Orion S.A. Common Shares

Greetings. Welcome to the Orion SA fourth quarter 2025 earnings conference call. At this time all participants will be in 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 from your telephone keypad. Please note this conference is being recorded. I'll now hand the conference over to Chris Kapsch, Vice President of Investor Relations. Thank you. You may now begin.

Thank you, Rob. Good morning, everyone. This is Chris Katsch, VP of Investor Relations at Orion, and welcome to our conference call to discuss our fourth quarter and full year 2025 earnings results. Joining our call are Courtney Painter, Orion's Chief Executive Officer, and John Puckett, our Chief Financial Officer. We issued our fourth quarter results this morning, and we have posted a slide presentation to the investor relations portion of our website. We will be referencing this deck during the call. Before we begin, We are obligated 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 Securities and Exchange Commission, and our actual results may differ from those described during the call. In addition, all forward-looking statements are made as of today, February 17, 2026. Orion 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 tables attached to our press release and the quarterly earnings debt. Any non-GAAP financial measures presented in these materials should not be considered as alternatives to financial measures required by GAAP. With that, I will turn the call over to Corny. Good morning.

Thank you, Chris, and thank you all for taking the time to join our conference call. Before getting into our Q4 review commentary, I'm excited to introduce our new chief financial officer, John Puckett, who joined Orion in early December. John has over 30 years of financial leadership experience, including 14 years in the chemical industry. Some of you may know him from his tenure at Celny's, where he most recently served as a vice president and CFO of the acetyl segment. John, it's been a few months, but welcome again to Orion. Moving to our results discussion, starting on slide three, we finished 2025 with better Q4 results than we had contemplated early in November. The upside was primarily a function of higher volumes than customers had forecasted. In rubber, tire factory curtailments were not as pronounced as customers had indicated. A larger factor, however, was our specialty segment, where volume and mix were better than expected. I'm particularly pleased with our free cash flow of $55 million for the full year, thanks to a concerted effort from our team to drive working capital efficiencies. We will discuss in a moment why we expect positive free cash flow to continue in 2026, despite lower EBITDA levels. One of Orion's core values is our emphasis on safety, and 2025 was a near record year for employee safety within our company globally. With only three incidents across our network of plants, last year was the second best year since Orion became a public company. And based on industry standard metrics, our performance was about nine times better than the broader chemicals space. A huge congratulations to our team on this distinguished achievement. Moving to slide four, and really for the next few slides, my intent here is to touch on three key points. First, what the industry has endured leading to the guidance we've conveyed today. Second, the actions we have taken to navigate these trough conditions, including what is needed to ensure we deliver positive free cash flow, this year, next year, and in the future. And third, tire industry data, which is indicating our businesses' fundamental drivers are setting up for recovery. On slide four, we recap a few dynamics that translated into uniquely difficult backdrop for the carbon black industry in 2025, leading to challenging negotiations for 2026 supply array agreements. We've talked for some time about the elevated imports of tires into key western regions. These generally persisted throughout the year, and some auto industry experts have argued that tariff uncertainty only magnified this surge throughout much of 2025. I will share encouraging data in a moment that suggests an inflection could now be at hand. Part of what fueled the import surge was a lingering consumer response to higher inflation, resulting in a trade down to lower value brands, which are mainly imported. We believe this trade down has occurred in the truck and bus category as well, especially with smaller fleet operators. Encouragingly, industry trade journals have reported this trend reversing. In the past couple of months, Tier 2 and Tier 1 tires outsold Tier 3 brands for the first time last year. This trade-up reversion is a positive trend for our customers and more consistent with historical consumer preferences. Shifting from passenger car to truck tires, freight activity has been a drag for the tire industry for the past few years. This may surprise some on the call, but it's an important point. Truck and bus tires count for about one-third of all carbon black that is consumed in tire production globally, and more than 40% of the tire market in the Americas. Of course, this suggests that the freight industry's recession has also been a headwind to the truck tire demand and therefore carbon black volumes. The specialty portion of the carbon black industry has been affected by persistently weak PMI. In addition, Broad uncertainty has discouraged investment, encouraged lean inventories, and weighed on consumer confidence. Collectively, these soft demand conditions have been a significant factor in the carbon black industry's challenging contract negotiations. On slide five, we highlight the actions Orion has taken to ensure our resilience through today's conditions. We are relentlessly focused on managing costs. On top of the cost reductions last year, we're taking additional actions which should drive $20 million in productivity, efficiency, and headcount savings. We are sharply reducing CapEx, which is a key fact lever that will enable us to deliver positive free cash flow again this year. We executed on the plan we announced last summer to rationalize three to five production lines and have already closed the lines we intend to. We are also pleased that our operational excellence initiatives are building momentum and bearing fruit. For example, the reliability of our North American plants improved more than 200 basis points over the course of 2025, enabling market-improved on-time order metrics. We are focused on replicating our early successes here across our plant network worldwide. Efforts include adopting a variety of capital light but novel process technologies and at least one AI tool is being leveraged for greater process efficiency. As you know, Orion believes we're entitled to earn a fair return when selling our products. In prior years, we have traded off some volume and share to achieve this. However, in early negotiations last year, it became clear that this approach was not going to work for us or our customers. we pivoted to a more win-with-our-customers strategy to maintain share. At the same time, we found that our customers, with weaker demand themselves, were looking to consolidate suppliers. This approach favored global suppliers like Orion. We believe that we emerged from this process having defended our overall share and gotten closer to a few of our key customers. Finally, we successfully negotiated and executed an amendment to our credit agreement that provides flexibility as we navigate through this cycle. John will elaborate more on this in a moment. Moving to slide six. Underlying carbon black indicators are improving. Passenger car, truck, and off-road tire categories each comprise about a third of the carbon black consumed as a reinforcement material for the tire market on a global basis. The upper right chart with U.S. import data depicts the above normal level of imports starting in 2023 and persisting during 2024 before surging throughout much of 2025. The more recent trend suggesting import levels are subsiding is encouraging. In Europe, an investigation into the dumping of Chinese tires is now expected to include in June And the European Commission has simultaneously launched a probe into the subsidizing of Chinese-made tires exported to Europe. A bit more of a leading indicator for imports is the export data from key tire manufacturing countries. Thailand is the single largest exporter of both passenger car and truck and bus tires to the U.S. And as depicted in the lower left chart, exports from Thailand have been trending favorably. generally declining since the initial framework for a country-specific trade deal with Thailand was announced August 1st, and subsequent to when Section 232 tariffs on truck parts, including tires, were effective as of November 1st. We're also monitoring potential positive outcomes from changes to the USMCA trade agreement likely this summer. On this slide, we also show a sharp decline in tire exports from India, the largest exporter of off-road tires, including construction, mining, and ag equipment tires. On slide seven, I merely wanted to remind investors just how pronounced the downturn in the key truck and bus category has been, as gauged by freight activity. The Cast Freight Shipment Index shows three straight years of progressively lower freight activity in North America, including 2025 levels below the 2020 lows. There are indicators, including a rebound in spot freight rates, suggesting this market could be at an inflection. And with that, we'll turn the call over to John.