Orion S.A. Common Shares

Greetings. Welcome to Orion Engineered Carbon's full year and fourth quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. Any question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll now turn the conference over to Wendy Wilson, Head of Investor Relations. Wendy, you may begin.

Thank you, Rob. Good morning, everyone, and welcome to Orion Engineered Carbon's conference call to discuss our fourth quarter and full year 2022 financial results. I'm Wendy Wilson, head of investor relations. With me today are Corning Painter, chief executive officer, and Jeff Gleick, chief financial officer. We issued our press release after the market closed yesterday, and we also 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 described in the company's filings with the SEC, and our actual results may differ from those described during the call. In addition, all forward-looking statements are made as of today, February 17th. The company is not obligated 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. Additionally, when we comment today on EBITDA, we will be referring to adjusted EBITDA. I will now turn the call over to Corrine Painters.

Thank you, Wendy. Good morning, everyone, and welcome to our earnings conference call. We had a great year in 2022. Many thanks go out to the tremendous Orion team for advancing our sustainability, growth, and financial agenda in the face of multiple challenges throughout the year, challenges that we treated as opportunities. We delivered fourth quarter adjusted EBITDA of approximately $65 million, a 25% increase with specialty outperforming our expectations due to the strength of our premium products, despite some customer destocking. Moreover, the team delivered record full-year adjusted EBITDA of $312 million, our first time breaking the $300 million level. Let me start out by highlighting four key accomplishments. First, as we mentioned on our third quarter call, we made substantial progress in the 2023 to 2024 rubber negotiation cycle for price, volume, and terms. I say 2023 to 2024 because taking Asia, where contracts are structured differently, out of the equation, over 50% of our tire volume will be on multi-year contracts. Our progress reflects the customer's value, our dependability, and quality. and that the global supply-demand dynamics continue to work in our favor. For example, in North America, underlying demand is increasing due to onshoring of tire production. Couple that with the need for sustainable returns on invested capital, including sustainability capital. We see carbon black capacity remaining tight. I'll show you more on this a bit later. Based on pricing alone, we expect rubber gross profit per ton to increase $80 to $100 in 2023. Second, we achieved a number of sustainability-related milestones. We kept our third round U.S. Air Emissions Project on track, having recently announced its completion. The project execution environment improved in 2022, but still our people, contractors, and suppliers worked around many challenges. We were upgraded by CDP, one of the most serious and respected platforms for environmental reporting to be, which is the second highest level. This past week, we received our scoring by EcoVidice, one of the world's most comprehensive rating tools. Our score improved five points to 77, earning us a gold medal and putting us in the 99th percentile, a huge improvement from our score of 52 in 2018. We also achieved ISCC certification for our biocircular grades from three plants. Third, our team increased our dual fuel flexibility in Europe. As of today, we can reduce natural gas usage by about 35 to 40%. The natural gas crisis in Europe may have passed for now, but this provides us with great flexibility as we move forward. Fourth, I am proud to say that the team kept the new plant in China on track despite many challenges. In the fourth quarter, before the COVID zero policy was lifted, COVID finally came to Y Bay. Our site was locked down, but with forethought and quick action, we were able to host the construction crew at our plant, meaning they were living at our site. We made sure the workers were well taken care of with good food, entertainment, and comfortable living accommodations to ensure that worker health and safety were not compromised. Then, after COVID-0 was lifted, we had to work through a huge wave of COVID infections. Thanks to their prompt action and dedication, we remain on schedule and budget and are currently commissioning the facility. With these and several other key items, like our announced expansion of acetylene-based hapo-conductive capacity higher earnings power, and increased cash flow, we are on track to a mid-cycle adjusted EBITDA capacity of $500 million and are confident in this. With that, I'll turn the call over to Jeff.