If GrafTech International were a bard, it could wax poetic in an ode to the electrode. The company is a leading maker in the US of graphite electrodes, which are essential to the production of electric arc furnaces. GrafTech also manufactures advanced carbon materials, flexible graphite products, flow field plates, gas diffusion layers, and carbon electrodes and refractories for the aeronautics, construction, energy, fire protection, marine, and transportation industries. Customers have included such notable names as Arcelor Mittal, BaoSteel, Elkem, Griffin Wheel (railroad wheels), Samsung Electronics, and ThyssenKrupp Steel.
The company services customers in about 65 countries through its 11 manufacturing facilities located on five continents. It currently has the capacity to manufacture approximately 220,000 metric tons of graphite electrodes annually. GrafTech gets 70% of its total sales from outside the US.
GrafTech has two reportable segments: Industrial Materials (82% of total sales) and Engineered Solutions (18%). The products are marketed under brand names such as GRAFOAM, SPREADERSHIELD, eGRAF, GRAFOIL, and GrafPower, among others. Industrial Materials comprises graphite electrodes and refractory products. Graphite electrodes act as conductors of electricity and are used primarily in steel manufacturing to generate sufficient heat to scrap metal in electric arc furnaces. Refractory products include carbon and graphite refractory bricks, which are used for their high thermal conductivity.
Engineered Solutions comprises advanced graphite materials and natural graphite products. Advanced graphite materials include primary products, which are sold to customers for further processing (such as steel railroad car wheels). Natural graphite products consist of flexible graphite and electronic thermal management solutions used in electronics, power generation, automotive, petrochemical, and transportation industries.
After posting a record revenue high for 2011 at $1.3 billion, GrafTech saw both its revenues and profits slip during 2012. Its net revenues dipped by 5% from 2011 to 2012, while its profits plunged by 23%. GrafTech was hurt particulary by a decrease in net sales from its Industrial Materials segment as it experienced lower demand for both graphite eletrodes and needle coke, especially in the European markets.
Its decrease in profits was the result of the lower net revenues coupled with an increase in the amount it paid on interest. The company posted higher debt levels to support a share repurchase program, capital expenditures, and working capital leases.
GrafTech is dependent on the health of the steel mini-mill, transportation, semiconductor, solar, petrochemical, and other metal industries. The company strives to keep costs low, so it can ride out the cycles of the market. It has also grown its product portfolio and augmented its technology through acquisitions.
In 2011 it purchased Micron Research Corporation for $6.5 million in cash. Micron Research manufactured super fine grain graphite materials and primarily serviced electrical discharge machining customers. Graftech utilized Micron’s technology and capability to service other applications including solar, electronics, and medical.
Also that year, the company acquired Fiber Materials for $14 million in cash. Fiber manufactured highly engineered advanced carbon composite materials serving the aerospace and defense industries and high temperature insulation for use in industrial applications. The deal added technology in advanced carbon composites to GrafTech’s product portfolio and aided in propelling continued growth in its Engineered Solutions segment.
Four investment entities own sizable stakes in GrafTech. Royce & Associates and FMR LLC each own nearly 14% of the company, while Janus Capital and Milikowsky Group each own 11%.