GrafTech International Ltd.

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 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. Please be advised 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 Deibel. Thank you. Please go ahead.

Thank you. Good morning and welcome to Graf Tech International's fourth quarter and year end 2021 conference call. On with me today is Dave Rintoul, Gravtech's Chief Executive Officer, Tim Flanagan, our Chief Financial Officer, Jeremy Halford, our Chief Operating Officer, and Senior Vice President Quinn Coburn. Dave will begin with a review of our safety performance, current industry conditions, and demands for our products. Jeremy will discuss our sales, production, and operational matters, as well as give an update on our ESG initiatives. Tim will cover our financial details, and Dave will close with final remarks and open the call to questions. Now turning to our first slide. 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. These statements are based on current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from those indicated by forward looking statements are shown here. We will also discuss certain non-GAAP financial measures, and these slides include the relevant non-GAAP reconciliations. You can find these slides in the investor relations section of our website at www.graftec.com. A replay of the call will also be available on our website. I'll now turn 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. We begin, as we always do, with safety. Health and safety excellence is a core value of Gravtech and a fundamental element of our success. We ended the year with a total recordable injury rate of 0.49. This is a modest improvement over the previous year, and importantly, is nearly half of our pre-pandemic level. We are pleased with the progress as we continue on our journey to achieve our ultimate goal, which is zero injuries. We will remain steadfast in our efforts to send every employee home safely every day. I want to thank the entire Grafstech team for their continued work and focus on health and safety and the environment. 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. 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. I'm looking forward to working closely with Tim as we continue to pursue our strategic and operational initiatives and drive value for all our stakeholders.

Thanks, Dave. Certainly appreciate that. I'm excited to be here. I look forward to working with everyone on the Graphtec team and spending more time with the investment community.

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. The global steel manufacturing utilization rate outside of China was 75% in the fourth quarter of 2021 compared to 74% in the third quarter. This represents a 5% improvement compared to 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 2020. As anticipated, the strength in the steel industry is now being reflected in the graphite electrode industry. 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. We continue to see acceleration of demand for needle coal, 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. Electricity and natural gas costs continue to remain elevated, particularly in our European locations. We are well positioned, however, to effectively manage through this environment. Graphtec's 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, 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. As I mentioned, our vertical integration is a key component of our strength in being a reliable supplier and dependable business partner. We are focused on assisting our customers to maintain high utilization rates. 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. This strong momentum in the graphite electrode market has led to higher pricing for our products. Our non-LTA price rose approximately 10% in the fourth quarter of 2021, which is on top of a 12% sequential increase in the third quarter of 2021. In addition, we expect our first quarter non-LTA prices to increase 17 to 20% over the fourth quarter as virtually all of our non-LTA business was reset on January 1st. 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 us through slide six.

Thanks, Dave. We're pleased with the strong sales results that we generated in the fourth quarter. We sold 44,000 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 29,000 metric tons of graphite electrodes under our LTAs at an average approximate price of $9,400 per metric ton and 15,000 metric tons of non-LTA sales at an average approximate price of $5,000 per metric ton. Net sales in the fourth quarter increased 7% compared to the fourth quarter of 2020 to $363 million. 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. We will look to offer our customers a variety of contract terms tailored to their needs, 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. 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 European plants. Our investment in the new automated pin line at St. Mary's continues to progress well and helps to de-risk our pin production capacity. All of our sites continue to be very focused on further improving efficiencies and maximizing production given the strong demand for our graphite electrodes. 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. As the world moves toward more EAF-based steel production, we are investing to meet the growing demand that this shift creates, and we're committed to being disciplined in this approach. Like all global suppliers, we have experienced pressures with shipping channels in various markets, driven by container shortages, port congestion, and supplier root constraints. 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. In September, we published our second annual sustainability report, which is available on our website. 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. 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. 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. So now I'll turn it over to Tim to discuss our fourth quarter financial results on slide eight.

Thanks, Jeremy. We are pleased with another strong financial performance in the fourth quarter as a result of increased sales and profitability. Net income totaled $141 million or 54 cents of GAAP earnings per share and 50 cents per share on an adjusted basis. 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 even a margin of 50%. Fourth quarter cash flow continued to be strong, but was impacted by the build of working capital during the quarter. More specifically, we had higher accounts receivable and inventory balances as we ended the year. We also had increased raw material purchases in the fourth quarter as we began to prepare for the 2022 productions plan. We generated $100 million in cash from operations and $87 million of adjusted free cash flow. 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 our 2021 debt reduction to $400 million for the second straight year. We improved our total debt to adjusted EBITDA ratio to 1.6 times at year end, compared to 2.2 times at the end of 2020. 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. Now turning to slide 10. We are pleased with the strong earnings and cash flows we have delivered in 2021. We prioritize the majority of that cash flow to reduce debt, repaying $400 million during the year. Additionally, we purchased $50 million of stock in 2021, and we continue to have $159 million available to us under our stock repurchase program. We are committed to delivering value to our shareholders through a disciplined capital allocation strategy. This includes returning capital to our shareholders while investing in our business and continuing to reduce debt to further strengthen our balance sheet. We expect our 2022 capital expenditures to be in the range of $70 to $80 million. We continue to use these funds to support our high quality, low cost global operating assets and to target high return operational improvements. 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. As you have 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. Over the long term, we expect electric arc furnaces will continue to grow their share of the global steel market as it is a more cost-effective and environmentally friendly process and an effective way to decarbonize the steel industry. We are now seeing the impact of higher graph by electoral prices in our reported results, and we expect the impact on our results to continue well into 2022. We are committed to a disciplined capital allocation strategy that enhances shareholder value while also improving graph tech's financial profile, giving us the flexibility to successfully operate through industry cycles. Our proven track record of high quality earnings and significant cash flow generation further supports our capital allocation. We believe that GRAPTEC 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 have a sustainable and long-term competitive advantage from our low cost structure and vertical integration into our key raw material, petroleum needle coke. Our graphite electrodes are highly engineered and require extensive process knowledge to manufacture. The services and solutions that Graphtec provides help position both our customers and our company for a strong future. With the commitment of our people and our significant competitive advantages, we continue to strongly believe Graphtec is well positioned to deliver results today and over the long term. This concludes our prepared remarks and we'll now open the call up for questions.

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. Our first question comes from the line of Dave Gagliano with BMO Capital Markets.

Hi, thank you for taking my questions, and thank you for the additional information regarding pricing and costs. Just two quick questions on those metrics. First of all, on the pricing side, you mentioned you expect the impact, I believe in the prior remarks right at the end there, you expect the impact to continue well into 2022. 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 obviously we've seen a little bit of a wobble 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.

Okay. Thanks, Dave. So let me kind of answer your question, taking the latter part first. I would suggest to you that the wobble that you reference is only maybe to a small extent in the American market. And, you know, this morning hot roll coil prices were at $1,220 a short ton, which is well above anything historic. Certainly everybody's maybe perhaps got a little – accustomed to numbers are slightly higher than that, but 1220 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 about that, and I think about the projections that we're hearing on vehicle build, the light vehicle build for 2022, being in the plus 15 million units compared to 12.9 in 2021. 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, you know, Black Sea bill of prices have been increasing over the last several weeks. sitting at 655 this morning demonstrating the strength in the Middle East and Far East markets that use those products. And at the same time, 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 that the market is still quite stable and stable at a relatively high number. Having said that, we talk often about spot market and the lag that you point out is in fact present. And therefore, we're commenting on the first quarter as we have begun to do over the last couple of these earnings calls. But 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, and our competitors will need for that to happen as they're facing rising needle coke costs. I know I'll be asked that later, so we might as well tackle it now. Needle coke costs, if you look at the information that's available through the import-export statistics in various countries across the world, you'll see that that number is ranging from $1,700 to $2,300, which is upward from where it was last year. And our anticipation is there will continue to be upward pressure on that value as well. So for all of those reasons, the stability in the overall global steel market, increasing impacts on needle coke that affect 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.

Okay, that's very helpful information. Thank you for that. And just my follow-up, which you touched on with regards to the needle coke side of the cost. But just overall, I believe what you said on the prayer remarks was 7% to 9% quarter-over-quarter increase So it's kind of a two-part question. You know, I just want to make sure, is that a, you know, overall unit cost quarter-over-quarter increase? And then, you know, the second part of that question is, if you could parse out how much of that, you know, 7% to 9% increase is driven by, for example, higher power prices in Europe versus needle coke, you know, versus other pieces.

Thanks. So thanks for the clarification. Yes, the 7% to 9% is... an all-in cost per metric ton value. So it is a unit cost. It's an all-in cost. And you're correct that some portion of that is the increase in needle cost as well as some of the pressures we face in the area of electricity and natural gas. I have Tim provide a little color on that. But suffice it to say that most of that pressure, as I referenced in our prepared remarks, is more so in our European locations. And some of those commodities we have short-term, rather meaning one-year type arrangements, where some portion of those costs are in fact fixed to provide us some protection. 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 the energy, both natural gas and electricity, probably represent about 15% of our total cost structure, so you can kind of back into then what the variability of that would otherwise impact from a cost structure perspective, but 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. 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 cost structure that we have. And so we're probably somewhere 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 will.

Okay, that's helpful. Thank you very much.

Your next question comes from the line of Arun Viswanathan. with RBC Capital Markets.

Great, thanks for taking my question. Good morning. Hope you're all well. So, yeah, so appreciate the color as well on the pricing commentary. So I guess that implies something in the $5,850 to $6,000 per ton 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. So assuming that's something like, you know, 10 percent or so, a quarter or five to 10 percent in that range, it looks like you can get into the mid sixes in, you know, in the middle of the year of 22 and then maybe exit at seven. And that would also kind of imply something, you know, in the in the 2000 to twenty five hundred dollar range for needle cokes. Um, and, and, and your current price of say, uh, you know, again, in Q1 of 58, 50 to 6,000, um, indicates kind of a needle price close to 2000. So, um, could you, could you kind of comment on some of those ranges? Um, am I in the right neighborhood as far as how I'm thinking about, um, how, how the year could play out?

Uh, thanks Harun. Uh, I think, uh, You're doing fairly well. I think your Q1 value is in the right vicinity. And as we walk through the balance of the year, as I said earlier, it's a little early for us to start projecting 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 history has taught us early on after the IPO that then they undercut us by about a hundred hundred bucks and then then we're between a rock and a hard spot so I'm respectfully going to refrain from you know confirming those exact values I think you're 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 not too far out. I think your needle folk thoughts might be a slight bit conservative. I expect between the increase in graphite electrode business and the EV world, we might see a bit more pressure than you're suggesting, which I want to remind everybody. 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.

OK, great. And then I appreciate that. Also, just questions around steel and utilization. So it looks like steel market utilization is still in the north of 80% range. 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. I guess, is that right? 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. We'd seen steel prices rise over a year ago and It's taken a little bit longer for electrode prices to catch up, and my assumption is that there's extra supply or inventory out there, so on the electrode side. So is that right? And have you seen electrode prices continue and needle cook prices continue to go up when steel prices are going the other way? And is that just a function of the typical catch up? Maybe you can just comment on that dynamic.

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%. Please bear in mind that that is all in and we're not currently running the front end of St. Mary's. 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 of. Regarding the steel side, 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. 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 pretty optimistic and positive about where the overall industry is going. There's always some, you know, puts and takes as we get through certain parts of the the year as build schedules are being looked at. And this whole chip crisis is being worked through from the automotive guys. The ISM manufacturing index is still at 60. And the durable goods index is projected to increase through 2023. So I think there's many reasons to remain again optimistic and positive about the steel industry and then subsequently the graphite electrode industry. 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, positivity in the space in which we play.

Could you also comment on, 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, has that, you know, conditions on the inventory side continued to improve?

Well, look, compared to a year ago, absolutely, inventories, are much tighter, not just a little bit. People went into the year last year because of the pandemic, 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 those inventory levels. So we view inventory levels today at what I would call, you know, a pre-pandemic normal value, maybe slightly below normal, but not a great deal. But by and large, people running 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, That's a balanced place, if you will. I think the inventory situation is healthy from our perspective. Healthy meaning there's not excess in the system and we can be reliable suppliers with what we have. We, by no stretch of the imagination, have excess inventory in our system. just enough to 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.

Great. Thank you.

Your next question comes from the line of Alex Hacking with Citi.

Yeah, good morning, Dave and team. I just wanted to follow up on the cost side a little bit. Can you remind me, is the needle coke manufacturing process significantly more energy intensive than the electrode manufacturing process, or are they roughly similar?

No. Remember that the needle coke process, at least our process at Seadrift. 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 reaction process as opposed to high amounts of natural gas and or electricity.

Okay, thanks. And then also at Seadrift, if I remember correctly, when you signed the LTAs, you know, four years ago, you also hedged out the decant oil going forward. Am I remembering correctly? And therefore, you know, are you still effectively using hedged decant oil prices today? And those will start to roll off as the LTAs roll off going forward?

Yeah, you're thinking of it absolutely correctly. And one thing that I should have mentioned in the answer to your previous question at our seed drift 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

Okay, thanks. And then that 7% to 9% increase in unit COGS for the first quarter, you know, given that a lot of your energy costs in Europe would be on, as you said, sort of fixed for the year, you know, should we assume that, you know, cost is maybe assuming needle coke is flattish? Should we assume that your costs are still rising after that in the second and third quarters, but at a significantly lower rate, given that most of that European power sort of inflation and increased use of third-party needle coke would already be in there? Or should we expect similar magnitude of increases?

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 the European power side. But, you know, 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.

Okay, thanks. And then just one more, if I may. Can you just remind me of, 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 left or is it mostly on kind of three, six months at this point? Thanks.

Yeah, we have a few, uh, one years, but we have a, uh, 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. So we don't have much that's fixed for the whole year, more that look at the second half. And we're still waiting. We haven't really even begun to talk much about the second half because it's too early.

Okay. Yeah, I had heard some conversations that needlecock prices were going up in the second half, but it sounds like that's maybe with other electrodes. Manufacturers. Okay. Appreciate the feedback and answers. Thank you.

Your next question comes from the line of Michael Glick with JP Morgan.

Hey, good morning. Just one question for me. How are you all thinking about capital allocation in terms of debt repayment versus stock buyback? Thanks.

Yeah, you know, I think, you know, as we stated, I mean, we remain focused. committed to a disciplined process. We talk to our board on a quarterly basis and think about capital allocation accordingly as we look at the projections for our business. 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 operating projects to generate some operating improvements for us in the long term. We remain committed on the balance sheet. I think we've said a number of times that our target debt level or debt dividend 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. 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 uh in the second half of last year so um you know we remain committed to that program and we'll continue to do so going forward thank you you have a follow-up question from line of dave gagliano with bmo capital markets

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.

So, Dave, I think on the last call, somebody was asking me about capacity utilizations and what have you, rather. And I made the statement that round numbers are theoretical capacity is somewhere around 200,000 tons and that running at about 90% capacity over a longer term period is probably a place that's 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 uh, you know, uh, scheduled maintenance outages that you've got to do. So, um, hopefully that can, that helps answer your question.

Yeah. So, so no notable variations from that, um, on a near term basis. That's really what all I was asking about.

Yeah. I mean, we're going to, obviously Jeremy works hard with the operating guys to, you know, get as much juice from the orange as we possibly can. And then that won't stop. But, um, I think that's a good place to think about it and we made a little bit of reference here to a little bit higher CapEx spend and 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 in 2018 be prepared so that we can grow.

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, when we think about your overall unit costs, roughly what percentage is decant oil? That's my first question. And then the other parts of that question are, you know, specifically when were those hedges put in place? And, you know, more specifically, you know, when do they start to roll off?

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 the the cost structure and the percentages? Yeah.

I mean, I think if you think about the decant oil, I mean, that is the primary raw ingredient for making the petroleum needle coat. So it's probably about two thirds of the overall cost structure of our internally manufactured needle coat.

Okay. And, and, and I apologize. I don't, I don't have the numbers in front of me. How much of that, like when we sort of filtered through the graphite electrode overall unit costs, how much is the internally manufactured, um, you know, needle coke, what percentage of total cost would that piece be?

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.

Okay. All right. Appreciate it. Thanks.

You know, in a broader term, I mean, in the past, you know, we've always talked about from a capability perspective, that we could we can support about two-thirds of our order book uh with cdrift and would need about one-third from from the outside world so you can at a high level you can think about it that in that context okay all right that's helpful thanks

This concludes our question and answer session. I will now hand the call back over to Mr. Rintoul for closing remarks.

Thank you, Phyllis. 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 Gravtech 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 Graf Tech and we look forward to speaking with you next quarter.