Orion Engineered Carbons (NYSE: OEC) reported Q2 EPS of ($0.14), $0.09 better than the analyst estimate of ($0.23). Revenue for the quarter came in at $202.6 million versus the consensus estimate of $180.02 million.

Second Quarter 2020 Highlights

• Continued focus on protecting employees, maintaining agile production and managing costs
• Generated $85.7 million of operating cash flow despite sharply lower volumes and profitability, reflecting a $77.3 million working capital reduction, providing a countercyclical, stabilizing impact on results
• Established $45 million in additional ancillary credit lines under revolving credit facility, contributing to a $86 million sequential increase in liquidity accessible at any net leverage level to $333 million
• Net sales of $202.6 million compared to $399.0 million in the second quarter of 2019 reflecting the COVID-19 induced global economic downturn
• Net loss of $17.8 million and basic EPS of $(0.30) compared to net income of $24.7 million and $0.41 in the second quarter of 2019
• Adjusted EBITDA1 of $15.2 million compared to $71.5 million in the second quarter of 2019
• Adjusted Net Loss1 of $8.6 million and Adjusted EPS1 of $(0.14) compared to Adjusted Net Income of $31.7 million and Adjusted EPS of $0.53 in the second quarter of 2019
• Net leverage ratio of 2.97x LTM Adjusted EBITDA compared to 2.28x at year-end 2019

“Against the backdrop of the pandemic, the Orion team did an excellent job in working safely, supporting the communities we serve, cutting costs, maintaining operational agility and further enhancing liquidity. As a result, we are well positioned for the eventual recovery in our end markets, which was evident in our Rubber markets throughout the quarter and continued into July, while most Specialty end markets remained largely subdued during the quarter with a significant step-up in July. Our people have done a tremendous job working through this unusual period and most importantly operating our facilities safely with no employee-to-employee contagion, and with great agility in the face of rapidly shifting demand. In addition, our teams continued to support the communities where we operate by donating their time and equipment to those who are working on the front lines during the global pandemic. I want to thank them for their continued focus and dedication,” said Corning Painter, Chief Executive Officer.

Mr. Painter continued, “Our reported results reflected the effects of a 42 percent reduction in volumes caused by the abrupt reduction in global mobility induced by COVID-19, with Adjusted EBITDA of $15.2 million. We continue to focus on safety, building agility to serve our customers, reducing costs, and emerging stronger from this. We believe the long-range outlook for underlying carbon black demand remains strong and unchanged, but in the short run, we may benefit from a tailwind if driving continues to grow as a preferred mode of transportation during this period of stringent physical distancing. Indeed, miles driven proved to be a leading indicator of the nascent recovery of recent months."

Outlook

Mr. Painter continued, “We cannot predict the ultimate course of COVID-19 or the ensuing pace and shape of the recovery in our end markets. However, we can see that current trends, such as the recovery in driving rates and auto sales from historic lows early in the second quarter, are very positive for us. As economies gradually reopen, we expect demand to continue to recover across our specialty and rubber carbon black end markets."

"We have successfully navigated through the first phase of this downturn and remain confident in our ability to deliver meaningful results for our customers, our employees, the communities where we operate and the shareholders whom we serve,” concluded Mr. Painter.

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