Industrial Materials Segment
The Industrial Materials segment’s net sales were $262 million in the second quarter of 2012, as compared to $270 million in the second quarter of 2011. Lower sales volume of graphite electrodes and needle coke were partially offset by higher realized pricing of both products.
Operating income for the Industrial Materials segment was $42 million in the second quarter of 2012, as compared to $32 million in the second quarter of 2011. The increase is due primarily to higher realized pricing of graphite electrodes and needle coke as compared to the same period in the prior year. While lower volumes adversely impacted operating income, the profit expansion from the price increase in the current quarter exceeded the negative impact from the decline in volumes. Also adding to operating income in the quarter was the carryover benefit of lower costs from inventory related to higher fourth quarter 2011 production rates and lower cost raw materials purchased in 2011. It is important to note that the lower cost inventory has been essentially absorbed and we anticipate that the impact of 2012 raw material cost increases and higher fixed cost absorption will be more fully reflected in the second half of the year.
As discussed previously, our Seadrift production team has collaborated with scientists from our Engineered Solutions segment to develop a super premium grade of needle coke. In the second quarter of 2012, Seadrift successfully commercialized this breakthrough product and began selling super premium needle coke to third parties. This development demonstrates our continued commitment to leverage our core competency in graphite material science to grow our Company by commercializing new products and technologies. Mr. Shular stated, “While we do not anticipate that these sales will materially impact our 2012 results, we are encouraged by the market acceptance of this breakthrough product and believe it will prove strategically valuable to our business in the future.”