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

Greetings, and welcome to the Orion Engineered Carbons S.A. Annual General Meeting. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Dan Smith, Chairman of the Board. Thank you. You may begin.

Good afternoon, everyone. I'm 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, other directors of the company are present at Annual General Meeting of Shareholders, including Ms. Kerry Galvin, Ms. Mary Lindsey, Mr. Paul Huck; Mr. Yi Hyon Paik, Mr. Didier Miraton, Mr. Hans-Dietrich Winkhaus. And Mr. Corning Painter, who is also CEO of the company. I also welcome Mr. Jeff Glajch, the CFO of the company; Dr. Christian Eggert, the General Counsel of the Orion Group; and Mr. Carsten Opitz, the company's legal adviser on Luxembourg law matters who are all physically present at the meeting venue here 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 adviser, as the Secretary of meeting. I hereby also call Dr. Christian Eggert, Orion Group's General Counsel, as scrutineer of the meeting. The scrutineer will supervise the accounting of the shareholder votes cast. For each agenda item subject to a vote, I'll ask the shareholder representatives to submit the vote for the shareholders to myself, the Secretary and the scrutineer. There are no shareholders physically in attendance at the meeting venue in Luxembourg that can attend the meeting. I want to remind you that voting during the meeting via telephone is not possible. Therefore, the vote to the shareholders that will be voted in this meeting are such vote to 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. Please note that 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 duly -- legally convened and fulfills requirements in terms of quorum. Article 10 of the Articles of Association requires notice to a 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 a Luxembourg newspaper as specified by the Board of Directors. Considering this, the Board of Directors published the invitation in the Luxembourg Official Gazette and in a newspaper commonly delivered in Luxembourg. The public notice regarding the Annual General Meeting of Shareholders was published in Luxembourg Official Gazette on 27 May 2022, and the Luxemburger Wort newspaper, on 25 May 22. The proxy statement and proxy statement supplement of this Annual General Meeting were made publicly available through the U.S. Securities and Exchange Commission's EDGAR system on April 29, 2022. And on the company's website on May 18, 2022. Upon request, they were also mailed to the shareholders of the company on record date by the transfer agent for the company's common shares. The convening notice and agenda of the Annual General Meeting, together with the meeting materials were also sent by registered mail to the registered shareholders of the company on June 7, 2022. The convening notice was also uploaded to the company's website on May 18, 2022. Article 10 of the Articles of Association also provides that the Annual General Meeting of the shareholders shall be held in Grand Duchy of Luxembourg at the registered office of the company or at such other place as may be specified in the convening notice of meeting within 6 months after the end of each financial year. The convening notice for every general meeting of shareholders shall contain the date, time, place and agenda of the meeting. The Board of Directors has decided that the Annual General Meeting of Shareholders shall be held on Thursday, June 30, 2022, 2:00 p.m. Central European Time at the registered seat of the company located at 6, Route de Trèves, L-2633 Senningerberg, Municipality of Niederanven, Grand Duchy of Luxembourg. In addition to the opportunity to participate in person, shareholders were also provided with the opportunity to participate in the Annual General Meeting by teleconference. The dial-in information participation of the Annual General Meeting by teleconference was published on our website 1 week prior to the Annual General Meeting date. Our shareholders were provided with the possibility to ask questions to the Board of Directors until 11:59 p.m. Central European Time on June 21, 2022, by sending an e-mail to our Investor Relations e-mail address together with a proof of shareholding. No such questions were sent by shareholders. It will not be possible to raise questions and vote shares during this meeting if you participate via teleconference. The audited statutory annual financial statement for the financial year 2021, including the management report was made available on the company's website since May 18, 2022, and the other two consolidated financial statement of the company for the financial year 2021, including the management report was made available on the company's website since May 24, 2022. Furthermore, these reports were sent by mail to the registered shareholders of the company on June 7, 2022. The audited statutory annual financial statement of financial year 2021, including the management report, was also available at the registered office of the company since May 24, 2022. The audited consolidated financial statement for the fiscal year -- financial year 2021, including the management report, was also available at the registered office of the company since May 24, 2022. Annual General Meeting will deliberate validly regardless of the number of common shares present or represented by proxy. A note that the Annual General Meeting of Shareholders 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 that the meeting has been legally convened and fulfills requirements in terms of quorum. I commonly asked the shareholder representatives to show me their proxies for the shares they represent in accordance with filled out and signed legal attendance sheet. Okay. I'm seeing those.

I represent the public shareholders with 50,283,116 common shares. During the voting procedure, I will expressly state of how many represented common shares the shareholders voted for, against or abstained from the vote.

Thank you, Ms. Galvin. I comely ask the Secretary and the scrutineers to note not that I have a total of 60,992,259 common shares of the company having no par value 242,994 common shares were held by the company as of April 28, 2022, which is the record date for this meeting. And therefore, are not entitled vote. And 50,283,116 shares are represented at the meeting. I further ask the secretary and the scrutineer to note that a total of approximately 82.77% of the common share that are entitled to vote are thus represented at the meeting. As the meeting has now come to an order, we shall move to the matters that should be discussed and decided in this Annual General Meeting according to the agenda. One or more shareholders of record holding at least 10% of common shares may put items on the agenda of the Annual General Meeting, provided that such item is accompanied by a justification or a draft resolution to be adopted in the general meeting. I verify hereby 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 the presentation of the management report by the Board of Directors and the report of the independent auditor of the company in relation to the annual accounts and the consolidated financial statements of the company for the financial statements for the year ended December 31, 2021. 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 2021, and to present the management report and the audited financial statements for the financial year 2021 on behalf of the Board of Directors.

Thank you, Dan. The Orion team came together to accomplish many key objectives in 2021, as we recovered from the depths of the 2020 global pandemic. We delivered increased revenue, net income and earnings per share year-over-year, supported by increased demand for our higher-margin businesses. From an operations front, we completed and commissioned our extensive air commissions control work at our Ivanhoe site. We also completed the new reactor line in Ravenna as well as qualifying several important products. These successes were achieved despite the challenges that continued throughout the year, such as supply chain issues, rising raw material costs and shifting demand for our products. The team never wavered and ensured that we did not let our key stakeholders down. Our strong operating performance resulted in improved financial performance as well. Full year adjusted EBITDA was $268.4 million, up year-over-year, increase of over 34.2% and our second-highest ever with Specialty representing about 55% of EBITDA. We have the confidence based on our recovery to reinstate our dividend with an interim payment on January 12, 2022. Additionally, we issued a sustainability-linked term loan, which was one of the first loans of its type in the U.S. Looking forward, we're clearly at an inflection point in our history as a public company. Our focus is to invest for growth, and we have many attractive growth opportunities on the horizon. Our primary focus is on expanding the capacity of our kappa ultrapure conductive additives. We are one of only a handful of global producers who use high-purity gases acetylene to make conductive additives. Our kappa products are in high demand for lithium-ion batteries and other applications. And we view this opportunity as a key additional driver for further profitable growth in our conductives business. I would urge you to refer to our announcement of May 2022, outlining our new growth project to increase conductive capacity and to look at our current information that can be found on our website to better understand our go-forward plans for expansion to serve the growing demand for this product. We also have many opportunities to advance sustainability as well. We use sustainability as an all-encompassing -- as all encompassing and key to our success as a corporation. Investing in sustainability is core to our growth strategy. Among several collaborations, we are the only carbon black producer that is part of the EU-funded BlackCycle project, a public-private partnership seeking a way to save the environment from billions of tons of waste by recycling the 1.6 billion tires that are discarded every year worldwide. The Michelin-led initiative is researching ways to produce new tires from sustainable carbon black produced by using circular feedstock from prioritized old tires. We believe the event of a circular economy is a strategic opportunity for our industry, and we plan to be the innovation partner, leading the way to support our customers and our own sustainability success. We will continue to work diligently to ensure that sustainability is an opportunity for us. We expect the upcoming year's results to be quite strong based on our strong pricing initiatives in 2021, higher projected volumes based on new qualifications in wind, expanded capacity with our Ravenna startup as well as fewer maintenance turnarounds in 2022. We are also entering a period of demand -- I'm sorry, a period where demand is outstripping global supply growth, and that is an additive positive. In 2022, we will maintain a focus on driving shareholder value through continuing to be responsive to our customers' needs, advancing our sustainable sustainability business goals and investing in select high-return strategic initiatives to bolster our short-term and longer-term earnings growth potential. Thank you for being an Orion Engineers Carbon investor. We look forward to your continued support as we profitably and responsibly grow the company for many years to come. Thank you.

Mr. Painter. Thank you very much. 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 to call for a vote of all the other agenda items from #1 to #11 of the agenda of the Annual General Meeting as published on May 27, 2022 in the Luxembourg Official Gazette and on May 25, 2022, and newspaper Luxemburger Wort for a vote. Agenda item #1, sub I, the Board of Directors proposed that the shareholders resolve as follows: Mr. Anthony L. Davis, 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, call to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2022.

I represent the public shareholders with 44,790,105 common shares. The shareholders voted with 44,652,480 common shares voting in favor; 97,427 common shares voting against and 40,270 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 #1, Sub II, the Board of Directors proposed that shareholders resolve as follows: Ms. Kerry Galvin is appointed by the General Meeting as Director of the company for a term ending on the day 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, 2022.

I represent the public shareholders with 44,790,104 common shares. The shareholders voted with 44,241,217 common shares voting in favor, 531,917 common shares voting against and 16,970 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 #1, sub III. 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 day 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, 2022.

I represent the public shareholders with 44,790,105 common shares. The shareholders voted with 44,439,883 common shares voting in favor, 332,645 common shares voting against and 17,577 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 #1, subpart 4. 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 day 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, 2022.

I represent the public shareholders with 44,790,104 common shares. The shareholders voted with 44,496,310 common shares voting in favor, 276,824 common shares voting against and 16,970 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 #1, Subpart V. 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, 2022.

I represent public shareholders with 44,790,104 common shares. The shareholders voted with 44,379,023 common shares voting in favor, 399,437 common shares voting against and 11,644 common shares abstaining from voting.

I, therefore, kindly ask the secretary and the scrutineer to note this outcome and that the resolution be adopted as proposed by the Board of Directors. Agenda #1, subpart 6. 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, 2022.

I represent the public shareholders with 44,790,104 common shares. The shareholders voted with 43,617,740 common shares voting in favor, 507,858 common shares voting against and 66 -- sorry, 664,506 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 #1, subpart 7. The Board of Directors propose that the shareholders to 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, 2022.

I represent the public shareholders with 44,790,096 common shares. The shareholders voted with 44,454,294 common shares voting in favor, 324,629 common shares voting against and 11,173 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 #1, subpart 8. 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, 2022.

I represent the public shareholders for 44,790,105 common shares. The shareholders voted with 43,618,467 common shares voting in favor, 1,154,368 common shares voting against and 17,270 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 #1, subpart 9. 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 ended December 31, 2022.

I represent the public shareholders with 44,790,105 common shares. The shareholders voted with 44,322,771 common shares voting in favor, 455,890 common cares voting against and 11,444 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 #1, Subpart 10. 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, 2022.

I represent the public shareholders with 44,790,105 common shares. The shareholders voted with 42,869,989 common shares voting in favor, 1,904,524 common shares voting against and 15,592 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. Moving on to agenda item #2. The Board of Directors propose that the shareholders resolve as follows: approval on a nonbinding advisory basis of the compensation of company's named executive officers for 2021, the so-called say-on-pay vote. As disclosed in the proxy statement for the company's 2022 Annual General Meeting of shareholders.

I represent the public shareholders with 44,790,094 common shares. The shareholders voted with 41,832,115 common shares voting in favor, 2,884,741 common shares voting against and 72,238 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 shall be remunerated during the financial year that ends on December 31, 2022, as follows: each nonexecutive 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 a full approximate 1-year term, she or he 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. And the Chairman of the Nominating Sustainability and Governance Committee shall receive an additional retainer of $20,000.

I represent the public shareholders with 45,072,542 common shares. The shareholders voted with 42,838,472 common shares voting in favor, 2,151,270 common shares setting against and 82,800 common shares abstaining from voting.

I therefore kindly ask the secretary and the scrutineer to note this outcome and that the resolution is voted 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 for the financial year that ended on December 31, 2021, are approved.

I represent the public shareholders with 50,283,114 common shares. The shareholders voted with 50,119,139 common shares voting in favor, 94,616 common shares voting against and 59,359 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: consolidated financial statements of the company for the financial year that ended December 31, 2021, are approved.

I represent the public shareholders with 50,283,114 common shares. The shareholders voted with 50,201,896 common shares voting in favor, 11,204 common shares voting against and 70,014 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. Agenda Item #6. The Board of Directors propose that the shareholders of the company hereby approve that from the profit of the company for the 2021 financial year and the amount of EUR 50,884,068.17, an amount of EUR 26,297 should be allocated to the legal reserve. Further, an aggregated amount of EUR 1,94,464.77 has been declared as interim dividend and further an amount of EUR 49,763,306.40 should be carried forward to the next financial year, resulting in a total accrued profit carried forward in the amount of EUR 98,981,83.25. The Board further propose to the shareholders of the company hereby further approve the interim dividend in an aggregated amount of EUR 1,094,464.77, including the interim dividend in the amount of USD 1,253,943.90 correspond to amount of EUR 1,079,404.23 declared by the company on October 29, 2021.

I represent the public shareholders with 50,000,676, common shares. The shareholders voted with 49,948,610 common shares voting in favor, 12,226 common shares voting against and 39,840 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 resolve as follows: the members of the Board of Directors are discharged for the performance of their mandates during the financial year that ended on December 31, 2021, 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 44,790,104 common shares. The shareholders voted with 44,750,391 common shares voting in favor; 24,182 common shares voting against and 15,531 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 proposed 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 this mandate during the financial year that ended on December 31, 2021, including the audit of the company's annual accounts and the consolidated financial statements for such period.

I represent the public shareholders with 44,884,849 common shares. The shareholders voted at 44,472,567 common shares voting in favor, 321,232 common shares voting against and 21,030 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 that the shareholders resolve as follows: Ernst & Young, Luxembourg, Société anonyme - Cabinet de revision agréé is appointed as independent auditor of the company for the financial year ending on December 31, 2022, 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 50,283,116 common shares. The shareholders voted with 49,972,121 common shares voting in favor, 86,638 common shares voting against and 36,640 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: the shareholders of the company hereby ratify the appointment of Ernst & Young LLC to be the company's independent and registered public accounting firm for all matters not required by Luxembourg law, for the fiscal year ending on December 31, 2022.

I represent the public shareholders of 50,283,116 common shares. The shareholders voted with 50,070,199 common shares voting in favor, 81,632 common shares voting against and 36,558 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 11. The Board of Directors propose that the shareholders resolve as follows: Board of Directors of the company is authorized with the option to delegate to purchase and sell in the name and on behalf of the company, shares of the company in accordance with conditions set forth by Article 430-15 of the law of 10 August 1915 on commercial companies as amended regarding the acquisition of its own shares. The fraction of the capital acquired are transferred in the form of a block of shares may amount to the entire program. Such transactions may be carried out at any time, including during the tender offer period, in accordance with applicable laws and regulations. The scope and conditions of the authorization granted to the Board of Directors to purchase shares to the company in the name and on behalf of the company, as disclosed in the proxy statement for the company's 2022 Annual General Meeting of Shareholders, shall apply to the purchase by the company of its own shares.

I represent the public shareholders with 44,977,819 common shares. The shareholders voted with 44,229,739 common shares voting in favor, 308,206 common shares voting against and 439,874 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 anybody wish to discuss additional matters in connection with the agenda of this annual generating shareholders? I note this 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 at 2:35 p.m. Central European Time. Thank you, and have a great day.

Thank you, everyone. The conference call has just ended. You may now disconnect your lines. Thank you.