Orion SA Q4 FY2024 earnings call

• 2024 overview: Finished 2024 with EBITDA just north of $300 million, surpassing the $300 million EBITDA mark for the third consecutive year despite soft rubber segment demand. - Sustainability: Achieved EcoVadis’s platinum rating, leading in the carbon black industry for production sites with ISCC PLUS certifications and second highest level in CDP's climate change and water security evaluation. - 2025 market backdrop: Markets were sideways, global auto builds were flattish, passenger car tire replacement demand was relatively stable, but elevated tire imports continued to pressure local production. - Execution strategy: Leaned into factors controllable, earned additional mandates in rubber segment for 2025, completed non - labor workforce reduction, expected operational challenges in China to be behind us in 2025, and focused on multiyear recovery in specialty segment with various levers. - Industry trends: Global trend towards reshoring of manufacturing activity, which is beneficial to the business as customers are willing to pay a premium for localized security of supply. - Cash flow and stock repurchase: Anticipated sharp improvement in cash flow, reinitiated share repurchase activity, bought back nearly $20 million worth of stock in 2024 since resuming in August, and continued buying in 2025.

Rubber segment: In the fourth quarter, late - quarter demand weakness led to 2% lower volumes year - over - year. The gross profit benefit from contractual base pricing was more than offset by regional mix, adverse timing on pass throughs and lower contribution from cogen. For the full year 2024, due to soft rubber demand, adverse cogen comparisons and inflationary costs, EBITDA was 9% lower. Specialty segment: In 2024, full - year volumes advanced 11%. In the fourth quarter, after flat year - over - year volumes in the third quarter, the business's multiyear recovery regained momentum with 9% year - over - year volume growth. The trailing 12 - month gross profit per ton graph illustrates a burgeoning inflection in the specialty business.

• 2025 adjusted EBITDA midpoint is about $310 million, representing about 7% to 8% constant currency growth assuming flat markets this year and no benefits from potential tariffs at least yet. - Adjusted EPS expected in the $1.45 to $1.90 range. - Free cash flow currently expected in the $40 million to $70 million range. - Anticipate free cash flow to more than double in 2026 with an additional $50 million reduction in growth CapEx once the conductive plant in La Porte, Texas is completed.

• Global industrial backdrop: Nearly two and a half years of PMI contraction in both North America and Europe. - Tire import distortion: Elevated levels of low value tire imports persisted through the end of 2024, weighing on local tire production. - Consumer behavior: Consumers trading down in tires due to mixed consumer confidence and lingering inflationary pressures. - Geopolitical uncertainty: Uncertainty regarding the new administration's trade policies and the return of sanctioned Russian carbon black products to Europe.

Q: On the guidance for 2025, how much of it is in control and how much needs markets to cooperate, and what drives the $20 million higher or lower?

A: Jeff Glajch said on the rubber side, expecting rubber volume increases around the mid - single digit range from additional lanes won with customers. On the specialty side, expecting some additional volume growth. There's about $10 million improvement in operations in China, another $10 million to $15 million between specialty and co - gen area, and about $5 million negative from additional variable comp cost. Corning Painter added that customers didn't put out significantly increased forecasts for 2025 on the rubber side, and imports could go up or down which is not in planning.

Q: Speak to perspective on supply addition in specialty blacks and end markets where carbon black intensity is changing?

A: Corning Painter said the biggest change in specialty from a market perspective is conductivity, with EV batteries, energy storage systems, high voltage wire and cable markets being relevant. Also, there are opportunities in more niche markets and for higher specification carbon black in certain applications like automotive top coat.

Q: Thoughts on supply addition in Russia, China and India and their operating rates in 2025?

A: Corning Painter said if there was peace in Europe, there might be some change in supply flows. Russian operating rates were likely down, China's capacity reporting was hard to read, India had some expansions with older plants having lower loading. Normalization in Europe could lead to retirement of older plants in India.

Q: Rubber volume was down 2% in the fourth quarter, what about unit tire volumes at retail in geographies?

A: Corning Painter said in North America tire sales were up, but U.S. TMA tire production was down significantly and tire imports were up significantly, which was the big story in rubber carbon black demand.

Q: How much can be devoted to share buybacks, update on La Porte and pressure from import markets?

A: Corning Painter said it's an opportunistic approach depending on business cash requirements and share price. La Porte plants were advancing, with equipment challenges, expected to finish late this year and qualify next year, and actively signing customers. Import markets still had pressure with no let up seen, and different regions had different import regimes affecting the business.

Q: On La Porte, earnings contribution in 2026 and normalization of Russia impact?

A: Corning Painter said La Porte would be negative in 2026 as it would have operating and labor costs. On Russia impact, he thought local supply in Europe would still be preferred, and it would be a shift in import sources, with Russian carbon black return concerns being overstated to some extent