Orion looking to double earnings by 2025

NEW YORK—Orion Engineered Carbons has laid out the details of its long-term growth plan, targeting mid-cycle adjusted earnings of $500 million by 2025.

The carbon black manufacturer has defined a series of "high margin" opportunities for growth, which include expanding its conductive additives production for electric vehicles and investing in sustainable materials for the rubber markets.

Commenting during the company's investor day on June 8, CEO Corning Painter said Orion followed three themes for its sustainable rubber growth.

These include enabling carbons, where Orion will offer carbon blacks that improve the sustainability of customers; recycled carbons coming from waste tires; and renewable carbons, which Orion will try to extract from the "natural CO2 cycle" from biological feedstock.

"We are not pursuing these (sustainable products) out of a sense of defensiveness," Painter said.

"We make an essential product," he added. "Our raw material is an industrial by-product, it is carbon-rich, if we don't use it, it will go into a boiler and create an immense amount of CO2."

Painter said Orion is investing in the three options because its customers are interested in them.

"We see a business opportunity in this," he said

In addition, the company will tap the "incredible pricing environment" to increase earnings, said the CEO.

"North America has been brewing for a long time. There have been people adding tire capacity here, but there hasn't been a new reactor for rubber carbon black.

"In fact, at the end of the year this year, one factory is going to close," he added.

This will make the supply tighter and makes the North American market "a very attractive market for us," according to Painter.

"And if we shift over to Europe, that region used to be more or less very tight in supply-demand balance, even when including Russia as a supplier to Europe," Painter said.

Right now, the company official went on to say, "nobody is very comfortable with that Russian supply chain," making Europe a highly favorable market, not just in terms of pricing, but also in terms of overseas shipment and supply.

To sum up, Painter said a combination of investment in conductive additives and a favorable environment for rubber products is expected to help it nearly double earnings (EBITDA) to $500 million by 2025, compared to $268 million reported in 2021.

This year, Orion expects earnings to rise to $325 million, and over the next three years the recently announced acetylene-based additives plant in Texas will increase earnings by another $50 million.

Capacity expansion across global sites including in China, where the company is carrying out "significant debottlenecking" this year, as well as the new reactor at the Ravenna, Italy, also are anticipated to contribute $75 million to mid-term earnings.

"And then there will be some small but very attractive expansion for some of the very highly differentiated products," he added.

The manufacturer also expects a $50 million contribution from the pricing/mix effect both within its specialty and rubber carbon products.

According to Orion, the carbon black supplier manufactured 701,000 metric tons of rubber carbon black in 2021 and was the world's No. 3 supplier with 10 percent of global market share.

Of the entire volume, 60 percent went toward replacement tires, 15 percent toward OEM tires and 25 percent towards general rubber goods.

Geographically, Europe contributed to 40 percent of the company's overall sales, followed by the Americas at 39 percent and Asia at 21 percent.