Orion Engineered Carbons S.A. (NYSE:OEC) Q3 2022 Earnings Conference Call November 4, 2022 8:30 AM ET Company Participants Wendy Wilson - Head of IR Corning Painter - CEO Jeffrey Glajch - CFO Conference Call Participants Josh Spector - UBS Jon Tanwanteng - CJS Securities Chris Kapsch - Loop Capital Operator Greetings. Welcome to Orion Engineered Carbons Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal ...

3Q 2022 Earnings Conference Call November 4, 2022 Forward-Looking Statements Forward-Looking Statements This presentation contains and refers to certain forward-looking statements with respect to our financial condition, results of operations and business. These statements constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are statements of future expectations that are based on management ...

PART I - Financial Information [Financial Statements and Supplementary Data (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20and%20Supplementary%20Data%20(Unaudited)) Presents unaudited financial statements showing increased sales but lower nine-month net income due to a prior-year litigation gain [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details revenue and profit figures, highlighting a significant year-over-year variance in operating income Key Financial Metrics | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $543.1M | $393.0M | $1,568.8M | $1,154.1M | | **Gross profit** | $114.4M | $98.7M | $352.1M | $311.3M | | **Income from operations** | $53.6M | $40.3M | $161.1M | $215.6M | | **Net income** | $31.8M | $21.0M | $94.0M | $133.6M | | **Diluted EPS** | $0.52 | $0.35 | $1.53 | $2.20 | - For the nine months ended September 30, 2021, Income from operations included a **gain of $82.9 million** related to a litigation settlement, which significantly impacted the year-over-year comparison[6](index=6&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Outlines the company's assets, liabilities, and equity, showing growth in assets driven by receivables and inventories Key Balance Sheet Items | Balance Sheet Item | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $790.7M | $665.0M | | **Total assets** | $1,843.4M | $1,631.0M | | **Total current liabilities** | $547.9M | $448.7M | | **Total liabilities** | $1,412.7M | $1,311.3M | | **Total stockholders' equity** | $430.7M | $319.7M | - Key changes from Dec 31, 2021, to Sep 30, 2022, include a significant increase in **Accounts Receivable (from $288.9M to $403.7M)** and **Inventories (from $229.8M to $266.7M)**, contributing to the rise in total assets[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash movements, indicating a significant decrease in cash from operations compared to the prior year Cash Flow Summary | Cash Flow Activity (Nine Months Ended Sep 30) | 2022 | 2021 | | :--- | :--- | :--- | | **Net cash (used in)/provided by operating activities** | $(16.7)M | $121.3M | | **Net cash used in investing activities** | $(167.1)M | $(113.7)M | | **Net cash provided by (used in) financing activities** | $167.4M | $(7.6)M | | **Cash and cash equivalents at end of period** | $43.1M | $62.3M | - The significant decrease in cash from operating activities in 2022 was primarily driven by changes in operating assets and liabilities, particularly a **$149.2 million increase in trade receivables** and a **$65.3 million increase in inventories**[15](index=15&type=chunk) [Notes to the Condensed Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Provides context on debt, segment reporting, and significant capital expenditures related to environmental compliance - **Total debt increased from $782.9 million** at year-end 2021 to **$879.2 million** as of September 30, 2022, primarily due to an increase in other short-term debt and obligations[28](index=28&type=chunk) - The company is managed in two operating segments: **Rubber Carbon Black** and **Specialty Carbon Black**, with performance evaluated using Adjusted EBITDA[72](index=72&type=chunk)[74](index=74&type=chunk) - Under a consent decree with the EPA, the company has spent **$264 million on capital expenditures** for pollution control technology at its U.S. facilities as of September 30, 2022[69](index=69&type=chunk)[70](index=70&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes financial performance, highlighting sales growth from higher costs and pricing, with strong Rubber segment results [Operating Results](index=21&type=section&id=Operating%20Results) Compares current period results to the prior year, detailing drivers for changes in net sales and operating income - **Q3 2022 vs Q3 2021:** Net sales rose **38.2% to $543.1 million**, driven by passing through higher feedstock costs, pricing, and higher Rubber segment volume, while gross profit increased **15.9% to $114.4 million**[91](index=91&type=chunk)[92](index=92&type=chunk)[95](index=95&type=chunk) - **Nine Months 2022 vs 2021:** Net sales grew **35.9% to $1,568.8 million**, but income from operations fell to $161.1 million from $215.6 million, as the prior year included an **$82.9 million gain** from a litigation settlement[102](index=102&type=chunk)[103](index=103&type=chunk)[108](index=108&type=chunk) - **Adjusted EBITDA for Q3 2022 increased 21.2% to $80.5 million**, and for the nine months increased **14.3% to $247.1 million**, driven by pricing and strong performance in the Rubber Carbon Black segment[88](index=88&type=chunk)[101](index=101&type=chunk)[114](index=114&type=chunk) [Segment Discussion](index=23&type=section&id=Segment%20Discussion) Details the performance of the Specialty and Rubber Carbon Black segments, noting divergent results - **Specialty Carbon Black:** Q3 Adjusted EBITDA **fell 20.3% to $31.1 million**, driven by an **18.2% decrease in sales volume** due to lower demand and price competition in lower-end markets[116](index=116&type=chunk)[119](index=119&type=chunk)[121](index=121&type=chunk) - **Rubber Carbon Black:** Q3 Adjusted EBITDA **surged 80.3% to $49.4 million**, fueled by a **10.4% increase in volume**, strong pricing, and favorable product mix, reflecting higher demand in the Americas and EMEA[116](index=116&type=chunk)[125](index=125&type=chunk)[127](index=127&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Reviews the company's liquidity position, working capital changes, and capital expenditure activities - As of September 30, 2022, the company had **total liquidity of $203.3 million**, including $43.1 million in cash and $130.3 million available under its revolving credit facility[140](index=140&type=chunk) - **Net working capital increased from $323.6 million** at year-end 2021 to **$492.3 million** as of September 30, 2022, mainly due to higher oil prices increasing the value of inventories and trade receivables[143](index=143&type=chunk)[144](index=144&type=chunk) - **Capital expenditures for the first nine months of 2022 were $167.1 million**, up from $113.7 million in the prior year period, primarily for safety, growth, and EPA-mandated emissions reduction technology[148](index=148&type=chunk)[149](index=149&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) States no material changes in market risk disclosures from those reported in the 2021 Form 10-K - Information about market risks for the period ended September 30, 2022 **does not differ materially** from that discussed in the 2021 Form 10-K[157](index=157&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls - Based on an evaluation as of September 30, 2022, the CEO and CFO concluded that the company's **disclosure controls and procedures were effective**[158](index=158&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[159](index=159&type=chunk) PART II - Other Information [Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) Details ongoing legal matters, which are not expected to materially impact the company's financial condition - The company is involved in various claims and lawsuits arising in the ordinary course of business[161](index=161&type=chunk) - Management believes that the aggregate results of current proceedings **will not have a material adverse effect** on the company's financial condition[161](index=161&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, focusing on supply chain disruptions from the Russia-Ukraine conflict and potential tax law changes - A key business risk is the potential for **disruptions in carbon black oil and natural gas supplies** caused by the ongoing conflict between Russia and Ukraine, which may lead to price volatility and adversely impact operations[163](index=163&type=chunk)[164](index=164&type=chunk) - The company faces risks from potential changes in tax laws, including the imposition of **"windfall profit" taxes** in various jurisdictions, which could adversely affect financial results[166](index=166&type=chunk)[167](index=167&type=chunk)[169](index=169&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered sales of equity securities or use of proceeds during the period - None reported[170](index=170&type=chunk) [Exhibits](index=30&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the report, including required officer certifications - The report includes filed certifications from the CEO and CFO as required by the Exchange Act, as well as furnished certifications pursuant to 18 U.S.C. Section 1350[171](index=171&type=chunk)

| --- | --- | --- | --- | --- | --- | --- | --- | |------------------|-----------------|-------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | OLION ENGINERED | | | | | | | | | | | | | | | | | | 2Q 2022 Earnings | | | | | | | | | August 5, 2022 | Conference Call | | | | | | | | | | | | | | | | Forward-Looking Statements Forward-Looking Statements This precentation contairs and refers to certain forward-kooking statements with respect to our financial condition, results of ope ...

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q2 2022 was $83.4 million, up 5.8% year-over-year, marking a record for the company and its specialty business [26][30] - Revenue increased by 34.8% year-over-year to $1.026 billion, with adjusted EBITDA rising from $150 million to $167 million [39][42] - Gross profit per ton increased over 8% compared to last year, reflecting improved mix, particularly in the specialty business [28][30] Business Line Data and Key Metrics Changes - Specialty revenue reached $181.9 million, up 16.4% year-over-year, driven by higher oil prices and improved product mix [34] - Rubber business revenue increased to $359.3 million, up 46.8% year-over-year, supported by feedstock-related price increases and strong volume, particularly in Europe and the Americas [36] - Gross profit per ton for the Rubber business was $308.8, down slightly year-over-year and 3.9% sequentially, reflecting higher operating costs [37] Market Data and Key Metrics Changes - The company noted a strong demand for conductive additives, particularly in the lithium-ion space, despite some weakness in lower-end specialty markets like masterbatch [50] - The North American market has seen a significant demand for replacement tires, which is expected to remain strong due to a robust used car market [18][19] - The company has turned down over 15 kilotons of spot volume requests in North America, indicating a supply-demand imbalance favoring the company [14][15] Company Strategy and Development Direction - The strategic roadmap remains focused on shifting capital spending from EPA compliance to value-added activities, with a goal of reaching mid-cycle adjusted EBITDA capacity of $500 million by 2025 [8][13] - The company is expanding its conductives facility, which will increase production capacity by approximately 12 kilotons per year, with expected sustainable EBITDA levels of $40 million to $45 million [9][10] - The 2023 Rubber contracting season is underway, with expectations for favorable pricing negotiations and multi-year agreements [24][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position despite potential economic slowdowns, citing strong fundamentals and favorable supply-demand dynamics [13][19] - The company is proactively addressing natural gas supply concerns in Europe and is working to reduce gas usage in line with European Commission requests [20][21] - Management maintained full-year adjusted EBITDA guidance of $310 million to $340 million, reflecting strong momentum from the first half of the year [42][46] Other Important Information - The company is experiencing inflationary costs and supply chain issues but is taking actions to protect its position and grow the business [19][40] - The company has completed significant air emissions upgrades in the U.S. and is focusing on growth projects moving forward [43][45] Q&A Session Summary Question: Margin performance in Specialty - Management indicated that while margins were impressive, they expect a decline due to weaker markets in lower-end specialty areas like masterbatch [49][50] Question: Guidance expectations - Management is tracking towards the midpoint of their guidance range, with potential upside from strong performance in the Rubber area [55][56] Question: Natural gas curtailment and alternative fuels - Management discussed the conversion to alternative fuels, indicating that costs may be lower than natural gas and that they are prepared for potential curtailments [57][60][61] Question: Rubber Black margin progression - Management acknowledged FX headwinds affecting margins and projected gross profit per ton for Rubber Black to be in the range of $310 to $330 moving forward [64][65] Question: Capital expenditures and free cash flow - Management confirmed expectations of being free cash flow positive next year and mentioned the potential for buybacks as a capital allocation strategy [70][71]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ ORION ENGINEERED CARBONS S.A. (Exact name of registrant as specified in its charter) Grand Duchy of Luxembourg 001-36563 00-0000000 (St ...

1 E N G I N E E R E D C A R B O N S 1Q 2022 Earnings Conference Call May 6, 2022 Forward-Looking Statements This presentation contains and refers to certain forward-looking statements with respect to our financial condition, results of operations and business. These statements constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are statements of future expectations that are based on manage ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ ORION ENGINEERED CARBONS S.A. (Exact name of registrant as specified in its charter) Grand Duchy of Luxembourg 001-36563 00-0000000 (S ...

Orion Engineered Carbons S.A. (NYSE:OEC) Q1 2022 Earnings Conference Call May 6, 2022 8:30 AM ET Company Participants Wendy Wilson - Head of IR Corning Painter - CEO Jeff Glajch - CFO Conference Call Participants Josh Spector - UBS Laurence Alexander - Jefferies Jon Tanwanteng - CJS Securities Barry Haimes - Sage Asset Management Chris Kapsch - Loop Capital Operator Greetings and welcome to Orion Engineered Carbons First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-o ...

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