Business Context and Reporting Period
Company: GrafTech International Ltd.
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: GrafTech is a leading manufacturer of high-quality graphite electrodes essential for electric arc furnace (EAF) steel production and petroleum needle coke. The company operates a single reportable segment, Industrial Materials, with manufacturing facilities in France, Spain, Mexico, and the United States (St. Marys facility idled in 2024). The company is vertically integrated, producing its own petroleum needle coke at its Seadrift, Texas facility.
Key Financial Metrics
| Metric (in thousands, except per share) | 2025 | 2024 |
|---|---|---|
| Net Sales | $504,134 | $538,782 |
| Net Loss | $(219,835) | $(131,165) |
| Loss Per Share (Diluted) | $(8.45) | $(5.09) |
| EBITDA | $(11,374) | $(11,411) |
| Adjusted EBITDA | $(9,088) | $1,632 |
| Cash Cost of Goods Sold per MT | $3,807 | $4,290 |
| Weighted-Average Realized Price per MT | $4,100 | $4,725 (approx.) |
| Total Debt | ~$1.1 billion | ~$1.1 billion |
| Liquidity (Cash + Availability) | $340.0 million | $464.2 million |
| Cash and Cash Equivalents | $138.4 million | $256.2 million |
Note: Per share data reflects a 1-for-10 reverse stock split effective August 29, 2025.
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased 6% to $504.1 million, driven primarily by a 13% decrease in the weighted-average realized price per metric ton (MT), partially offset by a 6% increase in sales volume (109.2k MT vs. 103.2k MT).
- Widening Losses: Net loss increased 68% to $219.8 million. This was significantly impacted by a $42.6 million non-cash deferred income tax expense related to establishing full valuation allowances against U.S. and Switzerland deferred tax assets.
- Cost Reductions: Cash cost of goods sold per MT decreased 11% to $3,807, reflecting ongoing cost rationalization initiatives. However, this was insufficient to offset the decline in selling prices.
- Interest Expense: Interest expense increased 22% to $104.1 million due to a full year of interest on the Initial First Lien Term Loan Facility issued in December 2024.
- Inventory Valuation: Lower of cost or market (LCM) inventory valuation adjustments decreased to $18.3 million in 2025 from $24.9 million in 2024.
Guidance, Outlook, and Risks
Outlook and Guidance
- 2026 Volume: Management projects a 5-10% year-over-year increase in sales volume for 2026, with approximately 65% of anticipated volume already committed in the order book.
- 2026 Pricing: Pricing dynamics remain challenging with aggressive competitor pricing expected to continue. Management is shifting sales mix toward the U.S. to capture higher average selling prices.
- Cost Structure: Management expects a low single-digit percentage-point decline in cash cost of goods sold per MT for 2026 compared to 2025.
- Capital Expenditures: Full-year 2026 capital expenditures are expected to be approximately $35 million.
Key Risks and Contingencies
- Market Conditions: Continued overcapacity in the global graphite electrode industry, particularly from China, is exerting downward pressure on prices. The company notes that spot prices remain at depressed levels.
- Debt Covenants: Operating performance has reduced availability under the 2018 Revolving Credit Facility due to financial covenant compliance. The company must maintain a Senior Secured First Lien Net Leverage Ratio of no more than 4.00:1.00.
- Legal Proceedings: Pending litigation in Brazil regarding "Clause IV" wage increase provisions could result in material losses, though the company intends to vigorously defend its position. Additionally, a Brazilian tax assessment of approximately $32.4 million is being appealed.
- Supply Chain: Dependence on a single facility in Monterrey, Mexico, for connecting pin manufacturing poses operational risk.
Investor Verification Checklist
- Debt Covenant Compliance: Verify the company's ability to maintain the 4.00:1.00 leverage ratio required by the 2018 Revolving Credit Facility given the current net loss trajectory.
- Valuation Allowance Impact: Assess the long-term implications of the $92.2 million valuation allowance recorded against deferred tax assets in the U.S. and Switzerland.
- Pricing Power: Monitor the effectiveness of the strategy to shift sales volume to the U.S. market to mitigate global price declines.
- Brazil Litigation: Track developments in the "Clause IV" labor litigation and the $32.4 million tax assessment in Brazil for potential material financial impact.
- Liquidity Runway: Confirm the sufficiency of the $340 million liquidity position to fund operations and debt service through the next 12 months, especially given the negative free cash flow of $120.5 million in 2025.