Investor Presentation

Transcription

1 Investor Presentation March 2011 This presentation includes forward looking statements. Please refer to our forward looking statement at the end of the presentation.

2 Key Investment Considerations Leading market position Major player in graphite electrode markets Graphite electrode industry s low-cost producer Six graphite electrode manufacturing facilities strategically located on four continents with customers in about 65 countries One of the largest, global technical support teams in the industry Sustainable competitive advantages Unique, advantaged global manufacturing network cannot be easily replicated Economies of scale 125 years of R&D experience and process know-how Only backward-integrated graphite electrode producer Strong long-term industry fundamentals Industrial Materials end market include mini-mills, growth sector of steel industry Electrodes are consumed at a rate of one electrode every 8 to 10 hours No commercially viable substitute for graphite electrodes Well positioned to penetrate high-growth alternative energy & electronics markets Commercializing advantaged technologies Six R&D 100 awards for newly commercialized products in the past eight years Expertise in solar energy storage & fuel cell development recognized with two U.S. Department of Energy grants in 2010 Approximately 775 patents and patent pending applications Solid balance sheet & cash flow Solid Balance Sheet - net debt position of $288 million in 2010, consisting of $143 million zero coupon Senior Subordinated Notes, and $130 million drawn on revolver Solid liquidity and balance sheet positioned for future growth Shareholders equity of $1.2 billion 2

3 GrafTech Today 2010 Revenue: $988 Million* ~80% ~20% Industrial Materials Engineered Solutions Graphite Electrodes Leader in graphite electrodes Industry s low cost producer Unique global manufacturing network World-class quality and service o Steel ( Mini-mill ), non-ferrous metals Needle Coke World s second largest producer Key raw material in graphite electrodes Approx. 45% of the total cost of a graphite electrode o Graphite electrodes Refractories Unique technologylonger life therefore more productivity for our customers Protects furnace walls against thermal, mechanical and chemical attack o Steel (Integrated mills) Advanced Graphite Materials & Natural Graphite Wide range of highly engineered synthetic graphite products Excellent customer application knowledge Tailored solutions Electronic Thermal Management ( ETM ) solutions Exploiting continued trend of miniaturization and increased computing power o Transportation, solar, oil and gas exploration, nuclear, electronics, fuel cell power generation Capitalizes on Strength in Global Steel, Participates in Large Infrastructure Build Exploits Graphite Material Science Expertise, Participates in Growth Markets 3 *Excluding the impact of the acquisitions.

4 Diverse Global Customer Base Sales In Over 65 Countries Markets Markets by by Region1 1 Europe, Middle East, Africa 43% Asia Pacific 19% Americas 38% Key Key Customers Customers Arcelor Mittal BaoSteel Gerdau S.A. Steel Dynamics Thyssen Krupp Samsung Elkem Solar Griffin Wheel No customer is greater than 10% of total sales Domestic (USA) sales approximately 20 % The quality of GTI s customer portfolio is not dependent on any local market or customer 1 Based on 2010 revenue 4

5 Our Industrial Materials Segment 5

6 Graphite Electrode Fundamentals Key Component in EAF Steel Production Graphite Electrodes - Consumables Critical component for mini-mills Conducts electricity in EAF to melt scrap steel Graphite electrodes are consumed every 8 to 10 hours Represents relatively small portion of total EAF steel production costs Approximately two to three percent No available substitute High barriers to entry Electric Arc Furnace (EAF) Graphite Electrode Graphite Electrodes are a Critical Component for EAF Steel Production 6

7 Key Industry Served: Mini Mill Sector Long-term, Growth Segment of the Global Steel Market EAF Production Integrated Production Total World % EAF Emerging (ex. China) % EAF Advanced % EAF % 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% Source: World Steel Association, GTI Estimates EAF Steel Key Advantages Low capital and cost structure Environmentally friendly Improving ability to produce specialty steel products EAF as a percent of total steel has grown from 14 percent in 1970 to 28 percent in 2010 As emerging economies develop, they generate scrap steel that supports future EAF steel growth EAF s historically growing at two to three percent a year EAF s produce approximately 1/3 of the world s steel Strong Industry Fundamentals 7

8 Key Raw Material Requirements Cost Cost of of goods goods sold sold (graphite (graphite electrodes) electrodes) Fixed Fixed vs. vs. Variable Variable Other 20% Fixed 30% Freight 4% Depreciation 5% Pitch 6% Energy 10% Labor 11% Coke 44% Variable 70% Size provides economies of scale and purchasing leverage Historically, prior to the start of a calendar year, we secure pricing and terms for the majority of our graphite electrode production costs 100% ownership in Seadrift, the second largest petroleum coke producer in the world Only backward-integrated graphite electrode producer Approximately 45% of the total cost of a graphite electrode Source: Company estimates based on, among other things, operating levels, product mix and currency exchange rates. 8

9 Acquisitions Strengthen Business Model Excellent Strategic Fit Seadrift GrafTech C/G Independent needle coke producer Global leader in graphite material science and technology U.S. based graphite electrode producer This combination creates a sustainable future for our graphite electrode business supply chain 9

10 Our Engineered Solutions Segment 10

11 Engineered Solutions Products Tailored Graphite Solutions for High Growth Markets Diversified mix of high growth markets yielding $173 million in revenue in Strong Value Proposition for growth markets: Solar Silicon: Largest graphite billet in the world for increased batch size and reduced costs Oil Exploration: Graphite molds consumed in production of diamond drill bits Transportation: Specially engineered graphite to enable low cost rail wheels Semiconductor: Ultra pure graphite for silicon single crystal growth Electronics: Natural graphite thermal solutions for the thinnest and most demanding electronic devices Nuclear: Long term energy programs evolving around next generation reactor needs. Solar Insulation Packages Crucibles for Production Crystal Growing Products Polysilicon Solar cells Energy Molds for Drill Bits Insulation Packages Furnace Parts Reactor Parts Oil Production Wind Nuclear Other Thermal Mgt. for Flat Screen TVs Flow Field Plates Molds for Carbon Composite Parts TV Fuel Cell Cars Air Planes 11

12 Financial Overview 12

13 2010 Full Year Recap V Sales (MM)* % Operating Income* % Net income* More than doubled SG&A* % R&D % + ROS (NI/Sales) 10% 15% + 5 pts Operating Cash Flow (25) EPS* $0.52 $ $0.68 Leveraging Top Line Growth into Solid Operating Results *Excludes the impact of the acquisitions, Seadrift impairment and other special items. 13

14 2011 Outlook 2011 Guidance (including the acquisitions of Seadrift and St. Marys and related purchase price accounting) EBITDA* in the range of $285 million to $315 million (up approx. 40% over 2010). Overhead expense to be in the range of $145 million to $155 million. Interest expense in the range of $18 million to $20 million. The effective book tax rate to be in the range of 22 percent to 24 percent. Planned capital expenditures to be in the range of $135 million to $150 million. Depreciation expense of approximately $85 million. Cash flow from operations to be in the range of $185 million to $215 million (up approx. 40% over 2010). Fully diluted share count of approximately 146 million shares. A solid balance sheet and low cost business model positions our team to capitalize on the improving global economic environment. 14

15 Financial Calendar Earnings Release Dates Q Earnings Release - April 27, 2011 Contact Us Phone: Fax: kelly.taylor@graftech.com Internet: 15

16 Key Investment Considerations Leading market position Major player in graphite electrode markets Graphite electrode industry s low-cost producer Six graphite electrode manufacturing facilities strategically located on four continents with customers in about 65 countries One of the largest, global technical support teams in the industry Sustainable competitive advantages Unique, advantaged global manufacturing network cannot be easily replicated Economies of scale 125 years of R&D experience and process know-how Only backward-integrated graphite electrode producer Strong long-term industry fundamentals Industrial Materials end market include mini-mills, growth sector of steel industry Electrodes are consumed at a rate of one electrode every 8 to 10 hours No commercially viable substitute for graphite electrodes Well positioned to penetrate high-growth alternative energy & electronics markets Commercializing advantaged technologies Six R&D 100 awards for newly commercialized products in the past eight years Expertise in solar energy storage & fuel cell development recognized with two U.S. Department of Energy grants in 2010 Approximately 775 patents and patent pending applications Solid balance sheet & cash flow Solid Balance Sheet - net debt position of $288 million in 2010, consisting of $143 million zero coupon Senior Subordinated Notes, and $130 million drawn on revolver Solid liquidity and balance sheet positioned for future growth Shareholders equity of $1.2 billion 16

17 Appendix 17

18 Steel Demand Drivers End Markets Associated with Steelmaking Routes Integrated vs. Mini-Mill Integrated steel shops produce steel from iron ore through a two step process using a blast furnace and a basic oxygen furnace Mini-mill steel shops melt scrap steel in EAF furnaces Carbon Steel Flat Steel Products (plate, coils, sheets) End Market Automotive, appliances, shipbuilding, machinery Steelmaking Largely produced using integrated production route Long Steel Products (wire, bar, rail, beams) Construction, infrastructure Primarily produced using mini-mill production route 18

19 GTI Well Positioned Versus Competitors Company 2010 Estimated Capacity (ooo s mt) # Plants / Avg. Plant Size Comments / 43 High-quality, low-cost producer Global presence on four continents Only backward-integrated producer SGL Carbon AG (Germany) / 24 Higher cost facilities on two continents Showa Denko (Japan) / 52 One facility in Japan; one facility in US Tokai Carbon (Japan/Germany) / 33 Higher cost SEC (Japan) 27 1 / 27 Higher cost Nippon Carbon (Japan) 32 1 / 32 Higher cost HEG (India) 66 1 / 66 Improving quality /competitive costs GIL (India/Germany) 78 3 / 26 Lower quality/competitive costs Superior (US) Other Producers (Primarily China) 12 1 / 12 Lower quality, high-cost facility 290 Lower quality INDUSTRY CAPACITY 1,185 Note: 2010 company estimates. 19

20 Forward Looking Statement NOTE ON FORWARD-LOOKING STATEMENTS: This news release and related discussions may contain forward-looking statements about such matters as: our outlook for 2011; the impact of acquired businesses; growth prospects; the markets we serve; our profitability, cash flow, and liquidity; future sales, costs, working capital, revenues, and business opportunities; future operational performance; strategic plans; stock repurchase plans; costs of materials and production; supply chain management; the impact of cost competitiveness and liquidity initiatives; changes in production capacity or efficiency; capital expenditures; future prices and demand for our products; product quality; investments and acquisitions that we may make in the future; the integration of Seadrift and St. Marys into our operations; financing (including factoring and supply chain financing) activities; debt levels; our customers' operations and demand for their products; our position in markets we serve; regional and global economic and industry market conditions, including our expectations concerning their impact on us and our customers and suppliers; conditions and changes in the global financial and credit markets; tax rates and the effects of jurisdictional mix; and currency exchange and interest rates. We have no duty to update these statements. Our expectations and targets are not predictions of actual performance and historically our performance has deviated, often significantly, from our expectations and targets. Actual future events, circumstances, performance and trends could differ materially, positively or negatively, from those set forth in these statements due to various factors, including: the extent of any adjustments to our announced 2010 fourth quarter and full year results; the actual timing of the filing of our Form 10-K with the SEC and potential effects of delays in such filing; failure to achieve earnings or other estimates; failure to successfully develop and commercialize new or improved products; adverse changes in inventory or supply chain management; limitations or delays on capital expenditures; business interruptions; delays or changes in or non-consummation of investments or acquisitions that we may make in the future; failure to successfully integrate into our business any completed investments and acquisitions; failure to achieve expected synergies or the performance or returns expected from any completed investments or acquisitions; inability to protect our intellectual property rights or infringement of intellectual property rights of others; changes in market prices of our securities; changes in our ability to obtain financing on acceptable terms; adverse changes in labor relations; adverse developments in legal proceedings; non-realization of anticipated benefits from organizational changes and restructurings; negative developments relating to health, safety or environmental compliance or remediation or liabilities; downturns, production reductions or suspensions, or changes in steel and other markets we or our customers serve; political unrest which adversely impacts us or our customers businesses; declines in demand; intensified competition and price or margin decreases, including growth by producers in developing countries; graphite electrode and needle coke manufacturing capacity increases; adverse differences between actual graphite electrode prices and spot or announced prices; consolidation of steel producers; mismatches between manufacturing capacity and demand; significant changes in our provision for income taxes and effective income tax rate; changes in the availability or cost of key inputs, including petroleumbased coke or energy; changes in interest or currency exchange rates; inflation or deflation; failure to satisfy conditions to government grants; changes in government fiscal and monetary policy; a protracted regional or global financial or economic crisis; and other risks and uncertainties, including those detailed in our SEC filings, as well as future decisions by us. This news release does not constitute an offer or solicitation as to any securities. References to street or analyst earnings estimates mean those published by First Call. 20

21 Reconciliations Net Debt Reconciliation 12/31/2010 Long-term debt $ 275,799 Short-term debt 155 Supply chain financing 24,959 Total debt $ 300,913 Less: Cash and cash equivalents 13,096 Net Debt $ 287,817 NOTE ON NET DEBT RECONCILIATION: Net debt is a non-gaap financial measure that GrafTech calculates according to the schedule above, using GAAP amounts from the Consolidated Financial Statements. GrafTech excludes cash and cash equivalents from net debt. GrafTech believes that net debt is generally accepted as providing useful information regarding a company s indebtedness and that net debt provides meaningful information to investors to assist them to analyze leverage. Management uses net debt as well as other financial measures in connection with its decisionmaking activities. Net debt should not be considered in isolation or as a substitute for total debt or total debt and other longterm obligations calculated in accordance with GAAP. GrafTech s method for calculating net debt may not be comparable to methods used by other companies and is not the same as the method for calculating net debt under its senior secured revolving credit facility. 21