Orion Engineered Carbons (NYSE: OEC) reported Q4 EPS of $0.42, $0.02 better than the analyst estimate of $0.40. Revenue for the quarter came in at $322.4 million versus the consensus estimate of $365.94 million.

Fourth Quarter 2019 Highlights

• Net sales of $322.4 million compared to $386.0 million in the fourth quarter of 2018
• Net Income of $19.0 million and basic EPS of $0.32 compared to $15.7 million and $0.27 in the fourth quarter of 2018
• Adjusted EBITDA1of $63.2 million compared to $64.4 million in the fourth quarter of 2018
• Adjusted EPS1 of $0.42 compared to $0.42 in the fourth quarter of 2018
• Net cash provided by operating activities increased by $88.8 million during the fourth quarter of 2019 to $231.5 million for the full year of 2019 compared to $122.0 million for the full year of 2018

“Orion executed well in the fourth quarter, delivering Adjusted EBITDA within our forecasted guidance range and continuing to implement key initiatives to better position the company in this challenging macro environment. The continuation of weak auto OEM dynamics and evidence of tire customers conservatively approaching year end contributed to the volume declines in the fourth quarter, however, favorable trends in price and product mix helped to offset some of the weakness. Furthermore, our operating performance drove strong cash generation and a substantial reduction in net debt,” said Mr. Corning Painter, Chief Executive Officer.

Mr. Painter continued, “Over the past year, the Orion team accomplished a number of value-enhancing strategic initiatives including reducing costs and achieving higher pricing, while demonstrating agile capital management. Notably, in 2019 we adopted a leaner management structure, renewed our revolver at more attractive rates and achieved price increases in our Rubber Carbon Black segment. We also continued our sustainability journey by establishing long-range targets and advancing our pollution control technology in an U.S. EPA-compliant manner at our North American manufacturing facilities, consistent with our core values of advancing sustainable operations and growth.

Looking to the year ahead, by proactively engaging in pricing negotiations for 2020, we achieved meaningful Rubber price increases, taking another positive step towards improving returns. Specialty pricing also increased, albeit at a lower level compared to Rubber. Additionally, during the quarter we successfully installed surcharge mechanisms to better recover raw material costs across the majority of our 2020 Rubber contracted volumes, effectively further de-risking our business by reducing earnings volatility in the years ahead. We remain focused on driving strong operational and financial performance in the business, while continuing to position our company for future success,” concluded Mr. Painter.

2020 Outlook

Mr. Painter concluded, “We have positioned ourselves well for 2020. Consistent with this outlook, we expect full year Adjusted EBITDA for 2020 to be in the range of $250 million to $280 million, with an expectation of delivering flat to modest growth in Adjusted EBITDA on a year over year basis while continuing to generate strong cash from operations.”

This outlook is based on current GDP expectations and assumes that carbon black feedstock prices, exchange rates and feedstock impacts will be at levels experienced late in the fourth quarter of 2019. Other guidance metrics for 2020 include shares outstanding of 60.6 million before vesting of awards under the Group’s Long Term Incentive Program, an underlying tax rate in the range of 29% to 30% on pre-tax income, and capital expenditures in the range of $130 million and $150 million of which non-EPA related spending is expected to comprise approximately 45% to 50%, prior to any reimbursement from Evonik AG, with maintenance capital comprising around 45%, and growth-oriented capital comprising the balance. Depreciation and Amortization for 2020 is estimated to be in the range of $95 to $100 million.

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