Orion S.a. · NYSE:OEC
Orion — Orion Engineered Carbons — Jefferies Virtual Industrials Conference 2020
29 slides from Orion's conference presentation, Aug 6, 2020
Slide 1: Investor Presentation August 2020
Investor Presentation August 2020 1
Slide 2: Forward-Looking Statements & Non-GAAP Financial Measures
Forward-Looking Statements & Non-GAAP Financial Measures 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 t
Slide 3: A Compelling Long-Term Investment
A Compelling Long-Term Investment Leading Global Producer of Specialty and Technical Rubber Grade Carbon Black Strong Liquidity and Financial Standing Resilient End Markets and Business Model Focused on Shareholder Returns with Aligned Incentives Strong Cash Flow Currently Invested in Plants - Creat
Slide 4: About Orion
About Orion Production Production Year Founded Headquarters Employees Facilities Capacity 1932 Houston 14 1,200 kmt 1,450+ 2019A Sales by Segment ($MM) 2019A Adj. EBITDA by Segment ($MM) 34% 46% $1,476 $267 66% 54% Specialty Carbon Black Specialty Carbon Black Rubber Carbon Black Rubber Carbon Black
Slide 5: Global, Well Positioned, Flexible Production Network
Global, Well Positioned, Flexible Production Network Ability to supply customers with the full range of grades Coordinate raw material purchasing and particle sizes by leveraging different feedstocks from numerous global and local suppliers Redundancy in plant footprint ensures stability of supply I
Slide 6: Long Term Growth Drivers
Long Term Growth Drivers Productivity Higher Return on Capacity Expansion (Process Technology & Costs) R&D Spend (New Product Ratio) Shifting Pricing Toward Sustainability Market Growth (ESG) Reinvestment Levels Free cash flow conversion to rise post EPA investments Potential resolution of Evonik in
Slide 7: Orion Engineered Carbons Overview
Orion Engineered Carbons Overview Segment Specialty Carbon Black Rubber Carbon Black A leading global specialty producer with 25% Product portfolio weighted towards technical grades Description business share by volume and now exceeds 26% of total volume and 46% Adjusted EBITDA 31% of Adjusted EBITD
Slide 8: Specialty Carbon Black - Business Profile
Specialty Carbon Black - Business Profile FY2019 Gross Sales by Region Where Sold Historical Gross Profit $250 795 813 $900 760 725 $800 679 34.2% $200 $700 197 199 189 $600 $150 171 170 42.8% $500 EMEA $400 $100 $300 Americas $200 $50 Asia $100 $0 $0 2015 2016 2017 2018 2019 Gross Profit Gross Prof
Slide 9: Rubber Carbon Black – Business Profile
Rubber Carbon Black – Business Profile FY2019 Gross Sales by Region Where Sold Historical Gross Profit 20.6% 280 284 $250 $300 224 228 231 $250 $200 201 219 39.4% 184 188 $200 $150 178 EMEA $150 $100 Americas $100 Asia $50 $50 $0 $0 2015 2016 2017 2018 2019 40.0% Gross Profit Gross Profit Per Ton Ke
Slide 10: Post-IPO Performance Demonstrates Business Resiliency
Post-IPO Performance Demonstrates Business Resiliency $ in millions Adjusted EBITDA Contribution Margin $350 $600 $300 $500 $250 $400 $200 $300 $150 294 257 267 247 $200 232 $100 $100 $50 $0 $0 2015 2016 2017 2018 2019 Adjusted EBITDA Contribution Margin 10
Slide 11: Consistently Strong Cash Flow Conversion
(2) Consistently Strong Cash Flow Conversion $ in millions $300 80% 74% 72% 70% $250 64% 70% 65% 61% 60% $12 $200 $206 50% 42% $178 $167 $150 40% $149 $51 30% $100 $111 20% $50 10% $0 0% 2015 2016 2017 2018 2019 (1) Free Cash Flow EPA Spend Cash Flow Conversion (2) Cash Flow Conversion excluding EPA
Slide 12: Consistently Strong Earnings Despite Oil Price Movement
Consistently Strong Earnings Despite Oil Price Movement $ in millions Average Brent Crude Adjusted EBITDA Oil Price Per Barrel $300 $80 $280 $70 $260 $60 $240 $50 $220 $200 294 $40 $180 267 257 $30 247 232 $160 $20 $140 $10 $120 $100 $0 2015 2016 2017 2018 2019 Adjusted EBITDA Brent 12
Slide 13: Orion’s Response to COVID-19
Orion’s Response to COVID-19 Protecting Employees Production Secured and distributed personal protective equipment early Sustained ability to operate through pandemic, with all plants Work from home policy as appropriate open and shipping, though select reactors idled Highly effective physic
Slide 14: Market Overview and Recovery Outlook
Market Overview and Recovery Outlook Rubber Carbon Black Specialty Carbon Black 2019 Volume: 772 kmt 2019 Volume: 251 kmt Printing & OEM Tire Coatings (non- 15% auto) 25% Replacement Tire 60% Special Apps (non-auto) MRG 5% 25% Polymer (non- auto) 60% Automotive 15% Replacement Tire OEM Tire MRG Auto
Slide 15: Global Overview
Global Overview Business Trends and Customer Dynamics Rubber Carbon Black volume levels improved: (-7%) y/y in July vs. (-59%) y/y in April Americas: Most tire plants running in July with a degree of restocking likely taking place; July volume trend +154% sequentially vs. April EMEA: Most tire plant
Slide 16: Substantial Financial Flexibility and Liquidity
Substantial Financial Flexibility and Liquidity ($ in millions and all data as of 6/30/20) $333M of Total Liquidity Balance Sheet Highlights (Available at any TTM Adjusted EBITDA Level) Cash & Cash Equivalents $143 Total Short Term Debt, net $137 Cash and cash equivalents (1) Total Long Term Debt, n
Slide 17: Orion’s Focus on Sustainability
Orion’s Focus on Sustainability We continue to make progress on ESG initiatives In 2019, we took six concrete steps forward in sustainability: • Added sustainability to the Board of Directors’ Nominating and Governance Committee now called the Nominating, Sustainability and Governance Committee; • F
Slide 18: A Compelling Long-Term Investment
A Compelling Long-Term Investment Leading Global Producer of Specialty and Technical Rubber Grade Carbon Black Strong Liquidity and Financial Standing Resilient End Markets and Business Model Focused on Shareholder Returns with Aligned Incentives Strong Cash Flow Currently Invested in Plants - Creat
Slide 19: Appendix
orion APPENDIX
Slide 20: Balanced and Comprehensive Product Portfolio
Balanced and Comprehensive Product Portfolio Specialty Carbon Black Rubber Carbon Black Uses High quality, durable pigmentation Reinforcement and performance additive in rubber Enhancement characteristics such as UV protection, compounds (improves resilience, tear-strength, pigmentation, visco
Slide 21: The Leader in Carbon Black Technology
The Leader in Carbon Black Technology OEC is a leading producer of highly customized and diverse carbon black products; broad technology and product portfolio Production Technologies and Applications Furnace Thermal Acetylene After Gas Black Lamp Black Black Black Black Treating Tires Tires MRG MRG
Slide 22: Carbon Black Demand Drivers
Carbon Black Demand Drivers Carbon black growth dynamics benefit from several global megatrends Mega Trends Driver Description Carbon black market correlates closely with GDP (indicator for most of carbon black’s 1 GDP end markets; such as automotive, consumer goods, construction / infrastructure,
Slide 23: RCF and Term Loan
RCF and Term Loan Summary of key terms RCF TLB - EUR tranche TLB - USD tranche Borrowers Orion Engineered Carbons GmbH, OEC Finance US LLC and Orion Engineered Carbons Intl. GmbH Amount EUR 250 million EUR 324 million USD 283 million Maturity 25 April 2024 25 July 2024 25 July 2024 1st priority secu
Slide 24: Capital Allocation Framework
Capital Allocation Framework Maximizing liquidity top priority at this time • Credit Profile: (1) • Steady state: net leverage target of 2.0 to 2.5x • Current state: Exceeding steady state target amid economic downturn. Financial covenant does not apply if revolver draws (which exclude ancillary lin
Slide 25: FY20 – Financial Assumptions
FY20 – Financial Assumptions Capex $140M - $145M Depreciation & Amortization $95M - $100M Tax Rate 29% - 30% Debt Service (interest and scheduled debt repayments) $27M - $29M Basic Share Count at December 31, 2020 60.6M Sensitivities Working Capital(1) • $10/bbl change in average feedstock price cha
Slide 26: Historical Non-GAAP Metrics Reconciliation
Historical Non-GAAP Metrics Reconciliation Historical Non-GAAP Metrics Reconciliation ($million unless otherwise stated) Three Months Ended June 30 2019 2020 Revenue 399 203 Variable costs (1) -256 -129 Contribution Margin 143 74 Sales volume (in kmt) 270 157 Contribution Margin per Metric Ton 530 4
Slide 27: Historical Non-GAAP Metrics Reconciliation
Historical Non-GAAP Metrics Reconciliation Historical Non-GAAP Metrics Reconciliation ($million unless otherwise stated) Six Months Ended June 30, 2019 2020 Revenue 784 539 (1) Variable costs -504 -333 Contribution Margin 280 206 Sales volume (in kmt) 533 392 Contribution Margin per Metric Ton 525 5
Slide 28: Non-U.S. GAAP Metric Definitions
Non-U.S. GAAP Metric Definitions In this presentation we refer to Adjusted EBITDA, Contribution Margin, Contribution Margin per ton, Net Working Capital, Capital Expenditures and Adjusted EPS, which are financial measures that have not been prepared in accordance with Generally Accepted Accounting S
Slide 29: Investor Relations Contact Details
INVESTOR RELATIONS CONTACT DETAILS WENDY WILSON INVESTOR-RELATIONS@ORIONCARBONS.COM 29
Orion Engineered Carbons — Jefferies Virtual Industrials Conference 2020 on 6ix