Orion Engineered Carbons (NYSE: OEC) reported Q1 EPS of $0.52, $0.03 better than the analyst estimate of $0.49. Revenue for the quarter came in at $406.7 million versus the consensus estimate of $370.91 million.

First Quarter 2018 Year over Year Highlights

• Volumes increased by 4.0% to 286.1 kmt compared to 275.1 kmt in the first quarter of 2017 with increases in 3.1% in Specialty and 4.3% in Rubber
• Revenue increased by $82.6 million to $406.7 million compared to the first quarter of 2017
• Profit (Net Income) of $24.2 million increased by $7.4 million from $16.8 million in first quarter of 2017 and accordingly Basic EPS increased by $0.13 to $0.41
• Adjusted EBITDA1 increased $13.4 million or 21.4% to a record $76.0 million, while Adjusted EPS1 increased $0.14 to $0.52
• Specialty Carbon Black Adjusted EBITDA increased by $6.1 million to $40.3 million
• Rubber Carbon Black Adjusted EBITDA increased by $7.3 million to $35.7 million
• Dividend payments increased 10% or $0.02 per share to $0.20 per share

“We are very pleased with our strong start to the year. Our markets have strengthened worldwide and helped drive revenue up by 25.5% with gains in both Specialty and Rubber volumes. The stronger markets also supported price increases in both segments. While foreign exchange rates also favored revenue, the fundamentals of volume growth with stronger pricing were apparent in this good start to the year. As a result, our Adjusted EBITDA reached a quarterly record of $76 million,” said Jack Clem, Orion’s Chief Executive Officer.

“In Specialties, we were successful in our efforts to recapture margin pressured last year by a sharp rise in feedstock costs. Base prices were raised across all segments and regions and certain markets with lower margins were scaled back to support a shift to higher margin production. The result was a strong recovery in gross profit per ton which grew sequentially from $661 to $781 and on a year over year basis was up by $91 per ton aided also by a favorable foreign exchange. In Rubber we entered the year optimistic about demand and better pricing resulting from customer agreements concluded in the fourth quarter of last year. This proved to be justified as our production network was pushed to near capacity and better pricing was indeed achieved, helped in part by a continued strong performance by our facility in China which managed to have a record quarter in spite of the challenges of a quite volatile feedstock market,” added Mr. Clem.

“During the quarter we continued shifting our portfolio to higher value products by realigning capacity in our global production network, rationalizing some grades to devote our capacity to stronger margin products. We remain on track to complete the full realignment of the South Korean production footprint in the second quarter of this year. Capital expenditures are coming in on budget, the closure of the smaller plant is on schedule and the sale of the real estate in the suburb of Seoul is ahead of schedule with a price that is in line with expectations. We have begun work on the new Specialty line at our facility in Italy and it is on schedule to begin production in the fourth quarter of 2019. These capacity and mix realignment initiatives, carefully calibrated pricing and improving demand/supply dynamics position us to take full advantage of improving global economic conditions. We took advantage of a favorable interest rate environment to again successfully reprice our long term debt package and to convert our U.S. dollar debt to euros to better match our cash flows as a U.S. dollar reporting entity. The result was a saving of a very meaningful 8 cents per share. This has been a very successful start to 2018,” concluded Mr. Clem.

2018 Full Year Outlook

“After this strong start we see little reason we cannot continue our first quarter’s operational momentum. Based on the strengthened markets and the success of our initiatives, along with the positive impact of foreign exchange on our financial results in the quarter, we are increasing our outlook for full year Adjusted EBITDA to between $280 million and $300 million, based on the assumptions that volume growth will be in line with current GDP expectations and that oil prices, feedstock and importantly exchange rate impacts will stay at levels seen during the first quarter of 2018," stated Mr. Clem.

Other guidance metrics for 2018 include shares outstanding of 59.7 million reflecting the vesting of part of the long term incentive program for senior management, an underlying tax rate of 32%-33% on pre-tax income, and capital expenditures reflecting an operating run rate consistent with the past of approximately $100 million before expenditures associated with the consolidation of the Company’s plants in South Korea and EPA related capex. Depreciation is estimated to be approximately $75 million, and amortization is estimated to be approximately $25 million (including amortization of acquired intangibles of about $16 million) in 2018.

For earnings history and earnings-related data on Orion Engineered Carbons (OEC) click here.