GrafTech International Ltd. (EAF) Cash Flow Statement

The OCF/NI ratio fluctuates wildly, from 2.50 in 2024Q2 to -0.87 in 2025Q3, indicating that cash generation is heavily influenced by working capital timing rather than underlying earnings. In 2025Q3, a $31.6M working capital inflow drove positive OCF despite a net loss, while in 2025Q2 a $43.5M outflow exacerbated the cash burn. This pattern suggests that reported losses are not fully translating into cash outflows, but the volatility implies limited predictability in cash conversion.

The FCF trajectory shows no sustained improvement, with the only positive quarters (2025Q3 and 2024Q3) driven by working capital inflows rather than operational profitability. The widening gap between FCF and net income, particularly in 2026Q2 where FCF was -$69.4M versus net income of -$40.5M, suggests that capital expenditures and working capital needs are amplifying the cash drain. This implies that the company is consuming cash at a rate faster than its losses suggest, which may strain liquidity if the trend persists.

The low capital intensity, relative to the company's asset base, may indicate that maintenance capex is being deferred, which could impair long-term production capacity. The spike in CapEx/Revenue to 15.8% in 2025Q4 was due to a revenue trough rather than a strategic increase, as CapEx remained around $18M. Given the negative gross margins, it appears that the company is not investing in growth, but the sustainability of this approach is questionable if equipment replacement becomes necessary.

The erratic working capital swings, with cumulative WC change of +$24.1M over ten quarters, suggest that the company is not consistently converting sales into cash. The positive WC changes in several quarters may indicate that the company is collecting receivables or reducing inventory, but the negative swings in 2025Q2 and 2024Q2 imply buildup or delayed collections. This volatility complicates cash flow forecasting and may indicate that the company is struggling to align production with demand, given the price erosion noted in the income statement analysis.

The absence of dividends and buybacks is consistent with the company's negative cash flow and strained balance sheet. The only acquisition activity was a $9.3M outflow in 2026Q1, which may indicate a small strategic purchase, but overall capital deployment is focused on survival rather than growth. This suggests that management is prioritizing debt servicing and operational needs over returning capital to shareholders, which is prudent given the current cash burn.

The large gap between net income and operating cash flow suggests that a substantial portion of reported losses are non-cash, likely due to depreciation and potential impairment charges. However, the negative operating cash flow still indicates that the company is consuming cash at the operational level, which is concerning. This divergence may also reflect working capital inflows that temporarily offset cash losses, but the underlying trend is one of persistent cash consumption, which warrants close monitoring.