Orion rubber black earnings dampened by lower volumes, higher costs

Houston, Texas – Orion Engineered Carbons has seen its rubber carbon black business impacted by lower volumes and higher costs.

Segment sales increased 36% year-on-year to $242.9 million (€210 million) during the three months to end of September, said Orion in a 5 Nov statement.

The increase was achieved as a result of passing through higher feedstock costs and despite a 3% decline in volumes to 173 kilotonnes. 

Lower volumes, Orion said, principally reflected lower demand in Europe, Middle East and Africa (EMEA), and particularly Korea. 

Adjusted earnings (EBITDA) of the segment declined 4.0%, to $27.4 million, due to lower volumes and higher fixed costs. Adjusted earnings margin decreased 470 basis points to 11.3%, year over year. 

“With year-to-date rubber volumes at 90% of 2019 levels, we continue to expect 2022 market conditions to be very favourable for our rubber carbon black business,” said CEO Corning Painter, during a 5 Nov conference call.

The official remained optimistic about the 2022 demand despite the ongoing semiconductor and other supply chain disruptions. 

“We expect driving an automobile to remain the preferred mode of transportation for individuals and families and commercial traffic to remain robust,” he said. 

These factors will likely result in higher miles driven, increasing demand for replacement tires, which make up approximately 60% of Orion’s rubber carbon black volume.

“Our positive 2022 outlook is also influenced by the projected tightening of the global supply demand dynamics as measured by global utilisation rates,” he went on to say.

According to Painter, Orion has completed 2022 rubber carbon black negotiations with approximately two-thirds of EMEA and Americas volume currently under contract “at market-driven pricing.”

Comments in transcript sourced from Seeking Alpha.