Orion Engineered Carbons (NYSE: OEC) reported Q1 EPS of $0.40, $0.08 worse than the analyst estimate of $0.48. Revenue for the quarter came in at $384.7 million versus the consensus estimate of $412.14 million.

• Net Income of $19.0 million and basic EPS of $0.32 versus $26.8 million and $0.45 in first quarter of 2018
• Adjusted EPS1 of $0.40
• Cash flow from operations of $26.2 million
• Total Carbon Black volumes decreased 8.2% (decreased 4.0% allowing for plant consolidation in South Korea) to 262.8 kmt against first quarter of 2018 but increased 2.6% compared to fourth quarter 2018 volumes of 256.2 kmt.
• Revenue of $384.7 million and Adjusted EBITDA1 of $64.6 million down from $406.7 million and $76.0 million in the first quarter of 2018, with Specialty Carbon Black Adjusted EBITDA of $29.4 million and Rubber Carbon Black Adjusted EBITDA of $35.2 million. Revenues and Adjusted EBITDA at fourth quarter 2018 levels
• Specialty Carbon Black Adjusted EBITDA margin of 22.3% and Rubber Carbon Black Adjusted EBITDA margin of 13.9%

1 See below for a reconciliation of non-GAAP financial measures to the most directly comparable US-GAAP measures

“We had a challenging first quarter, with our results coming in at levels similar to fourth quarter 2018, reflecting suboptimal market conditions for us and the chemical industry as a whole. Despite the challenges, destocking appears to have slowed and we have successfully progressed key marketing initiatives, allowing us to gain more stable footing heading into the balance of the year,” said Corning Painter, Chief Executive Officer. “We remain keenly focused on our path going forward. In our Specialty business, we anticipate modest volume recovery to be sustained, which will simultaneously improve our mix. Our view is supported by broader indications of a general recovery in China, in part driven by government stimulus programs and more constructive customer sentiment. For our Rubber Black segment, we are making good progress in the China market. We expect the modest volume recovery we have recently seen across both businesses, combined with cost, pricing, and other key initiatives, will drive improved quarterly performance on a go forward basis.”

2019 Outlook

“Despite a challenging start to the year, we saw some recovery towards the end of Q1 in base volumes and premium grades as well as more confident customer sentiment,” Mr. Painter said. “At the same time, we have launched a profit improvement program and continue to work on pricing excellence; a key initiative that we remain committed to executing. We anticipate that business demand will improve from Q1 levels over the course of the year as we have also started to see indications of improvement in China. Consistent with our previous expectations and further supported by recent positive trends, we are reiterating our outlook for full year Adjusted EBITDA for 2019 to be in the range of $280 million to $300 million. This outlook is based on the assumptions that oil prices, exchange rates and feedstock impacts will not materially change from average levels seen the first quarter of 2019.

We expect depreciation and amortization to be approximately $95 million, with our tax rate expectation for 2019 on pre-tax income at 30.1%. Our basic share count at the end of 2019 is expected to be 60 million shares with no decision about any share buyback in 2019.

In terms of other areas of guidance, we are currently pacing our capital expenditures for 2019 to be approximately $150 million, comprising of base capex, the already announced specialty line investment in Ravenna, Italy, as well as the US EPA settlement related capex, which is estimated to be around $80 million before any reimbursement to us by Evonik for this expenditure. As we actively evaluate our capital allocation strategy, we are committed to remaining within our leverage targets and keeping our dividend stable, as our strong and efficient financing structure supports these costs.”

In conclusion Mr. Painter said, “We believe destocking is largely behind us now. We remain focused on executing in the current environment: pacing our capital spend in line with business results, cost leadership, value pricing, channel management, operational excellence, debottlenecking high margin products, getting new products qualified, and strengthening our liquidity. We look forward to executing our strategic and financial plan and driving improving results through the course of the year.”

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