Orion S.A. Common Shares

Greetings. Welcome to Orion Engineer Carbid's first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Wendy Wilson, Head of Investor Relations in Corporate Communications. Thank you. You may begin.

Thank you, Operator. Good morning, everyone, and welcome to Orion Engineered Carbon's conference call to discuss our first quarter 2021 financial results. I'm Wendy Wilson, Head of Investor Relations and Corporate Communications. With us today are Corning Painter, Chief Executive Officer, and Lauren Crenshaw, Chief Financial Officer. We issued our press release after the market closed yesterday, and we have posted a slide presentation to the investor relations portion of our website. We will be referencing this presentation during the call. Before we begin, I'd like to remind you that some of the comments made on today's call are forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's filings with the SEC. Actual results may differ materially from those described during the call. In addition, all forward-looking statements are made as of today, May 7th. The company does not undertake to update any forward-looking statements based on new circumstances or revised expectations. All non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures in the table attached to our press release. I will now turn the call over to Corning Painter.

Thank you, Wendy. Good morning, everyone, and welcome to our first quarter earnings conference call. Following such an extraordinary year, I'm pleased that our business has started 2021 on such strong footing. Our specialty products are in high demand, driving outstanding year-over-year and sequential volume growth. Our rubber business is solid, realizing year-over-year and sequential volume gains. I want to thank the Orion commercial, production, customer service, and supply chain teams in particular for continuing to work safely in terms of COVID-19 and for their agility in managing a very active order book. COVID-19 infection rates are very high in some of the communities where we operate, and we continue to believe we have had no workplace contagion. From a community standpoint, true to our corporate values, we contributed funds this quarter to Hutchinson County United Way in Texas to support residents impacted by winter storm Uri. We operate a carbon black manufacturing facility in Hutchinson County's largest city, Borger, and have had the privilege of being part of the community for the past 93 years. I'm proud to say that we were able to operate our cogeneration plant there through the storm, which took down so many power generators. From a financial perspective, we reported first quarter adjusted EBITDA of $70.9 million, up 11% year over year, and up 7.4% sequentially, led by the strength of our specialty business, Notably, our adjusted EBITDA margin was 19.7%, up 70 basis points year over year, with a specialty EBITDA margin of 27.5%, up 410 basis points year over year. Looking to 2022, we're pleased to be gaining traction in many of our new offerings, particularly for advanced materials such as conductive grades for lithium-ion batteries and other applications. We also believe our rubber carbon black business is on track for a very robust 2022, and the customers appreciate our reliable local production that they can count on. As I've said before, we value agility, ensuring that on a sales and operations planning and logistics perspective, we remain ready to respond to whatever demand scenario ultimately transpires. You can refer to slide number 17 in this earnings deck if you're interested in how our businesses have responded since the ongoing demand recovery that began roughly three-quarters ago. As we have moved into 2021, consumer mobility trends are mixed globally. However, we may well see a vaccine-driven lift as public policies currently limiting mobility are eventually relaxed. On the commercial side of our business, commercial freight trends remain strong and seem likely to do so for the foreseeable future. The original equipment market drives approximately 40% of rubber volumes and 11% of specialty volumes. It bottomed around the second quarter of 2020 but picked up sharply roughly nine months ago and continues to trend favorably despite the well-publicized global semiconductor shortfall disrupting production at numerous factories around the world. Global light vehicle sales continue to show improvement year to date on a year-over-year basis. The combination of strong demand with supply chain snags has led to relatively low dealership inventory levels. As a result, we expect both the specialty and rubber segments of our business serving the OE market to benefit as the supply chain issues are resolved and production levels normalize. For the remainder of today's call, Lauren and I will cover the first quarter results and provide an update on the sustainability and growth investments we have underway. After our prepared remarks, we'll be happy to take your questions. Turning to our first quarter results in greater detail, as you can see on slide four, adjusted EBITDA rose to $70.9 million year over year, primarily driven by the sharp broad-based demand recovery across most specialty applications and geographies, partially offset by the unfavorable impact of rubber market dynamics in Korea, which have compressed margins, a one-time $2 million cost impact related to winter storm Uri, and higher incentive compensation accruals year over year. At this time, I'll turn the call over to Lawrence.