Part I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Orion S.A. is a global leader in Specialty and Rubber Carbon Black manufacturing, operating 14 facilities and managing cost volatility - Orion S.A. is a leading global manufacturer of **carbon black**, used as additives for polymers, batteries, inks, coatings (Specialty), and tires/rubber (Rubber Carbon Black)[19](index=19&type=chunk) - The company operates **14 wholly-owned and one jointly-owned production facilities** across Europe, Americas, South Africa, and Asia, with its principal R&D center in Cologne, Germany[20](index=20&type=chunk)[50](index=50&type=chunk) - Orion's business is organized into two reportable segments: **Specialty Carbon Black** and **Rubber Carbon Black**[21](index=21&type=chunk) [Overview](index=5&type=section&id=1.1%20Overview) Orion S.A., incorporated in Luxembourg in 2014, is a global leader in carbon black manufacturing, producing Specialty and Rubber Carbon Black across 14 wholly-owned and one jointly-owned facilities worldwide - Orion S.A. is a Luxembourg joint stock corporation, incorporated in **2014**, with its principal executive office in Spring, Texas, U.S[18](index=18&type=chunk) - The company is a leading global manufacturer of **carbon black products**, primarily used as additives for Specialty Carbon Black (polymers, batteries, inks, coatings) and Rubber Carbon Black (tires, rubber applications)[19](index=19&type=chunk) - Orion operates **14 wholly-owned production facilities** and **one jointly-owned facility** across Europe, North and South America, South Africa, and Asia[20](index=20&type=chunk) [Products and Applications](index=5&type=section&id=1.2%20Products%20and%20Applications) Orion manufactures Specialty Carbon Black for coatings, polymers, inks, and batteries, and Rubber Carbon Black for tires and mechanical rubber goods, enhancing properties like color, conductivity, and durability - Specialty Carbon Black is manufactured for polymers, batteries, printing, and coatings, with grades varying in particle size, structure, surface area, and chemistry to affect properties like jetness, tinting strength, dispersibility, and electrical conductivity[24](index=24&type=chunk)[25](index=25&type=chunk) - Applications for Specialty Carbon Black include automotive base coats, architectural coatings, pipes, power cables, printing inks, and conductive additives for lithium-ion, lead-acid, and dry cell batteries[27](index=27&type=chunk)[28](index=28&type=chunk)[33](index=33&type=chunk) - Rubber Carbon Black products are used in tires (tread durability, rolling resistance, traction) and mechanical rubber goods (physical strength, fluid resistance, conductivity) for automotive, construction, food, consumer, and medical applications[30](index=30&type=chunk)[34](index=34&type=chunk) [Drivers of Demand](index=6&type=section&id=1.3%20Drivers%20of%20Demand) Demand for Specialty Carbon Black is driven by growth in coatings, polymers, printing, and battery industries, while Rubber Carbon Black demand is tied to automotive tire and mechanical rubber goods industries - Specialty Carbon Black demand is driven by growth in coatings, polymers, printing, and battery industries, influenced by industrialization, automotive OEM demand, infrastructure, consumer spending, and electric vehicle penetration[33](index=33&type=chunk) - Rubber Carbon Black demand is largely driven by the automotive tire, commercial tire, and mechanical rubber goods (MRG) industries, influenced by replacement and OEM tire production, miles driven, and regulatory requirements[33](index=33&type=chunk)[35](index=35&type=chunk) [Customer Contracts](index=7&type=section&id=1.4%20Customer%20Contracts) Approximately 65% of Orion's global volume is covered by long-term indexed contracts with formula-driven price adjustments for raw material and energy costs, while non-indexed contracts are regularly reviewed - Approximately **65% of Orion's global volume** is covered by indexed contracts with monthly or quarterly automatic feedstock and/or energy cost adjustments[42](index=42&type=chunk) - Non-indexed contracts, typically shorter than three months, have sales prices reviewed regularly to reflect raw material and energy price fluctuations and overall market conditions[42](index=42&type=chunk) - These contracts help reduce the impact of oil price fluctuations on margins, but rapid and significant changes can still affect earnings due to non-indexed contracts and varying productivity improvements[36](index=36&type=chunk) [Raw Materials](index=7&type=section&id=1.5%20Raw%20Materials) The primary raw material for carbon black is carbon black oil, derived from petroleum refining, coal tar distillation, and ethylene production, with supply largely covered by contracts, alongside natural gas and acetylene gas - The principal raw material for carbon black is **carbon black oil**, a residual heavy oil from petroleum refining, coal tar distillation, and ethylene production[38](index=38&type=chunk) - The majority of carbon black oil supply is covered by short and long-term contracts with diverse suppliers[38](index=38&type=chunk) - Natural gas is also used, and some grades are produced from acetylene gas, with costs influenced by raw material availability, supply/demand, and transportation[38](index=38&type=chunk) [Seasonality](index=7&type=section&id=1.6%20Seasonality) Orion's business is generally not seasonal, though operating results typically show weaker performance in the last three months of the calendar year - The business is generally not seasonal, but results are typically weaker in the last three months of the calendar year[39](index=39&type=chunk) [Innovation](index=7&type=section&id=1.7%20Innovation) Orion maintains a strong reputation for carbon black product and process technology, driven by its Innovation Group's collaboration with customers and manufacturing to develop tailored solutions and advance bio-circular feedstocks - Orion has a long-standing reputation for carbon black product and process technology, applications knowledge, and innovation, with product innovations being a key competitive factor[40](index=40&type=chunk) - The Innovation Group, with centers in Europe, Asia, and the Americas, focuses on applications technology (customer collaboration, new product development) and process development (production improvement, bio-circular feedstocks)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - Intellectual property development and management, including patents and trademarks, are considered a strategic competitive advantage, though some rights are subject to historical agreements with Evonik Industries AG[46](index=46&type=chunk)[47](index=47&type=chunk) [Human Capital](index=8&type=section&id=1.8%20Human%20Capital) Orion's success relies on attracting, developing, and retaining a talented global workforce of approximately 1,658 employees, fostering a positive culture through training, mentoring, and succession planning - Orion's success depends on attracting, recruiting, training, and developing a talented global workforce of approximately **1,658 employees**[48](index=48&type=chunk)[50](index=50&type=chunk) - The company's talent programs include formal learning, on-the-job training, mentoring, succession planning, empowerment groups, and performance reviews, with a focus on promoting from within[51](index=51&type=chunk)[52](index=52&type=chunk) - Approximately **66% of employees** are covered by collective bargaining agreements, and the company reports stable relations with low voluntary turnover[54](index=54&type=chunk) [Environmental, Health and Safety Matters](index=9&type=section&id=1.9%20Environmental%2C%20Health%20and%20Safety%20Matters) Orion is committed to continuous improvement in EHSS performance, adhering to global management systems, actively managing air and water quality, waste, and chemical regulations, while addressing product stewardship concerns - Orion's integrated global management system is based on Responsible Care 14001, ISO 9001, ISO 14001, and ISO 45001 standards, with all operating sites third-party certified to ISO 14001 and ISO 9001[55](index=55&type=chunk) - The company manages air quality challenges by controlling exhaust gases (CO, NOx, sulfur compounds) through combustion and utilizing de-NOx and desulfurization processes, with **eleven sites capable of energy co-generation**[58](index=58&type=chunk)[59](index=59&type=chunk) - Orion's facilities emit significant volumes of CO2 and are subject to emissions trading systems (EU ETS, South Korean ETS) and other GHG regulations, which may require purchasing emission rights or incurring capital expenditures for emission reduction[64](index=64&type=chunk)[65](index=65&type=chunk) - Carbon black is classified by IARC as a **Group 2B substance** (possible human carcinogen) and as a nanomaterial in Europe, leading to ongoing regulatory scrutiny and potential for increased operating costs or sales restrictions[78](index=78&type=chunk)[79](index=79&type=chunk)[81](index=81&type=chunk) [Item 1A. Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) Orion faces diverse risks including global economic conditions, operational hazards, regulatory compliance, financial leverage, and stock ownership - Operations are materially connected to worldwide economic conditions, with demand for carbon black historically linked to GDP and cyclical industries like automotive and construction[84](index=84&type=chunk) - The company is exposed to operational hazards inherent in chemicals manufacturing, including fires, explosions, accidents, natural disasters, and supply chain disruptions, which could lead to significant expenditures and liabilities[89](index=89&type=chunk)[90](index=90&type=chunk) - Orion is subject to extensive environmental, health, and safety laws and regulations, with potential for significant compliance costs, remediation obligations, fines, and litigation, especially concerning air emissions, GHG, and chemical product classifications[115](index=115&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk) - The company's financial leverage, restrictive debt covenants, and potential credit rating downgrades could limit its financial flexibility, increase borrowing costs, and impact its ability to fund operations and growth[138](index=138&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) [Risks Related to Our Business](index=12&type=section&id=1.1A.1%20Risks%20Related%20to%20Our%20Business) Orion's business is vulnerable to global economic downturns, operational disruptions, dependence on concentrated customers, intense competition, raw material cost volatility, geopolitical conflicts, and cybersecurity threats - Negative worldwide economic conditions, particularly in the cyclical automotive and construction industries, can reduce demand and materially affect profitability due to the company's large fixed asset base[84](index=84&type=chunk) - Operational risks in chemicals manufacturing, including technical difficulties, natural disasters, and supply chain interruptions, can disrupt production and lead to significant financial liabilities[89](index=89&type=chunk)[90](index=90&type=chunk) - The company is dependent on its top ten customers, who accounted for approximately **47% of its volume in 2024**, making it vulnerable to changes in these relationships or industry consolidation[91](index=91&type=chunk) - Volatility in raw material (carbon black oil, natural gas) and energy costs, exacerbated by geopolitical conflicts (Russia-Ukraine, Hamas-Israel, China-Taiwan tensions), poses a significant risk, as the company may not always be able to pass through cost increases to customers[99](index=99&type=chunk)[100](index=100&type=chunk)[103](index=103&type=chunk)[111](index=111&type=chunk) - Information technology systems failures, network disruptions, and cybersecurity attacks could disrupt production, impede transaction processing, compromise data, and lead to increased costs and reputational damage[106](index=106&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) [Risks Related to Legal and Regulatory Matters](index=15&type=section&id=1.1A.2%20Legal%20and%20Regulatory%20Risks) Orion's operations are subject to extensive and evolving EHS laws, including those related to GHG emissions, air and water quality, and waste management, which could lead to significant compliance costs, remediation liabilities, and litigation - The company is subject to extensive EHS laws and regulations, requiring permits and compliance with stringent standards, with potential for significant costs, fines, and liabilities for violations or environmental damage[115](index=115&type=chunk)[116](index=116&type=chunk) - Regulations requiring greenhouse gas (GHG) emission reductions or imposing taxes/fees on emissions could significantly impact the business, requiring costly measures like new technology or purchasing carbon allowances[121](index=121&type=chunk)[122](index=122&type=chunk) - Carbon black's classification as a possible human carcinogen by IARC and a nanomaterial by EU regulations could lead to more stringent controls, increased compliance costs, and adverse effects on reputation and sales[120](index=120&type=chunk)[124](index=124&type=chunk) - Litigation or legal proceedings, including product liability, environmental, or asbestos-related claims, could expose the company to significant liabilities and adversely affect financial results[130](index=130&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk) - The inability to successfully protect intellectual property rights, including patents and trade secrets, particularly in countries with less effective enforcement, could limit technological advantages and reduce future profits[134](index=134&type=chunk) [Risks Related to Indebtedness, Currency Exposure and Other Financial Matters](index=21&type=section&id=1.1A.3%20Risks%20Related%20to%20Indebtedness%2C%20Currency%20Exposure%20and%20Other%20Financial%20Matters) Orion's significant financial leverage and debt service obligations may restrict cash flow and increase vulnerability to economic downturns, while foreign currency and interest rate fluctuations can impact financial results - Significant financial leverage requires a substantial portion of cash flow for debt service, reducing funds for growth, capital expenditures, and dividends, and increasing vulnerability to economic downturns[138](index=138&type=chunk) - Restrictive covenants in debt instruments limit the company's ability to merge, sell assets, pay dividends, or make acquisitions, and non-compliance could trigger defaults[140](index=140&type=chunk) - Fluctuations in foreign currency exchange rates (especially USD vs. Euro, Korean Won, Chinese Renminbi) and interest rates can materially affect financial results, despite hedging strategies[143](index=143&type=chunk)[144](index=144&type=chunk) - Challenges from tax authorities regarding decisions and assumptions in assessing tax obligations, or significant changes in jurisdictional earnings mix or tax laws, could lead to additional tax payments and adversely affect financial condition[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) [Risks Related to Ownership of our Common Stock](index=24&type=section&id=1.1A.4%20Risks%20Related%20to%20Ownership%20of%20our%20Common%20Stock) Investors cannot be assured of dividend payments, and stockholder rights under Luxembourg law may differ from U.S. laws, potentially offering less protection and making U.S. judgment enforcement difficult - The ability to pay dividends on common stock is not assured and depends on financial condition, future operations, growth opportunities, and debt covenants[155](index=155&type=chunk) - Stockholder rights under Luxembourg law may differ from U.S. corporate law, potentially offering less protection to minority stockholders[156](index=156&type=chunk) - Enforcing U.S. judgments or bringing original actions against Orion S.A. (a Luxembourg entity) or its non-U.S. directors in the U.S. or outside Luxembourg may be difficult due to the lack of a direct treaty and differing legal procedures[157](index=157&type=chunk)[158](index=158&type=chunk)[160](index=160&type=chunk) - Luxembourg and European insolvency and bankruptcy laws are substantially different from U.S. laws and may offer stockholders less protection[162](index=162&type=chunk) [General Risk Factors](index=25&type=section&id=1.1A.5%20General%20Risk%20Factors) General risks include potential strikes and work stoppages if negotiations with employee representatives are unsuccessful, the inability to recruit and retain key personnel, and disruptions in credit and capital markets - Failure to successfully negotiate with employee representatives, including labor unions and works councils, could lead to strikes and work stoppages, adversely affecting the business[163](index=163&type=chunk) - The inability to recruit or retain key management and personnel could hinder the implementation of business strategy and materially affect financial results[164](index=164&type=chunk) - Disruptions in credit and capital markets could make it difficult for Orion and its suppliers/customers to borrow money or raise capital, potentially impacting sales, increasing bad debt exposure, and raising raw material prices[165](index=165&type=chunk)[166](index=166&type=chunk) [Item 1B. Unresolved Staff Comments](index=25&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report [Item 1C. Cybersecurity](index=26&type=section&id=Item%201C.%20Cybersecurity) Orion protects its IT and OT environments through industry-standard security technologies, processes, and organizational design, led by a CISO with Board oversight, acknowledging ongoing cyber risks - Orion is committed to protecting IT and OT environments using industry practices, including security technologies (firewalls, intrusion detection, encryption), regular system updates, and vulnerability assessments[168](index=168&type=chunk)[169](index=169&type=chunk) - The Chief Information Security Officer (CISO) leads cybersecurity risk management and the Cyber Emergency Response Team, with oversight from the Audit Committee and Board of Directors[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - The company conducts vulnerability and security assessments, penetration testing, and scenario-based evaluations, benchmarking against standards like NIST, and has a continuous security improvement process[169](index=169&type=chunk) - Risks from prior cybersecurity threats have not materially affected the business to date, but the company acknowledges ongoing material cybersecurity risks[173](index=173&type=chunk) [Item 2. Properties](index=27&type=section&id=Item%202.%20Properties) Orion operates 14 wholly-owned production facilities and one jointly-owned facility across Europe, North and South America, South Africa, and Asia, with most facilities ISO 9001 and ISO 14001 certified - Orion operates **14 wholly-owned production facilities** (excluding one under construction in La Porte, Texas) and **one jointly-owned facility** in Dortmund, Germany[175](index=175&type=chunk) - These facilities are located across Europe, North and South America, South Africa, and Asia[175](index=175&type=chunk) - Most production facilities are ISO 9001 (Quality Management) and ISO 14001 (Environmental Management) certified[175](index=175&type=chunk) [Item 3. Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) Orion is periodically involved in various claims and lawsuits, including contract disputes, environmental damages, personal injury, and asbestos litigation, but believes the aggregate outcome will not materially adversely affect its financial condition - Orion is involved in various claims and lawsuits, such as product-related claims, liability claims, employment-related claims, and asbestos litigation[176](index=176&type=chunk) - The company believes the aggregate outcome of these proceedings will not have a material adverse effect on its financial condition, but may be material to operating results and cash flow for any particular period[176](index=176&type=chunk) - The outcome of legal proceedings is inherently uncertain, and no assurances are offered regarding their effect on the company[176](index=176&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Orion S.A Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=28&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Orion S.A.'s common stock is listed on the NYSE under 'OEC', with approximately 11 record holders, and the company has an active stock repurchase program, with 496,883 shares repurchased in Q4 2024 - Orion S.A.'s common stock is listed on the New York Stock Exchange (NYSE) under the symbol **"OEC"**[178](index=178&type=chunk) - As of February 14, 2025, there were approximately **11 record holders** of common stock, with a substantially greater number of beneficial holders[179](index=179&type=chunk) - The Board of Directors, upon stockholder approval, determines dividend payments based on financial condition, earnings, cash flows, debt service, capital requirements, and business plans[182](index=182&type=chunk) - A stock repurchase program, approved on May 5, 2023, authorizes the purchase of up to approximately **6.9 million shares** of common stock through June 2027[184](index=184&type=chunk) Common Stock Repurchases (Q4 2024) | Period | Total shares purchased | Average price per share | Max shares yet to be purchased | |:---|:---|:---|:---| | October 1 – 31, 2024 | — | $ — | 5,384,875 | | November 1 – 30, 2024 | 164,912 | $18.00 | 5,219,963 | | December 1 – 31, 2024 | 331,971 | $16.86 | 4,887,992 | | **Q4 2024 Total** | **496,883** | | **4,887,992** | [Item 6. Reserved](index=29&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Orion's 2024 financial performance saw decreased net income and Adjusted EBITDA due to a criminal misappropriation scheme and demand softening in Rubber Carbon Black, despite Specialty Carbon Black recovery Key Financial Highlights (2024 vs 2023) | Metric | 2024 (in millions, except volume) | 2023 (in millions, except volume) | Delta | Year-Over-Year % Change | |:---|:---|:---|:---|:---|\ | Volume (kmt) | 934.8 | 932.1 | 2.7 | 0.3% | | Net sales | $1,877.5 | $1,893.9 | $(16.4) | (0.9)% | | Gross profit | $428.8 | $451.0 | $(22.2) | (4.9)% | | Selling, general and administrative expenses | $237.8 | $221.9 | $15.9 | 7.2% | | Research and development costs | $27.1 | $24.5 | $2.6 | 10.6% | | Loss due to misappropriation of assets, net | $59.3 | $— | $59.3 | —% | | Income from operations | $102.7 | $205.3 | $(102.6) | (50.0)% | | Net income | $44.2 | $103.5 | $(59.3) | (57.3)% | | Adjusted EBITDA | $302.2 | $332.3 | $(30.1) | (9.1)% | - Net income in 2024 was significantly impacted by a criminal scheme resulting in **$42.9 million** (net of tax benefit) in fraudulently-induced wire transfers[196](index=196&type=chunk) - Adjusted EBITDA decreased primarily due to demand softening in the Rubber Carbon Black segment, higher fixed costs, and lower cogeneration, partially offset by improved demand in Specialty Carbon Black[197](index=197&type=chunk)[215](index=215&type=chunk) [Overview](index=30&type=section&id=2.7.1%20Overview) In 2024, Orion reported net sales of $1,877.5 million, a sales volume of 934.8 kmt, net income of $44.2 million, and Adjusted EBITDA of $302.2 million - In 2024, net sales were **$1,877.5 million**, sales volume was **934.8 kmt**, net income was **$44.2 million**, and Adjusted EBITDA was **$302.2 million**[193](index=193&type=chunk) [Key Factors Affecting Our Results of Operations](index=30&type=section&id=2.7.2%20Key%20Factors%20Affecting%20Our%20Results%20of%20Operations) Orion's operating results and financial condition are materially affected by factors largely beyond its control, including volatile global economic conditions and raw material prices - Results of operations and financial condition are materially affected by factors beyond the company's control, including volatile global economic conditions[194](index=194&type=chunk) - Past performance is not necessarily indicative of future performance due to the volatility of these factors[194](index=194&type=chunk) [Recent Developments and Certain Known Trends](index=30&type=section&id=2.7.3%20Recent%20Developments%20and%20Certain%20Known%20Trends) In 2024, Rubber Carbon Black markets faced headwinds while Specialty Carbon Black saw demand recovery, with net income impacted by a criminal misappropriation scheme and Adjusted EBITDA decreasing due to segment softening and higher fixed costs - In 2024, Rubber Carbon Black markets experienced headwinds from soft global demand, capacity additions, economic uncertainty, and higher tire imports in the U.S. and Europe[195](index=195&type=chunk) - Specialty Carbon Black segment benefited from demand recovery across all regions[195](index=195&type=chunk)[197](index=197&type=chunk) - Net income was adversely impacted by a criminal scheme involving **$42.9 million** in fraudulently-induced wire transfers (net of $16.4 million tax benefit)[196](index=196&type=chunk) - Adjusted EBITDA decreased due to demand softening in Rubber Carbon Black, higher fixed costs, and lower cogeneration, despite improved Specialty Carbon Black demand[197](index=197&type=chunk) - Volatility in carbon black feedstock prices, influenced by geopolitical considerations (e.g., Russia-Ukraine war, Middle-East conflicts), is mitigated by raw material cost pass-through provisions and multiple sourcing strategies[198](index=198&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=30&type=section&id=2.7.4%20Reconciliation%20of%20Non-GAAP%20Financial%20Measures) Orion presents non-GAAP financial measures like Adjusted EBITDA, Net Working Capital, and Capital Expenditures to provide additional insight into operational performance and facilitate period-to-period comparisons, though they are not GAAP substitutes - Orion presents non-GAAP financial measures, including Adjusted EBITDA, Net Working Capital, and Capital Expenditures, to provide additional insight into operational performance[199](index=199&type=chunk)[201](index=201&type=chunk) - Adjusted EBITDA is defined as Income from operations before depreciation and amortization, stock-based compensation, and non-recurring items, plus Earnings in affiliated companies, net of tax[201](index=201&type=chunk) - These non-GAAP measures are used by the Chief Operating Decision Maker (CODM) to evaluate operating performance and allocate capital, facilitating comparisons by eliminating differences from depreciation, financing, and taxation[201](index=201&type=chunk) Reconciliation of Net Income to Adjusted EBITDA (2024 vs 2023) | Metric | 2024 (in millions) | 2023 (in millions) | Delta | Year-Over-Year % Change | |:---|:---|:---|:---|:---|\ | Net income | $44.2 | $103.5 | $(59.3) | (57.3)% | | Add back Income tax (benefit) expense | $9.7 | $60.3 | $(50.6) | (83.9)% | | Income from operations | $102.7 | $205.3 | $(102.6) | (50.0)% | | Add back Depreciation & amortization | $125.3 | $113.0 | $12.3 | 10.9% | | EBITDA | $228.0 | $318.3 | $(90.3) | (28.4)% | | Loss due to misappropriation of assets, net | $59.3 | $— | $59.3 | —% | | **Adjusted EBITDA** | **$302.2** | **$332.3** | **$(30.1)** | **(9.1)%** | [Operating Results (2024 Compared to 2023)](index=31&type=section&id=2.7.5%20Operating%20Results%20(2024%20Compared%20to%202023)) In 2024, Orion experienced a slight decrease in net sales and a significant drop in net income and Adjusted EBITDA compared to 2023, primarily driven by a criminal misappropriation of assets and higher fixed costs Consolidated Operating Results (2024 vs 2023) | Metric | 2024 (in millions) | 2023 (in millions) | Delta | Year-Over-Year % Change | |:---|:---|:---|:---|:---|\ | Volume (kmt) | 934.8 | 932.1 | 2.7 | 0.3% | | Net sales | $1,877.5 | $1,893.9 | $(16.4) | (0.9)% | | Cost of sales | $1,448.7 | $1,442.9 | $5.8 | 0.4% | | Gross profit | $428.8 | $451.0 | $(22.2) | (4.9)% | | Selling, general and administrative expenses | $237.8 | $221.9 | $15.9 | 7.2% | | Research and development costs | $27.1 | $24.5 | $2.6 | 10.6% | | Loss due to misappropriation of assets, net | $59.3 | $— | $59.3 | —% | | Income from operations | $102.7 | $205.3 | $(102.6) | (50.0)% | | Income tax expense | $9.7 | $60.3 | $(50.6) | (83.9)% | | Net income | $44.2 | $103.5 | $(59.3) | (57.3)% | | Comprehensive income | $14.2 | $76.1 | $(61.9) | (81.3)% | - Net sales decreased marginally by **0.9% to $1,877.5 million**, driven by lower oil price pass-through, lower Rubber Carbon Black volume, and unfavorable foreign currency, partially offset by Specialty Carbon Black recovery[207](index=207&type=chunk) - Gross profit decreased by **4.9% to $428.8 million**, primarily due to higher fixed costs, unfavorable raw material cost pass-through, and lower cogeneration[209](index=209&type=chunk) - A **$55.7 million loss** (net of recoveries) and **$3.6 million** in professional fees were recognized due to a criminal misappropriation scheme in Q3 2024[211](index=211&type=chunk)[212](index=212&type=chunk) - Income tax expense decreased significantly by **83.9% to $9.7 million**, with the effective tax rate falling to **18.0%** (from 36.9% in 2023) due to the release of uncertain tax positions ($13.3 million) and benefits from changes in U.S. international tax laws ($9.6 million)[213](index=213&type=chunk)[214](index=214&type=chunk)[458](index=458&type=chunk) [Segment Discussion](index=33&type=section&id=2.7.6%20Segment%20Discussion) In 2024, Specialty Carbon Black saw increased volume and net sales but a slight Adjusted EBITDA decrease, while Rubber Carbon Black experienced volume and net sales declines, leading to a significant Adjusted EBITDA drop Segment Performance (2024 vs 2023) | Metric | Specialty Carbon Black 2024 | Specialty Carbon Black 2023 | Rubber Carbon Black 2024 | Rubber Carbon Black 2023 | |:---|:---|:---|:---|:---|\ | Volume (kmt) | 245.8 | 221.4 | 689.0 | 710.7 | | Net sales (in millions) | $646.3 | $610.6 | $1,231.2 | $1,283.3 | | Gross profit (in millions) | $151.9 | $160.3 | $276.9 | $290.7 | | Adjusted EBITDA (in millions) | $108.1 | $110.7 | $194.1 | $221.6 | - Specialty Carbon Black volume increased by **11.0%** due to demand recovery across all regions and end markets, leading to a **5.8% increase in net sales**[219](index=219&type=chunk)[220](index=220&type=chunk) - Specialty Carbon Black Adjusted EBITDA decreased by **2.3%** due to higher fixed costs and lower cogeneration, partially offset by higher volume[221](index=221&type=chunk) - Rubber Carbon Black volume decreased by **3.1%** primarily due to lower demand in the Americas region, resulting in a **4.1% decrease in net sales**[222](index=222&type=chunk) - Rubber Carbon Black Adjusted EBITDA decreased by **12.4%** due to lower volume in the Americas, lower cogeneration, and higher fixed costs, partially offset by favorable pricing[224](index=224&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=2.7.7%20Liquidity%20and%20Capital%20Resources) Orion's net cash from operating activities significantly decreased in 2024, while cash used in investing activities increased, primarily for the La Porte facility, and financing activities shifted to a net inflow from borrowings Historical Cash Flows (2024 vs 2023) | Cash Flow Activity | 2024 (in millions) | 2023 (in millions) | |:---|:---|:---|\ | Net cash provided by operating activities | $125.3 | $345.9 | | Net cash used in investing activities | $(206.7) | $(172.8) | | Net cash provided by (used in) financing activities | $89.3 | $(197.1) | - Cash provided by operating activities decreased significantly, reflecting net income adjusted for non-cash items and working capital changes, including the **$55.7 million misappropriation loss** and **$3.6 million** in related professional fees[227](index=227&type=chunk) - Cash used in investing activities increased to **$206.7 million**, primarily for maintenance and growth investments, including **$66.4 million** for the La Porte, Texas facility[228](index=228&type=chunk) - Net cash provided by financing activities was **$89.3 million**, driven by **$68.2 million** in net borrowings under ancillary credit facilities and **$48.0 million** in other short-term debt, partially offset by debt repayments and share repurchases[229](index=229&type=chunk) - As of December 31, 2024, total liquidity was **$201.6 million**, comprising **$44.2 million** in cash, **$127.5 million** in revolving credit facility availability, and **$29.9 million** in other credit lines[232](index=232&type=chunk) - Net Working Capital increased slightly to **$346.1 million** (from $344.4 million in 2023), influenced by improved payment terms and factoring of receivables, partially offset by a decrease in accounts payable[233](index=233&type=chunk)[234](index=234&type=chunk) - Gross debt increased by **$90.5 million to $908.7 million** as of December 31, 2024, with **$8.7 million** of long-term debt scheduled for repayment in 2025[236](index=236&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=2.7.8%20Critical%20Accounting%20Policies%20and%20Estimates) Orion's critical accounting policies involve significant management judgments and estimates for inventories, loss contingencies, and income tax accruals, which are inherently uncertain and can materially affect financial results - Inventories are valued at the lower of cost or net realizable value using the average cost method, with periodic reviews for obsolescence and price declines[240](index=240&type=chunk)[241](index=241&type=chunk) - Loss contingencies are recorded when probable and reasonably estimable, with disclosures for material potential losses, and are subject to inherent uncertainties in estimation[242](index=242&type=chunk) - Accruals for income taxes involve significant judgment in determining provisions, deferred tax assets/liabilities (with valuation allowances), and uncertain tax positions, which are recognized when more likely than not to be sustained[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) [Accounting and Reporting Changes](index=36&type=section&id=2.7.9%20Accounting%20and%20Reporting%20Changes) Orion adopted ASU No. 2023-07 (Segment Reporting) on January 1, 2024, with no material impact, and upcoming ASUs are expected to require additional footnotes but not materially impact financial statements - Orion adopted ASU No. 2023-07, Segment Reporting, on January 1, 2024, which did not have a material impact on its Consolidated Financial Statements[353](index=353&type=chunk)[354](index=354&type=chunk) - Upcoming ASUs (2024-03, 2025-01) will require disaggregated expense disclosures in footnotes, and ASU No. 2023-09 will require improved income tax disclosures, but neither is expected to materially impact the Consolidated Financial Statements[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Orion is exposed to market risks from foreign exchange, interest rates, and commodity prices, which it manages through a systematic financial and risk management system, primarily using derivative financial instruments for hedging - Orion's primary market risk exposures relate to foreign exchange, interest rate, and commodity risks[249](index=249&type=chunk) - Derivative financial instruments are used solely for hedging these risks, not for speculative purposes, as part of a systematic financial and risk management system[249](index=249&type=chunk) [Interest Rate Risk](index=37&type=section&id=2.7A.1%20Interest%20Rate%20Risk) Orion is exposed to interest rate risk from new liabilities and variable interest rate term loans, which it mitigates using hedging instruments, with a hypothetical 50 basis point fluctuation impacting interest expense by $2.3 million to $3.0 million - Orion is exposed to interest rate risk from incurring new liabilities and variable interest rate term loans[251](index=251&type=chunk) - Appropriate hedging instruments are in place to mitigate exposure to increasing interest rates[251](index=251&type=chunk) Interest Rate Sensitivity (December 31, 2024) | Scenario | (Increase) decrease in interest expense (in millions) | (Increase) decrease in total comprehensive income before taxes (in millions) | |:---|:---|:---|\ | 0.50% increase in interest rate | $(2.3) | $2.3 | | 0.50% decrease in interest rate | $3.0 | $(3.0) | [Foreign Currency Risk](index=37&type=section&id=2.7A.2%20Foreign%20Currency%20Risk) Orion's financial results are significantly impacted by fluctuations in the U.S. dollar relative to other currencies, particularly the euro, Korean won, and Chinese renminbi, which the company manages through operating activities and selective derivative transactions - A significant portion of Orion's reporting entities use the euro as their functional currency, and the reporting currency is the U.S. dollar, leading to translation gains or losses deferred in Accumulated other comprehensive income[254](index=254&type=chunk) - Fluctuations in the U.S. dollar relative to other currencies (euro, Korean won, Chinese renminbi) materially affect financial results[143](index=143&type=chunk)[254](index=254&type=chunk) - Foreign exchange contracts and cross-currency swaps are used to minimize the effects of net currency exchange exposures, with a policy to maintain a balanced position in foreign currencies[256](index=256&type=chunk) Foreign Currency Sensitivity (December 31, 2024) | Scenario (Value of USD in relation to EUR) | FX gain (loss) in financial result (in millions) | |:---|:---|\ | Increase by 10% | $8.5 | | Decrease by 10% | $(10.4) | [Commodity Risk](index=38&type=section&id=2.7A.3%20Commodity%20Risk) Orion faces commodity risk from changes in market prices for raw materials, primarily carbon black oil, which it mitigates through worldwide purchasing activities and formula-driven price adjustment mechanisms covering approximately 65% of sales volume - Commodity risk results from changes in market prices for raw materials, mainly carbon black oil, which have fluctuated significantly[261](index=261&type=chunk) - Purchasing risks are reduced through worldwide purchasing activities and optimized processes for raw materials[261](index=261&type=chunk) - Approximately **65% of sales volume** is based on formula-driven price adjustment mechanisms for raw material costs, which helps maintain segment margins[262](index=262&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Orion S.A.'s audited consolidated financial statements for 2024, 2023, and 2022, including statements of operations, comprehensive income, balance sheets, cash flows, and changes in stockholders' equity, along with detailed notes and the independent auditor's report - The consolidated financial statements for Orion S.A. as of December 31, 2024 and 2023, and for the three years ended December 31, 2024, are presented in conformity with U.S. GAAP[268](index=268&type=chunk)[298](index=298&type=chunk) - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements and on the effectiveness of internal control over financial reporting as of December 31, 2024[268](index=268&type=chunk)[269](index=269&type=chunk)[508](index=508&type=chunk)[509](index=509&type=chunk) Consolidated Statements of Operations (2024, 2023, 2022) | Metric (in millions, except per share data) | 2024 | 2023 | 2022 | |:---|:---|:---|:---|\ | Net sales | $1,877.5 | $1,893.9 | $2,030.9 | | Gross profit | $428.8 | $451.0 | $448.8 | | Income from operations | $102.7 | $205.3 | $197.1 | | Net income | $44.2 | $103.5 | $106.2 | | Basic EPS | $0.76 | $1.75 | $1.74 | | Diluted EPS | $0.76 | $1.73 | $1.73 | Consolidated Balance Sheets (December 31, 2024 vs 2023) | Asset/Liability/Equity (in millions) | 2024 | 2023 | |:---|:---|:---|\ | Total current assets | $613.3 | $646.1 | | Total non-current assets | $1,244.0 | $1,187.3 | | **Total assets** | **$1,857.3** | **$1,833.4** | | Total current liabilities | $516.7 | $440.3 | | Total non-current liabilities | $865.7 | $914.6 | | **Total liabilities** | **$1,382.4** | **$1,354.9** | | Total stockholders' equity | $474.9 | $478.5 | | **Total liabilities and stockholders' equity** | **$1,857.3** | **$1,833.4** | Consolidated Statements of Cash Flows (2024, 2023, 2022) | Cash Flow Activity (in millions) | 2024 | 2023 | 2022 | |:---|:---|:---|:---|\ | Net cash provided by operating activities | $125.3 | $345.9 | $81.0 | | Net cash used in investing activities | $(206.7) | $(172.8) | $(232.8) | | Net cash provided by (used in) financing activities | $89.3 | $(197.1) | $149.3 | | Cash, cash equivalents and restricted cash at end of period | $44.7 | $40.2 | $63.4 | [Notes to the Consolidated Financial Statements](index=46&type=section&id=2.8.7%20Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes provide detailed information on Orion's accounting policies, financial instruments, debt, employee benefits, and segment performance, highlighting the valuation of cross-currency swaps, the impact of a $55.7 million misappropriation, and a significant decrease in income tax expense - The valuation of cross-currency swaps, totaling **$38.9 million** as of December 31, 2024, was identified as a critical audit matter due to the complexity of the fair value model and reliance on valuation specialists[274](index=274&type=chunk)[275](index=275&type=chunk) - A one-time pre-tax charge of **$55.7 million** (net of recoveries) was recognized in 2024 due to a criminal misappropriation scheme, along with **$3.6 million** in professional fees[211](index=211&type=chunk)[212](index=212&type=chunk)[473](index=473&type=chunk) - Income tax expense decreased significantly in 2024 due to the release of **$13.3 million** in uncertain tax positions and **$9.6 million** in benefits from changes in U.S. international tax laws[214](index=214&type=chunk)[458](index=458&type=chunk)[466](index=466&type=chunk) - Orion's gross debt balance increased to **$908.7 million** as of December 31, 2024, up **$90.5 million** from 2023, with **$657.8 million** in aggregate principal amounts of long-term debt due through 2029[236](index=236&type=chunk)[375](index=375&type=chunk)[397](index=397&type=chunk) - The company invested in Alpha Carbone, a French tire recycling company, in Q2 2024, contributing **$2.8 million (€2.7 million)** in convertible bonds, to produce circular carbon black[492](index=492&type=chunk)[493](index=493&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=72&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure [Item 9A. Controls and Procedures](index=72&type=section&id=Item%209A.%20Controls%20and%20Procedures) Orion's management concluded that disclosure controls and procedures were effective as of December 31, 2024, following the remediation of a material weakness in internal control over manual wire transfers identified in Q3 2024 - As of December 31, 2024, management concluded that disclosure controls and procedures were effective[496](index=496&type=chunk) - A material weakness in internal control over manual wire transfers was identified in Q3 2024 due to a criminal scheme, where controls did not operate effectively to safeguard assets[500](index=500&type=chunk) - Remedial measures included implementing additional cash disbursement controls, enhancing management's quarterly sub-certifications, and providing employee training[500](index=500&type=chunk) - Management determined that the material weakness was fully remediated as of December 31, 2024, after controls operated effectively for a sufficient period[500](index=500&type=chunk) - Ernst & Young, the independent registered public accounting firm, issued an unqualified audit report on management's internal control over financial reporting[501](index=501&type=chunk)[508](index=508&type=chunk) [Item 9B. Other Information](index=72&type=section&id=Item%209B.%20Other%20Information) There is no other information to report under this item [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=73&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to Orion S.A Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=80&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section provides information on Orion's executive officers, highlighting their extensive experience, and notes the company's adoption of a Code of Conduct, Insider Trading Policy, and Code of Ethics - Corning F. Painter serves as Chief Executive Officer (age 62), joining in September 2018, with prior experience as Executive Vice President for Industrial Gases at Air Products and Chemicals[516](index=516&type=chunk) - Jeffrey Glajch is the Chief Financial Officer (age 62), joining in April 2022, with over 35 years of experience in corporate finance and accounting, including as CFO at Graham Corporation[517](index=517&type=chunk) - Dr. Sandra Niewiem (age 47) is Senior Vice President, Global Specialty Carbon Black and EMEA Region, and Pedro Riveros (age 54) is Senior Vice President, Global Rubber Carbon Black and Americas Region[518](index=518&type=chunk)[519](index=519&type=chunk) - Orion has adopted a Code of Conduct, Insider Trading Policy, and Code of Ethics, applicable to all employees and directors, including senior management and financial officers, available on its website[521](index=521&type=chunk)[522](index=522&type=chunk) [Item 11. Executive Compensation](index=81&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2025 Proxy Statement [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=81&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of certain beneficial owners and management is incorporated by reference from the company's 2025 Proxy Statement [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=81&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's 2025 Proxy Statement [Item 14. Principal Accounting Fees and Services](index=81&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the company's 2025 Proxy Statement Part IV [Item 15. Exhibits, Financial Statement Schedules](index=82&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements included in Form 10-K, notes the omission of schedules, and provides a comprehensive Exhibit Index detailing various agreements and certifications - Financial statements are included as part of Item 8 of this Form 10-K[528](index=528&type=chunk) - Schedules are omitted as the required information is not applicable, not material, or included in the consolidated financial statements and notes[528](index=528&type=chunk) - A comprehensive Exhibit Index is provided, listing various corporate documents, credit agreements, incentive plans, employment agreements, and certifications, with certain confidential information omitted[529](index=529&type=chunk)[531](index=531&type=chunk)[533](index=533&type=chunk)[535](index=535&type=chunk) [Item 16. 10-K Summary](index=82&type=section&id=Item%2016.%2010-K%20Summary) This item indicates that no 10-K Summary is applicable SIGNATURES The report is duly signed on behalf of Orion S.A. by its Chief Executive Officer, Corning F. Painter, and Chief Financial Officer, Jeffrey Glajch, along with the Directors, on February 19, 2025 - The report is signed by Corning F. Painter, Chief Executive Officer, and Jeffrey Glajch, Chief Financial Officer, on February 19, 2025[539](index=539&type=chunk)[540](index=540&type=chunk) - The report is also signed by the company's Directors on the same date[540](index=540&type=chunk)

Financial Update - Orion S.A. announced a preliminary financial update for the fiscal year ended December 31, 2024[5] - The press release detailing the financial update was issued on January 15, 2025[5] - The report is not deemed "filed" under the Securities Exchange Act of 1934, indicating it is for informational purposes only[6] - The report includes an interactive data file as part of its exhibits[7] Company Information - The company is listed on the New York Stock Exchange under the trading symbol OEC[3] - Jeffrey Glajch serves as the Chief Financial Officer of Orion S.A.[11]

Orion (OEC) came out with quarterly earnings of $0.47 per share, missing the Zacks Consensus Estimate of $0.53 per share. This compares to earnings of $0.49 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -11.32%. A quarter ago, it was expected that this producer of the chemcial additive carbon black would post earnings of $0.59 per share when it actually produced earnings of $0.41, delivering a surprise of -30.51%.Over the la ...

Financial Data and Key Metrics Changes - Q2 2024 EBITDA was below expectations, with revised guidance indicating a midpoint reduction of $25 million to $30 million compared to earlier projections [4][23] - Overall volumes improved by 3% year-over-year, driven by a 17% recovery in specialty volumes, which offset a small decline in rubber volumes [17][18] - The company expects full-year gross profit per ton to exceed the 2023 level of $409 [19] Business Line Data and Key Metrics Changes - Specialty business volumes were up 17% year-over-year, reflecting broad-based demand recovery across geographic markets [21] - Rubber segment volumes declined by 2% year-over-year and 8% sequentially, impacted by inflation-driven consumer trade down and weaker tire demand in China [18][20] - The rubber business is expected to see modest volume improvement in the second half of the year, while specialty is anticipated to continue its recovery [7][25] Market Data and Key Metrics Changes - Rubber volumes are down in North America and Asia, while Europe saw gains due to last year's negotiations [6] - The company noted that the consumer trade down to lower-value brands is affecting demand in key markets [5][10] - The overall economic confidence in China remains low, impacting OEM builds and local tire companies [46][48] Company Strategy and Development Direction - The company plans to resume share repurchase activity at a modest pace, reflecting confidence in the carbon black industry's fundamentals and competitive position [8][28] - Future capital expenditures are expected to be lower, focusing on debottlenecking and expanding capacity for specialty grades [8][27] - The company is optimistic about the rubber segment heading into 2025, citing potential tariff increases and ongoing industry restructuring [13][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging quarter but emphasized the underlying strength of the business and the importance of transparency [50] - The company expects a gradual improvement in the freight market and overall economic conditions, particularly in the second half of 2024 [38] - Management is cautious about the ongoing negotiations for 2025, indicating that they will not rush into volume commitments [11][12] Other Important Information - The company has made significant progress in sustainability initiatives, including investments in tire recycling and low emissions technology [14][15] - The effective tax rate assumption for the year is marginally higher due to the jurisdictional mix of earnings [24] Q&A Session Summary Question: Volume cadence in the second half of the year - Management noted that July showed signs of recovery, particularly in rubber, and expects some seasonality in Q4 but less than in previous years [29] Question: Balancing cash flow and buybacks - Management indicated a willingness to slightly increase leverage to facilitate opportunistic buybacks [30] Question: Maintenance costs in Q2 - Planned and unplanned maintenance costs were higher in Q2, with expectations for lower maintenance in the upcoming quarters [30] Question: Strength in specialty markets - Coatings and polymers showed relative strength, with some lower-value areas performing well [31] Question: Capacity utilization in Rubber Black - Current capacity utilization is in the mid-70s, which is low compared to mid-cycle expectations [32] Question: Economics of tire imports versus domestic production - Management discussed the impact of higher shipping costs and potential consumer shifts towards higher-value tires as tariffs come into play [36] Question: Conditions in China - The macroeconomic environment in China remains challenging, with reduced consumer confidence affecting investments [46]

Core Insights - Orion (OEC) reported quarterly earnings of $0.41 per share, missing the Zacks Consensus Estimate of $0.59 per share, and down from $0.53 per share a year ago, representing an earnings surprise of -30.51% [1] - The company posted revenues of $477 million for the quarter ended June 2024, missing the Zacks Consensus Estimate by 3.94%, but up from $458.8 million year-over-year [2] - Orion shares have declined approximately 11.2% year-to-date, contrasting with the S&P 500's gain of 15.8% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.54 on revenues of $503.78 million, and for the current fiscal year, it is $2.13 on revenues of $1.98 billion [7] - The estimate revisions trend for Orion is currently favorable, leading to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Chemical - Specialty industry, to which Orion belongs, is currently ranked in the top 30% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8]

Financial Performance - Net sales for Q1 2024 increased by $2.2 million, or 0.4%, to $502.9 million compared to Q1 2023, driven by higher volume in both segments [83]. - Gross profit for Q1 2024 decreased by $14.2 million, or 10.4%, to $122.2 million year over year, primarily due to higher fixed costs and lower cogeneration pricing in Europe [86]. - Adjusted EBITDA for Q1 2024 decreased by $15.8 million, or 15.6%, to $85.3 million compared to Q1 2023, influenced by higher fixed costs and lower cogeneration pricing [92]. - Gross profit per metric ton decreased by 15.8% to $491.9 in Q1 2024, driven by lower margins in both segments [86]. - Net income for Q1 2024 decreased by $15.6 million, or 36.9%, to $26.7 million compared to Q1 2023 [82]. - Specialty Carbon Black segment net sales increased by $8.9 million, or 5.5%, to $170.9 million in Q1 2024 [94]. - Rubber Carbon Black segment net sales decreased by $6.7 million, or 2.0%, to $332.0 million in Q1 2024 [94]. Volume and Sales Growth - Volume for Q1 2024 increased by 14.9 kmt to 248.4 kmt year over year, primarily due to higher volume in both segments [84]. - Net sales for the three months ended March 31, 2024, increased by $8.9 million, or 5.5%, year over year, to $170.9 million, driven by higher volume [96]. - Volume for the same period increased by 10.3 kmt, or 19.4%, year over year, to 63.3 kmt, due to recovery across all regions and end markets [96]. Operating Expenses and Cash Flow - Selling, general and administrative expenses increased by $3.8 million, or 6.6%, to $61.5 million in Q1 2024 due to higher personnel costs [87]. - Net cash provided by operating activities was $32.4 million for the three months ended March 31, 2024, down from $108.1 million in the same period of 2023 [105][106]. - Net cash used in investing activities amounted to $33.1 million for the three months ended March 31, 2024, primarily for safety and maintenance investments [107]. Liquidity and Debt - Total liquidity as of March 31, 2024, was $261.7 million, including cash and equivalents of $43.9 million [115]. - Net working capital increased from $344.4 million as of December 31, 2023, to $363.4 million as of March 31, 2024, driven by higher accounts receivable [118][120]. - Net debt as of March 31, 2024, was $773.1 million, with a net leverage ratio of 2.44x [115]. Stock Repurchase and Legal Matters - The company has approved a new stock repurchase program allowing the purchase of up to approximately 6.9 million shares through June 2027, supplementing an existing program authorizing $50 million in stock repurchases [132]. - No shares of common stock were repurchased during the three months ended March 31, 2024 [134]. - The company is involved in various legal proceedings, but believes the aggregate results will not materially affect its financial condition [129]. Risk Factors - There have been no material changes to risk factors associated with the business as previously disclosed in the Annual Report for the year ended December 31, 2023 [131]. - The company faces risks from geopolitical events, including the Russia-Ukraine war and the Hamas-Israel conflict, which may impact energy costs and raw material availability [21]. - The company is exposed to fluctuations in foreign currency exchange and interest rates, which could affect its financial performance [21]. - The company is subject to environmental, health, and safety laws, which may incur compliance costs and liabilities [21]. - The company has not reported any defaults upon senior securities [135]. - The company is committed to maintaining adequate insurance coverage to mitigate potential risks [21].

Financial Performance - Net sales for Q1 2024 were $502.9 million, an increase of $2.2 million or 0.4% year over year[4] - Adjusted EBITDA for Q1 2024 was $85.3 million, down 15.6% from $101.1 million in Q1 2023[4] - Net income decreased to $26.7 million, a decline of $15.6 million or 36.9% year over year[4] - Gross profit decreased to $122.2 million in Q1 2024 from $136.4 million in Q1 2023, resulting in a gross profit per metric ton of $491.9, down from $584.2[42] - Net income for Q1 2024 was $26.7 million, a decrease from $42.3 million in Q1 2023, leading to diluted EPS of $0.45, down from $0.70[44] - Adjusted net income for Q1 2024 was $30.8 million, compared to $45.1 million in Q1 2023, reflecting the impact of various adjustments[44] - Net income for the three months ended March 31, 2024, was $26.7 million, a decrease of 37.0% compared to $42.3 million for the same period in 2023[54] Sales and Volume - Volume increased by 14.9 kmt, or 6.4%, year over year, primarily due to higher volume in both segments[6] - Specialty Carbon Black segment net sales rose by $8.9 million, or 5.5%, to $170.9 million year over year[14] - Rubber Carbon Black segment net sales declined by $6.7 million, or 2.0%, to $332.0 million year over year[18] - Net sales for the first quarter of 2024 were $502.9 million, a slight increase from $500.7 million in the same period of 2023[47] Debt and Equity - The company's net debt as of March 31, 2024, was $773.1 million, down $8 million from the end of 2023[22] - Total debt as of March 31, 2024, was $813.5 million, resulting in net debt of $773.1 million after accounting for cash and cash equivalents[42] - Long-term debt, net, decreased slightly to $668.7 million from $677.3 million, a reduction of 1.3%[52] - Total stockholders' equity increased to $492.2 million, up from $478.5 million, representing a growth of 2.7%[52] Cash Flow and Assets - Cash and cash equivalents at the end of the period were $43.9 million, down from $76.8 million a year earlier, reflecting a decrease of 42.9%[54] - Net cash provided by operating activities decreased to $32.4 million for Q1 2024, down 70.0% from $108.1 million in Q1 2023[54] - Total assets increased to $1,874.6 million as of March 31, 2024, up from $1,833.4 million at December 31, 2023, representing a growth of 2.3%[52] - Total current liabilities rose to $468.8 million, an increase of 6.5% from $440.3 million at the end of 2023[52] Investments and Future Outlook - The company expects 2024 Adjusted EBITDA to be in the range of $340 million to $360 million, representing over 5% growth at the midpoint compared to 2023[23] - The projected full year 2024 Adjusted Diluted EPS is between $2.05 and $2.20 per share, indicating over 11% growth at the midpoint[23] - The company celebrated the groundbreaking for a new acetylene-based conductive additives facility in La Porte, Texas, expected to be commissioned in 2025[3] - Research and development costs increased to $6.6 million in Q1 2024 from $6.2 million in Q1 2023, indicating ongoing investment in new product development[47] Operational Performance - The company reported a decrease in income from operations to $52.8 million in Q1 2024, down from $73.5 million in Q1 2023[47] - The weighted-average shares outstanding decreased to 58,640 thousand in Q1 2024 from 60,287 thousand in Q1 2023, impacting per-share metrics[47] - The company reported a decrease in inventories to $277.5 million from $287.1 million, a decline of 3.0%[52] Risks and Challenges - The company highlighted potential risks including geopolitical events and economic conditions that could affect future performance[30]

Financial Performance - In 2023, net sales decreased by $137.0 million, or 6.7%, to $1,893.9 million from $2,030.9 million in 2022, primarily due to declining oil prices and lower volume [203]. - Adjusted EBITDA increased by $20.0 million, or 6.4%, from $312.3 million in 2022 to $332.3 million in 2023, driven by improved contractual pricing [209]. - Gross profit increased by $2.2 million, or 0.5%, to $451.0 million in 2023, with gross profit per metric ton rising by 3.8% to $483.9 [205]. - Net income for 2023 was $103.5 million, a decrease of $2.7 million, or 2.5%, from $106.2 million in 2022 [202]. - Comprehensive income decreased by $66.1 million, from $142.2 million in 2022 to $76.1 million in 2023 [211]. - Selling, general and administrative expenses decreased by $5.2 million, or 2.3%, to $221.9 million in 2023, attributed to lower freight costs [206]. - Interest and other financial expenses increased to $50.9 million in 2023 from $39.9 million in 2022, representing a rise of 27.5% [277]. - Cash paid for interest increased to $38.9 million in 2023 from $33.5 million in 2022 [286]. - Net cash provided by operating activities significantly increased to $345.9 million in 2023 from $81.0 million in 2022 [286]. Segment Performance - Specialty Carbon Black Segment Adjusted EBITDA was $110.7 million with an Adjusted EBITDA Margin of 18.1%, while Rubber Carbon Black Segment Adjusted EBITDA was $221.6 million with a margin of 17.3% [196]. - Specialty Carbon Black segment net sales decreased by $64.8 million, or 9.6%, from $675.4 million in 2022 to $610.6 million in 2023, primarily due to declining oil prices [214]. - Volume for the Specialty Carbon Black segment decreased by 2.9 kmt, or 1.3%, from 224.3 kmt in 2022 to 221.4 kmt in 2023, attributed to weakness across most geographies [214]. - Gross profit for the Specialty Carbon Black segment fell by $40.4 million, or 20.1%, from $200.7 million in 2022 to $160.3 million in 2023, driven by lower demand and unfavorable product mix [215]. - Adjusted EBITDA for the Specialty Carbon Black segment decreased by $33.2 million, or 23.1%, from $143.9 million in 2022 to $110.7 million in 2023, influenced by geographic and product mix issues [216]. - Rubber Carbon Black segment net sales decreased by $72.2 million, or 5.3%, from $1,355.5 million in 2022 to $1,283.3 million in 2023, mainly due to declining oil prices and lower volume [217]. - Volume for the Rubber Carbon Black segment decreased by 27.9 kmt, or 3.8%, from 738.6 kmt in 2022 to 710.7 kmt in 2023, primarily due to lower demand in the Americas and EMEA region [218]. - Gross profit for the Rubber Carbon Black segment increased by $42.6 million, or 17.2%, from $248.1 million in 2022 to $290.7 million in 2023, driven by improved contractual pricing [218]. - Adjusted EBITDA for the Rubber Carbon Black segment increased by $53.2 million, or 31.6%, from $168.4 million in 2022 to $221.6 million in 2023, primarily due to improved contractual pricing [219]. Liquidity and Capital Structure - As of December 31, 2023, the company had liquidity of $279.3 million, including cash and equivalents of $37.5 million and $221.6 million available under the revolving credit facility [230]. - Net Working Capital decreased to $344.4 million as of December 31, 2023, compared to $461.6 million as of December 31, 2022, primarily due to improved payment terms and factoring of accounts receivable [232]. - Total current liabilities decreased to $440.3 million in 2023 from $552.8 million in 2022, a reduction of 20.3% [283]. - Long-term debt increased slightly to $677.3 million in 2023 from $657.0 million in 2022, an increase of 3.5% [283]. - Stockholders' equity rose to $478.5 million in 2023, up from $459.4 million in 2022, reflecting an increase of 4.5% [283]. - The company repurchased 2,895,664 shares of common stock for $65.6 million under its Stock Repurchase Program in 2023 [289]. Assets and Liabilities - Total assets decreased to $1,833.4 million in 2023 from $1,888.7 million in 2022, a decline of approximately 2.9% [283]. - Cash and cash equivalents at the end of 2023 were $37.5 million, down from $60.8 million in 2022, representing a decrease of 38.2% [286]. - Accounts receivable as of December 31, 2023, totaled $242.2 million, down from $370.4 million in 2022, with net accounts receivable after expected credit losses at $241.0 million compared to $367.8 million in 2022 [354]. - The total inventory as of December 31, 2023, was $287.1 million, an increase from $277.9 million in 2022, with inventory reserves rising to approximately $25.4 million from $21.4 million [356]. - Total debt and other obligations decreased to $814.3 million in 2023 from $915.3 million in 2022 [372]. Accounting and Reporting - The consolidated financial statements are prepared in accordance with U.S. GAAP, including accounts of Orion S.A. and its subsidiaries [295]. - Revenue is recognized when control of goods is transferred to customers, typically upon shipment or delivery [326]. - The company plans to adopt new accounting standards related to segment reporting and income taxes, effective after December 15, 2023, which will require additional disclosures but is not expected to materially impact the financial statements [352]. - The allowance for credit losses as of December 31, 2023, was $1.2 million, down from $2.6 million in 2022, indicating improved credit loss management [354]. Debt and Interest Rates - The Euro-denominated Term Loan interest rate increased to 5.60% in 2023 from 2.80% in 2022, while the U.S. dollar Term Loan rate rose to 7.41% from 4.11% [378]. - The company received a 10 basis point interest rate reduction on its sustainability-linked Term Loan due to meeting its 2022 emissions target [376]. - The revolving credit facility (RCF) was amended to extend maturity to September 2028 and borrowing capacity was reduced from €350 million to €300 million [383]. - The weighted average interest rate on the RCF increased to 6.2% as of December 31, 2023, up from 4.8% in 2022 [387]. - The net leverage ratio as of December 31, 2023, was 2.63x, corresponding to an interest margin of 2.30 for both USD and Euro denominated borrowings [388].

Financial Performance - Q3 2023 - Adjusted EBITDA was $77 million[3], a decrease of 4% year-over-year (YoY)[23] - Adjusted diluted EPS was $049[3], compared to $057 in 3Q22[23] - Revenue decreased by 142% YoY to $4662 million[23] due to lower oil price pass-through[26] - Volume increased slightly by 08% YoY to 2452 kmt[23], with growth in China offset by declines in EMEA and the Americas[6] Financial Performance - Year-to-Date (YTD) - Adjusted EBITDA increased by 75% YoY to $266 million[16, 48] - Adjusted diluted EPS increased to $176[16] from $170[112] - Revenue decreased by 91% YoY to $14257 million[112] - Volume decreased by 56% YoY to 7060 kmt[112] Business Segment Performance - **Rubber Business:** Adjusted EBITDA decreased by 161% YoY to $261 million[27], with volume up 145%[27] - **Specialty Business:** Adjusted EBITDA increased by 36% YoY to $512 million[84], with volume down 3%[84] Cash Flow and Capital Allocation - The company expects discretionary cash flow of $170-$190 million and free cash flow of $90-$125 million for the full year 2023[57] - The company has reduced net debt by $102 million YTD to $756 million[100] - The company has repurchased nearly 5% of outstanding stock for approximately $63 million[100] Forward Guidance and Assumptions - The company anticipates adjusted EPS of $200-$210 per share for FY23[53] - Capital expenditures are projected to be $175 million - $200 million[53] - The company estimates cash debt service of approximately $50 million[53]

Financial Data and Key Metrics Changes - The company reported third quarter adjusted EBITDA of $77 million and adjusted diluted EPS of $0.49, marking the second highest results for both figures in the third quarter [5] - Year-to-date adjusted EBITDA reached a record $266 million, up 7.5%, with adjusted diluted EPS of $1.76, just $1 million short of the entire 12-month adjusted EBITDA from two years ago [5][11] - The trailing 12-month return on capital employed (ROCE) stands at 17%, significantly exceeding the weighted average cost of capital [10] Business Line Data and Key Metrics Changes - Specialty business faced challenges with lower gross profit per ton due to startup impacts and reduced cogeneration profitability, but overall performance remains strong [6][11] - In rubber, the company noted industry restructuring and expanding tire capacity in the Americas and Europe, which is tightening the market [8] - Gross profit per ton for Q3 was $386, lower than previous quarters but above the Q3 2022 level of $364, with expectations to revert above $400 in Q4 [23] Market Data and Key Metrics Changes - The company experienced flat volume in the third quarter, with increased specialty demand from the new plant in China offset by lower volumes in EMEA and the Americas [145] - Demand conditions in the U.S. and Europe are subdued, with rubber demand slightly stronger in North America compared to Europe, while specialty demand is weak in both regions [102][103] Company Strategy and Development Direction - The company is focused on ramping up its greenfield facility in Huaibei, China, and completing air emission upgrades in the U.S. [16][53] - The launch of new products, such as PRINTEX Kappa 10, aims to address growing demand in the electric vehicle market [18] - The company is positioning its specialty business for further growth through various initiatives, including customer qualifications and facility upgrades [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving another year of earnings growth despite lower demand compared to 2022, with a strong position heading into 2024 [26][28] - The company anticipates that destocking will be a headwind into the second half of 2024, but remains optimistic about its resilience [51] - Management highlighted the importance of being agile in response to market changes and emphasized the ongoing restructuring in the rubber market [25][66] Other Important Information - The company reduced its net debt by $102 million in the first nine months of 2023, with a debt to EBITDA ratio now at 2.29 times, down from nearly three times in mid-2022 [13] - The company has repurchased $63 million worth of shares since late Q4 2022, representing nearly 5% of outstanding stock [13][140] - The company secured funding for developing a climate-neutral process for producing carbon black from alternative sources [141] Q&A Session Summary Question: Contract pricing progress for next year - Management indicated that while they are making progress, they do not expect to provide specific metrics at this time due to commercial sensitivity [31] Question: Drivers of lower price/mix benefit in rubber contracts - The startup in China and associated issues impacted the price/mix benefit, which would have been higher without these factors [32] Question: EBITDA impact from startups in rubber and specialty segments - The estimated EBITDA impact from startups was approximately $20 in rubber and about $70 in specialty [33] Question: Expectations for the trajectory of the Specialty segment - Management noted that the trajectory will depend on market conditions and the performance of premium products [40] Question: Impact of UAW on Q4 - Management stated that the UAW impact is included in their guidance, which anticipates a strong Q4 [80] Question: Comparison of demand conditions in the U.S. and Europe - Demand is currently weak across both regions, with rubber being slightly stronger in North America [102][103]