Orion S.a. · NYSE:OEC
Orion — Q3 2023 Earnings Presentation
26 slides from Orion's earnings presentation, Nov 3, 2023
Slide 1: 3Q 2023 Earnings Conference Call
3Q 2023 Earnings Conference Call November 3, 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements Forward-Looking Statements This presentation contains and refers to certain forward-looking statements with respect to our financial condition, results of operations and business. These statements constitute forward-looking statements within the meaning of Section 21E of t
Slide 3: On Track For Record Year
3Q Results • Adjusted EBITDA $77 million • Adjusted diluted EPS $0.49 Nine Month Results • Record Adjusted EBITDA $266 million, up 7.5% • Record Adjusted diluted EPS $1.76 • Revolver renewed at Euro 300M On Track For • Strong cash flow – on track for ~55% conversion • Repurchased nearly 5% of outsta
Slide 4: Rubber Trends
Q3 N.A. Tire Sales Estimate* Replacement Tire (~3/4 of tire market) Passenger Car/Light Truck + 6% Heavy Truck - 17% OEM (~1/4 of the tire market) Rubber Passenger Car/Light Truck - 1% (affected by UAW) Heavy Truck - 5% (improved from -9%) Trends N.A. Tire Wear Indicators Gasoline Sales** +
Slide 5: Strong Foundation
Total Sales Adjusted EBITDA ($ in millions) ($ in millions) $330- $1,850 - $340 $2,031 $1,900 $312 $1,547 $267 $268 $1,476 $1,136 $200 Strong Foundation 2019 2020 2021 2022 2023F 2019 2020 2021 2022 2023F Return on Capital Employed Accelerating profitability with focus 18% 17% on return on capital 1
Slide 6: 3Q Performance
3Q Performance ($ in millions) Metric (1) 3Q23 3Q22 Y/Y 2Q23 Seq Key Drivers Volume (kmt) 245.2 243.3 0.8% 227.3 7.9% Revenue $466.2 $543.1 (14.2)% $458.8 1.6% • Volume flat, with an increase in China, offset by lower volume in EMEA and the Gross Profit $110.2 $114.4 (3.7)% $117.1 (5.9)% Americas Gr
Slide 7: YTD Performance
YTD Performance ($ in millions) Metric (1) 3Q23 YTD 3Q22 YTD Y/Y Key Drivers Volume (kmt) 706.0 747.9 (5.6)% • Subdued industrial demand affects Revenue $1,425.7 $1,568.8 (9.1)% volume in most markets Gross Profit $363.7 $352.1 3.3% • Revenue - Lower oil price pass through Gross Profit/ton (2) $515.
Slide 8: Key Financial Metrics
Key Financial Adjusted EBITDA Metrics ($ in millions) $80.5 ($10.5) $77.3 $13.4 3Q Key Performance Drivers ($10.0) $3.9 • Volume decrease reflects softer demand in rubber • Price/mix improvement driven by contractual price improvements • Costs impacted by lower cogeneration profitability Q3 22 Volum
Slide 9: Specialty Business Results
Specialty Metric 3Q 23 3Q 22 Y/Y 2Q 23 Seq Business Volume (kmt) 59.9 52.3 14.5% 53.6 11.8% Revenue $150.4 $169.6 (11.3)% $149.5 0.6% Results Gross Profit Gross Profit/ton (1) $38.6 $644.4 $44.8 $856.6 (13.8)% (24.8)% $42.6 $794.8 (9.4)% (18.9)% Adj. EBITDA $26.1 $31.1 (16.1)% $29.9 (12.7)% 3Q Key P
Slide 10: Specialty Business Results
Specialty Business Adjusted EBITDA - Specialty Results ($ in millions) $31.1 ($0.4) ($3.8) $26.1 3Q Key Performance Drivers ($3.0) $2.2 • Price/mix decreased due to mix • Costs affected by lower cogeneration profitability and fixed cost absorption Q3 22 Volume Price/Mix Costs FX Q3 23 10
Slide 11: Rubber Business Results
Rubber Metric 3Q 23 3Q 22 Y/Y 2Q 23 Seq Business Volume (kmt) 185.3 191.0 (3.0)% 173.7 6.7% Results Revenue $315.8 $373.5 (15.4)% $309.3 2.1% Gross Profit $71.6 $69.6 2.9% $74.5 (3.9)% Gross Profit/ton (1) $386.4 $364.4 6.0% $428.9 (9.9)% 3Q Key Performance Drivers Adj. EBITDA $51.2 $49.4 3.6% $57.4
Slide 12: Rubber Business Results
Rubber Business Adjusted EBITDA - Rubber ($ in millions) Results ($7.5) $51.2 $49.4 $1.7 $17.2 3Q Key Performance Drivers ($9.6) • Demand is impacted by lower tire manufacturing in key markets • Price improved due to contract negotiations • Costs were impacted by lower cogeneration profitability Q3
Slide 13: Cash Generation
Sources & Uses YTD ($ in millions) HIGHLIGHTS Adjusted EBITDA $266 Change in NWC 88 Change in Provision 0 Operating Activities Interest Payments -30 • Higher Adjusted EBITDA y/y reflects improved pricing Cash Income Taxes -37 • Net working capital (NWC) decrease primarily due to Other -13 improved c
Slide 14: Growing Cash Conversion
DISCRETIONARY CASH FLOW AND ADJUSTED EBITDA ($M) $400 70% $335(1) $350 60% $312 $300 $268 ~55% 50% Growing Cash $250 $200 40% Conversion $200 $150 28% 33% $208(1) 30% 19% $102 20% $100 $55 $51 $50 10% $0 0% 2020 2021 2022 2023F Adj. EBITDA DCF Conversion (1) Including $75-$80M working capital improv
Slide 15: FY23 Financial Guidance and Select Assumptions and Sensitivities
Guidance Adjusted EBITDA Total $330M-$340M Adjusted EPS $2.00 per share - $2.10 per share Capital Expenditures $175M - $200M Depreciation & Amortization $105M - $115M FY23 – Effective Tax Rate ~30% Financial Cash Debt Service ~$50M Current Basic Share Count at September 30, 2023* 58.2M Guidance and
Slide 16: Appendix
Appendix 16
Slide 17: 2023 Capital Spending
Est 2023 Category Spend Comments ($ in millions) Maintenance $80-90 Preventative, routine and upgrades EPA $30 Final plant completed by Q4 2023 2023 Capital Growth Spending – – Debottlenecks, Expansion Huaibei and Kappa Conductives $25-35 $40-45 High return investments (>25% ROIC) Huaibei ramping up
Slide 18: Full Year Cashflow/Usage Expectation
FY2023 ($ in millions) EBITDA $330 – 340 Interest and dividends* (55-60) Full Year Taxes (60) Cashflow/ WC improvement 75-80 Usage Maintenance capex EPA capex (80-90) (30) Expectation Discretionary Cash Flow $170 – 190 Growth capex (Huaibei/Kappa) (40-45) Profit enhancing capex (25-35) Free Cash Flo
Slide 19: Historical Non-GAAP Metrics Reconciliation
Historical Non-GAAP Metrics Reconciliation ($ million unless otherwise stated) Three Months Ended Nine Months Ended September 30, Q3 2023 Q2 2023 Q3 2022 2023 2022 2021 Net sales 466 459 543 1,426 1,569 1,154 Cost of Sales 356 342 429 1,062 1,217 843 Gross Profit 110 117 114 364 352 311 Sales volume
Slide 20: Historical Reconciliation of FCF and Discretionary CF
Historical Reconciliation of FCF and Discretionary CF ($million) Twelve Months Ended December 31, Non-GAAP 2022 2021 2020 Adjusted EBITDA $312 $268 $200 Maintenance & EPA CAPEX (152) (156) (116) Metrics Interest payments (34) (23) (21) Cash paid for taxes (24) (38) (8) Discretionary Cash Flow $102 $
Slide 21: Historical Adjusted Diluted EPS Reconciliation
Historical Non-GAAP Metrics Reconciliation in $ per share Historical Adjusted diluted EPS Q3 2023 Three Months Ended Q2 2023 Q3 2022 Nine Months Ended September 30, 2023 2022 Non-GAAP Diluted EPS $0.44 $0.51 $0.52 $1.65 $1.53 Long Term Incentive Plan 0.06 0.04 0.03 0.14 0.08 Other Adjustments includ
Slide 22: Historical Adjusted Net Income Reconciliation
Historical Historical Non-GAAP Metrics Reconciliation ($million) Adjusted Net Income Three Months Ended Nine Months Ended September 30, Non-GAAP Q3 2023 Q2 2023 Q3 2022 2023 2022 Net income $ 26.2 $ 30.1 $ 31.8 $ 98.6 $ 94.0 add back long term incentive plan 3.6 2.6 1.9 8.3 5.0 Metrics add back othe
Slide 23: Capital Employed and Adjusted EBIT Reconciliation
Historical Non-GAAP Metrics Reconciliation ($ million unless otherwise stated) Capital Employed 2023 2022 2021 2020 2019 2018 Q3 2023 YTD Q3 2022 YTD Total Assets 1,833.7 1,843.4 1,888.7 1,631.0 1,389.8 1,257.4 1,273.0 Historical LESS: Current Liabilities -449.3 -547.9 -552.8 -448.7 -324.7 -285.2 -3
Slide 24: Net Debt and Debt Ratio
Historical Historical Non-GAAP Metrics Reconciliation ($million) Net Debt and Debt ratio September 30, 2023 Non-GAAP Current portion of long term debt and other financial liabilities $ 149.1 Long-term debt, net 662.8 Total debt as per Consolidated Balance Sheets 811.9 Metrics Add: Deferred debt issu
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Non-GAAP Financial Measures We present certain financial measures that are not prepared in accordance with GAAP or the accounting standards of any other jurisdiction and may not be comparable to other similarly titled measures of other companies. For a reconciliation of t
Slide 26: Investor Relations Contact Details
Investor Relations Contact Details Wendy Wilson wendy.wilson@orioncarbons.com 26
Orion S.A. Common Shares — Q3 2023 Earnings Presentation on 6ix