Mr. Shular continued, “We responded quickly to the changing market dynamics in 2012, reducing our work force by nine percent, freezing merit increases for the global leadership team and reducing planned capital expenditures and overhead expense. We remain focused on managing costs, capitalizing on growth opportunities and maximizing profitability in a very competitive and challenging graphite electrode market in 2013.”
Industrial Materials Segment
The Industrial Materials segment’s net sales for the fourth quarter of 2012 were $310 million, as compared to $297 million in the fourth quarter of 2011. Net sales in the quarter increased primarily as a result of higher realized selling prices for both graphite electrodes and needle coke compared to the prior year quarter, offset in part by lower volumes in the electrode business.
Adjusted operating income
for the Industrial Materials segment was $44 million in the fourth quarter of 2012, as compared to $49 million in the fourth quarter of 2011, excluding pension related charges. The decline in operating income was due to lower graphite electrode sales volume and higher costs, partially offset by higher selling prices across the segment.
It is important to note that 2013 marks the final year of a third party wind-down agreement triggered by the acquisition of Seadrift in which GrafTech is obliged to purchase minimum needle coke quantities. Going forward, this will provide us with increased flexibility to further optimize our vertical integration with Seadrift and manage inventories.
Engineered Solutions Segment
Net sales for the Engineered Solutions segment increased 19 percent to $61 million in the fourth quarter of 2012 as compared to $51 million in the fourth quarter of 2011. Adjusted operating income
was $7 million, or 11 percent of net sales, in the fourth quarter of 2012 as compared to $4 million, or 8 percent of net sales, in the fourth quarter of 2011, excluding the pension related charges in both periods. The increase in revenue and operating income was primarily driven by growth in our advanced consumer electronics products and a more favorable product mix as we continue to penetrate high-growth end markets with attractive margin profiles.
Mr. Shular commented, “Our Engineered Solutions business finished the year with record sales of $223 million, achieving a more than 20 percent annual growth rate for the past three years. The capital investments we made and new products we developed in our research and development center in recent years helped propel this growth. In 2013, we expect to build on this positive momentum with continued revenue growth and margin expansion.”