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Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2023-11-02 · 103 added, 162 removed, 164 unchanged (62% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis summarizes the significant factors affecting our results of operations and financial condition during the three and nine months ended September 30, 2023 and 2022 and should be read in conjunction with the information included under Item 1.

The following discussion and analysis summarizes the significant factors affecting our results of operations and financial condition during the three months ended March 31, 2024 and 2023 and should be read in conjunction with the information included under Item 1.

Financial Statements and Supplementary Data (Unaudited) elsewhere in this report.

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For a reconciliation of these non-GAAP financial measures to their nearest comparable GAAP measures, see section Reconciliation of Non-GAAP Financial Measures below.

These non-GAAP measures include, but are not limited to, Gross profit per metric ton, Adjusted EBITDA, Net working capital, Capital expenditures, Segment Adjusted EBITDA margin (in percentage), Net debt and Net leverage.

These non-GAAP measures include, but are not limited to, Gross profit per metric ton, Adjusted EBITDA, Net Working Capital, Capital Expenditures and Segment Adjusted EBITDA Margin (in percentage).

• Gross profit per metric ton —Gross profit divided by volume measured in metric tons.

• Adjusted EBITDA —Income from operations before depreciation and amortization, share-based compensation, and non-recurring items (such as, restructuring expenses, consulting fees related to Company strategy, legal settlement gain, etc.) plus Earnings in affiliated companies, net of tax.

• Adjusted EBITDA —Income from operations before depreciation and amortization, stock-based compensation, and non-recurring items (such as, restructuring expenses, legal settlement gain, etc.) plus Earnings in affiliated companies, net of tax.

• Net Working Capital —Inventories, net plus Accounts receivable, net minus Accounts payable.

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• Segment Adjusted EBITDA Margin (in percentage )—Segment Adjusted EBITDA divided by segment revenue.

• Net debt —Current portion of long-term debt and other financial liabilities plus Long-term debt, net plus Deferred debt issuance costs less Cash and cash equivalents.

• Net leverage —Net debt divided by trailing twelve months Adjusted EBITDA.

Adjusted EBITDA is used by our chief operating decision maker (“CODM”) to evaluate our operating performance and to make decisions regarding allocation of capital, because it excludes the effects of items that have less bearing on the performance of our underlying core business.

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Reconciliation of Gross profit per metric ton:

(In millions, except volume and per metric ton data) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 Delta 2023 2022 Delta

(In millions, except volume and per metric ton data) Three Months Ended March 31,

2024 2023 Delta

Net sales $ 502.9 $ 500.7 $ 2.2 0.4

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Reconciliation of Net income to Adjusted EBITDA:

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 Delta 2023 2022 Delta

(In millions) % (In millions) %

Three Months Ended March 31,

2024 2023 Delta

(In millions) %

Net income $ 26.7 $ 42.3 $ (15.6) (36.9)

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The table below presents our historical results derived from our Condensed Consolidated Financial Statements for the periods indicated.

Three Months Ended September 30, Year-Over Year

Three Months Ended March 31, Year-Over Year

2024 2023 Delta

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Research and development costs 6.6 6.2 0.4 6.5

Other expenses, net 2.7 0.3 2.4 800.0

Other (income) expenses, net 1.3 (1.0) 2.3 (230.0)

Income from operations 52.8 73.5 (20.7) (28.2)

Interest and other financial expense, net 12.7 15.2 (2.5) (16.4)

Reclassification of actuarial gain from AOCI (2.2) — (2.2) N/A

Reclassification of actuarial gain from AOCI — (2.2) 2.2 (100.0)

Income before earnings in affiliated companies and income taxes 40.1 60.5 (20.4) (33.7)

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Foreign currency translation adjustments (6.4) (7.3) 0.9 (12.3)

Net gains (losses) on derivatives 0.9 10.6 (9.7) (91.5)

Net losses on derivatives (0.5) (1.8) 1.3 (72.2)

Defined benefit plans, net 0.1 (1.4) 1.5 (107.1)

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Comprehensive income $ 19.9 $ 31.8 $ (11.9) (37.4)

Net sales decreased by $76.9 million, or 14.2%, in the third quarter of 2023 to $466.2 million, compared to the third quarter of 2022, primarily driven by the pass-through effect of declining oil prices in both segments.

Those were partially offset by improved contractual pricing and favorable foreign exchange impact.

Volume increased in aggregate by 1.9 kmt in the third quarter of 2023 to 245.2 kmt, compared to the third quarter of 2022 due to higher volume in the Specialty Carbon Black segment, partly offset by lower volume in the Rubber Carbon Black segment.

Net sales for the three months ended March 31, 2024 increased by $2.2 million, or 0.4%, to $502.9 million, year over year, primarily driven by higher volume in both segments.

Those were partially offset by the pass-through effect of declining oil prices in both segments and lower cogeneration price due to European electricity prices.

Volume for the three months ended March 31, 2024 increased in aggregate by 14.9 kmt to 248.4 kmt, year over year, primarily due to higher volume in both segments.

Specialty volume recovery was across all regions and end markets.

Cost of sales

Cost of sales decreased by $72.7 million, or 17.0%, to $356.0 million in the third quarter of 2023, compared to the third quarter of 2022 primarily due to the effect of declining oil prices.

Gross profit decreased by $4.2 million, or 3.7%, to $110.2 million, year over year.

The decrease was primarily driven by lower volume in Rubber Carbon Black segment and lower margin in the Specialty Carbon Black segment.

Gross profit per metric ton decreased by 4.4% to $449.4, year over year, driven by lower margin primarily in the Specialty carbon black pricing.

Cost of sales for the three months ended March 31, 2024 increased by $16.4 million, or 4.5%, to $380.7 million year over year, primarily due to higher volume in both segments and associated costs.

Those were partially offset by declining oil prices.

Gross profit for the three months ended March 31, 2024 decreased by $14.2 million, or 10.4%, to $122.2 million, year over year.

The decrease was primarily driven by favorable timing items in the prior year, North American rubber volume, higher fixed costs and lower cogeneration pricing in Europe.

Those were partially offset by higher volume in both segments.

Gross profit per metric ton decreased by 15.8% to $491.9, year over year, driven by lower margin in both segments.

Selling, general and administrative expenses

Selling, general and administrative expenses remained flat in the third quarter of 2023 compared to the third quarter of 2022.

Selling, general and administrative expenses for the three months ended March 31, 2024 increased by $3.8 million , or 6.6% to $61.5 million, year over year, due to higher personnel costs.

Provision for income taxes

For the three months ended September 30, 2023, the Company recognized Income before earnings in affiliated companies and income taxes of $35.0 million, compared to $43.4 million in the three months ended September 30, 2022.

The provision for income taxes was an expense of $8.9 million and $11.7 million for the three months ended September 30, 2023 and 2022, respectively.

The effective tax rate for the three months ended September 30, 2023, was 25.4%, as compared to 27.0% for the three months ended September 30, 2022.

The decrease in our effective tax rate for three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily

Management’s Discussion and Analysis of Financial Condition and Results of Operation

attributable to changes in projected pre-tax income mix in countries with varying statutory tax rates.

Adjusted EBITDA (A Non-GAAP Financial Measure)

Adjusted EBITDA decreased in the third quarter of 2023 by $3.2 million, or 4.0%, to $77.3 million, year over year.

The decrease was driven by lower volume in the Rubber Carbon Black segment and lower cogeneration profitability in both segments, a byproduct, partially offset by improved contractual pricing.

Comprehensive Income

Comprehensive income decreased by $9.2 million in the third quarter of 2023 compared to the third quarter of 2022.

The activities from the components of Comprehensive income are discussed below:

• $8.0 million of net favorable impacts of unrealized changes in foreign currency translation adjustments.

• $9.7 million of net unfavorable impacts related to financial derivative instruments primarily driven by net periodic changes in cross currency and interest rate swaps, and

• $1.9 million of net unfavorable changes in defined pension and other post-retirement benefits.

Additionally, Net income decreased by $5.6 million in the third quarter of 2023 compared to the third quarter of 2022.

For the nine months ended September 30, 2023 compared to nine months ended September 30, 2022

Condensed Consolidated Statement of Operations Data Nine Months Ended September 30, Year-Over Year

2023 2022 Delta

(In millions) %

Net sales $ 1,425.7 $ 1,568.8 $ (143.1) (9.1)

Cost of sales 1,062.0 1,216.7 (154.7) (12.7)

Gross profit 363.7 352.1 11.6 3.3

Selling, general and administrative expenses 168.3 173.2 (4.9) (2.8)

Research and development costs 18.3 15.9 2.4 15.1

Other expenses, net (1.0) 1.9 (2.9) (152.6)

Income from operations 178.1 161.1 17.0 10.6

Interest and other financial expense, net 41.6 29.1 12.5 43.0

Reclassification of actuarial gain from AOCI (6.7) — (6.7) N/A

Income before earnings in affiliated companies and income taxes 143.2 132.0 11.2 8.5

Income tax expense 45.0 38.3 6.7 17.5

Earnings in affiliated companies, net of tax 0.4 0.3 0.1 33.3

Net income 98.6 94.0 4.6 4.9

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments (12.2) (14.7) 2.5 (17.0)

Net gains (losses) on derivatives (1.3) 32.1 (33.4) (104.0)

Defined benefit plans, net (4.6) 0.4 (5.0) (1,250.0)

Total other comprehensive (loss) income, net of tax (18.1) 17.8 (35.9) (201.7)

Comprehensive income $ 80.5 $ 111.8 $ (31.3) (28.0)

Net sales decreased by $143.1 million, or 9.1%, in the nine months ended September 30, 2023 to $1,425.7 million, year over year, driven primarily by the pass-through effect of declining oil prices and lower volume in both segments.

Those were partially offset by improved contractual pricing and favorable product mix in the Rubber Carbon Black segment.

Volume decreased by 41.9 kmt to 706.0 kmt compared to the nine months ended September 30, 2022.

Cost of sales

Cost of sales decreased by $154.7 million, or 12.7%, to $1,062.0 million and in the nine months ended September 30, 2023 compared to the

For the three months ended March 31, 2024, and 2023 the Company recognized Income before earnings in affiliated companies and income taxes of $40.1 million, compared to $60.5 million, respectively.

The provision for income taxes was an expense of $13.5 million and $18.3 million for the three months ended March 31, 2024 and 2023, respectively.

The effective tax rate for the three months ended March 31, 2024, and 2023 was 33.7% and 30.2%, respectively.

The increase in effective tax rate for three months ended March 31, 2024,

Management’s Discussion and Analysis of Financial Condition and Results of Operation

nine months ended September 30, 2022, primarily due to the effect of declining oil prices and lower volume.

Gross profit increased by $11.6 million, or 3.3%, to $363.7 million, and gross profit per metric ton increased by 9.4% to $515.2 year over year.

The increase was primarily driven by improved contractual pricing and favorable product mix in the Rubber Carbon Black segment, partially offset by lower volume in both segments.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased by $4.9 million, or 2.8%, to $168.3 million in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by lower freight costs due to lower volume in both segments.

Provision for income taxes

For the nine months ended September 30, 2023, the Company recognized Income before earnings in affiliated companies and income taxes of $143.2 million, compared to $132.0 million in the nine months ended September 30, 2022.

The provision for income taxes was an expense of $45.0 million and $38.3 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

The effective tax rate for the nine months ended September 30, 2023, was 31.4%, as compared to 29.0% for the nine months ended September 30, 2022.

The increase in our effective tax rate for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily attributable to changes in projected pre-tax income mix in countries with varying statutory tax rates.

as compared to the three months ended March 31, 2023, was primarily attributable to changes in projected pre-tax income mix in countries with varying statutory tax rates.

Adjusted EBITDA (A Non-GAAP Financial Measure)

Adjusted EBITDA increased by $18.6 million, or 7.5%, from $247.1 million in the nine months ended September 30, 2022 to $265.7 million in the nine months ended September 30, 2023.

The increase was primarily due to improved contractual pricing and favorable product mix in the Rubber Carbon Black segment.

Those were partially offset by lower volume and cogeneration profitability in both segments.

Adjusted EBITDA decreased in the first quarter of 2024 by $15.8 million, or 15.6%, to $85.3 million, year over year.

The decrease was driven by favorable timing items in the prior year, North American rubber volume, higher fixed costs and lower cogeneration pricing in Europe.

Comprehensive Income

Comprehensive income decreased by $31.3 million in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The activities from the components of Comprehensive income are discussed below:

• $2.5 million of net favorable impacts of unrealized changes in foreign currency translation adjustments.

• $33.4 million of net unfavorable impacts related to financial derivative instruments primarily driven by net periodic changes in cross currency and interest rate swaps, and

• $5.0 million of net unfavorable changes in defined pension and other post-retirement benefits.

These decreases were partially offset by $4.6 million of higher net income in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

Comprehensive income decreased in the first quarter of 2024 by $11.9 million to $19.9 million, year over year.

The components of Comprehensive income are discussed below:

Net income decreased by $15.6 million in the first quarter of 2024 compared to the first quarter of 2023.

These were partially offset by,

• $0.9 million of net impacts of unrealized changes in foreign currency translation adjustments.

• $1.3 million of net impacts related to financial derivative instruments primarily driven by net periodic changes in cross currency and interest rate swaps, and

• $1.5 million of net changes in defined pension and other post-retirement benefits.

Segment Discussion

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The table below presents our segment results derived from our unaudited Condensed Consolidated Financial Statements for the periods indicated.

Three Months Ended September 30, Nine Months Ended September 30,

(In millions, except volume and percentage data) 2023 2022 Delta 2023 2022 Delta

Three Months Ended March 31,

(In millions, except volume and percentage data) 2024 2023 Delta

Specialty Carbon Black

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Specialty Carbon Black

Net sales decreased by $19.2 million, or 11.3%, year over year, to $150.4 million for the three months ended September 30, 2023, primarily driven by the pass-through effect of declining oil prices.

Net sales decreased by $67.2 million, or 12.7%, year over year, to $461.9 million for the nine months ended September 30, 2023, primarily driven by the pass-through effect of declining oil prices and lower volume.

Volume increased by 7.6 kmt, or 14.5%, year over year, to 59.9 kmt for the three months ended September 30, 2023, primarily due to ramp up of our Huaibei facility.

Volumes decreased by 11.1 kmt, or 6.3% year over year, to 166.5 kmt for the nine months ended September 30, 2023, primarily due to weakness in certain end-markets.

Gross profit decreased by $6.2 million, or 13.8%, year over year, to $38.6 million, and decreased by $29.7 million, or 18.2%, year over year, to $133.3 million for the three and nine months ended September 30, 2023, respectively.

The gross profit decrease in both comparative periods was primarily driven by the lower margin due to lower demand and lower volume in the first half of 2023.

Adjusted EBITDA decreased by $5.0 million, or 16.1%, year over year, to $26.1 million, for the three September 30, 2023, primarily due to lower demand, which resulted in unfavorable product mix and lower cogeneration profitability.

Adjusted EBITDA decreased by $25.7 million, or 21.6%, year over year, to $93.3 million for the nine months ended September 30, 2023.

The decrease was primarily due to lower demand, which resulted in lower volume, unfavorable product mix and lower cogeneration profitability.

Adjusted EBITDA margin decreased by 90 basis points, year over year, to 17.4% and by 230 basis points, year over year, to 20.2% for the three and nine months ended September 30, 2023, respectively.

Net sales for the three months ended March 31, 2024 increased by $8.9 million, or 5.5%, year over year, to $170.9 million, primarily driven by higher volume, partially offset by pass-through effect of declining oil prices.

Volume for the three months ended March 31, 2024 increased by 10.3 kmt, or 19.4%, year over year, to 63.3 kmt, primarily due to volume recovery across all regions and end markets.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

Gross profit for the three months ended March 31, 2024 decreased by $10.4 million, or 20.0%, year over year, to $41.7 million, primarily driven by lower margin and lower cogeneration pricing in Europe, partially offset by higher volume.

Adjusted EBITDA for the three months ended March 31, 2024 decreased by $9.4 million, or 25.2%, year over year, to $27.9 million, primarily due to lower margin and lower cogeneration pricing in Europe, partially offset by higher volume across all regions and end-markets.

Adjusted EBITDA margin for the three months ended March 31, 2024 decreased by 670 basis points, year over year, to 16.3%.

Rubber Carbon Black

Net sales decreased by $57.7 million, or 15.4%, year over year, to $315.8 million and decreased by $75.9 million, or 7.3%, year over year, to $963.8 million for the three and nine months ended September 30, 2023, respectively.

The decrease in both comparative periods was primarily due to the pass-through effect of declining oil prices and lower volumes, partially offset by improved contractual pricing.

Volume decreased by 5.7 kmt, or 3.0%, year over year, to 185.3 kmt and decreased by 30.8 kmt, or 5.4%, year over year, to 539.5 kmt, for the three and nine months ended September 30, 2023, respectively, due to lower demand in both comparative periods.

Gross profit increased by $2.0 million, or 2.9%, year over year, to $71.6 million, and increased by $41.3 million, or 21.8%, to $230.4 million for the three and nine months ended September 30, 2023, respectively.

The increase in both comparative periods was primarily due to improved contractual pricing, partially offset by lower cogeneration profitability.

Adjusted EBITDA increased by $1.8 million, or 3.6%, year over year, to $51.2 million, and by $44.3 million, or 34.6%, to $172.4 million for the three and nine months ended September 30, 2023.

The increase was primarily due to improved contractual pricing, partially offset by lower volume and cogeneration profitability.

For the three and nine months ended September 30, 2023, Adjusted EBITDA margin rose 300 basis points to 16.2%, year over year, and 560 basis points to 17.9%, year over year, respectively.

Net sales for the three months ended March 31, 2024 decreased by $6.7 million, or 2.0%, year over year, to $332.0 million.

The decrease was primarily due to the pass-through effect of declining oil prices, partially offset by higher volume.

Volume for the three months ended March 31, 2024 increased by 4.6 kmt, or 2.5%, year over year, to 185.1 kmt, due to higher demand in Europe/Middle East/Africa and Asia/Pacific regions.

Gross profit for the three months ended March 31, 2024 decreased by $3.8 million, or 4.5%, year over year, to $80.5 million.

The decrease was primarily due to lower margin and lower cogeneration pricing in Europe, partially offset by and higher volume.

Adjusted EBITDA for the three months ended March 31, 2024 decreased by $6.4 million, or 10.0%, year over year, to $57.4 million.

The decrease was primarily driven by favorable timing items in the prior year, North American Rubber volume and lower cogeneration pricing in Europe, partially offset by higher European and Asian volume.

For the three months ended March 31, 2024, Adjusted EBITDA margin decreased 150 basis points to 17.3%, year over year.

Liquidity and Capital Resources

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The tables below present our historical cash flows derived from our unaudited Condensed Consolidated Financial Statements for the periods indicated.

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions)

Net cash provided by (used in) operating activities $ 273.7 $ (16.7)

Net cash provided by operating activities $ 32.4 $ 108.1

Net cash used in investing activities (33.1) (30.5)

Net cash provided by (used in) financing activities 7.0 (62.5)

Net cash provided by operating activities during the nine months ended September 30, 2023 was $273.7 million.

Net cash provided by operating activities during the three months ended March 31, 2024 was $32.4 million.

The cash provided by operating activities primarily reflects changes in working capital.

Change in working capital includes $107.6 million sale of certain accounts receivables, discussed in Note B.

Accounts Receivable .

Net cash used in investing activities in the three months ended March 31, 2024 amounted to $33.1 million.

The expenditures were primarily related to safety and maintenance investments.

Net cash provided by financing activities during the three months ended March 31, 2024 amounted to $7.0 million.

These inflows primarily consisted of $37.5 million related to other short-term debt borrowings, partially offset by $28.4 million, net related to repayment of our ancillary credit facilities.

Net cash provided by operating activities for the three months ended March 31, 2023, amounted to $108.1 million.

The cash provided by operating activities primarily reflects changes in working capital and higher Net income.

Change in working capital includes $300.4 million sale of certain accounts receivables during 2023, discussed in Note D.

Debt and Other Obligations.

Net cash used in investing activities in the nine months ended September 30, 2023 amounted to $111.0 million.

These expenditures were composed of a combination of safety, maintenance-related and growth investments, as well as $26.5 million of expenditures associated with our ongoing efforts to install emissions reduction technology to meet EPA requirements in the U.S.

Net cash used in financing activities during the nine months ended September 30, 2023 amounted to $164.9 million.

These outflows primarily consisted of $88.7 million related to the reduction of other short-term debt, $58.9 million for repurchase of common stock under the Stock Repurchase Program and $23.7 million, net related to repayment of our ancillary credit facilities.

Net cash used in operating activities for the nine months ended September 30, 2022, amounted to $16.7 million.

The cash used in operating activities primarily reflects changes in working capital and lower Net income.

Net cash used in investing activities for the nine months ended September 30, 2022, amounted to $167.1 million.

These expenditures were comprised of a combination of safety, maintenance-related, and growth investments, as well as expenditures associated with our ongoing efforts to install emissions reduction technology to meet EPA requirements in the U.S.

Net cash provided by financing activities for the nine months ended September 30, 2022, amounted to $167.4 million.

Cash inflows during the nine months of $139.9 million were primarily related to net drawings under our senior secured revolving credit facilities (“RCF”), $35.3 million borrowings to partially finance our Huaibei facility in China from Bank of China and $7.0 million of short-term working capital borrowings in Korea, partially offset by scheduled debt repayments.

Change in working capital includes $68.9 million sale of certain accounts receivables, discussed in Note B.

Accounts Receivable .

Net cash used in investing activities for the three months ended March 31, 2023, amounted to $30.5 million.

These expenditures were comprised of a combination of safety, maintenance-related and growth investments, as well as $8.4 million of expenditures associated with our, now completed, installation of emissions reduction technology to meet EPA requirements in the U.S.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

Net cash used in financing activities for the three months ended March 31, 2023, amounted to $62.5 million.

These outflows primarily consisted of $32.9 million related to repayment of our ancillary credit facilities and $29.3 million for repurchase of common stock under the Stock Repurchase Program.

Sources of Liquidity

Our principal sources of liquidity are the net cash generated (i) from operating activities, primarily driven by our operating results and changes in working capital requirements and (ii) from financing activities, primarily driven by borrowing amounts available under our committed multicurrency, senior secured RCF and related ancillary facilities, various uncommitted local credit lines, and, from time to time, term loan borrowings and Accounts receivable factoring.

Our principal sources of liquidity are the net cash generated (i) from operating activities, primarily driven by our operating results and changes in working capital requirements and (ii) from financing activities, primarily driven by borrowing amounts available under our committed multicurrency, senior secured revolving credit facility (the “RCF”) and related ancillary facilities, various uncommitted local credit lines, and, from time to time, term loan borrowings and Accounts receivable factoring.

We believe our anticipated future operating cash flows, the capacity under our existing credit facilities and uncommitted bilateral lines of credit, along with access to surety bonds, will be sufficient to finance our planned Capital expenditures, settle our commitments and contingencies, and address our normal anticipated working capital needs for the foreseeable future.

As of September 30, 2023, the company had total liquidity of $333.7 million, including cash and equivalents of $59.1 million, $234.4 million availability under our revolving credit facility, including ancillary lines, and $40.2 million of capacity under other available credit lines.

As of March 31, 2024, the company had total liquidity of $261.7 million, including cash and equivalents of $43.9 million, $192.6 million availability under our revolving credit facility, including ancillary lines, and $25.2 million of capacity under other available credit lines.

Net debt was $773.1 million, and Net leverage was 2.44x.

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The following table sets forth the principal components of our Net working capital as of the dates indicated.

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(In millions)

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Conversely, decreases in the cost of raw materials lead to a decrease in our Net working capital requirements over the same period of time.

Our Net working capital decreased from $461.6 million as of December 31, 2022, to $373.3 million as of September 30, 2023.

Our Net working capital increased from $344.4 million as of December 31, 2023, to $363.4 million as of March 31, 2024.

The drivers of the changes in working capital over the periods were:

• Accounts receivable, net —Improved payment terms and factoring of certain accounts receivables.

Debt and Other Obligations to the accompanying Condensed Consolidated Financial Statements for further information related to the Company’s factoring agreements.

• Inventories, net —Lower oil prices and a decrease in production due to lower demand.

• Accounts payable —Lower oil prices was the primary driver.

• Accounts receivable, net —Increase driven by higher sales were partially offset by improved payment terms.

• Inventories, net —The primary driver for inventory decreases were lower oil prices.

Capital expenditures (A Non-GAAP Financial Measure)

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Off-Balance Sheet Arrangements

As of September 30, 2023, we did not have any off-balance sheet arrangements.

As of March 31, 2024, we did not have any off-balance sheet arrangements.

Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

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These forward-looking statements include, without limitation, statements about the following matters:

• our strategies for (i) strengthening our position in Specialty carbon black or Rubber carbon black, (ii) increasing our Specialty or Rubber carbon black margins and (iii) strengthening the competitiveness of our operations;

• our cash flow projections;

• the installation and operation of pollution control technology in our United States (“U.S.”) manufacturing facilities pursuant to the U.S.

Environmental Protection Agency (“EPA”) consent decree;

• our strategies for (i) maintaining or strengthening our position in Specialty Carbon Black or Rubber Carbon Black, (ii) maintaining or increasing our Specialty or Rubber Carbon Black margins and (iii) maintaining or strengthening the competitiveness of our operations;

• our profit and cash flow projections;

• the outcome of any in-progress, pending or possible litigation or regulatory proceedings;

• the expectations regarding environmental-related costs and liabilities;

• the expectations regarding the performance of our industry and the global economy, including with respect to foreign currency rates;

• the sufficiency of our cash on hand and cash provided by operating activities and borrowings to pay our operating expenses, satisfy our debt obligations and fund Capital expenditures;

• the expectations regarding the performance of our industry and the global economy, including foreign currency rate fluctuations;

• the sufficiency of our cash on hand, cash provided by operating activities and borrowings to pay our operating expenses, satisfy our debt obligations and fund capital expenditures;

• the ability to pay dividends;

• the ability to have access to new debt providers;

• our anticipated spending on, and the timely completion and anticipated impacts of, capital projects including growth projects, emission reduction projects and the construction of new plants;

• our anticipated spending on, and the timely completion and anticipated impacts of, capital projects including growth projects, and the construction of new plants;

• our projections and expectations for pricing, financial results and performance in 2024 and beyond;

• the status of contract negotiations with counterparties and the impact of new contracts on our growth;

• the implementation of our natural gas and other raw material consumption reduction contingency plans;

• the demand for our specialty products;

• our expectation that the markets we serve will continue to remain stable or grow.

• the status of contract negotiations with counterparties and the impact of new contracts on our business;

• our expectation that the markets we serve will continue to demand our products.

All these forward-looking statements are based on estimates and assumptions that, although believed to be reasonable, are inherently uncertain.

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These factors include, among others:

• the negative or uncertain worldwide economic conditions and developments;

• possible negative or uncertain worldwide economic conditions and developments;

• the volatility and cyclicality of the industries in which we operate;

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• our dependence on major customers and suppliers;

• the unanticipated fluctuations in demand for our specialty products, including due to factors beyond our control;

• unanticipated fluctuations in demand for our products, including due to factors beyond our control;

• our ability to compete in the industries and markets in which we operate;

• our ability to address changes in the nature of future transportation and mobility concepts which may impact our customers and our business;

• our ability to develop new products and technologies successfully and the availability of substitutes for our products;

• changes in the nature of transportation in the future, which may impact our customers and our business;

• our ability to successfully develop new products and technologies;

• the availability of substitutes for our products;

• our ability to implement our business strategies;

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• our ability to realize benefits from investments, joint ventures, acquisitions or alliances;

• our ability to negotiate with counterparties on terms satisfactory to us, the satisfactory performance by such counterparties of their obligations to us, as well as our ability to meet our performance obligations towards such counterparties;

• our ability to realize benefits from planned plant capacity expansions and site development projects and impacts of potential delays to such expansions and projects;

• our information technology systems failures, network disruptions and breaches of data security;

• our ability to negotiate satisfactory terms with counterparties, the satisfactory performance by such counterparties of their obligations to us, as well as our ability to meet our performance obligations towards such counterparties;

• our ability to realize benefits from planned plant capacity expansions and site development projects and the impacts of potential delays to such expansions and development projects;

• any information technology systems failures, network disruptions and breaches of data security;

• our relationships with our workforce, including negotiations with labor unions, strikes and work stoppages;

• our ability to recruit or retain key management and personnel;

• our exposure to political or country risks inherent in doing business in some countries;

• any and all impacts from the Russian war against Ukraine and/or any escalation thereof as well as related energy shortages or other economic or physical impairments or disruptions;

• any and all impacts from the recent Hamas terror assaults against Israel as well as any reactions by Israel and any and all escalations of the Hamas/Israel conflict;

• the geopolitical events in the European Union (“EU”), relations amongst the EU member states as well as future relations between the EU and other countries and organizations;

• the environmental, health and safety regulations, including nanomaterial and greenhouse gas emissions regulations, and the related costs of maintaining compliance and addressing liabilities;

• the possible future investigations and enforcement actions by governmental, supranational agencies or other organizations;

• our operations as a company in the chemical sector, including the related risks of leaks, fires and toxic releases;

• the market and regulatory changes that may affect our ability to sell or otherwise benefit from co-generated energy;

• our exposure to political or country risks inherent in doing business globally;

• any and all impacts from the Russia-Ukraine war and the Hamas-Israel conflict and/or any escalation thereof related energy costs, raw material availability or other economic disruptions;

• geopolitical events in the United States (“U.S.”), Middle-East, European Union (“EU”) and China, relations amongst Western countries and their neighbors, as well as future relations between the U.S., EU, China, and other countries and organizations;

• all environmental, health and safety laws and regulations, including nanomaterial and greenhouse gas emissions regulations, and the related costs of maintaining compliance and addressing liabilities;

• any possible future investigations and enforcement actions by governmental, supranational agencies or other organizations;

• our operations as a company in the chemical sector, including the related risks of leaks, fires and toxic releases as well as other accidents;

• any market and regulatory changes that may affect our ability to sell or otherwise benefit from co-generated energy;

• any litigation or legal proceedings, including product liability, environmental or asbestos related claims;

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• the availability and efficiency of hedging;

• any changes in international and local economic conditions, including with regard to the dollar and the euro, dislocations in credit and capital markets and inflation or deflation;

• the potential impairments or write-offs of certain assets;

• any required increases in our pension fund contributions;

• any changes in international and local economic conditions, dislocations in credit and capital markets and inflation or deflation;

• any potential impairments or write-offs of certain assets;

• any required increases in our pension fund or retirement-related contributions;

• the adequacy of our insurance coverage;

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or elsewhere outside Luxembourg;

• any current or future changes to disclosure requirements and obligations, related audit requirements and our ability to comply with such obligations and requirements.

• any current or future changes to disclosure requirements and obligations, including but not limited to new ESG-related disclosures, related audit requirements and our ability to comply with such obligations and requirements.

Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include those factors detailed under the captions “Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995” and “Risk Factors” and in “ Note Q.

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Quantitative and Qualitative Disclosures About Market Risk

Information about market risks for the period ended September 30, 2023 does not differ materially from that discussed under “ Item 7A” in our 2022 Form 10-K.

Information about market risks for the period ended March 31, 2024 does not differ materially from “ Item 7A” in our Annual Report in Form 10-K for the year ended December 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis