Orion Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: The $69 million adjusted EBITDA in Q2 matched expectations despite demand headwinds, with volumes up 3 % year-over-year and sequential earnings boosted by improved manufacturing performance.
  • Negative Sentiment: A surge in imported tires ahead of U.S. automotive tariffs weighed on Rubber demand, while tariff uncertainty and polymer end-market destocking led to an 8 % year-over-year volume drop in Specialty products.
  • Positive Sentiment: Orion expects new 25 % automotive tariffs to normalize tire imports by late 2025/early 2026, strengthening Rubber segment demand, and potential India tariffs should curb carbon black imports into the U.S.
  • Positive Sentiment: The company is implementing production rationalization by closing 3 to 5 lines (<5 % capacity), driving cost and productivity improvements through operational excellence and extracting $27 million from working capital in Q2.
  • Neutral Sentiment: Orion narrowed its adjusted EBITDA guidance range due to ongoing headwinds but reaffirmed its $40 million–$70 million free cash flow guidance, prioritizing debt reduction and lower CapEx over share repurchases.
AI Generated. May Contain Errors.
Earnings Conference Call
Orion Q2 2025
00:00 / 00:00

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Operator

Ladies and gentlemen, greetings, and welcome to the Orion S. A. Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

Operator

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Chris Kapsch, Vice President of Investor Relations. Please go ahead.

Christopher Kapsch
Christopher Kapsch
VP of IR at Orion S.A.

Thank you, Ryan. Good morning, everyone. This is Chris Kapsch, VP of Investor Relations at Orion, and welcome to our conference call to discuss second quarter twenty twenty five results. Joining our call today once again are Corning Painter, Orion's Chief Executive Officer and Jeff Gleich, our Chief Financial Officer. We issued second quarter results after the market closed yesterday, and we have posted a slide presentation to the Investor Relations portion of our website.

Christopher Kapsch
Christopher Kapsch
VP of IR at Orion S.A.

We will be referencing this deck during the call. Before we begin, we are again 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, 08/07/2025. Orion is not obligated to update any forward looking statements based on new circumstances or revised expectations.

Christopher Kapsch
Christopher Kapsch
VP of IR at Orion S.A.

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 deck. All non GAAP financial measures presented in these materials should not be considered as alternatives to financial measures required by GAAP. And with that, I will turn the call over to Toreen Painter.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Good morning. Thank you, Chris, and thank you all for taking time to join our conference call. Before discussing some industry trends and digging into Q2 results, I wanted to briefly express my gratitude to Chief Financial Officer, Jeff Gleich, who after nearly four years with Orion will be retiring in the fourth quarter. Jeff's leadership and guidance will be genuinely missed throughout the organization. We've commenced a formal search process, and we appreciate Jeff's intent to help ensure a smooth transition through the end of the year.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Turning to Slide three. The 69,000,000 of adjusted EBITDA we generated during Q2 was in line with our expectations, and that was despite demand headwinds that became more acute during the quarter. Overall, volumes were up 3% year over year in the quarter, but declined a little more than 4.5 sequentially. A markedly improved manufacturing performance at our plants was a key driver of the higher sequential earnings. As we had indicated last quarter, the level of unplanned downtime during Q1 was anomalous, and our efforts to drive better planned performance through operational excellence initiatives are now starting to bear fruit.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

I mentioned demand headwinds. Here, we experienced this in both segments in Q2. Affecting our Rubber business, there was a surge of tire imports into The U. S, presumably to beat the early May automotive sectorial tariff deadline. We believe this continued away on local tire manufacturing rates and therefore our demand.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

In Specialty, and you've seen this across the broader Chemicals segment, uncertainty resulting from the lack of tariff clarity, possibly some destocking in polymer end markets and economic malaise more generally have translated into a softer demand environment, and Orion was not immune. Despite this difficult backdrop, some of our more profitable specialty product lines have exhibited resilience, and we continue to make tangible progress with new customer qualifications for our higher growth conductive grades, lithium ion batteries, energy storage systems, high voltage wire and cable applications and conventional battery markets, amongst others. This commercial trajectory for our conductives product line in the healthy double digit range in terms of CAGR helps position the Specialty segment for longer term earnings recovery. Near term, the overall Specialty demand trends have remained choppy. However, the recent propensity for customers to place orders in a just in time fashion could suggest inventories are quite low through the specialty supply chain.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

The subject of tariffs, of course, remains topical. We continue to expect that the automotive tariff rates, which include replacement tires, will help normalize the level of tire imports into The U. S, diminishing pressure on top tier local tire manufacturers, our customers. We believe this will translate into improved Rubber segment demand starting late this year or early next year. Most recently, the attention has shifted to India.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

I don't think that 25% plus 25% tariff is definitive, but even a 15% to 25% tariff would be impactful. While less important to the overall Orion Mosaic, this will make carbon black imports into The U. S. Less economically viable. Indian imports currently satisfy about 4% of North American market demand.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Not coincidentally, the 2026 negotiations are underway, a bit earlier than normal in our view. My read is that customers started early for two reasons. First, due to the elevated tire imports, consumption of carbon black has been disappointing so far into 2025. They like that backdrop for negotiations. Second, the 2026 is looking more encouraging, and tire makers want to close negotiations before this becomes more apparent.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

The U. S. Section two thirty two automotive parts tariffs and the announced reciprocal tariffs on India improves the setup. Meanwhile, in Europe, the Chinese tire dumping investigation is underway, and you have to ask yourself if the Europeans are really going to keep the door wide open for their crucial automotive segment. The impact of these moves has not yet been felt in business trends.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

And by the way, on top of everything else I just mentioned, another risk factor for tire makers is carbon black and other auto related imports from Canada or Mexico potentially being in play given that the USMCA comes up for resetting mid-twenty twenty six. We may hear more about what the U. S. Administration's intention here as early as this October. The last point on this slide, investors should know we are not standing still, simply hoping for the challenging backdrop to improve.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Here, we mentioned self help initiatives that are underway. Expect more elaboration on these efforts over the balance of 2025. Beyond improving productivity and lowering costs, we've also shifted our capital allocation priorities towards debt reduction over share repurchases, at least in the near term. On Slide four, we share recent tire industry data and our current view of how tariffs may affect these trends. Despite all the noise and volatility, the originally contemplated automotive tariffs have remained steady at 25%, and the early May deadline for that targeted segment has come and gone.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

We believe this tariff imposition is what spurred the surge of imports into The U. S. As shown on the top slide shown on the slide, excuse me, on top of already elevated levels. Recall, a historically more normal level of tire imports as a percentage of industry sell through has been in the low 50% range. In the past one years point or so, this level has increased to more than 6065% by some counts.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

The tire industry channel shifted to lower value tires, including imported Tier three and Tier four brands, in response to the consumers' reaction to inflation. But we think the stronger cost of ownership offering of the world's leading tire manufacturers, including their Tier two offerings, combined with trade policy shifts, will reverse this dynamic. And as you can see in the top left chart, monthly tire imports surged when the auto import tariffs became aberrant and remained elevated through May. This has, in turn, weighed on U. S.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Tire production as depicted in The U. S. PMA data shown here in the lower left chart. We expect June data to show reduced tire imports. I think tire companies want to frame the annual negotiations before this kind of market data becomes more apparent.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Given this recent import surge, tire channel inventories, certainly for the lower tier offerings, are likely elevated. From customer engagement, we've gleaned their expectation for channel inventories to be drawn down in the 2025, possibly towards the end of the year, and tire production rates may then recover. When portraying U. S. Tire imports as elevated but likely to normalize with some assistance from tariffs, we're often asked by investors, well, how do you know the increased import levels are not structural in nature?

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

We've added Slide five to help answer this question. Here, we show there is 7,000,000,000 to $8,000,000,000 of capital so far that major tire customers have committed to projects in North America alone to expand or modernize their tire production capacities. These are all investments scheduled to ramp in the next four years, considering contributing to a 3% to 3.5% North American CAGR through the end of the decade. This CAGR is net of some closures that have been announced. We believe these investments are just one example of the reshoring and deglobalization trends that are taking place.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Essentially, all of these project announcements have predated the new tariff paradigm. In terms of carbon black, it's not unreasonable to expect little or no greenfield capacity expansion in North America at least over the next three years based on the absence of project activity. Back to the tire onshoring trend, there's a similar dynamic at play in Europe, albeit although to be fair, there have been more closure announcements of older, less competitive factories in that region. On Slide six, we wanted to touch upon our recently announced production rationalization and some other self help initiatives intended to bolster our performance under a scenario where the business cycle trough is extended. The decision to shutter three to five production lines, representing less than 5% of our global capacity, is part of a broader portfolio optimization effort targeting lower margin business.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

This initiative was based on data driven analysis, allowing us to examine cash flow performance beyond regions and plants and all the way down to production line, product grades and even by customer. Going forward, we'll have fewer reactors competing for maintenance capital, so we can also sharpen our pencil on our maintenance spend. We simply cannot have assets on hold for when a customer's decision to source from an undependable supply chain fails them. Shifting gears a bit. Part of the reason this rationalization decision is prudent reflects the progress we're making with our own operational excellence programs. These initiatives are gaining traction across our portfolio and building momentum. To be clear, we're not sitting around waiting for demand's inevitable recovery. In our current scenario planning, we contemplate subdued demand over the balance of 2025. To this end, we're executing on the additional cost reductions that we mentioned last quarter. We've stressed that driving a sharp improvement in free cash flow is our greatest priority, and that remains the case. Here, we've made good progress, including the extraction of $27,000,000 from working capital in the second quarter alone, primarily from inventories.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

We also expect the Q1 increase in receivables to reverse in Q4. The confluence of these and other working capital actions, along with lower CapEx, underpin our ability to reaffirm our previously conveyed free cash flow targets. Jeff will elaborate more on this in a few moments. And with that, I'll hand the call over to Jeff, who will walk you through the second quarter results in more detail.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

Thanks, Corning. Before I start, I do want to thank Corning for his kind words earlier. As we announced last week, I have decided to retire in a couple of months, but I intend to not only support Orion's search for a new CFO, but then to continue with the transition through at least year end and perhaps even into early twenty twenty six. I've enjoyed my three point five years at Orion. I decided to retire for personal reasons and have only true respect for our Orion team.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

Finally, my opinion is with the tariff headwinds that Corning mentioned earlier, we could be on the precipice of a ramp up in volume as we look at 2026. Now on to our Q2 results. On slide seven, you will see our business exhibited resilience in Q2 with volumes improving 3% year over year. We saw growth in our Rubber business, but a decrease in Specialty due to hesitancy across our customer base, particularly related to automotive OEMs and the polymer supply chain, our highest volume Specialty end market. While total Orion profitability was down year over year, reflecting adverse geographic and product mix and pricing, these variances were partially offset by lower cost and a greater cogen contribution.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

Gross profit per ton improved sequentially, thanks largely to better operating performance, enabling greater fixed cost absorption. Overall, cost improvements benefited from self help actions, which were obscured by the adverse inventory revaluation, which we had called out on last quarter's call due to lower average oil prices across Q2. On Slide eight, our Rubber business delivered 7% higher volumes year over year and 4% higher adjusted EBITDA. The volume improvement was expected, a function of the twenty twenty five contract outcomes and would have been better if not for import related headwinds across the western markets in which we operate. As Corning noted, imports continue to increase compared with already elevated 2024 levels.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

Our China business also delivered higher volumes, a function of improved plant operations there. Overall, Rubber volume gains were skewed towards lower margin regions, hence the adverse mix dragged on the volume contribution in our year over year EBITDA bridge. Our gross profit per ton recovered sharply on a sequential basis in Q2, thanks mostly to improved plant performance. However, this metric would have been stronger if not for the headwinds from the elevated imports into our highest performing rubber markets. In the EBITDA bridge, you can see a strong cost performance more than offsetting pricemix, thanks to better absorption, a higher cogen contribution and lower fixed costs despite adverse timing related to pass through provisions.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

On Slide nine, in Specialty, the main issue in Q2 was soft demand due to the macro backdrop and related customer hesitancy with tariff uncertainty translating to weaker trends in manufacturing sectors, especially in our key North American and European regions. Specialty volumes were down 8% year over year and 6% sequentially, and these sluggish volumes were a major factor in our EBITDA bridge. Product pricing and mix was a positive contributor to EBITDA on a year over year basis, but profitability, including GP per ton degradation, was hurt by the inventory revaluation I mentioned. This transient impact, roughly $50 per ton, was only partly offset by a more favorable cogen contribution and reduced cost. The euro's appreciation was late in the second quarter, so FX translation was not a major driver in our P and L results.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

Slide 10 shows our latest guidance. Reflecting the surge in import headwinds affecting our Rubber segment and overall macro uncertainty impacting both segments, we are narrowing our adjusted EBITDA guidance by reducing the high end of our prior range. Note also, considering improved operations coupled with persistently soft overall demand backdrop, we anticipate production rates to further lower inventories as we drive to achieve our free cash flow commitment for the year. You can see on this slide that we are maintaining our free cash flow expectations of 40,000,000 to $70,000,000 or $55,000,000 at the midpoint. Slide 11 simply shows our continued focus to reduce CapEx not only in 2025, but in 2026 as we've discovered over the past as we've discussed over the past few quarters.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

Slide 12 shows the higher expectation for cash being extracted from working capital. We've already made substantial progress in Q2 in inventories. We expect meaningful benefit simply from the normal seasonal accounts receivable release during Q4. We've also launched initiatives which should serve as insurance to achieve this free cash flow target. After achieving our commitment in 2025, higher free cash flow conversion is a straightforward lift next year simply from lower capital expenditures.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

Looking forward, we have shifted our capital allocation priority from buybacks to debt pay down. That will be the priority through at least the balance of 2025 and likely into 2026. We finished the quarter with a net debt to EBITDA ratio of 3.55, one turn higher than the high end of our target range. I would note that the stronger euro at quarter's end increased this metric 15 to 20 basis points due to our euro translation to dollars euro debt translation to dollars, sorry. Efforts over the balance of this year and into next year will be focused on both reducing the numerator and increasing the denominator to improve this metric.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

With that, I will turn the call back to Corning.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Thanks, Jeff. Before moving to Q and A, let me just summarize a few key takeaways captured on Slide 13. We're pleased with the sequential earnings improvement, partially enabled by our better overall planned performance. We look to build on better operating metrics through continuous improvement and manufacturing excellence programs, which, as we mentioned, are gathering momentum. Despite the in line second quarter result, and let me be clear about this point, we're by no means complacent.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Our intensified focus goes beyond simply weathering the challenging backdrop and is focused on positioning Orion to demonstrate much greater earnings power to win the business cycle and other factors inevitably inflect in our favor. We do expect to see demand benefit from the new tariff paradigm in late twenty twenty five or early twenty twenty six, even as our tire customers are hardly likely to acknowledge this reality as supply contract negotiations for next year progress in earnest. Finally, I just want to reiterate that through all of this, driving free cash flow improvement remains the company's highest priority after safety at this juncture. If there are tactical decisions that improve cash flow at the expense of P and L, we will make that trade all else equal. In short, we fully intend to achieve our 2025 free cash flow guidance and setting us up for even greater free cash flow next year.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

And with that, Ryan, please open up the lines. We'll be happy to take people's questions. Thank you.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. The first question comes from the line of Josh Spector from UBS. Please go ahead.

Christopher Perrella
Christopher Perrella
Director Equity Research at UBS Group

Good morning, everyone. It's Chris Perrella on for Josh. I just wanted to ask about the step up in earnings in the second half of the year. Compared to the 2Q base, how much of that is volume growth? How much of that is the self help?

Christopher Perrella
Christopher Perrella
Director Equity Research at UBS Group

Can you just kind of dig into the details of how you see or what's in your assumptions in the guidance?

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

Sure, Chris. This is Jeff. A couple of things. First off, if you recall, in our Q2 numbers, we have this $5,000,000 inventory revaluation. So Q2, excluding that, would have perhaps been more in the mid closer to the mid-70s than where we were at.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

I think as we look forward, from a volume standpoint, I wouldn't see necessarily a step up in volume. I think if we look at the Rubber business, for example, compared to where we were in Q2, I think we would be relatively in line with that, which will still be year over year growth, but on a sequential basis wouldn't necessarily see much of an increase. I think specialty, maybe we see a little bit of a pickup in volume. But again, given where the markets are right now, it's a little bit challenging. So I think really, off, it's that more normalization of Q2.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

And then I think, as you noted, some of the cost actions we've taken, while we've benefited so far, we will see at least that benefit in the second half of the year.

Christopher Perrella
Christopher Perrella
Director Equity Research at UBS Group

Thank you. I appreciate the color on that. And then the question on the cash balance at the end of the year. What actions do you have? Or could you elaborate a little bit more on other levers that you have to pull yet to hit that target?

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

Sure. So if you think about working capital, there's three levers. There's receivables, there's payables and there's inventory. We've done a quite good job on receivables over the past couple of years starting in 2023, so not a lot there right now. The inventory, we took our inventory down, as Corning noted, dollars 27,000,000 in Q2. I'd say between now and Q4, I think there's more of an opportunity to take that down.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

It may not happen in Q3, and part of the reason would be we've got some shutdowns in early Q4, some turnarounds. And when we do that, we want to build up a little inventory beforehand. So you probably won't see it in Q3, but perhaps you'll see a little bit in Q4. And then on the payables side, we've got some activities that we're looking at. I don't want to go into too much detail yet, but they may help us as we get to it later into 2025 and then also furthermore in 2026.

Christopher Perrella
Christopher Perrella
Director Equity Research at UBS Group

Thank you. Appreciate that. And Jeff, enjoy the retirement.

Jeff Glajch
Jeff Glajch
CFO at Orion S.A.

Thanks, Chris.

Operator

Thank you. The next question comes from the line of Kevin Estock from Jefferies. Please go ahead.

Kevin Estok
Equity Research Senior Associate - Chemicals, Emerging Technologies & Industrial Biotech at Jefferies LLC

Hey, good morning. This is Kevin on for Alexander. So just curious on the tariffs. I guess I was

Operator

Kevin, I do apologize to interrupt you, but your audio is not coming in clear.

Kevin Estok
Equity Research Senior Associate - Chemicals, Emerging Technologies & Industrial Biotech at Jefferies LLC

Can you hear me now? Hello?

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

A little better. I think if you just try talking really softly or slowly, let's try that.

Kevin Estok
Equity Research Senior Associate - Chemicals, Emerging Technologies & Industrial Biotech at Jefferies LLC

Okay. So on tariffs, I was just wondering, I guess, do you expect production to initially come back to Mexico, let's say, before The US? And just on the short tail wind itself, have you thought about it or been quantified?

Operator

Kevin, again, do apologize your audio is not coming in clear.

Kevin Estok
Equity Research Senior Associate - Chemicals, Emerging Technologies & Industrial Biotech at Jefferies LLC

Okay.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

So Kevin, I heard the first half of that. Do we expect production to be revert more to Mexico than The U. S? No, we don't. I think it would be broadly felt.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Maybe if you can try a different line and then get back in the queue. It's very hard to hear you.

Operator

Thank you. We take the next question from the line of Jon Tanwanteng from CJS Securities. Please go ahead.

Jonathan Tanwanteng
Managing Director at CJS Securities

Hi, good morning and thank you for taking my questions. I was wondering if you could talk about what you're expecting in Q4, if it's going to be the traditional seasonal downtick or if maybe there's more tariff certainty, perhaps rates are lower, inventories are drawn down, if that might be a little bit different or people might still be cautious?

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Well, it's John, excellent question, and I wish I could tell you with great certainty what's going to happen in Q4. I think there's a possibility we could see a stronger Q4 given the whole tariff paradigm. But I think very early to call that out as with a lot of confidence right now.

Jonathan Tanwanteng
Managing Director at CJS Securities

Okay. Great. And then if you could just expand a little bit more on the structural versus temporary discussion on imports. Imported tires at, you know, the the lower grades that you're talking about, are they with the tariffs now, are they are the prices now in line with what domestic tire companies offer your customers? Or is there still a price gap, I guess, with the tariffs there?

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Yes. I'd say there's still a price gap, and it's a little bit apples to orange. So the domestic producers, which are global companies, not just U. S. Companies, operate in The United States, I would say they primarily associate them with their Tier one brands.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Just about all of them have a Tier two brand as well. And in both of those brands, they tend to be offering a tire which comes with a mileage guarantee and things like that. So the value proposition they're offering is somewhat better than, let's say, a Tier three, Tier four imported tire is. So I think what the tariffs achieved, the 25% automotive tariff, is it closes that gap quite considerably for them in terms of selling against And you do see some signs of those major premium tire companies investing a bit more advertising in their second tier lines right now. And I think, yes, they still cost a little bit more, but they offer you more of a warranty.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

There's more there to sell in terms of value add cost of ownership. Does that answer your question, Doug?

Jonathan Tanwanteng
Managing Director at CJS Securities

It does. I'm just curious as to if you've seen any reversion to the higher value versus the lower price in the end markets from just a consumer mix perspective or if that continues to trend towards the lower price?

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

I wouldn't say we're like our position in the supply chain that we're going to be the first guys to see it. What I would say is that for some of the majors, their second tier brand tire factories have performed better in the course of this year than their premium ones in terms of simply volume taken relative to plan.

Jonathan Tanwanteng
Managing Director at CJS Securities

Okay. Great. Last one, if I could sneak one in. Just any incremental tariff impacts from the August 1 announcements? I think you mentioned India.

Jonathan Tanwanteng
Managing Director at CJS Securities

I don't know if there's anything else that was either a headwind or a tailwind that might impact you guys. Any updates that's So

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

the biggest thing for our customers is simply the 25% automotive tariff, and that includes replacement tires. And that's the two thirty two. It's a section separate item, so not really part of the reciprocal tariff. So even somebody who has a 10% tariff rate, for example, automotive parts are subject to that. So that's, I think, a real positive steady thing for it.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

There's not a lot of carbon black imported into The Americas. But in The U. S, there is some coming out of India. So I think 25% and just yesterday, another 25% total of 50%. I'm not saying I'm sure it's gonna stay at that level, but any elevated tariff level on India is also something that would make that imported carbon black from India, I think, just less economically viable.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

And I think a tariff in the 10% to 15% to 25% range would be meaningful as well in that space.

Jonathan Tanwanteng
Managing Director at CJS Securities

Great. Thank you.

Operator

Thank you. The next question comes from the line of John Roberts from Mizuho Securities. Please go ahead.

John Roberts
John Roberts
Managing Director at Mizuho Financial Group

Thank you, and thanks, Jeff, for your service. On Slide four, is the implication that the area between the twenty twenty five import line and the upper dash line, that area represents the excess imports. So do we need to see that twenty twenty five line go below the dash line by an equal area to rebalance the market?

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Well, I think any decline in that prior to where it was in '24 or, you know, dare to dream '23, whatever, in 2019, any downward movement in that is improvement from the perspective of our customers. Our customers doing better is ourselves doing better. So if you're talking about getting back to when it was more like in the low 50s, certainly, let's say, like twenty twenty nine twenty nineteen, excuse me, was the time frame when we were in that kind of range. Does that get what you're after there, John?

John Roberts
John Roberts
Managing Director at Mizuho Financial Group

Well, yeah, I just didn't know how far down we have to go till you would think inventories would be, say, normalized.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Well, so inventories is a different question, right? So I think inventories is this question of the surge of product came in, and that's going to have to get sold through, and that's going to be out there at the tire dealers, right, in their shops competing with those, let's say, Tier two brands of the major tire companies. And our tire customers nobody has great visibility to that. Our tire customers would say they expect that to be burned down, let's say, over the course of the remainder of this year. But in terms of tire manufacturing, the underlying signal for where this market is going, that's all about this import rate.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

And any downward movement in that is good, and you can just pick your year and say, well, what would it be like if it was less than '22,

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

'23, blah, blah, blah, all the way down to '19. But the speed with which it declines is probably says a little bit about how quickly the inventory gets burned down. But I think the real signal there is just for what we can expect for demand going forward.

John Roberts
John Roberts
Managing Director at Mizuho Financial Group

Okay. And then the Cabot transaction in Mexico seemed like a unique opportunity for them. And you earlier did the LyondellBasell transaction in Europe. Are there many other captive carbon black plants around the world that we we could see some further consolidation here?

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Very limited in terms of captive. Yeah. I mean, there is consolidation. It's possible against maybe, you know, some of the especially some of the, you know, smaller carbon black companies that are out there. I think that's possible.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

But in terms of really a captive thing, it's quite limited.

John Roberts
John Roberts
Managing Director at Mizuho Financial Group

Great. Thank you.

Operator

Thank you. Ladies and gentlemen, as there are no further questions, I would now hand the conference over to Mr. Conning Painter for his closing comments.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

Okay. Well, thank you again for your attention. Once again, Jeff, thank you very much for your service over the last three point five years. We'll miss you. We will be back out on the road meeting with investors.

Corning Painter
Corning Painter
CEO & Executive Director at Orion S.A.

We'll be at the Mizuho, the UBS and the Jefferies conferences in New York in the coming weeks, and we look forward to engaging with many of you at those events in person. So I wish everyone a good rest of your day. Thank you for your time.

Operator

Thank you. Ladies and gentlemen, the conference of ORION S. A. Has now concluded. Thank you for your participation. You may now disconnect your lines.

Executives
    • Christopher Kapsch
      Christopher Kapsch
      VP of IR
    • Corning Painter
      Corning Painter
      CEO & Executive Director
    • Jeff Glajch
      Jeff Glajch
      CFO
Analysts
    • Christopher Perrella
      Director Equity Research at UBS Group
    • Kevin Estok
      Equity Research Senior Associate - Chemicals, Emerging Technologies & Industrial Biotech at Jefferies LLC
    • Jonathan Tanwanteng
      Managing Director at CJS Securities
    • John Roberts
      Managing Director at Mizuho Financial Group
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