.
Speaker 2: Factors that could cause actual results to different material from those indicated by forward looking statements are shown here.
Factors that could cause actual results to differ materially from those indicated by forward looking statements are shown here.
Speaker 2: We will also discuss certain non- GAAP financial measures, and these slides include the relevant non-gap reconciliation.
We will also discuss certain non-GAAP financial measures and these slides include the relevant non-GAAP reconciliations.
Speaker 2: You can find these slides in the Investor Relations section of our website at www.graphtech.com.
Can find these slides in the Investor Relations section of our website at Www Dot Tech Dot com.
A replay of the call will also be available on our website I'll now turn the call over to Dave.
Speaker 2: A replay of the call will also be available on our website. I'm now turning the call over to Dave.
Good morning, everyone and thank you for joining our fourth quarter and year end earnings call I Hope you your families and your colleagues are all well.
Speaker 3: Good morning, everyone, and thank you for joining our fourth quarter and your end earnings call. I hope you, your families and your colleagues are all well.
Speaker 3: We begin as we always do with safety. Health and safety excellence is a core value or graph tech and a fundamental element of our success.
We begin as we always do with safety health and safety Excellence is a core value of grab tech and a fundamental element of our success.
Speaker 3: We ended the year with a total recordable injury rate of 0.49.
We ended the year with a total recordable injury rate of 0.4 night.
Speaker 3: This is a modest improvement over the previous year, and importantly, is nearly half of our pre-pandemic level.
This is a modest improvement over the previous year, and importantly is nearly half of our pre pandemic level.
Speaker 3: We are pleased with the progress as we continue on our journey to achieve our ultimate goal, which is zero injury.
We are pleased with the progress as we continue on our journey to achieve our ultimate goal, which is zero injuries.
Speaker 3: We will remain steadfast in our efforts to send every employee home safely every day.
We will remain steadfast in our efforts to send every employee home safely every day.
Speaker 3: I want to thank the entire Grapptech team for their continued work and focus on health and safety and the environment.
I want to thank the entire graph tech team for their continued work and focus on health and safety and the environment.
Speaker 3: Before moving on, I'd like to take a moment to introduce everyone to Tim Flanagan, who has joined our team as Chief Financial Officer.
Before moving on.
To take a moment to introduce everyone to Tim Flanagan, who has joined our team as Chief Financial Officer.
Speaker 3: Tim has an impressive background and brings more than two decades of experience in senior financial leadership positions, including as a chief financial officer to a significant supplier to the steel industry.
Tim has an impressive background and brings more than two decades of experience in senior financial leadership positions, including as a chief financial officer to a significant supplier to the steel industry.
Speaker 3: I'm looking forward to working closely with him as we continue to pursue our strategic and operational initiatives and drive value for all our stakeholders.
I'm looking forward to working closely with him as we continue to pursue our strategic and operational initiatives and drive value for all our stakeholders. Thanks.
Speaker 3: Thanks, Dave certainly appreciate that. I'm excited to be here. I look forward to working with everyone on the GraphTech team and spending more time with the investment.
Thanks, Steve certainly appreciate that.
Good to be here and look forward to working with everyone on the graph tech team and spending more time with the investment community.
Speaker 3: Now turning to slide floor, I'll provide some comments on the market.
Now turning to slide four I'll provide some comments on the market.
Conditions in the steel industry remain very strong in the fourth quarter, while hot roll coil pricing has come off its recent highs it still remains well above historic levels.
Speaker 3: Conditions in the steel industry remain very strong in the fourth quarter. While hot-rural coil pricing has come off its recent highs, it still remains well above historic levels.
Speaker 3: The global steel manufacturing utilization rate outside of China was 75% in the fourth quarter of 2021 compared to 74% in the third quarter.
The global steel manufacturing utilization rate outside of China with 75% in the fourth quarter of 2021 .
Compared to 74% in the third quarter.
Speaker 3: This represents a 5% improvement compared to the fourth quarter of 2020.
This represents a 5% improvement compared to the fourth quarter of 'twenty 'twenty.
Speaker 3: The U.S. Steel Industry Utilization rate was 83% in the fourth quarter of 2021, compared to 85% in the third quarter and 71% in the fourth quarter of 2020.
The U S steel industry utilization rate was 83% in the fourth quarter of 2021.
Compared to 85% in the third quarter and 71% in the fourth quarter of 'twenty 'twenty.
Speaker 3: As anticipated, the strength of the steel industry is now being reflected in the graphite electrode industry.
As anticipated the strength in the steel industry is now being reflected in the graphite electrode industry.
Speaker 3: During the second half of 2021, prices began to increase as a result of the underlying fundamental strength in the market. These positive trends remain in place as we begin 2022.
During the second half of 2021 prices began to increase as a result of the underlying fundamental strength in the market.
These positive trends remain in place as we begin 2022.
Speaker 3: We continue to see acceleration of demand for needle co and expect rising prices through 2022.
We continue to see acceleration of demand for needle Coke and expect rising prices through 2022.
Like most other industries, we too are experiencing inflationary pressures on certain aspects of our business and we anticipate the impact of this will be in the range of 7% to 9% on our cost per metric ton compared to Q4.
Speaker 3: Like most other industries, we too are experiencing inflationary pressures on certain aspects of our business, and we anticipate the impact of this will be in the range of 7-9% on our cost-permetric ton compared to Q4.
Speaker 3: Electricity and natural gas costs continue to remain elevated, particularly in our European location.
Electricity and natural gas costs.
<unk> to remain elevated, particularly in our European locations.
Speaker 3: We are well positioned, however, to effectively manage through this environment. Graph-text substantial vertical integrations allows us to manufacture a significant portion of our key raw material at a relatively stable price, which is a major competitive advantage compared to our peers. Graph-text substantial vertical integrations allows us to manufacture a significant portion of our key raw material at a relatively stable price, which is a major competitive advantage compared to our peers.
We are well positioned however to effectively manage through this environment.
<unk> substantial vertical integration allows us to manufacture a significant portion of our key raw material at a relatively stable price, which is a major competitive advantage compared to our peers.
Turning to slide five.
Speaker 3: Demand for our products continues to remain strong. In these times of tightening supply, we remain committed to providing our customers with high quality products to meet their increasing demanding needs.
Demand for our products continues to remain strong in these times of tightening supply we remain committed to providing our customers with high quality products to meet their increasing demanding needs.
Speaker 3: As I mentioned, our vertical integration is a key component of our strength in being a reliable supplier and dependable business partner.
As I mentioned, our vertical integration is a key component of our strength and being a reliable supplier and dependable business partner.
Speaker 3: We are focused on assisting our customers to maintain high utilization rate.
We are focused on assisting our customers to maintain high utilization rates.
Speaker 3: Our architect furnace monitoring system provides recommendations to our customers, helping them increase productivity and decreasing cost, making us a key strategic partner in the EAF manufacturing process.
Our architect furnace monitoring system provides recommendations to our customers, helping them increase productivity and decreasing cost, making us a key strategic partner in the EIF manufacturing process.
Speaker 3: This strong momentum in the graphite electrode market has led to higher pricing for our product.
This strong momentum in the graphite electrode market has led to higher pricing for our products.
Speaker 3: Our non-LTA price rose approximately 10% in the fourth quarter of 2021.
Our non LTA price rose approximately 10% in the fourth quarter of 2021 .
Speaker 3: which is on top of a 12% sequential increase in the third quarter of 2021.
Which is on top of a 12% sequential increase in the third quarter of 2021.
Speaker 3: In addition, we expect our first quarter non-LTA prices to increase 17 to 20 percent over the fourth quarter as virtually all of our non-LTA business was reset on January 1st.
In addition, we expect our first quarter non LTA prices to increase 17% to 20% over the fourth quarter is virtually all of our non LTA business was reset on January one.
Speaker 3: We have kept our estimates for graphite electrode revenue and volumes under our LTAs unchanged for 2022 and beyond, reflecting our confident outlook that demand for our products will remain strong. Now Jeremy will walk
We have kept our estimates for graphite electrode revenue and volumes under our LTA is unchanged for 2022 and beyond reflecting our confident outlook the demand for our products will remain strong.
Now Jeremy will walk us through slide six.
Thanks, Dave we're pleased with the strong sales results that we generated in the fourth quarter.
Speaker 3: Thanks, Dave. We're pleased with the strong sales results that we generated in the fourth court.
Speaker 3: sold 44,000 metric tons of electrodes in the quarter, which represents our highest quarterly sales volume total since the second quarter of 2019.
Sold 44000 metric tons of electrodes in the quarter, which represents our highest quarterly sales volume total since the second quarter of 2019.
Our fourth quarter shipments were comprised of 29000 metric tons of graphite electrodes under our LTA is at an average approximate price at $9400 per metric ton.
Speaker 3: Our fourth quarter shipments were comprised of 29,000 metric tons of graphite electrodes under our LTAs at an average approximate price of $9,400 per metric.
Speaker 3: and 15,000 metric tons of non-LPA sales at an average approximate price of $5,000 per metric ton.
And 15000 metric tons of non LTA sales at an average approximate price of $5000 per metric ton.
Net sales in the fourth quarter increased 7% compared to the fourth quarter of 2021 pardon me 2000 $20 million to $363 million.
Speaker 2: Net sales in the fourth quarter increased 7% compared to the fourth quarter of 2021, pardon me, 2020, to 363 million.
Speaker 3: As we progress through 2022, our commercial team will be focused on leveraging our vertically integrated position, which makes us a key top tier electrode producer that can provide our customers with security of supply during these periods of high demand.
As we progressed through 2022, our commercial team will be focused on leveraging our vertically integrated position, which makes us a key top tier electrode producer that can provide our customers with security of supply during these periods of high demand.
We will look to offer our customers a variety of contract terms tailored to their needs.
Speaker 3: We will look to offer our customers a variety of contract terms tailored to their needs.
Speaker 3: We believe that our ability to provide our customers with the surety of supply and term flexibility will continue to strengthen our position as a preferred supplier.
We believe that our ability to provide our customers with the surety of supply and term flexibility will continue to strengthen our position as a preferred supplier within the industry.
Speaker 2: Our production reached 46,000 metric tons in the fourth quarter, as we had a swift recovery from our third quarter, regularly scheduled maintenance outages in our Europe .
Our production reached 46000 metric tons in the fourth quarter as we had a swift recovery from our third quarter regularly scheduled maintenance outages in our European plants.
Speaker 3: Our investment in the new automated tin line at St. Mary's continues to progress well and helps the D-risk our tin production.
Our investment in the new automated pin line at St. Marys continues to progress well it helps to derisk, our pin production capacity.
Speaker 2: All of our sites continue to be very focused on further improving efficiencies and maximizing production given the strong demand for our graphite electricity.
All of our sites continue to be very focused on further improving efficiencies and maximizing production given the strong demand for our graphite electrodes.
Speaker 3: To that end, we're also targeting highly focused operational improvements at our plant.
To that end, we're also targeting highly focused operational improvements at our plants supported by select capital projects with high return on investment to extract as much capacity as possible from our manufacturing network.
Speaker 2: Supported by select capital projects with high return on investment to extract as much capacity as possible from our manufacturing network.
As the world moves towards more EASA steel production, we are investing to meet the growing demand that this shift creates.
Speaker 3: As the world moves toward more EAF-based steel production, we are investing to meet the growing demand that this shift creates. We're committed to be...
We're committed to being disciplined in this approach.
Speaker 3: Like all global suppliers, we have experienced pressures with shipping channels in various markets, driven by container shortages, port congestion, and supplier route constraints.
Like all global suppliers, we have experienced pressures with shipping channels in various markets driven by container shortages port congestion and supplier constraints. Our team has worked diligently through these challenges to meet our customers' needs.
Speaker 2: Our team has worked diligently through these challenges to meet our customers' needs.
Now turning to slide seven.
We continue to progress on our ESG journey.
Speaker 3: September we published our second annual sustainability report which is available on our web.
In September we published our second annual sustainability report, which is available on our website.
Speaker 2: Our enhanced reporting in this area will not only benefit our stakeholders, but will also assist us in identifying projects that will improve our environmental impact.
Our enhanced reporting in this area will not only benefit our stakeholders, but will also assist us in identifying projects that will improve our offer our environmental impact.
Speaker 3: We've already completed several projects in this area. For example, in 2021, every electrode manufacturing plant completed at least one capital project to improve air emission.
We've already completed several projects in this area for example in 2021 every electrode manufacturing plant completed at least one capital project to improve air emissions.
Speaker 2: We plan to keep up our momentum in this area and have already identified additional projects for 2022 that will further advance our environmental efforts.
We plan to keep up our momentum in this area and have already identified additional projects for 2022 that will further advance our environmental efforts.
Speaker 3: So now I'll turn it over to Tim to discuss our fourth quarter financial results on slide eight.
So now I'll turn it over to Tim to discuss our fourth quarter financial results on slide eight.
Thanks, Jeremy.
Speaker 3: We are pleased with another strong financial performance in the fourth quarter as a result of increased sales and profitability.
We are pleased with another strong financial performance in the fourth quarter as a result of increased sales and profitability.
Speaker 2: Net income totaled $141 million or 54 cents of gap earnings per share and 50 cents per share on an adjusted base.
Net income totaled $141 million or <unk> 54 cents of GAAP earnings per share and <unk> 50 per share on an adjusted basis.
Speaker 4: Fourth quarter at just the diva of $183 million was $11 million higher than the third quarter and $7 million higher than the fourth quarter of 2020. Again, achieving an adjusted even a mark.
Fourth quarter, adjusted EBITDA of $183 million was $11 million higher than the third quarter and $7 million higher than the fourth quarter of 2020.
Again, achieving an adjusted EBITDA margin of 50%.
Speaker 4: For the quarter cash flow continued to be strong, but was impacted by the bill that worked in capital during the quarter.
Fourth quarter cash flow continued to be strong, but was impacted by the build of working capital during the quarter.
Speaker 4: More specifically, we had higher accounts receivable and inventory balances as we ended the year.
More specifically, we had higher accounts receivable and inventory balances as we ended the year.
Speaker 4: We also had increased raw material purchases in the fourth quarter as we began to prepare for the 2022 productions plan.
We also had increased raw material purchases in the fourth quarter as we began to prepare for the 2022 production plan.
Speaker 4: We generated $100 million in cash from operations and $87 million of adjusted pre-cash flow.
We generated $100 million in cash from operations and $87 million of adjusted free cash flow.
Speaker 4: We expect to achieve continued strong free cash flow conversion in 2022.
We expect to achieve continued strong free cash flow conversion in 2022.
Now to slide nine.
We further strengthened our capital structure with a $100 million reduction in our term loan during the fourth quarter, bringing.
Speaker 4: We further strengthen our capital structure with a $100 million reduction in our term loan during the fourth quarter, bringing our 2021 debt reduction to $400 million for the second straight year.
Bringing our 2021 debt reduction to $400 million for the second straight year.
Speaker 4: We improved our total debt to adjusted EBITDA ratio to 1.6 times at ear end compared to 2.2 times at the end of 2020.
We improved our total debt to adjusted EBITDA ratio to one six times at year end.
Third to two two times at the end of 2020.
Speaker 4: As of December 31st, our total liquidity was approximately $305 million consisting of $58 million of cash and $247 million available under our revolving credit facility.
As of December 31, our total liquidity was approximately $305 million consisting of $58 million of cash and $247 million available under our revolving credit facility.
Now turning to slide 10.
Speaker 4: We are pleased with the strong earnings in cash loads we have delivered in 2021.
We are pleased with the strong earnings and cash flows we have delivered in 2021.
Speaker 4: We prioritize the majority that cash flow to reduce debt repaying $400 million during the year.
Prioritize the majority of that cash flow to reduce debt repaying $400 million during the year.
Speaker 4: Additionally, we purchased $50 million of stock in 2021, and we continue to have 159 million available to us under our stock repurchase program.
Additionally, we repurchased $50 million of stock in 2021, and we continue to have 159 million available to us under our stock repurchase program.
Speaker 4: We are committed to delivering value to our shareholders through a disciplined capital allocation strategy.
We are committed to delivering value to our shareholders through a disciplined capital allocation strategy.
Speaker 4: This includes returning capital to our shareholders while investing in our business and continuing to reduce debt to further strength in our balance sheet.
This includes returning capital to our shareholders, while investing in our business and continuing to reduce debt to further strengthen our balance sheet.
Yeah.
Speaker 4: We expect our 2022 capital expenditures to be in the range of $70 to $80 million.
We expect our 2022 capital expenditures to be in the range of $70 million to $80 million.
Speaker 4: We continue to use these funds to support our high quality low cost global operating assets and to target high return operational and troop.
We continue to use these funds to support our high quality low cost global operating assets and to target high return operational improvements.
Speaker 4: Our continued focus on strong capital structure provides us with significant financial, operational, and strategic flexibility. With that, I'll hand it back to Dave on slide.
Our continued focus on strong capital structure provides us with significant financial operational and strategic flexibility.
With that I'll hand, it back to Dave on Slide 11.
Thanks, Tim.
Speaker 3: As you heard, we continued to be encouraged by the demand and pricing trends in the graphite electrode industry, driven by the strength of global electric arc furnace steel-made.
As you heard we continue to be encouraged by the demand and pricing trends in the graphite electrode industry driven by the strength of global electric arc furnace steelmaking.
Speaker 3: Over the long term, we expect electric art furnaces will continue to grow their share of the global steel market as it is more cost effective and environmentally friendly process and an effective way to decarbonize the steel industry.
Over the long term, we expect electric arc furnaces will continue to grow their share of the global steel market as it is more cost effective and environmentally friendly process and an effective way to decarbonize the steel industry.
Speaker 3: We are now seeing the impact of higher graph by electrode prices and our reported results. And we expect the impact on our results to continue well into 2022.
We are now seeing the impact of higher graphite electrode prices in our reported results and we expect the impact on our results to continue well into 2022.
Speaker 3: We are committed to a disciplined capital allocation strategy that enhances shareholder value while also improving graph text financial profile, giving us the flexibility to successfully operate through industry cycle.
We are committed to a disciplined capital allocation strategy that enhances shareholder value, while also improving graph techs financial profile, giving us the flexibility to successfully operate through industry cycles.
Speaker 3: Our proven track record of high quality earnings and significant cash flow generation further supports our capital allocation.
Our proven track record of high quality earnings and significant cash flow generation further supports our capital allocation.
Speaker 3: We believe that Graftech continues to be well positioned for solid long-term growth as one of the largest producers of ultra-high-powered graphite electrodes in the world.
We believe the graph tech continues to be well positioned for solid long term growth as one of the largest producers of ultra high powered graphite electrodes in the world.
Speaker 3: We have a sustainable and long-term competitive advantage from our low-cost structure and vertical integration into our key raw material petroleum needle coals.
We have a sustainable and long term competitive advantage from our low cost structure and vertical integration into our key raw material petroleum needle coke.
Speaker 3: Our graphway electrodes are highly engineered and require extensive process knowledge to manufacture.
Our graphite electrodes are highly engineered and require extensive process knowledge to manufacture.
Speaker 3: The services and solutions the GraphTech provides help position both our customers and our company for a strong future.
The services and solutions that graph Tech provides help position, both our customers and our company for a strong future.
Speaker 3: With the commitment of our people and our significant competitive advantages, we continue to strongly believe GrafTech is well positioned to deliver results today and over the long term.
With the commitment of our people and our significant competitive advantages. We continue to strongly believe grass tech is well positioned to deliver results today and over the long term.
Speaker 3: This concludes our prepared remarks and we're now open to call up for questions.
This concludes our prepared remarks, and we'll now open the call up for questions.
Speaker 1: At this time, if you would like to ask a question, please press star then the number one on your telephone keypad. To withdraw your question, press the pound key.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Withdraw your question press the pound key.
[laughter].
Speaker 1: Our first question comes from the line of Dave Gagliano with BMO capital market.
Our first question comes from the line of David Gagliano with BMO capital markets.
Hi, Thank you for taking my questions and thank you for the additional information regarding pricing and costs.
Speaker 5: Thank you for taking my questions. And thank you for the additional information regarding pricing and costs.
Speaker 5: Just two quick questions on those metrics. First of all, on the pricing side.
Just two quick questions on on those metrics first of all on the pricing side.
Speaker 5: You mentioned you expect the impact, I believe in the February remarks right at the end, they expect the impact to continue well into 2022. I'm wondering if you could speak to that in a little more detail, with regards to spot prices in terms of the trend as we get into 2Q and 3Q. I know in the past you've talked about lags being about six months, and I've actually seen a little bit of a, you know, wobble and...
You mentioned you expect the impact I believe in the prepared remarks or at the end of <unk>. We expect the impact to continue well into 2022 I'm wondering if you could speak to that in a little more detail.
With regards to spot prices in terms of the trend as we get into <unk> and <unk> I know in the past you've talked about lags being about six months.
Obviously, we've seen a little bit of a wobble in and the steel market. So I'm wondering.
Speaker 5: in the steel market. So I'm wondering what you're seeing in terms of your spot market activity and pricing as of now. That's my first question. I have a follow up on the cost side as well.
What you're seeing in terms of your spot market activity and pricing are.
As of now that's my first question I have a follow up on the cost side as well.
Okay. Thanks, Thanks, Dave.
So so let me kind of answer your question, taking the latter part first.
Speaker 3: So so let me kind of answer your question taking the latter part first
Speaker 3: I would suggest you that the wallbow that you reference is only maybe to a small extent in the American market.
I would suggest to you that the wobble that you referenced is only.
Maybe to a small extent in the American market.
Speaker 3: And this morning, all real coil prices were at $1,220 a short time, which is well above anything historic. Certainly, everybody's maybe perhaps got a little accustomed to numbers as far they're higher than that. But $1,220 is certainly a very healthy number. And I would also point out to you that ReBar is at historic levels, you know, at $1040 a ton. So when I think of...
And you know this morning hot rolled coil prices were at $220, a short ton, which is well above anything that stork, certainly everybody's maybe perhaps got a little a.
Accustomed to numbers is slightly higher than that but <unk> 'twenty is certainly a very healthy number and I would also point out to you that rebar is at historic levels. You know a 10 40 a tonne.
So when I think about that and.
Speaker 3: And I think about the projections that we're hearing on a vehicle bill, the light vehicle bill for 2022, being in the plus 15 million units compared to 12.9 in 2021.
And I think about the projections that we're hearing on a vehicle build the light vehicle build for 2020 to being in the plus 15 million units compared to $12 nine in 2021.
Speaker 3: I think there is plenty of reason to be, that's for North America. I think there's plenty of reason to be optimistic and confident in the stability of the North American market. And when I look globally, Black State bill of prices have been increasing over the last several weeks, sitting at $6.55 this morning, demonstrating the strength.
I think there is plenty of reason to be that for North America. I think there's plenty of reason to be optimistic and confident in the stability of the north American market and when I look globally.
Black Sea billet prices have been increasing over the last several weeks sitting at 655. This morning, demonstrating the strength.
Speaker 3: in the Middle East and Far East markets that use those products.
In the middle East and far East.
Markets that use those products.
Speaker 3: So, and at the same time, the hot roll number in Europe is remained reasonably stable of light. So I think there's plenty of reason to believe when we look at a global perspective, that the market is still quite stable and stable at a relatively high number.
And at the same time not the hot roll number in Europe has remained reasonably stable of late so I think there's plenty of reason to believe when we look at a global perspective.
The market is still quite stable and stable at a relatively high number having.
Speaker 3: Having said that, we talked often about spot markets and the leg that you point out is in fact present.
Having said that.
We talk often about spot market and in the lag that you point out is in fact a present.
Speaker 3: And therefore, you know, we're commenting on the first quarter as we have begun to do over the last couple of these earnings calls.
And therefore, you know we're all we're commenting on the first quarter as we have begun to do over the last a couple of these earnings calls.
Speaker 3: You know, we'll consistent with that. We don't normally go beyond that. Other than to say that our expectation is that spot pricing will continue to increase as we go through the year.
Consistent with that we don't normally go beyond that other than to say that our expectation is that spot pricing will continue to.
Increase.
As we go through the year.
Speaker 3: And our competitors will need for that to happen as they're facing rising needle poke costs.
And our competitors will need for that to happen as they are facing rising.
Needle coke costs.
Speaker 3: I'll be asked that later so we might as well tackle it now. Needle code calls if you look at the information that's available through the import export, statistics in various countries across the world.
And I know I'll be asked that later, so we might as well to tackle it now no needle coke costs. If you look at the information that's available through the import export statistics in various countries across the world.
Speaker 3: You'll see that that number is ranging from 17 to $2,300, which is upward from where it was last year. And our anticipation is that it will continue to be upward pressure on that value as well.
You'll see that that number is ranging from 17 to $2300, which is upward from where it was last year and our anticipation is they will just continue to be upward pressure on that value as well so for all of those reasons the stability in our in the overall global steel market.
Speaker 3: So for all of those reasons, the stability in the overall global steel market.
Speaker 3: increasing impacts on
Increasing impacts on needle.
Speaker 3: needle coke that affect our competitors at a higher rate than us.
Needle coke.
Our competitors at a higher rate than us we continue to be optimistic that pricing will continue to move forward as we go through the balance of the year it might not be at the clip that we've seen in the last two quarters, but we do expect it to move upward.
Speaker 3: We continue to be optimistic and pricing will continue to
Speaker 3: move forward as we go to the balance of the year. It might not be at the clip that we've seen in the last two quarters, but we do expect it to move up.
Speaker 5: Okay, that's very helpful information. Thank you for that. And just my follow up, which you touch on with regards to the needle code side of the costs. But just overall, I believe what you said on the forever march is 79% quarter or quarter increase.
Okay. That's very helpful information. Thank you for that and just my follow up would you touch on with regards to the needle coke side of the cost.
But just overall I believe what you said on the prepared remarks of 7% to 9% quarter over quarter increase.
Speaker 5: So it's kind of a two-part question. I just want to make sure, is that a, you know, overall unit cost quarter of a quarter increase? And then, you know, the second part of that question is, if you could parse out how much of that, you know, seven to nine percent increase is driven by.
So it's kind of a two part question.
I just want to make sure is that a overall unit cost quarter over quarter increase and then.
Second part of that question is if you could parse out how much of that.
Seven a 9% increase is driven by.
Speaker 5: For example, higher power prices in Europe versus needle coke versus other.
For example, higher power prices in Europe versus needle Coke.
Versus other pieces. Thanks. So so thanks for the clarification, yes, the 7% to 9% is is and all in cost per metric ton value.
Speaker 3: So thanks for the clarification. Yes, the 79% is an all-end cost per metric ton value. So it is a unit cost, and it's an all-end cost. And you're correct that some portion of that is the increase in needle cost as well as some of the...
So it is a unit cost includes it's an all in cost.
And you're correct that some portion of that is is the AR increase in needle cost as well as some of the.
Speaker 3: pressures we face in the area of electricity and natural gas. And I'm going to have Tim provide a little color on that. But suffice it to say that, you know, the most of that pressure, as I referenced in our prepared remarks, you know, is more so when our European locations. And, you know, some of those. So
Pressures, we face in the area of electricity and natural gas and I'm Gonna have Tim provide a little color on that but suffice it to say that you know the most of that pressure as I referenced in our prepared remarks.
You know it is more so on our European locations and you know some of those.
Speaker 4: uh... commodities we have you know uh... short-term rather meaning one-year type arrangements or some portion of those costs are in fact fixed to provide us some protection but i'm gonna uh... defer here to Tim to provide a little color on that yeah thanks Dave and you're absolutely right about the conditions in Europe being a little bit challenged on the energy front I'd probably just remind everybody that you know the energy both natural gas and electricity probably represent about fifteen percent of our total
Commodities, we have you know short term, rather meaning one year type of arrangements, where some portion of those costs are in fact fixed will provide us some protection, but I got up.
Defer to Tim to provide a little color on that yeah, Thanks, Dave and you're absolutely right about the conditions in Europe being a little bit challenged on the energy front I'd, probably just remind everybody that the energy both natural gas and electricity probably represent about 15% of our total.
Speaker 4: Cost structure, so you can kind of back into then, you know, what the variability of that, you know, would otherwise impact from a cost structure perspective.
Cost structure. So you can kind of back into then what the variability of that would otherwise impact from a cost structure perspective, but.
Speaker 4: today's point on our contract structure and what we've done proactively in Europe around both electricity and natural gas has gone out and in many cases entered into fixed price contracts in Europe . So a vast majority of our power needs in Europe are fixed at this point in time. We're probably not quite as fixed on the natural gas side across the board, but again, natural gas is a much smaller piece of the overall.
To Dave's point.
On our contract structure and what we've done proactively in Europe around both electricity and natural gas has gone out and in many cases entered into fixed price contracts in Europe .
So a vast majority of our power needs in Europe are fixed at this point in time.
Probably not quite as fixed on the natural gas side across the board, but again natural gas is a much smaller piece of the overall.
Our cost structure that we have and so we're probably somewhere.
Speaker 4: cost structure that we have. So we're probably somewhere.
Speaker 4: less than 50% fixed, but we do have some contract structures that just give us a little bit of a muted effect from spikes and peaks and valleys in the spot market if you want.
Less than 50% fixed, but we do have some contract structures.
That just give us a little bit of a muted effect from spikes in the peaks and valleys in the spot market. If you will.
Okay. That's helpful. Thank you very much.
Your next question comes from the line of Arone, Viswanathan with RBC capital markets.
Speaker 1: Your next question comes from the line of a room this one at the with RBC capital market.
Yeah.
Speaker 6: Great, thanks for taking my questions. Good morning. Hope you're all well.
Great. Thanks for taking my question good morning, I hope, you're all well so yeah. So I appreciate the color as well on the pricing commentary, so I guess that.
Speaker 6: So yeah, so appreciate the color as well on the price and commentary. So I guess...
Speaker 6: That implies something in the $5,850 to $6,000 per tonne range for Q1 non-LTA business. And then I guess you noted that subsequent quarters could also see rises, but maybe not in that 17 to 20 percent range.
That implies something in the 50 $850 to 6000 dollar per ton range for Q1, our non LTA business and then I guess are you you noted that subsequent quarters could also see rises but maybe not in that 17% to 20% range. So assuming that something like you know, 10% or so a quarter.
Speaker 6: So assuming that's something like 10% or so a quarter or 5% to 10% in that range, it looks like you can get into the mid fixes.
5% to 10% in that range.
It looks like you can get into the mid sixes.
Speaker 6: in the middle of the year of 22 and then maybe exit at seven. And that would also kind of imply something in the 2000 to $2,500 range for needle co.
In you know in the middle of the year of 22, and then maybe exit it seven and and and that would also kind of imply.
Imply something.
And in the 2000 to 2500 dollar range for needle Coke.
Speaker 6: And your current price of, say, you know, again, in Q1 of 50 to 6,000 indicates kind of a needlecoat price close to 2,000. So, could you kind of comment on some of those ranges? Am I in the right neighborhood as far as how I'm thinking about how the year could play out?
And and and your current price I would say Ah you know again in Q1 of a 50 56000 indicates kind of a needle coke price close to 2000 and so.
Could you could you kind of comment on some of those ranges.
Finding the right neighborhood as far as how I'm thinking about how the year could play out.
Speaker 3: Thanks, Haroon. I think you're doing fairly well. I think your Q1 value is in the right vicinity.
Thanks, you Rune I think youre.
Youre doing fairly well I think your Q1 value isn't isn't the right vicinity.
Speaker 3: And as we walk through the balance of the year, you know, as I said earlier, it's a little early for us to start projecting Q2, Q3, Q4 price increases. You know, we were framed from doing that because the minute I do that, I've just told our competition what our numbers are and the history has taught us early on after the IPO that they undercut us by about 100 bucks. And then...
And as we walked through the balance of the year.
As I said earlier, it's a little early for us to start projecting a Q2 Q3 Q4 price increases you know we refrain from doing that because the minute I do that I've just told our competition.
What our numbers are and our history has taught us early on and after the IPO that then they undercut us by about 100 hundred box and then [laughter], then where are between a rock and hard spots. So I'm I'm respectfully I'm going to refrain from you know confirming those exact values I.
Thank you again, you're you're in the right church.
You know whether you're exactly in the right Pew remains to be seen but I think you're you're not too far out I think your needle Coke thoughts Mike.
Speaker 3: you're not too far out. I think your needle folk thoughts might be a slight fit conservative. I expect between the increase in the...
It might be a slight bit conservative I expect between the increase in.
Graphite electrode business and the E V World, we might see a bit more pressure than you're suggesting which I want to remind everybody.
Speaker 3: graphile electoral business and the e.v. world. We might see a bit more pressure than you're suggesting, which I want to remind everybody.
Hum.
Speaker 3: is actually helpful for graph tech because it actually does help us at the end of the day. So we're one of the few people that have that kind of view on that particular.
Is actually helpful for graph tech because it actually does help us at the end of the day. So we're one of the few people that have that kind of view on.
That particular cost.
Speaker 6: Okay, great. And then appreciate that. Also just the questions around steel and utilization. So it looks like steel market utilization is still in the north of 80% range.
Okay, Great and then I appreciate that also just questions around steel so and utilization. So it looks like you know steel market utilization is still in the.
North of 80% range.
Speaker 6: But electrode utilization, I mean, your own utilization looks to be in the 70% range. I'm not sure if the industry is also around there, but I would assume that it is.
But electrode utilization I mean, your own utilization looks to be in the 70% range I'm not sure. If the industries is also around there, but I would I would assume that it is.
Speaker 6: I guess is that right? And, or, and again, I'm also making that assumption because it appears the appreciation in electrodes has been a little bit behind what we had originally thought. You know, we've seen still prices rise over a year ago.
I guess is that right and or and again I'm also making that assumption because it appears the appreciation in electrodes has been a little bit behind what we had originally thought you know what we'd seen still prices rise over a year ago, and it's taken a little bit longer for electric prices to catch up and my assumption is if there is extra.
Speaker 6: It's taken a little bit longer for electrode prices to catch up and my assumption is that there's extra Supplier inventory out there. So on the electrode side
Supplier inventory out there so on the electrode side. So is that right and have you seen electrode prices continue and needle coke prices continue to go up when steel prices are going the other way and is that just a function of the the typical catch up.
Speaker 6: So is that right? And have you seen electrode prices continue, and you'll cook prices continue to go up when fuel prices are going the other way? And is that just a function of the typical catch up? Maybe you can just come in on that dynamic.
Maybe you can just comment on that on that dynamic.
Speaker 3: Sure, so let me help you a little bit on the utilization rate. I'm assuming you're looking at page three of the earnings release, where you see at the bottom something that says total capacity utilization 78%.
Sure.
So let me let me help you a little bit on the utilization rate I I'm.
I'm, assuming you're looking at page three of the earnings release, where you see at the bottom something that says total capacity utilization 78%.
Please bear in mind that that is a all in and we're not currently running.
Speaker 3: Please bear in mind that that is all in. And we're not currently running the front end of St. Mary. So we really don't have that capacity. The right number you should be thinking about is on that same page, capacity utilization, excluding St. Mary's, which is 88%. That's what you should currently be thinking.
The front end of St. Marys. So we really don't have that compare the right number you should be thinking about is on that same page capacity utilization, excluding St Marys, which is 88%.
That's the way you should currently be thinking off.
Speaker 3: Regarding the steel side.
Regarding the steel side.
Speaker 3: Again, I think you hear all the steel guys being on their calls still relatively bullish. I think that, as I referenced earlier, if you look at the projection for the North America-like vehicle build, it's about 2.5 million more units than were built in 2021.
Again, I I think you hear all the steel guys being on their calls still relatively bullish.
I think that as I referenced earlier, if you look at the projection for the North America light vehicle build.
It's a you know about two and a half million more units than were built in 2021.
Speaker 3: The non-residential infrastructure projections are up for 2023 by over 40,000 tons. If you look at the infrastructure bill that just got passed in the United States, the impact of that is projected to be 20 to 25 million tons over five years. So I think there's plenty of reasons to be still
Nonresidential infrastructure projections are up for the for 2023 by over 40000 tons.
If you look at the infrastructure Bill that just got passed in the United States.
The impact of that.
It is projected to be 20 to 25 million tons over five years.
So I think there's plenty of reasons to be still I'm, a pretty optimistic and positive about where the overall industry is going there's always some you know puts and takes as we get through per certain parts of the the year as build schedules are being all.
Speaker 3: pretty optimistic and positive about where the overall industry is going. There's always some, you know, puts and takes as we get through per certain parts of the year as build schedules are being looked at. And this whole chip crisis is being, you know, work through from the automotive guys. You know, the ISM manufacturing index is still at 60.
Looked at in this whole chip crisis is being work through from the automotive guys.
You know the ISR manufacturing index is still at 60.
Speaker 3: And that the durable goods indexes projected to increase through 2023. So
And that the.
The durable goods index is projected to increase through 2023 so.
Speaker 3: I think there's many reasons to remain
I think there's many reasons to remain.
Speaker 3: Again, optimistic and positive about the steel industry and then by subsequently the graphite electrode industry.
Again optimistic and positive about the steel industry and then by and subsequently the.
Outside electrode industry.
Speaker 3: Not to mention the conversion to electric arc furnaces that is in a number of projects that have been announced both in the United States, Canada, Europe , there's a lot of I think.
Not to mention the conversion to electric arc furnaces that is in the number of projects that have been announced both in the United States, Canada Europe , There's a lot of I think.
Speaker 3: positivity in the space in which we play.
Positivity in the space in which we play.
Could you also comment on that thanks for that could you also comment on just inventory levels of electrodes I guess at your own plants and maybe what you see in the industry. I mean do you think the industry is tighter right now than it was maybe a year ago or you know is that as you know.
Speaker 6: Could you also comment on, thanks for that. Could you also comment on just inventory levels of electrodes? I guess that your own plants and maybe what you see in the industry. I mean, you think the industry is tighter right now than it was maybe a year ago or, you know, has that, you know, conditions on the inventory side continue to improve.
Conditions on the inventory side continued to improve.
Speaker 3: So I'll look compared to a year ago, absolutely, inventories are much tighter, not just a little bit. People went into the year last year with, because of the pandemic, they're still feeling the impact of the pandemic. And as you might recall, it was the end of Q1 last year where we began to see some normalization of
Yeah, well look compared to a year ago.
Oh, absolutely inventories.
Our much tighter and not just a little bit people went into the year last year with a because of the pandemic. There still are feeling the impact of the pandemic and as you might recall. It was the end of Q1 last year, where we began.
And to see some normalization of bad those inventory levels. So we view inventory levels.
Speaker 3: They had those inventory levels. So, you know, we view inventory levels.
Speaker 3: today at what I would call a pre-pandemic normal value, maybe slightly below normal, but not a great deal. But by and large, people running...
Today at what I would call.
Our pre pandemic normal value may be slightly below normal, but not a great deal.
But by and large people running with I think you guys have heard me referenced this before you know lot of people run with about three months of inventory because it takes three months to make in electrodes. So that's kind of you know keep that's a balanced place.
Speaker 3: with I think you guys have heard me reference this before, you know, a lot of people run with about three months of inventory because it takes three months to make an electrode. So that's kind of, you know, keep that's a balanced place, if you will. So yeah, I think the inventory situation is healthy from our perspective, meaning healthy meaning there's not excess in the system. And, uh...
Well so yeah I think the inventory situation is is healthy from our perspective, many healthy meaning there's not excess in the system and we can be reliable suppliers with with what we have we by no stretch the imagination.
Speaker 3: We can be reliable suppliers with what we have. We, by no stretch of the imagination, have excess inventory in our system. We have just enough to continue to be reliable and meet our demands and keep it flowing at a good pace and turn, keep our days of inventory at a good financial value.
Excess inventory in our system we have.
Just enough to you know continue to be reliable and meet our demands and keep it flowing at a good pace in turn keep our days of inventory at a good financial value.
Yeah.
Great. Thank you.
Speaker 1: Your next question comes from the line of Alex Hacking with Citi.
Your next question comes from the line of Alex hacking with Citi.
Speaker 7: Yeah, good morning, Dave and team. I just wanted to follow up on the cost side a little bit. Can you can you remind me is the is the needle coke manufacturing process significantly more energy intensive than the electrode manufacturing process? Or are they roughly similar?
Yeah, Good morning, Dave and team I, just wanted to follow up on the cost side a little bit.
Can you ever can you remind me is the is the needle coke manufacturing process significantly more energy intensive than the electrode manufacturing process or are they roughly similar.
Speaker 3: No, remember that the needle coke process, at least our process is seed ripped. I'm going to speak to that. We are very much like a small, you can think of us in the context of being a small refinery. It's mostly a chemical.
No remember that the needle coke price status at least our processes seadrift I'm like I'm I'm going to speak to that.
We are very much like a small so you can think of us in the context of being a small refinery, it's mostly a chemical rehab.
Speaker 3: reaction process as opposed to high amounts of natural gas and or electricity.
Reaction process as opposed to you know high amounts of natural gas or electricity.
Okay. Thanks, and then also at Seadrift, if I remember correctly.
Speaker 7: Okay, thanks. And then also at Seadrift, if I remember correctly...
Speaker 7: Um, when you signed the LPAs, you know, 4 or 5, you know, 4 years ago, you also hedged out the, the decant oil going forward. Um, am I remembering correctly and therefore.
When you signed the L. P. As you know four or five four years ago, you also hedged out the decant oil going forward.
I am I remembering correctly and therefore.
Speaker 7: You know, are you still effectively using hedged decan oil prices today and those will start to roll off as the LTA's roll off going forward?
Are you still effectively using hedged decant oil prices today, and those will start to roll off as the L. T A's roll off going forward.
Speaker 3: Yeah, you're thinking of it absolutely correctly.
Yeah, you're thinking of it absolutely correctly.
Speaker 3: And one thing that I should have mentioned in the answer to your previous question at our seed rip facility, we take any of the energy that's created in the chemical reactions and run it through a boiler, capture that energy, and make our own electricity, and we're a net provider. We actually put electricity back out onto the grid.
And one thing that I Should've mentioned in the answer to your previous question at our Seadrift facility.
We take any of the energy that's created in the chemical reactions and run it through a boiler capture that energy and make our own electricity and we're a net provider, we actually put electricity back out onto the grid.
Speaker 7: Okay, thanks. And then that, that's 79% increase in unit cogs for the first quarter.
Okay. Thanks, and then Matt that 7% to 9% increase in unit Cogs for the first quarter.
Speaker 7: You know, given that a lot of your.
You know given that.
A lot of your.
Speaker 7: Energy costs in Europe would be on as you said, sort of fixed.
Energy costs in Europe would be.
As you said sort of fixed for the year.
Speaker 7: You know, should we assume that cost is maybe...
You know should we assume that.
Cost is maybe.
Assuming needle coke is flattish them shall we assume that your costs are.
Speaker 7: assuming needle coke is flatish. Should we assume that your costs are...
Speaker 7: still rising after that in the second and third quarters, but at a significantly lower rate given that most of that European power.
Still rising after that in a second or third quarters, but at a.
A significantly lower rate given that most of our European power.
Speaker 7: uh sort of inflation and increased use of platinium coke would already be in there or should we expect you know similar magnitude of increase
Sort of inflation and increased use of third party needle coke would already be in there or should we expect.
Similar magnitude of increases.
Speaker 4: Yeah, I think it's fair to say that we wouldn't expect to see the same increases as we go through the second third fourth quarters Given the dynamics that we talked about earlier on on the European power side But you know obviously, you know the years still have to play out, but you would be at that same order of magnitude
Yeah, I think it's fair to say that we wouldn't expect to see the same increases as we go through the second third and fourth quarters, given the dynamics that we talked about earlier on on the European power side.
But obviously you know the year still has to play out but you wouldn't be at that same order of magnitude in any way shape or form.
Speaker 7: Okay, thanks. And then just one more if I may. Can you just remind me of the rough contract mix that you have? And I guess my question is, as we stand today, how much of your non-LTA business is priced for the year? Do you have any one-year contract?
Okay. Thanks, and then just one more if I may can you just remind me.
You know the rough sort of contract mix that you have and I guess my question is you know as we stand today, how much of your non LTA businesses is priced for the year do you have any one year contracts.
Speaker 7: Laughter is mostly on kind of three, six months at this point. Thanks.
Laughter was it mostly on kind of three six months at this point thanks.
Speaker 3: We have a few one years, but we have a number of one-year contracts where we agreed that we would revisit the price in a second half, and we did that with the expectation that pricing would be increasing during the year.
Yeah, we have a few one years, but we have a number of one year contracts, where we agreed that we would revisit the price in the second half and we did that with the expectation that pricing would be increasing during the year.
Speaker 3: So we don't have much that's fixed for the whole year. More that look at the second half. So, and we're still waiting. We haven't really even begin to talk much about the second half because it's too early.
So we don't have much there's fixed for the whole year more of that.
Look at the second half so and we're still waiting we haven't really even began to talk much about the second half because it's too early.
Speaker 7: Oh, okay. Yeah, I had had some conversations that, you know, Coke prices were going up in the second half, but it sounds like
Oh, Okay, Yeah, I had heard some conversations that needle coke prices were going up in the second half, but it sounds like that's.
Speaker 7: maybe we'll cover the lecture of manufacturers. Okay, appreciate the feedback and on to thank you.
That's maybe revolve or electric.
Manufacturers, Okay I appreciate the feedback and the answer thank you.
Speaker 1: Your next question comes from the line of Michael Blick with JP Morgan.
Your next question comes from the line of Michael Glick with J P. Morgan.
Speaker 5: Hey, good morning. Just one question for me. How are you all thinking about capital allocation in terms of debt repayment versus stock buyback?
Hey, Good morning, just one question for me just how are you all thinking about capital allocation in terms of.
Debt repayment versus stock buyback.
Thanks.
Speaker 4: Yeah, you know, I think, you know, as we stated, I mean, we remain committed to a discipline process.
Yeah, you know I think you know as we stated.
Main committed to a disciplined process.
Speaker 4: We talk to our board on a quarterly basis and think about capital allocation accordingly as we look at the projections for our business.
We talk to our board on a quarterly basis and think about capital allocation Accordingly, as we look at the projections for our business.
Speaker 4: You know, we'll continue to invest, as we noted, slightly higher capital expenditures planned for the year, again, targeting some high-return projects and projects to generate some operating improvements for us in the long term.
We will continue to invest as we noted a slightly higher capital expenditures planned for the year are again targeting some high return projects and operate the project to generate some operating improvements for us in the long term.
Speaker 4: We remain committed on the balance sheet. I think we've said a number of times that our
We remain committed on the balance sheet I think we've said a number of times that our.
Speaker 4: Our target debt level or debt EBITDA level is no more than two to two and a half times and we're certainly comfortable being below that as we are today at 1.6 times.
Our target debt level, our debt to EBIT level is no more than two to two and a half times and we're certainly comfortable being below that as we are today at one six times.
Speaker 4: But we have been active in the markets as well in terms of returning capital to shareholders both in the form of dividends as well as share buybacks with the 50 million that we did in the third and fourth quarter of 2021. And we have the 159 million still sitting out there that was authorized by our board in the second half of last year. So we were really committed to that program and we'll continue to do so going forward.
But we have been active in the markets as well as in terms of returning capital to share our shareholders. Both in the form of dividends as well as share buybacks with the $50 million that we did in the third and fourth quarter of 2021, and we have the $159 million still sitting out there that was authorized by our board and the SEC.
Half of last year so.
We remain committed to that program and we'll continue to do so going forward.
Thank you.
Speaker 1: You have a follow up question from the line of Dave Gagliano would be a more capital market.
You have a follow up question from the line of David Gagliano with BMO capital markets.
Speaker 5: Great. Thanks for taking my follow-ups. Just two quick ones here. First of all, on near-term volume expectations, if you could just speak a little bit to your first quarter and perhaps second quarter volume expectations if you're willing to, and then I have a follow-up on the cost.
Great. Thanks for taking my follow up just two quick ones here first of all on near term.
Volume expectations, if you could just speak a little bit to your first quarter.
And perhaps second quarter volume expectations, if you're willing to and then.
I have a follow up on the on the on the cost.
Speaker 3: So Dave, I think on the last call, somebody was asking me about, you know, capacity utilization and whatever, and what have you rather.
So Dave I think on the last call.
Somebody was asking me about capacity utilization somewhat however.
And what have you rather.
Speaker 3: And I made the statement that, you know, round numbers are theoretical capacity is somewhere around 200,000 tons and that, you know, running at about 90% capacity over a longer term period is probably a place that's
And I made the statement that you know round numbers are a theoretical capacity is somewhere around 200000 tons and that you know running at about 90% capacity over a longer term period is probably a place that's.
Speaker 3: prudent from an expectation perspective. You might have moments of greatness where you get over that for a short period of time and then you've got, you know, scheduled maintenance, all the duties that you've got to do. So hopefully that can help sense your question.
You know prudent.
From an expectation perspective, you know you might have moments of greatness, we get over that for a short period of time and then you've got a you know a scheduled maintenance outages that you gotta do so hopefully that can add that helps answer your question.
Yeah. So no notable variations from that.
Speaker 3: Yes, so no notable variations from that on a near-term basis. That's really what all I was asking about. Yeah, I mean, we're going to obviously, Jeremy's worked hard with the operating guys to, you know...
On a near term basis, that's really about all I was asking him out yeah. I mean, we're gonna obviously, Jeremy worked hard with your operating guys stuff you know.
Speaker 3: get as much juice from the oranges we possibly can, and then that won't stop. But I think that's a good place to think about it. And, you know, we may
Get as much juice from the Orange as we possibly can and then that won't stop but I think that's a good place to to think about it and you know we made a little bit of reference here you know until we're a little bit higher.
Speaker 3: A little bit of reference here, you know, till we're a little bit higher cap X spend and a lot of that extra additional spend is directed towards thinking about where the market's going on a, I'll call it a medium term basis and being sure that
Capex spend and along with that extra additional spend is directed towards thinking about where the market's going on a I'll call. It a medium term basis and being sure that we're doing some things not unlike we did an 18 to.
Speaker 3: We're doing some things not unlike we did in 18 to be prepared.
Be prepared so that we can we can grow.
Speaker 3: so that we can grow.
Speaker 5: Okay, that's helpful. Thanks. And then just my follow up on, actually on Alex's question a few minutes ago, on on decant oil and the hedges. I was wondering if you could drill down into that a little bit more specifically. You know, when we think about your overall unit cost.
Okay. That's helpful. Thanks, and then just my follow up on actually on Alex's question, a few minutes ago on decant oil and the hedges I was wondering if you could drill down into that a little bit more.
Specifically you know when when when we think about your overall unit costs.
Speaker 5: Um, you know, what, roughly what percentage, um, is decant oil? Uh, that's my first question. And then, and then the other parts of that question are, you know, specifically when were those hedges put in place?
You know what roughly what percentage.
As D can hoyle. That's my first question then and then the other parts of that question or specifically when were those hedges put in place.
Speaker 5: And more specifically, when do they start to roll off?
And more specifically when do they when do they start to roll off.
Speaker 3: The hedges were put in place at the time that the LTA program began, you know, over hard to believe, over four years ago now. Tim, you want to comment on the comments?
Yeah. The hedges were put in place at the time that the LTA program began.
You know over hard to believe over four years ago now Tim you want to comment on them.
Our cost structure and.
Speaker 4: Yeah, I mean, I think if you think about the decan oil, I mean, that is the primary wrong ingredient for making the petroleum meal coke. So it's probably about two thirds of the overall cost structure of our internally
Percentages, yes.
I think if you think about the decant oil I mean that is the primary raw ingredient for making the petroleum needle coke. So its probably about two thirds of the overall cost structure of our internally manufactured needle coke.
Speaker 5: Okay. And I apologize. I don't have the numbers in front of me. How much of that – like, when we sort of filter through the graphite electrode overall unit cost, how much is the internally manufactured?
Okay, and I apologize I don't I don't have the numbers in front of me how much of that like when.
When we sort of filter through the graphite electrode overall unit costs, how much is the internally manufactured.
Yeah.
Speaker 5: you know, needle coat, what percentage of total costs with that?
No needle coke, but what percentage of total.
Total cost with that piece of it.
Speaker 4: Yeah, we haven't given that level of specificity because it's obviously a mix of what we generate internally as well as what we buy on the market from a third party needle coke.
Yeah, we haven't given that level of specificity because it's obviously a mix of what we generate internally as well as what we buy on the market from a third party needle Coke perspective.
Speaker 3: OK. All right. Appreciate it. Thanks. Yeah, on a broader term, I mean, in the past.
Okay, Alright, thanks Robert.
Robert a broader term I mean in the past.
Speaker 3: You know, we've always talked about from a capability perspective.
We've always talked about from a capability perspective.
Speaker 3: that we could, we can support about two-thirds of our order book with speed rest and need about one-third from the outside world.
We could we can support about two thirds of our order book.
With seadrift and need about one third from from the outside World. So.
Speaker 3: and I'd rather high-lovely think about it in that context.
You can at a high level, you can think about that and in that context.
Okay Alright.
Alright thats helpful. Thanks.
Yeah.
Okay.
Speaker 1: This concludes our question and answer session. I will now hand the call back over to Mr. Rintu for closing remarks.
This concludes our question and answer session I will now hand, the call back over to Mr. Rintoul for closing remarks.
Speaker 3: Thank you, fellas. I would like to take this opportunity to wish everyone on the call health and safety in the coming months. Thank you for your interesting graph tech, and we look forward to speaking with you in the next quarter. Take care.
Thank you fill us I would like to take this opportunity to wish everyone on the call health and safety in the coming months.
Thank you for your interest in graph Tech and we look forward to speaking with you in the next quarter.
Take care and have a safe day.
Thank you I would like to take this opportunity to wish everyone on this call health and safety in the coming months. Thank you for your interest in <unk> and we look forward to speaking with you next quarter.
Speaker 1: Thank you. I would like to take this opportunity to wish everyone on this call, health and safety in the coming months. Thank you for your interest in Graph Tech, and we look forward to speaking with you next quarter.
Yeah.
Yeah.
Okay.
Speaker 8: .
Yes.
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Speaker 8: Royal
Okay.
Yeah.
Good morning.
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Speaker 8: Oh
Okay.
Yeah.
No.