8-K: GrafTech Reports Q2 2025 Results: Sales Volume Up, Net Loss Widens on Tax Expense

GrafTech International Ltd. announced its second quarter 2025 financial results, showing increased sales volume and reduced cash costs, but a significant net loss primarily due to a non-cash income tax expense.

Summary

• Sales volume grew 12% year-over-year to 28.6 thousand MT in Q2 2025, marking GrafTech's highest sales volume performance since the third quarter of 2022.
• Net sales for Q2 2025 were $132 million, a 4% decrease compared to $137 million in Q2 2024, primarily due to lower weighted-average realized prices.
• Net loss for Q2 2025 was $87 million, or $0.34 per share, significantly wider than the $15 million net loss ($0.06 per share) in Q2 2024.
• The Q2 2025 net loss included a $43 million non-cash income tax expense related to the establishment of a full valuation allowance against deferred tax assets.
• Adjusted EBITDA was $3 million for Q2 2025, down from $14 million for Q2 2024.
• Cash costs per metric ton (MT) saw a 13% year-over-year reduction for Q2 2025.
• Sales volume in the United States increased 38% year-over-year for Q2 2025 and 32% for the first six months of 2025.
• Total liquidity as of June 30, 2025, was $367 million, consisting of $159 million in cash, $108 million in revolving credit facility availability, and $100 million in delayed draw term loan availability.
• Gross debt stood at $1,125 million as of June 30, 2025, with substantially no maturities until December 2029; net debt was approximately $966 million.
• The weighted-average realized price was approximately $4,200 per MT in Q2 2025, a 12% decrease year-over-year but a 2% sequential increase from Q1 2025.
• Net cash used in operating activities was $53 million in Q2 2025, and adjusted free cash flow was negative $53 million.

Sentiment

Score: 4

Explanation: While the company showed strong operational improvements in sales volume growth and cost reduction, the significant increase in net loss due to a non-cash tax expense and the continued challenging pricing environment indicate underlying financial weakness. The positive long-term outlook is tempered by current market realities.

Positives

• Sales volume grew 12% year-over-year in Q2 2025 to 28.6 thousand MT, marking the highest performance since Q3 2022.
• Sales volume in the United States increased significantly by 38% year-over-year in Q2 2025 and 32% for the first six months of 2025, reflecting a strategic shift to a key region.
• Achieved a 13% year-over-year reduction in cash costs per MT for Q2 2025.
• Generated positive EBITDA of $3 million in Q2 2025, reflecting continued progress on the path to normalized levels of profitability.
• Maintained a strong liquidity position of $367 million as of June 30, 2025, supporting the ability to manage near-term industry challenges.
• Now projects a 7-9% year-over-year decline in cash costs per MT for full-year 2025, exceeding previous guidance of a mid-single digit percentage point decline.
• Continues to expect an approximate 10% year-over-year increase in sales volume for full-year 2025, which would result in cumulative sales volume growth of approximately 25% since the end of 2023.
• Has substantially no debt maturities until December 2029.
• Remains confident in long-term demand growth for graphite electrodes driven by the steel industry's ongoing shift toward electric arc furnace (EAF) steelmaking and decarbonization efforts.
• Benefits from an industry-leading position and sustainable competitive advantages, including substantial vertical integration into petroleum needle coke via the Seadrift facility.

Negatives

• Net sales decreased 4% year-over-year to $132 million in Q2 2025.
• Net loss significantly widened to $87 million ($0.34 per share) in Q2 2025 from $15 million ($0.06 per share) in Q2 2024.
• The net loss included a $43 million non-cash income tax expense related to a full valuation allowance against deferred tax assets.
• Adjusted EBITDA declined to $3 million in Q2 2025 from $14 million in Q2 2024.
• Net cash used in operating activities increased to $53 million in Q2 2025 from $37 million in Q2 2024.
• Adjusted free cash flow was negative $53 million in Q2 2025, worse than negative $44 million in Q2 2024.
• Weighted-average realized price decreased 12% year-over-year to approximately $4,200 per MT in Q2 2025, due to the substantial completion of long-term sales agreements and persistent competitive pressures.
• Challenging pricing dynamics have persisted in most regions, with the pricing environment remaining 'unsustainably low'.
• Geopolitical uncertainty continues to have a significant impact on broader steel industry trends.

Risks

• Dependence on the global steel industry generally and the electric arc furnace steel industry in particular.
• Cyclical nature of the business and the selling prices of products, which may decline in the future, potentially leading to prolonged periods of reduced profitability, net losses, or adverse impact on liquidity.
• Sensitivity of business and operating results to economic conditions, including any recession, and the possibility that others may not be able to fulfill their obligations.
• Inability to implement business strategies effectively, including the ability to implement price increases and shift sales to regions with higher average selling prices.
• Continued overcapacity of the global graphite electrode industry, which may further adversely affect graphite electrode prices.
• Competitiveness of the graphite electrode industry.
• Dependence on the supply of raw materials, including decant oil and petroleum needle coke, and disruptions in supply chains for these materials.
• Primary reliance on one facility in Monterrey, Mexico for the manufacturing of connecting pins.
• Cost of electric power and natural gas, particularly in Europe.
• Manufacturing operations are subject to hazards.
• Legal, compliance, economic, social, and political risks associated with substantial operations in multiple countries.
• Fluctuation of foreign currency exchange rates could materially harm financial results.
• Results of operations could further deteriorate if manufacturing operations were substantially disrupted for an extended period due to equipment failure, climate change, regulatory issues, natural disasters, public health crises, political crises, or other catastrophic events.
• Risks and uncertainties associated with litigation, arbitration, and like disputes, including disputes related to contractual commitments.
• Dependence on third parties for certain construction, maintenance, engineering, transportation, warehousing, and logistics services.
• Information technology systems failures, cybersecurity incidents, network disruptions, and breaches of data security, including with respect to third-party suppliers and business partners.
• Inability to recruit or retain key management and plant operating personnel or successfully negotiate with employee representatives, including labor unions.
• Sensitivity of long-lived assets on the balance sheet to changes in the market.
• Dependence on protecting intellectual property and the possibility that third parties may claim that products or processes infringe their intellectual property rights.
• Impact of inflation and the ability to mitigate its effect on costs.
• Impact of macroeconomic and geopolitical events on business, results of operations, financial condition, and cash flows, and the disruptions and inefficiencies in the supply chain that may occur as a result of such events.
• Imposition of current, new, or increases of existing custom duties and other tariffs in the countries in which the company, its customers, and its suppliers operate could adversely affect operations and results of operations.
• Indebtedness could limit financial and operating activities or cash flows may not be sufficient to service indebtedness.
• Past increases in benchmark interest rates and the fact that any current or future borrowings may subject the company to interest rate risk.
• Risks and uncertainties associated with the ability to access the capital and credit markets could adversely affect results of operations, cash flows, and financial condition.
• Disruptions in the capital and credit markets could adversely affect customers and suppliers.
• Restrictive covenants in financing agreements could restrict or limit operations.
• Changes in, or more stringent enforcement of, health, safety, and environmental regulations applicable to manufacturing operations and facilities.
• Ability to continue to meet the New York Stock Exchange listing standards.
• Ability to obtain stockholder approval for a reverse stock split with respect to common stock, the implementation of the Reverse Stock Split pending such approval, and the potential effects of the Reverse Stock Split.

Future Outlook

GrafTech expects an approximate 10% year-over-year increase in sales volume for full-year 2025, driven by regaining market share and a compelling customer value proposition. The company now projects a 7-9% year-over-year decline in cash costs per MT for 2025, exceeding previous guidance. Pricing dynamics remain challenging and unsustainably low in most regions, leading to initiatives to optimize the order book and actively shift sales volume to higher-priced regions, particularly the United States, with a previously announced 15% price increase on uncommitted 2025 volume. Long-term demand for graphite electrodes is expected to grow due to the steel industry's decarbonization efforts and ongoing shift toward electric arc furnace (EAF) steelmaking, alongside accelerating demand for petroleum needle coke for lithium-ion batteries in the electric vehicle market.

Management Comments

• "We continue to deliver on our key commercial, operational and financial objectives and targets, reflecting strong execution of our strategic initiatives and our absolute focus on managing all areas within our control."
• "Our ability to drive strong volume growth and expand our market share in key regions, despite a challenging commercial environment, demonstrates the strength of our customer value proposition and our focus on meeting customer needs."
• "At the same time, our team is executing cost savings initiatives that will accelerate our return to normalized profitability as the market recovers."
• "Longer term, decarbonization efforts will continue to reshape steelmaking in the years ahead. Specifically, we remain confident that the steel industrys ongoing shift toward electric arc furnace steelmaking will continue, driving long-term demand growth for graphite electrodes."
• "The successful execution of our initiatives to manage the current market dynamics is serving to preserve our ability to remain the electric arc furnace industrys preeminent supplier of high-quality graphite electrode products and technical services. As a result, GrafTech is in a strong position to benefit from long-term favorable trends that will shape the future of our industry and deliver significant growth."

Industry Context

The announcement highlights the ongoing shift in the steel industry towards electric arc furnace (EAF) steelmaking as a key driver for long-term demand growth for graphite electrodes, aligning with global decarbonization efforts. Geopolitical uncertainty and tariffs continue to impact broader steel industry trends, with the U.S. market showing modest growth in steel production, particularly via EAF. The company also notes accelerating demand for petroleum needle coke due to its utilization in producing synthetic graphite for use in lithium-ion batteries for the growing electric vehicle market, indicating a broader market trend impacting their key raw material supply.

Comparison to Industry Standards

• The filing mentions 'persistent competitive pressures across all of our principal commercial regions' and that the 'pricing environment remains unsustainably low,' but does not provide specific comparable companies, projects, or results to benchmark against industry standards.

Legal Proceedings

• The filing mentions general risks and uncertainties associated with litigation, arbitration, and similar disputes, including those related to contractual commitments. No specific current legal proceedings are detailed.

Stakeholder Impact

• Shareholders: The significant net loss and negative free cash flow could negatively impact shareholder value. The potential for a reverse stock split is noted as a risk that could affect share price and marketability.
• Employees: The company is executing cost savings initiatives, which may imply potential workforce adjustments, though not explicitly stated.
• Customers: The company is focused on meeting customer needs and strategically shifting sales to key regions, indicating continued engagement. A 15% price increase on uncommitted 2025 volume was announced.
• Creditors: A strong liquidity position and no substantial debt maturities until December 2029 provide some stability, but high gross and net debt levels remain.
• Suppliers: Dependence on raw material supply and potential supply chain disruptions are noted risks.

Next Steps

• Continue to execute actions to accelerate the path to normalized levels of profitability.
• Optimize the order book and actively shift the geographic mix of sales volume to regions where there is an opportunity to capture higher average selling prices, particularly in the United States.
• Closely manage working capital levels and capital expenditures, with full-year 2025 capital expenditures anticipated to be approximately $40 million.
• Monitor geopolitical uncertainty and assess its potential impact on the commercial environment for graphite electrodes.
• Hold an earnings call on July 25, 2025, at 10:00 a.m. (EDT) to discuss results.

Key Dates

Recommendation

While GrafTech demonstrated strong operational execution with increased sales volume and significant cost reductions, the substantial net loss driven by a non-cash tax expense and persistent challenging pricing dynamics indicate ongoing headwinds. The long-term positive outlook tied to EAF steelmaking and decarbonization is compelling, but current profitability issues and negative cash flow warrant a cautious approach. The company's strong liquidity and manageable debt maturity schedule provide stability, but the immediate financial performance suggests a 'hold' until there's clearer evidence of sustained profitability improvement and market recovery.

Keywords

Graphite electrodes, Electric arc furnace, EAF steelmaking, Petroleum needle coke, Decarbonization, Steel industry, Industrial materials, Manufacturing, GrafTech, EAF, Financial results, Quarterly report, Cost reduction, Sales volume, Liquidity, Debt, Tariffs, Supply chain