Orion S.A. Common Shares

results call. At this time, all participants are in a listen-only mode. A brief 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Wendy Wilson, Head of Investor Relations. Thank you, Wendy. You may begin.

Thank you, Alicia. Good morning, everyone, and welcome to Orion's conference call to discuss our third quarter 2023 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 our 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 today on today's call are forward-looking statements. These statements are subject to the risks and uncertainties as described in our 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, November 3rd. 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. I will now turn the call over to Corey Painter.

Thank you, Wendy. Good morning, everyone, and thank you for joining our call today. As you can see on slide three, we remain on track for another year of growth and record results in 2023. We delivered third quarter adjusted EBITDA of $77 million and adjusted diluted EPS of 49 cents, the second highest third quarter results we've ever posted for both figures. Beyond this, we also reported nine-month record adjusted EBITDA of $266 million of 7.5% and adjusted diluted EPS of $1.76. Our nine-month adjusted EBITDA of $266 million is just one million short of our entire 12-month adjusted EBITDA just two years ago in 2021. We also delivered strong third quarter operating cash flow and reduced our debt level. At the same time, we continued our share purchases, having bought back $63 million in total since the fourth quarter of 2022, nearly 5% of our outstanding shares. We have two operational milestones. First, we continue to ramp up our first ever greenfield facility in Huaibei, China. Customer qualifications, sales, and operations are all progressive. Second, we progressed our final air emission upgrade in the U.S. in the third quarter. I'm happy to say the controls are now operational and final testing is scheduled for this quarter. We will also be completing an important safety upgrade at the same site. It's great to be on the verge of having this behind us. As is typical of startups, Both of these projects had some negative impacts on the third quarter and will also impact the fourth quarter in terms of margins and in the US on sales. This, combined with lower power prices in Europe and lower loading, drove the drop in specialty gross profit per ton this quarter. However, none of this casts a shadow on the strength of our specialty business. In fact, this is important progress for us. We can now better support our Chinese customers with product made in China for China, and reallocate reactors in the US and Europe for those local markets. Another important milestone for us was securing German and EU funding for further developing a climate neutral process for producing carbon black from alternative sources, such as the molecular recycling of tires. This was an arduous and competitive process. and we greatly appreciate the confidence of the German government and the EU. I'd like to take a moment to talk about the role of people and culture in our performance under pressure. As you know, we expected to have a stronger manufacturing environment, resulting in higher volumes this year. We set the bar high. Even though our adjusted EBITDA is up 7.5% year to date, the team is disappointed. Despite this, The people of Orion progressed some difficult challenges this quarter and delivered excellent results given the manufacturing economies we operate in. Why? I would say the commitment and engagement of the Orion team. We actually measure engagement using a third-party firm. We have improved this measure by 1,100 basis points since 2021, a huge improvement and a rare accomplishment according to the firm. Beyond that, the Orion team consistently reports customer focus as a near universal top priority. I believe this, along with thoughtfully allocating capital, has enabled us to succeed despite a soft manufacturing environment and an ever-changing world. You can see this has paid off in our financial results. They're not as high as we would like, but we compare very well to other manufacturers. If you follow other specialty chemical companies, you know we are one of the few that remain on track for stronger year-over-year performance. This is a testament to the great team here and our long-term strategy. On the operations front, specialty demand, reflecting the broader manufacturing economy, continues to be subdued. We are using this as an opportunity to push new customer qualifications, upgrade our plants, introduce new products to the market. we've achieved a number of recent wins in the battery, wiring cable, and coatings markets. A good example of a new product is our recently announced launch of Printex Kappa 10, a high quality conductive additive that will address surging demand from producers of lithium ion batteries for electric vehicles, energy storage systems, and consumer applications. The new product is produced in existing reactor systems that have been upgraded initially in Europe and soon in Asia. It marks an important expansion of Orion's portfolio of conductive additives. In addition, in the quarter, we opened a new battery innovation center and have added additional leadership to our conductive additives team. There are mixed views these days on the speed of the conversion to EVs and the ultimate size of the market. For us, however, this is nearly all upside, and we are confident profitably securing our product in this important market. In rubber, as I mentioned earlier, we believe industry restructuring is evident in our results and will continue. Tire capacity continues to expand in the Americas and Europe, and this simply tightens the market. Although we've seen some weakness in truck traffic, reflecting destocking and a less than robust manufacturing environment this year, the underlying trend is with us. Additionally, the EU ban on Russian carbon black begins mid-year 2024. While some Russian carbon black is being bought in the EU today, one large re-bulking distributor, meaning that they have the ability to transfer imports from Russia into trucks and rail cars, was recently barred from doing business, reminding everyone of the danger in that business model. Let me provide an update of what we think is happening downstream. starting with rubber on slide four. First, on the bottom of the page, you can see that people are driving and the trucking, while still negative, has improved from being down 15 to 19% last quarter. Moving up the slide, OEM tire demand weakened in the quarter. I don't think that's a surprise for anyone. Finally, at the top of the slide, while replacement truck tire volumes remain weak, passenger car and light truck replacement volumes have improved significantly from being down 6% last quarter. In general, according to the US TMA data, US tire shipments were up 4% year over year in August. However, tire manufacturing is lagging that recovery. Now, all this is based on US data. However, we continue to believe the picture in the EU is similar, albeit perhaps with higher level of tire imports. With that, I would ask Jeff to provide additional insights into our financial results.

Thank you, Courtney. Starting on slide five, we have used this slide for a couple of quarters now. It provides a good visual representation of our multi-year growth. In 2023, we expect at the midpoint to grow even to 7% versus 2022, despite lower volumes. Our return on capital employed, or ROSI, progress has continued over the past few years during a time when we made our substantial air emissions control investments. The ROSI levels we achieved were significantly in excess of our weighted average cost of capital. At the conclusion of the third quarter, the trailing 12-month ROC stands at 17%. This key metric keeps us aligned with our shareholders as stewards of their capital and with the long-term sustainability of the company. On slide six, you can see the consolidated results in the third quarter. Volume in the quarter was flat with an increase in specialty. due to our new capacity in China coming online, offset by lower volumes in EMEA and in the Americas. The contractual price improvements in rubber partly offset the decrease in revenue, which was due to lower oil pricing, which, as you know, is a pass-through to our customers. While our profitability metrics were close to last year's level, there were headwinds in the quarter. Code generation profitability was down, because the comparable, the third quarter of 2022, had extremely high electric prices in Europe. We knew this was likely to be a significant drag on earnings as we mentioned it back in August. The startup of Huawei also affected our gross profit and GP per ton metrics in each business. Finally, we had some cost absorption issues in specialty. The sum of these lowered gross profit, GP per ton, and adjusted EBITDA by approximately 4% each versus Q3 2022. Despite these headwinds, the third quarter this year was still solid, and as Corning mentioned, this quarter was our second highest Q3 ever, just $3 million of adjusted EBITDA behind last year. Slide 7 provides the unit A results for the company. Weaker volume in rubber across most markets, as well as the lower oil price pass-through drove revenue down 9%. This revenue drop was partly mitigated by stronger contractual pricing. The higher contractual pricing benefited gross profit per ton. The gains in GP per ton that we had seen in the first half of 2023 were tamped down some due to the Q3 headwinds I mentioned previously. Unit A EBITDA was up over $18 million, or 8%, and adjusted diluted EPS up 6 cents. We achieved these gains despite volume decreases and the significant drop in cogeneration profitability as power prices dropped in Europe relative to the extraordinary high power prices last summer. On slide 8, in Q3, the benefit of the price mix improvement was driven by contractual pricing gains in rubber that were more than offset by lower volume and lower cogeneration profitability the latter of which shows up in the cost column. On slide nine, specialty in the third quarter had increased volumes primarily from our new plant in China. Our other markets remained relatively subdued due to the continued softness in demand in those geographies. Gross profit per ton decreased compared with the Q3 level last year due to both geographic and end market mix of sales. as well as the lower cogeneration profitability. Importantly, for the specific mix of products that we sold in the quarter, our pricing has continued to remain stable. Slide 10 shows the key factors affecting adjusted EBITDA for the specialty business compared with last year. As noted earlier, mixed adversely affected results, as did a significant reduction in cogeneration profitability and some fixed cost absorption. Slide 11, on slide 11, Q3 rubber volume decrease was affected by lower demand in the Americas. We experienced higher gross profit in GP per ton driven by the contractual price increases. However, this was partially offset by lower cogeneration profitability and startup related impacts in the court. Q3 GP per ton was $386, which, while lower than the past two quarters, was still above the Q3 2022 level of $364. The Q3 2023 level will likely be the low point for the year, and we expect it to revert well above $400 in the fourth quarter. Slide 12 shows the key factors affecting adjusted EBITDA for the rubber business. Strong contractual pricing was clearly the key driver. However, much of this was offset by lower volume and reduced cogeneration profitability. We believe the lower volume is a combination of fewer end customer purchases and an increase in tire imports into European markets. On slide 13, you can see the effect that our improved cash flow has had on our debt. We have reduced our net debt by $102 million in the first nine months of 2023 to $756 million. Our debt to EBITDA ratio now stands at 2.29 times down from nearly three times in mid 2022. We've also repurchased $59 million worth of shares this year and 63 million in share buybacks since we started our program in late Q4 2022. This represents nearly 5% of our outstanding stock. We will continue to look opportunistically to repurchase shares free cash flow. Additionally, we announced early in the fourth quarter that we renewed our senior secured revolving credit facility, which was intentionally reduced from €350 million to €300 million as a result of the company's stronger cash flow. The credit facility has a five-year term and was oversubscribed by 20%. Our goal is to continue to strengthen our balance sheet, reduce our total net debt, and improve our net debt to EBITDA ratio. We have made substantial progress in all of these areas over the past year. Before I pass the call back to Corning, on slide 14, I would point out the dramatic increase in our discretionary cash flow conversion as we have stepped up our profitability and nearly completed our EPA projects. I expect a dramatically improved conversion rate that we have seen in 2023 to continue in the coming years. With that, I'll turn the call back to Corning to discuss our 2023 guidance.

Thanks, Jeff. The topic of destocking has come up in the Q&A with investors over the last year, so I'd like to add a bit more color. In general, it's hard to speak with certainty about this, as we are well removed from the end customer and comprehensive data is elusive. However, we recently had a chance to review a third-party analysis of the impact of destocking on the chemical industry. By looking at comments made by retail, packaging, and personal care companies who are close to the consumer, they estimate that destocking will be a headwind into the second half of 2024. Naturally, there's a fair amount of uncertainty and assumptions in this kind of analysis, which puts a premium on being agile and responding to market changes quickly. In the face of the market uncertainties, we believe our business has proven to be resilient. And as Jeff and I have both said earlier, we continue to believe this will be another year of earnings growth. We also believe we are in a strong position going into 2024 with the majority of our Americas and EMEA rubber demand essentially committed. Again, Our demand is not immune to de-stocking in the business cycle, but tires do wear out. Beautiful black cars, increasingly powered by batteries, continue to be made, and black ebullition wear is hot. We're confident in our business, and we are maintaining our adjusted EBITDA guidance midpoint while narrowing the range to $330 million to $340 million. This guidance is up over 7% at the midpoint and implies a slightly stronger Q4 this year. Our adjusted EPS guidance range is $2 to $2.10 per share is up 5% year over year at the midpoint. In closing, I would say, first, we are on track for our third consecutive year of earnings growth and a record year despite lower demand than in 2022. Second, with the ramping up of our Wi-Fi facility, Kappa 10 conversions, expanded customer applications facilities, de-bottlenecking activities, and the construction of the new acetylene-based plant in LaPorte, Texas, we are positioning our specialty business for further growth. Third, the fundamentals of the tire and rubber carbon black industries in our key markets continue to evolve favorably, and we expect this to continue in the foreseeable future. Fourth, the U.S. air emissions systems at our final plant are operating as we speak. We expect to complete the third-party stack test this quarter. With this capital spending nearly behind us, we can use our cash flow to more directly improve shareholder value. I continue to be encouraged by the future I see for Orion, for our shareholders, our employees, and the communities we serve. We've been on a journey over the past few years to improve our performance and increase returns to shareholders, and we are seeing the results come to fruition this year, and I expect it to continue into 2024 and beyond. Thank you. Operator, please open up the line for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from Josh Skepther with UBS. Please proceed with your question. Hey, guys.

Thanks for taking my question. I guess first I wanted to ask on contract pricing. I think in the release last night, you were pretty positive on the progress and said you're almost done. Last year at this time, you were able to size what you thought the impact could be for next year. I wanted to see if you could do the same now.

Yeah, Josh, last year was a kind of unique event in that we had it all wrapped up at this point, and it was very significant, and we thought it was important to do that disclosure at that time. We typically don't, and really going forward, I don't expect us to typically release that kind of information at this point in time. We still have some going, and there is an element of what's appropriate and commercially sensitive.

Okay, all right, fair enough. I'll pivot to something else then. So when I looked at the quarter itself, I guess sticking on the rubber contracts, the price mix benefit was lower in 3Q than it was in the past couple of quarters, despite volumes being higher. What was the driver of that?

So part of the impact in the quarter in terms of mix was that startup in China and some issues associated with the startup. And without that, that would have been above 400, for example.

Okay, understood. So that flowed through into price mix. And that's actually kind of the last piece I wanted to poke on is just within the two segments, rubber and specialty, you talked about the startups. Can you size those in terms of the EBITDA impact you thought you saw in each of the segments in the quarter?

Sure. We saw maybe a better way to describe it, if I can describe it on a GP per ton basis, probably about $20 in the rubber and probably close to about $70 in the specialty.

Thanks. And that lasted to fourth quarter? Same impact?

There will be an impact in the fourth quarter. It shouldn't be as dramatic.

Okay, thanks. I'll turn it over.

Thank you. Our next question comes from the line of Chris Capps with Loop Capital Markets. Please proceed with your question.

Hi, good morning. I understand the commercial sensitivity of the conversation around contract negotiations, but in the last quarter, the second quarter call, you provided some more specific metrics and some color around you know, the imperative and the nature of the ongoing conversation. So I'm just wondering if you could have any more color about the progress. I think you had said, you know, 60% of your volume commitments were complete as of three months ago. So any additional insights I think would be helpful for investors to try to assess the prospects for 24. Sure.

So a couple things. Number one, I mean, the points I made last quarter remain on track. So restructuring continues to happen, right? You can look at the Notch report. It actually has a list of tire manufacturing, new investment, new projects, what they're going to mean in terms of KT. You can see that for North America. You can see it for Europe. You can see it all around the world. So that restructuring of the market, that is very much in place. Number two, right, we are just like on the verge of finishing all those air emissions upgrades. Our competitors had to do the same. So look, like we're entitled to a return on investment on that. Number three, yes, things are a little weak right now. We're not negotiating for 2023. We're negotiating for 2024. In some cases, we're negotiating for 24, 25, 26, that kind of a thing. So it's a forward look, which is another item. And then in Europe, you have this huge dislocation with the ban on Russian carbon black. For some tire companies going back a couple years, they probably got about half their carbon block from Russia. That is a really big change. So those are all positive drivers. We are further along. But there's competitive and there's sensitivities about impacts we could have on the broader market and so forth. So I would just rather not say exactly what we have left or don't, because I think that can get complicated in that regard. To be clear, despite everything I just said, I do not expect a repeat of last year. Last year was a bit of a reset in North America. I think that Europe is obviously a different supply and demand dynamic. So maybe that's an area where more can be achieved this year. We'll see when it's all said and we all announce our results. So don't take my reticence as like, I think all the fundamentals are there and it's a long-term game where titles will return on capital. It's just difficult when the negotiations are still undergoing and that's where we are this year, not quite done.

Right. Historically, this is a much more normal time to still be crossing T's, dotting I's, negotiating as my history serves.

Oh, yeah, for sure.

For sure. Yeah. Yeah. And then, so also the other question was just on maybe framing your view of, I don't know if trajectory is the right word, but for the specialty segment, there's some, you know, variances here in the third quarter, both mix, the co-gen, drag, which I assume is going to persist into the fourth quarter and maybe early next year. So, but just, you know, there's also some cross currents in the different end markets. I'm wondering if you could discuss kind of what your, you know, just general expectations are in terms of the trajectory and mix and profitability of that segment, you know, as we exit this year going into next year. Thank you.

Sure. So, first let's talk about power. So, power is clearly a more dynamic market than it's been in a long time in Europe. I think that will continue. We don't really define what that power price is. So, that's going to be noise in this, but from an operational perspective, I don't think super significant in it. Because we price according to the value we create for our customers, We're always going to have mix being an important part of the overall equation for us. We feel strongly that we have held share in the premium grades and the important grades for us. We do at the lower end of this, we'll trade off volume between rubber and specialty, as well as just where we think is an appropriate price cutoff point. But I think in the important grades, we're strong on that. So depending upon not just even how the premium perform, but do we see a lot of volume sometimes in, let's say, less premium products, that's going to share mix. And that's hard to predict for next year. I think for as an operating company, that's all about being agile. And to some degree, right, this is going to reflect the broader manufacturing economy going into next year. We have the startup effects, which Jeff talked about. We'll have some impact of that in the fourth quarter, but then I think that will be behind us. You know, things like Kappa 10 and new product qualifications, all those are the sort of things that move the bulk average of, let's say, GP per ton forward as we continue to work. But if you think about it this quarter, without that startup, we would have been above 700, which I think is a pretty respectable number.

Appreciate the color. Thanks. You're welcome, Chris.

Thank you. Our next question comes from the line of John Tangwen Ten with CGS Securities. Please proceed with your question.

Hi. Good morning, guys. Thank you for taking my questions. My first one is you mentioned the press release and then kind of talked about it a little bit, but you quoted lower demand, and I'm wondering, was that a specific reference to destocking versus end demand? Or was that a reference to something else more generally in your overall end markets?

Right. So if we let's separate this rubber and specialty. I shared that one report that we reviewed that was looking at it. When they looked at, you know, packaging, personal care, the truth is certain areas were on an upward trend, certain ones were on a downward trend. I think the result of that is, though, that end consumer demand has shifted a bit more towards services and experiences, a little bit away from manufacturing goods. They would say that, you know, there was the great shortage when we came out of COVID, right, and there were shortages for everything. People built a lot of inventory, and we're now more or less in a phase of kind of working through that, especially as consumer demand has shifted a little bit. So I think you're looking at a mix of both of them. That's a little bit hard to see, to speak with certainty about how much is destocking versus end customer demand. And I think that's just the reality we have to all accept. When you look at the rubber demand, which is largely going around tires, it's a little bit easier, right? Which is why we put in that slide. It shows, to be clear though, a bit of a mixed environment, right? So passenger car, gasoline consumption, miles driven, Those kind of metrics continue to grow. Truck traffic, reflecting to a certain degree manufacturing, but also just general commerce, is off a bit. And so you sort of have mixed factors in that. Beyond that, I think you do see, or you have seen up until now, certainly, consumers deferring some of their purchases. When you look at the purchases by light truck and passenger cars, Those were up a bit this quarter, so maybe it shows like we're hitting the end of that, but I think we need more than one quarter to really have a trend there.

Does that help, John? It does. Thank you, Corning. And then second, do you have an estimate of what your UAW impact in Q4 is going to be? I don't know if it's going to be anything material or not, but any clarity would be helpful.

Yeah, no, I would just say that's in our expectation of the guidance that we provided. you know, which is a fairly strong Q4 if you compare it to prior years.

Okay, fair enough. And then last question, just what's driving the lower EPS guidance versus the unchanged midpoint of the EBITDA guidance? It doesn't look like your tax or interest rate expectations have changed, so I'm just wondering what's going on there.

Sure, John. There's not that much. It might be a little on the light side.

I'm sorry, what was that?

Sorry, there's nothing really dramatically different. It might be a little on the light side on APS. Okay. Sometimes we have Q4 tax things that sometimes come in that I was concerned about, so decided to be a little cautious there.

Because the Q4 tax things, of course, are cumulative for the year. John, are you still there? Did you have another question?

I'm sorry, I think I was on mute. I was saying thank you for that. Thank you.

Thank you. Our next question comes from Lawrence Alexander with Jefferies. Please proceed with your question.

Hi, good morning. This is Kevin S. back on for Lawrence. Thank you for taking my questions. I guess I was just wondering how you were thinking about 2024. I guess thoughts on a possible further slowdown, maybe a recession, thinking about maybe how rising rates are impacting auto loans. Just curious to get your thoughts around the puts and takes for next year.

Well, so we'll do our guidance later right after we could report our fourth year and quarter results. And so that kind of gives us a little more time to see how the economy develops between now. Then it's certainly a pretty dynamic world that we're in. But I think if you come back to it, like, on the fundamental level. especially if you think about rubber. The economy can go wherever it's going to go. Yeah, there can be truck traffic goes up and down a bit or passenger cars, but it's ultimately a product that wears out. It's a consumable. I think that's a strength for us in whatever environment we're in. I think products like Kappa 10 that are going into a new market that have high growth, I think that's something where we can place all that product regardless. I think in a market like China, where we're small in the overall scheme of things, we're going to have success in our specialty and in our rubber there, we'll be able to place that all. So I think we've got certain real strengths going into this. If it is low, we'll be very focused on customer qualifications, that sort of thing. If it's very strong, we'll be taking full advantage of it. And I just don't know that I'm in a better position to speak about macroeconomics than anybody else you read about.

Okay, Terry, thank you. And I guess most of my other questions have been asked already, but I guess I think last quarter you mentioned that you expect customer shutdowns to be longer in Q4 than usual. I'm just wondering, is that still true?

Excellent question, Kevin. I appreciate that. Certainly for some have signaled that they may take a longer shutdown. Others have not, right? So this is somewhat customer-specific. And I would say that that's really was a comment we made it before about rubber. But even in other specialty markets, I guess we find the difference between what one customer is experiencing in their game plan versus another is somewhat spiky and a little bit distinct right now. But that's in our guidance for the fourth quarter. And, yeah, I do think we'll see some people really trying to draw down their inventory for the end of the year.

Got it. Thank you very much.

Thank you. Our next question comes from the line of Jeff Sokalskas with JP Morgan. Please proceed with your question.

Thanks very much. If you exclude WABE from both specialty and rubber black businesses, and I know volume exclusive of WABE decreased, but how much did it decrease? What would your volume numbers have been in the two businesses excluding the capacity addition?

So, your question, first of all, good morning, Jeff.

So, your question is ex-WABE, what exactly was our volume? I'm sort of a little reluctant to go exactly to one site that we're in startup. You know, the volume impact there is, you know, there's larger volume in rubber, let me say, than the others, so that they both would have been a little bit further negative. But just for commercial sensitivity in China, and given the specialties aimed at a few markets in particular, I'd rather not go to quite that level of detail for one quarter.

Okay. So, let's try it a different way. Yeah, what was your utilization rate in Waube?

Excellent. So, our utilization was around 70%. So, that's a mixture of, you know, our maintenance that we had in the quarter. That's a mixture of the EPA work, those upgrades, as well as just, you know, responding to end customer demand levels.

And in the fourth quarter, we should be, I don't know, 90% utilization in Waube?

Well, so we'll have some work as we go through the startup and take some downtime to make this adjustment or that adjustment. So that will impact YBA. I think it will be less than 90% in the fourth quarter, but loading there would otherwise be quite high, yeah.

And then lastly, can you just give us a feel for what the demand conditions are like in your two businesses in the United States and Europe? In other words, if you had to compare the U.S. demand to European demand, are they both the same? Is one weaker or stronger than the other? How do you feel about it?

Right. So first of all, Jeff, let me go even broader and throw in China. I don't think demand is really robust in any of those three markets right now. So you're kind of talking about, you know, what's the Yeah, within a pretty so-so environment, how do you scale the two? I'd say rubber's a little bit stronger in North America, perhaps because Europe's seeing a little bit more in terms of tire imports. I'd say specialty is, I'd say it's really soft in both, and it depends a little bit. You have to start getting into end segment by end segment, and that can shift around quarter to quarter.

So in specialty, which is weaker, the United States or Europe?

So which one is weaker? I would say, again, on tire, I think rubber is a little bit weaker in Europe than it is in North America. Specialty between the two, I would say they're both quite weak. Probably Europe is a little bit weaker than North America.

And lastly, your capex is 175 to 200. Can you even get to 175 given your spending through the first nine months?

Yeah, Jeff, good question. So it's considerably back-end loaded, and we've backed it off a bit just in timing. A lot of the timing is regarding to LaPorte. So I think that we'll see a number of large purchases left this quarter and that will pass there. And some of the underspend, right, is going to shift over into next year.

All right. Thank you very much.

Thank you. Our next question comes from the line of Kyle Maury with Grizzly Rock Capital. Please proceed with your question.

Good morning, Corning, Jeff, and Wendy. Two related questions for me within your conductives business. On Printex Kappa, can you frame out the potential incremental EBITDA contribution relative to the recent announcement? And then secondly, how does this Printex Kappa EBITDA relate to the report Texas? Because this is in addition, right? Just wanted to make sure it's not a shift, but rather a growth.

Yeah, so we expect, let's say, in the three to five year time period that this would contribute, let's say, five, ten million dollars of EBITDA to us. It's a different product than what we're going to make in LaPorte. It's aimed at a different segment in the marketplace, so it's really complementary. Now, a lot of battery companies have a wide range of materials, so it does help to make us a bit more relevant to these folks. but really see it as a separate marketplace.

Excellent. Thank you.

Thank you. Our next question comes from the line of John Ting Wangten with CGS Securities. Please proceed with your question.

Hi, thank you. Just to follow up on the CapEx, did you push, what was the amount that's pushing out into 24, number one? And number two, can you give us a preview of what your overall CapEx plan is for next year and just kind of what's growth, what's maintenance? That would be very helpful. Thank you.

Sure. I would expect, like, $20 to $30 million to push into next year, the point we're expecting for this year. If we think about next year, we'll have maintenance capital in a similar range, let's say around $90 million. And I would expect almost the vast majority of our growth capital really to be LaForte for next year. And so that would right there get you, let's say, in the $200 million range, I'd say. Plus we may have to make the adjustment depending on how much pushes over from one year to the other. Does that get all of your question, John?

Yeah, and the pushed out piece, that wasn't EPA spending, was it? Or is it something else?

No, no, no, no. It's mainly about when you place orders for big pieces of equipment that are going to go to report.

Understood. Thank you. And then second, I think you gave a metric on Robert getting back well above 400 per ton on a gross profit basis in Q4. Did you give something similar on specialty that I don't recall if you said so?

No, we didn't because like mix, there is a much more dynamic market for us and the whole power play. So I think we'll, we'll have to see where that ends up. Okay. Do you have a directional expectation? Yeah, I think it's probably improving from where we are right now. Yeah. Okay, great. Thank you guys.

Thank you.

Thank you. Our next question comes from the line of Chris Capps with Loop Capital Markets. Please proceed with your question.

Yeah, so my follow-up is kind of a bigger picture one. And on slide three of your presentation, you talked about being on track for the 2025 mid-cycle capacity of $500 million in EBITDA. I'm just kind of wondering, you know, obviously there was never an expectation to get there linearly and There's business cycles and so forth. And the world changes seemingly every day almost. But I'm just kind of curious what sort of levers or pieces you would need in a theoretical waterfall to get there, whether it's economy or pricing between now and then or different recoveries and markets and specialties. Maybe you could just talk about the bridge to that kind of threshold. Thank you. Yeah, great.

Thanks, Chris. All right. So let's hit a couple different things. So we start on pricing. To be clear, we see the pricing that we achieve in 2023 to be the baseline, right? I don't want any confusion around that. We see that's a number from which we can continue to grow, that the market continues to tighten for rubber carbon black in North America, in Europe, actually in South America as well. So you can just see that in the tire capacity being expanded. We're going to need to be able to, we're going to just clearly have pricing power in that environment. And we need to rate prices to get return on all the capital we're putting into air emissions. It's only fair. So I think the pricing part is something we can continue to build on from here. And I think in specialty, we can continue to drive our mix in a favorable way. In any one quarter like the current quarter, do you exactly know what your mix is going to be month to month? Hard to say, especially in today's topsy-turvy economy. But I think the trend is clearly with it, and you can see it in the numbers we've posted. Next, our target is a 2025 mid-cycle economy earnings capacity. So we see ourselves in no way in a mid-cycle economy right now. Certainly for the materials, for the chemicals industry, I don't think this is mid-cycle where we are. So, yeah, we expect some recovery in volume. That volume is going to flow in very nicely for us. And then we continue with the various growth of investments that we have, principally the LaPorte project. I do not expect to fully load Laporte in 2025, so I expect to have the capacity in 2025, not the full EBITDA from that. We've always said, right, it's going to take a year or two to get those products qualified into the right markets. But I do think having that capacity in the United States, in that timeframe, looking at a number of these gigafabs, right, I think that's going to be really positive for us. So I see that as really pretty low risk. If you think about the three big levers that we had to get there, well, one was Laporte. So that project continues. It's on track. We will do very well with that. Another one was pricing and mix. So we already achieved everything in pricing, although it's just awkward in terms of competitive dynamics. I think about how much I say, look, I think it's a positive, fundamental environment that we're in. And then the other one was things like Y-Bay. Well, Y-Bay is up and running. Product is shipping. You know, I think those things are all going to deliver for us. So I think we're very much on track for that. Are we going to have a mid-cycle economy in 2025? I don't know. We'll have to see. But we're going to be ready for it. I think that's what's really

And I think, Chris, just to layer on what Corey said early on in his response, clearly a big lever there is volume. And the volume is the function of where the economy, where the market demand is at at the time.

Yeah, I would say another thing is like, we're not going out to chase volume in specialty that isn't really there. I don't think that's the way to run a specialty business. So, you know, we're cautious on that. I don't think we've lost share at the same time. We're entitled to the premiums that we have in our specialty business. Stuff performs very well.

Thank you for the call. All right. Thank you, Chris. Thanks, Chris.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Corrine Painter for closing comments.

All right, so thank you to our analysts and the investors for your insightful and penetrating questions today. We really appreciate your interest, your continued support, and look forward to seeing some of you soon as we're going to be on the road later this month and in December talking to investors. Thank you all for your time.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.