Orion SA Q2 FY2025 earnings call

• Jeff Glajch, Chief Financial Officer, to retire in Q4; formal search for new CFO underway. - Q2 adjusted EBITDA $69M in line with expectations; volumes up 3% YOY but down ~4.5% sequentially. - Improved manufacturing performance at plants due to operational excellence initiatives. - Demand headwinds in both segments: rubber affected by surge in tire imports; Specialty affected by tariff uncertainty, destocking, economic malaise. - Some profitable Specialty product lines resilient; progress with new customer qualifications for higher-growth grades. - Shuttered 3-5 production lines as part of portfolio optimization; focus on free cash flow improvement, including extracting $27M from working capital in Q2. - Shifted capital allocation priority to debt reduction over share repurchases.

Rubber business: Volumes up 7% year-over-year, adjusted EBITDA up 4%. Specialty: Volumes down 8% year-over-year and 6% sequentially due to soft demand from macro backdrop, tariff uncertainty, etc. Rubber volume gains were skewed towards lower-margin regions. Specialty was affected by soft demand in manufacturing sectors, with some profitable product lines showing resilience.

• Narrowing adjusted EBITDA guidance by reducing the high end of prior range. - Maintaining free cash flow expectation of $40 million to $70 million at midpoint. - Focus on debt reduction over share repurchases at least in near term. - Expect Q1 increase in receivables to reverse in Q4, with working capital actions and lower CapEx underpinning free cash flow targets.

• Surge of tire imports into U.S. weighing on local tire manufacturing rates and rubber demand. - Uncertainty from lack of tariff clarity, destocking in polymer end markets, and economic malaise affecting Specialty segment. - Potential impact of Indian tariffs on carbon black imports into U.S. - Elevated tire channel inventories due to recent import surge.

Q: How much of the step-up in earnings in the second half of the year compared to Q2 is volume growth vs self-help?

A: Excluding inventory revaluation, Q2 was closer to mid-70s. Volume growth not expected to be a big step-up; more from normalization and cost actions.

Q: Actions to hit cash balance target?

A: Levers include receivables (already improved), inventory (further reduction possible, with some build-up before Q4 shutdowns), and payables (ongoing activities).

Q: Expectations for Q4, seasonal downtick or different due to tariff certainty?

A: Uncertain, but possibility of stronger Q4 given tariff paradigm, though cautiousness may still exist.

Q: Tariffs and production return to Mexico vs U.S.?

A: Production not expected to revert more to Mexico than U.S.; broadly felt.

Q: Implication of Slide 4 regarding import excess and market rebalancing?

A: Any downward movement in import rates is improvement for customers, with inventories expected to be burned down over remainder of year.