Orion Engineered Carbons(OEC) - 2025 Q2 - Quarterly Results

Executive Summary and Business Highlights Second Quarter 2025 Key Highlights Orion S.A. reported a decline in net sales, net income, and EPS for Q2 2025 compared to the prior year, with Adjusted EBITDA also decreasing. The results were in line with expectations, supported by improved sequential plant performance Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Change YoY | | | :--- | :--- | :--- | :--- | | Net sales | $466.4 million | Down $10.6 million | | Net income | $9.0 million | Down $11.5 million | | Diluted EPS | $0.16 | Down $0.19 | | Adjusted EBITDA | $68.8 million | Down 8% | | Adjusted Diluted EPS | $0.32 | Down $0.09 | Six Months 2025 Key Highlights For the first six months of 2025, Orion S.A. experienced a year-over-year decrease across key financial metrics including net sales, net income, and Adjusted EBITDA, reflecting persistent market challenges 6M 2025 Key Financial Metrics | Metric | 6M 2025 | Change YoY | | | :--- | :--- | :--- | :--- | | Net sales | $944.1 million | Down $35.8 million | | Net income | $18.1 million | Down $29.1 million | | Diluted EPS | $0.32 | Down $0.48 | | Adjusted EBITDA | $135.0 million | Down 16% | | Adjusted Diluted EPS | $0.55 | Down $0.38 | Other Strategic Highlights The company reported improved plant performance sequentially and announced plans to discontinue production at several carbon black lines. Free Cash Flow expectations for 2025 are being maintained - Improved plant performance sequentially[5] - Announced plan to discontinue, in aggregate, production of three to five carbon black lines at multiple facilities[5] - Maintaining Free Cash Flow expectations for 2025[5] Management Commentary CEO Corning Painter noted that Q2 results met expectations despite persistent demand headwinds from elevated tire imports and broader macro uncertainty. CFO Jeff Glajch emphasized the focus on cash flow improvement, expecting to achieve the 2025 free cash flow goal despite macro headwinds - CEO Corning Painter stated Q2 results were in line with expectations, aided by improved sequential plant performance[4] - Persistent demand headwinds from elevated tire imports and macro uncertainty continue to pressure key tire customers[5] - CFO Jeff Glajch highlighted a resolute focus on improving cash flow and expects to reach the previously stated goal of more than $50 million in free cash flow for 2025[7] Detailed Financial Performance Second Quarter 2025 Performance Overview Orion S.A.'s second quarter 2025 results showed a mixed performance with volume growth driven by Rubber Carbon Black, but overall net sales and profitability declined due to lower oil prices, reduced Specialty Carbon Black volume, and unfavorable raw material pass-through timing Consolidated Financial Results (Q2 2025) Q2 2025 Consolidated Financials (YoY Change) | Metric | 2025 (Millions) | 2024 (Millions) | Delta (Millions) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Volume (kmt) | 240.0 | 233.1 | 6.9 | 3.0% | | Net sales | $466.4 | $477.0 | ($10.6) | (2.2)% | | Gross profit | $98.4 | $109.8 | ($11.4) | (10.4)% | | Income from operations | $32.1 | $41.6 | ($9.5) | (22.8)% | | Net income | $9.0 | $20.5 | ($11.5) | (56.1)% | | Adjusted EBITDA | $68.8 | $75.1 | ($6.3) | (8.4)% | | Diluted EPS | $0.16 | $0.35 | ($0.19) | (54.3)% | - Net sales decreased by $10.6 million (2.2%) year over year, primarily due to lower oil prices, partially offset by higher Rubber Carbon Black segment volume, favorable foreign exchange, and higher cogeneration[7] - Gross profit decreased by $11.4 million (10.4%) year over year, mainly due to lower volume in the Specialty Carbon Black segment, unfavorable timing from raw material cost pass-through, and unfavorable customer/regional mix in Rubber Carbon Black[7] - Adjusted EBITDA decreased by $6.3 million (8.4%) year over year, driven by lower Specialty Carbon Black volume, unfavorable price, and raw material pass-through timing, partially offset by higher cogeneration[8] Specialty Carbon Black Segment (Q2 2025) Q2 2025 Specialty Carbon Black Segment (YoY Change) | Metric | 2025 (Millions) | 2024 (Millions) | Delta (Millions) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Volume (kmt) | 58.0 | 62.9 | (4.9) | (7.8)% | | Net sales | $158.1 | $165.5 | ($7.4) | (4.5)% | | Gross profit | $32.6 | $39.5 | ($6.9) | (17.5)% | | Adjusted EBITDA | $19.9 | $28.0 | ($8.1) | (28.9)% | - Volume declined by 7.8% year over year, primarily due to lower demand in Europe, Middle East, Africa, and the Americas[11] - Adjusted EBITDA decreased by 28.9% year over year, mainly due to lower volume and unfavorable price and product mix[11] Rubber Carbon Black Segment (Q2 2025) Q2 2025 Rubber Carbon Black Segment (YoY Change) | Metric | 2025 (Millions) | 2024 (Millions) | Delta (Millions) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Volume (kmt) | 182.0 | 170.2 | 11.8 | 6.9% | | Net sales | $308.3 | $311.5 | ($3.2) | (1.0)% | | Gross profit | $65.8 | $70.3 | ($4.5) | (6.4)% | | Adjusted EBITDA | $48.9 | $47.1 | $1.8 | 3.8% | - Volume increased by 6.9% year over year, driven by higher demand in the Asia Pacific and Americas regions[12] - Adjusted EBITDA increased by 3.8% year over year, primarily due to lower fixed costs and higher cogeneration, partially offset by unfavorable timing from raw material cost pass-through[12] Six Months 2025 Performance Overview For the first six months of 2025, Orion S.A. experienced a decline in consolidated net sales and profitability, primarily due to lower oil prices and reduced Specialty Carbon Black volume, despite volume growth in the Rubber Carbon Black segment Consolidated Financial Results (6M 2025) 6M 2025 Consolidated Financials (YoY Change) | Metric | 2025 (Millions) | 2024 (Millions) | Delta (Millions) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Volume (kmt) | 491.7 | 481.5 | 10.2 | 2.1% | | Net sales | $944.1 | $979.9 | ($35.8) | (3.7)% | | Gross profit | $196.5 | $232.0 | ($35.5) | (15.3)% | | Income from operations | $63.3 | $94.4 | ($31.1) | (32.9)% | | Net income | $18.1 | $47.2 | ($29.1) | (61.7)% | | Adjusted EBITDA | $135.0 | $160.4 | ($25.4) | (15.8)% | | Diluted EPS | $0.32 | $0.80 | ($0.48) | (60.0)% | - Net sales decreased by $35.8 million (3.7%) year over year, primarily due to the pass-through of lower oil prices and lower Specialty Carbon Black segment volume, partially offset by higher Rubber Carbon Black volume and cogeneration[13][15] - Adjusted EBITDA decreased by $25.4 million (15.8%) year over year, mainly due to lower Specialty Carbon Black volume, unfavorable timing from raw material cost pass-through, and unfavorable customer/regional mix in Rubber Carbon Black, partially offset by higher cogeneration[16] Specialty Carbon Black Segment (6M 2025) 6M 2025 Specialty Carbon Black Segment (YoY Change) | Metric | 2025 (Millions) | 2024 (Millions) | Delta (Millions) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Volume (kmt) | 119.9 | 126.2 | (6.3) | (5.0)% | | Net sales | $318.8 | $336.4 | ($17.6) | (5.2)% | | Gross profit | $72.6 | $81.2 | ($8.6) | (10.6)% | | Adjusted EBITDA | $45.3 | $55.9 | ($10.6) | (19.0)% | - Volume decreased by 5.0% year over year, primarily due to lower demand in Europe, Middle East, Africa, and the Americas[17] - Adjusted EBITDA decreased by 19.0% year over year, mainly due to lower volume and unfavorable price and product mix[17] Rubber Carbon Black Segment (6M 2025) 6M 2025 Rubber Carbon Black Segment (YoY Change) | Metric | 2025 (Millions) | 2024 (Millions) | Delta (Millions) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Volume (kmt) | 371.8 | 355.3 | 16.5 | 4.6% | | Net sales | $625.3 | $643.5 | ($18.2) | (2.8)% | | Gross profit | $123.9 | $150.8 | ($26.9) | (17.8)% | | Adjusted EBITDA | $89.7 | $104.5 | ($14.8) | (14.2)% | - Volume increased by 4.6% year over year, primarily due to higher demand in the Asia Pacific and Americas regions[18] - Adjusted EBITDA decreased by 14.2% year over year, mainly driven by unfavorable timing from raw material cost pass-through and unfavorable customer and regional mix[18] Outlook and Guidance 2025 Financial Guidance Orion S.A. narrowed its 2025 guidance ranges for Adjusted EBITDA and Adjusted EPS, citing a surge in North American tire imports and revised macro assumptions for the second half of the year. The company reaffirmed its Free Cash Flow guidance - Revised 2025 Adjusted EBITDA guidance range: $270 million – $290 million[21] - Corresponding Adjusted EPS guidance range: $1.20 – $1.45[21] - Reaffirmed Free Cash Flow guidance range: $40 million – $70 million[21] - Guidance adjustments factor in a surge of tire imports into North America during Q2 and revised macro assumptions for H2 2025[21] Corporate Information and Disclosures About Orion S.A. Orion S.A. is a leading global specialty chemical company specializing in carbon black, used in various high-performance applications like tires, coatings, and batteries. With a history spanning over 160 years, Orion operates 14 plants worldwide and focuses on sustainable solutions - Orion S.A. (NYSE: OEC) is a leading global supplier of carbon black, a solid form of carbon produced as powder or pellets[24] - Carbon black is used for tires, coatings, ink, batteries, plastics, and other specialty applications, providing tint, color, reinforcement, electrical conductivity, durability, and UV protection[24] - The company has innovation centers on three continents and produces carbon black at 14 plants worldwide, with a corporate lineage over 160 years old[24] Cautionary Statement Regarding Forward-Looking Statements This section outlines the inherent uncertainties and risks associated with forward-looking statements made in the report, emphasizing that actual results may differ materially due to various factors including economic conditions, operational risks, market demand, raw material costs, and geopolitical developments. Investors are cautioned against undue reliance on these statements - The document contains forward-looking statements regarding financial condition, results of operations, and business, subject to known and unknown risks and uncertainties[25] - Key factors that could cause actual results to differ include negative economic conditions, operational risks in chemical manufacturing, dependence on major customers/suppliers, geopolitical changes, raw material volatility, and regulatory compliance[27] - The company undertakes no obligation to publicly update or revise any forward-looking statement, except as required by applicable law[28] Non-GAAP Financial Measures Explanation Orion S.A. presents several non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, Adjusted Diluted EPS, Free Cash Flow, and Net Debt, to provide additional insights into operational performance and facilitate period-to-period comparisons. These measures are used by management for evaluating performance and capital allocation, but are not substitutes for GAAP measures - Non-GAAP measures presented include Adjusted Net Income, Adjusted EBITDA, Adjusted Diluted EPS, Free Cash Flow, and Net Debt[31] - Adjusted EBITDA is used by the Chief Operating Decision Maker (CODM) to evaluate operating performance and make capital allocation decisions, as it excludes items less bearing on core business performance[33] - These non-GAAP measures are considered useful additions to GAAP measures for facilitating operating performance comparisons and clarifying business trends, but should not be considered in isolation or as substitutes for GAAP indicators[34][35] - Reconciliation of forward-looking non-GAAP measures (Adjusted EBITDA and Adjusted Diluted EPS outlook for 2025) to GAAP is not provided due to the inability to predict certain significant items without unreasonable efforts[36] Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Statements of Operations The unaudited Condensed Consolidated Statements of Operations provide a detailed breakdown of revenues, costs, and profits for the three and six months ended June 30, 2025, compared to the same periods in 2024, showing significant declines in net income and EPS Condensed Consolidated Statements of Operations (Unaudited) | (In millions, except share and per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $466.4 | $477.0 | $944.1 | $979.9 | | Cost of sales | 368.0 | 367.2 | 747.6 | 747.9 | | Gross profit | 98.4 | 109.8 | 196.5 | 232.0 | | Income from operations | 32.1 | 41.6 | 63.3 | 94.4 | | Net income | $9.0 | $20.5 | $18.1 | $47.2 | | Diluted EPS | $0.16 | $0.35 | $0.32 | $0.80 | Condensed Consolidated Balance Sheets The unaudited Condensed Consolidated Balance Sheets present the company's financial position as of June 30, 2025, compared to December 31, 2024, indicating an increase in total assets and liabilities, with a slight decrease in total stockholders' equity Condensed Consolidated Balance Sheets (Unaudited) | (In millions, except share amounts) | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Total current assets | $682.5 | $613.3 | | Total non-current assets | $1,342.4 | $1,244.0 | | Total assets | $2,024.9 | $1,857.3 | | Total current liabilities | $620.8 | $516.7 | | Total non-current liabilities | $937.6 | $865.7 | | Total liabilities | $1,558.4 | $1,382.4 | | Total stockholders' equity | $466.5 | $474.9 | | Total liabilities and stockholders' equity | $2,024.9 | $1,857.3 | Condensed Consolidated Statements of Cash Flows The unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025, show a decrease in net cash provided by operating activities and net cash used in investing activities, alongside a decrease in net cash provided by financing activities compared to the prior year Condensed Consolidated Statements of Cash Flows (Unaudited) | (In millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $54.1 | $61.7 | | Net cash used in investing activities | ($71.4) | ($87.8) | | Net cash provided by financing activities | $14.0 | $23.5 | | Decrease in cash, cash equivalents and restricted cash | ($3.3) | ($2.6) | | Cash and cash equivalents at the end of the period | $42.6 | $34.2 | Reconciliation of Non-GAAP to GAAP Financial Measures Reconciliation of Net Income to Adjusted EBITDA This section provides a reconciliation of Net Income to Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024, detailing the adjustments made for income tax expense, interest, depreciation, amortization, and other non-recurring items Reconciliation of Net Income to Adjusted EBITDA (Unaudited) | (In millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income | $9.0 | $20.5 | $18.1 | $47.2 | | Add back Income tax expense | 4.6 | 9.1 | 13.5 | 22.6 | | Add back Interest and other financial expense, net | 19.1 | 12.2 | 32.8 | 24.9 | | Add back Depreciation of property, plant and equipment and amortization of intangible assets and right of use assets | 32.0 | 30.3 | 63.5 | 59.2 | | Adjusted EBITDA | $68.8 | $75.1 | $135.0 | $160.4 | Reconciliation of Total Debt to Net Debt This reconciliation details the calculation of Net Debt as of June 30, 2025, by adjusting total debt from the consolidated balance sheet for deferred debt issuance costs and subtracting cash and cash equivalents Reconciliation of Total Debt to Net Debt (Unaudited) | (In millions) | June 30, 2025 | | :------------------------------------------ | :------------ | | Current portion of long term debt and other financial liabilities | $342.0 | | Long-term debt, net | $680.2 | | Total debt as per Consolidated Balance Sheets | $1,022.2 | | Add: Deferred debt issuance costs - Term loans | $2.8 | | Less: Cash and cash equivalents | $42.6 | | Net debt | $982.4 | Reconciliation of Net Income to Adjusted Net Income and Diluted EPS to Adjusted Diluted EPS This reconciliation provides a detailed breakdown of adjustments from Net Income to Adjusted Net Income and Diluted EPS to Adjusted Diluted EPS for the three and six months ended June 30, 2025 and 2024, including items like long-term incentive plans, intangible asset amortization, and foreign exchange rate impacts Reconciliation of Net Income to Adjusted Net Income and Diluted EPS to Adjusted Diluted EPS (Unaudited) | (In millions, except share and per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income | $9.0 | $20.5 | $18.1 | $47.2 | | add back long-term incentive plan | 3.6 | 3.0 | 6.3 | 6.5 | | add back intangible assets amortization | 1.9 | 1.8 | 3.7 | 3.6 | | add back foreign exchange rate impacts | 6.7 | 0.4 | 6.8 | 0.7 | | Tax effect on add back items at estimated tax rate | (3.9) | (1.6) | (5.5) | (3.5) | | Adjusted net income | $18.2 | $24.5 | $31.0 | $55.3 | | Diluted Earnings per share | $0.16 | $0.35 | $0.32 | $0.80 | | Adjusted Diluted EPS | $0.32 | $0.41 | $0.55 | $0.93 |