Orion aims to offset impact of carbon-black feedstock costs

Luxembourg – Orion Engineered Carbons expects a bounce-back in earnings at its Rubber Carbon Black business, despite the continuing negative impact of feedstock costs.

The Luxembourg-based company reported an 11.3-percent rise in volumes at its rubber blacks unit – or 3.9-percent higher ignoring the impact of the newly acquired OECQ – to 229.0 kilotonnes in the second quarter of 2016.

The increase reflected strong demand in Europe, plus additional volumes of 15.1 kilotonnes from its acquisition of OECQ in the last quarter of 2015, said a 4 Aug interim results statement.

On the downside, revenues fell 19.4 percent year-on-year to €149.9 million as price declines – linked to lower feedstock costs – regional mix and currency effects offset revenue gains from OECQ.

Second quarter earnings (adjusted EBITDA) dipped 26.5 percent to €19.1 million on “persistent negative feedstock cost impacts, increased depreciation charges and to a lesser extent unfavourable foreign exchange translation effects.”

The factors, added Orion, outweighed the positive impact of OECQ and the launch of pricing surcharges in Europe. These were implemented during the quarter and will come to full effect in the second half of 2016.

Orion went on to note that a feedstock supply arrangement for its rubber blacks business would conclude at the end of 2016. This, it said, was likely to have a negative impact on profitability in 2017.

However, Orion added that it expected planned reductions in fixed costs and improvements in pricing and product mix to offset higher feedstock costs and raise profitability on rubber blacks in 2017.