Kelly Powell - Manager, Investor Relations Craig S. Shular - CEO Mark Widmar - CFO

Ian Zaffino - Oppenheimer & Co Brett Levy- Jefferies Asad Abedi - Merrill Lynch Charles Bradford - Bradford Research Mark Parr - Keybanc Capital Market Phil Gibbs - KeyBanc Capital Markets Bob Richard - Longbow Research Paresh Jain - Religare Securities Sam Martini - Cobalt Capital Don Skemmell - SCM, LLC.

Thank you Robby. Good morning and welcome to GrafTech International's second quarter conference call.

On the call today is GrafTech Chief Executive Officer, Craig Shular, and our Chief Financial Officer, Mark Widmar. We issued our earnings release this morning.

If you did not receive a copy, please contact Jen Raedake at 216-676-2281 and she will be happy to fax or e-mail a copy to you. As a reminder, some of the matters discussed during this call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Please note the cautionary language about our forward-looking statements contained in our press release. That same language applies to this call.

Also to the extent that we discussed any non-GAAP financial measures, you will find reconciliations in our press release which is posted on our website at www.graftech.com in the Investors Relations section. At this time, I would like to turn the call to Craig.

Thank you, Kelly. Good morning to everyone and thank you for joining our call.

Today we will take you to our second quarter and first half '08 highlights and then we will open up to questions. Net sales in the quarter increased 25% to 320 million.

Operating income was up 36% to 89 million, while operating and income margin improved more than two full percentage points to 27.7%. Income from continuing operations before special items increased over 50% to 60 million resulting in $0.51 EPS.

First half '08 operating cash flow nearly doubled to 102 million as compared to 54 million a year ago. In June, we completed a redemption and conversion of all of our 225 million outstanding convertible debentures, allowing us to complete the quarter with net debt at 163 million, a reduction of $277 million year-over-year.

We are pleased to have announced also in the quarter, the acquisition of an 18.9% stake in Seadrift Coke, the world's second largest needle coke producer. This strategic investment reinforces our view on the strong electrode industry supply chain fundamentals and allowed us a partial hedge for our most important single-largest raw material needle coke, which currently represents approximately 40% of the cost to produce graphite electrode.

Turning to our industrial material segment, net sales increased 25% to 275 million. Operating income for the segment was 80 million, an increase of 30% over the prior year.

Our graphite electrode segment benefitted from a number of factors including higher selling prices, execution on productivity initiatives, positive impact of currency, and the continued benefit of lower cost raw materials purchased in '07 and sold from inventory in the first half of this year. It is important to note that as expected and detailed in our Q1 earnings release, our lower cost raw material has been virtually all utilized in the first half of '08 and we anticipate that the full impact of '08 raw material cost increases will be more fully reflected in the second half of this year.

As a result, we expect a $0.03 EPS headwind as we move into the third quarter as higher cost raw materials begin to flow through our results. We also anticipate in Q3 an approximate $0.02 decline sequentially as a result of lower sales volume associated with the usual seasonal slowness in Europe as a result of their summer holiday period.

Both of these items are very consistent with our experience in Q3 last year. In the engineered solution segment, second quarter sales grew 27% to 44 million, as compared to 35 million in the same period last year.

Operating income for the segment more than doubled to 9 million. This segment recall serves non-steel sectors with solid growth profiles.

These include the electronics, oil exploration, transportation, and thermoprocessing industries. Increased sales into these end-markets resulted in improved operating income for the segment.

Recapping first half '08 performance. We are continuing to see solid year-over-year improvement in our results as the initiatives we have undertaken continue to gain traction.

The impact of these initiatives is reflected in our first half '08 results. Sales are up 26%, operating income improved 49% in the first half.

Operating margins in the industrial materials business improved three full percentage points, and engineered solution operating margins are up a full 12 percentage points. Income from continued operations before specials increased 77% to 121 million, and operating cash flow nearly doubled to a little over a $100 million.

Return on sales for the first half '08 improved over five full percentage points to 19.9% up from 14.1% in the same period last year. Net debt declined in the first half over 60% to $163 million.

Our team has delivered a very solid first half result. Turning to outlook, yesterday we announced the retirement of 35 million of our most expensive debt, our 10 and a quarter senior notes.

Following this redemption, we will have just 40 million of senior notes remaining from the original 550 million outstanding in issue. Congrats to our team.

We remain encouraged by underlying demand for our products and continue to anticipate a solid year for global EAF and the markets to drive our engineered-solution segment. We expect the total company '08 sales to increase 20% to 22%, up from our previous guidance of 16% to 18%.

As a result of this, we are increasing our full year guidance for '08. We target income before specials to improve approximately 35% year-over-year to the 320, 330 million range, and cash flow from ops to be approximately $190 million.

That concludes our prepared remarks, and let us open it up for questions.

Great, thank you very much. Good Quarter!

Thank you Ian. How are you today?

Good. Good.

My question would be, you gave a lot of detail on the cost increases you are seeing. Can you actually give us an idea of the pricing that you are seeing for your products in the electrode side and little of the spot mark you are doing, or about how your negotiations are going for '09 and also how your engineered solutions business is doing?

Thanks.

Thanks Ian. On the pricing as you have asked over the course of this year, we have seen pricing for electrodes trend up over the course of the year.

There has been a tremendous cost pressure and as you are aware, we have announced a number of increases on the selling price over the course of the year to try and offset some of those. And, so over the course of this year Ian, electrode prices have been on the upward trend.

’09, the book building process will start here in Q3, so we are in the front-end of it, we have not really started building the ’09 book, but obviously we have been preparing on the price front to get ahead of the what we except to be some pretty heavy cost increases as we going the '09. Engineered solutions, your last question, has benefited from some very nice growth industries that it participates in.

Solar has been doing very well. We offer a number of tailored solutions into that industry as we do into some of the dime-and-drill bit, and oil fill service business, and into some of the electronics industry business.

Some of the latest generation electronics, goods with higher lines speeds, smaller handheld equipment is really starting to give our thermomanagement management business some traction as those appliances and lines speed-type items demand stronger thermomanagement products. So the engineered solution team is off to a great start, nice double digit year-over-year, operating income margin expansion.

And we will look forward to a solid second half in that business as we do in the steel business we serve.

Okay. So, I guess to sum up your initial comments was that -- you answered my question is that it is seems like pricing next year should at least offset the increases in raw materials you are seeing this year.

Is that pretty much correct?

That is absolutely our goal. Our goal has been to get ahead of large costing increases as we have been successful for the last few years.

And so our goal will have us getting a fair price for our product, supply demand equation remains tight on graphite electrodes and the cost pressure are driving up the selling price.

And then just one final question before I hop off is, can you give us an idea of the receptivity of the surcharges that you have announced. What are your customers saying about that?

Obviously, they probably don’t want to pay a whole lot, but it is a very small cost of their product, so, I got to believe that they are a little bit receptive to it at the least. So if you can elaborate enough, that would be helpful too.

Thanks.

Absolutely. Ian yes.

In July we raised the base price of our graphite electrodes for future orders and also put in a surcharge attribute to those orders. And as I said earlier, the '09 book building is just beginning so I really don’t have a lot of data points there.

And I think we just have to let some time go by, and let us build the book, and obviously the marketplace will determine it was successful in executing a surcharge. We have seen unprecedented cost increase this year and to date we have been able to offset those with productivity improvements and price increases, but obviously in these types of markets having a surcharge vehicle may help us further offset those in the future.

So Ian, we are just going to have to let us build the book and the marketplace will determine whether or not that surcharge feature holds.

Great, thank you very much.

Thank you sir.

Hey Craig. hi guys.

I wanted to ask you a little bit of the Seadrift transaction. Does that imply that you guys will have, I do not know, more captive supply or is that going to be strictly on an arms length basis, going forward?

And if that is the case, are you guys looking to make additional share acquisition or out and out acquisitions in the needle coke area?

Thanks Brett. On Seadrift, our 18.9% holding does not entitle us to claim on any coke so, all transactions with Seadrift are 100% arms-length market price, et cetera.

Time will tell what else comes to market. Obviously, if some other needle coke assets came to market more of Seadrift or another producer, obviously we would have an interest in looking at that.

Alright. And you noted that you did buy back another 35 million of the 10 and a quarters.

Did you buy them below call price, and at this point what is your inclination to just call the rest of them at some particular call date?

Brett, we bought the 35 right at the call price, and so, there’s only 40 million outstanding and over the balance of this year we will monitor our own cash flow probably look to take those up before year end.

Thanks very much, guys.

Thanks Brett. Have a good day.

Good morning. Just one question for you, on your guidance for '08.

I want to understand what had surprised you positively during the course of 2008 given you showed a pretty good visibility on your cost and your pricing for needle coke and electrodes this year.

Asad, thanks for the question. I guess, I would not say anything has really surprised us.

We knew and monitored the oil situations so we knew cost were going to be up significantly. I guess on the favorable side, prices have trended up over the course of the year and so whatever we put in the book on the spot side generally has been at higher prices than the prior month of the prior quarter.

So prices have continued up, demand remain very tight on the electrode side. Global steel is running well.

There are some pockets where it is a bit slow globally, steel looks very solid across the balance over the year.

Great, thank you.

Thanks Asad

Good morning, I have got a couple of questions. First of all, the Seadrift deal, is that purchase price all done and any debt already taken care on the books?

Our acquisition is all done, closed and so there are no open issues on that Chuck. Seadrift has of course its own balance sheet and it has some debt on the balance sheet but there are no open issues on that transaction.

We are fully closed and done, and I was appointed to the board. We got one board seat so I took the board seat literally 48 hours after we closed.

Terrific. Another question, how much natural gas do you use?

Because pretty clearly that is the price that has been down a lot and should be a significant benefit.

Well, Chuck, the total costs that make a graphite electrode natural gas is around 7%. So do not get me wrong, it is an important item, but it is only about 7% of our cost structure.

So you are right, gasses come off nicely down to single digit now and so we are getting a little benefit from that but it is only a 7% item in total.

But you know $12 down to $9, and $7 could go to a $5.

It could, could. So yes we are enjoying some benefit from that but obviously when you go to bunker fuel and transportation charges, all those are on the increase, metallurgical coke, virtually everything you touch is on the increase.

And yes, we are getting a few bucks here on natural gas here for as long as it stays in single digit.

Then on the demand side, I have heard stories about a lot of mini-mill, electric furnace mills being built in Russia and other places in the Central Europe. Do you have any idea or can you tell us what you are looking for as far as demand growth in some of this areas that some of us are not all that close to?

Well, Chuck you are right. Russia has built a lot of new furnaces and of course they are putting in the ground the largest available electric arc furnaces that they can find.

These all demand large diameter of high quality electrode so they play right through our sweet spot. So Russia, Middle East, China, the growth and new start-ups we are seen there are absolutely dead center in our target zone.

They play to our strengths in quality and customer tax service. So, we are seeing in total, as we have said earlier on calls, probably EAF growing at about 3% to 4% per year and obviously specific consumption on the electrode side does improve year-after-year.

And so net growth is probably somewhere around 2% to 3% net growth worldwide. In some pockets like Russia, China, obviously it is higher than those numbers but we track this very close, we are very good at new furnaced start-ups, our customer tech team is very, very well skilled and so literally we know where every new furnaces, the start-up time and usually we would participate in a good share of their electrodes.

Because usually the estimate for steel longer term growth is closer to 5% now, yet, every place I look, you are gaining market share. So it seems like maybe are being a little conservative.

Well, when we talk 3 to 4, we look at absolutely the long cycle and yes if you go here in the last few years and maybe what some people are forecasting for the next 3 to 5, it looks like we are in the very good period, we agree. And could it be higher than the 3% or 4% over the next five years?

Absolutely, a possibility. What we like to see is, customers in those geographies putting in these large furnaces because they demand the highest quality electrodes.

Some of these old generations smaller medium-sized furnace, literally almost any electrode will work, but when you get into large furnaces going into the ground, you need a high quality electrode, it is usually large diameter and usually you want a lot of customer tech service around it.

Thank you very much

Thanks Chuck, have a good day.

Hi, this is Phil Gibbs for Mark, how is everyone?

Hey, Phil, we’re dong great. How are you today?

Good. Now, this -- you had said you are on the front-end of contract negotiations for 2009 and you typically talk about goal posts for your needle coke costs and obviously it is becoming a greater percentage of the cost to produce an electrode.

And I was wondering what your thoughts are on those goal posts whether or not they have widened or narrowed given the change in oil pricing and it looks like continued tight supply demand balance.

Phil, we are absolutely working on needle coke. We will get that all locked up and negotiated, the full requirements we need for '09 and then we will start up the bid season.

I would expect the bid season to get some momentum here in Q3, so you are spot on. We are working on the needle coke and we will get all that fixed and then we will start to put together, what for '09 we would expect to be a very good book.

Your ability to buy extra material going into 2009, has there been any change to that agreement because you typically can buy within the high-end of your allocation ban from Conoco, and will a lot of those things remain in place?

Yes, that is all in place and I do not expect any problems securing the volume of coke that we need for '09. So on the volume side, because we are a very larger buyer, I do not anticipate any problems on securing the volume that we need to support '09 and all we are doing now is putting the finishing touches on price negotiation to secure pricing for all of '09 on our critical needle coke.

Obviously, Seadrift investment will give us some hedge for a portion that buy.

Okay. And can you also talk about some of your productivity improvements that you have made throughout the business and what you are looking to do going forward in the second half '08 CapEx budget into 2009.

Well, we have had a number of them. Some of them are more obvious than others; some of them show up very clearly on the P&L.

Obviously year-over-year, we have improved on the overhead side. When you look at one overhead is percentage at sales, it has dropped dramatically, from double-digit number to a single-digit now.

And then in absolute terms, I think, we are running 1 million, 2 million ahead per quarter versus last year. So some of it is very discernible, some of it, in the production arena is less discernible on our P&L because obviously it is offsetting, sometimes increasing raw material cost.

But everyone of our production facilities is involved in the productivity improvement projects, we have been embracing very much kind of the lean Toyota production, production process and system and that is beginning to pay nice benefits. So I think perhaps over '09 we will start to quantify some of this and maybe give a couple metrics around this as this initiative really starts to gain traction.

Yes, I was just wondering if you had anything specific per any one of your plans in particular, any specific projects that you are working on, or whether or not it was just broad based and by your answer it seems as though it is pretty much broad based at this point.

Yes, Phil. It is broad based, it is across the entire platform.

And recall some of our increased capital expenditure for '08 is driven towards productivity initiatives. We have a number of great opportunities and if you go back the last couple of years we have been cash constrained.

And so we have a team now, that has been very anxious to get at this and that is what we are doing and they are beginning to pay off nicely for us.

Okay and then just lastly, can you remind us what your spot mix is? Is it still between less than 5%, something like that?

Yes, generally when we build a book, the spot piece is going to be somewhere 5% to 8% at the front-end of the year and then as of course as you get towards the end of the year that of course shrinks as people come in and in need of your capacity. So it generally runs 5% to 7%.

By the second half of the year, I mean, you pretty much have your book filled at this point done -

That’s right. Now we will get some key customers that will come in, maybe an emergency requirement, maybe some change in their planning process or maybe they got let down by another supplier and they will come in and get additional requirements from us.

And obviously we will do our best to serve them but it is not at their contracted price. It is at the new prevailing price and we have had some cases of that in Q1 and now in Q2.

And so, those have been at a much higher price than what the contract was booked at and that is why, as we said, on the pricing front over the course of this year, we have seen prices come up.

Great, I appreciate that and great quarter.

Thank you Phil, have a great day.

Thank you.

Good morning and thanks for taking our call.

Good morning Bob, how are you doing today?

Good sir. Just a little more elaboration on your CapEx, I appreciate the previous question.

$40 million left to date and you are saying that is more for productivity enhancements than let us say maintenance CapEx in nature. What specifically do you target in the processor with those capital dollars?

Where is the bottleneck in the production?

Well Bob, at varies by facility and obviously not all of that is productivity improvements. Our maintenance spend might be closer to 35 million, 40 million kind of maintenance spend.

So the amount above that to the 75 would be productivity, sometimes quality, opportunities we have in the plant and it varies by plant. Each plant has a different generation kind of period when it was build.

Some of the newer plants have a different bottleneck than some of our older facilities. So really it is not one particular area, by plant.

And so our initiatives are to look at each plant then when line up all of the opportunities and the return on invested capital pay-back period and then we just work down that list. So the 25 to 35 million above our maintenance spend is pretty much pointed at those productivity initiatives.

And then there is other bucket on growth. Our engineered solution business obviously has been growing significantly and it needs more volume.

It is sending an awful lot of great tailored solutions to solar and some of those other electronic industries. So we have been adding some capacity in those areas as the demand has gone up.

So some of that addition above the maintenance capital is also for growth.

Okay, I appreciate that, that is very helpful. My follow-up is tax rate.

You are still guiding at 27 to 29, it has been alittle higher during the first couple quarters, north of 31. Is that an issue?

Is there anything to worry about or any color there?

Nothing to worry about and we should finish up the year 27, 29 over the year.

Okay thanks very much and good quarter.

Thanks Bob, have a great day.

Thanks for taking my question. Just wanted to get a sense of what are the kind of capacity that has been added to graphite electrode?

Sir, we are not adding any capacity to graphite electrodes.

What are the trends (ph) globally?

First, a couple of competitors have announced increases. I think a couple of the Indian competitors have announced some.

I would see it in the total global demand, not material and that also, as we said earlier, constrained by the availability of the quality of needle coke.

Okay. So going forward, can we see (inaudible) probably steel manufacturers not adding additional electrical facilities just because there is no available graphite electrodes available with them because of shortage of needle coke?

Paresh, I do not see that happening. What I see is the needle coke producers continuing to debottleneck their facilities which will not in any way impede EAF growth.

So I would expect the coke supply to be there and ready as the electrode demand and the ultimate EAF steel demand arises.

Thank you.

Thanks Paresh.

Hi guys, how are you?

Hey Sam, we are doing great. How are you today?

Good. Just a quick question for Mark, two quick housekeeping questions.

On the debt balance. The 303 to the kind of 180 total, I am assuming that taking out 225 to convert and then 100 for Seadrift is that basically to walk?

Yes, that is basically to walk.

So fully drawn to the revolver, if I look at the 180, I have got 75 of the 10 and a quarter is going to 40 and the revolver, what is it 215 total size drawn with a 100, is that right?

Yes, 215 is the total size of which we drew about 100 of it to fund the portion of the Seadrift acquisition and we have a normal amount of LCs that is drawn against that as well.

And that is LIBOR plus 200?

It's actually LIBOR plus 150.

Plus 150. And then Mark, how do you think about the credit right now, just the total availability?

We have been talking that for a while about the 10 and a quarters, they are basically gone. The converts are gone, when the 10 and a quarters are retired to 40 you will be a whopping one-third times levered and what are the other -- how do you envision the revolver, how do you envision recapitalizing this balance sheet?

Yes, I mean I think we have talked before around the revolver capacity around 215, given our liquidity requirements coupled with -- the revolver coupled with factory lines and other initiatives that we have in place, we are very comfortable with liquidity that we currently have available for us for working capital needs, as well as selective opportunistic transactions like we had with Seadrift, right. So I think from that standpoint, we have sufficient liquidity to address both working capitals, as well as our growth initiatives that we’ve embarked on.

In talking about the credit in more or less evaluating it from a rating agency's perspective, as you know Sam we’ve had two upgrades EPS this year and clearly we are positioning ourselves for further upgrades as we continue to improve and the balance sheet strengthens itself the way it has and we continue to generate cash flow along the profile we have done over last year or so. And from my standpoint, we feel very comfortable with the balance sheet and the capacity that we have to grow the business.

I mean does S&P need you to be at zero drawn debt to be greater than a BB credit?

No, I think, Sam there is a number of things that they take in consideration when they are trying to assess the credit rating and concentration into a particular industry is obviously one of the elements that they would look at, size, scale of company was another thing. So there is a number of elements that come into play.

So if you look at it purely from the metric standpoint, clearly our metrics stand alone would say our ratings should be higher than where currently is that.

Mark, if you were to -- do you think you have the ability right now, given the current credit markets, if you wanted to size up the credit facility and say, you wanted to have $500 million credit facility, A is it available and B, what would be the cost you think and C, would you want it?

Yes, I mean, clearly the credit markets where they are right now are not all that attractive for anyone to be in the market. All I would say is that in the market as it exists today, is we probably would be better positioned than most in companies that they were trying to access the credit markets, given our balance sheet and given our industry and the outlook for our business.

So clearly at this point in time, I would not be looking to access the credit markets. We believe we have sufficient liquidity to manage our business and as the credit markets would improve, we would evaluate at that point in time.

And then just for the last, housekeeping share count proforma for the end of the quarter is, what about 121 per diluted?

Yes, well we ended up the quarter at 119.5

That was an average, just cleaning up the converts.

Yes, we will see a little bit of pressure on that in terms of the timing. But you have got to remember the convert was already -- really does not have an impact because it is in the fully diluted whether it was there at the beginning, as part of the basic count or at the end, after we converted it, right?

I just wanted to make sure I got the make all right.

Yes, you got it right.

Thanks guys.

Thanks Sam . Have a great day.

Good morning Don. How are you today?

Good morning gentlemen. Great.

How are you?

Great, thanks.

My only question is where do we stand on the development of sales force on the Engineer Solution segment?

Well Don, we have a global sales force in place for that business. Their numbers show you some of the traction they hae been gaining, but as we look forward obviously with the growth in that business we are adding resources to that team.

It is a global team today and we are adding to that team on a regular basis as they build out their business and as their business models expands to those nice growth industries. Don, anything further?

Oh no, that is it. Thank you.

Thank you, Don. Next question?

Good morning, just one quick follow-up. Given the current price of scrap steel and given the lack of availability in some regions, do you see any risk to electric arc furnace production next year?

Asad, what we see is a very solid second half year this year. And then in all of our work with our customers, and recall we sell in 85 countries, our customer base is looking for a very solid '09.

They do not see constraints in production because of scrap, they see cost pressures like all of us do, but none of our customers globally see them not being able to run because of scrap. And I think - a couple of things are at play here.

One obviously as scrap prices have gone up, people had gotten very creative and aggressive getting at scrap. And then the second thing, and this is something we keep reminding people kind of a medium longer term for our business is, China, Russia, Middle East are putting tremendous infrastructure steel into the ground.

China is putting 400 million plus tons of steel a year into the ground in China. They are developing what is going to be, I think, in the next five years, a very nice automobile industry and all of those are going to generate some tremendous amounts of scrap down the road.

And so that is what has us very excited about the medium longer term here. So we really do not see, nor do our customers see any major constraint around global scrap from any EAF from running hard.

Okay. Thanks a lot.

Thanks Asad, have a good day.

Robby, thank you very much. Ladies and gents, thank you very much for attending our call.

And I will talk to you next quarter. Have a great day.