Orion S.A. (OEC) Earnings Call Transcript & Summary

Welcome, everyone. This is Orion Engineered Carbons 2021 Annual General Meeting. I'll now turn the call over to Chairman of the company's Board of Directors, Mr. Dan Smith.

Good afternoon, everyone. I am Dan Smith, Chairman of the Board of Directors of Orion Engineered Carbons S.A. I would like to welcome you to the Annual General Meeting of Shareholders of the company. In addition to me, 2 other directors of the company are present by telephone at this Annual General Meeting of Shareholders; Ms. Kerry Galvin and Mr. Corning Painter, who is also the CEO of the company. I also welcome Mr. Lorin Crenshaw, the CFO of the company; Dr. Christian Eggert, the General Counsel of Orion Group; and Mr. Carsten Opitz, the company's Legal Advisor on Luxembourg law matters, who are physically present at the meeting venue in Luxembourg. As Chairman of the Board of Directors, I hereby declare the meeting open and call myself to be Chairman of the meeting. In compliance with the provisions of the Articles of Association, I call Mr. Carsten Opitz, the company's legal advisor as the secretary to the meeting. I hereby also call Dr. Christian Eggert, Orion Group's General Counsel, as scrutineer of the meeting. The scrutineer will supervise the counting of the shareholder votes cast. For each agenda item subject to a vote, I will ask the shareholder representatives to submit the votes from the shareholders to myself, the secretary and the scrutineer. There are no shareholders physically in attendance at the meeting venue in Luxembourg that could vote during the meeting. I want to remind you that voting during the meeting via telephone is not possible. Therefore, the votes of the shareholders that will be voted in this meeting are such votes of the shareholders of the common shares that are represented by proxy for the meeting duly executed and received by the voter deadline. This includes votes submitted via the Internet or by telephone. Resolutions will be adopted by a simple majority of the votes validly cast at this Annual General Meeting. I would now like to verify whether the Annual General Meeting has been convened in compliance with both the company's Articles of Association and the Luxembourg law of governing commercial companies dated 10th of August 1915, as amended and whether the meeting has been legally convened and fulfills the requirements in terms of quorum. Article 10 of the Articles of Association requires notice of General Meeting of Shareholders to be given to shareholders with a minimum of 15 days prior to the meeting by publishing the notice in the Luxembourg Official Gazette and in Luxembourg newspaper as specified by the Board of Directors. Considering this, the Board of Directors published the invitation in Luxembourg Official Gazette and in the newspaper commonly delivered in Luxembourg. The public notice regarding the Annual General Meeting of Shareholders was published on May 10, 2021, in the Luxembourg Official Gazette and in the newspaper, Luxemburger Wort. The proxy statement and the proxy statement supplements to the annual general meeting were made publicly available through the U.S. Securities and Exchange Commission's EDGAR system on April 30, 2021, and on the company's website on May 1, 2021. Upon request, they were also mailed to the shareholders of the company on record date or by the transfer agent for the company's common shares. The convening notice and agenda of Annual General Meeting, together with the meeting materials, were also sent by registered mail to the registered shareholders of the company on June 1, 2021, and June 2, 2021. The convening notice was uploaded to the company's website on May 6, 2021. Article 10 of the Articles Association also provides that the Annual General Meeting of Shareholders shall be held in the Grand Duchy of Luxembourg at the registered office of the company or at such other places may be specified in the convening notice of such meeting within 6 months after the end of each financial year. The convening notice for every general meeting of shareholders shall contain the date of the meeting. I kindly ask the shareholder representatives to show me their proxies for the shares they represent in accordance with the filled out and signed attendance sheet.

I represent the public shareholders with 54,299,919 common shares. During the voting procedure, I will expressly state with how many represented common shares the shareholders voted for, against or abstained from a vote.

Thank you, Ms. Galvin. I kindly ask the secretary and scrutineer to note that out of a total of 60,992,259 common shares of the company, having no par value, 401,733 common shares were held by the company as of April 29, 2021, which is the record date for the meeting, and therefore, are not entitled to vote. And 54,299,919 common shares are represented at the meeting. I further ask the secretary and the scrutineer to note that a total of approximately 89.60% of the common shares that are entitled to vote are thus represented at the meeting. As the meeting has now come to an order, we shall move on to the matters that should be discussed and decided in this annual general meeting according to the agenda. One or more shareholders of record totaling at least 10% of the common shares may put items on the agenda of the general meeting, provided that such item is accompanied by a justification or a direct resolution to be adopted in the general meeting. I hereby verify that no additional item was put on the agenda of the meeting. I would now like to start with the fourth item of the agenda, which is presentation of the management report by the Board of Directors and the reports of the independent auditor of the company in relation to the annual accounts and the consolidated financial statements of the company for the financial year that ended December 31, 2020. I would like to ask Mr. Painter, the CEO of the company, to provide our shareholders with a brief overview of the business of the company in the financial year 2020 and to present the management report and the audited financial statements for the fiscal year -- financial year 2020 on behalf of the Board of Directors.

Thank you, Dan. 2020 was certainly an extraordinary year and a tragic year for many families. It was also an enormous test for the global Orion team and for our business. And I'm proud to say that we met the challenge with fortitude and resilience. I'm quite pleased with the speed of our recovery throughout 2020 and the strength of our financial position through the end. From a financial perspective, in the fourth quarter, we reported adjusted EBITDA of $66 million, up 4.4% year-over-year, reflecting the substantial operating leverage we had expected the company to deliver as the economy recovered. Our company-wide adjusted EBITDA margin was 20.9%, and the Specialty Carbon Black margin was 30.5%. These strong results were primarily attributable to our Specialty Carbon Black business unit which saw volumes rise low double digits from the third quarter as the economy was recovering. We also experienced slightly less seasonality than anticipated in our Rubber Carbon Black business at the end of the year where volumes declined only mid-single digits sequentially. Ultimately, we borrowed a modest $27 million to fund our operations for the year and experienced a 1x increase in our leverage at year-end. From a capital allocation perspective, in March, we suspended our dividend to provide financial flexibility to weather the impending economic storm. Going forward, we will emerge stronger as we establish a capital allocation policy that maximizes shareholder value through, first, ensuring our financial standing across severe economic downturn like 2020; and second, by ensuring that we have adequate capital to fund value-enhancing growth initiatives, that is, projects with an economic return significantly in excess of our cost of capital; and third, by establishing a mechanism to guide the size and frequency of capital return to shareholders over time. During the depths of the pandemic, we also made capital investments and took operational actions to ensure that Orion would emerge even stronger than before. When demand was low, we took the opportunity to invest in the reliability of our facilities. The projects included commissioning new emissions control technology in Orange, Texas, and upgrading electrical and cogeneration technology in Borger, Texas, and Qingdao, China. Our very talented team also developed and implemented a project that improved our order processing, to reduce customer order times, providing better customer experience amongst other initiatives. Throughout the year, we also supported the communities where we're privileged to operate by donating materials to help with the pandemic-related needs and supporting those team members who are affected by the hurricanes in the U.S. Finally, we continue to make progress on our sustainability efforts. We published our latest sustainability report during the year and highlighted progress across multiple ESG dimensions, including our governance, emissions reduction, strategic collaborations, employee engagement, culture and community support. For example, we significantly enhanced our Board independence and diversity in 2020, further demonstrating our commitment to effective, transparent and accountable corporate governance practices. From a product perspective, we have 3 ESG areas of focus. First, recycled carbon blacks such as those made from oil recovered from end-of-life tires. Second, green carbon blacks derived from renewable feedstocks; and third, enabling carbon blacks, which refer to grades that enable lower fuel consumption or extend the useful lives of our customers' product. We will continue to work diligently to ensure that the sustainability is an opportunity for us and to make it an integral part of our strategy. If you're interested in learning more, I commend the report to you. You can find it on our website. We will be publishing our next report later this year. In 2021, we will maintain our focus on driving shareholder value through continuing to be responsive to our customers' needs, advancing our sustainability business goals and investing in select high-return strategic initiatives to bolster our short- and long-term earnings growth potential. Thank you for being an Orion Engineered Carbons investor. We look forward to your continuing support as we grow profitably and responsibly for many years to come. Thank you, Dan.

Thank you very much, Corning. As stated, I note that no questions were submitted by the shareholders electronically or in person. I would, therefore, like to close the fourth item of the agenda and move on the call for a vote of all other agenda items from item #1 to item #10 of the agenda of the Annual General Meeting as published on May 10, 2021, in the Luxembourg Official Gazette and in the newspaper Luxemburger Wort. First part of agenda item #1, the Board of Directors propose that the shareholders resolve as follows: Ms. Kerry Galvin is appointed by the General Meeting as Director of the company for a term ending on the date of the Annual General Meeting of Shareholders of the company, called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2021.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 44,889,504 common shares voting in favor; 4,398,057 common shares voting against; and 78,967 common shares abstaining from voting.

I, therefore, kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. The second part of the agenda item #1, the Board of Directors propose that the shareholders resolve as follows: Mr. Paul Huck is appointed by the General Meeting as Director of the company for a term ending on the date of the Annual General Meeting of the Shareholders of the company, called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2021.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 49,222,073 common shares voting in favor; 136,833 common shares voting against; and 7,622 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. The third part of agenda item #1, the Board of Directors propose that the shareholders resolve as follows: Ms. Mary Lindsey is appointed by the General Meeting as Director of the company for a term ending on the date of the Annual General Meeting of Shareholders of the company, called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2021.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 49,177,320 common shares voting in favor; 110,241 common shares voting against; and 78,967 common shares abstaining from voting.

I, therefore, kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. The fourth part of agenda item #1, the Board of Directors propose that the shareholders resolve as follows: Mr. Didier Miraton is appointed by the General Meeting as Director of the company for a term ending on the date of the Annual General Meeting of Shareholders of the company, called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2021.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 49,288,465 common shares voting in favor; 67,439 common shares voting against; and 10,624 common shares abstaining from voting.

I therefore kindly ask that the secretary and scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. The fifth part of agenda item #1, the Board of Directors propose that the shareholders resolve as follows: Mr. Yi Hyon Paik is appointed by the General Meeting as Director of the company for a term ending on the date of the Annual General Meeting of Shareholders of the company, called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2021.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 49,245,611 common shares voting in favor; 110,294 common shares voting against; and 10,623 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. The sixth part of agenda item #1, the Board of Directors propose that the shareholders resolve as follows: Mr. Corning F. Painter is appointed by the General Meeting as Director of the company for a term ending on the date of the Annual General Meeting of Shareholders of the company, called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2021.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 49,256,253 common shares voting in favor; 98,811 common shares voting against; and 11,464 common shares abstaining from voting.

I therefore kindly ask that the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. The seventh part of agenda item #1, the Board of Directors propose that the shareholders resolve as follows: Mr. Dan F. Smith is appointed by the General Meeting as Director of the company for a term ending on the date of the Annual General Meeting of Shareholders of the company, called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2021.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 48,601,118 common shares voting in favor; 750,531 common shares voting against; and 7,879 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. For the eighth part of agenda item #1, the Board of Directors propose that the shareholders resolve as follows: Mr. Hans-Dietrich Winkhaus is appointed by the General Meeting as Director of the company for a term ending on the date of the Annual General Meeting of Shareholders of the company, called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2021.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 49,324,697 common shares voting in favor; 31,404 common shares voting against; and 10,428 common shares abstaining from voting.

I therefore kindly ask that the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. The ninth part of agenda item #1, the Board of Directors propose that the shareholders resolve as follows: Mr. Michel Wurth is appointed by the General Meeting as Director of the company for a term ending on the date of the Annual General Meeting of Shareholders of the company, called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2021.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 49,180,713 common shares voting in favor; 106,851 common shares voting against; and 76,964 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. Now for agenda item #2, the Board of Directors propose that the shareholders resolve as follows: Approval, on a nonbinding advisory basis, of the compensation paid to the company's named executive officers for 2020, say-on-pay vote, as disclosed in the proxy statement for the company's 2021 Annual General Meeting of Shareholders.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 48,160,102 common shares voting in favor; 1,026,237 common shares voting against; and 180,189 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. Agenda item #3. The Board of Directors propose that the shareholders resolve as follows: The members of the Board during the financial year that ends on December 31, 2021, shall be remunerated as follows: Each Non-Executive Director shall receive a cash retainer of $100,000 and restricted common shares of the company with a value of $100,000 at the time of issuance, with such awards generally subject to vesting only if the Director serves the full approximate 1-year term he or she was appointed for. The Non-Executive Chairman of the Board shall receive an additional retainer of $105,000. The Chairman of the Audit Committee of the Board shall receive an additional retainer of $25,000. The Chairman of the Compensation Committee of the Board shall receive an additional retainer of $20,000. The Chairman of the Nominating, Sustainability and Governance Committee shall receive an additional retainer of $15,000.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 47,288,588 common shares voting in favor; 1,898,375 common shares voting against; and 179,564 common shares abstaining from voting.

Therefore, I kindly ask that the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. Agenda item #4. The Board of Directors propose that the shareholders resolve as follows: The annual accounts of the company in accordance with Lux GAAP for the financial year that ended on December 31, 2020, are approved.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 53,334,678 common shares voting in favor; 57,168 common shares voting against; and 908,069 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. Agenda item #5. The Board of Directors propose that the shareholders resolve as follows: The consolidated financial statements of the company in accordance with U.S. GAAP for the financial year that ended on December 31, 2020, are approved.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 53,337,233 common shares voting in favor; 56,786 common shares voting against; and 905,897 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. Agenda item #6. The Board of Directors propose that the shareholders of the company hereby resolve to carry forward the loss suffered by the company corresponding to an amount of EUR 10,000,561.74 to the next financial year. The Board further proposes to the shareholders to approve the interim dividend paid by the company from its amount available during the 2020 financial year of EUR 10,481,282.79, representing and paid in U.S. dollars in an amount of $12,044,829.40 of interim dividend.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 54,244,067 common shares voting in favor; 54,956 common shares voting against; and 893 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. Agenda item #7. The Board of Directors propose that the shareholders to revolve as follows: The members of the Board of Directors are discharged from the performance of their mandates during the financial year that ended on December 31, 2020, including discharge from any liability in connection with the performance of their mandates, including the management of the company's affairs during such period.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 48,193,176 common shares voting in favor; 142,064 common shares voting against; and 1,031,288 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. Agenda item #8. The Board of Directors propose that the shareholders resolve as follows: The independent auditor, Ernst & Young, Luxembourg, Société Anonyme - Cabinet de Revision Agréé is discharged from any liability in connection with the performance of its mandates during the financial year that ended on December 31, 2020, including the audit of the company's annual accounts and consolidated financial statements for such period.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 47,934,445 common shares voting in favor; 499,089 common shares voting against; and 932,995 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. Agenda item #9. The Board of Directors propose to the shareholders to resolve as follows: Ernst & Young, Luxembourg, Société Anonyme - Cabinet de Revision Agréé is appointed as the independent auditor of the company for the financial year ending on December 31, 2021, for the purpose of all statutory accounts as required by Luxembourg law including the annual accounts and consolidated financial statements of the company.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 54,170,276 common shares voting in favor; 105,966 common shares voting against; and 23,674 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. Agenda item #10. The Board of Directors propose that the shareholders resolve as follows: Ernst & Young GmbH is appointed as the company's independent registered public accounting firm for all matters not required by Luxembourg law for the period from January 1, 2021, until the filing of the company's annual report on Form 10-K on February 18, 2021. And Ernst & Young LLC is appointed to be the company's independent required -- registered public accounting firm for all matters not required by Luxembourg law and effective upon the filing date of the company's annual report on Form 10-K on February 18, 2021, for the fiscal year ending on December 31, 2021.

I represent the public shareholders with 54,299,919 common shares. The shareholders voted with 54,247,352 common shares voting in favor; 27,687 common shares voting against; and 24,877 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is adopted as proposed by the Board of Directors. Does anyone wish to discuss additional merits in connection with the agenda of this Annual General Meeting of Shareholders? I note this is not to be the case. Now that all matters constituting the agenda of the Annual General Meeting of Shareholders have been handled, I therefore declare the meeting closed. Thank you, and have a great day.