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, and you may now begin.

Good afternoon, everyone. I am Dan Smith, Chairman of the Board and Director of Orion. I would like to welcome you to the Annual General Meeting of Shareholders of the company. In addition to me, 4 other directors of the company are present at this Annual General Meeting of Shareholders. Ms. Kerry Galvin, Mr. Hans-Dietrich Winkhaus, Mr. Yi Hyon Paik, Mr. Corning Painter, who is also the CEO of the company. I also welcome Mr. Jeff Glajch, the CFO of the company; Dr. Christian Eggert, the General Counsel of Orion Group and Mr. Carsten Opitz, the company's legal adviser on Luxembourg law matters. 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 the meeting. I hereby also call Dr. Christian Eggert, Orion Group's General Counsel as scrutineer of 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 vote for the shareholders to myself, to 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 the 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 legally convened and fulfills requirements in terms of quorum. Article 10 of the Articles of Association requires Notice of the 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 a newspaper commonly delivered in Luxembourg. The public notice regarding the Annual General Meeting of Shareholders was published in The Luxembourg Trade and Companies Register on 2nd of May 2023. And in the newspaper, Luxemburger Tageblatt on 27 April 2023. 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 7, 2023, and on the company's website on April 12, 2023. On May 30, an additional proxy statement supplement to the Annual General Meeting concerning the amendment of the 2023 Director Equity Plan and the 2023 Omnibus Equity Plan and the extension of the voter deadline to June 6, 2023, was made publicly available through the U.S. Securities and Exchange Commission's EDGAR system and on the company's website. Upon request, they were also mailed to the shareholders of the company on the record date by the transfer agent for the company's common shares. The convening notice and agenda of the Annual General Meeting, together with meeting materials were also sent by registered mail to the registered shareholders of the company on May 11, 2023. The amended version of the 2023 Director Equity Plan and the 2023 Omnibus Equity Plan were sent by registered mail to the registered shareholders of the company on May 30, 2023. The convening notice was also uploaded to the company's website on April 12, 2023. Article 10 of the Articles of 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 place as 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, time, place and agenda for the meeting. The Board of Directors has decided that Annual General Meeting of Shareholders shall be held on Wednesday, June 7, 2023, at 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 for participation in Annual General Meeting by teleconference was published on our website one week prior to the Annual General Meeting day. Our shareholders were provided with the possibility to ask questions to the Board of Directors until 11:59 p.m. Central European Time on May 30, 2023 by sending an e-mail to our Investor Relations e-mail address, together with the 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 fiscal year 2022, including management report was made available on the company's website since April 12, 2023. Also, the audited consolidated financial statement of the company for the financial year 2022, including the management report was made available on the company's website since April 12, 2023. Furthermore, these reports were sent by mail to the registered shareholders of the company on May 11, 2023. The audited statutory annual financial statement for the financial year 2022, including the management report was also available at the registered office of the company since April 12, 2023. The audited consolidated financial statement for financial year '22, including the management report was also available at the registered office of the company since April 12, 2023. The amended version of the 2023 Director Equity Plan and the 2023 Omnibus Equity Plans were available at the registered office of the company since May 30, 2023. The 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 Operations dated 10 August 1915, as amended and the meeting has been legally convened and fulfills the requirements in terms of quorum. I kindly ask the shareholder representatives to show me their proxies for the shares they represent in accordance with filled out and signed attendance sheet.

I represent the public shareholders with 51,197,503 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 kindly ask the secretary and the scrutineer to note that out of a total of 60,992,259 common shares of the company, having no par value, 1,633,625 common shares were held by the company as of April 6, 2023, which is the record day for this meeting and therefore are not entitled to vote. And 51,197,503 common shares are represented at the meeting. I further ask the secretary and the scrutineer to note that a total of approximately 86% of common shares are entitled to vote are thus represented at the meeting. As the meeting will now come to 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 holding at least 10% of the common shares may put items on the agenda of Annual General Meeting, provided that each such items accompanied by a justification or a draft resolution to be adopted in the general meeting. I verify hereby that no additional item is 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 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 on December 31, 2022. 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 2022 and to present the management report and audited financial statements for the financial year of 2022 on behalf of the Board of Directors.

Thank you, Dan. The Orion team came together to accomplish many key milestones in 2022. It was certainly an inflection point for our history as a public company. We achieved $2 billion in revenue for the first time, up 31% compared with 2021. Our adjusted EBITDA was a record $312 million for the first time over $300 million and up $44 million from 2021. In late 2022, we announced a $50 million share buyback, which we have completed. And in May, the Board approved a new share repurchase program with authorization to purchase up to approximately 6.9 million shares of our outstanding common stock. On the operations front, we expanded our Ravenna, Italy plant, which quickly sold out; advanced our greenfield plant in Huaibei, China, which is now shipping qualification samples; announced our intent to build a state-of-the-art kappa conductive plant in La Porte, Texas, which will provide 12,000 tons of high-purity conductive carbon black to be used in lithium-ion batteries, electrical grid upgrades and other key end markets in 2025 and is expected to generate $40 million to $45 million of annual EBITDA. And we brought our Borger, Texas plant emission project online. We are the first carbon black producer to complete 3 air emission control plant projects in the United States. We have 1 more plant to complete in Belpre, Ohio, which we expect to complete in the second half of this year. We remain committed to developing environmentally sound products that people want to buy, good governance, transparency, effective community support and a positive workplace. In 2022, we successfully achieved international sustainability and carbon certification, commonly known as ISCC plus certification for multiple grades of carbon black across 2 continents. And we improved our EcoVadis score significantly over the past 4 years and achieved gold status. It's notable that we are now in the top 1% of all companies graded by EcoVadis. Furthermore, we have many attractive growth opportunities on the horizon. One key focus area is to expand our capacity for 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 an additional driver for further profitable growth in our conductive business. Using the midpoint of our guidance, we expect our 2023 EBITDA to grow 17% and EPS to grow 25%. This is driven by strong pricing achieved in our 2022 rubber negotiations. We also have the structural tailwind of tire capacity growth outstripping supply in both our Americas and EMEA rubber markets. We will continue to focus on generating strong profitable growth, free cash flow, executing on high return investments and achieving consistent high returns on invested capital. Thank you for your continued investment in Orion. We look forward to our journey together as we grow profitably for many years to come. Thank you.

Thank you very much, Mr. Painter. 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 of the other items from Item #1 to Item #12 of the agenda of the Annual General Meeting as published on May 2, 2023 in the Luxembourg Trading Companies Register and on April 27, 2023, in the newspaper, Luxemburger Tageblatt for a vote. Agenda Item #10 -- pardon me, #1. The Board of Directors proposed that the shareholders resolve as follows: 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 called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2023.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 46,836,007 common shares voting in favor; 437,882 common shares voting against and 54,790 common shares abstained from the 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 Part 2. The Board of Directors proposed 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 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, 2023.

[indiscernible] common shares. The shareholders voted with 44,759,214 common shares voting in favor; 2,554,049 common shares voting against; and [ 15,416 ] 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 Part 3. The Board of Directors proposed 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 Shareholders of the company called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2023.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 46,959,887 common shares voting in favor; 350,485 common shares voting against; and [ 12,057 ] 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, Part 4. The Board of Directors proposed 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 the Shareholders of the company called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2023.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 46,966,760 common shares voting in favor; 310,156 common shares voting against; and 45,503 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 #1, Part 5. The Board of Directors proposed 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, 2023.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 46,827,735 common shares voting in favor; 482,342 common shares voting against and 12,362 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 #1, Part 6. The Board of Directors proposed to 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 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, 2023.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 46,010,837 common shares voted in favor; 1,266,395 common shares voting against; and 45,197 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 #1, Part 7. The Board of Directors proposed 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, 2023.

I represent the public shareholders with 51,197,503 common shares. Shareholders voted with 46,969,783 common shares voting in favor, 342,761 common shares voting against, and 9,885 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, Part 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 day of the Annual General Meeting of the Shareholders of company called to approve the company's annual accounts and consolidated financial statements for the financial year ending December 31, 2023.

I represent the public shareholders with 51,197,503 common shares. Shareholders voted with 46,932,420 common shares voting in favor, 376,962 common shares voting against; and 12,057 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 #1, Part 9, the Board of Directors proposed that the shareholders resolve as follows: Mr. Hans-Dietrich Winkhaus is appointed by the General Meeting as Director of the company for 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, 2023.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 46,793,435 common shares voting in favor; 516,649 common shares voting against; and 12,345 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 #1, Part 10. The Board of Directors proposed 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, 2023.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 44,571,639 common shares voting in favor; 2,704,851 common shares voting against; and 45,939 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 #2, the Board of Directors propose that the shareholders resolve as follows: Approval on a nonbinding advisory basis, the compensation paid to the company's named executive officers as disclosed in the proxy statement for the company's 2023 Annual General Meeting of Shareholders.

I represent the public shareholders with 51,197,503 common shares. Shareholders voted with 46,586,083 common shares voting in favor; 719,785 common shares voting against; and 16,561 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 #3, the Board of Directors propose that the shareholders resolve as follows: members of the Board shall be remunerated during the financial year that ends on December 31, 2023, as follows: Each nonexecutive directors shall receive a cash retainer of $100,000 and restricted common shares of the company with a value of $137,500 at the time of issuance with such awards generally subject to vesting only if the director serves the full approximate 1-year term, she or he was appointed for. The Non-Executive Chairman of the Board shall receive an additional cash retainer of $105,000. Chairman of the Audit Committee of the Board shall receive an additional cash retainer of $25,000. The Chairman of the Compensation Committee of the Board shall receive an additional retainer of $25,000. And the Chairman of the Nominating Sustainability and Governance Committee shall receive an additional cash retainer of $20,000. Each nonsharing nonexecutive member of the following board shall receive an additional cash retainer as follows: For Audit Committee members, an additional cash retainer of $10,000; for Compensation Committee members, an additional cash retainer of $7,000; and the Nominating Sustainability and Governance Committee Members, an additional cash retainer of $5,000.

I represent the public shareholders with 51,197,503 common shares. Shareholders voted with 47,245,844 common shares voting in favor; 60,081 common shares voting against; and 16,504 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 #4. The Board of Directors proposed that the shareholders resolve as follows: the annual accounts of the company [indiscernible] for the financial year that ended on December 31, 2022, after due consideration of the report from the independent auditor on such annual accounts are approved.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 50,302,074 common shares voting in favor; 7,022 common shares voting against; and 882,357 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 proposed 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, 2022, after due consideration of the report from the independent registered public accounting firm on such consolidated financial statements are approved.

I represent the public shareholders with 51,197,503 common shares. Shareholders voted with 50,306,048 common shares voting in favor; 5,674 common shares voting against; and 879,731 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 proposed that the shareholders of the company hereby resolved to carry forward the loss suffered by the company corresponding to an amount of EUR 7,532,269.47 to the next financial year, and that the company's shareholders further approve the interim dividends declared by the company during the 2022 financial year in the aggregate amount of EUR 4,777,586.16.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with [indiscernible] common shares voting in favor, 2,018,412 common shares voting against, and 7,766 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 #7. The Board of Directors proposed 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, 2022, 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 51,197,503 common shares. Shareholders voted with 44,507,236 common shares voting in favor; 1,940,150 common shares voting against; and 875,033 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 #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 its mandate during the financial year that ended on December 31, 2022, including all of the company's annual accounts and consolidated financial statements for such period.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 44,207,016 common shares voting in favor; 2,240,955 common shares voting against; and 874,448 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. Agenda Item #9, the Board of Directors proposed 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, 2023, 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 51,197,503 common shares. Shareholders voted with 49,154,904 common shares voting in favor; 2,019,876 common shares voting against; and 6,673 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 #10. The Board of Directors proposed that the shareholders resolve as follows: The shareholders of the company hereby ratified the appointment of Ernst & Young LLC to be the company's independent registered public accounting firm for all matters not required by Luxembourg law for the fiscal year ending on December 31, 2023.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 51,180,260 common shares voting in favor; 6,937 common shares voting against; and 4,256 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 #11. The Board of Directors proposed to the shareholders resolve as follows: the 2023 Employee Incentive Compensation Plan, the 2023 Omnibus Equity Plan to replace the expiring 2014 Omnibus Employee Incentive Compensation Plan is approved.

I represent the public shareholders with 51,197,503 common shares. The shareholders voted with 39,113,791 common shares voting in favor; 8,121,839 common shares voting against; and [indiscernible] 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 #12, the Board of Directors propose that the shareholders resolve as follows: the 2023 nonemployee director equity plan known as the 2023 Director Equity Plan to replace the expiring 2014 nonemployee director plan is approved.

I represent the public shareholders with 61,997,510 common shares. The shareholders voted with 40,899,598 common shares voting in favor; 6,339,426 shares voting against; 83,405 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. [indiscernible] I wish to discuss additional matters in connection with the agenda to this Annual General Meeting of Shareholders. I know this is not the case. Now all the matters constituting the agenda of the Annual General Meeting of Shareholders have been handled. I, therefore, declare the meeting closed at 2:36 p.m. Central European Time. Thank you, and have a great day.

Goodbye.