Orion posts higher sales, profit despite volume declines

SPRING, Texas—As far as first quarters go, Orion Engineered Carbons had a good one.

The maker of rubber and specialty carbon blacks, saw sales rise by $16.2 million year-over-year, recording $500.7 million for the quarter. Net income, likewise, was up $9.8 million over the year-ago period, coming in at $42.3 million.

Gross profit for the quarter grew by 15.7 percent year over year, coming in at $136.4 million.

"The increase was primarily driven by improved contractual rubber carbon black price and favorable specialty carbon black mix and timing benefits," Orion said in its financial statement. "Those were partially offset by lower volume in both segments. Higher margins per ton resulted from price increases in rubber carbon black to recover environmental and reliability related capital expenditures and an improved mix in specialty carbon black."

Adjusted EBITDA was up by 22 percent year-over-year to a record $101 million for the three months.

All of this growth came even as volumes decreased—by about 19,700 metric year-over-year. On the specialty black side, this was driven by slowdowns in the lower profitability end markets. Rubber carbon black volume decreases were due to short-term demand and customer turnarounds.

Rubber carbon black sales increased by $31.8 million—about 10.5 percent—year-over-year to $338.7 million for the period. This increase came even as volumes dropped slightly, about 3.8 percent, or about 7,100 metric tons overall.

Orion attributes this to volume decline to the timing of customer shutdowns.

Adjusted EBITDA, for rubber blacks increased by $23.1 million, or 56.8 percent, to $63.8 million, when compared to the year-ago period. This resulted in improved gross profit margins, which were partially offset by lower volume.

Year over year, adjusted EBITDA for the rubber segment per ton increased by $136.50—about 63 percent—to $353.50.

Specialty carbon black segment volume declined by around 12,000 metric tons, or 19.2 percent, year over year. Orion attributes this primarily to the economic slowdown in all major ends markets as well as price competition.

Net sales for the segment fell by about 8.8 percent or around $15.6 million to $162.0 million compared to the previous period. This was primarily driven by reduced sales volume in low end markets, though it was partially offset by favorable product mix.

Year-over-year adjusted EBITDA for specialty blacks declined by 12.2 percent—about $5.2 million—to $37.3 million. Volume reduction drove the decline. It was partially offset by improved gross profit margins.