In today’s briefing:
- Graftech: Deleveraging Story Moves Out Even Further / Dead Money
- Steel Dynamics Inc.: Major Drivers
- The Williams Companies Inc.: Major Drivers
Graftech: Deleveraging Story Moves Out Even Further / Dead Money
- GrafTech International Ltd (EAF US) results for Q4 2022 were worse than expected, and guidance for volumes down 50% in H1 2023e was shocking.
- In summary, our intrinsic value was too aggressive, and there was a low margin of safety on the investment. Constant execution issues in a favorable environment didn’t help our cause.
- The stock isn’t as cheap when trading at 11.1x/9.5x FY23e/FY24e. The deleveraging story now gets pushed out to the end of FY25. The investment is dead money for two years.
Steel Dynamics Inc.: Major Drivers
- Steel Dynamics had a strong quarter, generating sales, earnings, and cash flow above market expectations.
- Sinton is demonstrating considerable operating improvement and has a clear path to profitability in the second quarter of 2023.
- While metal spreads continue to widen due to stable product pricing and decreased steel input costs, steel fabrication businesses had a solid quarterly operating income of $682 million.
The Williams Companies Inc.: Major Drivers
- Williams reported a solid quarter and managed an all-around beat driven by strong performance across its core businesses and JV upstream operations.
- Although operating and maintenance expenditures increased, primarily due to more frequent maintenance tasks, the company is still on track to meet its goals.
- This is an important step towards expanding the company’s core regulated utility business.
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