OEC - Earnings call transcript Q1 2024 | Orion Engineered Carbons S.A.

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Operator

Ladies and gentlemen, good morning, and welcome to the Orion S.A.

First Quarter 2024 Earnings Conference Call. [Operator Instructions]. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

conference recorded. this reminder, a is being As It Wendy Wilson, my pleasure your host, to introduce Head is now of Investor Relations. ahead. go Please

Wendy Wilson

Thank Wilson, Head and everyone, Investor Relations. to quarter Good Orion's of financial Ryan. XXXX Wendy call first discuss welcome I'm results. conference our you, to morning,

the With are and slide after release the our closed yesterday, Corning Relations Chief Jeff a Officer; and Investor press me our issued Chief our to our also of today we presentation posted Glajch, Financial Painter, website. Executive Officer. portion We market

We will the be referencing this presentation during call.

I'd the some uncertainties are and begin, call and may results SEC, subject made those we are like the today's with risks the as Before our during to actual described remind that on the from statements call. to differ of in you forward-looking the described These statements. filings comments company's

measures made our most revised statements measures attached any to directly to today, Painter. table reconciled in now all or circumstances based the during comparable are to X, addition, to statements the obligated Corning forward-looking as In this financial release. the call GAAP not company update I'll turn XXXX. The expectations. non-GAAP over of All call new is our press are discussed forward-looking May on

Corning Painter

year's $XX everyone, our our thank XXXX of behind joining with second you, started Wendy. Thank best Good morning, today. million, last call footing only EBITDA and results. adjusted We you for on strong QX a

saw we in More importantly, business. underlying improvement the

markets line levels. profit to $XXX a of build. ton our we new above to this Our QX $XXX $XXX per key profit more our $XXX were from year. of the in per ton. Prior in show last specialty to $XXX At from range. typically margins gross rubber which same time, volume restructure, grew can ran normal gross year's margins with that is ton we Rubber increased These our compared $XXX XX% the per in last margin continue with clearly to well and gross normal the XXXX, results profit to level average per ton

margins our continue outperform a record of we markets, in of we're in and track exceed to growth specialty expect result demand to As a markets. the in despite another ton deeper per progress we strong Europe, geographic XXXX in both into more Americas. year Rubber, leading on a to both challenging to expectations Rubber, demand weaker-than-expected in EBITDA. In Digging be in expect summary, to mix

million accomplishment, thank X% means we largest of adapt distinction. top sustainability, committed world's well-respected these the to respectively. In We possible business the Orion at EBITDA congratulations are a team $XXX $X.XX you and million, X% from on up confident and rating That to adjusted companies highest place EPS agility been of diluted adjusted has ranking we platinum, with providers the A EcoVadis that huge This to changes [accessed] one quite guidance our tremendous notified well a to recently earned prestigious XX%, of by is to that EcoVadis, raised per this progress. with whole our validating our NGO can and $XXX range gold ratings. remain done. amongst the to were share, $X.XX and we of of sustainability

things for begins value the restructuring ban preferring industry Asia see trucking wrap XXXX. in makes months, from the challenges further. already end X a customers Black, promising out units of the are business recession towards at perhaps the and to our and very for We all up XXXX with which looking Rubber, combined market confidence Carbon Looking Europe, in pricing the chain, U.S. This, on before our cycle. negotiations, strengthens gearing two seeming than Russian less with our EU customers gaining starting to the shipping

now, negotiations in defining the off the for framing XXXX kicking while essentially parameters negotiation. are stage, others the are Some

In the to a alter holding want early, but month. we are we left framing to at starting last part, for for the volume customer our at and avoid open terms of then being

So time-bounded support consider products rebates stricter our in enforcing utilizing advanced production business two specialty business, polymer towards offers, strengthening our and be the volume Specialty we we will to QX. in market. In significant shifting

report First, and ongoing gas marketing surface-treated the that last we our additional customer ink uptake of and shared happy that expectations. technical the the markets. for capacity of and is milestones to I quarter, grades well, coatings unique we related achieved black am debottlenecking high-performance, to going exceeding technical

new carbon announced introduction more [indiscernible], with the of batteries at value Second, of a cost-based conductive last also aimed we a month, proposition.

this to a sales lithium-ion has qualified ]. commercial up battery say have picked [ space player Here, I'm the and been leading by happy product in

Turning to Slide X.

EPA top growth. spending I us, now the capital financial on profitable our strategic One ways. capital behind after as management's responsibility allocation focus we and allocation rewarding is priority for more With us and will see shareholder safety.

La celebrated new alternative will facility North to Texas, will site produce that carbon scheduled in conductive shift recently in with conductive producing this only we online completed, America, groundbreaking settling-based Porte, high-purity X/XX to electrification. This the compared carbon be When additives of global our the the mid-XXXX. the technology. footprint plant conductive Here, to with in additives about be is support

to additional the only but material financial are world. in ask Jeff results. provide the insights this in is our not formulations for I electric that out communicated batteries, the cables to we've also would lithium-ion grids high-voltage an build needed With As into around essential that, supports past,

Jeffrey Glajch

volume in and you, gross and Slide in per profit increasing all China. Thank in down. Europe X increasing regions with last businesses Gross profit were up for the ton volumes consolidated Specialty On Rubber the Compared and quarter. are Corning. both first year, QX results with was

XXXX, $X and million. you If we recall, discussed year, totaling timing some repeat. in did QX as last onetime benefits Those not we had

all by We metrics especially rubber basis, volume this a up sequential profit we was were and X, regional mix. which of primarily Rubber from volume. mix poor also regional gross saw Stronger On profit North XX% ton, pricing year per in with Slide American adverse $XXX. On up, note, impact volume at to a gross offset an and the look EBITDA drivers. the significant was increase China more less in and

black was was we On timing due the million per as where as pricing. the higher the issues despite and North labor items previously volume, impact noted, last ton American Rubber the China, as as the Europe in increases. upcoming in seeing of well offset Slide and volumes demand carbon the higher onetime $X QX year, costs less operating already from Americas. costs cost with previously X, well contractual benefit the by cogeneration increased Russian Poor price timing to lower mix, mentioned. from This in namely gross cogeneration. On side, costs we ban and but lower in are experienced year, as profit this lower last regional mostly fixed Compared weaker strong benefits

$XXX the ton profit year's of XXXX, a gross However, continued XXXX. Slide of was above was ton Pricing continue to expect improvement. X of Corning QX million up higher well what level business. shows average profit per structural $XXX. of Reiterating market versus the chart to waterfall $X gross the we in due across rubber per last this said, impacts

of by also Cost impact the $X X.X%, improved pricing. regional the impacts impacted offset the million. up was volume mix While adversely EBITDA

impacts for increased Slide split be between roughly all profit impact Volume mentioned X lower all to to chart, the prior year year-over-year fixed a the timing financial nearly costs. pricing. On regions previously table primarily the decreased on cost basis, Just per $X.X cogeneration increases is higher Specialty. and this markets. clear ton million is Gross across and due cost on and

QX than As $XXX. to gross significantly up our expected, profit ton higher XXXX, was per XX%

our we will our XX-month as turning level the expect half has the of XX-month curve declined While be this per back X is past up and gross QX our move year. the above trailing level, trailing ton we profit into over second quarters,

had down debt X.X to continue forward, Debt XX slide. cash our an favorable XX was still and also look our than and operating from compared surface-treated lower we conditions the higher-margin trailing as the as lower of increase are rest but timing Gas the which moves Specialty stronger Specialty ratio CapEx example increased since and EBITDA, higher chart, level as slightly, earlier year products, improve in specialty X.X XX-month targeted volumes was a XXXX. items X.Xx, expect to the of mix shows Corning we labor volume noted expect discussed were quarter. last EBITDA in range. The EBITDA market an also year-end waterfall but XXXX of QX on our within as capital, products. As to flow by working We shows our the towards of impact for for with costs. Slide this. Slide offset Black what previous well Increased we volumes

range shows in made we as in level, debt and to cash for our it usage generation XX concerted with comfortable expected significantly XXXX. Slide lower are We a effort our XXXX.

our the capital in million. capital will in up as discretionary usage For any go On where we have plant. for this change year, cash majority the was This of towards shown saw risk La XXXX. table, one working this not we area is QX, Porte working of $XX

our over this We Corning closely discuss that, XXXX With to I guidance. will will the call turn monitor the to back as year continues.

Corning Painter

expect Thanks, start, year. off be to Jeff. this We're and to I a record good another

EPS. be fourth conditions, XX% XX. X% Slide our project would to an growth. EBITDA year and reaffirming current growth on Based guidance. we Turning XXXX, our in of We're in increase This

for points few you. a with close me Let

obvious. restructuring, XX The and the in North our continue. be the days. in are Black and industry on polymers for will continues The to tire a The curve. strengthening been starts announced supply carbon which and balance risks tightens in also market supply has factories in Tire America EU ban demand black a factories, First, chain supply-demand continue rubber years Carbon Russian underway to far-flung of move new Europe. direction,

demand Specialty is Second, recovering.

facility we capital is margins. mid opportunities for Specialty on And expanding year, additional fourth, seriously. our Third, deployment for LaPorte providing next track take

shares providing maintaining committed are strong Ryan, and with La balance free Porte, reducing leverage. the capital our your a flow, for cash that, questions. And by wisely, deploying back sheet through increased increasing please lines like returns buying investments up to or open We

Operator

Instructions]. [Operator

from question Spector first line of UBS. is Josh with Our the

Joshua Spector

was if expectations. you're forward kind I of could the some talk Corning, volume your you trends the that about bit wondering of in today market a and seeing

that your your think is maybe pretty it's in more guidance no assumption upbeat pretty improvement. But optimistic clear I So where on demand assumes seem at. or comments

So how what's changed? your that have compare And baked guidance? how into things versus does

Corning Painter

Sure.

guidance, in that I'd quite for the broad necessary like developments year QX, the Specialty across it. So in our marketplace this do That the really to achieve stick in to a think that. we positive the have hockey really said there's say market. never it's confidence saw nor is do we we area, said, in there

those customers, are are So for high. example, who distributors and like some forth. pipe But of the often so very film, areas are thin so coatings, coatings higher-margin like serving are things margins

And that we so I you to way. path. Specialty. Broadly this GP can and of per think developed a really a continuing thing being be bit. it's see think fear how But in to our and that speaking, that ton down balance able inventory down is restock up don't going the sort customers see big do stock I in has in of

American On North increased the but the only the up see tire space, tire that's mid-teens, in and of X%. you like you see, maybe purchase tires example, production in for market,

still suffering now maybe come they So stronger. back the seeing while bottoming, We're imports. volumes, really they're still haven't for trucking

which to I do see the have run right, an over and a that improvement, bit improves possible the our it's from rate it trend, stabilized, guidance. here. year, course We little need to the of from hit think, million $XX So we'll at of rate has

in numbers. So expected there's our growth some

Joshua Spector

guess, bit little guess trying And to maybe the here take term quarter. Yes. point, on more a on second I that I near last

year. be Specialty to with And there cogen higher You guess ask noise XQ we expect had volume from a you this in Rubber, there the I are do up comps easy other was is, and should simple last in the considering? some some in with year-on-year offsets or in maybe volumes EBITDA But profitability improving I mean, first pretty quarter way some Rubber. credits

Corning Painter

run good rate that basis, improved Does next for position So that on and improving Josh? a I I help, with market. think a margins Specialty we're in clean think year

Joshua Spector

would with just [indiscernible] volumes little I other XX%. earnings assume I What mean, that like be lift something I second wrong up think be thinking? would A bit, year-on-year. try quarter. I that guess, the could on

Corning Painter

out precisely that of looked sort terms you. last our impacts and last rates and of any in in year at having to doing you -- other think where timing think what can flow I'm Just about have without the But for that power P&L. of year this I and were

I So downbeat. that so in kind and have for a quickly, not pricing in general, costs -- example, if a I moved can sharply thing mean, particular I'm our models. the lag and trying be input of Josh, that's to mean

at in we'll looking I QX. think that be a quarter stronger

I think numbers. without our implied giving out in that's specific guidance

Jeffrey Glajch

this Josh, is And Jeff.

higher in significantly Just the EBITDA last were our were X year million. last $XXX about would in relative to roughly got if but we course last you X the midpoint we've have clearly -- think one whether midpoint the hit quarters at additional to the have to the $XXX of $XXX last to We quarters, of one guidance X of a guidance. year. thought, it's in our last be over the In quarters, of million certainly X quarters quarter, million,

or you some more X see. we last the did We and quarters, quarter the then did quarter So of look loaded, weren't to back-end there's of if have a bit at stronger we'll a you year, second over pretty nearly strong. have second it's have third a and as significant whether quarter that ramp see -- fourth

perhaps growth third in you more year-over-year. see So and quarter fourth would the

Operator

John line Securities. is the Mizuho question Our of Roberts from next with

John Ezekiel Roberts

since normal normal I seasonality, kind XX% December been seasonal seasonal? quarter Would better overall, you guess. Specialty, Rubber, normal or It's March of XX% while pickup, the characterize growth the we've than X% a or quarter, had versus worse volume Q-over-Q, the

Corning Painter

let's a Europe EBITDA describe step the power I special saw, prices times had over looked we but better say, like a say, I the There time. than a and in bigger, a as we really that's were would change, when normal. back bit little sharply move let's Specialty circumstance few or that.

normal little bit So a I than seasonality. better at your put the Specialty

John Ezekiel Roberts

North And a seeing your at then has you like, fair least markets, automotive auto OEM has slowed America, products? Are the industrial amount that developed in Europe, it OEM of And industrial seems Rubber here. rubber in exposure.

Corning Painter

North of in Well, as bit slower probably a space. I some America and the see said, we OEM is that

I tires for less. like America. of it's And North tightened the] that I a North the is is out saying better where In replacement not impact Europe, import us that Some little Russian [tighter has just things really think But I'd market. market dramatically think that I'm America, It's ban suggest is. say bit the than up. I'll of the the on to tease exactly difficult

John Ezekiel Roberts

got upbeat in is a actually that about Okay. And not then lastly, going I on. there I think, capacity now? sustainability in know China and China confusing, read China. your pretty you you've lot big, It's of the sounded but new the strength what's right to of What's companies,

Corning Painter

So exports. think really economy that set are Chinese the sectors of on I

European like like You well, much. kind matters there like demand, that not demand, but of can North consumer the consumer of a at, story recovery it's above In maybe XX%, in look is the general, It's right? thing. American index, purchaser slightly

in read think for still November, -- it's I but market. sentiment that So there last -- when improved wouldn't like was think into I sentiment I negative bullish extremely but that, I isn't where a don't it's that in there from situation slightly I some and don't

Operator

with Our John line next question the of CJS Securities. is from Tanwanteng

Jonathan Tanwanteng

two, are I talk you yet? I how are and was ahead have import there if more 'XX this about first bit you if movement, wondering ban. have and little remaining Russian guess, capacity a is upside started pricing Exactly 'XX or impacting in the you there pricing seeing 'XX in could those much negotiations of you seeing it

Corning Painter

Sure.

they in locked specifically, Carbon they've without premier their in of let's supply their had lot Russian tire Europe, say, locked supply in -- already Black. So brands, a the and

say it's more second the So in play a area. I'd

to in do additional really Indian we Competition opportunities there. is see some So space. I see supply pick volume that up with --

sets It's So it's very a next And environment. it's for positive would for I I not say. this year. think like unchecked positivity, a strong all definitely negotiation up

Jonathan Tanwanteng

And started Okay. year? next discussions have those this is year? later that for yet Or

Corning Painter

so -- some the clear talk that make to tried I yes. numbers. people Oh, are in in people some framing,

already. that's [indiscernible] So

Jonathan Tanwanteng

this pricing rating. on if wondering point? is also, just that was platinum And nominal congratulations ability? more impacts at the it I Or your

Corning Painter

really many of for for that is customers their our metric about think and sustainability, I sure. preferred are concerned that

in I think on not really a on for we're reliability worth that that up just industry, not another think leader supplier haul. long of in sense And I paying and unlocking count -- validation serious long-term this is of have the it this. count the you and So we're And can risk a the suppliers. commitment is surely that something learned people

think I a So it's for positive net us.

Jonathan Tanwanteng

Okay. the areas as see of the you areas through kind what in What still improvement for And it. you those prospects Got weakness in? are do year? go

Corning Painter

Yes. tires Tire still is manufactured. are than up a American would North weaker I say purchases more Well, area. much

what of then in cost manufacturing very earning me] to value normal. So, accept [let proposition we are brands manufacturing, customers, and I as European North clear, and America relies I better the changes tire with North the tires, adjust the mean to America ownership a up, tire mean that back certain a really people happened say market, this sort and new pricing people's have business, to the start of incomes people on

the general, a opportunity that's up think -- specialty area, market I in some the others. more marketplace. mean, every almost is than in big I for the

-- offshore example, X.X for if that demand would that increase and that connecting that thing sort John? help, far-flung and kind as wind America, Does of that's in the So in thing. on farms of wind market, wind that grew North particular land that progresses,

Jonathan Tanwanteng

XX months? mentioned allocation, where important. deploy just I'm X wondering the cash finally, that to you then an And does. just likely most It excess it capital on is was update next you in

Corning Painter

right. All

uses allocation, in cash of what -- So what's terms one, flow, other framework think cash. a about we our just are when the think for we number about capital

ways relative different valuing what share We and about to about the price share think should be. our also thinking of price,

balance working mentioned, start. the for as of exposures course, that not with Jeff and just thing, milestones are but Of the such balance capital, [indiscernible] that today, prices, as sheet the sheet sort the to and what significant oil

I quarter. in trend, in So to significantly for out do were in in first undervalued not opportunity. the the definitely We be stably And good think share year likely we market. not we're continue see this is the things the market and really price play the if -- a relatively

draw magnitude on don't the did it's have of little of the balance X.XX. move that like. We effects. But flow, we really that bit EPA really higher. TTM have the see do we our artifact With spending, us an and positive not but to we up was ratio cash a that sheet, nonetheless, That's

of plays I in unlikely on out. year balance be think but the this that, as change year, So the the to we're things market

Operator

[Operator Instructions] of from is Our next Spector line Josh with UBS. the question

Joshua Spector

got I try again. to

through reading you I quarter last the was quarter. had some higher definitely I'm don't to year, want I last year. want was the specific XQ, Because that So moving of flat Oil lower impacts first be cogen specifically but the was gas but Europe obviously, out. walk here called you on to it do through parts, guess. higher that now. It's

going I'm a drivers outside a should higher is there? focus that year, should of the hope run I'm Specialty, is bit relates And be at things. growth as we probably could for higher rate there. guess focusing that there side second to I are XQ And last because, is Oil a is little be I would of I trying half informative again bit the think mean anything positive, looking year-over-year. us, if of at volume to gas, of that I So comps easy. you're my little XQ be a there it's about EBITDA to which mean, of Is the more why of specifically year-over-year? energy negative. obviously, the ask be looking probably the it I'll

any color would So additional be helpful.

Jeffrey Glajch

Josh, this is Jeff.

the get a little starting QX all last place. on year, Let just give you same on me more clarity us to

as and million last power well 'XX as EBITDA the that late that in had some $XX last is onetime of was all 'XX across set we of about think discussed had because year benefit forward year So million. I $X in was QX we cogen call we year the items, in that some $XX of up million. about that our Included benefited which sales probably in

that So $X.X kind think a as you about can million quarter. of

and balance just been to would So have million between million. right in million result kind $X.X I around year that of place $X there. get operating $XX us the want the same last

Corning Painter

do. Do we're So Well, last talked power there's exceed There's But the do think that forward going numbers. we remind that that's to. before, XX]? blow us, we that just to we sale we element. to but year's certainly expect number? in necessarily about aspire [ past we've Yes, to

Joshua Spector

Yes.

if normalizes that's I and we assume slightly baked volumes. other the than I I comes per in, better some guess, mean, So that piece I you earnings the quarter down first year-on-year, have at of to look think the guess maybe some that ton Rubber, benefit. specialty of

Is I but before it? that that think to way percent. comp a about up it fair little think an asked about XX-ish bit, a should year-on-year, be [indiscernible] there's easy

Corning Painter

I Well, or per I -- because would expect we this contracts pieces, point. say of we at to GP if to Rubber the specialty majority ton are hold just from today. the where are continue less are ton the I GP expect where more in per the we locked take improve would would

there you yes, takes what progresses year volume growth from Jeff, on add? of higher the a want level us sort modest to And into is anything so as levels.

Jeffrey Glajch

well. you that hit think No, I

weakness continue per But GP Americas, into that We ton will we to that's volume number in gave built we the again, see in believe. the you.

Joshua Spector

to that. on do one I want focusing beyond XQ. ask appreciate I

at that the clear. On of Porte mean I pretty guess within groundbreaking it's see to start-up groundbreaking. seems La the year I project, a look when good I

costs then over it, And there's baked we 'XX, us you there's that and with one, the other up? profitability do maybe to call Do things that for have into profitability level actually 'XX? to because muted for timeline see guess buffer actually what from and how be comfort or half? 'XX? now? And that is two, less start-up questions Or two commissioning, I does we So of months mean XX the do that running [indiscernible] start in see plant in second that ramping or

Corning Painter

excellent offshore I and majority groundbreaking you being It's, just we're inflation I to and this bit is technique. leading the U.S. of super going plant Coast was a cost then year question. and availability. the Josh, than lot think, The derisks about wondering more little get a commissioning if later. that a built labor modules. a manufacturing see in that It Gulf of

We are right on the Houston Shipping Canal.

site use is opportunity a this So great to those techniques.

that's -- of the the schedule. plant bulk And And in. that's is on come going where how really all to

we think year. good I So late feel be that. very in will modules really coming for this Those

say, in we financial Porte contribution expect let's XXXX point. be any of kind I thing. mid year, start-up, do this from So not to that next Then do in La expect at

wouldn't it say the to takes. And I think the is process to And big longer I into the you're a I differentiated would achieve, margin some qualification time. higher the striking contribution. take well really going product, expect higher the the XXXX,

Operator

Ladies further for questions, comments. and hand gentlemen, the no as conference to I now Corning his Painter closing there over are

Corning Painter

today. all again Well, thank you your for time

good of rest further any many of day. if investors. to your As trust And hear have us. for thank that out [an reach again you a you've questions to questions, Thank and industrialist] I'd the from we for happy be for myself, like put the our really have received Please all into you thank all, we'd you that well. you listening thoughtful and and just as

Operator

now Orion SA has Thank for of concluded. conference your you The participation.

disconnect now lines. your You may

Orion Engineered Carbons (OEC) 3 May 242024 Q1 Earnings call transcript