Orion S.A. · NYSE:OEC
Orion — Orion Engineered Carbons — Investor Presentation (March 2023)
33 slides from Orion's investor presentation, March 2023
Slide 1: Investor Presentation March 2023
Investor Presentation March 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements Forward-Looking Statements This presentation contains and refers to certain forward-looking statements with respect to our financial condition, results of operations and business. These statements constitute forward-looking statements within the meaning of Section 21E of t
Slide 3: Engineered Carbons are Ubiquitous, Essential Chemistry
Engineered Carbons Wire & Cable/Conductivity Synthetic Fibers are Ubiquitous, Essential Chemistry Rubber Optimize Physical, Electrical Engineered Plastics and Optical Properties Versatile and Customizable Adhesives Conductivity Orion Engineered Carbons 3
Slide 4: About Orion
About Orion Year Founded 1862 Countries Served 80+ Functional Capacity ~1,000 kmt Employees #1 GLOBAL SPECIALTY ~1,600 CARBON BLACK MARKET Production Facilities 14 Supply to more than 1,000 customers Annual Revenues* Adjusted Operating #3 with average customer Sales Volume* EBITDA* Cash Generation*
Slide 5: Investment Thesis: Enhanced Value Roadmap
1 Value Proposition 2025 Mid-Cycle Capacity of Investment Thesis ~$500M Adjusted EBITDA ENHANCED VALUE ROADMAP 2 ONGOING, SUSTAINED STRONG LONG-TERM 2023-2025 Discretionary Cash Flow of DEMAND FOR GLOBAL OUTLOOK $700-$800M CARBON BLACK Including supply/demand provides attractive opportunity to imbal
Slide 6: Strong Foundation
Structural changes 31%+ YoY Net Gross Profit drive improved Sales Increase Increased ~16% YoY Price and Terms Strong Recent Authorization for a $50m Share ~16% Adjusted EBITDA YoY Growth Positioned to Significantly Foundation Repurchase Program Increase Cash Flow Record of Significant Total Sales ($
Slide 7: Orion Engineered Carbons Overview
RUBBER SPECIALTY CARBON BLACK CARBON BLACK Orion Global leader in specialty carbon black. Thought leader on the need for return on capital Engineering materials to provide solutions in and in driving for increased investment pricing conductivity (battery, cable, plastics), coatings, levels in a mark
Slide 8: Rubber Carbon Black
FY2022 NET SALES FY2022 VOLUME BY REGION BY MARKET 19% 11% 25% 38% 739 kmt Rubber 43% 60% Carbon Black EMEA Americas Asia MRG Replacement Tire OEM Tire Business Profile KEY END MARKETS (% of Net Sales) Tire & Technical Tire MRG Distributor/Dealer ~71% 25% ~5% Orion Engineered Carbons 8
Slide 9: Rubber's Solid Foundation
Rubber's Solid Foundation Solid and Sustaining Contributor to Results SALES VOLUME GROSS PROFIT PER TON ADJ. EBITDA ($ in millions) (in kmt) ($ in millions) ($ in millions) 765 - $425- $1,400- $250 - 775 $450 $1,500 772 $270 701 739 $1,355 635 $336 $284 $270 $169 $968 $948 $226 $145 $691 $120 $90 20
Slide 10: Growth Drivers
TRADITIONAL EMERGING MILES DRIVEN SUSTAINABILITY Growth TIRE PRODUCTION EV MOBILITY Drivers VEHICLE PRODUCTION TIRE DESIGN Traditional drivers will continue to support growth while emerging demands are gaining in importance and relevance Orion Engineered Carbons 10
Slide 11: Global Rubber Demand
Global Rubber Demand EMEA 2% - 3% CAGR China 3% - 4% Brazil CAGR Korea 3% - 4% CAGR 3% - 4% 1% - 2% CAGR CAGR North GLOBAL America 3% - 4% CAGR RUBBER DEMAND MARKET Global Capacity / Demand Supply Chain COMPLEXITY & Localization Trends Imbalance Disruption DYNAMICS Source: Notch Consulting September
Slide 12: North America Rubber
North America 2,500 Supply and Demand (from 2000 to 2030) Rubber 2,000 2000-2030 1,500 1,000 Forecast Demand Now Outpacing Supply 500 0 CB Effective Capacity 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 20
Slide 13: Specialty Carbon Black
FY2022 NET SALES FY2022 VOLUME BY REGION BY APPLICATION 13% 5% 32% 42% 15% 224 kmt Specialty 25% 67% Carbon Black EMEA Americas Asia Automotive Polymer (non-auto) Printing & Coatings (non-auto) Special Apps (non-auto) Business Profile KEY END MARKETS (% of Net Sales) Polymers Printing Systems Dealer
Slide 14: Specialty's Contribution
Specialty's Contribution Strong Platform For Growth SALES VOLUME GROSS PROFIT PER TON ADJ. EBITDA ($ in millions) (in kmt) ($ in millions) ($ in millions) $600 - $800- $148 $144 263 $675 $650 251 $850 232 210- $829 $598 224 220 $122 $100- $751 $110 $120 $509 $679 $641 $445 2019 2020 2021 2022 2023F
Slide 15: Specialty Growth Drivers
GROWING CONSUMER DEMAND Industrial and Deco Coatings Synthetic Fibers Specialty Pressure Pipes Packaging Ink Growth MOBILITY Engineered Plastics Drivers Adhesives and Sealants Automotive Coatings Favorable Megatrends SUSTAINABILITY Electric Vehicles Lithium-Ion Batteries Orion Engineered Carbons 15
Slide 16: Growth Outlook
FAVORABLE MEGATRENDS UNDERPIN GROWTH OUTLOOK SPECIALTY CARBON BLACK DEMAND GLOBAL DEMAND (KT) (in KT) 4 - 5% CAGR 1,189 955 Growth Outlook 2021 2026 Demand Growth AMERICAS EMEA APAC DEMAND GROWTH BY SEGMENT (CAGR 2021-26) Across World Regions 3 - 4% 3 - 4% 5 - 6% CAGR CAGR CAGR Lithium-ion Batteries
Slide 17: The Conductivity Opportunity
Lithium-Ion Battery Demand Actuals/Projections (GWh) 17% 24% 2,246 CAGR CAGR 1,700 1,310 1,157 The 794 1,033 Conductivity Opportunity 2023 2025 Avicienne Consulting McKinsey Consulting 2030 Exponential Demand underpinned Conductive additive lithium-ion battery by megatrends demand growth above deman
Slide 18: Winning in Conductivity
Furnace Black Differentiated Production Capabilities Winning in Gas Black Conductivity Lamp Black Proprietary Aftertreatments Differentiated Production Capabilities >$80M EBITDA Thermal Black and >40% average EBITDA margins Kappa Conductives Proprietary surface aftertreatments applied for some premi
Slide 19: Global Megatrends
Global Megatrends Megatrend Electrification Sustainability Growing Consumer Demand Impact Result Impact Result Impact Result EV’s Conductive Additive Electrification Conductive Ethical Shopping EV Demand Demand Additive Demand Power Storage Circular Economy Aspirational Purchases Prestige Materials
Slide 20: Midcycle Cash Flow
Mid-Cycle Discretionary Cash Flow ($ in millions) $700 TO $800 $300 - $340 $200 - $240 (1) $235 - $275 $102 $55 $51 2020 2021 2022 2023F 2024F 2025F Midcycle Mid-Cycle Free Cash Flow ($ in millions) $400 Cash Flow TO $500 $200-$240 $135-$175 $75-$125(1) $14 ($8) $16 2020 2021 2022 2023F 2024F 2025F
Slide 21: Value Creation Mindset
CAPITAL SPENDING CAPITAL SPENDING PRIORITIES OUTLOOK ($ in millions) $230 - HIGH RETURN $233 $240 OPPORTUNITIES Value $215 Ravenna and the ~$200 ~$200 $81 Ramp-up of Huaibei $59 Creation $115- $125 New Kappa Plant $145 $100 $100 High Return Growth Investments $29 $95 $67 $25 Mindset $61 MAINTENANCE
Slide 22: FY23 Financial Guidance and Assumptions
Guidance Total $350M-$380M Adjusted EBITDA Rubber $250M-$270M Specialty $100M-$120M Adjusted EPS $2.30 per share - $2.60 per share Capital Expenditures $230M - $240M FY23 – Depreciation & Amortization $105M - $115M Financial Effective Tax Rate ~30% Guidance and Cash Debt Service ~$40M Assumptions Es
Slide 23: 2023 Capital Spending
Est 2023 Category Spend Comments ($ in millions) Maintenance* $90 Preventative, routine and upgrades 2023 Capital EPA $25 Final plant completed by Q4 2023 Growth* Spending – Debottlenecks, Expansion $35-45 High return investments (>25% ROIC) Commissioning Huaibei now. Kappa is a – Huaibei and Kappa
Slide 24: Cashflow Usage
FY2023 ($ in millions) Adj. EBITDA $350 – 380 Interest and dividends* (45) Taxes (60) Cashflow/ WC improvement 70 - 80 Usage Maintenance capex EPA capex (90) (25) Discretionary Cash Flow $200 - 240 Growth capex (Huaibei/Kappa) (80) Profit enhancing capex (35-45) Free Cash Flow $75-125 *Includes ~$40
Slide 25: Growth Outlook
Mid-Cycle Adj. EBITDA Capacity 17% ($ in millions) CAGR $500 $15-$30 $40-$60 Growth $365(1) $50 Outlook $268 $312 2021 Adj. 2022 Adj. 2023F Adj. Kappa Other Price/Mix 2025F Adj. EBITDA EBITDA EBITDA Conductive Capacity EBITDA Capacity Expansion (1)Guidance mid-point Orion Engineered Carbons 25 CAGR:
Slide 26: Appendix
Appendix Orion Engineered Carbons 26
Slide 27: Innovation Initiatives: Kappa vs CNT
OPTIMIZING PERFORMANCE REQUIRES MIX OF CONDUCTIVE CARBON FORMS Kappa conductive (at low CNTs (at low loading) Cathode active material (non-conductive) loading) Short range: kappa crosslinks High number of small kappa Innovation CNT and provides intimate contact with active material particles creatin
Slide 28: Historical Non-GAAP Metrics
Historical Non-GAAP Metrics Reconciliation ($million unless otherwise stated) Three Months Ended Twelve Months Ended December 31, Q4 2022 Q3 2022 Q4 2021 2022 2021 2020 Net sales 462 543 393 2,031 1,547 1,136 Cost of Sales 365 429 317 1,582 1,160 844 Gross Profit 97 114 75 449 387 292 Sales volume (
Slide 29: Historical Non-GAAP Metrics
Reconciliation of FCF and Discretionary CF ($million) Twelve Months Ended December 31, 2022 2021 2020 Adjusted EBITDA $312 $268 $200 Maintenance & EPA CAPEX (152) (156) (116) Interest payments (34) (23) (21) Cash paid for taxes (24) (38) (8) Historical Discretionary Cash Flow $102 $51 $55 Non-GAAP D
Slide 30: Historical Non-GAAP Metrics
Historical Non-GAAP Metrics Reconciliation in $ per share Twelve Months Ended Adjusted diluted EPS Three Months Ended December 31, Q4 2022 Q3 2022 Q4 2021 2022 2021 Historical Diluted EPS Long-Term Incentive Plan $0.20 0.04 $0.52 0.03 $0.01 0.03 $1.73 0.13 $2.21 0.09 Non-GAAP Add back Environmental
Slide 31: Historical Non-GAAP Metrics
Historical Non-GAAP Metrics Reconciliation ($million) Adjusted Net Income Three Months ended Twelve months ended Q4 2022 Q3 2022 Q4 2021 2022 2021 Historical Net Income add back long-term incentive plan expenses $ 12.2 $ 2.6 31.8 $ — 1.1 1.8 $ 106.2 7.7 $ 134.7 5.2 Non-GAAP add back EPA-related expe
Slide 32: Non-GAAP Financial Measures
Non-GAAP Financial Measures Non-GAAP Financial Measures We present certain financial measures that are not prepared in accordance with GAAP or the accounting standards of any other jurisdiction and may not be comparable to other similarly titled measures of other companies. For a reconciliation of t
Slide 33: Investor Relations Contact Details
Investor Relations Contact Details Wendy Wilson [email protected] Orion Engineered Carbons 33
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