GrafTech International Ltd.

The stable outlook reflects S&P Global Ratings' view that GrafTech International Ltd. will generate steady cash flows as the company continues to benefit from favorable market conditions and take-or-pay contracts on a good portion of its sales. We expect that stable operating performance will lead to adjusted debt to EBITDA in the mid-2x area over the next 12 months. We could lower our ratings if the company were to pursue additional debt-financed shareholder-friendly activities or if graphite electrode market conditions were to materially deteriorate. In this scenario, debt leverage could move well beyond 4x while contract renewals put operating margins at risk. GrafTech has a short track record of sustained lower debt leverage following two successive debt-financed dividend recapitalizations. That

... (LTAs), and vertical integration should support GrafTech's stronger and more stable cash flow generation. We expect the company to generate about $1 billion of EBITDA in 2019 and 2020, as about two-thirds of its production will be sold at a fixed graphite electrode price of more than double its historical average of $4,500 per metric ton (mt). We also believe GrafTech will continue to benefit from the integration of its Seadrift needle coke facility in Texas. That said, we cannot exclude a supply response or more competition from graphite electrode producers over the medium term, resulting in significant contract renewal risk. GrafTech remains exposed to graphite electrode and petroleum needle coke price volatility as well as the overall health of the steel industry. A third of the company's business will continue to be sensitive to significantly volatile commodity prices. We estimate that adverse spot price movements to about $4,500 per...

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