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

Financial Performance Overview Orion S.A. reported a year-over-year decline in key financial metrics for the first quarter of 2025 Q1 2025 Financial Highlights Orion S.A. reported a year-over-year decline in key financial metrics for the first quarter of 2025, including significant drops in net sales, net income, and EPS Q1 2025 Key Financial Metrics (Y/Y) | Metric | Q1 2025 | Change (Y/Y) | | :--- | :--- | :--- | | Net Sales | $477.7 million | -$25.2 million | | Net Income | $9.1 million | -$17.6 million | | Diluted EPS | $0.16 | -$0.29 | | Adjusted EBITDA | $66.2 million | -22% | | Adjusted Diluted EPS | $0.22 | -$0.30 | Management Commentary Management attributed weaker Q1 results to unplanned plant downtime and raw material pass-through timing, expecting a sequentially better Q2 and reaffirming free cash flow guidance - CEO Corning Painter stated that Q1 results were impacted by unplanned plant downtime and raw material pass-through timing, but expects a sequentially better Q2 due to operational improvements[3] - The company anticipates a net benefit from auto sector tariffs on imported replacement tires but acknowledges risks if broader tariffs lead to a global economic slowdown[4] - CFO Jeff Glajch expressed confidence in achieving free cash flow goals, reaffirming guidance due to reduced capex spending and viewing 2025-2026 as inflection years for this metric[5] Consolidated Financial Results For Q1 2025, Orion's sales volume slightly increased, but net sales, gross profit, and income from operations significantly declined due to lower oil prices, FX rates, and operational issues Q1 2025 Consolidated Financial Performance (Y/Y) | (In millions, except volume and EPS data) | Q1 2025 | Q1 2024 | Y/Y Change in % | | :--- | :--- | :--- | :--- | | Volume (kmt) | 251.7 | 248.4 | 1.3% | | 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)% | | Adjusted EBITDA | $66.2 | $85.3 | (22.4)% | | Adjusted Diluted EPS | $0.22 | $0.52 | (57.7)% | - The decrease in net sales was primarily driven by lower oil prices and unfavorable foreign exchange impact, partially offset by higher volume in the Rubber Carbon Black segment[7] - The decline in gross profit and Adjusted EBITDA was mainly caused by unplanned downtime and unfavorable timing from the pass-through of raw material costs[7][8] Business Segment Performance Orion's business segments experienced mixed performance in Q1 2025, with Specialty Carbon Black declining and Rubber Carbon Black facing significant EBITDA reduction despite volume growth Specialty Carbon Black The Specialty Carbon Black segment experienced a downturn in Q1 2025, with volume declining 2.2% and Adjusted EBITDA decreasing by 9.0% due to lower demand Specialty Carbon Black Q1 Performance (Y/Y) | (In millions, except volume) | Q1 2025 | Q1 2024 | Y/Y Change in % | | :--- | :--- | :--- | :--- | | Volume (kmt) | 61.9 | 63.3 | (2.2)% | | Net sales | $160.7 | $170.9 | (6.0)% | | Gross profit | $40.0 | $41.7 | (4.1)% | | Adjusted EBITDA | $25.4 | $27.9 | (9.0)% | - The volume decline was primarily due to lower demand in the Americas region[12] Rubber Carbon Black The Rubber Carbon Black segment saw volume increase by 2.5% in Q1 2025, but Adjusted EBITDA fell sharply by 28.9% due to operational issues and unfavorable mix Rubber Carbon Black Q1 Performance (Y/Y) | (In millions, except volume) | Q1 2025 | Q1 2024 | Y/Y Change in % | | :--- | :--- | :--- | :--- | | Volume (kmt) | 189.8 | 185.1 | 2.5% | | Net sales | $317.0 | $332.0 | (4.5)% | | Gross profit | $58.1 | $80.5 | (27.8)% | | Adjusted EBITDA | $40.8 | $57.4 | (28.9)% | - Volume increased due to higher demand in the Americas and Asia Pacific regions[14] - Adjusted EBITDA decline was driven by unplanned downtime, unfavorable timing from raw material cost pass-throughs, and customer/regional mix[14] Outlook and Forward-Looking Statements Orion has adjusted its full-year 2025 guidance for Adjusted EBITDA and EPS while reaffirming free cash flow targets, acknowledging inherent risks in forward-looking statements 2025 Full Year Outlook Orion has slightly adjusted its full-year 2025 guidance for Adjusted EBITDA and EPS, while reaffirming its free cash flow guidance Revised 2025 Full Year Guidance | Metric | Guidance Range | | :--- | :--- | | Adjusted EBITDA | $270 million – $310 million | | Adjusted EPS | $1.20 – $1.70 | | Free Cash Flow | $40 million – $70 million (Reaffirmed) | Forward-Looking Statements & Risk Factors The report includes forward-looking statements based on current management expectations, subject to various known and unknown risks including economic conditions and geopolitical changes - The report contains forward-looking statements concerning financial condition, results, and business outlook, which are based on current expectations and assumptions and involve significant risks and uncertainties[19] - Key risk factors include: negative economic conditions, industry volatility, operational disruptions, dependence on major customers/suppliers, geopolitical changes (tariffs), and feedstock price fluctuations[20] Unaudited Condensed Consolidated Financial Statements Orion's unaudited condensed consolidated financial statements for Q1 2025 show a significant decline in net income and operating cash flow, alongside increases in total assets and liabilities Statements of Operations The unaudited condensed consolidated statement of operations for Q1 2025 shows a sharp decrease in net income to $9.1 million from $26.7 million in Q1 2024 Condensed Consolidated Statements of Operations (Unaudited) | (In millions, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net sales | $477.7 | $502.9 | | Gross profit | $98.1 | $122.2 | | Income from operations | $31.2 | $52.8 | | Net income | $9.1 | $26.7 | | Diluted EPS | $0.16 | $0.45 | Statements of Financial Position As of March 31, 2025, Orion's total assets increased to $1,968.2 million, primarily due to higher accounts receivable, while total liabilities also rose to $1,502.1 million Condensed Consolidated Statements of Financial Position (Unaudited) | (In millions) | March 31, 2025 | December 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 | Statements of Cash Flows For Q1 2025, net cash provided by operating activities significantly dropped to $0.4 million, leading to a net decrease in cash of $7.0 million for the period Condensed Consolidated Statements of Cash Flows (Unaudited) | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 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 | | Increase (decrease) in cash | ($7.0) | $6.3 | Reconciliation of Non-GAAP to GAAP Financial Measures Orion provides non-GAAP financial measures like Adjusted EBITDA and Adjusted Diluted EPS to offer a clearer view of underlying operational performance by excluding certain items Explanation of Non-GAAP Measures Orion presents non-GAAP financial measures such as Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS to evaluate operating performance and facilitate comparisons - Adjusted EBITDA is defined as Income from operations before depreciation and amortization, stock-based compensation, and non-recurring items, plus earnings in affiliated companies[25] - Management uses Adjusted EBITDA to evaluate operating performance and allocate capital, as it excludes items with less bearing on the core business, facilitating performance comparisons[26] - The company cannot reconcile forward-looking non-GAAP measures like Adjusted EBITDA to GAAP measures without unreasonable effort due to the unpredictability of significant items such as legal settlements and restructuring costs[30] Reconciliation Tables In Q1 2025, GAAP Net Income of $9.1 million was reconciled to an Adjusted EBITDA of $66.2 million and an Adjusted Diluted EPS of $0.22 through specific adjustments Reconciliation of Net Income to Adjusted EBITDA (Q1 2025) | (In millions) | Q1 2025 | | :--- | :--- | | Net income | $9.1 | | Add back Income tax expense | $8.9 | | Add back Interest and other financial expense, net | $13.7 | | Income from operations | $31.2 | | Add back Depreciation and amortization | $31.5 | | Other adjustments (LTIP, etc.) | $3.5 | | Adjusted EBITDA | $66.2 | Reconciliation of Net Income to Adjusted Diluted EPS (Q1 2025) | (In millions, except per share data) | Q1 2025 | | :--- | :--- | | Net income | $9.1 | | Total add back items (LTIP, amortization, etc.) | $3.7 | | Adjusted net income | $12.8 | | Diluted Earnings per share | $0.16 | | Adjusted Diluted EPS | $0.22 |