Orion Engineered Carbons(OEC) - 2025 Q1 - Quarterly Report

PART I - Financial Information Financial Statements and Supplementary Data (Unaudited) Orion S.A. reported a significant Q1 2025 profitability decline, with net sales down 5.0% and net income dropping 65.9% Condensed Consolidated Statements of Operations Q1 2025 net sales decreased to $477.7 million, gross profit fell 20%, and net income declined substantially Q1 2025 vs Q1 2024 Statement of Operations (in millions, except per share data) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $477.7 | $502.9 | -5.0% | | Gross profit | $98.1 | $122.2 | -19.7% | | Income from operations | $31.2 | $52.8 | -40.9% | | Net income | $9.1 | $26.7 | -65.9% | | Diluted EPS | $0.16 | $0.45 | -64.4% | Condensed Consolidated Statements of Comprehensive Income Q1 2025 comprehensive income decreased to $10.1 million, primarily due to lower net income Q1 2025 vs Q1 2024 Comprehensive Income (in millions) | Component | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $9.1 | $26.7 | | Foreign currency translation adjustments | $2.6 | $(6.4) | | Net losses on derivatives | $(1.5) | $(0.5) | | Comprehensive income | $10.1 | $19.9 | Condensed Consolidated Balance Sheets Total assets increased to $1,968.2 million, liabilities to $1,502.1 million, and stockholders' equity slightly decreased Balance Sheet Summary (in millions) | Account | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $688.6 | $613.3 | | Total assets | $1,968.2 | $1,857.3 | | Total current liabilities | $601.9 | $516.7 | | Total liabilities | $1,502.1 | $1,382.4 | | Total stockholders' equity | $466.1 | $474.9 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities plummeted to $0.4 million in Q1 2025, with investing and financing activities impacting overall cash Q1 2025 vs Q1 2024 Cash Flows (in millions) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $0.4 | $32.4 | | Net cash used in investing activities | $(29.2) | $(33.1) | | Net cash provided by financing activities | $21.8 | $7.0 | | (Decrease) in cash | $(7.0) | $6.3 | Notes to the Condensed Consolidated Financial Statements (Unaudited) Notes detail increased total debt to $972.5 million, weak segment performance, and subsequent interest rate swap agreements - Total debt increased from $905.8 million at year-end 2024 to $972.5 million as of March 31, 2025, primarily due to a rise in other short-term debt and obligations[37] - The company's effective tax rate increased to 50.9% in Q1 2025 from 33.7% in Q1 2024, attributed to changes in the projected pre-tax income mix across different tax jurisdictions[71] - Subsequent to the quarter end, on April 25, 2025, the company entered into two interest rate swaps totaling €200.0 million to hedge its variable interest rate Euro-denominated term loan[84] Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2025 net sales decreased 5.0%, gross profit fell 19.7%, and Adjusted EBITDA decreased 22.4% to $66.2 million Q1 2025 vs Q1 2024 Key Performance Metrics (in millions) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $477.7 | $502.9 | -5.0% | | Gross profit | $98.1 | $122.2 | -19.7% | | Net income | $9.1 | $26.7 | -65.9% | | Adjusted EBITDA | $66.2 | $85.3 | -22.4% | - The decrease in gross profit was primarily driven by unplanned downtime, unfavorable timing from the pass-through of raw material costs, and unfavorable foreign exchange rate impact[103] - As of March 31, 2025, the company had total liquidity of $166.2 million, comprising $37.5 million in cash, $104.8 million in revolving credit facility availability, and $23.9 million in other credit lines[132] Segment Discussion Both segments saw profitability decline, with Rubber Carbon Black Adjusted EBITDA down 28.9% and Specialty Carbon Black down 9.0% Segment Adjusted EBITDA (in millions) | Segment | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Specialty Carbon Black | $25.4 | $27.9 | -9.0% | | Rubber Carbon Black | $40.8 | $57.4 | -28.9% | - Specialty Carbon Black volume decreased by 2.2% due to lower demand in the Americas, leading to a 9.0% drop in Adjusted EBITDA[115][116] - Rubber Carbon Black volume increased by 2.5%, but Adjusted EBITDA fell 28.9% due to unplanned downtime, unfavorable timing from raw material cost pass-through, and customer/regional mix[117][119] Liquidity and Capital Resources Q1 2025 operating cash flow plummeted to $0.4 million, and net working capital increased to $391.0 million Net Working Capital Components (in millions) | Component | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Accounts receivable, net | $274.0 | $211.9 | | Inventories, net | $297.0 | $290.4 | | Accounts payable | $(180.0) | $(156.2) | | Net working capital | $391.0 | $346.1 | - The increase in Net Working Capital was driven by higher sales increasing accounts receivable and increased production boosting inventory levels[138][141] Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in market risk disclosures compared to the 2024 Annual Report on Form 10-K - Information about market risks for the period ended March 31, 2025 does not differ materially from the disclosures in the 2024 Annual Report on Form 10-K[147] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[148] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[149] PART II - Other Information Legal Proceedings The company is involved in various ordinary course legal proceedings, with management believing no material adverse effect on financial condition - The company is subject to various lawsuits and claims in the ordinary course of business but does not believe the ultimate outcome will have a material adverse effect on its financial condition[72][151] Risk Factors No material changes to risk factors have occurred since the 2024 Annual Report on Form 10-K filing - No material changes to risk factors have occurred since the filing of the 2024 Annual Report on Form 10-K[153] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 1,111,332 shares of common stock under its publicly announced program Q1 2025 Share Repurchases | Period | Total Shares Purchased | | :--- | :--- | | January 2025 | 424,122 | | February 2025 | 395,819 | | March 2025 | 291,391 | | Q1 2025 Total | 1,111,332 | Exhibits The report lists various exhibits filed with the SEC, including officer certifications and Inline XBRL data files - Exhibits filed include CEO and CFO certifications required by the Exchange Act and Section 1350, as well as Inline XBRL documents[156]