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On Monday, Citi issued a new price target for GrafTech International Ltd. (NYSE:EAF), reducing it from $1.50 to $0.80, while keeping a Neutral rating on the stock. The revision follows an updated model that predicts a negative EBITDA of approximately $25 million for the year 2025. According to InvestingPro data, the company’s current EBITDA stands at -$19.46 million, with concerning financial health indicators showing the company is quickly burning through cash. This adjustment is expected to lead to a cash burn of around $150 million, compared to the company’s liquidity at the end of 2024, which is projected to be $464 million. This liquidity figure takes into account EBITDA minus approximately $100 million in interest expenses, minus about $40 million in capital expenditure, plus an estimated $15 million from the release of working capital. While InvestingPro analysis shows the company maintains a healthy current ratio of 4.16, indicating sufficient liquid assets to meet short-term obligations, the significant debt burden of $1.09 billion remains a concern.
Citi’s analysis suggests that GrafTech has approximately three years of financial runway under current trough conditions. The forecast for graphite electrode (GE) prices is a crucial factor, with prices modeled at $4,100 per ton in the first half of the year and $4,400 per ton in the second half. Despite the market for electrodes being at a low point, Citi remains neutral on the stock due to the high-risk nature of the investment, citing limited visibility and negative cash flows. The long-term real average price for electrodes typically resides in the $6,000 range.
The report highlighted that while there are signs of potential improvement in the European Union, such as progress towards peace in Ukraine and increased spending in Germany, the spot prices for graphite electrodes in China are still hovering in the low $2,000s. This disparity in regional prices contributes to the uncertain outlook for GrafTech’s financial performance. InvestingPro subscribers have access to 16 additional ProTips and comprehensive analysis through the Pro Research Report, offering deeper insights into GrafTech’s market position and financial outlook among 1,400+ top US stocks.
Citi’s position reflects the current market conditions and GrafTech’s financial projections, indicating a cautious stance on the company’s stock amidst challenging industry dynamics.
In other recent news, GrafTech International Ltd reported a net loss of $39 million for the first quarter of 2025, translating to a loss of $0.15 per share, which slightly missed the forecasted EPS of -$0.14. The company’s revenue also fell short, reaching $112 million compared to the anticipated $124.27 million. Despite these financial challenges, GrafTech introduced a new 800 millimeter graphite electrode product and expects sales volume growth along with a 15% price increase on uncommitted volumes. The company reported a 2% year-over-year increase in sales volume and a significant improvement in capacity utilization to 63%. Additionally, GrafTech is focusing on expanding its presence in the US and EU markets, with expectations of future demand driven by infrastructure and defense spending. Analyst discussions highlighted GrafTech’s strategic initiatives to manage costs and optimize production, with a notable 25% increase in US sales volume year-over-year. The company maintains a strong liquidity position with $421 million, including $214 million in cash, to navigate ongoing market challenges.
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