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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 93 added, 59 removed, 193 unchanged (44% 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 months ended March 31, 2025 and 2024 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 and six months ended June 30, 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.

We prepare our financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”).

Unless otherwise indicated, the “Company,” “we,” “us,” “our” or similar words are used to refer to Orion S.A.

together with its consolidated subsidiaries (“Orion S.A.”).

In July 2025, we announced our plan to idle production of three to five carbon black lines at multiple operating facilities in the Americas and EMEA by the end of 2025.

This decision is part of our strategy to focus maintenance investments on higher-performing production lines – making them more reliable and productive.

PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION

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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, Adjusted EBITDA, Net Working Capital and Capital Expenditures.

These non-GAAP measures include, but are not limited to, Adjusted EBITDA, Segment Gross Profit, Net Working Capital and Capital Expenditures.

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

• Segment Gross Profit —Segment Net sales minus segment Cost of sales.

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

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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 March 31,

2025 2024 Delta

(In millions, except volume) %

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 Delta 2025 2024 Delta

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

Volume (in kmt) 240.0 233.1 6.9 3.0 491.7 481.5 10.2 2.1

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

Three Months Ended March 31,

2025 2024 Delta

(In millions) %

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 Delta 2025 2024 Delta

(In millions) % (In millions) %

Net income $ 9.0 $ 20.5 $ (11.5) (56.1) $ 18.1 $ 47.2 $ (29.1) (61.7)

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Operating Results Discussion

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.

For the three months ended June 30, 2025 compared to three months ended June 30, 2024

Volume for the three months ended June 30, 2025 increased by 6.9 kmt to 240.0 kmt, year over year, due to higher volume in the Rubber Carbon Black segment.

Net sales for the three months ended June 30, 2025 decreased by $10.6 million, or 2.2%, to $466.4 million, year over year, primarily due to lower oil prices.

This was partially offset by higher Rubber Carbon Black segment volume, favorable foreign exchange rate impact and higher cogeneration.

Cost of sales

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.

Cost of sales for the three months ended June 30, 2025 increased marginally by $0.8 million, or 0.2%, to $368.0 million, year over year.

Gross profit for the three months ended June 30, 2025 decreased by $11.4 million, or 10.4%, to $98.4 million, year over year.

The decrease was driven primarily by lower volume in the Specialty Carbon Black segment, unfavorable timing from the pass-through of raw material costs and unfavorable customer and regional mix in the Rubber Carbon Black segment.

Selling, general and administrative expenses

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.

Selling, general and administrative expenses for the three months ended June 30, 2025 decreased by $2.6 million, or 4.3% to $57.7 million, year over year, primarily driven by lower distribution costs.

Provision for income taxes

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.

For the three months ended June 30, 2025, the Company recognized Income before earnings in affiliated companies and income taxes of $13.0 million, compared to $29.4 million for the three months ended June 30, 2024.

The income tax expense for the three months ended June 30, 2025 was $4.6 million compared to $9.1 million for the three months ended June 30, 2024.

The effective tax rate for the three months ended June 30, 2025, and 2024 was 35.4% and 31.0%, respectively.

The increase in effective tax rate for three months ended June 30, 2025, as compared to the three months ended June 30, 2024, was primarily driven by valuation allowances for tax losses.

Comprehensive Income (loss)

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

Comprehensive income (loss) decreased in the second quarter of 2025 by $6.8 million to $4.3 million, year over year.

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

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

Net income decreased by $11.5 million in the second quarter of 2025 compared to the second quarter of 2024.

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

• $5.7 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:

dollar versus euro and

• $0.8 million of net unfavorable impact related to financial derivative instruments primarily driven by net periodic changes in cross currency swaps.

Adjusted EBITDA (A Non-GAAP Financial Measure)

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.

Adjusted EBITDA decreased in the second quarter of 2025 by $6.3 million, or 8.4%, to $68.8 million, year over year.

The decrease was driven by lower volume in the Specialty Carbon Black segment, unfavorable price and unfavorable timing from the pass-through of raw material costs, partially offset by higher cogeneration.

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

For the six months ended June 30, 2025 compared to six months ended June 30, 2024

Volume increased by 10.2 kmt to 491.7 kmt compared to the six months ended June 30, 2024, primarily due to higher Rubber Carbon Black segment volume, partially offset by lower Specialty Carbon Black segment volume.

Net sales decreased by $35.8 million, or 3.7%, in the six months ended June 30, 2025 to $944.1 million, year over year, primarily driven by the pass-through of lower oil prices, and lower Specialty Carbon Black segment volume.

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

Cost of sales

Cost of sales decreased marginally by $0.3 million, to $747.6 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Gross profit decreased by $35.5 million, or 15.3%, to $196.5 million, year over year.

The decrease was primarily driven by unfavorable impact from the pass-through of raw material costs, partially offset by higher cogeneration.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased by $5.7 million, or 4.7%, to $116.1 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily driven by driven lower distribution, professional service and personnel costs.

Provision for income taxes

For the six months ended June 30, 2025, the Company recognized Income before earnings in affiliated companies and income taxes of $30.5 million, compared to $69.5 million in the six months ended June 30, 2024.

The provision for income taxes was an expense of $13.5 million and $22.6 million for the six months ended June 30, 2025 and June 30, 2024, respectively.

The effective tax rate for the six months ended June 30, 2025, was 44.3%, as compared to 32.5% for the six months ended June 30, 2024.

The increase in our effective tax rate for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was primarily driven by valuation allowances for tax losses.

Adjusted EBITDA (A Non-GAAP Financial Measure)

Adjusted EBITDA decreased by $25.4 million, or 15.8%, from $160.4 million for the six months ended June 30, 2024 to $135.0 million in the six months ended June 30, 2025.

The decrease was primarily due to lower volume in the Specialty Carbon Black segment, unfavorable timing from the pass-through of raw material costs and unfavorable customer and regional mix in the Rubber Carbon Black segment.

Those were partially offset by higher cogeneration.

Comprehensive Income

Comprehensive income decreased by $16.6 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Net income decreased by $29.1 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

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

• $14.7 million of net favorable impact due to foreign currency translation adjustments, and

• $1.8 million of net unfavorable impacts related to financial derivative instruments primarily driven by net periodic changes in cross currency and interest rate swaps.

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

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 March 31,

2025 2024 Delta

(In millions) %

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 Delta 2025 2024 Delta

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

Specialty Carbon Black

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Specialty Carbon Black

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.

Volume decreased by 4.9 kmt, or 7.8%, year over year, to 58.0 kmt and by 6.3 kmt, or 5.0% year over year, to 119.9 kmt for the three and six months ended June 30, 2025, respectively, primarily due to lower demand in the Europe, Middle East and Africa, as well as the Americas region.

Net sales decreased by $7.4 million, or 4.5%, year over year, to $158.1 million and by $17.6 million, or 5.2%, year over year, to $318.8 million for the three and six months ended June 30, 2025, respectively, primarily due to lower volume and lower oil prices.

Gross profit decreased by $6.9 million, or 17.5%, year over year, to $32.6 million and by $8.6 million, or 10.6%, year over year, to $72.6 million for the three and six months ended June 30, 2025, respectively, primarily driven by lower volume and unfavorable price and product mix.

Adjusted EBITDA for the three and six months ended June 30, 2025 decreased by $8.1 million, or 28.9%, year over year, to $19.9 million and by $10.6 million, or 19.0%, year over year, to $45.3 million, respectively.

The decrease was primarily due to lower volume and unfavorable price and product mix.

Rubber Carbon Black

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.

Volume increased by 11.8 kmt, or 6.9%, year over year, to 182.0 kmt and increased by 16.5 kmt, or 4.6%, year over year, to 371.8 kmt, for the three and six months ended June 30, 2025, primarily due to higher demand in the Asia Pacific and Americas regions.

Net sales decreased by $3.2 million, or 1.0%, year over year, to $308.3 million and decreased by $18.2 million, or 2.8%, year over year, to $625.3 million for the three and six months ended June 30, 2025, primarily due to the pass-through of lower oil prices, partially offset by higher volume.

Gross profit for the three and six months ended June 30, 2025 decreased by $4.5 million, or 6.4%, year over year, to $65.8 million and decreased by $26.9 million, or 17.8%, year over year, to $123.9 million.

The decrease was primarily due to unfavorable timing from the pass-through of raw material costs.

Adjusted EBITDA increased by $1.8 million, or 3.8%, year over year, to $48.9 million for the three months ended June 30, 2025, driven primarily by lower fixed costs and higher cogeneration, partly offset by unfavorable timing from the pass-through of raw material costs.

Adjusted EBITDA decreased by $14.8 million, or 14.2%, to $89.7 million for the six months ended June 30, 2025, driven primarily by unfavorable timing from the pass-through of raw material costs and unfavorable customer and regional mix.

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

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

Three Months Ended March 31,

(In millions, except volume)

Six Months Ended June 30,

(In millions)

Net cash provided by operating activities $ 54.1 $ 61.7

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Net cash provided by financing activities 14.0 23.5

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

Net cash provided by operating activities during the six months ended June 30, 2025 was $54.1 million.

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

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Accounts Receivable to the Condensed Consolidated Financial Statements.

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

Net cash used in investing activities in the six months ended June 30, 2025 amounted to $71.4 million.

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

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

Net cash provided by financing activities during the six months ended June 30, 2025 amounted to $14.0 million.

These inflows primarily consisted of $17.6 million related to other short-term debt borrowings and $28.0 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 three months ended March 31, 2024, amounted to $32.4 million.

Net cash provided by operating activities for the six months ended June 30, 2024, amounted to $61.7 million.

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

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Accounts Receivable to the Condensed Consolidated Financial Statements.

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

Net cash used in investing activities for the six months ended June 30, 2024, amounted to $87.8 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.

Net cash provided by financing activities for the six months ended June 30, 2024, amounted to $23.5 million.

These inflows primarily consisted of $52.7 million related to other short-term debt borrowings, partially offset by $17.7 million, net related to repayment of our ancillary credit facilities.

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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.

As of June 30, 2025, the company had total liquidity of $181.9 million, including cash and equivalents of $42.6 million, $103.5 million availability under our revolving credit facility, including ancillary lines, and $35.8 million of capacity under other available credit lines.

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

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

March 31, 2025 December 31, 2024

(In millions, except volume)

June 30, 2025 December 31, 2024

(In millions)

Accounts receivable, net $ 270.0 $ 211.9

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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 $346.1 million as of December 31, 2024, to $391.0 million as of March 31, 2025.

Our Net working capital increased from $346.1 million as of December 31, 2024, to $382.3 million as of June 30, 2025.

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

• Inventories, net —Increase in production to meet forecasted demand resulted in increased raw material and finished goods inventory;

• Accounts receivable, net —This increase was primarily driven by higher sales, partially offset by factoring of certain accounts receivables.

• Accounts receivable, net —This increase was primarily due to lower balance at December 31, 2024 from increased factoring of certain accounts receivables.

Refer Note B.

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Those increases were partially offset by:

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

• Inventories, net —Decrease in production to meet forecasted demand resulted in a reduction in finished goods inventory.

The value of Inventory, net was also impacted by lower oil prices and foreign exchange rate;

• Accounts payable —Increase in accounts payable was primarily due to timing of payments.

Capital expenditures (A Non-GAAP Financial Measure)

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Off-Balance Sheet Arrangements

As of March 31, 2025, we did not have any off-balance sheet arrangements.

As of June 30, 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.

You should not place undue reliance on forward-looking statements.

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.

Forward-looking statements are typically identified by words such as “anticipate,” “assume,” “assure,” “believe,” “confident,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “objectives,” “outlook,” “guidance,” “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:

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These factors include, among others:

• possible negative or uncertain worldwide economic conditions and developments;

• negative or uncertain worldwide economic conditions and developments;

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

• unanticipated impacts of our plans and strategies, including our plans to discontinue production at certain facilities;

• our dependence on major customers and suppliers;

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

• further changes and uncertainty 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;

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Quantitative and Qualitative Disclosures About Market Risk

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.

Information about market risks for the period ended June 30, 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