Orion S.A. Completes all Air Emissions Technology Projects and Updates Business Conditions

Rhea-AI Summary

Orion S.A. (NYSE: OEC) has completed upgrading its air emissions control technology at all four of its U.S. carbon black plants, marking the biggest sustainability-related initiative in the company’s history. Despite challenges such as contractor issues, COVID-19, and supply chain disruptions, Orion finished ahead of some competitors. The company is now focusing on investing in profitable growth, reducing debt, and returning value to shareholders. However, with a slower recovery in end markets and downtime as a result of the EPA project, the company expects 2023 results to land at the lower end of its Adjusted EBITDA guidance range of $330 million to $340 million. While demand is recovering, it is building slower than expected in many markets. Orion projects a fourth year in a row of earnings growth in 2024, with a similar rate to 2023, which was a mid-single digit EBITDA increase.

Positive

• None.

Negative

• Slower recovery in end markets and downtime as a result of the EPA project leading to lower 2023 results than expected

Insights

Environmental Policy Analyst

Orion S.A.'s completion of air emissions control technology upgrades at its U.S. carbon black plants represents a significant compliance milestone with the U.S. Environmental Protection Agency's regulations. This proactive approach to environmental stewardship not only mitigates potential regulatory risks but also positions the company favorably in an industry that is increasingly sensitive to sustainability practices. The initiative likely required substantial capital investment, which can impact short-term financials but may provide long-term benefits through potential operational efficiencies and improved market positioning.

Moreover, the commitment to sustainability-linked projects, such as conductive materials for lithium-ion batteries and products for the circular economy, indicates a strategic pivot towards sectors with growing demand. This aligns with global trends in resource efficiency and energy transition, which can open up new revenue streams and diversify the company's product portfolio. The emphasis on reducing debt and returning value to shareholders suggests a balanced approach to growth and financial health, which is critical for investor confidence.

Financial Analyst

The announcement of Orion S.A.'s expected Adjusted EBITDA to be at the lower end of its guidance range reflects the financial impact of the recent upgrades and market conditions. The slower-than-anticipated demand recovery in end markets, compounded by the downtime associated with the final EPA project, has evidently constrained revenue growth. Investors should note that while earnings growth is projected to continue into 2024, the rate is expected to be in line with the mid-single digit EBITDA increase seen in 2023.

It is essential to consider the company's performance relative to competitors who may have also faced similar challenges with emission control technology upgrades. Orion's ability to complete these upgrades ahead of some competitors could provide a competitive edge. However, the actual benefit to the company's market share and profitability will depend on how effectively it capitalizes on the upgrades and navigates the post-upgrade operational landscape.

Market Research Analyst

Orion S.A.'s focus on producing materials for lithium-ion batteries and the circular economy taps into two rapidly expanding markets. The demand for lithium-ion batteries is driven by the growth in electric vehicles and renewable energy storage solutions. The circular economy, which emphasizes the reuse and recycling of materials, is gaining traction due to increasing environmental awareness and regulation.

Understanding market trends and consumer preferences will be crucial for Orion as it ventures into these sectors. The company's ability to innovate and adapt to these markets will determine its success in leveraging these sustainability-linked projects for profitable growth. While these initiatives may attract ESG-focused investors, the company must also demonstrate that these ventures can deliver on their financial promise to maintain broader investor interest.

HOUSTON--(BUSINESS WIRE)-- Orion S.A. (NYSE: OEC), a global specialty chemicals producer, announced today it has completed upgrading its air emissions control technology at all four of its U.S. carbon black plants – the biggest sustainability-related initiative in the company’s history.

The company recently finished its final air emissions project at its plant in Belpre, Ohio. Previously the company upgraded the Borger, Texas, Ivanhoe, Louisiana, and Orange, Texas, facilities.

The upgrades were part of an initiative from the U.S. Environmental Protection Agency that applied to all carbon black producers in America. The projects were especially challenging for Orion because it has more carbon black plants in the United States than any other company. Despite suffering from contractor issues, COVID-19 and supply chain disruptions, Orion finished ahead of some competitors.

“Our difficult journey to make our facilities run cleaner is now completed. Well done to the Orion team,” said Orion CEO Corning Painter. “Looking forward, we are entering an exciting new era as we focus more on investing in profitable growth, reducing debt and returning value to shareholders.”

“Central to our growth strategy, Orion will continue to invest in sustainability-linked projects,” Painter continued. “This will include producing conductive materials for lithium-ion batteries and developing products for the circular economy.”

With a slower recovery in end markets and downtime as a result of Orion's final EPA project, the company expects 2023 results to land at the lower end of its Adjusted EBITDA guidance range of $330 million to $340 million. While demand is recovering, it is building slower than expected in many markets.

“We are projecting our fourth year in a row of earnings growth in 2024 and expect the rate to be similar to 2023, which was a mid-single digit EBITDA increase,” Painter said.

About Orion S.A.

Orion S.A. (NYSE: OEC) is a leading global supplier of carbon black, a solid form of carbon produced as powder or pellets. The material is made to customers’ exacting specifications for tires, coatings, ink, batteries, plastics and numerous other specialty, high-performance applications. Carbon black is used to tint, colorize, provide reinforcement, conduct electricity, increase durability and add UV protection. Orion has four innovation centers and produces carbon black at 15 plants worldwide, offering the most diverse variety of production processes in the industry. The company’s corporate lineage goes back more than 160 years to Germany, where it operates the world’s longest-running carbon black plant. Orion is a leading innovator, applying a deep understanding of customers’ needs to deliver sustainable solutions. For more information, please visit orioncarbons.com.

Forward-Looking Statements

This document contains certain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements of future expectations that are based on current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. New risk factors and uncertainties emerge from time to time and it is not possible to predict all risk factors and uncertainties, nor can we assess the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information, other than as required by applicable law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240122240804/en/

Wendy Wilson

Orion S.A.

Head of Investor Relations

wendy.wilson@orioncarbons.com

+1 281-974-0155

William Foreman

Orion S.A.

Director of Corporate Communications and Government Affairs

william.foreman@orioncarbons.com

Direct: +1 832-445-3305

Source: Orion Engineered Carbons S.A.

FAQ

What is the ticker symbol for Orion S.A.?

The ticker symbol for Orion S.A. is OEC.

What is the biggest sustainability-related initiative in Orion S.A.'s history?

The biggest sustainability-related initiative in Orion S.A.'s history is the completion of the air emissions control technology upgrade at all four of its U.S. carbon black plants.

What are the challenges faced by Orion S.A. during the upgrades?

Orion S.A. faced challenges such as contractor issues, COVID-19, and supply chain disruptions during the upgrades.

What is Orion S.A.'s expected Adjusted EBITDA guidance range for 2023?

Orion S.A. expects its 2023 results to land at the lower end of its Adjusted EBITDA guidance range of $330 million to $340 million.

What does Orion S.A. project for its earnings growth in 2024?

Orion S.A. projects a fourth year in a row of earnings growth in 2024, with a similar rate to 2023, which was a mid-single digit EBITDA increase.