On July 22, 2013, the World Steel Association cited that global steel
production, excluding China, declined 2.7 percent in the first half of
2013 as compared to the same period in the prior year. Expectations for
improvement in the second half of 2013 are waning and steel customer
confidence remains low.
EBITDA targeted in the range of $145 million to $165 million (previous
guidance was $165 million to $195 million);
Overhead expense (selling and administrative, and research and
development expenses) of approximately $135 million (previous guidance
was $140 million);
Interest expense of approximately $37 million (previous guidance was
$35 million to $40 million);
Capital expenditures in the range of $90 million to $110 million;
Depreciation and amortization expense of approximately $95 million
(previous guidance was $90 million to $95 million);
An effective tax rate in the range of 35 percent to 40 percent
(previous guidance was 33 percent to 36 percent); and
Cash flow from operations in the range of $110 million to $130 million
(previous guidance was $150 million to $180 million).
As a result of the above economic factors, steel data and feedback from
our customers, we are reducing our targeted EBITDA range for the full
year 2013 to $145 million to $165 million to reflect weaker than
previously anticipated demand for our Industrial Materials products.
Consequently, we are also reducing our targeted operating cash flow
guidance to $110 million to $130 million to reflect the reduction in
profitability and higher than previously planned inventory levels.
It is important to note that 2013 marks the final year of a third party
wind-down agreement triggered by the acquisition of Seadrift Coke in
which GrafTech is obliged to purchase minimum third party needle coke
quantities. Going forward, this will provide us with increased
flexibility to further optimize our vertical integration with Seadrift
and reduce inventories. Given the challenging operating environment, we
are also reducing our targeted overhead expense** to
approximately $135 million. This compares to overhead expense**
of $155 million in 2012.
In the third quarter of 2013, we are targeting EBITDA to be in the range
of $30 million to $40 million. Continued growth and improved
profitability in the Engineered Solutions segment is expected to
partially offset weakness in the Industrial Materials segment.
Mr. Shular concluded, "We have built an advantaged, low-cost business
model supported by a solid capital structure. GrafTech is well
positioned to emerge from this difficult part of the cycle stronger than
we entered it."
In summary, our expectations for 2013 are as follows: