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November 09, 2020 02:59 PM

Orion rubber blacks sales down, recovery in sight

European Rubber Journal Report
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    HOUSTON—Orion Engineered Carbons' rubber black segment has continued to see year-on-year declines in results but a market recovery is in sight, according to CEO Corning Painter.

    "Our business and financial results made a sharp recovery from the historic low volumes in the prior quarter and demonstrate the resilience of our business," Painter said in a third quarter results statement.

    The rubber business, he said, recovered to 91 percent of prior-year levels, with improved pricing.

    Rubber carbon black volumes declined by 9.1 percent year-over-year to 1.78 million metric tons during the three months to end of September.

    Volumes were up 65.9 percent compared to the previous quarter "reflecting partial end market recovery," Orion said.

    Orion posted volume declines in all regions, citing the COVID-19-induced global economic downturn, which impacted demand from tire customers.

    The decline also partially reflected the impact of the company's commercial strategy during 2019 contract negotiations, which emphasized raising price over volume, Orion said.

    Net sales fell 28 percent to $178.4 million during the quarter, primarily driven by the pass-through of lower feedstock costs to customers.

    Additionally, the broad-based volume slowdown across all regions and markets negatively impacted sales. Base price increases partially offset the lower revenue.

    Segment gross profit declined 26.7 percent to $42 million during the three-month period, due mainly to lower volumes and the impact of passing through lower feedstock costs.

    Rubber earnings (adjusted EBITDA) fell 25.1 percent to $28.5 million, driven by lower volumes, the impact of passing through lower feedstock costs and unfavorable mix.

    The earnings margin was slightly higher at 16.0 percent in the third quarter of 2020, compared to 15.4 percent in the third quarter of 2019.

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