Q3 2023 Orion SA Earnings Call
Greetings and welcome to Orion third quarter financial results call.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Wendy Wilson head of Investor Relations. Thank you Wendy you may begin.
Thank you Alicia.
Morning, everyone and welcome to Orion <unk> conference call to discuss our third quarter 2023 financial results.
I'm, Wendy Wilson head of Investor Relations.
With me today are Corning painter, Chief Executive Officer, and Jeff <unk>, Chief Financial Officer.
We issued our press release after the market closed yesterday, and we also posted a slide presentation to the Investor relations portion of our website.
We will be referencing this presentation during the call.
Before we begin I'd like to remind you that some of the comments made today on today's call are forward looking statements.
These statements are subject to the risks and uncertainties as described in our filings with the M. P.
And our actual results may differ from those described during the call.
In addition, all forward looking statements are made as of today November 3rd.
The company is not obligated to update any forward looking statements based on new circumstances or revised expectations.
All non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures.
In the table attached to our press release.
I will now turn the call over to Corning painter.
Thank you Wendy and good morning, everyone and thank you for joining our call today.
As you can see on slide three we remain on track for another year of growth and record results in 2023.
We delivered third quarter, adjusted EBITDA of $77 million and adjusted diluted EPS of <unk> 49 said.
The second highest third quarter results, we have ever posted for both figures.
Beyond this we also reported nine month record adjusted EBITDA of $266 million.
Seven 5% and adjusted diluted EPS of $1 76.
Our nine month adjusted EBITDA of $266 million is just 1 million short of our entire 12 month adjusted EBITDA just two years ago in 2021.
We also delivered strong third quarter operating cash flow and reduced our debt level at the same time, we continued our share repurchases having bought back 63 million in total since the fourth quarter of 2020 to nearly 5% of our outstanding shares.
We have two operational milestones first we continue to ramp up our first ever our first ever Greenfield facility is why Bay China.
Customer qualifications sales and operations are all progressing.
Second we progressed our final air emission upgrade in the U S. In the third quarter I'm happy to say the controls are now operational and final testing is scheduled for this quarter.
We will also be included completing an important safety upgrade at the same site, it's great to be on the verge of having this behind us.
As is typical of start ups. Both of these projects had some negative impacts on the third quarter and will also impact the fourth quarter in terms of margins and in the U S on sale.
This combined with lower power prices in Europe, and lower loading drove the drop in specialty gross profit per ton this quarter.
However, none of US cast a shadow on the strength of our specialty business. In fact this is important progress for US we can now better support our Chinese customers with product made in China for China, and reallocate reactors in the U S and Europe those local markets.
Another important milestone for us with securing German in EU funding for further developing a climate neutral process for producing carbon black from alternative sources, such as the wall I can the recycling of tires. This was an arduous and competitive process and we greatly appreciate the confidence of.
The German government and the EU.
I'd like to take a moment to talk about the role of people and culture in our performance under pressure.
As you know we expected to have a stronger manufacturing environment, resulting in higher volumes this year.
We set the bar high even though our adjusted EBITDA is up seven 5% year to date the team is disappointed.
Despite this the People's Orion progress some difficult challenges this quarter and delivered excellent results given the manufacturing economies we operate.
What.
I would say the commitment and engagement of the Orion team, we actually measure engagement using a third party firm. We've improved this measure by 1100 basis points since 2021, a huge improvement and a rare accomplishment according to them.
Beyond that the Orion team consistently reports customer focus is a near universal top.
I believe this along with thoughtfully allocating capital has enabled us to succeed despite the soft manufacturing environment and an ever changing world. You can see this has paid off and our financial results, they're not as high as we would like but we compare very well to other manufacturers if you follow up.
Other specialty chemical companies you know we are one of the few that remain on track for a stronger year over year performance.
This is a testament to the great team here and our long term strategy.
On the operations front specialty demand, reflecting the broader manufacturing economy continues to be subdued.
We are using this as an opportunity to push new customer qualifications upgrade our plants and introduce new products to the market. We have achieved a number of recent wins in the battery wire and cable and coatings markets.
A good example of a new product is our recently announced launch of pre tax cap of 10 high quality.
Quality conductive additives that will drive surging demand from producers of lithium ion batteries for electric vehicles energy storage systems and consumer applications.
The new product is produced in existing reactor systems that have been upgraded initially in Europe and soon in Asia. It marks an important expansion of orion's portfolio of conductive additives.
In addition in the quarter, we opened a new battery innovation center and have added additional leadership to our conductive additives team.
There are mixed views. These days on the speed of the conversion to Evs and the ultimate size of the market.
For US. However, this is nearly all upside and we are confident profitably securing our product in this important market.
And Robert as I mentioned earlier, we believe the industry restructuring is evident in our results and will continue.
Tire capacity continues to expand in the Americas, and Europe, and this simply tightens the market.
Although we've seen some weakness in truck traffic, reflecting destocking in a less than robust manufacturing environment. This year. The underlying trend is with us. Additionally, the EU ban on Russian carbon black begins midyear 2024.
While some Russian carbon black is being bought into EU today, one large revolting distributor, meaning that they have the ability to transfer imports from Russia into trucks and railcars.
It was recently barred from doing business reminding everyone of the danger in that business model.
Let me provide an update of what we think is happening downstream starting with rubber on slides.
First on the bottom of the page you can see that people are driving and the trucking while still negative has improved from being down 15% to 19% last quarter.
Moving up the slide OEM tire demand weakened in the quarter.
That's a surprise right.
Finally at the top of the slide while replacement truck tire volumes remain weak passenger car and light truck replacement volumes have improved significantly from being down 6% last quarter.
In general according to the U S TMA that U S tire shipments were up 4% year over year in August However, tire manufacturing these lagging.
Now all of this is based on U S. However.
However, we continue to believe that picture in the EU is similar, albeit perhaps with higher level of tire imports.
With that I would ask Jeff to provide additional insights into our financial results.
Thank you Corning.
Starting on slide five.
We've used this slide for a couple of quarters now it provides a good visual representation of our multi year growth.
In 2023, and we expect that the midpoint to grow EBIT was 7% versus 2022, despite lower volumes.
Our return on capital employed are rosy progress has continued over the past few years during a time when we made our substantial air emissions control investments.
The Wuxi levels, we achieved was slightly were significantly in excess of our weighted average cost of capital.
At the conclusion of the third quarter. The trailing 12 months grocery stands at 17%. This key metric keeps us aligned with our shareholders as stewards of their capital and with the long term sustainability of the company.
On slide six you can see the consolidated consolidated results in the third quarter volume in the quarter was flat with an increase in specialty due to our new capacity in China coming online offset by lower volumes in EMEA and in the Americas.
The contractual price improvements in rubber, partly offset the decrease in revenue.
Which was due to lower oil pricing, which as you know is a pass through to our customers.
While our property profitability metrics were close to last year's level, there were headwinds in the quarter cogeneration profitability was down because the comparable third quarter of 2022 had extremely high electric prices in Europe.
We knew this was likely to be a significant drag on earnings as we mentioned it back in August.
The startup of why they also affected our gross profit and GP per tonne metrics in each business.
Finally, we had some cost absorption issues in specialty.
The sum of these lowest gross profit GP per ton and adjusted EBITDA by approximately 4% each versus Q3 2022 <unk>.
Despite these headwinds the third quarter of this year.
Still solid and is according mentioned this quarter was our second highest Q3 ever just $3 million of adjusted EBITDA behind last year.
Slide seven provides a year to date results for the company.
Weaker volume and Robert across most markets as well as the lower oil price pass through drove revenue down 9%.
This revenue drop was partly mitigated by stronger contractual pricing.
The higher contractual pricing benefited gross profit per ton.
The gains in GP per tonne that we had seen in the first half of 'twenty, 'twenty 2023, where tamped down some due to the Q3 headwinds I mentioned previously.
Year to date, EBITDA was up over $18 million or 8%.
Adjusted diluted EPS up six six.
We achieved these gains despite volume decreases and the significant drop in cogeneration profitability as power prices dropped in Europe relative to the extraordinary high power prices last summer.
On slide eight in.
In Q3, the benefit of the price mix improvement was driven by contractual pricing gains in rubber.
More than offset by lower volume and lower cogeneration profitability.
The latter which shows up in the cost.
On slide nine.
Specialty in the third quarter had increased volumes, primarily from our new plant in China.
Our other markets remained relatively subdued due to the continued softness in demand in those geographies.
Gross profit per ton decreased compared with the Q3 level last year due to both geographic and end market mix of sales as well as the lower cogeneration profitability.
Importantly for the specific mix of products that we sold in the quarter. Our pricing has continued to remain stable.
Slide 10 shows the key factors affecting adjusted EBITDA for the specialty business compared with last year.
As noted earlier mix adversely affected results as did the significant reduction in cogeneration profitability and some fixed cost absorption.
Slide 11 on Slide 11, Q3 rubber volume decrease was affected by lower demand in a made in the Americas.
We experienced higher gross profit and GP per ton driven by the contractual price increases. However, this was partially offset by lower co generation profitability and startup related impacts of the court.
Q3, GP per ton was $386, which while lower than the past two quarters was still above the Q3, 2022 level of $364.
The Q3 2023 level will likely be the low point for the year, but we expect it to a river well above $400 in the fourth quarter.
Slide 12 shows the key factors affecting adjusted EBITDA for the rubber business strong contact contractual pricing was clearly the key driver. However, much of this was offset by lower volume and reduced cogeneration profitability.
We believe the lower volume is a combination of fewer end customer purchases and an increase in tire imports into the European markets.
On slide 13, you can see the effect that our improved cash flow as head of our debt.
We have reduced our net debt by $102 million in the first nine months of 2023 to 700 and $756 million.
Our debt to EBITDA ratio now stands at $2 to $2 two nine times down from nearly three times in mid 2022.
We've also repurchased $59 billion worth of shares this year and 63 million share buybacks. Since we started our program in late Q4 2022.
This represents nearly 5% of our outstanding stock.
We will continue to look opportunistically to repurchase shares with a portion of our free cash flow.
Additionally.
We announced during the third quarter.
Early in the fourth quarter that we renewed our senior secured revolving credit facility, which was intentionally reduced from 350 million euros. So it's 300 million euros as a result of the company's stronger cash flow.
The credit facility has a five year term and was oversubscribed by 20%.
Our goal is to continue to strengthen our balance sheet.
Our total net debt and improve our net debt to EBITDA ratios.
We have made substantial progress in all of these areas over the past year.
Before I pass the call back to Corning.
<unk> I would point out the dramatic increase in our discretionary cash flow conversion as we have stepped up our profitability and nearly completed our PPA projects.
I expect it to dramatically improve conversion rates that we have seen in 2023 to continue in the coming years.
With that I'll turn the call back according to discuss our 2023 guidance.
Thanks, Jeff.
The topic of Destocking has come up in the Q&A with investors over the last year, so I'd like to add a bit more color in general it's hard to speak with certainty about this is where you are well removed from the end customer and comprehensive data as elusive. However, we recently had a chance to review of third party analysis.
The impact of Destocking on the chemical industry.
By looking at the comments made by retail packaging and personal care companies, who are close to the consumer they estimate that destocking will be a headwind into the second half of 2024.
Naturally there's a fair amount of uncertainty and assumptions in this kind of analysis, which puts a premium on being agile in responding to market changes quickly.
In the face of the market uncertainties, we believe our business has proven to be resilient and as Jeff and I. Both said earlier, we continue to believe this will be another year of earnings growth.
We also believe we are in a strong position going into 2024 with a majority of our Americas and EMEA a rubber demand essentially committed.
Again, our demand is not immune to destocking in the business cycle of tires do wear out beautiful black bars increasingly powered by batteries continued to be made and black Appalachia where is hot.
We're confident in our business and we are maintaining our adjusted EBITDA guidance midpoint, while narrowing the range to $330 million to $340 million. This guidance is up over 7% at the midpoint and implies a slightly stronger Q4. This year, our adjusted EPS guidance.
Range is $2 to $2.10 per share is up 5% year over year at the midpoint.
In closing I would say first we are on track.
For our third consecutive year of earnings growth and a record year, despite lower demand than in 2022.
Second with the ramping up of our winemaking facility.
10 conversions expanded customer applications facilities debottlenecking activities and the construction of the new acetylene based plant in La Porte, Texas, we are positioning our specialty business for further growth.
Third the fundamentals of the tire and rubber carbon black industries in our key markets continue to evolve favorably and we expect this to continue in the foreseeable future.
For the U S Air emission systems at our final plants are operating as we speak we expect to complete the third party stack test this quarter with this capital spending nearly behind US we can use our cash flow to more directly improve shareholder value.
I continue to be in Q courage by the future I see for Orion for our shareholders our employees and the communities we serve.
We've been on a journey over the past few years to improve our performance and increased returns to shareholders and we are seeing the results come to fruition. This year and I expect it to continue into 2024 and beyond.
Thank you operator, please open up the line for questions.
Yeah.
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One moment, please while we poll for questions.
Okay.
Yes.
Yeah.
Thank you. Our first question comes from Jos Sceptre with UBS. Please proceed with your question.
Okay.
Hey, guys. Thanks for taking my question.
I guess first I wanted to ask on the contract pricing I think in the release last night, you were pretty positive on the progress and said you're almost done last year. At this time, you were able to size what the impact could be for next year I wanted to see if you could do the same now.
Yeah, Josh last year was a kind of unique events that we've had it all wrapped up at this point and it was very significant and we thought it was important and do that disclosure at that time, we typically down and really going forward I don't expect us to typically released that kind of information at this point in time, we still have some.
Going and there is an element of what's appropriate in commercially sensitive.
Okay, that's fair enough.
Pivot to something else then so.
When I looked at the quarter itself I guess sticking on the rubber contracts the price mix benefit was lower in <unk> than it was in the past couple of quarters, despite volumes being higher what was the driver of that.
Yeah.
So part of the impact in the quarter in terms of mix was that start up in China, and some issues associated with the startup and without that that would have been above 400 for example.
Yeah.
Okay understood so that flowed through it to price next and that's actually kind of data.
This is Jeff.
Within the two segments rubber and specialty you talked about the startups can you size those in terms of the EBITDA impact you thought you saw in each of the segments in the quarter.
Sure Yeah, we saw maybe a better way to describe it I can describe out of GP per tonne basis, probably about $20 into Robert.
Robert probably closer to about 70 in the specialty.
Yes.
Thanks, Ed and that last into the fourth quarter.
Damon Packard classic there will there will be an impact in the fourth quarter it shouldn't be as dramatic.
Okay. Thanks, I'll turn it over.
Yeah.
Thank you. Our next question comes from the line of Chris Capps with loop capital markets. Please proceed with your question.
Hey, good morning, I understand the commercial sensitivity of the you know the.
A conversation around contract negotiations, but in the last quarter in the second quarter call you provided some more specific metrics in <unk>.
You know some.
Some color around the.
The imperative and the nature of the ongoing conversation. So I'm just wondering if you could have any any more color about.
The progress I think you had said 60% of your.
Volume commitments were completed as of three months ago. So any any additional insights I think would be helpful for investors to try to assess the prospects for 'twenty four.
Sure.
So a couple of things number one I mean the points I made last quarter remain on track. So restructuring continues to happen right. You can look at the notch report actually enlisted tire manufacturing new investment new projects, what theyre going to mean in terms of <unk> you can see that for North America, you can see it for Europe, because it all around.
World, So that restructuring of the market that is very much in place number two right. We are just like on the verge of finishing all of this air emissions upgrades competitors had to do the same so looks like we're entitled to a return on investment.
Number three yes things are a little weak right now we're not negotiating for 2023 were negotiating for 2024 and in some cases, we're negotiating for 'twenty four 'twenty five 'twenty six that type of thing. So it's a poor word look which is another item and then in Europe. You have this huge dislocation with the ban on Russian apartment block for some higher comp.
And he is going back a couple of years, they've probably got about half their carbon black from Russia that is a really big change. So those are all positive drivers we are further along.
But theres competitive in their sensitivities about.
You know impacts we can have on the broader market and so forth.
So I would just rather not say exactly what we have left are down because I think that can get complicated in that regard.
To be clear despite everything I, just said I do not expect a repeat of last year last year was a bit of a reset in North America.
I think that Europe is obviously, a different supply and demand dynamics.
So maybe that's an error.
We're more can be achieved this year, we will see when it's all saddened we all announce our results.
So don't take my Radisson says like.
Yeah.
Some indication I think all the fundamentals are there and it's a long term game, we're entitled to return on capital.
It's just it.
It's just difficult when the negotiations are still undergoing.
And that's why we are not.
Not quite done.
Right.
And you know just historically this is kind of a much more normal time to still be.
Crossing T's and dotting I's negotiating.
My history serves but.
Oh, Yeah, Oh for sure for sure yes.
Yeah, and then also the other question was just on.
Maybe framing.
Framing.
Your view of I don't know if trajectory is the right word but for the specialty segment.
There's some.
Variance is here in the third quarter of both mix.
The co Gen drag, which I assume is going to persist into the fourth quarter and maybe early next year or so but just you know there's also some crosscurrents in the different end markets I'm wondering if you could.
Discuss kind of what your just general expectations are in terms of the trajectory and mix and profitability of that segment you know as we.
Exit this year going into next year. Thank you.
Sure. So first let's let's talk about power. So power is clearly a more dynamic market than it's been in a long time in Europe I think that will continue we don't really.
Define what that power prices. So that's gonna be noise in this but from an operational perspective, I don't think it's super significant in it.
Because we price according to the value we create for our customers.
We're always going to have mix being an important part of the overall equation for us.
We feel strongly that we have held share in the premium grades in the Oregon grades for US we do at the lower end of this we'll trade off volume between Russia and arms between rubber and specialty.
As well as just.
We think it's an appropriate price cut off point, but I think in the important grades were strong on that so soon depending upon not just even how the premium perform but do we see a lot of volume sometimes in let's say less premium products, that's going to share mix in that that's hard to predict for next year I think present operating.
Company, that's all about being agile and to some degree right. This is going to reflect the broader manufacturing economy.
Going into the into next year.
We have the startup effects, which Jeff talked about.
Well some impact of that in the fourth quarter, but then I think that will be behind us.
Things like cap of 10, and new product qualifications, all those sort of things that they moved the bulk of average of let's say GP per ton forward as we continue to work.
But if you think about it this quarter without that startup we would have been above 700, which I think is a pretty respectable number.
I appreciate the color. Thanks.
Youre welcome Chris.
Thank you. Our next question comes from the line of John Penguin Ken.
With CGS Securities.
Please proceed with your question.
Hi, Good morning, guys. Thank you for taking my questions Mike.
My first one is you mentioned in the press release kind of talked about a little bit but.
You quoted lower demand and I'm wondering was that a specific reference to destocking and versus end demand.
Or was that a reference to something else more generally and your overall end markets.
Right. So if we let's separate this rubber and specialty I shared that one report that we review that was looking at it when they looked at.
Packaging and personal care the truth is certain areas. We're on an upward trend certain ones are on a downward trend I think the gestalt of that is though that end consumer demand has shifted a bit more towards services and experiences away a little bit away from manufacturing goods, they would say that.
Every day there was the great shortage when we came out of Covid right and there were shortages for everything people built a lot of inventory and we're now more or less in a phase of kind of working through that especially as consumer demand has shifted a little bit. So I think youre looking at a mix of both of them, that's a little bit hard to see.
See speak with certainty about.
How much is destocking versus end customer demand and I think that's just the reality we have to all except when you look at the rubber demand, which is largely going around tire. So it's a little bit easier right, which is why we put in that slide it shows to be clear, though a bit of a mixed environment right. So passenger car gasoline consumption miles.
Driven those kind of metrics continue to grow truck traffic, reflecting to a certain degree manufacturing, but also just general commerce is off of it and suddenly you sort of have mixed factors in that beyond that I think you do see or you have seen up until now certainly consumers deferring some of their purchases.
When you look at the.
Purchases by light truck and personal our passenger cars those were up a bit this quarter. So maybe it shows like we're hitting the end of that but I think we need more than one quarter to really havent trend there.
Does that help Tommy.
It does thank you coding and then secondly, do you have an estimate of what your UAW impacting Q4 is going to be I don't know if its going to be anything material or not but any clarity would be helpful.
Yeah, No I would just say that's in our our expectation in the guidance that we provided which is a fairly strong Q4 and compared to prior years.
Okay Fair enough and then last question, just what's driving the lower EPS guidance versus the unchanged midpoint of the EBITDA guidance. It doesn't look like your tax or or interest rate expectations have changed so I'm just wondering what's going on there.
Sure.
There's not that much it might it might be a little on the life side.
I'm, sorry, what was that.
Sorry. It is there's there's not nothing really dramatically different is it might be a little on the light side of EPS.
Okay.
Sometimes we have Q4 tax things if somebody to come in that I was concerned about so.
Decided to two.
We're cautious there.
It was a Q4 tax things of course are cumulative for the year.
John are you still there did you have another question.
Oh, I'm, sorry, I think I was on mute. Thank you for that.
Thank you you don't have a giant.
Okay.
Thank you. Our next question comes from Laurence Alexander with Jefferies. Please proceed with your question.
Hi, Good morning. This is Kevin asked back on for Laurence. Thank you for taking my questions. I guess I was just wondering how you were thinking about 2020 for I guess thoughts on.
Possible further slowdown maybe a recession thinking about maybe how rising rates are impacting auto loans, just sort of curious to get your thoughts around the puts and takes for next year.
Well, so we will do our guidance later right. After we report our fourth year and quarter results and so that's good.
There's a little more time to see how the economy.
Develops between now and then it's certainly a pretty dynamic world that we're in but I think if you come back to it like on the fundamental level.
Especially if you think about Robert the economy can go wherever it is kidney go. Yes, then it can be truck traffic goes up and down a bit or passenger cars, but it is ultimately a product that wears out it is.
Consumable I think that's a strength for us when whatever environment we're in.
Products like cap of 10 that are going into a new market that have high growth I think that's something where we can place all of that project, regardless I think in a market like China, where we're small in the overall scheme of things we're going to have success in our specialty and in our rubber there will be all will be able to place that at all so I think.
We've got certain like real strengths going into this if.
If it is slow we'll be very focused on customer qualifications that sort of thing if it's very strong will be taken full advantage of it.
And I, just don't know that I'm in a better position to speak about macroeconomics and anybody else here read about.
Okay, great. Thank you and I guess most of my other questions have been asked already but I guess I think last quarter. You mentioned that you expect customer shutdowns will be longer in Q4 than usual I guess I'm wondering is that still true.
Yeah excellent question, Kevin and I appreciate that certainly for some have signaled that they may take a longer shutdown others have not right. So this is somewhat customer specific I would say that that's really where the comment we made it before about rubber, but even in other specialty markets I guess, we find the difference.
Between what one customers experiencing in their game plan versus another is <unk>.
Somewhat spiky and a little bit distinct right now.
But that's in our guidance for the fourth quarter and yes, I do think we will see some people.
Really trying to draw down their inventory for the end of the year.
Got it thank you very much.
Yes.
Thank you.
Our next question comes from the line of.
Jeff Zekauskas with J P. Morgan.
Proceed with your question.
Thanks very much.
If you exclude Wabash from both.
Specialty.
Rubber black businesses.
And I know volume.
Exclusive of Wap, a decrease but how much did it decrease what would your volume numbers have been in.
And the two businesses excluding the capacity addition.
So your question first of all good morning, Jeff. So your question is X Y Bay, what exactly was our volume.
Sort of a little reluctant to go exactly one site that were in startup.
Yeah, the volume impact there is.
Uh huh.
And then there's larger volume and Robert let me say than the others. So they both went up.
<unk> been a little bit further negative, but just for commercial sensitivity in China and given our specialties aimed at a few markets in particular.
Rather not go.
Quite that level of detail for one quarter.
Got it.
Let's try a different way.
Yeah, what was your what was your utilization rate of claw back.
Excellent so our utilization was around 70%.
So that's a mixture of maintenance.
Maintenance that we had in the quarter, that's a mixture of the EPA work those upgrades.
As well as just responding to end customer demand levels.
And then the fourth quarter, we should be at 90% utilization and Huawei.
Well. So we're we'll have some work as we go through the start up and you take some downtime to make this adjustment or that adjustment. So that will impact why bad I think it'll be less than 90% in the fourth quarter, but loading there would otherwise be quite high yeah.
All right and then lastly can you just give us a feel for what the demand conditions are like in your two businesses in the United States and Europe.
Sure.
To compare the <unk>.
U S demand to European demand.
Or are they both the same this one weaker or stronger than the other how do you feel about it.
Right so.
I'll, let it go even broader and frankly in China I don't think demand is really robust in EMEA of those three markets right now.
Kind of talking about what's the.
And within a pretty social environment, how do you scale. The two I'd say Robert is a little bit stronger in North America, perhaps because Europe seeing a little bit more in terms of tire.
Imports.
I say specialty is.
Yeah.
I'd say, it's really soft involved and it depends a little bit you have to start getting in that segment by end segment and that can shift around quarter to quarter.
So in specialty which is weaker in the United States or Europe.
Yeah.
So which one is weaker.
I would say again entire I think rubber is a little bit weaker in Europe than it is in North America.
Specialty between the two I would say, they're both quite weak.
Yeah.
Probably Europe is a little bit weaker than North America.
Okay and lastly, your Capex is $1 75 to 200.
Can you even get to 175, given you're spending through the first.
Nine months, Yeah, Jeff Good question, so it's considerably backend loaded and we backed it off a bit just in timing or a lot of the timing as regarding to la Porte. So I think that we will see a number of large purchases left this quarter and that will get us there and some of the understand Brian is going to shift over into next.
Yes.
Alright, Thank you very much.
Okay.
Thank you. Our next question comes from the line of Kyle Mowery with Grizzly Rock capital. Please proceed with your question.
Good morning, Corning, Jeff and Wendy are two related questions for me within your conductive business on print text cap can you frame out the potential incremental EBITDA contribution relative relative to the recent announcement and then secondly, how does this print X cat.
EBITDA relate to the La Porte, Texas because this is in addition, right just wanted to make sure it's not a shift but rather.
Growth.
Yeah. So we would expect lets say in the three to five year time period that this would contribute let's say $5 million to $10 million of EBITDA to us it's a different product than what we're going to make in la Porte is aimed at a different segment in the marketplace. So it's really complementary now a lot of battery.
<unk> companies have a wide range of materials. So it all it does help to make us a bit more of a relevant to these folks, but we really see it as a as a just as a separate marketplace.
Excellent. Thank you.
Thank you. Our next question comes from the line of John Peng Wang Pen with CGS Securities. Please proceed with your question.
Hi, Thank you just to follow up on the Capex.
Did you push a what.
What was the amount that's pushing out into 24 number one and number two can you give us a preview of what's your overall Capex plan is for next year, and just kind of what's growth whats maintenance.
That would be very helpful. Thank you.
Sure I would expect like $20 million to $30 million to push into next year that at this point, we're expecting for this year. If we think about next year, we'll have maintenance capital in a similar range lets say around $90 million and I would expect almost the vast majority of our.
Growth capital really to be look for for next year.
And so that would get you, let's say in the $200 million range, plus we may have to make the adjustments paying about how much she said or from one year to the outlets.
Second all of your question, John Yes, and the pushed out piece that wasn't EPA spending was it or is it something else.
No no not Alex it's mainly about when you place orders for big pieces of equipment that are going to go to before.
Understood. Thank you.
Second.
I think you gave a metric on Robert getting back well above 400 per ton on a gross profit basis.
In Q4, it did you give something similar on specialty that I don't recall, if you said so.
No we didn't and cause like mixed there is a much more dynamic market for us and the whole power play. So I think well, we'll have to see where that ends up.
Okay do you have a directional expectation.
Yeah, I think it's probably improving from where we are right now yeah.
Okay, great. Thank you guys.
Thanks Scott.
Thank you. Our next question comes from the line of Chris Capps with loop capital markets. Please proceed with your question.
Yeah. So my follow up is.
Kind of a bigger picture one on slide three of your presentation, you talked about being on track.
The 2025 mid cycle capacity of $500 million in EBITDA I am just kind of wondering you know obviously there was never an expectation to get there linearly and theres business cycles, and so forth and the world changes seemingly every day, almost but I'm just kind of curious what sorry.
Sort of levers are piece pieces, you would need for.
Theoretical waterfall to to get there, whether its economy or pricing between now and then or.
Recoveries and markets and specialties, maybe you can just talk about the bridge to that China.
Threshold. Thank you.
Yeah, great. Thanks, Chris Alright, so, let's see I had a couple of different things and we start on pricing to be clear, we see the pricing that we achieved in 'twenty two 'twenty three to be the baseline right I don't want any confusion around that we see that's a number from which we can continue to grow.
But the market continues to tighten our rubber carbon black in North America, and Europe actually in South America as well. So you can just see that in a tire capacity being expanded we're going to need to be able to we're going to clearly have pricing power in that environment and we need.
The right prices to get return on all the capital we're putting into air emissions is only fair. So I think the pricing part is something we can continue to build on from here and I think in specialty we can continue to drive our mix.
Favorable way in any one quarter like the current quarter due to exactly know what your mix is going to be month to month hard to say and especially in today's topsy turvy economy, but I think the trend is clearly with it and you can see it in the numbers we posted.
Next our target is 2025 mid cycle economy earnings capacity right. So we see ourselves in no way in a mid cycle economy right now certainly for the materials for the chemicals industry. I don't think this is mid cycle, where we are so yeah, we'd expect somewhere.
Covering volume that volume is going to flow in very nicely for us and then we continue with the various morose of investments that we have principally the Laporte project I do not expect only load la Porte in 2025, so I expect to have the capacity in 2025, not the full EBITDA from that we'd always said.
It's going to take a year or two to get those products qualified into the right markets, but I do think having that capacity in the United States in that timeframe looking at a number of these giga fabs right I think that's going to be really positive for us. So I see that as really pretty low risk. If you think about the three big levers that we.
Had to get there well one was laporte. So that project continues its track lethal do very well with that I know on was pricing and mix. So we already achieved everything in pricing although.
Awkward in terms of competitive dynamics.
Hang up on how much I say look I think it's a positive fundamental environment that we're in.
And then the other one was things like why Bay, well why base up and running product is shipping.
I think those things are all going to deliver for us. So I think we're very much on track for that or are we going to have a mid cycle economy. In 2025, I don't know, we'll have to see but we're gonna be ready for it and I think thats whats really changed here and I think Chris.
Later on the quarter you said early on in his response clearly there's been a big lever there is volume and the volume is a function of where the economy, where the market demand is that at the time.
Yeah, I would say are not the other thing is we're not going out to chase volume in specialty that isn't really there I don't think that's the way to run a specialty business. So we're cautious on that I don't think we've lost share at the same time, we are entitled to the premiums that we have in our specialty business.
Stuff performs very well.
Thank you for the color.
Alright, Thank you Chris Thanks, Chris.
Thank you there are no further questions at this time I'd like to turn the floor back over to Corrine painter for closing comments.
Alright, so thank you to our analysts and the investors for your insightful and penetrating questions. Today, we really appreciate your interest your continued support and look forward to seeing some of you soon as were going to be on the road later this month and in December talking to investors. Thank you all for your time.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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