Orion S.A. Reports Nine Month and Third Quarter Financial Results

HOUSTON–(BUSINESS WIRE)–Orion S.A. (NYSE: OEC), a specialty chemical company, today announced financial results for the nine months and the third quarter of 2023.

Nine Months 2023 Highlights

• Net sales of $1,425.7 million, down $143.1 million, year over year
• Net income of $98.6 million, up $4.6 million, year over year
• Record Diluted EPS of $1.65, up $0.12, year over year
• Record Adjusted EBITDA¹ of $265.7 million, up 8%, year over year
• Record Adjusted Diluted EPS¹ of $1.76, up $0.06, year over year

Third Quarter 2023 Highlights

• Net sales of $466.2 million, down $76.9 million, year over year
• Net income of $26.2 million, down $5.6 million, year over year
• Diluted EPS of $0.44, down $0.08, year over year
• Adjusted EBITDA¹ of $77.3 million, down 4%, year over year
• Adjusted Diluted EPS¹ of $0.49, down $0.08, year over year

1

The reconciliations of Non-U.S. GAAP (“GAAP”) measures to the respective most comparable GAAP measures are provided in the section titled Reconciliation of Non-GAAP Financial Measures below.

“I am pleased to announce that we delivered $77 million of Adjusted EBITDA this quarter in the face of weak demand in many of our key markets. In addition, for the nine months, we achieved record adjusted diluted earnings per share up $0.06, to $1.76 from prior year,” said Corning Painter, Orion’s chief executive officer. “Looking forward I believe the trends toward greater tire making capacity in North America and Europe and towards valuing local supply will continue to help drive the restructuring of our industry. Our 2024 rubber business negotiations for EMEA and the Americas are nearing completion and we expect to wrap them up in the next month or so. Also, our final U.S. air emission controls system has been commissioned and we expect to complete the stack test this quarter. With this behind us, we will focus our capital allocation on profitable growth, reducing debt leverage, and returning value to shareholders.”

Jeff Glajch, Orion’s chief financial officer added, “Strong cash flow continued throughout the quarter, which has enabled us to end the nine months with a leverage ratio at 2.29 times, as we reduced net debt by over $100 million. At the same time, we have repurchased $59 million shares this year. We also successfully renewed our revolving credit facility, and due to our increased cash flow and debt requirements, we lowered its size from Euro 350 million to Euro 300 million. As Corning mentioned, we have much more flexibility to invest in growing the business, continuing our share repurchase program and exploring additional ways to grow our returns.”

Third Quarter 2023 Overview:

(In millions, except volume, per metric ton and EPS data)		Q3 2023		Q3 2022		Y/Y Change		Y/Y Change in %
Volume (kmt)		245.2		243.3		1.9		0.8%
Net sales		466.2		543.1		(76.9)		(14.2)%
Gross profit		110.2		114.4		(4.2)		(3.7)%
Gross profit per metric ton(1)		449.4		470.2		(20.8)		(4.4)%
Income from operations		45.7		53.6		(7.9)		(14.7)%
Net income		26.2		31.8		(5.6)		(17.6)%
Adjusted net income(1)		28.9		34.6		(5.7)		(16.5)%
Adjusted EBITDA(1)		77.3		80.5		(3.2)		(4.0)%
Basic EPS		0.45		0.52		(0.07)		(13.5)%
Diluted EPS		0.44		0.52		(0.08)		(15.4)%
Adjusted Diluted EPS(1)		0.49		0.57		(0.08)		(14.0)%

(1)

The reconciliations of these non-GAAP measures to the respective most comparable GAAP measures are provided in the section titled Reconciliation of Non-GAAP Financial Measures.

Volume increased by 1.9 kmt, year over year due to higher volume in the Specialty Carbon Black segment, partly offset by lower volume in the Rubber Carbon Black segment.

Net sales decreased by $76.9 million, or 14.2%, year over year, driven primarily by the pass-through effect of declining oil prices in both segments. Those were partially offset by improved contractual pricing and favorable foreign exchange impact.

Gross profit decreased by $4.2 million, or 3.7%, to $110.2 million, year over year. The decrease was primarily driven by lower volume in Rubber Carbon Black segment and lower margin in the Specialty Carbon Black segment.

Income from operations decreased by $7.9 million, or 14.7%, to $45.7 million, year over year, driven primarily by the pass-through effect of declining oil prices in both segments, partially offset by favorable contractual pricing.

Adjusted EBITDA decreased by $3.2 million, or 4.0%, to $77.3 million, year over year, primarily due to lower volume in the Rubber Carbon Black segment and cogeneration profitability in both segments, partially offset by improved contractual pricing.

Quarterly Business Segment Results

SPECIALTY CARBON BLACK
(In millions, except volume and per metric ton data)		Q3 2023		Q3 2022		Y/Y Change		Y/Y Change in %
Volume (kmt)		59.9		52.3		7.6		14.5%
Net sales		150.4		169.6		(19.2)		(11.3)%
Gross profit		38.6		44.8		(6.2)		(13.8)%
Gross profit per metric ton(1)		644.4		856.6		(212.2)		(24.8)%
Adjusted EBITDA		26.1		31.1		(5.0)		(16.1)%
Adjusted EBITDA/metric ton		435.7		594.6		(158.9)		(26.7)%
Adjusted EBITDA margin (%)(1)		17.4%		18.3%		(90)bps		(4.9)%

(1)

For Non-GAAP measures definitions refer to Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995, Reconciliation of Non-GAAP Financial Measures section below.

Specialty Carbon Black segment volume increased by 7.6 kmt, or 14.5%, year over year due to ramp up of our Huaibei facility.

Net sales decreased by $19.2 million, or 11.3%, to $150.4 million, year over year, primarily driven by the pass-through effect of declining oil prices.

Adjusted EBITDA declined by $5.0 million, or 16.1%, to $26.1 million, compared with a record quarter last year. These results were primarily due to lower demand, which resulted in unfavorable product mix and lower cogeneration profitability.

Year over year, Adjusted EBITDA per ton decreased by $158.9 or 26.7%, to $435.7, primarily driven by unfavorable product mix and lower cogeneration profitability. However, the end-market pricing was stable.

Year over year, Adjusted EBITDA margin decreased 90 basis points to 17.4%.

RUBBER CARBON BLACK
(In millions, except volume and per metric ton data)		Q3 2023		Q3 2022		Y/Y Change		Y/Y Change in %
Volume (kmt)		185.3		191.0		(5.7)		(3.0)%
Net sales		315.8		373.5		(57.7)		(15.4)%
Gross profit		71.6		69.6		2.0		2.9%
Gross profit per metric ton(1)		386.4		364.4		22.0		6.0%
Adjusted EBITDA		51.2		49.4		1.8		3.6%
Adjusted EBITDA/metric ton		276.3		258.6		17.7		6.8%
Adjusted EBITDA margin (%)(1)		16.2%		13.2%		300bps		22.7%

(1)

For Non-GAAP measures definitions refer to Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995, Reconciliation of Non-GAAP Financial Measures section below.

Rubber Carbon Black segment volume declined by 5.7 kmt, or 3.0%, year over year due to the lower demand.

Net sales declined by $57.7 million, or 15.4%, to $315.8 million, year over year, primarily due to the pass-through effect of declining oil prices and lower volumes, partially offset by improved contractual pricing.

Adjusted EBITDA increased by $1.8 million, or 3.6%, to $51.2 million, year over year, driven by improved contractual pricing, partially offset by lower volume and cogeneration profitability.

Year over year, Adjusted EBITDA per ton increased by $17.7, or 6.8% to $276.3, year over year.

Adjusted EBITDA margin rose 300 basis points to 16.2%.

Nine Months 2023 Highlights

		Nine Months Ended September 30,				Year-Over Year
(In millions, except volume, per metric ton and EPS data)		2023		2022		Delta
Volume (kmt)		706.0		747.9		(41.9)		(5.6)%
Net sales		1,425.7		1,568.8		(143.1)		(9.1)%
Gross profit		363.7		352.1		11.6		3.3%
Gross profit per metric ton(1)		515.2		470.8		44.4		9.4%
Income from operations		178.1		161.1		17.0		10.6%
Net income		98.6		94.0		4.6		4.9%
Adjusted net income(1)		105.5		104.4		1.1		1.1%
Adjusted EBITDA(1)		265.7		247.1		18.6		7.5%
Basic EPS		1.66		1.54		0.12		7.8%
Diluted EPS		1.65		1.53		0.12		7.8%
Adjusted Diluted EPS(1)		1.76		1.70		0.06		3.5%

(1)

The reconciliations of these non-GAAP measures to the respective most comparable GAAP measures are provided in the section titled Reconciliation of non-GAAP Financial Measures.

Volume decreased by 41.9 kmt to 706.0 kmt compared to the nine months ended September 30, 2022.

Net sales decreased by $143.1 million, or 9.1%, in the nine months ended September 30, 2023 to $1,425.7 million, year over year, driven primarily by the pass-through effect of declining oil prices and lower volume in both segments. Those were partially offset by improved contractual pricing and favorable product mix in the Rubber Carbon Black segment.

Gross profit increased by $11.6 million, or 3.3%, to $363.7 million, and gross profit per metric ton increased by 9.4% to $515.2 year over year. The increase was primarily driven by improved contractual pricing and a favorable product mix in the Rubber Carbon Black segment, partially offset by lower volume in both segments.

Income from operations increased by 17.0, or 10.6%, to 178.1, year over year, driven primarily by favorable contractual pricing.

Adjusted EBITDA increased by $18.6 million, or 7.5%, from $247.1 million in the nine months ended September 30, 2022, to $265.7 million in the nine months ended September 30, 2023. The increase was primarily due to improved contractual pricing and favorable product mix in the Rubber Carbon Black segment. Those were partially offset by lower volume and cogeneration profitability in both segments.

Nine Months Business Segment Results

SPECIALTY CARBON BLACK
		Nine Months Ended September 30,
(In millions, except volume and per metric ton data)		2023		2022		Delta
Volume (kmt)		166.5		177.6		(11.1)		(6.3)%
Net sales		461.9		529.1		(67.2)		(12.7)%
Gross profit		133.3		163.0		(29.7)		(18.2)%
Gross profit per metric ton(1)		800.6		917.8		(117.2)		(12.8)%
Adjusted EBITDA		93.3		119.0		(25.7)		(21.6)%
Adjusted EBITDA/metric ton		560.4		670.0		(109.7)		(16.4)%
Adjusted EBITDA margin (%)(1)		20.2%		22.5%		(230)bps		(10.2)%

(1)

The reconciliations of these non-GAAP measures to the respective most comparable GAAP measures are provided in the section titled Reconciliation of Non-GAAP Financial Measures.

Volumes decreased by 11.1 kmt, or 6.3% year over year, to 166.5 kmt for the nine months ended September 30, 2023, primarily due to weakness in certain end-markets.

Net sales decreased by $67.2 million, or 12.7%, year over year, to $461.9 million for the nine months ended September 30, 2023, primarily driven by the pass-through effect of declining oil prices and lower volume.

Adjusted EBITDA decreased by $25.7 million, or 21.6%, year over year, to $93.3 million for the nine months ended September 30, 2023. The decrease was primarily due to lower demand, which resulted in lower volume, unfavorable product mix and lower cogeneration profitability.

Year over year, Adjusted EBITDA per ton decreased by $109.7 or 16.4%, to $560.4, primarily driven by unfavorable product mix and lower cogeneration profitability. However, the end-market pricing was stable.

Adjusted EBITDA margin decreased by 230 basis points, year over year, to 20.2% for the nine months ended September 30, 2023.

RUBBER CARBON BLACK
		Nine Months Ended September 30,
(In millions, except volume and per metric ton data)		2023		2022		Delta
Volume (kmt)		539.5		570.3		(30.8)		(5.4)%
Net sales		963.8		1,039.7		(75.9)		(7.3)%
Gross profit		230.4		189.1		41.3		21.8%
Gross profit per metric ton(1)		427.1		331.6		95.5		28.8%
Adjusted EBITDA		172.4		128.1		44.3		34.6%
Adjusted EBITDA/metric ton		319.6		224.6		94.9		42.3%
Adjusted EBITDA margin (%)(1)		17.9%		12.3%		560bps		45.5%

(1)

The reconciliations of these non-GAAP measures to the respective most comparable GAAP measures are provided in the section titled Reconciliation of Non-GAAP Financial Measures.

Volume decreased by 30.8 kmt, or 5.4%, year over year, to 539.5 kmt, for the nine months ended September 30, 2023, due to the lower demand .

Net sales decreased by $75.9 million, or 7.3%, year over year, to $963.8 million for the nine months ended September 30, 2023, primarily due to the pass-through effect of declining oil prices and lower volumes, partially offset by improved contractual pricing.

Adjusted EBITDA increased by $44.3 million, or 34.6%, to $172.4 million for the nine months ended September 30, 2023. The increase was primarily due to improved contractual pricing, partially offset by lower volume and cogeneration profitability.

Year over year, Adjusted EBITDA per ton increased by $94.9 or 42.3%, to $319.6, driven by improved contractual pricing, partially offset by lower cogeneration profitability.

For the nine months ended September 30, 2023, Adjusted EBITDA margin rose 560 basis points to 17.9%, year over year.

Debt

As of September 30, 2023, the company net debt was $756.5 million and EBITDA to debt ratio was 2.29 times.

Outlook

“We are confident that we can deliver a third consecutive year of earnings growth, despite lower demand. We are narrowing our 2023 Adjusted EBITDA guidance range to $330 million to $340 million, up seven percent at the midpoint, compared with our previous record 2022 results. We also project full year 2023 Adjusted EPS of $2.00 to $2.10, up nine percent at the midpoint. Free cash flow should be approximately $100 million this year and we look forward to further growth in 2024,” Mr. Painter concluded.

Conference Call

As previously announced, Orion will hold a conference call tomorrow, Friday, November 3, 2023, at 8:30 a.m. (EDT). The dial-in details for the live conference call are as follows:

U.S. Toll Free:		1-877-407-4018
International:		1-201-689-8471

A replay of the conference call may be accessed by phone at the following numbers to Thursday, November 17, 2023:

U.S. Toll Free:		1-844-512-2921
International:		1-412-317-6671
Conference ID:		13741913

Additionally, an archived webcast of the conference call will be available on the Investor Relations section of the company’s website at www.orioncarbons.com.

To learn more about Orion S.A., visit the company’s website at www.orioncarbons.com, where we regularly post information including notification of events, news, financial performance, investor presentations and webcasts, non-GAAP reconciliations, SEC filings and other information regarding our company, its businesses and the markets it serves.

About Orion S.A.

Orion S.A. (NYSE: OEC) is a leading global supplier of carbon black, a solid form of carbon produced as powder or pellets. The material is made to customers’ exacting specifications for tires, coatings, ink, batteries, plastics and numerous other specialty, high-performance applications. Carbon black is used to tint, colorize, provide reinforcement, conduct electricity, increase durability, and add UV protection. Orion has innovation centers on three continents and produces carbon black at 15 plants worldwide, offering the most diverse variety of production processes in the industry. The company’s corporate lineage goes back more than 160 years to Germany, where it operates the world’s longest-running carbon black plant. Orion is a leading innovator, applying a deep understanding of customers’ needs to deliver sustainable solutions. For more information, please visit www.orioncarbons.com.

Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

This document contains and refers to certain forward-looking statements with respect to our financial condition, results of operations and business, including those in the “Outlook” and “Quarterly Business Segment Results” sections above. 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’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among others, statements concerning the potential exposure to market risks, statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions and statements that are not limited to statements of historical or present facts or conditions. Forward-looking statements are typically identified by words such as “anticipate,” “assume,” “assure,” “believe,” “confident,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “objectives,” “outlook,” “probably,” “project,” “will,” “seek,” “target,” “to be” and other words of similar meaning.

These forward-looking statements include, without limitation, statements about the following matters: • our strategies for (i) strengthening our position in Specialty carbon black or Rubber carbon black, (ii) increasing our Specialty or Rubber carbon black margins and (iii) strengthening the competitiveness of our operations; • our cash flow projections; • the installation and operation of pollution control technology in our United States (“U.S.”) manufacturing facilities pursuant to the U.S. Environmental Protection Agency (“EPA”) consent decree; • the outcome of any in-progress, pending or possible litigation or regulatory proceedings; the expectations regarding environmental-related costs and liabilities; • the expectations regarding the performance of our industry and the global economy, including with respect to foreign currency rates; • the sufficiency of our cash on hand and cash provided by operating activities and borrowings to pay our operating expenses, satisfy our debt obligations and fund capital expenditures; • the ability to pay dividends; • the ability to have access to new debt providers; • our anticipated spending on, and the timely completion and anticipated impacts of, capital projects including growth projects, emission reduction projects and the construction of new plants; • our projections and expectations for pricing, financial results and performance in 2023 and beyond; • the status of contract negotiations with counterparties and the impact of new contracts on our growth; • the implementation of our natural gas and other raw material consumption reduction contingency plans; • the demand for our specialty products; and • our expectation that the markets we serve will continue to remain stable or grow.

All these forward-looking statements are based on estimates and assumptions that, although believed to be reasonable, are inherently uncertain. Therefore, undue reliance should not be placed upon any forward-looking statements. There are important factors that could cause actual results to differ materially from those contemplated by such forward-looking statements. These factors include, among others: • the negative or uncertain worldwide economic conditions and developments; • the volatility and cyclicality of the industries in which we operate; • the operational risks inherent in chemicals manufacturing, including disruptions due to technical facilities, severe weather conditions or natural disasters; • our dependence on major customers and suppliers; • the unanticipated fluctuations in demand for our specialty products, including due to factors beyond our control; • our ability to compete in the industries and markets in which we operate; • our ability to address changes in the nature of future transportation and mobility concepts, which may impact our customers and our business; • our ability to develop new products and technologies successfully and the availability of substitutes for our products; • our ability to implement our business strategies; • our ability to respond to changes in feedstock prices and quality; • our ability to realize benefits from investments, joint ventures, acquisitions or alliances; • our ability to negotiate with counterparties on terms satisfactory to us and the satisfactory performance by such counterparties of their obligations to us as well as our ability to meet our performance obligations towards such counterparties; • our ability to realize benefits from planned plant capacity expansions and site development projects and the impact of potential delays to such expansions and projects; • our information technology systems failures, network disruptions and breaches of data security; • our relationships with our workforce, including negotiations with labor unions, strikes and work stoppages; • our ability to recruit or retain key management and personnel; • our exposure to political or country risks inherent in doing business in some countries; • any and all impacts from the Russian war against Ukraine and/or any escalation thereof as well as related energy shortages or other economic or physical impairments or disruptions; • any and all impacts from the recent Hamas terror assaults against Israel as well as any reactions by Israel and any and all escalations of the Hamas/Israel conflict; • the geopolitical events in the European Union (“EU”), relations amongst the EU member states as well as future relations between the EU and other countries and organizations; • the environmental, health and safety regulations, including nanomaterial and greenhouse gas emissions regulations, and the related costs of maintaining compliance and addressing liabilities; • the possible future investigations and enforcement actions by governmental, supranational agencies or other organizations; • our operations as a company in the chemical sector, including the related risks of leaks, fires and toxic releases; • the market and regulatory changes that may affect our ability to sell or otherwise benefit from co-generated energy; • any litigation or legal proceedings, including product liability, environmental or asbestos related claims; • our ability to protect our intellectual property rights and know-how; • our ability to generate the funds required to service our debt and finance our operations; • any fluctuations in foreign currency exchange and interest rates; • the availability and efficiency of hedging; • any changes in international and local economic conditions, including with regard to the dollar and the euro, dislocations in credit and capital markets and inflation or deflation; • the potential impairments or write-offs of certain assets; • any required increases in our pension fund contributions; • the adequacy of our insurance coverage; • any changes in our jurisdictional earnings mix or in the tax laws or accepted interpretations of tax laws in those jurisdictions; • any challenges to our decisions and assumptions in assessing and complying with our tax obligations; • the potential difficulty in obtaining or enforcing judgments or bringing legal actions against Orion S.A. (a Luxembourg incorporated entity) in the U.S. or elsewhere outside Luxembourg; and • any current or future changes to disclosure requirements and obligations, related audit requirements and our ability to comply with such obligations and requirements.

You should not place undue reliance on forward-looking statements. We present certain financial measures that are not prepared in accordance with U.S. GAAP and may not be comparable to other similarly titled measures of other companies. These non-U.

Contacts

Wendy Wilson

Investor Relations

+1 281-974-0155

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