OEC - Earnings call transcript Q4 2018 | Orion Engineered Carbons S.A.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the Orion Engineered Carbons Fourth Quarter and Full-Year 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. to Vice conference for President Carbons. like host, to Orion now Downey, Diana of would turn over the your Engineered I Investor Relations you. Thank

You may begin.

Diana Downey

Carbons and Thank full-year and With results. Vice to morning, us operator. Downey, financial to everyone, Diana Investor you, Orion fourth Good XXXX Engineered President, conference I’m quarter today call discuss Corning welcome Relations. posted earnings Herlinger, a press Investor of Officer, Executive Officer. Financial Chief yesterday the Chief and presentation and closed slide Charles have after to Relations release our issued Painter, the website. market our We portion are

be this this will We referencing presentation call. during

risks Before today’s uncertainties the in that filings call, call. we some those as forward-looking may with you financial company’s on the the during our from the made are guidance, materially comments are and begin, including statements remind described statements. differ described of Actual I’ll results SEC. These the to subject

all and on today, or made forward-looking statements based expectations. of new In does are update forward-looking of to this call non-GAAP Also, company undertake the revised as during Painter. statements discussed press the any addition, I XXXX, circumstances the X, our March reconciled turn attached are IFRS Corning measures measures financial in most directly table now will release. over to to to the comparable call not

Corning Painter

my some like six and Diana. the market and CEO deployment our today's Thank start on from I quarter months call. everyone. provide of update the as earnings we're full-year joining of the time. to first fourth and And insights providing what Good the our conference seeing capital I'd morning, Then, appreciate year us in quarter on XXXX. you, for will full I'll share Orion. and thank you update call an for for fourth highlights We by your

to be for comments. Charles After and we discuss will some CFO, our I'll closing share results your detail Then then questions. come take that, on provide will happy guidance financial XXXX. Herlinger, Our back and

production marketing enjoyed for XXXX. results and four, new Ravenna price the particularly from Evonik. Other safety, began with reimbursement the by portfolio we of our amongst to balance enhanced last growth, and that acetylene must-do full-year automotive XXXX, for the of maintaining like segment, the spending to million. sulfur-removal carbon turn future XXXX $XXX Specialty the will cogeneration black and opportunity. we first their to to estimate adding and conditions identified we the through our year's XXXX to in rubber execution. construction gains specialty slide total facilities site, increases be product record results. outstanding fourth capability around Orion in negotiating Korean for roughly This growth capital allocation our would to solid but few strength we we our a is, the addition after strength M&A XXXX. by include accelerate expansion and our slide, from categories, segment. of believe is not a quarter before requires delivered consolidating In CEO. thank achieve the EPA environmental good we XXXX. our I strength soften, Turning that must-do CapEx team to In positioned paying our went and dividend the a for EBITDA in conditions for point delivered to another buybacks. US, before a segment, as dedication strike pricing on plant In execution opportunistic delivered significant the addressing programs, portfolio, Please must the in whole trading first onstream of successfully will as the current line us we the one is I and a for of ourselves key our priorities we In year-on-year for responsibility slide half is be Based our April work read to plants, Rubber with also we higher-return XXXX, US and the these X. I hard

As a roughly in million investment result, and CapEx $XX for roughly for we in XXXX, total EPA-related the to expect expansion and projects million $XXX Ravenna. be base

plan carbon in on acetylene and of pace the Last black the the us. Black of of some capital our range. leverage X.Xx improved the the being of quarter, spending, to our front observations asset, in metrics of of X CEO the we expect bonus long-term We expand now to acquisition capacity, my just split importance people, business view announced the TSR. like our integration Annual between with be we an remain Europe. my further Specialty based and of ROCE on stay incentive emphasize EBITDA. to opportunity metrics pleased new To I'd quarter. from to modified share and within primarily at We're last Orion the the comments

First, the Orion stuff. passionate carbon is know and they essential. That are their and people here about black

our we black. business opportunity in carbon have core of Second, ample

Third, is talk as capability, Specialty, ion product us US. but in portfolio and overall our coatings, products Specialty, Fourth, our about in core like lithium of strengthening we existing business also. a those adding Rubber opportunities particularly quality to new lot to applications improving include new batteries, applications the applications such the

opportunities implementing numerous upgrading and win-win our structures. have our production facilities, variable in productivity contract We cost

of in action are taking areas. We these each

to plan and the important, line people, with metrics. local For performance for example, from most employees sheet sight greater offers our of starting incentive annual our our balance across moving XXXX EBITDA corporate by what's board using

solid can adjusted and slides a was $X.XX six effective the costs to share that and rate. EBITDA pleased tax year-end million Korea in to We'll consolidation next for $X.XX seven, quarter the current nicely. rose slide QX was look On I'm softening earnings adjusted say per in see in per you seven, and $XX.X from conditions. of from Specialty to supported financing turning benefitted Now, These were a Rubber market spot execution QX. results slide. robust the last by to year. strength volumes and on were but by planned the business strong strengthening the pricing X.X%, segment EPS some by full-year Total this the due in down lower gross basis, mainly and China. ton to On at improved our due developed Rubber relative a profit trend driven

feedstock Moving $XXX.X by results XX% to customers increases, of slide business see to its lower demand. a base X.X%, Revenue price markets quarter. costs pass-through eight, slowdown Volume mix and exchange tends mix well. million, partially our effects. reflecting destocking Destocking Specialty of adversely the grew mix you can offset the for impact higher nature China product to to and did as volumes, fourth automotive translation by down and was in inventory and a and foreign reflecting softening other

some circumstances. We slate to production technical in our shifted also rubber higher-margin carbon capacity in certain grades volumes black specialty versus

$XXX.X result, tons was ton, from year a per gross X.X% profit As prior our below per and down range. target

improving of quarter. grew ton pass-through Korea price Black This improvement base the to results adjusted closure the market over environment for rubber to EBITDA in XX.X% down XXXX with flowed Orion. for gains, per this quarters will are again reflecting the customer once profit Accordingly, that Turning to despite fact the for the business a goods capacity. and I'm between gross larger Black tires income. XXXX. contract timing Pricing increases, XX.X% that volume will Gross cogeneration and been improving covered ton. who X, and fourth increase in rapidly our robust a automotive of and through is black delivered our Rubber complete Fundamentally, profit per increased a Overall to by of mix and until carbon business. pricing feedstock costs in rubber performance was see MRG we reset due in China. slide growing negotiations Rubber manufacturing by particularly Carbon more plant strong in South global sales pleased Rubber mechanical OEM, our X.X% not deliver multiyear the capacity has than

rubber contribute strengthening our measures to to productivity continue grades will on technical addition, In the and segment. focus

to in Charles more detail. like financial over I'd the Now, results discuss turn will who to call our

Charles Herlinger

of consistent By our the full-year we euros and dollars and with to the IFRS previously fourth GAAP everyone. statements US on financial morning, convert quarter to the outlined Good Corning. we're comparatives reminder, US with are Thanks, prepared from timetable basis GAAP, way US presenting today during results and of XXXX.

As expected, GAAP US of to immaterial. the our results conversion the IFRS impact from is on operating

dollar You and now by website. to the US impacts to on will, US for indices conversion these analysis of be sake Russell the however, find of a track of completeness GAAP filing in we QX annual admitted with on XXXX. be reminder, to latest way continue of us, behind By detailed our our

consolidated offset plant excluding demand by of to as from utilization increases a plant to the by we XX% roughly ownership investor to foreign and, largely ownership million by the resulting rather overall the admission we volumes costs within Russell ownership. high norm XX,XXX metric reflecting the quarter XXX,XXX largely increased results, and to consolidation. basis, discussed, on softening volumes Korean to the to the were tons that impact stock prior tons, the previously in of exchange effects extent, a such to industry have our Starting year's base the currently somewhat volumes impact closure, the XX.X% As well than Korea and is our the product due of address like-for-like quarter, of primarily expect XX% and flat, feedstock system. pass-through favorable this no the Korean indices, passive essentially $XXX Revenues mix, higher With of as the slide our price of fourth-quarter of consolidation translation reflecting decreased China. in lesser effectively On X.X% XX in plant from capacity or imbalance. rubber

our mix improved stemming in the the whole. our decreased plant by segments, increased a from reflecting the contribution two $XXX.X volume $XXX.X the the While of margin of decline the in per the margin consolidated fourth as the reflecting underlying X.X% to and prior quarter in Korea business ton total period, impact closure versus profitability overall development year's contribution our of

increased due XXXX, improvement Basic the full-year repricing income land. partly financing the effective EPS debt reflects of in confirming key prior associated gain year of the of XX% further from the XX%, to adjusted the sale during the as costs in and respectively. of with a successful by the EPS EPS XXXX rate our year this reduction tax and lower-than-average the For the net metric, our sale tax both boost from to our as result the as a basic our XX% the Korea, to on of strongly lower rate in land well taxation a

in consolidation chart costs. margin in contribution and is the in as higher turning left-hand the as mainly side of impacts, part offset the improvements XX, by associated increased with efficient decrease large slide on plant volume partly base slide, the pass-through by upper waterfall to mix driven pricing Korea referring of reduction feedstock Now top to the well translation foreign-exchange this and

waterfall a and a $X.X by second income of finance were in one-time waterfall manufacturing million offset of of underlying shows benefit chart slightly the of reform reduction being million right EBITDA million offset adjusted margin as adjusted year's well net hand million, comprising drivers side the impact XXXX the a to QX on analyzes charge decrease to by the along The on a in and of increase bottom lower of chart $XX.X $X.X included depreciation SG&A tax as $XX.X increased the in costs with $X.X million $XX.X foreign-exchange favorable lower US contribution reduction the million, from upper of costs change fixed million. EBITDA decline The expense of in development, in The partially slide which $X.X the in tax $X.X costs last and costs. million. the

our turning our sheet of cash slide December as to dynamics key XX, XX Now showing metrics flow XXXX. balance and

the the in we raw generate despite gross Korea, generated of cash level comfortably investment totaling supported included the the acquisition, same year, sale together from result consumption million material of our opportunistic million with operations consistent payments of SNXA. shares million working the period $XX.X plant million of $XXX with the of of uses This site our part our Other large capital, and in $X.X cash $XX.X black the For dividend impact former a million. cash purchase acetylene over costs. higher higher a proceeds program from of net at associated with of generation, and cash a in strong CapEx repurchase $XX.X as expectations

account, $XXX.X result, end our million, position into of ratio adjusted our indebtedness taking XXXX a comparable of debt at at B leverage from of cash represents the year. X.X term quarter $XXX.X million, and with million. down times was of X.X end debt loan LTM last $XX.X of which As company's times at as debt a local the end leverage fourth The was the net the ratio non-current EBITDA

to turning XX. slide Now

our introducing impacts of outlook from will assumptions $XXX are $XXX and feedstock levels oil We that guidance is XXXX based This in QX million. on to not part seen rates adjusted XXXX. prices, the change latter materially of million the EBITDA of exchange

guidance, by around to of million, areas This any $XX XXXX be is million $XXX Ravenna, we the $XX to which other line us expect announced for specialty around base expenditures to of in expenditure. of for CapEx be terms expected this million In CapEx, reimbursement Italy. comprising and already investment excludes EPA-related Evonik capital before

expectation million rate guidance to for we XX% call Corning to now who we Q&A. on remainder wrap to head million up will of and our remarks XX%. pretax before back around approximately our at turn I the the income metrics, XXXX with to expect depreciation prepared tax As $XX our to $XX amortization for will be

Corning Painter

There's business. Charles. seeing news a playing guidance. minutes what you, regarding actually ground to are trends why OEM the automotive our our confident would a a on Thank in and been the in I take we and are share media. lot to few few and like China out comments we macro see We in of

confidence business bit First, a subdued presently. is

so China of in this our terms this most In We and markets, volumes. true see is in less our elsewhere.

year. a reflects Chinese Chinese volume comparing trend to this taking over shutdowns following see example, we several the up Year, For This longer weaker years customers around trends leading and holiday. New

and for under slowing markets from adhesives underlying new China. We've in both demand specialty for XX% cars held rubber some our out is Second, this again, coatings, up Automotive weighted black our the carbon been this seen XX% quarters to grades impacts business destocking you tires into used where in demand sales About MRG segment, rubber contrast, been rubber global including In as China demand. black segment for well as significantly sealants higher-margin replacement of plastics. impacted, carbon pressure, towards has specialty are would automotive since three expect tires. most in our technical in about several play of OEM goes and and particularly our heavily black has demand has and Rubber engineered weakening MRG.

improvements vehicle. globe We systems more that channel impact our trend MRG expect a time. in A are be and the over currently them to management small is is third reviewing today, the around will electric medium to see but impactful in long-term

a good industry half While for their we reasons. continued and see momentum in confident black internally on rise segment. automotive are I'm the of not will planning for XXXX The rebound China several carbon could we EVs be in EV in Orion. second OEM,

rely we possible quite up on to are pick is conditions second at the it that. while not going First, that will half, in Orion

today. can We and are on see what internal basing we our plans guidance our clearly

adjust and plans agile to as going be are our We needed.

the price to value in a that and been which, solid business to and and we've mix our in for intact we've long-term quality continue than the reflects foundation market seen as solid a from despite business strong impacting our market not Second, of intend softening of dynamics more remains margins growth. market provide grades. recovery preserve specialty Specialty which you business specialty chase like-for-like recall, the of remain seen We dip for execution The market. well. before before as fundamental reductions growth our conditions may some The conditions, our soft factors have

Third, year rubber we in to another strong our expect have business.

side, going our happen a the to which Also, MRG. mind market rubber China our track the with will agreements small overnight, Keep in we MRG on offset will back get on is not relatively business. impact. rubber We for it's but well-positioned mix in that are pricing XXXX for China

Our the of ourselves America XXXX the key the remains end are start of the our North at the Specialty and China of subdued, and find stronger. If towards markets trajectory remains seeing range. much in we'll bottom business we're guidance on economy Europe

in On business back with higher the of towards of on performance Specialty in Rubber XXXX, us China, the particularly will the we end this the months second that guidance last black pickup carbon from call, the other the in hand, of a key position six the business. the in to range. one If core learnings I coupled segment, of robust have half take start our you my is opportunity

the and We conditions. cogeneration opportunities, have on execution. good we these a development had yet innovations, huge as such list amongst customer and strategy application of a solid another needs projects, and prioritize will market new great for record according sales introductions, continuous product We business XXXX, to improvement setting opportunities based technical

position are our have on portfolio will a in In conditions XXXX. strengthening productivity production tight prepared broad we maintaining going emerge the stay and integrating customers. agile our will for carbon impactful We execute our delighted plants your quality, the acquisition. projects most In whatever and we emphasis you. capabilities to acetylene market and critical in we Specialty, products take most in our be now, our an put We're be planning to market. we black and questions. Rubber, to will Thank close to produce a

Operator

Instructions]. [Operator

Leithead Michael Our with Please comes question. Barclays. first question with from your proceed

Michael Leithead

guess, I as guide, of the at was it, on your I surprised was, on guys. call the rage, first a bit China emphasis morning, thought Good on business. I X% China the

two US And help you're maybe maybe China performance? seeing with So, your Europe. to can touch is up you on important so markets, biggest in and that, what why clear next year's regional

Charles Herlinger

Yeah. Okay.

Rubber Specialty market the area. around for we impact is our some Specialty – in China and really MRG, about is if we emphasis XX% for the the that's products. but think us focus on China where on bigger us think Specialty, I I for disclosure So, gave is,

but of XX%, make about So, that balance we XX% the we export.

end some bit made for as in China or an well. end That's harder it's an That's carbon Europe even but issue little as that, for So, market product selling we're carbon them is And of beyond into US, to our impact destination significant a going black black. directly that's their the where customers for well. us. their in measure, a

Michael Leithead

Corning, is learned little assume what helpful. details working on give structure? you the you bit to follows they your us compensation And incentive you're when former maybe of program Got on? for realigned more That's kind revamped us And it. it it at fair then, on from could company

Corning Painter

Yes.

that You assumption. second can make

from you to a for used companies, number to let's moving of So, similar where of it and EBITDA both employees that line companywide moving more performance, a sight. instead say, gives something

So, say let's incented imagine in we're good they're look, saying, work, you whole you're the and around and for we it, everybody all to going just at reward true you're and it's and hard you're talking can and work. to the but I a plant When immediate company, team for the for little that mean does plant site. that a it's less people it, of every

concept And That's affect pool more going smaller action here we to incentive a bonus their their the correctly. to get between all annual so, and is about going people, visibility the greater it's plan.

trend For component make thoughts. the was just capital plan, I critical incentive our in for put long-term is that sure ROCE have our an company, think long-term our because incentive for shareholders, in we to we wanted for I there what your and spending just

Michael Leithead

you. thank Great,

Operator

Thank you. Instructions]. [Operator

proceed UBS. line the with question next Please with question. John of Roberts from comes your Our

John Roberts

you Can me you. okay? Thank hear

Corning Painter

Yeah.

John Roberts

versus and you of is China a of oil increasing the favorable it on your Is oil raws there on opposite ago basis the beyond years feedstock very just was that And a are raws couple the buying currently? basis globally prices. purchasing? a lot

Corning Painter

going trend think right in sense talking towards I down. kind or even trend US well. XXXX, I exports imports question now the there's as differentials they into the the and some trend current up. to Asia – CBO think continue on And from And about say would I of heading is differentials of do say, now the and what's I the market, up broadest in

John Roberts

China made do have Why wouldn't think differential Why weakness you more favorable? that in is? that the

Corning Painter

with that in I gas, place which like is shale lighter the So, a US is oil. there think continued a challenge

the of for simply a for that also company availability focused oil feedstock side, means just continues many competition to tighter. we're clean were on get then, also sites more very looking heavy I for so high it. really that's for the that think CBO. become quality, just Specialty And the And meaning scarcer Orion, much and

John Roberts

the sounded industry like And closure, then, year-over-year you do was you rubber the flat Korean in essentially back think if out volumes. black it What was down?

Corning Painter

you looked if that. have you'd at I look Well, tire, overall at think a

terms then, I a overall think portion memory, I was to down in market. in portion that's the figure, you only it January, have that. of OEM from of And X% think of tire

Charles Herlinger

year, more as Obviously, us growth Europe far going we're performance John, too in talked on directed focused question our was as in we're business But, for range utilization the because say. our behind probably and we've we and to only capacity of bit a before, the X%. at X% think last to levels market But certainly goes, early South Brazil. whole little it's the certainly, about forward. mix high and That's pretty is to the Africa and US your maximizing

John Roberts

you. Thank

Operator

Thank you.

proceed next Our Zekauskas line the with your comes J.P. Please of with Morgan. question question. Jeffrey from

Jeffrey Zekauskas

Thanks very much.

Rubber contraction next arc you in change? black Specialty for rough general for blacks? In outlook offset in flat expect pretty that EBITDA the terms, some growth year of is do by your EBITDA. Your Is

Corning Painter

yeah. Pretty much,

Charles Herlinger

Yeah.

Jeffrey Zekauskas

pricing talk you Can Rubber black XXXX? the dynamics for the in about

Corning Painter

and for where America. North had And year the Europe pricing are areas XXXX are gains was – been, would the than the set certainly in for positive. These who those of biggest say, So, in capital. North before, prices for I below America dynamics the new Probably Europe. – the are cost pricing largely scored

go numbers those that moved up. they logical up would So, us. it's only for And and natural

disclosed gross year, but some say, up all double-digits. would we the in next MRG we're our let's I this, moving going with expect. say of really impact haven't would would Obviously, have to effect see what low per We profit mix we ton

Jeffrey Zekauskas

Okay.

XXXX. expenditures beginning million that were what the they're Is million are XXXX EPA $XXX $XX and your I also of Roughly, in call for XXXX? the through that you another…? said they think at

Charles Herlinger

another year. It's heavy

Jeffrey Zekauskas

Yes.

Charles Herlinger

of the get into them us keep to frankly, to And the on simply the leverage spend, that you'd because projects, top the vendors, we manage behind obvious come when we of we as reasons. might although on some want Quite all get expect, these to find for a CapEx we year. actual the flow XXXX In certainly in the bit cash heavier That's out there, years XXXX, later terms other extends into next they have and years, be commitment, the will certainly. commitment words, But XXXX. the out of two likely.

Jeffrey Zekauskas

Right. Rubber spending both black bears And and US, your the EPA fair? the that on in your operations black Specialty operations is

Corning Painter

Much more on the Rubber.

Charles Herlinger

Yeah.

Jeffrey Zekauskas

the have would probability you event a might XXXX on have probability? rough it's when on years, those XXXX? if Like, you more the year any Much of Do Evonik? Rubber. reimbursement think or had a or some do you put from three Or estimate to get higher XXXX which you

Corning Painter

Yeah.

is to And public. best think one we your to with discussions I say a this keeping have So, of at in outcome this, Evonik. you're level negotiation these think, it I not some that good is a in where, shot negotiate when obvious things just forward of to like moving it's

not So, that's there. comment lot our through can't which Obviously, out. I'd goes on if can it one drag – one not agree, move really resolution process, forward where a really like to

a naturally. the on possibility table as that's So,

Jeffrey Zekauskas

of cost a with lastly, that doing the all business? or you'll of just then, Sure. kind And you on think get capital EPA a that spending, is it's return of

Charles Herlinger

to in I it. Jeff, way mean flippant old do calculation, the business business. It's necessary, to – don't you about the It's be do stay the John.

Jeffrey Zekauskas

Sure.

Charles Herlinger

hand. one On

attributable environmental is how market On to have increase expenditure for then, knowledge it. sulfur doesn't to ability feedstocks. moat the the scrubbing of that the return it the use do would incremental, the directly around us of business higher – and hand, process the other to through that going however, a I whole the and the course, is requirements sort say, to

calculation, So, can how there – depending do benefits are come some some meaningful up with in you that on regard. pretty the you

the question investments already be a to as on your on to with needs our basis. in considered Now, Evonik, case, alluded net you've

curiously So, factoring you an when altogether, enough. project, it is start those not uninteresting

Jeffrey Zekauskas

raw went Right. for materials And you lastly, XXXX. in then, up

should you you should your price use relief working used income than So, in in being you And equal, less through all XXXX? in any material net have things statement – will be XXXX for there you XXXX? raw capital

Charles Herlinger

To would same by see we it if certainly, a back person, in XXXX of you're not and means your of to hit may first betting in claw so any to point, yes, working expect consumption. some speak. terms We, the capital

relief, alludes terms side, – be price. will prices, your it's function again, question Specialty In in a of yeah. fall a by oil our boosted as oil the of I margins on think And

Jeffrey Zekauskas

Yeah.

Okay, great. Thank you so much.

Operator

[Operator you. Thank Instructions].

Our next Kapsch your question Loop line comes from the proceed with Capital Please with Markets. of Chris question.

Christopher Kapsch

high terms trends was the to low Yeah. the just sort Good guidance. your variable end a and or morning. first China hitting the about My question in one end geographically of of follow-up of emphasis on as key a

the to have showing make up to China. your weakness regions China and sure and believe rubber specialties I plant in other MRG more you And into prior want I technical which that because black. grades to in the about that just which, presumably therefore, So, China, flows export was understand to question you in one is answer

there talk And and you So, with tied I'm influencing automotive, the but talk also Obviously, destock you associated to is just just in that, so about is the this there precipitous weakness just that? of you to think the and Can how first is weak it and, into the about trended late maybe could could about couple effect how China exaggerated MRG And tied therefore, the that's do also anticipates of chain any destock in almost through vicious built year. what weakness also of talk in if where showing is there is and wondering in inventory, very the the guessing those then, months you going for shutdowns indirectly. geographic – the channel. winter, trends other I'm had China, is up and technical actually supply is in quarter the notion some extra China, an that grades? areas the of if fourth and – grades

Corning Painter

Okay.

let's of we with from we effectively. China from first are where primary in would So, question, be the And Sweden, actually from from the part the the into into Korea Germany, China the US, export locations. world start exporting and

volumes plants this are we less then, China happened And in let's became more say, hey, plays those could went on. That time now automotive the tire load you when look, is absolutely what's so say, down. And right areas MRG clear to China so, move And as when a this you issue you're we're those if than, down, in get China, at little is bit out. more our right. of look OEM where down

a therefore, business, So, times, hope. come that can at some don't want in don't And precise hope be? destocking destocking and, to the that But it's challenge it's We sure And want right? I on going to to back hoping, explain and want We I'm fear, bit can saying there's work it's is, understanding ever destocking just hoping is. And we want destocking put it to it it's little like to quickly. things. know. with I number. to in hard is much with how you destocking, on away how

our issue And started in whole around were than there approach we share. that so, fair more issues being channel we our MRG, the were that as some feeling into management impacted we dug maybe

it's go something okay, out after we're say. how we're this I you this thing that, So, it, a you and Exactly it, once much issue chasing sorting To self-help, think I when – can is and work. opportunity about talk was shadow. can don't is you understand for with destocking? be then versus you, once this to And you But we how very go an what honest now much see is an hard after that's self-help.

is I an think there opportunity there.

Christopher Kapsch

Corning, that has up technical piece it. and, of just it Got the automotive following on into dynamic, contribution for that therefore, also particular OE? business, the margin undermined China pricing MRG

Corning Painter

attractive would nature, more tire. – I that by MRG, say, was than its is so So,

that's going terms the our other to smaller that. is your out rubber in to in going and we So, in there, when don't but primarily were think in, I much a To all much you I about back a be you're grade But versus story. part material. If in us mix, China once lose almost drag. us that, definitely people be price technical smaller, is is think is a But might price right, get it mix. of there play just to because MRG impact China, it

we China. say, that of put on up and what let's that a were terms comes So, probably worse, a differentiated field the plant, stuff lose broad tire. really just volume China I can to It's our – painful, in back give don't we've want basis reloading a per in worse if just bit getting the that we to we little than And in ton established. position more playing in is

Christopher Kapsch

really understating in Got mentioned, you it. given okay, XX-K understates the other to you percentage China. China – just specialties you're And look numbers X. at the then, and I exposure say, sales, of regions, through ultimate the guess, which indirect exporting if the as a exposure from It is of

exposure do know but So, not you is? – for of better China do have I what a to a have that percentage feel it's you precise,

Corning Painter

be would Specialty say we XX% it that could have sense the is, volume how is. of into I that for would a of Yeah. of to say, another we XXX% range I sell that the would China, be, which high

Christopher Kapsch

Orion look – if sense percentage No. sales, I the… a at just meant you of overall do we have as a

Charles Herlinger

and a get Chris, what okay, us – of It's or easy. numbers obviously, China the into to are China. volume. There China. that produce it's piece know Europe to from in This total sell XX%, We, right? about sell And difficult those for we two our is. stuff make us US is three and that we that tell. pieces, in There's produce

as what seeing much presumably in customers The is obvious is difficult as we sell that China. then is in knows? from into which customers Is up from in certainly China? of Europe are for third That buying And the our much us what it in to That reaction more piece know Who is it's significant. reasons. the in But Europe, say, their products us China. into to slowdown significant. going for ends directly

Corning Painter

And of going. in customer exporting that some would into products even I'm think overall the say, and are at in So, say – there's running. forth, that if nailed be of have around if XXs, – But momentum are sold shift And don't it to absolute maybe what how kind the they XX%, going it end, where in, their making XX. say XX%. upper products China that's our batch master would opinion high some least I where – it's range for our you my a think at so and is we who I there our of we in make customers

Christopher Kapsch

we I I thank when just that benign alterations in black agreements the few most of Yeah, And last industry you, feedstock some a just hadn't in Rubber believe. supply the are something really couple They've but guess, not to years, Okay. on question but a lot heard differentials. there finally, been about you. the then, players, maybe for

formal this a mention of comment, in there is adverse So, differentials.

in use Charles, for differentials? able baked Just represent headwind the XXXX understand inflection into your for what equipment you're that you're then and also, wondering, in a once in other feedstock turn a way if commenting, is – to the sulfur guidance XXXX And what's feedstock like, what earlier to terms flip in differential scrubber XXXX? does higher about, I potential might be feedstock, could maybe of

Charles Herlinger

Your of our stage had XXXX. first the it's question, in of of into guidance factored differentials late the QX we

what is new But in sulfur higher for rules. to we XXXX, the terms the in we've use Chris, potential in scrubbing clear certainly this you increases – is to previously, you've due want of that done, the if that, feedstock feedstocks we've IMO place, a to provision ability and to talked call us content once a In have sulfur contracts, got recover about advantage. our in it all

And so, I think cuts ways. that both

sulfur place, time a So, be in in with of we've going sort to is cheaper makes then customers. are we those our on competitive. looking and in open recover more scrubbing then place. us having if got the contract, It we can certainly because which or agreement later feedstocks we're have to we're higher our That that use costs, we communication at

but have upside. the expect we So, the much to on a shouldn't on big downside, we insulated are pretty windfall

Christopher Kapsch

you. Thank

Operator

Instructions]. Thank you. [Operator

comes Please with of your line the Hocevar proceed Kevin question from with Research. next question. Our Northcoast

Kevin Hocevar

Hey, good morning, everybody.

Corning Painter

Good morning, Kevin.

Kevin Hocevar

how specialty. the lot different think a of of the to of tire your out here MRG rubber layout expectations of in those volumes, kind for those pieces for three then it side volume It categories? of – what's of XXXX? break in Could if divide moving your sounds of expectations terms and for you side like What's volumes into the the rubber, we kind volumes

Corning Painter

So, if well. we tire, we OEM, really just demand continuing probably significant. see strong Actually predictable regardless in as see America don't we almost now the in see manufacturing, Europe. North and have. on right We automobiles, – so is of market start because most very the And that's then certainly, And we baseline that in that variations we, continuing. replacement in those that minor brazil very in markets,

more two see but have little So, exposure in as I OEM we to all If say guidance. holding solid those that's what that's general up happen us. might manufacturing, in there in OEM, for we see that think a so program in a largely expect And pretty we what us. we MRG to our automotive markets, in I'd we for think about

We're of we've shift got rates low rate as market. guidance Year to, looking we we're you a basically guys in I we hockey at adjustments year-on-year on that What going we course be we're we're look for years, a we see giving that's our the based look China, we over stick. is of how trendline this February, look what what's New see January off to guidance to and I run And of on at where a what our in clear. into make not that. December Chinese based on currently are, For what forth, compared making at other so looking we want number. so real, January/February. quarter, and at this current we're specialty, how of rebuild went going year, sort see to kind to If

like from but might expect, I see are changes of not for we on, the gigantic just say, hope but these things I going where And let's now. so, economy trajectory kind in think plays That's don't you hockey a half. that's some what that all guidance. second basis the out, a world and stick they

Kevin Hocevar

as here year you then, through earlier go this we obviously, contracts kind calendar XXXX just we be got you. What Okay, in of this And the kicked see year. to to in do sounds XXXX? you pricing coming much least, like, terms side, don't tire some able there's of expect to from in think that growth. It I online. volume in again at get need too capacity the

do to in what guess, well guys I position again to see need So, to pricing get you next year. you

Corning Painter

get another different if contract place. North think different good set would simply glitches and to there's when I short work. there's And they supply now black see, We'll be have location, one real plants, talking up opportunities to during things are a continued year, to say, the Asia. a up structure going month. where outages So, year. plants course EPA of even the I'm about struggle this it in in little for someone's bit right pricing things later the coming this at this We that's chain spot carbon I'd as for them. taking also a are, America be because their is in It's Europe

So, capacity that's well. to impact going as

the truth lines, building US the and natural setting to who just used US. trends just playing – and the is people is just, that of we're for investment volumes on not it's let's and on I manufacture It getting change. stage that, consequence who into [ph] now So, this. simple to to now that's much there think, And in out – carries new are out in to say, tires, export non-investment years they're has facilities and in for right of those are that qualification logical carbon the many the tire and building black, now the

Kevin Hocevar

Got you.

Okay, thank you much. very

Operator

turn the you. and concludes question-and-answer any floor comments. gentlemen, our for to Thank back session. final Ladies this Mr. I'll Painter

Corning Painter

wonderful a day Thank and hope us a much. that great Thank gave you We appreciate today. time. We you all for have you weekend. all us you joining valuable this very and your time

Operator

today's concludes This teleconference. you. Thank

You this at may you for Thank lines your participation. your disconnect time.

Orion Engineered Carbons (OEC) 8 Mar 192018 Q4 Earnings call transcript