On August 1, 2024, Orion SA (OEC, Financial) released its 8-K filing for the second quarter of 2024. Orion SA, a manufacturer of carbon black products, reported mixed financial results for the period ended June 30, 2024.
Company Overview
Orion SA is a leading manufacturer of carbon black products, which are used to enhance the physical, electrical, and optical properties of various materials. The company operates in two main segments: Specialty Carbon Black and Rubber Carbon Black. The Rubber Carbon Black segment, which is used in tire reinforcement and mechanical rubber goods, generates the majority of the company's revenue. The Specialty Carbon Black segment is used as pigments and performance additives in coatings, polymers, printing, and special applications. Geographically, Orion derives most of its revenue from Germany.
Q2 2024 Financial Highlights
Orion SA reported net sales of $477.0 million for Q2 2024, an increase of $18.2 million or 4.0% year over year. However, net income declined by $9.6 million to $20.5 million, and diluted EPS fell by $0.16 to $0.35. Adjusted EBITDA also decreased by 14% to $75.1 million.
Segment Performance
In the Specialty Carbon Black segment, volume increased by 17.4% year over year to 62.9 kmt, driving net sales up by 10.7% to $165.5 million. Despite the volume growth, gross profit per metric ton decreased by 21.0% to $628.0, and adjusted EBITDA declined by 6.4% to $28.0 million.
In the Rubber Carbon Black segment, volume decreased by 2.0% year over year to 170.2 kmt. Net sales saw a modest increase of 0.7% to $311.5 million. However, gross profit per metric ton fell by 3.7% to $413.0, and adjusted EBITDA dropped by 17.9% to $47.1 million.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 | Y/Y Change | Y/Y Change (%) |
|---|---|---|---|---|
| Volume (kmt) | 233.1 | 227.3 | 5.8 | 2.6% |
| Net Sales ($ million) | 477.0 | 458.8 | 18.2 | 4.0% |
| Gross Profit ($ million) | 109.8 | 117.1 | (7.3) | (6.2)% |
| Net Income ($ million) | 20.5 | 30.1 | (9.6) | (31.9)% |
| Diluted EPS ($) | 0.35 | 0.51 | (0.16) | (31.4)% |
| Adjusted EBITDA ($ million) | 75.1 | 87.3 | (12.2) | (14.0)% |
Challenges and Achievements
Orion SA faced several challenges in Q2 2024, including softer demand in the Rubber segment and mixed macroeconomic trends globally. Despite these hurdles, the Specialty segment showed encouraging signs of recovery with strong double-digit volume growth. However, the company's profitability was impacted by higher fixed costs and lower cogeneration earnings compared to the prior year.
"Orion executed against a more challenging than contemplated backdrop in the second quarter of 2024, including softer Rubber segment demand and mixed macro trends globally. Still, our Specialty segment’s ongoing earnings recovery is encouraging, including strong double-digit volume growth and our Rubber segment’s profitability remained relatively steady," stated Corning Painter, Orion’s Chief Executive Officer.
Financial Position and Outlook
As of June 30, 2024, Orion SA's net debt stood at $803.5 million, with a net debt to adjusted EBITDA ratio of 2.64 times. The company plans to resume opportunistic stock buybacks in the third quarter of 2024, reflecting confidence in its financial position and future prospects.
"Considering our financial position, supportive industry fundamentals, ongoing plant investments and confidence in our prospects into 2025 and beyond, we will resume opportunistic stock buyback activity starting in the third quarter of 2024," continued Painter.
For the full year 2024, Orion SA has revised its guidance, expecting adjusted EBITDA to range between $315 million and $330 million, and adjusted diluted EPS to range between $1.75 and $1.95 per share.
For more detailed insights and the complete financial statements, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from Orion SA for further details.
