OEC

• Overall Business Resilience: The company's overall business remains resilient despite oil price volatility and broad global macroeconomic uncertainty. Rising customer demand for de-risked local supply chains aligns with the company's local-for-local business model and geographic footprint, driving underlying demand strength. Cost reduction initiatives spanning headcount, procurement, and operational efficiency are on track to deliver $20 million in annualized gross benefits. - Working Capital and Cash Flow: The company generated positive free cash flow of $2 million in Q2, even amid a 29% sequential increase in average oil-based feedstock prices. Working capital improvements (inventory reduction and extended vendor payment terms) fully offset a projected $60 million working capital headwind from higher feedstock prices, generating $4 million in cash from working capital initiatives in the quarter. CAPEX declined $11 million sequentially to $25 million, ending the quarter with total liquidity of $178 million and a net debt-to-adjusted EBITDA ratio of 4.4x, which is comfortably below credit agreement requirements. - Trade and Secular Industry Tailwinds: The European Commission has finalized 24% to 45% anti-dumping duties on Chinese tire exports, and Chinese imports to the EU have already dropped 75% from 2026 peak levels ahead of the final ruling. U.S. tire imports have also declined year-over-year for four consecutive months, with multiple global tire manufacturers announcing new reshoring investments in North American production capacity. Long-term secular trends, including the shift to larger tires, higher wear from electric vehicles, the shift to all-season tires, and stricter durability standards in Europe, are expected to increase carbon black demand by raising content per tire or increasing replacement frequency. - Strategic Priorities: Management is focused on building long-term partnerships with growth-minded customers that value the company's local proximity, reliable supply, and operational dependability. The organization maintains a laser focus on key value-driving performance metrics, including operational reliability, earnings growth, and free cash flow generation.

• Management reaffirms the prior full-year 2026 adjusted EBITDA guidance range of $170 million to $210 million, which was raised in the prior quarter. - Management lifted the full-year 2026 free cash flow outlook, with the new midpoint of the guidance range at $5 million, representing a $43 million full-year improvement driven by successful working capital optimization efforts that have reduced headwinds from higher feedstock prices. - The guidance assumes an average Brent crude price of $80 per barrel in the second half of 2026, aligned with recent industry forecasts. - The impact of upcoming EU emissions credit regulations is already incorporated into the current full-year guidance.

1. Specialty Segment: Q2 adjusted EBITDA was $39 million, representing a 96% year-over-year increase and the highest adjusted EBITDA for the segment in four years. It contributed 67% of total company adjusted EBITDA in the quarter. Year-over-year volumes increased 5% overall, with nearly 10% volume growth in the EMEA and Americas regions. Double-digit growth was achieved in higher-value product lines serving coatings, wiring cable, packaging, and battery markets, while mid-single-digit growth was recorded for engineered plastics in the general polymer end market. Adjusted EBITDA for the segment improved 26% sequentially quarter-over-quarter, driven by proactive pricing actions, favorable product mix, and higher volumes. 2. Rubber Segment: Q2 adjusted EBITDA was $19 million, representing a 61% year-over-year decline but was flat sequentially quarter-over-quarter. It contributed 33% of total company adjusted EBITDA in the quarter. The year-over-year decline was primarily driven by lower 2026 contractual pricing agreements, unfavorable customer mix, and absorption impacts from intentional internal inventory reduction actions. Overall year-over-year volume declined, but the North American spot market for carbon black was unexpectedly strong, with demand exceeding available capacity in some instances. Tire production rates in key regions remain below historical averages, but sell-through rates are above production rates and import volumes are trending downward.

• Ongoing oil price volatility creates feedstock cost uncertainty that impacts working capital and profitability. - Broad global macroeconomic and geopolitical uncertainty creates a volatile operating backdrop. - Tire production rates in key geographic regions remain below historical norms, pressuring near-term rubber segment results. - Contract pricing for the rubber segment is competitively sensitive, creating uncertainty around final negotiation outcomes. - Seasonal demand weakness in Europe during the third quarter summer holiday period could pressure specialty segment results. - EU emissions credit regulatory changes are scheduled to take effect in the third quarter of 2026, introducing potential P&L and cash flow impacts.

Q: What is the current status of 2027 contract price negotiations for rubber segment products, and what key factors are shaping the talks? / A: Negotiations have begun with a subset of customers, following the typical industry sequencing for annual talks. The current market environment, which includes reduced Chinese tire imports, new regulatory trade actions, and unexpected tightness in the North American spot market, creates a more favorable setup than in prior years. Management noted that negotiations are competitively sensitive, and customers have recently seen first-hand the value of reliable local supply from Orion.

Q: How much of the recent gross profit per ton improvement in the specialty segment can be sustained into Q3, and will the extended vendor payment terms be retained? / A: The majority of the Q2 improvement came from higher volumes and favorable product mix, which have inherent quarterly variability that makes Q3 performance hard to forecast with certainty. Some of Q2's gain came from timing of pricing actions that is not expected to repeat, but management confirmed that the extended vendor payment terms achieved this year will be retained permanently going forward, as a lasting improvement for the business.

Q: Is current specialty segment pricing aligned with the $80 per barrel second half Brent price assumption in guidance, and how tight is the carbon black feedstock market relative to other petroleum products? / A: A portion of specialty pricing is formula-based that automatically adjusts with oil prices with a lag, while most pricing is open, with recent base price increases already implemented that management expects to maintain. The company has invested in sourcing flexibility across different feedstock types, so even if middle distillate feedstocks (which face broader market tightness) are more expensive, Orion can shift sourcing to mitigate cost increases, and no production disruptions from feedstock shortages are expected.

Q: What is the expected timing and financial impact of EU emissions credit regulations on Orion's second half results? / A: The implementation timing for the new regulations has shifted multiple times, and management now expects it to go into effect in Q3 2026. The best current estimate of the financial impact on both P&L and cash flow has already been fully incorporated into Orion's existing full-year 2026 guidance.