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1. Company Snapshot

1.a. Company Description

Orion Engineered Carbons S.A., together with its subsidiaries, manufactures and sells carbon black products in Germany, the United States, South Korea, Brazil, China, South Africa, the rest of Europe, and internationally.It operates in two segments, Specialty Carbon Black and Rubber Carbon Black.The company offers post-treated specialty carbon black grades for coatings and printing applications; high purity carbon black grades for the fiber industry; and conductive carbon black grades for polymers, coatings, and battery electrodes.


It also provides rubber carbon black products for applications in mechanical rubber goods under the PUREX brand, as well as in tires under the ECORAX brand name.The company was formerly known as Orion Engineered Carbons S.à r.l. and changed its name to Orion Engineered Carbons S.A. in July 2014.Orion Engineered Carbons S.A. was founded in 1862 and is headquartered in Senningerberg, Luxembourg.

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1.b. Last Insights on OEC

The recent 3-month performance of Orion Engineered Carbons S.A. was negatively impacted by a decline in net sales, which decreased by $34.0 million year-over-year in the fourth quarter of 2024. Adjusted EBITDA also declined by $4.9 million year-over-year, indicating a decrease in profitability. The company's diluted EPS increased by $0.22 year-over-year, but this was largely due to a reduction in share count. Additionally, the company's agreement with Contec S.A. for the supply of TPO may not have had a significant impact on its recent performance, as the agreement was announced in February 2025, and the company's Q4 2024 earnings were released in February 2025.

1.c. Company Highlights

2. Orion's Q3 2025 Earnings: Navigating Headwinds

Orion's Q3 2025 financial performance was marked by revenue decline and lower-than-expected EPS. The company's EPS came in at $0.29, below the estimated $0.36. Revenue was impacted by soft demand in key markets, particularly in the Rubber segment and premium Specialty markets. Gross profit and EBITDA were also affected by fixed cost absorption variances. The company's efforts to reduce inventories and improve operating performance were evident, with a significant reduction in inventories, taking $34 million worth off the balance sheet as mentioned by Corning Painter, "We've taken $34 million worth of inventory off the balance sheet."

Publication Date: Nov -29

📋 Highlights
  • Free Cash Flow Guidance:: Full-year 2025 free cash flow expected between $25 million and $40 million amid persistent headwinds.
  • Inventory Adjustments:: $34 million reduction in inventory due to oil pricing adjustments, improving balance sheet flexibility.
  • Q4 Volume Decline:: Anticipated volume decrease in Q4 2025, with LaPorte plant negatively impacting 2026 earnings from start-up costs.
  • RCB Earnings Outlook:: Potential 2026 RCB segment improvement hinges on cost reductions and value positioning amid stable import pressures.
  • Specialties Guidance:: Formal 2026 guidance delayed pending customer feedback and market trends, with construction/automotive demand as key drivers.

Segment Performance and Outlook

The company's operating teams delivered strong plant reliability throughout Q3, which is beneficial for cost management and overall competitiveness. However, the business environment remains challenging, with soft demand in key Western regions and premium Specialty markets. For Q4, the company expects a decline in volumes, and the LaPorte plant is expected to be negative in 2026 due to start-up costs. The Specialty market is considered important, and a pickup in construction and automotive would be helpful, with official guidance to be provided in February.

Valuation and Cash Flow

The company's valuation metrics indicate a mixed picture. The P/E Ratio is negative at -8.95, and the P/B Ratio is 0.71, suggesting that the stock may be undervalued. The EV/EBITDA ratio is 4.54, indicating a relatively reasonable valuation. The company's focus on generating positive free cash flow is on track, with expectations of $25 million to $40 million for the full year. The Free Cash Flow Yield is 51.33%, which is a positive indicator. The Net Debt / EBITDA ratio is 2.24, indicating a manageable debt position.

Industry Trends and Recovery

The industry is expected to recover when demand conditions normalize, with a return to pre-COVID conditions characterized by strong demand from OEMs and tire manufacturing, and more normalized trade flows. The 232 tariffs are helping to close the gap between Tier 2 and Tier 3 tires, and customers are shifting back to normalized brands. The company's efforts to improve costs and move to more value positioning could lead to earnings improvement in the RCB segment in 2026, assuming sustained import tire pressure at 2025 levels. Analysts estimate next year's revenue growth at -1.7%, indicating a continued challenging environment.

3. NewsRoom

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Orion S.A. Gains Commercial Traction With Conductive Additives Vital for Grid Modernization

Nov -19

Source: businesswire.com

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Orion S.A. Names Jonathan Puckett Chief Financial Officer

Nov -07

Source: businesswire.com

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Orion S.A. (OEC) Q3 2025 Earnings Call Transcript

Nov -05

Source: seekingalpha.com

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Orion (OEC) Misses Q3 Earnings Estimates

Nov -05

Source: zacks.com

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Orion S.A. Reports Third Quarter 2025 Financial Results

Nov -04

Source: businesswire.com

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Y Intercept Hong Kong Ltd Increases Stock Position in Orion S.A. $OEC

Nov -03

Source: defenseworld.net

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Orion S.A.: The Bear Case Plays Out

Oct -15

Source: seekingalpha.com

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Orion S.A. Announces Preliminary Third Quarter 2025 Results, Business Update, and Conference Call Information

Oct -13

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.82%)

6. Segments

Rubber

Expected Growth: 5.5%

Orion Engineered Carbons S.A.'s 5.5% growth in Rubber segment is driven by increasing demand from tire manufacturers, growing adoption in non-tire applications, and rising prices due to supply chain constraints. Additionally, the company's focus on specialty rubber products and expansion in emerging markets contribute to its growth momentum.

Specialty

Expected Growth: 6.5%

Orion Engineered Carbons' Specialty segment growth of 6.5% is driven by increasing demand for high-performance tires, growth in electric vehicle adoption, and rising use of specialty carbon black in coatings, inks, and plastics. Additionally, Orion's focus on innovation, customer relationships, and operational efficiency also contribute to the segment's growth.

7. Detailed Products

Specialty Carbon Blacks

High-performance carbon blacks used in coatings, plastics, and other specialty applications

Rubber Carbon Blacks

Carbon blacks used in tire manufacturing and other rubber applications

Plastic Carbon Blacks

Carbon blacks used in plastic compounds and masterbatches

Inkjet Colorants

Specialty carbon blacks used in inkjet printing inks

Laser Marking Carbon Blacks

Specialty carbon blacks used in laser marking and engraving applications

8. Orion Engineered Carbons S.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Orion Engineered Carbons S.A. is medium due to the availability of alternative products and technologies that can replace carbon black in certain applications.

Bargaining Power Of Customers

The bargaining power of customers is low due to the specialized nature of Orion Engineered Carbons S.A.'s products and the lack of alternative suppliers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium due to the presence of multiple suppliers of raw materials and the company's ability to negotiate prices.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the carbon black industry, including the need for significant capital investment and technical expertise.

Intensity Of Rivalry

The intensity of rivalry is high due to the competitive nature of the carbon black industry, with multiple players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 63.34%
Debt Cost 8.31%
Equity Weight 36.66%
Equity Cost 12.03%
WACC 9.68%
Leverage 172.81%

11. Quality Control: Orion Engineered Carbons S.A. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Uzin Utz

A-Score: 5.9/10

Value: 6.9

Growth: 5.0

Quality: 6.5

Yield: 4.4

Momentum: 9.0

Volatility: 3.7

1-Year Total Return ->

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Stock-Card
Victrex

A-Score: 4.7/10

Value: 6.1

Growth: 1.9

Quality: 6.4

Yield: 8.1

Momentum: 1.5

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
Elementis

A-Score: 4.0/10

Value: 5.1

Growth: 1.7

Quality: 3.8

Yield: 1.2

Momentum: 6.5

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
Essentra

A-Score: 3.5/10

Value: 4.0

Growth: 1.3

Quality: 3.6

Yield: 6.2

Momentum: 1.0

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
Zotefoams

A-Score: 3.5/10

Value: 3.7

Growth: 5.4

Quality: 3.8

Yield: 3.1

Momentum: 4.0

Volatility: 1.0

1-Year Total Return ->

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Stock-Card
Orion Engineered Carbons

A-Score: 2.5/10

Value: 7.6

Growth: 3.2

Quality: 1.7

Yield: 1.2

Momentum: 0.0

Volatility: 1.0

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

4.96$

Current Price

4.96$

Potential

-0.00%

Expected Cash-Flows