GrafTech Announces Additional Operating and Cost Structure Initiatives to Improve Profitability and Competitive Positioning
24 September 2014 - 6:04AM
Business Wire
Initiatives Expected to Generate $30 Million in
Additional Annual Cost Savings
GrafTech International Ltd. (NYSE:GTI) announced today that it
has concluded another phase of its on-going company-wide cost
savings assessment. As a result, GrafTech has identified
approximately $30 million in cost-savings actions, in addition to
the more than $90 million in annual cost savings identified over
the past year.
These actions include changes to the Company’s operating and
management structure in order to streamline, simplify and
decentralize the organization. The Company believes that these
enhancements will allow GrafTech to work more closely with its
customers, drive greater accountability at the local level and
respond even more efficiently to changing market dynamics. In
addition, GrafTech will redesign its research and development
function and downsize the Company’s corporate functions.
GrafTech Chief Executive Officer, Joel Hawthorne, commented, “We
continue our relentless focus on creating a more streamlined
business model with greater accountability and cost efficiency.
This will allow us to better compete in the global marketplace and
best position GrafTech to drive innovation to support future
success. The initiatives announced today build upon those we
previously announced and represent total annual cost savings of
over $120 million that have been identified and implemented over
the past year.”
The management and organizational changes identified will
include:
- Rightsizing initiatives: These
actions will reduce costs and create a high level of business
ownership at the local level. Actions include a combination of
reduced contractor costs, attrition, early retirements and layoffs.
This simplified structure is designed to speed decision-making,
improve customer responsiveness and innovation for specific
markets, and more effectively prioritize development
opportunities.
- Redesign of research and development
function: This redesign will place a greater emphasis on
driving innovation to support new product development. Building on
the Company’s 128-year heritage, GrafTech will establish a
Technology and Innovation Center focused on commercializing next
generation technologies in carbon and graphite material science.
More traditional research and development initiatives related to
product testing and quality will be embedded within each business
unit to support business segment growth initiatives.
- Downsizing of corporate
functions: In conjunction with the organizational improvements
identified, the Company will downsize its corporate functions by
approximately 25 percent and relocate to a smaller, more cost
effective, corporate headquarters within Northeast Ohio. The
transition is expected to begin in the fourth quarter of 2014 and
be completed by the first quarter of 2015.
These actions are expected to generate annualized recurring cost
savings of approximately $30 million, approximately 75 percent of
which will be reflected in overhead expense and the remainder in
costs of goods sold. The majority of the savings are expected to be
realized in 2015. There will not be a material benefit from these
actions in 2014.
The Company expects to record a charge of approximately $20
million related to these actions in the third and fourth quarters
of 2014. Cash expenditures related to these actions are expected to
be approximately $12 million, the majority of which are expected to
be disbursed in 2015.
Mr. Hawthorne concluded, “We continue to face a challenging
global market, in both our Industrial Materials and Engineered
Solutions business. We will continue to focus on taking further
aggressive actions to position the Company to be profitable at this
low point of the cycle and strategically positioned to capitalize
on the eventual recovery in end market demand. The GrafTech Board
and management team are committed to restoring and growing value
for our shareholders by leveraging our backward-integrated,
low-cost, differentiated business model and executing on our
strategy by commercializing solutions.”
GrafTech International is a global company that has been
redefining limits for more than 125 years. We offer innovative
graphite material solutions for our customers in a wide range of
industries and end markets, including steel manufacturing, advanced
energy applications and latest generation electronics. GrafTech
operates 20 principal manufacturing facilities on four continents
and sells products in over 70 countries. Headquartered in Parma,
Ohio, GrafTech employs approximately 2,600 people. For more
information, call 216-676-2000 or visit www.graftech.com.
NOTE ON FORWARD-LOOKING STATEMENTS: This news release and
related discussions may contain forward-looking statements about
such matters as: our outlook; future or targeted operational and
financial performance; growth prospects and rates; the markets we
serve; future or targeted profitability, cash flow, liquidity,
sales, costs and expenses, tax rates, working capital, inventory
levels, debt levels, capital expenditures, EBITDA, cost savings and
business opportunities and positioning; strategic plans; cost,
inventory and supply chain management; rationalization and related
activities; the impact of rationalization, product line changes,
cost competitiveness and liquidity initiatives; expected or
targeted changes in production capacity or levels, operating rates
or efficiency in our operations or our competitors' or customers'
operations; future prices and demand for our products and changes
therein; product quality; diversification, new products, and
product improvements and their impact on our business; our
customers' operations and demand for their products; our position
in markets we serve; regional and global economic and industry
market conditions and changes therein, including our expectations
concerning their impact on us and our customers and suppliers; the
impact of accounting changes; and currency exchange and interest
rates and changes therein.
We have no duty to update these statements. Our expectations and
targets are not predictions of actual performance and historically
our performance has deviated, often significantly, from our
expectations and targets. Actual future events, circumstances,
performance and trends could differ materially, positively or
negatively, due to various factors, including: adjustments to our
preliminary 2014 third quarter results; actual timing of the filing
of our Form 10-Q with the SEC and potential effects of delays in
such filing; failure to achieve cost savings, EBITDA or other
estimates; actual outcome of uncertainties associated with
assumptions and estimates used when applying accounting policies
and preparing financial statements; failure to successfully develop
and commercialize new or improved products; adverse changes in
cost, inventory or supply chain management; limitations or delays
on capital expenditures; business interruptions including those
caused by weather, natural disaster, or other causes; inability to
protect our intellectual property rights or infringement of
intellectual property rights of others; changes in our ability to
obtain financing on acceptable terms; adverse changes in labor
relations; adverse developments in legal proceedings or
investigations; non-realization of anticipated benefits from, or
variances in the cost or timing of, organizational changes,
rationalizations and restructurings; loss of market share or sales
due to rationalization, product line changes, or pricing
activities; negative developments relating to health, safety or
environmental compliance, remediation or liabilities; downturns,
production reductions or suspensions, or other changes in steel,
electronics and other markets we or our customers serve; customer
or supplier bankruptcy or insolvency events; political unrest which
adversely impacts us or our customers' businesses; declines in
demand; intensified competition and price or margin decreases;
graphite electrode and needle coke manufacturing capacity
increases; fluctuating market prices for our products, including
adverse differences between actual graphite electrode prices and
spot or announced prices; consolidation of steel producers;
mismatches between manufacturing capacity and demand; significant
changes in our provision for income taxes and effective income tax
rate; changes in the availability or cost of key inputs, including
petroleum based coke or energy; changes in interest or currency
exchange rates; inflation or deflation; continuing uncertainty over
U.S. fiscal policy or condition; European sovereign debt issues;
changes in government fiscal and monetary policy; a protracted
regional or global financial or economic crisis; and other risks
and uncertainties, including those detailed in our SEC filings, as
well as future decisions by us. This news release does not
constitute an offer or solicitation as to any securities.
References to street or analyst earnings estimates mean those
published by First Call.
GTI-G
GrafTech International Ltd.Kelly Taylor, 216-676-2000Director,
Investor Relations
Graftech (NYSE:GTI)
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