Orion Engineered Carbons(US:OEC)2024-02-15 00:25Financial Performance - In 2023, net sales decreased by $137.0 million, or 6.7%, to $1,893.9 million from $2,030.9 million in 2022, primarily due to declining oil prices and lower volume [203]. - Adjusted EBITDA increased by $20.0 million, or 6.4%, from $312.3 million in 2022 to $332.3 million in 2023, driven by improved contractual pricing [209]. - Gross profit increased by $2.2 million, or 0.5%, to $451.0 million in 2023, with gross profit per metric ton rising by 3.8% to $483.9 [205]. - Net income for 2023 was $103.5 million, a decrease of $2.7 million, or 2.5%, from $106.2 million in 2022 [202]. - Comprehensive income decreased by $66.1 million, from $142.2 million in 2022 to $76.1 million in 2023 [211]. - Selling, general and administrative expenses decreased by $5.2 million, or 2.3%, to $221.9 million in 2023, attributed to lower freight costs [206]. - Interest and other financial expenses increased to $50.9 million in 2023 from $39.9 million in 2022, representing a rise of 27.5% [277]. - Cash paid for interest increased to $38.9 million in 2023 from $33.5 million in 2022 [286]. - Net cash provided by operating activities significantly increased to $345.9 million in 2023 from $81.0 million in 2022 [286]. Segment Performance - Specialty Carbon Black Segment Adjusted EBITDA was $110.7 million with an Adjusted EBITDA Margin of 18.1%, while Rubber Carbon Black Segment Adjusted EBITDA was $221.6 million with a margin of 17.3% [196]. - Specialty Carbon Black segment net sales decreased by $64.8 million, or 9.6%, from $675.4 million in 2022 to $610.6 million in 2023, primarily due to declining oil prices [214]. - Volume for the Specialty Carbon Black segment decreased by 2.9 kmt, or 1.3%, from 224.3 kmt in 2022 to 221.4 kmt in 2023, attributed to weakness across most geographies [214]. - Gross profit for the Specialty Carbon Black segment fell by $40.4 million, or 20.1%, from $200.7 million in 2022 to $160.3 million in 2023, driven by lower demand and unfavorable product mix [215]. - Adjusted EBITDA for the Specialty Carbon Black segment decreased by $33.2 million, or 23.1%, from $143.9 million in 2022 to $110.7 million in 2023, influenced by geographic and product mix issues [216]. - Rubber Carbon Black segment net sales decreased by $72.2 million, or 5.3%, from $1,355.5 million in 2022 to $1,283.3 million in 2023, mainly due to declining oil prices and lower volume [217]. - Volume for the Rubber Carbon Black segment decreased by 27.9 kmt, or 3.8%, from 738.6 kmt in 2022 to 710.7 kmt in 2023, primarily due to lower demand in the Americas and EMEA region [218]. - Gross profit for the Rubber Carbon Black segment increased by $42.6 million, or 17.2%, from $248.1 million in 2022 to $290.7 million in 2023, driven by improved contractual pricing [218]. - Adjusted EBITDA for the Rubber Carbon Black segment increased by $53.2 million, or 31.6%, from $168.4 million in 2022 to $221.6 million in 2023, primarily due to improved contractual pricing [219]. Liquidity and Capital Structure - As of December 31, 2023, the company had liquidity of $279.3 million, including cash and equivalents of $37.5 million and $221.6 million available under the revolving credit facility [230]. - Net Working Capital decreased to $344.4 million as of December 31, 2023, compared to $461.6 million as of December 31, 2022, primarily due to improved payment terms and factoring of accounts receivable [232]. - Total current liabilities decreased to $440.3 million in 2023 from $552.8 million in 2022, a reduction of 20.3% [283]. - Long-term debt increased slightly to $677.3 million in 2023 from $657.0 million in 2022, an increase of 3.5% [283]. - Stockholders' equity rose to $478.5 million in 2023, up from $459.4 million in 2022, reflecting an increase of 4.5% [283]. - The company repurchased 2,895,664 shares of common stock for $65.6 million under its Stock Repurchase Program in 2023 [289]. Assets and Liabilities - Total assets decreased to $1,833.4 million in 2023 from $1,888.7 million in 2022, a decline of approximately 2.9% [283]. - Cash and cash equivalents at the end of 2023 were $37.5 million, down from $60.8 million in 2022, representing a decrease of 38.2% [286]. - Accounts receivable as of December 31, 2023, totaled $242.2 million, down from $370.4 million in 2022, with net accounts receivable after expected credit losses at $241.0 million compared to $367.8 million in 2022 [354]. - The total inventory as of December 31, 2023, was $287.1 million, an increase from $277.9 million in 2022, with inventory reserves rising to approximately $25.4 million from $21.4 million [356]. - Total debt and other obligations decreased to $814.3 million in 2023 from $915.3 million in 2022 [372]. Accounting and Reporting - The consolidated financial statements are prepared in accordance with U.S. GAAP, including accounts of Orion S.A. and its subsidiaries [295]. - Revenue is recognized when control of goods is transferred to customers, typically upon shipment or delivery [326]. - The company plans to adopt new accounting standards related to segment reporting and income taxes, effective after December 15, 2023, which will require additional disclosures but is not expected to materially impact the financial statements [352]. - The allowance for credit losses as of December 31, 2023, was $1.2 million, down from $2.6 million in 2022, indicating improved credit loss management [354]. Debt and Interest Rates - The Euro-denominated Term Loan interest rate increased to 5.60% in 2023 from 2.80% in 2022, while the U.S. dollar Term Loan rate rose to 7.41% from 4.11% [378]. - The company received a 10 basis point interest rate reduction on its sustainability-linked Term Loan due to meeting its 2022 emissions target [376]. - The revolving credit facility (RCF) was amended to extend maturity to September 2028 and borrowing capacity was reduced from €350 million to €300 million [383]. - The weighted average interest rate on the RCF increased to 6.2% as of December 31, 2023, up from 4.8% in 2022 [387]. - The net leverage ratio as of December 31, 2023, was 2.63x, corresponding to an interest margin of 2.30 for both USD and Euro denominated borrowings [388].