GrafTech is a leading global manufacturer of graphite electrodes, which are crucial for the production of electric arc furnace steel. Brookfield's acquisition of the steel industry supplier led to an award-winning turnaround and significant value creation.
In an electric arc furnace, graphite electrodes conduct ultra-high-voltage electric current to melt steel scrap at temperatures near 3,000 degrees Fahrenheit. Electric arc furnace steel production is faster, more resilient and friendlier to the environment than steel production via blast furnaces. It is the fastest-growing segment of the steel industry today.
Acquired for $1.25 billion in 2015, GrafTech was struggling with poor earnings and facing a severe downturn in the steel industry. During due diligence, Brookfield identified specific production improvements and strategic positioning opportunities—not least of these was GrafTech's ownership of Seadrift Coke, a producer and leading supplier of petroleum needle coke, essential to graphite electrode manufacturing.
$100M in cost reductions
"We had conviction that electric arc furnace steel production would continue to gain market share against traditional blast furnace production. We felt that we could bring our operational experience to surface significant value in the business."
Over a two-and-a-half-year period, Brookfield successfully repositioned GrafTech, selling off non-core assets and focusing on its core electrodes business. Manufacturing was consolidated and productivity increased such that GrafTech now produces more from three plants than was previously produced from six plants and achieving $100 million in cost savings. Continuous performance improvements and emphasis on product quality led to increased customer satisfaction.
GrafTech today operates plants that are among the world's highest-capacity production facilities in Pamplona, Spain; Calais, France; and Monterrey, Mexico. The company’s capacity is set to increase through continued operational improvements.
Brookfield's turnaround of GrafTech was recognized by the trade group Private Equity International with an OpEx award in the large-cap Americas category. A panel judge described GrafTech's shift—from generating roughly $45 million of EBITDA and revenue of around $530 million to 2018 EBITDA of $1.2 billion and revenue of $1.9 billion—as "a stunning improvement."
Demand for high-quality graphite electrodes and needle coke continues to grow; however, the number of established, experienced suppliers is few, positioning GrafTech as a preferred partner for steelmakers.
"GrafTech now operates what we believe to be the most competitive portfolio of low-cost graphite electrode manufacturing facilities anywhere. The company has never been more focused, more efficient and better positioned for growth."