The ratings on GrafTech International Ltd. reflect its aggressive financial leverage, poor free cash flow generation, significant exposure to the cyclical steel industry, and raw material cost pressure. Ratings also reflect the company's good market position in graphite electrodes, favorable industry conditions currently, and fair liquidity. GrafTech manufactures carbon-based materials for use in various applications. Its primary product, graphite electrodes, accounts for approximately two-thirds of sales. The balance of the company's sales are derived from cathodes, advanced synthetic graphite products, and thermal interface products. Because graphite electrodes are primarily used in electric arc steel furnaces, the company is exposed to the cyclical steel industry, which can result in volatile performance and cash flows. However, annual sales contracts dampen the volatility
