What happened

Shares of graphite-materials producer GrafTech International (NYSE:EAF) fell 14% on Wednesday following the company's release of first-quarter results. GrafTech is feeling the impact of the COVID-19 pandemic and will reduce its dividend as a result.

So what

Before markets opened on Wednesday, GrafTech reported first-quarter earnings of $0.45 per share on revenue of $318.65 million, falling short of analyst expectations for $0.48 per share in earnings on sales of $353 million. Revenue was down 32.9% year over year, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 36.8%.

Hot rolled steel.

Image source: Getty Images.

The industrial company said in a statement that most of the more than 300 customer locations it services globally have ben impacted by the pandemic, with many steel customers suspending operations. "This is having a significant impact on demand, which we expect to last through the remainder of this year and into 2021," GrafTech said.

GrafTech had previously estimated long-term contract volumes totaling about 130,000 metric tons (MT) in 2020, but the company is now lowering that estimate to between 100,000 and 115,000 MTs. Spot prices for graphite electrodes are also likely to decrease in the months to come due to a lack of demand.

Now what

GrafTech is shifting to cash preservation mode, slashing planned 2020 capital expenditures by 50% to $30 million to $35 million. The company also declared a $0.01 per-share quarterly dividend, down 88% from the $0.085 per-share dividend declared last quarter.

The company is also eliminating all contractors and temporary workers, reducing overall headcount at its electrode plants by about 15%.

GrafTech is bullish about its long-term outlook, noting the importance of graphite-fed Electric Arc Furnaces (EAF) in steel production. Environmental concerns are pushing steelmakers to go green, and EAF steel is made with 75% less emissions than traditional blast oxygen furnace steel mills.

That's great for the long term, but isn't going to help results any time soon. Investors on Wednesday don't seem to be in any mood to wait out the downturn in the shares.