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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-07 · 104 added, 166 removed, 148 unchanged (65% 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, 2024 and 2023 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, 2025 and 2024 and should be read in conjunction with the information included under Item 1.

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

8 unchanged sentences

• Capital Expenditures —Cash paid for the acquisition of property, plant and equipment.

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.

Our operations are managed by senior executives who report to our Chief Executive Officer (“CEO”), the chief operating decision maker (“CODM”).

Adjusted EBITDA is used by our 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.

We use this measure, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing our business.

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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, Nine Months Ended September 30,

2024 2023 Delta 2024 2023 Delta

(In millions, except volume) % (In millions, except volume) %

Three Months Ended March 31,

2025 2024 Delta

(In millions, except volume) %

Volume (in kmt) 251.7 248.4 3.3 1.3

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Research and development costs 6.6 6.6 — —

Loss due to misappropriation of assets, net 60.7 — 60.7 N/A 60.7 — 60.7 N/A

Other income, net (2.8) 2.7 (5.5) (203.7) (0.1) (1.0) 0.9 (90.0)

Income (loss) from operations (15.3) 45.7 (61.0) (133.5) 79.1 178.1 (99.0) (55.6)

Other expenses, net 1.9 1.3 0.6 46.2

Income from operations 31.2 52.8 (21.6) (40.9)

Interest and other financial expense, net 13.7 12.7 1.0 7.9

Reclassification of actuarial gain from AOCI — (2.2) 2.2 (100.0) — (6.7) 6.7 (100.0)

Income (loss) before earnings in affiliated companies and income taxes (31.2) 35.0 (66.2) (189.1) 38.3 143.2 (104.9) (73.3)

Income tax expense (benefit) (10.8) 8.9 (19.7) (221.3) 11.8 45.0 (33.2) (73.8)

Income before earnings in affiliated companies and income taxes 17.5 40.1 (22.6) (56.4)

Income tax expense 8.9 13.5 (4.6) (34.1)

Earnings in affiliated companies, net of tax 0.5 0.1 0.4 400.0

Net income (loss) (20.2) 26.2 (46.4) (177.1) 27.0 98.6 (71.6) (72.6)

Net income 9.1 26.7 (17.6) (65.9)

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments 2.6 (6.4) 9.0 (140.6)

Net gains (losses) on derivatives (3.2) 0.9 (4.1) (455.6) (4.9) (1.3) (3.6) 276.9

Net losses on derivatives (1.5) (0.5) (1.0) 200.0

Defined benefit plans, net (0.1) 0.1 (0.2) (200.0)

Total other comprehensive (loss) income, net of tax 1.0 (6.8) 7.8 (114.7)

Comprehensive income (loss) $ (20.1) $ 25.7 $ (45.8) (178.2) $ 10.9 $ 80.5 $ (69.6) (86.5)

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

Comprehensive income $ 10.1 $ 19.9 $ (9.8) (49.2)

Reconciliation of Non-GAAP Financial Measures

The following table presents reconciliation of Net income (loss) to Adjusted EBITDA :

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

2024 2023 Delta 2024 2023 Delta

(In millions) % (In millions) %

Net income (loss) $ (20.2) $ 26.2 $ (46.4) (177.1) $ 27.0 $ 98.6 $ (71.6) (72.6)

Add back Income tax (benefit) expense (10.8) 8.9 (19.7) (221.3) 11.8 45.0 (33.2) (73.8)

The following table presents reconciliation of Net income to Adjusted EBITDA :

Three Months Ended March 31,

2025 2024 Delta

(In millions) %

Net income $ 9.1 $ 26.7 $ (17.6) (65.9)

Add back Income tax expense 8.9 13.5 (4.6) (34.1)

Add back Equity in earnings of affiliated companies, net of tax (0.5) (0.1) (0.4) 400.0

Income (loss) before earnings in affiliated companies and income taxes (31.2) 35.0 (66.2) (189.1) 38.3 143.2 (104.9) (73.3)

Income before earnings in affiliated companies and income taxes 17.5 40.1 (22.6) (56.4)

Add back Interest and other financial expense, net 13.7 12.7 1.0 7.9

Add back Reclassification of actuarial gain from AOCI — (2.2) 2.2 (100.0) — (6.7) 6.7 (100.0)

Income (loss) from operations (15.3) 45.7 (61.0) (133.5) 79.1 178.1 (99.0) (55.6)

Income from operations 31.2 52.8 (21.6) (40.9)

Add back Depreciation of property, plant and equipment and amortization of intangible assets and right of use assets 31.5 28.9 2.6 9.0

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Equity in earnings of affiliated companies, net of tax 0.5 0.1 0.4 400.0

Loss due to misappropriation of assets, net:

Misappropriation of assets, net 59.2 — 59.2 — 59.2 — 59.2 —

Professional fees related to misappropriation of assets 1.5 — 1.5 — 1.5 — 1.5 —

Long term incentive plan 2.7 3.5 (0.8) (22.9)

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$ 40.8 $ 57.4 $ (16.6) (28.9)

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

Operating Results Discussion

For the three months ended September 30, 2024 compared to three months ended September 30, 2023

Volume for the three months ended September 30, 2024 decreased in aggregate by 20.0 kmt to 225.2 kmt, year over year, due to lower volume in the Americas and Asia Pacific (“APAC”) regions, those were partially offset by higher volumes in Europe, the Middle East, and African region.

Net sales for the three months ended September 30, 2024 decreased by $2.8 million, or 0.6%, to $463.4 million, year over year, primarily driven by lower volume, partially offset by the favorable pass-through effect of oil prices.

For the three months ended March 31, 2025 compared to three months ended March 31, 2024

Volume for the three months ended March 31, 2025 increased in aggregate by 3.3 kmt to 251.7 kmt, year over year, due to higher volume in the Rubber Carbon Black segment.

Net sales for the three months ended March 31, 2025 decreased by $25.2 million, or 5.0%, to $477.7 million, year over year, primarily due to lower oil price and unfavorable foreign exchange rate impact.

Those were partially offset by higher volume in Rubber Carbon Black segment.

Cost of sales

Cost of sales for the three months ended September 30, 2024 decreased by $0.1 million year over year.

Gross profit for the three months ended September 30, 2024 decreased by $2.7 million, or 2.5%, to $107.5 million, year over year.

The decrease was driven primarily by higher fixed costs.

Cost of sales for the three months ended March 31, 2025 decreased marginally by $1.1 million, or 0.3% , to $379.6 million , year over year.

Gross profit for the three months ended March 31, 2025 decreased by $24.1 million, or 19.7%, to $98.1 million, year over year.

The decrease was driven primarily by unplanned downtime, unfavorable timing from the pass-through of raw material costs and unfavorable foreign exchange rate impact.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended September 30, 2024 increased by $2.3 million, or 4.1% to $57.9 million, year over year, driven by higher personnel costs.

Loss due to misappropriation of assets, net

During the third quarter of 2024, we were the target of a criminal scheme that resulted in multiple fraudulently induced outbound wire transfers to accounts controlled by unknown third parties aggregating to $59.2 million.

In addition, we incurred $1.5 million of professional

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

fees in connection with our investigations.

For more information, refer to Note J.

Commitments and Contingencies to the Condensed Consolidated Financial Statements.

Selling, general and administrative expenses for the three months ended March 31, 2025 decreased by $3.1 million, or 5.0% to $58.4 million, year over year, primarily driven by lower distribution costs.

Provision for income taxes

For the three months ended September 30, 2024, the Company recognized Loss before earnings in affiliated companies and income taxes of $31.2 million, compared to Income before earnings in affiliated companies and income taxes of $35.0 million for the three months ended September 30, 2023.

The income tax benefit for the three months ended September 30, 2024 was $10.8 million compared to income tax expense of $8.9 million for the three months ended September 30, 2023.

The effective tax rate for the three months ended September 30, 2024, and 2023 was 34.6% and 25.4%, respectively.

The increase in effective tax rate for three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily attributable to changes in projected pre-tax income mix in countries with varying statutory tax rates.

The 2024 effective tax rate was impacted by $18.2 million of tax benefit related to Loss due to misappropriation of assets, net.

For further discussion refer to Note J.

Commitments and Contingencies to the Condensed Consolidated Financial Statements.

Adjusted EBITDA (A Non-GAAP Financial Measure)

Adjusted EBITDA increased in the third quarter of 2024 by $2.8 million, or 3.6%, to $80.1 million, year over year.

The increase was driven by favorable pricing, partially offset by higher fixed costs and lower cogeneration.

Comprehensive Income

Comprehensive income (loss) decreased in the third quarter of 2024 by $45.8 million to $20.1 million, year over year.

For the three months ended March 31, 2025, the Company recognized Income before earnings in affiliated companies and income taxes of $17.5 million, compared to Income before earnings in affiliated companies and income taxes of $40.1 million for the three months ended March 31, 2024.

The income tax expense for the three months ended March 31, 2025 was $8.9 million compared to income tax expense of $13.5 million for the three months ended March 31, 2024.

The effective tax rate for the three months ended March 31, 2025, and 2024 was 50.9% and 33.7%, respectively.

The increase in effective tax rate for three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was primarily attributable to changes in projected pre-tax income mix in countries with varying statutory tax rates.

Comprehensive Income (loss)

Comprehensive income (loss) decreased in the first quarter of 2025 by $9.8 million to $10.1 million, year over year.

The components of Comprehensive income (loss) are discussed below:

Net income (loss) decreased by $46.4 million in the third quarter of 2024 compared to the third quarter of 2023.

Net income decreased by $17.6 million in the first quarter of 2025 compared to the first quarter of 2024.

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

• $3.0 million of net favorable impact due to change in foreign currency translation adjustments and

• $1.7 million of net favorable impact related to changes in defined pension and other post-retirement benefits, partially offset by,

• $9.0 million of net favorable impact due to change in foreign currency translation adjustments due to weakening of the U.S.

dollar versus euro.

Those increases were partially offset by:

• $1.0 million of net unfavorable impact related to financial derivative instruments primarily driven by net periodic changes in cross currency swaps.

For the nine months ended September 30, 2024 compared to nine months ended September 30, 2023

Volume increased marginally by 0.7 kmt to 706.7 kmt compared to the nine months ended September 30, 2023, primarily due to higher Specialty Carbon Black segment volume, partially offset by lower Rubber Carbon Black segment volume.

Net sales increased by $17.6 million, or 1.2%, in the nine months ended September 30, 2024 to $1,443.3 million, year over year, primarily driven by broad-based recovery in Specialty Carbon Black segment across all regions and Rubber Carbon Black price improvements, partially offset by unfavorable foreign currency translation impact and lower Rubber Carbon Black segment volume.

Cost of sales

Cost of sales increased by $41.8 million, or 3.9%, to $1,103.8 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to higher Specialty Carbon Black segment volume, its associated costs and higher fixed costs.

Gross profit decreased by $24.2 million, or 6.7%, to $339.5 million, year over year.

The decrease was primarily driven by higher fixed costs, unfavorable impact from pass-through of raw material costs and lower cogeneration.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $11.4 million, or 6.8%, to $179.7 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily driven by higher freight and personnel costs.

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

Loss due to misappropriation of assets, net

In addition, we incurred $1.5 million of professional fees in connection with our investigations.

For more information, refer to Note J.

Commitments and Contingencies to the Condensed Consolidated Financial Statements.

Provision for income taxes

For the nine months ended September 30, 2024, the Company recognized Income before earnings in affiliated companies and income taxes of $38.3 million, compared to $143.2 million in the nine months ended September 30, 2023.

The provision for income taxes was an expense of $11.8 million and $45.0 million for the nine months ended September 30, 2024 and September 30, 2023, respectively.

The effective tax rate for the nine months ended September 30, 2024, was 30.8%, as compared to 31.4% for the nine months ended September 30, 2023.

The decrease in our effective tax rate for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily attributable to changes in projected pre-tax income mix in countries with varying statutory tax rates.

The 2024 effective tax rate was impacted by $18.2 million of tax benefit related to Loss due to misappropriation of assets, net.

For further discussion refer to Note J.

Commitments and Contingencies to the Condensed Consolidated Financial Statements.

Adjusted EBITDA (A Non-GAAP Financial Measure)

Adjusted EBITDA decreased by $25.2 million, or 9.5%, from $265.7 million in the nine months ended September 30, 2023 to $240.5 million in the nine months ended September 30, 2024.

The decrease was primarily due to higher fixed costs, lower Rubber Carbon Black segment volume and lower cogeneration.

Those were partially offset by higher volume in Specialty Carbon Black segment.

Comprehensive Income

Comprehensive income decreased by $69.6 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Net income decreased by $71.6 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

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

• $0.8 million of net favorable impact due to foreign currency translation adjustments and

• $4.8 million of net favorable changes related to defined pension and other post-retirement benefits, partially offset by

• $3.6 million of net unfavorable impacts related to financial derivative instruments primarily driven by net periodic changes in cross currency and interest rate swaps.

Adjusted EBITDA decreased in the first quarter of 2025 by $19.1 million, or 22.4%, to $66.2 million, year over year.

The decrease was driven by unplanned downtime and unfavorable timing from the pass-through of raw material costs.

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

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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,

2024 2023 Delta 2024 2023 Delta

% (In millions, except volume) %

Three Months Ended March 31,

2025 2024 Delta

(In millions) %

Specialty Carbon Black

Volume (kmt) 61.9 63.3 (1.4) (2.2)

Net sales $ 160.7 $ 170.9 $ (10.2) (6.0)

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Gross profit $ 40.0 $ 41.7 $ (1.7) (4.1)

Volume (kmt) 59.7 59.9 (0.2) (0.3) 185.9 166.5 19.4 11.7

Adjusted EBITDA $ 25.4 $ 27.9 $ (2.5) (9.0)

Rubber Carbon Black

Volume (kmt) 189.8 185.1 4.7 2.5

Net sales $ 317.0 $ 332.0 $ (15.0) (4.5)

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Gross profit $ 58.1 $ 80.5 $ (22.4) (27.8)

Volume (kmt) 165.5 185.3 (19.8) (10.7) 520.8 539.5 (18.7) (3.5)

Adjusted EBITDA $ 40.8 $ 57.4 $ (16.6) (28.9)

Specialty Carbon Black

Volume decreased marginally by 0.2 kmt, or 0.3%, year over year, to 59.7 kmt for the three months ended September 30, 2024.

Volume increased by 19.4 kmt, or 11.7% year over year, to 185.9 kmt for the nine months ended September 30, 2024, primarily due to demand recovery across all regions and end markets.

Net sales increased by $12.1 million, or 8.0%, year over year, to $162.5 million for the three months ended September 30, 2024, primarily due to improved product mix in key applications, partially offset by lower volume.

Net sales increased by $37.0 million, or 8.0%, year over year, to $498.9 million for the nine months ended September 30, 2024, primarily due to higher volume across all regions.

Gross profit decreased by $2.0 million, or 5.2%, year over year, to $36.6 million for the three months ended September 30, 2024, primarily driven by lower cogeneration and higher fixed costs.

Gross profit decreased by $15.5 million, or 11.6%, year over year, to $117.8 million for the nine months ended September 30, 2024, primarily driven by higher fixed costs and lower cogeneration, partially offset by higher volume.

Adjusted EBITDA for the three months ended September 30, 2024 increased by $1.1 million, or 4.2%, year over year, to $27.2 million.

The increase was primarily due to improved product mix in key applications, partially offset by higher fixed cost and lower cogeneration.

Adjusted EBITDA for the nine months ended September 30, 2024 decreased by $10.2 million, or 10.9%, year over year, to $83.1 million.

The decrease was primarily due to higher fixed costs and lower cogeneration.

Those were partially offset by higher volume.

Volume decreased by 1.4 kmt, or 2.2%, year over year, to 61.9 kmt for the three months ended March 31, 2025, primarily due to lower demand in the Americas region.

Net sales decreased by $10.2 million, or 6.0%, year over year, to $160.7 million for the three months ended March 31, 2025, primarily due to lower oil price and unfavorable foreign exchange impact.

Gross profit decreased by $1.7 million, or 4.1%, year over year, to $40.0 million for the three months ended March 31, 2025, primarily driven by lower volume.

Adjusted EBITDA for the three months ended March 31, 2025 decreased by $2.5 million, or 9.0%, year over year, to $25.4 million.

The decrease was primarily due to lower volume.

Rubber Carbon Black

Volume decreased by 19.8 kmt, or 10.7%, year over year, to 165.5 kmt, and decreased by 18.7 kmt, or 3.5%, year over year, to 520.8 kmt, for the three and nine months ended September 30, 2024, respectively, primarily due to lower demand in the Americas and APAC regions.

Net sales decreased by $14.9 million, or 4.7%, year over year, to $300.9 million, and decreased by $19.4 million, or 2.0%, year over year, to $944.4 million for the three and nine months ended September 30, 2024, respectively, primarily due to lower volume, partially offset by favorable price.

Gross profit for the three and nine months ended September 30, 2024 decreased by $0.7 million, or 1.0%, year over year, to $70.9 million and decreased by $8.7 million, or 3.8%, year over year, to $221.7 million, respectively.

The decrease was primarily due to lower volume and cogeneration, partially offset by favorable price.

Volume increased by 4.7 kmt, or 2.5%, year over year, to 189.8 kmt for the three months ended March 31, 2025, primarily due to higher demand in the Americas and Asia Pacific regions.

Net sales decreased by $15.0 million, or 4.5%, year over year, to $317.0 million for the three months ended March 31, 2025, primarily due to lower oil price and unfavorable foreign exchange impact.

Gross profit for the three months ended March 31, 2025 decreased by $22.4 million, or 27.8%, year over year, to $58.1 million.

The decrease was primarily due to unplanned downtime, unfavorable timing from the pass-through of raw material costs, customer and regional mix and higher fixed costs.

Adjusted EBITDA decreased by $16.6 million, or 28.9%, year over year, to $40.8 million for the three months ended March 31, 2025, driven primarily by unplanned downtime, unfavorable timing from the pass-through of raw material costs and customer and regional mix.

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

Adjusted EBITDA increased by $1.7 million, or 3.3%, year over year, to $52.9 million for the three months ended September 30, 2024, driven primarily by favorable price, partially offset by lower volume.

Adjusted EBITDA decreased by $15.0 million, or 8.7%, to $157.4 million and nine months ended September 30, 2024 driven primarily by lower demand in Americas and APAC regions, lower cogeneration and higher fixed costs.

Those were partially offset by favorable price.

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, except volume)

1 unchanged sentence

Net cash used in investing activities (29.2) (33.1)

Net cash provided by (used in) financing activities 119.3 (164.9)

Net cash provided by operating activities during the nine months ended September 30, 2024 was $30.8 million.

The cash provided by operating activities primarily reflects changes in working capital, $59.2 million Loss due to misappropriation of assets, net and professional fees of $1.5 million.

Net cash provided by financing activities 21.8 7.0

Net cash provided by operating activities during the three months ended March 31, 2025 was $0.4 million.

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

Change in working capital includes $102.5 million sale of certain accounts receivables, discussed in Note B.

Accounts Receivable to the Condensed Consolidated Financial Statements.

Net cash used in investing activities in the nine months ended September 30, 2024 amounted to $135.7 million.

Net cash used in investing activities in the three months ended March 31, 2025 amounted to $29.2 million.

The expenditures were primarily related to safety, maintenance and growth investments.

Net cash provided by financing activities during the nine months ended September 30, 2024 amounted to $119.3 million.

Net cash provided by financing activities during the three months ended March 31, 2025 amounted to $21.8 million.

These inflows primarily consisted of $24.5 million related to other short-term debt borrowings and $19.1 million, net borrowings under our ancillary credit facilities.

Those were partially offset by scheduled debt repayments, dividend distributions and stock buybacks.

Net cash provided by operating activities for the nine months ended September 30, 2023, amounted to $273.7 million.

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

Net cash provided by operating activities for the three months ended March 31, 2024, amounted to $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 to the Condensed Consolidated Financial Statements.

Net cash used in investing activities for 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, now completed, installation of emissions reduction technology to meet EPA requirements in the U.S.

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

These expenditures were composed of a combination of safety and maintenance-related.

Net cash provided by financing activities for 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.

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 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.

During the third quarter of 2024, we were target of a criminal scheme that resulted in multiple fraudulently induced outbound wire transfers to accounts controlled by unknown third parties aggregating to $59.2 million.

The business and operations of the Company were not affected.

However, our Net leverage was negatively impacted.

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 March 31, 2025, the company had total liquidity of $166.2 million, including cash and equivalents of $37.5 million, $104.8 million availability under our revolving credit facility, including ancillary lines, and $23.9 million of capacity under other available credit lines.

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

As of September 30, 2024, the company had total liquidity of $209.4 million, including cash and equivalents of $53.2 million, $116.6 million availability under our revolving credit facility, including ancillary lines, and $39.6 million of capacity under other available credit lines.

Net working capital (A Non-GAAP Financial Measure)

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

(In millions, except volume)

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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 increased from $344.4 million as of December 31, 2023, to $399.9 million as of September 30, 2024.

Our Net working capital increased from $346.1 million as of December 31, 2024, to $391.0 million as of March 31, 2025.

The primary working capital change drivers, year over year, were as follows:

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Those increases were partially offset by:

• Accounts payable —Decrease in accounts payable was primarily due to timing of payments, partially offset by higher production.

• Accounts payable —Increase in accounts payable was primarily due to timing of payments, partially offset by higher production compared to year end.

Capital expenditures (A Non-GAAP Financial Measure)

We define Capital expenditures as cash paid for the acquisition of property, plant and equipment.

We plan to finance our Capital expenditures with cash generated by our operating activities and/or by utilizing existing debt capacity.

We currently do not have any material commitments to make Capital expenditures and do not plan to make Capital expenditures outside the ordinary course of our business.

We currently do not have any material commitments to make Capital expenditures, except for the under-construction facility at La Porte, Texas.

We do not plan to make material Capital expenditures outside the ordinary course of our business.

Off-Balance Sheet Arrangements

As of September 30, 2024, we did not have any off-balance sheet arrangements.

As of March 31, 2025, 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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Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements.

Forward-looking statements include, among others, statements concerning the potential exposure to market risks, statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions and statements that are not limited to statements of historical or present facts or conditions.

Forward-looking statements include, among others, statements concerning our potential exposure to market risks, macroeconomic conditions including tariffs, expected plant uptime, market conditions, anticipated customer demand, expected impacts of operational improvements and foreign exchange, expectations regarding capital expenditures, working capital and free cash flow, our outlook for 2025, and other statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions and statements that are not limited to statements of historical or present facts or conditions.

Forward-looking statements are typically identified by words such as “anticipate,” “assume,” “assure,” “believe,” “confident,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “objectives,” “outlook,” “probably,” “project,” “will,” “seek,” “target,” “to be” and other words of similar meaning.

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

• 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 foreign currency rate fluctuations;

• the impact of adoption of ASU 2025-01 on our financial results;

• 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;

• 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 2025 and beyond.

• 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;

• our internal controls over financial reporting, including the remediation of a material weakness;

• loss due to misappropriation of assets and potential recoveries of such loss.

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

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• possible negative or uncertain worldwide economic conditions and developments;

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

• the operational risks inherent in chemicals manufacturing, including disruptions due to technical facilities, severe weather conditions or natural disasters;

• the operational risks inherent in chemicals manufacturing, including but not limited to disruptions due to technical difficulties, severe weather conditions or natural disasters;

• our dependence on major customers and suppliers;

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

• changes in the geopolitical environment or government policy, including related to tariffs, counter-tariffs and other trade barriers;

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

• 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;

• our ability to respond to changes in feedstock prices and quality;

• our ability to effectively implement our business strategies;

• the volatility of costs, quality and availability of raw materials and energy;

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

• 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 planned and current site development projects, including our conductive additives facility at La Porte, Texas, and the impacts of potential delays to such expansions and development projects;

• our ability to realize benefits from planned plant capacity expansions and planned and current site 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 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;

• rapidly changing geopolitical environment, conflicts, growing tension between U.S.

and other countries, and/or any other escalations may impact energy costs, raw material availability or other economic disruptions;

• our ability to comply with complex environmental, health and safety laws and regulations, and current and any possible future investigations and enforcement actions by governmental, supranational agencies or other organizations;

• environmental, social and governance matters, including regulations requiring a reduction of greenhouse gas emissions or that impose additional taxes or fees on emissions as well as increased awareness and adverse publicity about potential impacts on climate change by us;

• development regulation of carbon black as a nano-scale material;

• 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 changes in European Union regulations or similar international regulations on chemical carbon that will affect our ability to market and sell our products;

• any market or 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;

• our ability to protect our intellectual property rights and know-how;

• our ability to generate the funds required to service our debt and finance our operations;

• any fluctuations in foreign currency exchange and interest rates;

• risks associated with our financial leverage;

• restrictive effects of the covenants in our debt instruments;

• any deterioration in our financial position or downgrade of our ratings by credit rating agencies;

• any fluctuations in foreign currency exchange or interest rates;

• the availability and efficiency of hedging;

• 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;

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• the adequacy of our insurance coverage;

• any changes in our jurisdictional earnings mix or in the tax laws or accepted interpretations of tax laws in those jurisdictions;

• any challenges to our decisions and assumptions in assessing and complying with our tax obligations;

• any changes in our jurisdictional earnings mix or in the tax laws or accepted interpretations of tax laws in those jurisdictions;

• the ability to pay dividends on our common stock at historical rates or at all;

• the difference between our stockholders’ rights and rights of stockholders of a U.S.

• the potential difficulty in obtaining or enforcing judgments or bringing legal actions against Orion S.A.

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or elsewhere outside Luxembourg;

• 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.

• the difference between Luxembourg & European insolvency and bankruptcy laws from U.S.

insolvency laws;

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

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

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

• our ability to generate the funds required to service our debt and finance our operations.

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

Information about market risks for the period ended March 31, 2025 does not differ materially from “ Item 7A” in our Annual Report in Form 10-K for the year ended December 31, 2024.

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