Orion S.a. · NYSE:OEC
Orion — FY2023 Earnings Presentation
33 slides from Orion's earnings presentation, Feb 15, 2024
Slide 1: 2023 Earnings Conference Call
2023 Earnings Conference Call February 15, 2024
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: Record Full Year Adjusted EBITDA
Full Year 2023 Results • Record Adjusted EBITDA $332 million, up 6% YoY • Adjusted diluted EPS $1.92 Record Full Year Fourth Quarter Results • Adjusted EBITDA $67 million Adjusted EBITDA • Adjusted diluted EPS $0.17 • Strong cash flow – ~65% conversion(1) • ~$1.10 per share returned to shareholders
Slide 4: Growing Profitability
Total Sales Adjusted EBITDA ($ in millions) ($ in millions) $2,031 $312 $332 $1,894 $267 $268 Growing $1,476 $1,136 $1,547 $200 Profitability 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Three Years of Return on Capital Employed Adjusted EBITDA growth 18% 16% 16% 15% Focus on Return on 10% Capi
Slide 5: 4Q Performance
4Q Performance ($ in millions) Key Drivers Metric (1) 4Q23 4Q22 Y/Y 3Q23 Seq Volume (kmt) 226.2 215.1 5.2% 245.2 (7.7)% • Volume increased year-over-year due to higher demand in the Specialty polymer Revenue $468.2 $462.1 1.3% $466.2 0.4% market, and Rubber in China Gross Profit $87.3 $96.7 (9.7)% $
Slide 6: Full Year Performance
Full Year Performance ($ in millions) Key Drivers Metric (1) FY 2023 FY 2022 Y/Y Volume (kmt) 932.1 962.9 (3.2)% • Subdued industrial demand affected volume in most markets, except China Revenue $1,893.9 $2,030.9 (6.7)% Gross Profit $451.0 $448.8 0.5% • Revenue was lower due to oil price pass throug
Slide 7: Key Financial Metrics
Key Financial Adjusted EBITDA Metrics ($ in millions) ($20.4) $332.3 $6.2 $312.3 2023 Key Performance Drivers $73.4 ($39.2) • Volume decrease reflects softer demand across most regions, except China • Price/mix increase driven by contractual price improvements in rubber • Costs impacted by lower cog
Slide 8: Rubber Full Year Performance
Rubber ($ in millions) Metric (1) FY 2023 FY 2022 Y/Y Full Year Volume (kmt) 710.7 738.6 (3.8)% Performance Revenue Gross Profit Gross Profit/ton (2) $1,282.3 $290.7 $409.0 $1,355.5 $248.1 $335.9 (5.3)% 17.2% 21.8% Adj. EBITDA $221.6 $168.4 31.6% Key Drivers Adj. EBITDA/ton (2) $311.8 $228.0 36.8% A
Slide 9: Rubber Business Results
Rubber Business Adjusted EBITDA - Rubber ($ in millions) Results (10.7) 3.4 $221.6 Full Year Key Performance 84.4 168.4 Drivers (23.9) • Volume down driven by subdued demand in most regions, except China • Price improved due to negotiated contract pricing • Costs were impacted by lower cogeneration
Slide 10: Specialty Full Year Performance
Specialty ($ in millions) Metric (1) FY 2023 FY 2022 Y/Y Full Year Volume (kmt) Revenue 221.4 224.3 (1.3)% Performance $610.6 $675.4 (9.6)% Gross Profit $160.3 $200.7 (20.1)% Gross Profit/ton (2) $724.0 $894.8 (19.1)% Adj. EBITDA $110.7 $143.9 (23.1)% Key Drivers Adj. EBITDA/ton (2) $500.0 $641.6 (2
Slide 11: Specialty Business Results
Specialty Business Adjusted EBITDA - Specialty ($ in millions) Results 143.9 (15.3) (8.9) Full Year Key Performance (11.5) $110.7 2.6 Drivers • Unfavorable regional volume fluctuations and unfavorable product mix • Higher costs due to cogeneration effects from lower European electricity prices FY202
Slide 12: Cash Generation
HIGHLIGHTS Sources & Uses 2023 ($ in millions) Operating Activities Adjusted EBITDA 332 • Higher Adjusted EBITDA y/y reflects improved pricing Change in NWC 125 • Net working capital (NWC) decrease primarily due to Cash Paid for Interest -39 improved customer agreements ($89M) Cash Income Taxes -56
Slide 13: Growing Cash Conversion
DISCRETIONARY CASH FLOW AND ADJUSTED EBITDA ($M) $400 70% $350 $350 $332 60% $312 $300 65% $268 50% Growing Cash $250 $200 $200 $218(1) 49% 40% Conversion $150 28% 33% $170 30% 19% $102 20% $100 $55 $51 $50 10% $0 0% 2020 2021 2022 2023 2024F Adj. EBITDA DCF NWC(1) Conversion (1) 2023 Included $89M
Slide 14: Focus On Growth Investments
Capital Spending Outlook ($ in millions) Capital Spending Priorities $233 Focus On $215 HIGH RETURN $200 OPPORTUNITIES $81 $190 $59 Growth $171 New Kappa Plant $145 $44 $110 High Return Growth Investments $29 $95 $67 $20 $29 Investments MAINTENANCE $61 CAP EX $90 $90 Reliability and Productivity $85
Slide 15: Mid-Cycle Capacity Assumptions
• At mid-cycle, we would expect economic indicators in the markets we serve to be at pre-COVID levels. We would also expect pricing required to maintain our margins Mid-Cycle Capacity • At mid-cycle capacity, expect our consolidated plant Assumptions utilization to return to the upper 80 percent ran
Slide 16: Path To $500 Million Adjusted EBITDA Capacity
Mid-Cycle Adj. EBITDA Capacity ($ in millions) $500 $50 $30 Path To $500 $70 Million Adjusted EBITDA Capacity $340-$360 $332 2023 2024F Mid-Cycle Margin Kappa 2025F Adj. Adj. EBITDA Adj. EBITDA Volume Conductives EBITDA 16
Slide 17: Financial Guidance and Assumptions
Guidance Adjusted EBITDA Total $340M-$360M Adjusted EPS $2.05 per share - $2.20 per share Capital Expenditures ~$200M Depreciation & Amortization $115M - $125M 2024 Effective Tax Rate Cash Debt Service(1) ~30% ~$50M Financial Current Basic Share Count at December 31, 2023* 57.9M Guidance and Select
Slide 18: Appendix
Appendix 18
Slide 19: Rubber Business Results
Rubber Metric 4Q 23 4Q 22 Y/Y 3Q 23 Seq Business Volume (kmt) Revenue 171.3 168.4 1.7% 185.3 (7.6)% Results $319.5 $315.8 1.2% $315.8 1.2% Gross Profit $60.3 $59.0 2.2% $71.6 (15.8)% Gross Profit/ton (1) $352.0 $350.4 0.5% $386.4 (8.9)% 4Q Key Performance Drivers Adj. EBITDA $49.2 $40.3 22.1% $51.2
Slide 20: Rubber Business Results
Rubber Business Adjusted EBITDA - Rubber ($ in millions) Results ($8.1) $49.2 $15.4 $1.2 4Q Key Performance Drivers $40.3 $0.4 • Volume flat reflecting the new facility in China, offset by lower demand in the Americas • Price improved due to negotiated contract pricing • Costs were impacted by lower
Slide 21: Specialty Business Results
4Q 23 4Q 22 Y/Y 3’Q 23 Seq Specialty Metric Volume (kmt) 54.9 46.7 17.6% 59.9 (8.3)% Business Revenue Gross Profit $148.7 $27.0 $146.3 $37.7 1.6% (28.4)% $150.4 $38.6 (1.1)% (30.1)% Results Gross Profit/ton (1) $491.8 $807.3 (39.1)% $644.4 (23.7)% Adj. EBITDA $17.4 $24.9 (30.1)% $26.1 (33.3)% 4Q Key
Slide 22: Specialty Business Results
Specialty Business Adjusted EBITDA - Specialty ($ in millions) Results ($2.7) $7.5 4Q Key Performance Drivers $24.9 ($13.7) • Higher volume across all regions, driven by the polymer market $17.4 $1.4 • Higher fixed costs due to maintenance, start-up and other timing-related costs and lower cogenerat
Slide 23: 2025 Rubber Mid-Cycle Capacity Target
Rubber Segment Mid-Cycle Capacity ($ in millions) $10 - 15 $35 - 40 2025 Rubber Mid‐Cycle Capacity Target $230-250 $275-305 $222 23
Slide 24: 2025 Specialty Mid-Cycle Capacity Target
Specialty Segment Mid-Cycle Capacity ($ in millions) $ 50 $15 - $25 2025 Specialty $ 20 - $40 Mid‐Cycle $190 - $230 Capacity Target $111 $105-$115 24
Slide 25: Cashflow/Usage Expectation
FY2024 ($ in millions) EBITDA $340 – 360 Interest (40) 2024 Taxes (50) Cashflow/ Maintenance capex (90) Usage Discretionary Cash Flow $160 – 180 Dividends (5) Expectation Total growth capex (inc. Kappa) (110) Free Cash Flow $45-65 25
Slide 26: Historical Non-GAAP Metrics
Historical Non-GAAP Metrics Reconciliation ($million unless otherwise stated) Three Months Ended Twelve Months Ended December 31, Q4 2023 Q3 2023 Q4 2022 2023 2022 2021 Net sales 468 466 462 1,894 2,031 1,547 Cost of Sales 381 356 365 1,443 1,582 1,160 Gross Profit 87 110 97 451 449 387 Sales volume
Slide 27: Historical Non-GAAP Metrics
Reconciliation of FCF and Discretionary CF ($million) Historical 2023 Twelve Months Ended December 31, 2022 2021 Non-GAAP Adjusted EBITDA Maintenance & EPA CAPEX Interest payments $332 (108) (39) $312 (152) (34) $268 (156) (23) Metrics Cash paid for taxes Discretionary Cash Flow (56) $129 (24) $102
Slide 28: Historical Non-GAAP Metrics
Historical Non-GAAP Metrics Reconciliation in $ per share Historical Adjusted diluted EPS Q4 2023 Three Months Ended Q3 2023 Q4 2022 Twelve Months Ended December 31, 2023 2022 Non-GAAP Diluted EPS Long Term Incentive Plan Add back Environmental reserve $0.08 0.12 — $0.44 0.06 — $0.20 0.04 (0.01) $1.
Slide 29: Historical Non-GAAP Metrics
Historical Non-GAAP Metrics Reconciliation ($million) Adjusted Net Income Three Months ended Twelve months ended Historical Net Income add back long term incentive plan expenses $ Q4 2023 4.9 $ 7.1 Q3 2023 26.2 $ 3.6 Q4 2022 12.2 2.6 $ 2023 103.5 15.4 $ 2022 106.2 7.7 Non-GAAP add back restructuring
Slide 30: Historical Non-GAAP Metrics
Historical Non-GAAP Metrics Reconciliation ($ million unless otherwise stated) Capital Employed 2023 2022 2021 2020 2019 2018 Q4 2023 Q4 2022 YTD YTD Total Assets 1,833.4 1,888.7 1,888.7 1,631.0 1,389.8 1,257.4 1,273.0 LESS: Current Liabilities -440.3 -552.8 -552.8 -448.7 -324.7 -285.2 -320.3 Capita
Slide 31: Historical Non-GAAP Metrics
Historical Non-GAAP Metrics Reconciliation ($million) Historical Net Debt and Debt ratio Current portion of long term debt and other financial liabilities $ December 31, 2023 137.0 Non-GAAP Long-term debt, net Total debt as per Consolidated Balance Sheets Add: Deferred debt issuance costs - Term loa
Slide 32: 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 33: Investor Relations Contact Details
Investor Relations Contact Details Wendy Wilson wendy.wilson@orioncarbons.com 33
Orion S.A. Common Shares — FY2023 Earnings Presentation on 6ix