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GrafTech Reports Fourth Quarter And Year Ended 2012 Results

In the needle coke market, additional supply has come on line with the restart of a major Asian producer whose operations had been suspended for several months in 2012. This producer appears to be currently fully operational, resulting in additional available capacity in 2013.

The graphite electrode and needle coke capacity additions described above are compounded further by a still recovering global economy and challenging steel market, in which many steel producers continue to struggle to achieve acceptable profitability levels. The modest improvement in the global economies and our steel end market, while encouraging, is not substantial enough to offset the negative impact of the graphite electrode and needle coke capacity additions. As a result, these factors are contributing to downward pricing pressure on both graphite electrodes and needle coke for 2013.

Looking forward, we believe that the excess graphite electrode capacity will be partially absorbed over time by growth in electric arc furnace (EAF) steel production. Based on CRU International (an independent market research firm) and other estimates, it is anticipated that approximately 100 million metrics tons of new EAF capacity will come on line over the next five years.

In light of current economic conditions, we are further reducing overhead expense by means of additional rightsizing initiatives, hiring restrictions, suspension of 2013 salary merit increases and reductions in travel and other discretionary expenses. We have also reduced targeted capital expenditures from 2012 levels given the difficult operating environment. In our Industrial Materials segment, at the mid-point of our guidance range, capital expenditures are expected to be approximately $60 million, $5 million of which will be invested in product innovation to grow our competitive advantages. In our Engineered Solutions segment, we plan to invest approximately $45 million, of which $35 million will be growth capital to support increasing demand for products used in the advanced consumer electronics (OLED/LED/LCD displays, tablets, smartphones, eReaders) and energy (lithium ion batteries, LEDs, oil and gas) industries. These investments position our Company for future growth and support our target of double-digit revenue growth and operating income margin expansion for the segment in 2013. On a stand alone basis (excluding shared corporate allocations, interest and taxes), we expect the Engineered Solutions business will generate sufficient cash to fund its capital and other business investments in 2013.

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