Orion S.a. · NYSE:OEC
Orion — Q2 2023 Earnings Presentation
26 slides from Orion's earnings presentation, Aug 10, 2023
Slide 1: 2Q 2023 Earnings Conference Call
2Q 2023 Earnings Conference Call August 10, 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: Accomplishments
2Q Results • Adjusted EBITDA $87 million, up ~5% • Adjusted diluted EPS $0.53 Six Month Results • Record Adjusted EBITDA $188 million, up ~13% • Record Adjusted diluted EPS $1.27 • Strong cash flow – on track for 62% conversion • $54 million shares purchased to date (4% of outstanding stock) • Y-T-D
Slide 4: Destocking and Deferred Demand
Tire replacement wave is coming N.A. Tire Sales Estimate* Replacement Tire (~3/4 of tire market) Passenger Car/Light Truck - 6% Heavy Truck - 19% Destocking OEM (~1/4 of the tire market) Passenger Car/Light Truck + 12% and Deferred Heavy Truck - 9% Demand N.A. Tire Wear Indicators Gasoline S
Slide 5: Strong Foundation
Total Sales Adjusted EBITDA ($ in millions) ($ in millions) $320- $1,850 - $350 $2,031 $1,950 $312 $1,547 $267 $268 $1,476 $1,136 $200 Strong 2019 2020 2021 2022 2023F Foundation 2019 2020 2021 2022 2023F Return on Capital Employed Accelerating profitability with focus 18% 17% on return on capital 1
Slide 6: 2Q Performance
2Q Performance ($ in millions) Metric (1) 2Q23 2Q22 Y/Y 1Q23 Seq Key Drivers Volume (kmt) 227.3 251.4 (9.6)% 233.5 (2.7)% Revenue $458.8 $541.2 (15.2)% $500.7 (8.4)% • Volume decrease in both businesses, with some gains in China Gross Profit $117.1 $119.8 (2.3)% $136.4 (14.1)% Gross Profit/ton (2) $
Slide 7: YTD Performance
YTD Performance ($ in millions) Metric (1) 2Q23 YTD 2Q22 YTD Y/Y Key Drivers Volume (kmt) 460.8 504.6 (8.7)% • Subdued demand in most markets Revenue $959.5 $1,025.7 (6.5)% Gross Profit $253.5 $237.7 6.6% • Revenue - stronger base price partly offset by lower oil price pass through Gross Profit/ton
Slide 8: Key Financial Metrics
Key Financial Adjusted EBITDA Metrics ($ in millions) $87.3 $83.4 ($0.7) $1.7 2Q Key Performance Drivers ($24.0) $26.9 • Price/mix improvement driven by contractual price improvements • Volume decrease reflects softer demand in rubber and across most specialty end markets Q2 22 Volume Price/Mix Cost
Slide 9: Specialty Business Results
Specialty Metric Volume (kmt) 2Q 23 53.6 2Q 22 59.7 Y/Y (10.2)% 1Q 23 53.0 Seq 1.1% Business Revenue $149.5 $181.9 (17.8)% $162.0 (7.7)% Results Gross Profit Gross Profit/ton (1) $42.6 $794.8 $60.6 $1,015.1 (29.7)% (21.7)% $52.1 $983.0 (18.2)% (19.1)% Adj. EBITDA $29.9 $45.4 (34.1)% $37.3 (19.8)% 2Q
Slide 10: Specialty Business Results
Specialty Business Adjusted EBITDA - Specialty ($ in millions) Results $45.4 ($11.1) 2Q Key Performance Drivers ($0.5) ($4.5) $29.9 $0.6 • Weaker demand in most end markets • Pricing: preserving business value in a lower volume market • Costs reflect unfavorable fixed cost absorption and lower co-ge
Slide 11: Rubber Business Results
Rubber Metric 2Q 23 2Q 22 Y/Y 1Q 23 Seq Business Volume (kmt) Revenue 173.7 191.7 (9.4)% 180.5 (3.8)% Results $309.3 $359.3 (13.9)% $338.7 (8.7)% Gross Profit $74.5 $59.2 25.8% $84.3 (11.6)% Gross Profit/ton (1) $428.9 $308.8 38.9% $467.0 (8.2)% 2Q Key Performance Drivers Adj. EBITDA $57.4 $38.0 51.
Slide 12: Rubber Business Results
Rubber Business Adjusted EBITDA - Rubber ($ in millions) Results $3.9 $1.1 $57.4 2Q Key Performance Drivers $38.0 $27.4 • Destocking and deferred consumer purchases reduced volume in the ($12.9) quarter • Price increases from contract negotiations Q2 22 Volume Price/Mix Costs FX Q2 23 12
Slide 13: Cash Generation
Sources & Uses YTD ($ in millions) HIGHLIGHTS Adjusted EBITDA $188 Change in NWC 97 Change in Provision -9 Operating Activities Interest Payments -21 • Higher Adjusted EBITDA y/y reflects improved pricing Cash Income Taxes -42 • Net working capital (NWC) decrease primarily due to Other -7 improved c
Slide 14: Cash Conversion
DISCRETIONARY CASH FLOW AND ADJUSTED EBITDA ($M) $400 70% $335(1) 62% $350 60% $312 $300 $268 50% $250 Cash Conversion $200 $200 33% $208(1) 40% 30% $150 28% 19% $102 20% $100 $55 $51 $50 10% $0 0% 2020 2021 2022 2023F Adj. EBITDA DCF Conversion (1) Including $80-$90M working capital improvement in
Slide 15: FY23 Financial Guidance and Assumptions
Guidance Adjusted EBITDA Total $320M-$350M Adjusted EPS $2.00 per share - $2.25 per share Capital Expenditures $200M - $225M Depreciation & Amortization $105M - $115M FY23 – Effective Tax Rate Cash Debt Service ~30% ~$50M Financial Current Basic Share Count at June 30, 2023* 58.6M Guidance and Selec
Slide 16: Appendix
Appendix 16
Slide 17: 2023 Capital Spending
Est 2023 Category Spend Comments ($ in millions) Maintenance* $85-90 Preventative, routine and upgrades 2023 Capital EPA $30 Final plant completed by Q4 2023 Growth* Spending – Debottlenecks, Expansion $25-45 High return investments (>25% ROIC) Commissioning Huaibei now. Kappa is a – Huaibei and Kap
Slide 18: Full Year Cashflow/Usage Expectation
FY2023 ($ in millions) EBITDA $320 – 350 Interest and dividends* (45) Full Year Taxes (50) Cashflow/ WC improvement 80 - 90 Usage Maintenance capex EPA capex (85-90) (30) Expectation Discretionary Cash Flow $185 - 230 Growth capex (Huaibei/Kappa) (60) Profit enhancing capex (25-45) Free Cash Flow $8
Slide 19: Historical Non-GAAP Metrics Reconciliation
Historical Non-GAAP Metrics Reconciliation ($ million unless otherwise stated) Three Months Ended Six Months Ended June 30, Q2 2023 Q1 2023 Q2 2022 2023 2022 2021 Net sales 459 501 541 960 1,026 761 Cost of Sales 342 365 421 706 788 549 Gross Profit 117 136 120 254 238 213 Sales volume (in kmt) 227
Slide 20: Reconciliation of FCF and Discretionary CF
Reconciliation of FCF and Discretionary CF ($million) Historical 2022 Twelve Months Ended December 31, 2021 2020 Non-GAAP Adjusted EBITDA Maintenance & EPA CAPEX $312 (152) $268 (156) $200 (116) Metrics Interest payments Cash paid for taxes (34) (24) (23) (38) (21) (8) Reconciliation Discretionary C
Slide 21: Historical Adjusted Diluted EPS Reconciliation
Historical Non-GAAP Metrics Reconciliation in $ per share Historical Adjusted diluted EPS Diluted EPS Q2 2023 $0.51 Three Months Ended Q1 2023 $0.70 Q2 2022 $0.49 Six Months Ended June 30, 2023 $1.20 2022 $1.02 Non-GAAP Long Term Incentive Plan Other Adjustments including restructuring 0.04 (0.03) 0
Slide 22: Historical Adjusted Net Income Reconciliation
Historical Non-GAAP Metrics Reconciliation ($million) Historical Adjusted Net Income Q2 2023 Three Months Ended Q1 2023 Q2 2022 Six Months Ended June 30, 2023 2022 Non-GAAP Net income add back long term incentive plan add back other adjustment items $ 30.1 $ 2.6 (1.6) 42.3 $ 2.1 (0.3) 29.7 1.6 1.4 $
Slide 23: Capital Employed and ROCE Reconciliation
Historical Non-GAAP Metrics Reconciliation ($ million unless otherwise stated) Capital Employed 2023 2022 2021 2020 2019 2018 Q2 2023 Q2 2022 YTD YTD Total Assets 1,843.2 1,847.5 1,888.7 1,631.0 1,389.8 1,257.4 1,273.0 LESS: Current Liabilities -476.1 -581.6 -552.8 -448.7 -324.7 -285.2 -320.3 Capita
Slide 24: Net Debt and Debt Ratio
Historical Non-GAAP Metrics Reconciliation ($million) Net Debt and Debt ratio June 30, 2023 Historical Current portion of long-term debt and other financial liabilities $ 189.0 666.9 Non-GAAP Long-term debt, net Total debt as per Consolidated Balance Sheets 855.9 Metrics Add: Deferred debt issuance
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 — Q2 2023 Earnings Presentation on 6ix