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GrafTech International Ltd. (NYSE:GTI) (“GrafTech”) today provided an update and reconfirmed the savings targets on its previously announced global rationalization initiatives. In October 2013, GrafTech announced a series of proposed global initiatives to position the Company to significantly reduce its Industrial Materials' cost base and improve its global competitive position. As part of the initiatives, the Company announced the proposed closure of its two highest cost graphite electrode plants, located in Brazil and South Africa, as well as a machine shop in Russia and planned reductions in corporate overhead.
The three planned closures are proceeding on schedule and as expected. All of the key milestones related to employees and applicable third parties have been achieved, and the rationalization is on target to be completed by the end of the second quarter 2014. The Company noted that the planned rationalization continues to be implemented in a professional and timely manner, with no disruption to the wind-down of the operations or to customer shipments.
Joel Hawthorne, Chief Executive Officer of GrafTech, commented, “I am very pleased with the professional manner with which the teams have managed through this transition. As always, the entire GrafTech team remains committed to delivering quality products and services, and has done an excellent job of taking care of our customers. While decisions like these are never easy to make, we believe the global initiatives we have undertaken will ultimately improve our operating efficiencies, enhance our global competitiveness and drive improved profitability across our Industrial Materials platform while positioning GrafTech to deliver long-term, sustainable value to our shareholders.”
Based on progress to date, the Company now has a better line-of-sight to the anticipated savings associated with the rationalization initiatives and today confirmed its estimate that these initiatives will generate approximately $75 million of annual cost savings ($35 million of which is expected to be realized in 2014). The Company also noted that the efforts related to supply chain efficiencies are on track, and GrafTech continues to expect $100 million of cash flow improvement ($75 million in 2014 and $25 million in 2015). The Company noted that the total global pre-tax costs for the rationalization are also tracking as planned (total pre-tax cost of approximately $105 million, approximately $30 million of which will be cash outlays).