GrafTech International Ltd.

good morning ladies and gentlemen and welcome to the graph tech third quarter 2022 earnings conference call and webcast at this time our lines are in a listen only mode following the presentation we will conduct a question and answer session if at any time during this call you need assistance please press star zero for the operator this call is being recorded on friday november 4th 2022 i would now like to turn the conference over to mike dillon vice president investor relations and corporate communications please go ahead

Good morning and welcome to GraphDeck International's third quarter 2022 earnings call. On with me today are Marcel Kessler, Chief Executive Officer, Jeremy Halford, Chief Operating Officer, and Tim Flanagan, Chief Financial Officer. Marcel will begin with comments related to our operations in Monterrey, Mexico. Jeremy will then discuss safety, sales, and operational matters. Tim will review our quarterly results and other financial details. Marcel will then close with comments on our outlook. We will then open the call to questions. Turning to our next slide, as a reminder, some of the matters discussed in this call may include forward-looking statements regarding, among other things, 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.graftech.com. A replay of the call will also be available on our website. I'll now turn the call over to Marcel.

Good morning, everyone. Thank you for joining Graftech's third quarter earnings call. Before we dive into Grafstech's third quarter performance, I would like to begin with a detailed discussion about our operations in Monterey, Mexico. First, I want to thank the entire Grafstech team and in particular all our employees in Monterey for their efforts to address the situation and the continued focus on moving our business ahead. And I would also like to thank our customers for their ongoing support and understanding. In a nutshell, Here is the update on the current status. First, Monterey's manufacturing operations remain suspended and we are pursuing all possible avenues to get the site reopened. At this point, we don't know when operations will resume. However, we remain confident in our ability to ultimately resolve this situation. Monterey is 30% of our total annual production capacity and currently the only site that produces the pin stock utilized for all our electrodes. We are working to restart our facility in St. Mary's, Pennsylvania as well as pursuing other mitigation strategies to produce 100% of our pin needs when fully implemented. Unless Monterey reopens, our business performance will be significantly impacted for the first two quarters of 2023 with a reduction in sales volume of 50% or more before recovering in the back half of the year. Fourth, we expect to be able to meet our LTA commitments in 2023. Fifth, we have ample liquidity to see us through this challenge. And sixth, while the situation with Monterey is very unfortunate, we remain optimistic about the longer-term outlook for Gravtech. We have sustainable competitive advantages, including substantial vertical integration into petroleum needle coke, longer-term demand tailwinds, and a talented and experienced team. We will emerge stronger from this short-term challenge. Let me provide more detail. on each of these six points. Our facility in Monterey has been operating since 1959, has over 550 employees and represents approximately 60,000 metric tons or 30% of our total annual electrode production capacity. Monterey's operations can produce a broad portfolio of products including various sizes of graphite electrodes and pins. As we have previously reported, on September 15th, inspectors from the environmental authorities for the state of Nuevo Leon, Mexico, visited our facility in Monterey. At the conclusion of this visit, the inspectors issued a temporary suspension notice. Other than to allow for safe wind-down of all operations, the suspension notice was effective immediately. In early October, we obtained clarification that certain non-production activities, including the movement of inventory, were permitted to continue. Apart from these permitted activities, operations have been halted since that time. The findings of the inspectors focused on procedural errors related to certain operating licenses and permits. I believe that it is important to point out that at no time during or after the inspection has it been alleged by the relevant authorities that our operations exceeded any existing emission standards. In the past several years, we have invested over $10 million upgrading our Monterey site to continuously improve our environmental performance. Also, we have previously initiated our voluntary participation in Mexico's Federal Clean Industry Certification Program. These efforts are part of our commitment to the community that we believe GrafTech has demonstrated in its long history in this area. We strongly disagree with the conclusion to suspend our operations and we believe this measure is in no way commensurate with the findings of the State Inspectors. Further, we do not believe a suspension notice should legally be applied to this situation. While we are complying with the suspension notice, we are vigorously defending our rights to resume operations. To that end, we are pursuing all available legal remedies as well as engaging in dialogue with the respective state and local authorities involved in these matters. As I mentioned in my introduction, Monterey is currently the only site that produces the pinstock needed for all our electrodes. Each electrode requires one pin to be utilized by our customers. We are actively pursuing multiple alternatives and mitigation strategies as it relates to internal production and external sourcing of pinstock. These include accelerating a potential restart of our St. Mary's, Pennsylvania facility. As many of you know, our St. Mary's site was previously a full-scope electrode and pin production facility. production at St. Mary's was rationalized at the time of lower demand in the electrode industry. Over the last few years, we resumed operation of certain functions at St. Mary's. We are now actively pursuing approvals for operating permits to restart the facility for pin production. With these permits and an incremental investment of about $8 million, St. Mary's will be able to resume operations supplying 100% of the pins for Gravtech electrodes. We expect that any max mitigation activities, including this potential restart of St. Mary's, will take the first half of 2023 to be fully implemented. However, until our Monterey operations are resumed, or our St. Mary's facility is operational, or other mitigation activities are successfully implemented, our ability to fulfill customer orders will be significantly impacted, particularly as we get into the next year. The impact will be less significant for the fourth quarter, as existing pinstock inventory is supporting our ability to fulfill most customer needs in the near term. For next year, if Monterey remains suspended, sales volume will be reduced by 50% or more in the first half of 2023 compared to the first half of 2022, but will recover after that. We expect to be able to meet our LTA commitments throughout 2023. As we move into the second half of 2023, assuming our mitigation activities related to PIN production are fully implemented and depending on market conditions, we anticipate that sales volume levels will recover. With over $130 million in cash on hand as of today, we have ample liquidity to see us through all reasonable scenarios. Also, there has been no impact on our ability to borrow under our existing facility, on our borrowing costs, or on our borrowing needs. While we are deeply disappointed with the current situation and the uncertainty that it has caused, we believe that ultimately reason and the rule of law will prevail and our Monterey facility will resume operations. As I said at the start, looking forward, we remain optimistic about the longer-term outlook for our business. We have a great team and sustainable competitive advantages. We will be able to leverage these competitive advantages to capitalize on long-term industry tailwinds generated by the steel industry's efforts to decarbonize. I will provide further comments on our outlook at the end of our prepared remarks. But let me first turn the call over to Jeremy now, who will be followed by Tim as they provide commentary on our third quarter performance.