On Wednesday, Citi maintained its Neutral rating on GrafTech International Ltd. (NYSE:EAF), with a steady price target of $2.00. The firm's recent analysis of GrafTech's financials revealed an adjusted EBITDA of negative $22 million, or negative $10 million after excluding a $12 million inventory valuation adjustment. This figure aligns with Citi's own forecast of negative $10 million. GrafTech's shipments remained steady at 24 kilotonnes, consistent with the third quarter and below half of the company's capacity.
The report highlighted that GrafTech's realized price for its products dropped to $4,800 per tonne, a decrease from $5,400 per tonne in the previous quarter. However, this was somewhat balanced by lower-than-anticipated costs, which came in at approximately $5,400 per tonne per electrode, excluding inventory adjustments, down from around $5,800 in the third quarter. It was noted that the cash cost is approximately $600 per tonne higher than the spot selling price.
GrafTech's free cash flow (FCF) remained neutral but was helped by a $42 million increase in working capital release. Looking ahead to 2024, the company has provided muted guidance, indicating continued market softness. Shipments for the year are expected to be on par with 2023, with a stronger performance anticipated in the first quarter, suggesting a total of around 100 kilotonnes for the year.
The company also anticipates further cost reductions, driven by lower raw material and energy prices, along with approximately $25 million in specific cost-cutting measures. These measures include suspending most activities at the St. Mary's facility and reducing overhead expenses, which are expected to contribute to an approximate $250 per tonne savings.
InvestingPro Insights
As GrafTech International Ltd. (NYSE:EAF) navigates a challenging market environment, recent data from InvestingPro provides additional context to the company's financial position and stock performance. GrafTech's market capitalization currently stands at $338.99 million USD, reflecting the market's valuation of the company amid its operational and financial developments.
An important metric to consider is the company's P/E ratio, which is at 26.94 based on the last twelve months as of Q3 2023. This ratio indicates how much investors are willing to pay for a dollar of earnings and is a critical gauge of the company's valuation relative to its earnings. In GrafTech's case, the P/E ratio suggests a market that is cautiously valuing its earnings potential.
InvestingPro Tips highlight some concerns, with analysts anticipating a sales decline in the current year and expecting net income to drop. These expectations align with the muted guidance provided by the company for 2024. Moreover, the stock has fared poorly, with a significant price fall over the last year, as indicated by a 75.9% one-year price total return as of the latest data point.
For investors seeking additional insights, InvestingPro offers more tips on GrafTech's financial health and stock performance. There are 11 additional InvestingPro Tips available, which can be accessed through the dedicated link: https://www.investing.com/pro/EAF. By using the coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, adding even more value to their investment research and decision-making processes.
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