Q2 2024 Orion SA Earnings Call

Operator: Greetings and welcome to the Orion SA Q2 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone 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, Chris Kapsch, Vice President of Investor Relations. Thank you. You may begin.

Operator: Greetings and welcome to the Orion SA Q2 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Orion S. H Q2, 'twenty 'twenty four earnings conference call.

Speaker Change: At this time all participants are in a listen only mode.

Operator: A brief question-and-answer session will follow the formal presentation.

Speaker Change: A brief question and answer session will follow the formal presentation.

Operator: Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: Should anyone 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 Chris Capps, Vice President of Investor Relations. Thank you you may begin.

Christopher Kapsch: It is now my pleasure to introduce your host, Chris Kapsch, Vice President of Investor Relations. Thank you, you may begin. Thank you.

Unknown Executive: Thank you, Satji.

Chris Kapsch: Thank you, Sachi. Good morning, everyone, and welcome to Orion's conference call to discuss both second quarter 2024 results and to provide a midyear update on some strategic context, which we believe will be helpful for the investment community to consider. This is Chris Kapsch, new to leading Orion's investor relations efforts. I know many of you from prior roles, and I look forward to working with you in this new capacity.

Chris Capps: Thank you Staci and good morning, everyone and welcome to Orion <unk> conference call to discuss <unk> second quarter 2024 results and to provide a midyear update on some strategic context, which we believe will be helpful. For the investment community to consider this is Chris Capps noodle, leading Orion Investor Relations efforts I know many of you.

Christopher Kapsch: Good morning, everyone. And welcome to Orion's conference call to discuss both second quarter 2024 results and to provide a mid-year update on some strategic context, which we believe will be helpful for the investment community to consider.

Christopher Kapsch: This is Chris Kapsch, new leading Orion's investor relations efforts. I know many of you from prior roles, and I look forward to working with you in this new capacity.

Speaker Change: Prior roles I look forward to working with you in his new capacity.

Chris Kapsch: Joining our call today are Corning Painter, Orion's Chief Executive Officer, and Jeff Glajch, our Chief Financial Officer. We issued our 2Q earnings after the close yesterday. We have posted a slide presentation on the investor relations portion of our website. We will be referencing this deck during the call. Before we begin, I am obligated to remind you that some of the comments made during today's call are forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's filings with the Securities and Exchange Commission, and our actual results may differ from those described during this call.

Christopher Kapsch: Joining our call today are Corning Painter, Orion's chief executive officer, and Jeff Klaik, our chief financial officer. We issued our two Q earnings after the close yesterday. We opposed to the slide presentation to the Investor Relations portion of our website. We will be referencing this deck during the call.

Joining our call today, our accordion, Taser Orion's, Chief Executive Officer, and Jeff <unk>, Our Chief Financial Officer, We issued our <unk> earnings after the close yesterday, we have posted a slide presentation to the Investor relations portion of our website, we will be referencing referencing this deck during the call before we begin.

Christopher Kapsch: Before we begin, I am obligated to remind you that some of the comments made on today's call are forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's filings with the Securities and Exchange Commission, and our actual results may be different from those described during this call. In addition, all forward-looking statements are made as of today, August 2nd. The company is not obligated to update any forward-looking statements based on any new circumstances or revised expectations. All non-GAAP financial measures discussing this call are reconciled to the most directly comparable GAAP measures, and the tables attached to our press release.

Chris Kapsch: In addition, all forward-looking statements are made as of today, August 2nd, and the company is not obligated to update any forward-looking statements based on any new circumstances or revised expectations. All non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures, and the tables attached to them are press-related.

Speaker Change: I'm obligated to remind you that some of the comments made on today's call are forward looking statements. These statements are subject to the risks and uncertainties as described in the company's filings with the Securities and Exchange Commission and our actual results may differ from those described during this call. In addition, all forward looking statements are made as of today August 2nd.

Speaker Change: The company is not obligated to update any forward looking statements based on any 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 tables attached to our press release.

Chris Kapsch: And with that, I will turn the call over to Corning Painter.

Corning Painter: And with that, I will turn the call over to Corning Painter. Thank you, Chris.

40 phasor: And with that I will turn the call over to 40 phasor.

Corning Painter: Thank you, Chris. Before walking through the detailed deck, let's skip to slide four and go right to the point. Why was Q2 EBITDA below expectations and what is our path forward? You will see our revised 2024 guidance midpoint is now $25 to $30 million below the expectations we set at the beginning of the year. Lower-than-expected rubber segment volumes and adverse cogeneration are the major factors.

Corning Painter: Before I'm walking through the detailed deck, let's skip to slide four and go right to the E. Why are Q2 EBITDA was below expectations? And what is our path forward? You will see our revised 2024 guidance midpoint is now $25 to $30 million below the expectations we set at the beginning of the year. Lower than expected rubber segment volumes and adverse co-generation are the major factors. Our specialty business is performing well. The volume was up again in Q2, and I'm not concerned about the decline in GP per ton compared to last year. This was mainly due to prior year timing effects and one-offs, lower co-generation, and higher maintenance.

40 phasor: Thank you Chris before walking through the detailed deck, let's skip to slide four and go right to the heat why our Q2 EBITDA was below expectations and what is our path forward.

40 phasor: You'll see our revised 2024, our guidance midpoint is now $25 million to $30 million below the expectations, we set at the beginning of the year.

Speaker Change: Lower than expected rubber segment volumes and adverse cogeneration are the major factors.

Corning Painter: Our specialty business is performing well, volume was up again in Q2, and I'm not concerned about the decline in GP per ton compared with last year. This was mainly due to prior year timing effects and one-offs, lower cogeneration, and higher maintenance. Most of these factors show us higher costs in our EBITDA bridge for this segment later in the deck. This business is improving with strengthening polymer and coatings markets, which netted to a slightly negative mix in the quarter, but that's fine. We respond to customer demand.

Speaker Change: Our specialty business is performing well volume was up again in Q2 and I'm not concerned about the decline in GP per ton compared with last year.

Speaker Change: This was mainly due to prior year timing effects and one offs lower cogeneration and higher maintenance. Most of these factors shown was higher cost and our EBITDA bridge for this segment later in the deck.

Corning Painter: Most of these factors show us higher costs in our EBITDA bridge for the segment later in the deck. This business is improving with strengthening polymer and coatings markets, which netted to a slightly negative mix in the quarter, but that's fine. We respond to customer demand. The GP per ton level is within our expected range.

Speaker Change: This business is improving with strengthening polymer and coatings markets, which netted to a slightly negative mix in the quarter, but that spot we were.

Speaker Change: Bond customer demand the GP per ton level is within our expected range.

Corning Painter: Let's focus then on the rubber business. First and importantly, pricing is up year on year, and we expect to gain in 2025 as well. Volume is nearly flat, but the underlying story is not as positive. Rubber carbon black demand is soft in our key markets with three drivers. Schwarz. First, as consumers adjust to higher inflation, they are currently trading down to lower-value brands, which ultimately hurts us. Second, but related to the first item, tired imports have been up sharply in North America and Europe. I have more to say about that in a little bit. Third, trucking activity follows manufacturing, and while this is perhaps bottom, the recovery is gradual at best.

Corning Painter: The GP per ton level is within our expected range. Let's focus then on the Robert. First, and importantly, pricing is up year on year, and we expect to gain in 2025 as well. Volume is nearly flat, but the underlying story is not as positive. Rubber carbon black demand is soft in our key markets, with three drivers. First, as consumers adjust to higher inflation, they are currently trading down to lower-value brands, which ultimately hurts us. Second, but related to the first item, used imports have been up sharply in North America and Europe. I have more to say about that in a little bit.

Let's focus then on the rubber business first importantly pricing is up year on year, and we expect to gain in 2025 as well.

Speaker Change: Volume is nearly flat, but the underlying story is not as positive rubber carbon black demand is soft and our key markets with three drivers.

Speaker Change: As consumers adjust to higher inflation. They are currently trading down to lower value brands, which ultimately hurts us.

Speaker Change: Second but related to the first Io hired imports have been up sharply in North America, and Europe, I have more to say about that in a little bit.

Corning Painter: Third, trucking activity follows manufacturing, and while this is perhaps at a bottom, the recovery is gradual at best. This impacts truck replacement tire and OEM demand. Regionally, rubber volumes are down in North America and Asia for us, and up in Europe, but only due to the European volume gains in last year's negotiations.

Speaker Change: Third trucking activity follows manufacturing and while this is perhaps bottom the recovery is gradual at best.

Corning Painter: This impacts truck replacement tire and OEM demand. Regionally, rubber volumes are down in North America and Asia for us and up in Europe, but only due to the European volume gains in last year's negotiations. To be clear, Europe and our other key markets are below expectations for the reasons I listed. Our cost performance in rubber is a mix between cogeneration, prior year one-offs, timing, and higher costs, including inflation. We'll discuss costs later in more detail, but some of this is tied to maintenance spending. All considered, lower rubber volumes account for more than $20 million of the reduction to our initial 2024 guidance.

Speaker Change: This impacts truck replacement tire and OEM demand.

Speaker Change: Regionally rubber volumes are down in North America, and Asia for Us and up in Europe, but only due to the European volume gains in last year's negotiation.

Corning Painter: To be clear, Europe and our other key markets are below expectations for the reasons I listed. Our cost performance in rubber is a mix between cogeneration, prior year one-offs, timing, and higher costs, including inflation. We'll discuss costs later in more detail, but some of this is tied to maintenance. All considered, lower rubber volumes account for more than $20 million of the reduction to our initial 2024 guideline. Looking forward to the second half of this year, specialties should continue to improve.

Speaker Change: To be clear Europe, and our other key markets are below expectations for the reasons that I listed.

Speaker Change: Yeah.

Speaker Change: Our cost performance and rubber is there a mix between cogeneration.

Speaker Change: Prior year, one offs timing and higher costs, including inflation will discuss cost later in more detail, but some of this is tied to maintenance spending.

Speaker Change: All considered lower rubber volumes account for more than $20 million of the reduction to our initial 2020 for guidance.

Corning Painter: Looking forward to the second half of this year, especially should continue to improve. We expect only a modest improvement in rubber volumes, and we will likely execute an inventory bill to prepare for 2025, which will help absorption. Cogen is an additional challenge. Our utility partner at our Louisiana plant was down intermittently in Q2 and is expected to be down for much of Q3. Further, European power prices have been below expectations. Looking to 2025, there are many reasons to believe rubber volumes will improve, and we continue to expect a favorable pricing cycle reflecting the restructuring of this industry.

Speaker Change: Looking forward to the second half of this year specialty should continue to improve.

Corning Painter: We expect only a modest improvement in rubber volumes, and we will likely execute an inventory build to prepare for 2025, which will help absorb Cogen is an additional challenge. Our utility partner at our Louisiana plant was down intermittently in Q2 and is expected to be down for much of Q3. Further, European power prices have been below expected.

Speaker Change: We expect only a modest improvement in rubber volume and we will likely execute an inventory build to prepare for 2025, which will help absorptions.

Speaker Change: Co. Gen is an additional challenge our utility partner at our Louisiana plant was down intermittently in Q2 and is expected to be down for much of Q3.

Speaker Change: Further European power prices have been below expectations.

Corning Painter: Looking to 2025, there are many reasons to believe rubber volumes will improve, and we continue to expect a favorable pricing cycle reflecting the restructuring of this industry. Personally, I think broadly applied higher tariffs are likely in our key markets, which will support demand and the value of local supply security. However, pricing remains a key priority, and I'll have more to say about that. Looking forward, we have two new facilities to load, Ybay and then LaPorte, in the second half of next year. These are top priorities for us. We expect significantly lower capex spending until we do that. As you can see on slide five.

Speaker Change: Looking to 2025, there are many reasons to believe rubber volumes will improve and we continue to expect a favorable pricing cycle, reflecting the restructuring of this industry.

Corning Painter: Personally, I think broadly applied higher tariffs are likely in our key markets, which will support demand and the value of local supply security. Pricing remains a key priority, and I'll have more to say about that.

Speaker Change: Personally I think broadly applied higher tariffs are likely in our key markets, which will support demand and the value of local supply secure.

Speaker Change: Pricing remains a key priority and I'll have more to say about that.

Corning Painter: Looking forward, we have two new facilities to load: Y-bay, and then LePort in the second half of next year. These are top priorities for us. We expect significantly lower CAPEX spending until we do that. As you can see on slide five, we will continue to devolve on that and expand capacity for our most differentiated specialty grades, but these efforts typically require minimal capital. In rubber, we remain excited about bringing sustainable grades to the market, and we'll have more to say about that in the future calls. But again, we expect modest CAPEX requirements associated with this effort.

Speaker Change: Looking forward, we have two new facilities to load.

Speaker Change: And then laporte in the second half of next year. These are top priorities for us.

Speaker Change: We expect significantly lower capex spending until we do that.

Speaker Change: As you can see on slide five.

Corning Painter: We will continue to de-bottleneck and expand capacity for our most differentiated specialty groups, but these efforts typically require minimal capital. In rubber, we remain excited about bringing sustainable grades to the market, and we'll have more to say about that on a future call. But again, we expect modest capital requirements associated with this effort. Considering lower anticipated capital expenditures, the recovering specialty business, the fundamental restructuring in rubber, and feedback from our shareholders, we have decided to opportunistically resume share repurchase activity at a modest pace. Depending upon working capital, our excess free cash flow may well be slightly negative. But on balance, we see this as the right move.

Speaker Change: We will continue to debottleneck and expand capacity for our most differentiated specialty grades, but these efforts typically require minimal capital.

Speaker Change: In rubber we remain excited about bringing sustainable grades to the market and we'll have more to say about that in future calls, but again, we expect modest capital requirements associated with this effort.

Corning Painter: Considering lower anticipated CAPEX spending, are recovering specialty business, the fundamental restructuring in rubber and feedback from our shareholders. We have decided to opportunistically resume share repurchase activity at a modest pace. Depending upon working capital, our excess free cash flow may well be slightly negative. of this year. But on balance, we see this as the right move. On slide six of the deck, we reference being back on track for another year of solid EBITDA, while the results are disappointing to us. We will likely achieve underlying EBITDA growth, excluding timing and other one-time benefits. Note, this would be despite a demand environment that isn't anything close to mid-cycle conditions, such as we saw in 2018.

Considering lower anticipated capital spending.

Speaker Change: Our recover and specialty business the fundamental restructuring in rubber and feedback from our shareholders. We have decided to opportunistically resumed share repurchase activity at a modest pace depend.

Speaker Change: Depending upon working capital or excess free cash flow may well be slightly negative this year, but on balance we see this is the right move.

Corning Painter: On slide 6 of the deck, we reference being back on track for another year of solid EBITDA, and while the results are disappointing, we will likely achieve underlying EBITDA growth, excluding timing and other one-time benefits. Note, this would be despite a demand environment that isn't anything close to a mid-cycle condition, such as we saw in 2018. Compared with those levels, we have about a hundred and fifty KT or, conservatively, 60 to 75 million dollars to be the upside in rubber volume alone.

Speaker Change: On slide six of the deck, we referenced.

Speaker Change: Being back on track for another year of solid EBITDA, while the results are disappointing to us we will likely achieve underlying EBITDA growth, excluding timing and other one time benefits.

Speaker Change: This would be despite a demand environment, there's not anything close to mid cycle conditions, such as we saw in 2018.

Corning Painter: Compared with those levels, we have about 150 KT, or conservatively $60 to $75 million of EBITDA upside in rubber volume below. Our rubber segment profit margins have held up well in spite of weak volumes. Replacement tire cell-through to consumers had been okay, but worsened during the quarter, and local tire builds have lagged end-market unit sales. Absolute tire build numbers in Western Martis are still substantially below pre-pandemic levels. This is partly due to the surge of low-value imports and is fueled by the consumer trade down because of inflation. Clearly, tire imports are impacting North American and European tire manufacturing.

Speaker Change: Compared with those levels, we have about 150, K T are conservatively $60 million to $75 million of EBITDA upside in rubber volume below.

Corning Painter: Our rubber segment profit margins have held up well in spite of weak volume. Replacement tire sell-through to consumers had been okay, but it worsened during the quarter, and local tire bills have lagged in market unit sales. Absolute tire bill numbers in Western markets are still substantially below pre-pandemic levels.

Speaker Change: Our rubber segment profit margins have held up well in spite of weak volumes replacement tire sell through to consumers has been okay, but worsened during the quarter and local tire bills have lagged and market unit sale.

Speaker Change: Absolute tire build numbers in western markets are still substantially below pre pandemic levels. This.

Corning Painter: This is partly due to the surge of low-value imports and is fueled by the consumer trade-down because of inflation. Clearly, tire imports are impacting North American and European tire manufacturing. However, we do not believe this is structural.

Speaker Change: This is partly due to the surge of low value imports and is fueled by the consumer trade down because of inflation.

Speaker Change: Clearly tired imports are impacting north American and European entire manufacturing just yesterday, a tire manufacturer spoke about their earnings release, we do not believe this is structural.

Corning Painter: Just yesterday, a tire manufacturer spoke about this and their earnings released. We do not believe this is structural. We believe the insuring of capacity into North America and into Western Europe will continue. We have seen blitz like this in our volumes before. A separate or a second tire company attributed the recent surge in imports to fear of appending parent increase. I will tell you, I do not see the United States or the EU surrendering their automotive markets. For Orion, these end-market headwinds have been amplified by the lower than expected co-gen contribution, but also costs largely tied to planned and unplanned maintenance turnarounds and inflation.

Corning Painter: We believe the onshoring of capacity into North America and into Western Europe will continue. We have seen blips like this in our volumes before. A separate or second tire company attributed the recent surge in imports to fear of a pending tariff. But I'll tell you, I do not see the United States or the EU surrendering their automotive market. For Orion, these end-market headwinds have been amplified by the lower-than-expected co-gen contribution and costs largely tied to planned and unplanned maintenance turnarounds and inflation.

Speaker Change: We believe the onshoring of capacity into North America into Western Europe will continue we have seen blips like this in our volumes before.

Speaker Change: A separate our second tier company contributed the recent surge in imports to fear of a pending Kerr Chris and.

Speaker Change: And I'll tell you I do not see the United States or the EU surrendering their automotive margins.

Speaker Change: For Orion these end market headwinds have been amplified by the lower than expected co. Gen contribution, but also costs largely tied to planned and unplanned maintenance turnarounds and inflation.

Corning Painter: A portion of the turnaround activity was associated with the ongoing upgrading of some of our manufacturing assets. These upgrades will reduce maintenance costs, enable greater reliability, and higher plan throughput over time. For example, in Q2, we replaced a very old filtering system in one of our lines in Belprio, which contributed to a month of downtime. Given the more challenging backdrop this year, we will be leaning more into efficiency initiatives than the trim costs and help us to achieve our revised guidance.

Corning Painter: A portion of the turnaround activity was associated with the ongoing upgrading of some of our manufacturing assets. These upgrades will reduce maintenance costs, enable greater reliability, and higher plant throughput over time. For example, in Q2, we replaced a very old filtering system in one of our lines in Belpré, Ohio, which contributed to a month of damage. Given the more challenging backdrop,

Speaker Change: A portion of the turnaround activity was associated with the ongoing upgrading some of our manufacturing assets. These upgrades will reduce maintenance costs enabled greater reliability and higher plant throughput over time.

Speaker Change: For example in Q2, we replaced a very old culturing system in one of our lines and Bell three, Ohio, which contributed to a month of downtime.

Speaker Change: Given the more challenging backdrop. This year, we will be leaning more into efficiency initiatives that will trim costs and help us to achieve our revised guidance.

Corning Painter: We will be leaning more into efficiency initiatives that will trim costs and help us to achieve our revised guidance. On slide 7, this mid-year report is an appropriate time to frame expectations regarding our prospects for 2025. As the industry's annual tire maker supply contract negotiator, we mentioned during our Q2 earnings call that some discussions had already commenced, but that we didn't need to rush into any deals, and we're going to be reluctant to hold volume commitments during lengthy negotiations. Those initial negotiations, indeed, timed out without conclusion, reflecting our intent to more strictly enforce time-bound authority.

Corning Painter: On slide 7, this mid-year report is an appropriate time to frame expectations regarding our prospects for 2025. As the industry's annual tire makers' supply contract negotiations have historically begun during the late summer months. We mentioned during our Q2 earnings call that some discussions had already commenced, but that we didn't need to rush into any deals, and we're going to be reluctant to hold volume commitments during lengthy negotiations. DeGaussation. Those initial negotiations, indeed, timed out without conclusion, reflecting our intent to more strictly enforce time-bound offers. We're now informal negotiations with a few major customers, but I would caution investors on expecting an early close.

Speaker Change: On slide seven this me on slide seven this mid year report is an appropriate time to frame expectations regarding our prospects for 2025 as the industry's annual tire makers' supply contract negotiations have historically begun during the late summer months we.

Mentioned during our Q2 earnings call that some discussions had already commenced but we didn't need to rush into any deals and we're gonna be reluctant to hold volume commitments during lengthy negotiation.

Speaker Change: Those initial negotiations indeed timed out without conclusion, reflecting our intent to more strictly enforced time bound offers we're now informal negotiations with a few major customers, but I would caution investors unexpectedly in early close some negotiations may be prolonged as we are.

Corning Painter: We're now in formal negotiations with a few major... But I would caution investors against expecting an early close. Some negotiations may be prolonged as we are determined to earn a return on capital for all our ongoing work. We're anticipating a positive outcome for this year's negotiation cycle for several reasons. First, the ongoing industry restructuring, tire capacity expanding in our key markets, contrasted with limited carbon black capacity. Second, I remind you, we're negotiating for 2025. This is not about 2025.

Corning Painter: Some negotiations may be prolonged as we are determined to earn a return on capital for all our ongoing investments. We're anticipating a positive outcome for this year's negotiation cycle for several reasons. First, is the ongoing industry restructuring, the tire capacity expanding in our key markets, contrasted with limited carbon-black capacity additions. Second, I remind you we're negotiating for 2025. This is not about 2024. Third, there are multiple pauses of indicators. Miles-driven data remains strong. The freight market is stabilizing. The Russian ban is now fully in place, and just recently, Belarus has been added to the ban.

Speaker Change: Permit to earn a return on capital for all our ongoing investments.

Speaker Change: We're anticipating a positive outcome for this year's negotiation cycle for several reasons.

Speaker Change: First is the ongoing industry restructure tire capacity expanding in our key markets contrasted with limited carbon black capacity additions second I remind you were negotiating for 2025. This is not about 2024.

Corning Painter: Third, there are multiple positive indicators. Miles-driven data remains strong. The freight market is stabilized. The Russian ban is now fully in place, and just recently, Belarus has been added to the list. And with specialty recovery, some carbon black industry capacity will shift from rubber back to specialty grade. Fourth, the industry's recent EPA investments effectively reduced the domestic industry's capacity by a few percentage points. These emission control systems have outages, and when they go down, they usually take the entire planet with them.

Speaker Change: Third there are multiple positive indicators miles driven data remains strong the freight market has stabilized the Russian ban is now fully in place and just recently Belarus has been added to the bag.

Corning Painter: And with specialty recovering, some carbon-black industry capacity will shift from rubber back to specialty grades. Fourth, the industry's recent EPA investments effectively reduce domestic industry's capacity by a few percentage points. These emission control systems have allergies, and when they go down, they usually take the entire plan with them. Fifth, as you know, shipping is now more expensive and less reliable. And finally, the potential for increased tariffs on imported tires in North America and Europe would boost localized demand. I think this is looking pretty likely. All of these considerations make us confident about the rubber segment heading into 2025.

Speaker Change: And with specialty recovering some carbon black industry capacity will shift from rubber back to specialty grades.

Speaker Change: Fourth the industry's recent EPA investments effectively reduced domestic industry capacity by a few percentage points.

Speaker Change: These emission control systems have outages and when they go down they usually take the entire plant with that.

Corning Painter: Fifth, as you know, shipping is now more expensive and less reliable. And finally, the potential for increased tariffs on imported tires in North America and Europe would boost localized demand. I think this is looking pretty likely.

Speaker Change: Fifth.

Speaker Change: As you know shipping is now more expensive and less reliable.

Speaker Change: And finally, the potential for increased tariffs on imported tires in North America, and Europe would boost localized demand I think this is like a pretty likely.

Corning Painter: All of these considerations make us confident about the rubber segment heading into 2025. Given this, we intend to build back inventories in the second half. This should improve our profit metrics, thanks to a confluence of operating leverage and better unit costs.

Speaker Change: All of these considerations make us confident about the rubber segment heading into 2025.

Corning Painter: Given this, we intend to build back inventories in the second half. This should improve our profit metrics thanks to a confluence of operating leverage and better unit costs. Now, while our rubber segment has done the heavy lifting in terms of our step change in EBITDA in recent years, we expect the specialty segment to continue to recover. Here, a broader end market recovery should enhance overall segment mix. When coupled with innovation-led growth, the specialty segment will be an important driver of Orion's medium-term growth trajectory. And without the need for meaningful additional growth capital, beyond the ongoing important investment.

Speaker Change: Given this we intend to build back inventories in the second half this should improve our profit metrics. Thanks to a confluence of operating leverage and better unit costs.

Corning Painter: While our rubber segment has done the heavy lifting in terms of our step change in EBITDA in recent years, we expect the specialty segment to continue to recover. Here, a broader end market recovery should enhance overall segment mix. When coupled with innovation-led growth, the specialty segment will be an important driver of Orion's medium-term growth trajectory without the need for meaningful additional growth capital beyond the ongoing LaPorte investment. Shifting gears, I want to discuss sustainability, where we believe we are misunderstood by the broader investment community.

Speaker Change: While our rubber segment has done the heavy lifting in terms of our step change in EBITDA in recent years, we expect the specialty segment to continue to recover.

Speaker Change: Here, a broader end market recovery should enhance overall segment mix.

Speaker Change: When coupled with innovation led growth the specialty segment will be an important driver of Ryan's medium term growth trajectory.

Speaker Change: And without the need for meaningful additional growth capital beyond the ongoing laporte invest.

Corning Painter: Shifting gears, I want to discuss sustainability, where we believe we are misunderstood by the broader investment community. Despite perceptions about industries like ours, we have made substantial progress on sustainability. From our perspective, we see opportunity here. Especially as our downstream customers increasingly strive for or have even made public commitments to circularity. In addition to considering the platinum rating we are in from Eco Vadiz, which places us in the 99th percentile, all companies having their sustainability programs evaluated. We hope you will take time to digest our latest Sustainability report. Ashley, a few noteworthy points here. We completed upgrades at all four of our U.S.

Speaker Change: Shifting gears I wanted to discuss sustainability, where we believe we are misunderstood by the broader investment community.

Corning Painter: Despite perceptions about industries like ours, we've made substantial progress. From our perspective, we see opportunity. Especially as our downstream customers increasingly strive for or have even made public commitments to circularity. In addition to considering the Platinum Rating we earn from EcoBuddy, which places us in the 99th percentile of all companies having sustainability programs of value, we hope you'll take time to digest our latest sustainability report published last, a few noteworthy.

Despite perceptions about industries like ours, we have made substantial progress on sustainability from our perspective, we see opportunity here.

Speaker Change: Especially as our downstream customers increasingly strive for or have even made public commitments to circularity.

Speaker Change: In addition to considering that platinum rating, we earned for an equal Moody's, which places us in the 99 percentile all companies having their sustainability program is a value.

Speaker Change: We hope you will take time to Digest, our latest sustainability report published last week.

Speaker Change: A few noteworthy points here.

Corning Painter: We completed upgrades at all four of our U.S. plants, well ahead of others completing their third. We were the first major industry player to produce carbon black from purely biocircular waste. During Q2, we made a small investment in a European tire recycling company, focused on scaling up production of tire pyrolysis oil, which will be dedicated to Orion and help commercially enable commercial-scale volumes of circular grades of carbon black. In South Africa, before it became, We proactively invested in state-of-the-art technology to process treated effluent water from a local wastewater treatment facility to repurpose that water for industrial use.

Speaker Change: We completed upgrades at all four of our U U S plants, well ahead of others completing their third plants.

Corning Painter: plans, well ahead of others completing their third plans. We were the first major industry player to produce carbon black from purely biocircular feed stocks. During Q2, we made a small investment in a European tire recycling company focused on scaling up production of tire pyrolysis oil, which will be dedicated to Orion and help in naval commercial scale volumes of circular grades of carbon black. In South Africa, before it became a crisis, we proactively invested in a state-of-the-art technology to process treated effluent water from a local waste water treatment facility to repurpose that water for industrial use.

Speaker Change: We were the first major industry player to produce carbon black from purely bio circular feedstocks.

Speaker Change: During Q2, we made a small investment in a European tire recycling company.

Speaker Change: Focused on scaling up production of tire pyrolysis oil, which will be dedicated to Orion and help commercial.

Speaker Change: Our help enable commercial scale volumes of circular grades of carbon black.

Speaker Change: In South Africa before it became a prices we proactively invested in a state of the art technology to process treated effluent water from a local wastewater treatment facilities to repurpose that water for industrial use this will help this water stressed community by reducing our use.

Corning Painter: This will help this water stress community by reducing our use of pollable water, improve our reliability, and reduce costs. And finally, the construction of our low emissions conductive carbon plant in aboard Texas is on track, start serving the battery and other growth markets in 2025. All of these efforts place Orion as an industry leader in striving commercially viable sustainable products. All considered, we feel confident in our foundation and our journey towards unlocking much greater inherent earnings power at Orion.

Corning Painter: This will help this water-stressed community by reducing our use of potable water, improve our reliability, and reduce costs. And finally, the construction of our low-emissions conductive carbons plant in La Porte, Texas, is on track to start serving the battery and other growth markets in 2025. All of these efforts place Orion as an industry leader in striving for commercially viable, sustainable products. All considered, we feel confident in our foundation and our journey towards unlocking much greater inherent earnings power at Orion. With that, I'll turn the call over to Jeff.

Speaker Change: Portable water improve our reliability and reduce costs.

Speaker Change: And finally, the construction of our low emission is conductive carbons plant in La Porte, Texas is on track start serving the battery and other growth markets in 2025.

Speaker Change: All of these efforts place Alliant as an industry leader is driving commercially viable sustainable products. All considered we feel confident in our foundation and our journey towards unlocking much greater inherent earnings power at Orion.

Jeff Klaik: With that, I'll turn the call over to Jeff. Thank you, Courtney, and good morning, everyone. Slide 8 covers the company financial results for the second quarter. Overall volumes improved 3% compared to last year. This was driven by a 17% recovery and specialty volumes, which more than offset a small decline in rubber volumes. The overall EBITDA performance compared to the prior year was negatively impacted by softer than expected rubber volumes, a lower cogeneration contribution, one-off benefits last year, timing issues, and negative absorption, namely that we did not build inventory as we had planned during the quarter.

Speaker Change: With that I'll turn the call over to Jeff.

Jeff Glajch: Thank you, Corning, and good morning, everyone. Slide 8 covers the company's financial results for the second quarter. Overall volumes improved 3% compared to last year. This was driven by a 17% recovery in specialty volumes, which more than offset a small decline in rubber volume. The overall EBITDA performance compared to the prior year was negatively impacted by softer-than-expected rubber volumes, a lower cogeneration contribution, one-off benefits from last year, timing issues, and Negative Absorption, namely that we did not build inventory as we had planned during the quarter.

Jeff: Thank you Gordon and good morning, everyone Slide eight covers the company's financial results for the second quarter.

Jeff: Overall volumes improved 3% compared to last year.

Jeff: This was driven by a 17% recovery specialty volumes, which more than offset a small decline in rubber volumes.

Jeff: The overall EBITDA performance compared to the prior year was negatively impacted by softer than expected rubber volumes.

Jeff: Lower cogeneration contribution one off benefits last year timing.

Jeff: Timing issues and negative absorption, namely that we did not build inventory as we had planned during the quarter.

Jeff Klaik: To provide a little more transparency on the second quarter, we had a strong April, but both May and June fell well short of expectations. On the slide 9, is the company's year-over-year EBITDA bridge, as I noted during our Q1 call, a more normalized earnings level for last year's second quarter was $80 million after adjusting for one-time items and the forward sale of power at elevated prices. You can see that both volume and price mix contributed positively overall. Timing issues primarily related to passive formulas and differentials, higher maintenance costs, a portion of which are intended to improve operating leverage over time, and cogeneration with a primary factor.

Jeff Glajch: To provide a little more transparency on the second quarter, we had a strong April, but both May and June fell well short of expectations. On to slide nine, which is the company's year-over-year EBITDA bridge. As I noted during our Q1 call, a more normalized earnings level for last year's second quarter was $80 million after adjusting for one-time items and the forward sale of power at elevated prices. You can see that both volume and price mix contributed positively overall. Timing issues primarily related to pass-through formulas and differentials

Jeff: To provide a little more transparency on the second quarter, we had a strong April but both may and June fell well short of expectations.

Jeff: On to slide nine.

Jeff: Is the company's year over year EBITDA bridge as I noted during our Q1 call a more normalized earnings level for last year's second quarter was $80 million. After adjusting for one time items and the forward sale of power at elevated prices.

Jeff: You can see that both volume and price mix contributed positively to overall timing.

Speaker Change: Timing issues, primarily related to pass through formulas and differentials.

Jeff Glajch: Higher maintenance costs, a portion of which is intended to improve our operating leverage over time, and cogeneration with the other primary factors. Slide 10 shows our rubber segments 2% year-over-year decline in volumes and an 8% sequential decline. As Corning referenced, inflation-driven consumer trade down in the passenger car tire market was a key contributor to the softer volumes, as well as weaker tire demand in a softer Chinese economy. The consumer trade down to lower tier brands and the related importation of lower quality tires from Southeast Asia represents a negative impact on Orion's customer mix in both North America and Europe.

Speaker Change: Higher maintenance costs, a portion of which are intended to improve.

Speaker Change: Operating leverage overtime.

Speaker Change: In cogeneration, where the primary other for the other primary factors.

Jeff Klaik: Slide 10 shows a rubber segment's 2% year-over-year decline in volumes and an 8% sequential decline. Wright. As Corning referenced, the inflation-driven consumer trade down in the passenger car tire market was a key contributor to the softer volumes, as well as weaker tire demand in a softer Chinese economy. The consumer trade down to lower tiered brands and the related importation of lower quality tires from Southeast Asia represents a negative impact for Orion's customer mix in both North America and Europe. Gross profit moderated just slightly, owing to the lower cojan, what was supported by the sturdiness of our supply agreements, which included higher year-over-year pricing.

Speaker Change: Slide 10 shows our rubber segments, 2% year over year decline in volumes and an 8% sequential decline.

Corning: As Corning referenced the inflation driven consumer trade down in the passenger car tire market was a key contributor to the softer volumes as well as weaker tire demand and a softer Chinese economy.

Corning: The consumer trade.

Corning: Trade down to lower tiered brands.

Corning: And the related importation of lower quality tires from southeast Asia represents a negative impact for orion's customer mix in both North America and Europe.

Jeff Glajch: Gross profit moderated just slightly, owing to the lower co-gen, but it was supported by the sturdiness of our supply agreements, which included higher year-over-year prices. We continue to expect full year gross profit per ton to exceed the 2023 level of $409.

Speaker Change: Gross profit moderated just slightly owing to the lower co. Gen. What was supported by the sturdiness of our supply agreements, which included higher year over year pricing.

Jeff Klaik: We continue to expect full year gross profit per ton to exceed the $2,023 level of $409.

Speaker Change: We continue to expect full year gross profit per ton to exceed the 2022 three level of $409.

Jeff Klaik: Slide 11 shows the EBITDA bridge for the driver business, which begins from a year-ago level that excludes one-time items and the benefit of the forward power sale. For this segment, you will see the volume, despite being lower, contributed slightly positively to EBITDA as a result of favorable geographic mix. Pricing was a more positive contributor year over year for selecting the annual improved annual contracts. The negative cojan contribution in this year's second quarter was a big factor in the rubber segment EBITDA bridge. Other costs include timing, higher maintenance, and inflation.

Yeah.

Jeff Glajch: Slide 11 shows Eva DeVridge for The Robert Business, which begins from a year-ago level that excludes one-time items and the benefit of the forward power sale. For this segment, you will see that volume, despite being lower, contributed slightly positively to Ibiza as a result of a favorable geographic mix. Pricing was a more positive contributor year over year, reflecting the improved annual contract. The negative co-gen contribution in this year's second quarter was a big factor in the rubber segment EBITDA bridge. Other costs include timing, higher maintenance, and inflation. Switching to slide 12.

Speaker Change: Slide 11 shows the EBITDA bridge for the rubber business.

Speaker Change: Which begins from a year ago levels that excludes one time items and the benefit of the forward power sales.

Speaker Change: For this segment you will see the volume despite being lower contributed slightly positively to EBITDA as a result of favorable geographic mix.

Speaker Change: Pricing was a more positive contributor year over year, reflecting the annual the improved annual contracts.

Speaker Change: The negative co Gen contribution in this year's second quarter was a big factor in rubbers, the rubber segment EBITDA bridge.

Speaker Change: Other costs include timing higher maintenance and inflation.

Jeff Klaik: Switching to slide 12, the volume strength that our specialty business, up 17% compared to last year's second quarter, reflected a broad-based demand recovery across essentially all geographic markets. Lower profitability metrics were a function of non-repeating benefits in last year's second quarter, as well as a lower cojan contribution and higher fixed cost. Reduced cojan, along with adverse absorption, contributed to the slight sequential declining gross profit.

Speaker Change: Switching to slide 12.

Jeff Glajch: The volume strength in our specialty business, up 17% compared to last year's second quarter, reflected a broad-based demand recovery across essentially all geographic markets. Lower profitability matrix metrics were a function of non-repeating benefits in last year's second quarter, as well as a lower cogent contribution and higher fixed costs. Lower co-gem, along with adverse absorption, contributed to the slight sequential decline in gross profit. Slide 13 shows the specialty segments year over year, even the bridge.

Speaker Change: The volume strength in our specialty business up 17% compared to last year's second quarter reflected a broad based demand recovery across essentially all geographic markets.

Speaker Change: Lower profitability matrix metrics were a function of not repeating benefits.

Speaker Change: In last year's second quarter.

As well as a lower cogent and contribution and higher fixed costs.

Speaker Change: Reduced co Jim along with adverse absorption contributed to the slight sequential decline in gross profit.

Jeff Klaik: Slide 13 shows the specialty segment year-over-year EBITDA bridge again from a more normalized year-ago level before one-time benefits. The big contributing here was a broad-based volume recovery, slightly skewed towards lower value markets. Higher cost this quarter will primarily adverse timing effects in contrast to last year's favorable timing effects.

Speaker Change: Slide 13 shows the specialty segment's year over year EBITDA bridge.

Jeff Glajch: Again, from a more normalized year-ago level before one-time benefits. The big contributor here was a broad-based volume recovery slightly skewed toward the lower value market. Higher costs this quarter were primarily adverse timing effects, in contrast to last year's favorable timing effects. On slide 14, we look at the year-to-date free cash flow, which was negative in the first half. This was partly due to a normal seasonal volume-driven working capital increase, as well as higher cash tax.

Speaker Change: Again from a more normalized year ago level before onetime benefits.

Speaker Change: The big contributor here was a broad based volume recovery slightly skewed towards lower value markets.

Speaker Change: Higher costs. This quarter were primarily adverse timing effects in contrast to last year's favorable timing effects.

Jeff Klaik: On the slide 14, we look at the year-to-date free cash flow, which was negative in the first half. This was partly due to normal seasonal volume driven working capital increase, as well as higher cash taxes. Because of the negative year-to-date free cash flow, our net leverage ratio is just above our targeted range. However, we are very comfortable with the absolute net debt level.

Speaker Change: On to slide 14, we look at the year to date cash year to date free cash flow, which was negative in the first half.

Speaker Change: This was partly due to normal seasonal volume driven working capital increase as well as higher cash taxes.

Jeff Glajch: Because of the negative year-to-date free cash flow, our net leverage ratio is just above our targeted range. However, we are very comfortable with the absolute net debt level. With that, I will turn the call back over to Corning. Thanks.

Speaker Change: Because of the negative year to date free cash flow our net leverage ratio is just above our targeted range.

Speaker Change: However, we are very comfortable with the absolute net debt level.

Corning Painter: With that, I will turn the call back over to Courtney.

Corning: With that I will turn the call back over to Corning.

Corning Painter: Thanks, Jeff. As conveyed previously, and I've shown in slide 15, we are reducing our full-year guidance to reflect Q2 results and a generally subdued full-year expectations for our rubber segment. Partially offset by better than previously projected specialty results.

Corning Painter: Thanks, Jeff. As conveyed previously, and as shown in slide 15, we are reducing our full-year guidance to reflect Q2 results and generally subdued full-year expectations for our rubber segment, partially offset by better-than-previously-projected specialty results. Our revised adjusted EBITDA guidance range is $315 to $330 million, and our revised EPS guidance range is adjusted commensurately. However, our effective tax rate assumption is marginally higher, a function of the jurisdictional mix of our earnings.

Corning: Thanks, Jeff as conveyed previously and as shown in slide 15, we are reducing our full year guidance to reflect Q2 results and a generally subdued full year expectations for our rubber segment, partially offset by better than previously projected specialty results.

Corning Painter: Charles. Our revised adjusted EBITDA guidance range is $315 to $330 million, and our revised EPS guidance range is adjusted commensurately. Our effective tax rate assumption is marginally higher, a function of the jurisdictional mix of our earnings this year. We still expect capital expenditures of about $200 million this year, including the increase in maintenance capital that we've talked about. A continued progress on the Greenfield investment in conductive carbons in Lecourt, Texas. At a high level, our revised guidance range reflects expectations that rubber demand improves modestly from Q2 levels based on some encouraging market indicators and signals from certain customers.

Corning: Our revised adjusted EBITDA guidance range is $315 million to $330 million and our revised EPS guidance range is adjusted commensurately.

Corning: Our effective tax rate assumption is marginally higher a function of the jurisdictional mix of our earnings this year.

Corning Painter: We still expect capital expenditures of about $200 million this year, including the increase in maintenance capital that we've talked about, Continued Progress on the Greenfield Investment in Conductive Carbons in La Porte. At a high level, our revised guidance range reflects expectations that rubber demand improves modestly from Q2 levels, based on some encouraging market indicators and signals from certain customers. The rubber segment's profitability should exhibit resilience with fixed-cost absorption improvement. We do not provide quarterly guidance, but note that our rubber segment should not exhibit as much Q4 seasonality as appeared to be the case in each of the last three years, when EPA project tie-ins weighed heavily on those results in those periods.

Corning: We still expect capital expenditures of about $200 million this year, including the increase in maintenance capital that we've talked about our continued progress on the Greenfield investment in conductive carbons in La Porte, Texas.

Corning: At a high level, our revised guidance range reflects expectations that rubber demand improves modestly from Q2 levels based on some encouraging market indicators and signals from certain customers. The rubber segments profitability should exhibit resilience with fixed cost absorption improvement.

Corning Painter: The rubber segments profitability should exhibit resilience, with fixed cost absorption improving. We do not provide quarterly guidance but note that our rubber segment should not exhibit as much Q4 seasonality as it appeared to be the case in each of the last three years when EPA projections weighed heavily on those results in those periods. The specialty segment is expected to see continued year-over-year profit growth thanks to end market demand recovery, the absence of downstream destocking in certain end markets, and relatively easy year-ago comparisons. We anticipate some sequential profit per ton improvement driven by favorable mix as demand for higher value products should recover disproportionately, and thanks to the commercial ramp of newly qualified specialty products.

We do not provide quarterly guidance, but note that our rubber segment should not exhibit as much Q4 seasonality is appeared to be the case in each of the last three years with each EPA project tie ins weighed heavily on those results in those periods.

Corning Painter: The specialty segment is expected to see continued year-over-year profit growth thanks to end-market demand recovery, the absence of downstream to stockpile in certain end markets, and relatively easy year-ago comparisons. We anticipate some sequential profit per ton improvement driven by favorable mix as demand for higher value products should recover disproportionately, and thanks to the commercial ramp of newly qualified specialty products. Looking forward, our mid-cycle adjusted EBITDA capacity goal of $500 million is on track.

Corning: The specialty segment is expected to see continued year over year profit growth. Thanks to end market demand recovery.

Corning: Absent a downstream destocking in certain end markets and relatively easy year ago comparisons.

Corning: We anticipate some sequential profit per ton improvement driven by favorable mix as demand for higher value products should recover disproportionately and thanks to the commercial ramp of newly qualified specialty products.

Corning Painter: Looking forward, our mid-cycle adjusted EBITDA capacity goal of $500 million is on track. At mid-cycle conditions, we would expect about 150 KT of higher rubber and 20 to 30 KT of higher specialty volumes contributing 60 to 75 and 20 to 30 million incremental dollars, respectively. Beyond that, we expect 20 to 30 million dollars of further mix and productivity. We believe there is 20 million dollars of upside from YBA as we work through the issues there. The addition of 40 to 45 million dollars of EBITDA potential from report gets us there. On slide 16 and before factoring in the resumption of buyback activity, we continue to see free cash flow being positive in 2024.

Corning: Looking forward, our mid cycle EBITDA adjusted EBITDA capacity goal of $500 million is on track.

Corning Painter: At mid-cycle conditions, we would expect about $150KT of higher rubber and $20-30KT of higher specialty volumes, contributing $60-75 and $20-30 million in incremental dollars, respectively. Beyond that, we expect $20 to $30 million of further mix and productivity. We believe there is $20 million of upside from YBay as we work through the issues there. The addition of $40 to $45 million of EBITDA potential from Laporte is shown on slide 16. And before factoring in the resumption of buyback activity, we continue to see free cash flow positive in 2024.

Corning: At mid cycle conditions, we would expect about 150 kt of higher rubber and 20% to 30 Kt of higher specialty volumes contributing 60% to 75% 20 to 30 million incremental dollars respectively.

Corning: Beyond that we expect $20 million to $30 million, a further mix and productivity. We believe there is $20 million of upside from why bay as we work through the issues. There. The addition of 40% to $45 million of EBITDA potential from Laporte gets us there.

Corning: On slide 16, and before factoring in the resumption of buyback activity, we continue to see free cash flow being positive in 2024.

Corning Painter: Although the absolute level of free cash flow will be lower than our previous expectations because of the reduced EBITDA level, as well as the slightly higher working capital draw and cash taxes.

Corning Painter: Although the absolute level of free cash flow will be lower than our previous expectations because of the reduced EBITDA level, as well as the slightly higher working capital draw and cash tax. As mentioned earlier, Slide 5 offered some directional expectations for CAPEX over the next couple of years. We have no intent to allocate capital to Greenfield Rubber or the Brownfield Expansion Project.

Corning: Although the absolute level of free cash flow will be lower than our previous expectations because of the reduced EBITDA level as well as the slightly higher working capital draw and cash taxes.

Corning Painter: As mentioned earlier, Slide 5 offered some directional expectations for CAPEX over the next couple of years. We have no intent to allocate capital to green field rubber or ground field expansion projects. As we mentioned, we will likely want to ramp the report before considering another significant green field investment in specialty. Other growth opportunities we envision over the next couple of years are capital-like. Therefore, we expect to have significant free cash flow over that period.

Corning: As mentioned earlier slide five offered some directional expectations for Capex over the next couple of years, we have no intent to allocate capital to Greenfield rubber or brownfield expansion projects. As we mentioned, we will likely want to ramp la Porte before considering another significant greenfield investment.

Corning Painter: As we mentioned, we will likely want to ramp Laporte before considering another significant greenfield investment in special. Other growth opportunities we anticipate over the next couple years are capital-like. Therefore, we expect to have significant free cash flow over that period. Our maintenance CAPEX will be targeted at pieces of equipment or unit operations that are problematic and / or have exceeded their useful life. This spending should lower maintenance costs going forward, resulting in improved plant reliability and better throughput. Our effective capacity has declined over the years because of the business's legacy of having been deprived of maintenance capital.

Corning: Specialty.

Corning: Other growth opportunities, we envision over the next couple of years, our capital light. Therefore, we expect to have significant free cash flow over that period.

Corning Painter: David. Our maintenance capex will be targeted on pieces of equipment or unit operations that are problematic and/or have exceeded their useful life. This spending should lower maintenance costs going forward, improve plant reliability, and better throughput. Our effective capacity has declined over the years because of the business's legacy of having been deprived of maintenance capital. This is one of the reasons why improving pricing is fair and something to be built upon. Based on reasonable EBITDA growth expectations over a multi-year horizon, a stable maintenance capital spent, and with declining growth and discretionary capex in each of the next two years, we expect a significant improvement in our free cash flow, which should be much stronger in 25 and then still higher in 2026.

Corning: Our maintenance Capex will be targeted on pieces of equipment are unit operations that are problematic <unk> have exceeded their useful life.

Corning: This spending should lower maintenance costs going forward.

Improve plant reliability and better throughput.

Corning: Our effective capacity has declined over the years because of the businesses legacy of having been deprived of maintenance capital. This is one of the reasons why improving pricing is fair and something to be built upon.

Corning Painter: This is one of the reasons why improving pricing is fair and something to be built upon. Based on reasonable EBITDA growth expectations over a multi-year horizon, a stable maintenance capital spend, and with declining growth and discretionary capex in each of the next two years, we expect a significant improvement in our free cash flow, which should be much stronger in 2025 and then still higher in 2020. Considering our share price, we continue to see our stock as undervalued.

Corning: Based on reasonable EBITDA growth expectations over a multiyear horizon, a sustainable maintenance capital spend and with declining growth and discretionary capex in each of the next two years, we expect a significant improvement in our free cash flow, which should be much stronger in 'twenty five and.

Corning: Still higher in 2026.

Corning Painter: Considering our share price, we continue to see our stock is undervalued. Given the confidence and the carbon-black industry's fundamentals, our competitive position, prospects for 25, as well as our overall strategy moving forward, we see share repurchases occurring valuations as approved use of capital.

Corning: Considering our share price, we continue to see our stock is undervalued given the confidence in the carbon black industry fundamentals, our competitive position prospects for 25 as well as our overall strategy moving forward, we see share repurchases at current valuations is a prudent use of capital.

Corning Painter: Given the confidence in the carbon black industry's fundamentals, our competitive position, prospects for 25, as well as our overall strategy moving forward, we see share repurchases at current valuations as a prudent use of capital. With that, we'll turn it back over to Satya for Q&A. Thank you.

Operator: With that, we'll turn it back over to statue for Q&A. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we pull for questions.

Corning: With that we'll turn it back over to Staci for Q&A. Thank you.

Corning: Yeah.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Thank you we will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.

Speaker Change: Participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we pull for questions. The first question is from Josh Spector from UBS. Please go ahead.

Speaker Change: One moment, please while we poll for questions.

Joshua Spector: The first question is from Josh Specter from UBS.

Speaker Change: The first question is from Josh Spector from UBS. Please go ahead.

Unknown Executive: Please go ahead.

Chris Perella: Good morning, everyone. It's Chris Perella on for Josh. A question, I guess, on the volume cadence in the second half of the year with things being softer. Do you see volumes down in the fourth quarter for both specialty and rubber, and how should we deal with that?

Unknown Executive: Good morning, everyone. It's Chris Porella on for Josh. It's a question, I guess, on the volume cadence in the second half of the year with things being softer. Do you see volumes down in the fourth quarter for both specialty and rubber? How should we think about that?

Speaker Change: Good morning, everyone, It's Chris Perrella on for Josh Quest.

Chris Perrella: Question I guess on the the volume cadence in the second half of the year with things being softer do you see volumes down in the fourth quarter for both specialty and rubber how should we think about that.

Corning Painter: So, looking forward, first thing I'd say is July was on track for us and a bit of recovery, especially I'd say, rubber. It's only one month, but it was an improvement.

Corning Painter: So looking forward, the first thing I'd say is July was on track for us and a bit of a recovery, especially, I'd say, in rubber. It's only one month, but it was an improvement. We would expect some seasonality in Q4, but just not as much as we've seen in the past, given the absence of COVID and a big EPA-style high-end investment. Does that answer your question, Chris

Speaker Change: So looking forward first thing I'd say is July was.

Speaker Change: On track for us and a bit of a recovery, especially I would say in rubber it's only one month, but it was an improvement.

Unknown Executive: We would expect some seasonality still in queue four, but just not as much as we've seen in the past, given the absence of a big EPA style. Is that fine, Gary? Does that answer your question, Chris?

Speaker Change: We would expect some seasonality still in Q4, but just not as much as we've seen in the past given the absence of.

Speaker Change: A big EPA style high and at that time.

Speaker Change: Does that answer your question, Chris Yeah, Yeah, and then I just had a follow up on the cash flow and the buybacks given the inventory build and sort of the absence of sort of working capital how do you opportunistically balanced the buybacks and what did you guys increase leverage a little bit.

Jeff Klaik: Yeah, yeah, and then I just had a follow-up on the cash flow in the buybacks, given the inventory builds and sort of the absence of working capital.

Chris Perella: Yeah, yeah, and then I just had a follow-up on the cash flow and the buybacks. Given the inventory build and sort of the absence of working capital, how do you opportunistically balance the buybacks? And would you guys increase leverage a little bit to do some of those opportunistically in the second half?

Jeff Klaik: How do you opportunistically balance the buybacks, and would you guys increase leverage a little bit to do some of those opportunistically in the second half?

Speaker Change: To do some of those opportunistically in the second half.

Jeff Glajch: Hey Chris, this is Jeff. Yeah, we would be willing to have a slight increase in leverage if we needed to do that, but it's not that meaningful an impact both on an absolute and on a leverage ratio basis.

Jeff Klaik: Chris, this is Jeff. Yeah, we would be willing to have a slight increase in leverage if we needed to do that, but it's not that meaningful, and in fact, both on an absolute and on a leverage ratio basis.

Speaker Change: Hey, Chris This is Jeff Yeah, we would we would be willing to have a slight increase in leverage if we needed to do that but it's not that meaningful an impact both on an absolute amount.

Speaker Change: Leverage ratio basis.

Chris Perella: are okay. And then I guess one more question: what were the maintenance costs for the second quarter, and will that subside in the third and fourth quarters, kind of like what were those one-off maintenance upgrades that you guys talked about?

Unknown Executive: Okay, and then I guess one more. I guess what were the maintenance costs in the second quarter that, and do you, will that subside in the third and fourth quarter?

Chris: Okay, and then I guess, one more I guess what were the maintenance costs.

Chris: In the second quarter that and do you well that subside in the third and fourth quarter kind of what were those one one off maintenance upgrades that you guys talked about.

Corning Painter: Kind of what were those one-off maintenance upgrades that you guys talked about? Yeah, we had simply planned more maintenance in the first and second quarter. Of course, that was in our guidance. But we also had some unplanned maintenance in the second quarter. We have less planned maintenance going forward. We expect less unplanned maintenance going forward. So things like, you know how the change out of that filtering system, we did a lot of other maintenance at the same time, why we had the downtime. That's the kind of thing that can make one quarter higher than, and that's the kind of thing that can make one quarter higher than the third quarter.

Corning Painter: Yeah, we had simply planned more maintenance in the first and second quarter. Of course, that was in our guidance.

Speaker Change: Yes, we had simply planned more maintenance in the first and second quarter of course that was in our guidance, but we also had some unplanned maintenance in the second quarter, we have less planned maintenance going forward, we expect less unplanned maintenance going forward, so things like <unk>.

Corning Painter: But we also had some unplanned maintenance in the second quarter. We have less planned maintenance going forward. We expect less unplanned maintenance going forward. So things like, in Ohio, the change out of that filtering system; we did a lot of other maintenance at the same time, which is why we had the downtime. That's the kind of thing that can make one quarter higher than another.

Speaker Change: The Ohio, the change out of that filtering system, we get a lot of other maintenance at the same time why we had the downtime that's the kind of thing that can make one quarter higher than another.

Chris Perella: Is there a way to quantify the kind of unplanned maintenance impact?

Unknown Executive: Is there a way to quantify kind of the unplanned maintenance impact? I'd say we're, you know, in let's say two to three million in the quarter. Okay, thank you very much. I appreciate that. You're welcome.

Speaker Change: Is there a way to quantify kind of the unplanned maintenance impact.

Jeff Glajch: I'd say we're in, you know, in, let's say, two to three million in the quarter.

Speaker Change: I'd say, we're in let's.

Speaker Change: Let's say $2 million to $3 million in the quarter.

Chris Perella: Okay, thank you very much. I appreciate that.

Speaker Change: Okay. Thank you very much I appreciate that.

Speaker Change: Yes.

Lawrence Alexander: The next question is from Lawrence Alexander from Jeffries. Let's go ahead. Hi, good morning.

Operator: The next question is from Lawrence Alexander from Jeffreys. Please go ahead. Hi, good morning.

Speaker Change: The next question is from Laurence Alexander from Jefferies. Please go ahead.

Corning Painter: Just in terms of strength or relative strength and specialty, are there any end markets that are kind of doing better than others, anything that's outperforming, anything that's underperforming? Sure. By Product.

Dan Rizzo: Hi, good morning. This is Dan Rizzo on behalf of Lawrence.

Dan Rizzo: This is Dan Rizzo on for Lawrence. I just in terms of to the strength of the relative strength and specialty. Is there any end markets that are kind of doing better than others, anything that's outperforming anything that's underperforming?

Dan Rizzo: Hi, Good morning. This is Dan Rizzo on for Laurence just in terms of the strength the relative strength in specialty is there any end markets that are kind of doing better than others anything that's outperforming anything that's underperforming.

Corning Painter: By sure. Again, product. Yeah. Um, so the coatings area has been relatively strong. That's more than just automotive, but I'd say in general, coatings as well.

Speaker Change: And for sure, but again product.

Yeah.

Corning Painter: So the coatings area has been relatively strong. That's more than just automotive, but I'd say in general coatings as well. We speak of polymers, but polymers is a really broad market. So let me say some of the lower value areas in that area. Master Batch going into those applications was strong for us. On a relative basis, actually, ink was a little bit stronger than usual. So those were a couple areas that looked good in that quarter. I just caution people; there's some movement quarter to quarter where we see that buying.

Speaker Change: So the coatings area has been relatively strong as more than just automotive, but I'd say in general coatings as well we speak of polymers polymers is a really broad markets. Let me say some of the lower value areas in that area master batch going into those applications was strong for us.

Corning Painter: We speak of polymers. The polymers is a really broad market. So let me say some of the lower value areas in that area. Master batch going into those applications was strong for us on a relative basis. Actually, it was a little bit stronger than usual. So those were a couple areas that looked good in that quarter. I just caution people. There's some movement quarter quarter where we see that buying activity. Okay.

Speaker Change: On a relevant basis actually Inc was a little bit stronger than usual. So those were a couple of areas.

Speaker Change: Looks good in that quarter I, just caution people theres, some movement quarter to quarter, where we see that the buying activity.

Dan Rizzo: Okay, and then, do you publish or release what your capacity utilization is in Rubber Black for you guys, and what do you think it is for the industry?

Speaker Change: Okay, and then could you I mean do you publish or at least what your capacity utilization isn't rubber black for you guys and what do you think it is for the industry.

Corning Painter: And then do you, I mean, do you publish or release what your capital utilization is in rubber black for you guys and what do you think it is for the industry? We don't speak for the industry. There is some third party data you could go for, but we were in, let's say, mid 70s. Okay, that's relatively low compared to where we would see mid cycle for sure, but with the current conditions, that's where we were. Would you consider mid cycle like mid 80s or higher? I mean, I think we've seen up to like mid 90s in the past.

Corning Painter: We don't speak for the industry, but there is some third-party data you could go for, but we were in, let's say, the mid-70s. So that's relatively low compared to where we would see it mid-cycle for sure, but with the current conditions, that's where we were.

Speaker Change: We don't speak for the industry. There is some third party data that you could go for it but we were in lets say.

Speaker Change: Mid seventies.

Speaker Change: So that is relatively low compared to where we would see mid cycle for sure but with the current conditions, that's where we were.

Dan Rizzo: Would you consider mid-cycle like the mid-80s or higher? I mean, I think we've seen up to the mid-90s in the past, if memory serves, I mean, going back a couple years.

Speaker Change: Would you consider mid cycle like like mid eighties, or higher I mean, I think we've seen up to like mid ninety's in the past if memory serves I mean going back a couple of years.

Corning Painter: If memory serves, I mean, going back a couple of years. Yeah, no, I think mid 90s, if you compare it to name plate, would be really hard for this industry. Maybe it's going to have to for others. No, I would expect to get it in the high upper 80s kind of area. So say, five to 90 in that range. All right.

Corning Painter: Yeah, no, I think mid-90s, if you talk compared to nameplate, would be really hard for this industry. Maybe it's going to catch up for others. No, I would expect to get it in the... High, upper 80s kind of area, so say 85 to 90 on that.

Speaker Change: Yeah, No I think mid Ninety's, a few tough compared to nameplate would be really hard for this industry maybe is cash.

Speaker Change: Catch up for others, no I would expect to get it in the.

Speaker Change: Hi, upper eighties kind of area. So it's 85 to 90 in that range Gotcha alright. Thank you very much to be clear, we were like a little bit below exactly midpoint in the seventies, so theres substantial leverage for us there.

Operator: Be clear, we were a little bit below exactly midpoint in the 70s, so you know there's substantial leverage for us there.

Unknown Executive: Thank you very much. We were like a little bit below exactly mid point in the 70s. So you know, there's substantial leverage for us there. Okay.

Unknown Executive: Thank you. You're welcome.

Speaker Change: Okay. Thank you.

Speaker Change: Youre welcome.

John 101 Tag: The next question is from John 101 tag from CJS Securities. Please go ahead. Hi, good morning. Thank you for taking my questions. I was wondering if you could give us a little more color or maybe a snapshot of the economics of tire imports versus domestic production. How, you know, how that changes as higher shipping costs maybe flow through supply chains and inventories. And if you think that's going to change a consumer mind at all, or if that's not going to matter, just given, you know, maybe imports may try to push through more volume ahead of what might be, you know, tariffs on that kind of stuff.

Operator: The next question is from John Tanwanteng from CJS Securities. Please go ahead.

Speaker Change: The next question is from John 10, one tag from P. J S Securities. Please go ahead.

John Tanwanteng: Hi, good morning. Thank you for taking my questions. I was wondering if you could give us a little more color or maybe a snapshot of the economics of tire imports versus, you know, domestic production, how, you know, how that changes as higher shipping costs maybe flow through supply chains and inventories, and if you think that's going to change consumer minds at all, or if that's not going to matter just given, you know, maybe importers may try to push through a more volume, you know, ahead of what might be, you know, tariffs on that kind of.

Speaker Change: Hi, Good morning. Thank you for taking my questions. I was wondering if you could give us a little more color on maybe a snapshot of the economics of tire imports versus domestic production.

Speaker Change: You know how that changes as higher shipping costs, maybe flow through supply chain and inventory and if you think that's going to change consumer minds at all.

Speaker Change: Or if that's not going to matter just given you know maybe importance I may try to push through.

More volume and you know that ahead of what might be.

Speaker Change: Tariffs on that kind of stuff.

Corning Painter: Sure.

Corning Painter: Sure. Maybe just an anecdotal story. There's a young person in our lives, not a direct child of ours, but in their early 20s, getting started in life, and they have a lot of issues with their vehicle. And they went to get it inspected, which meant they had to then go get some new tires. And they recounted how the tire salesperson said, you know, I'll sell you the same tire if you really, really want it. But if you would spend like $10 or $15 more, you can get a way better tire. And I mean, I think that conversation is playing out.

Sure maybe just an anecdotal story there as a young person in our lives not not a child of ours, but early 'twenty is getting started in life and a lot of issues with their vehicle and they went to get inspected which meant they had to then go get some new tires and are they recounted how the tire sales person.

Corning Painter: Maybe just an anecdotal story. There's a young person in our lives, not a direct child of ours, but early 20s getting started in life. And a lot of issues with their vehicle, and they went to get it inspected, which meant they had to then go get some new tires. And they recounted how the tire salesperson said, "You know, I'll sell you the same tire if you really, really want it." But if you would spend like $10 or $15 more, you can get a way better tire. And I mean, I think that conversation is playing out.

That said you know I'll tell you the same tire if you really really want it but if he would spend like 10 or $15 more you can get a way better tire and I mean, I think that conversation is playing out and that ultimately gets people to <unk>.

Corning Painter: And that ultimately gets people to a value proposition that's, you know, a little bit more of a long-term one as people get used to the inflation and wage growth improves and so forth relative to that as we see inflation coming down. In general, I think what you see is really low-value import tires coming through as we see tariffs coming in. It means that to hit the same competitiveness point, you have to go to even cheaper, lower value, less reliable tires. Or I think what we're going to see is just consumer sentiments moving back towards, you know, the higher value, really lower cost of ownership product.

Corning Painter: And that ultimately gets people to a value proposition that's, you know, a little bit more of a long term, as people get used to the inflation and wage growth, the improves and so forth relative to that is just to see inflation coming down. In general, I think what you see is really low value import tires coming through as we see tariffs coming in. It means you'll hit the same competitiveness point. You have to go to even cheaper, lower value, less reliable tires.

Speaker Change: <unk> proposition, that's a little bit more of a long term as people get used to the inflation and wage growth improves and so forth relative to that as we see inflation coming down.

In General I think what you see is really low value import tires coming through as we see tariffs coming in it means they have to hit the same competitiveness point you have to go to even cheaper lower value less reliable tires or I think what we're going to see is just consumer sentiment moving back towards the higher value.

Corning Painter: Or I think what we're going to see is just consumer sentiments moving back towards, you know, the higher value, really lower cost of ownership products. Scott.

Speaker Change: Really lower cost of ownership product.

Corning Painter: Got it. And to be clear, are you expecting on the trucking and manufacturing side improvements through 24 and 25, just given some uncertainty in the macro here that's appearing to crop up? Yeah, and you look at the FreightWaves data. It certainly suggests that we bottomed and we're coming up. You know, we're beyond even the second derivative; the first derivative is improved, but like there's a long way to go. So we see that coming. I think the data speaks for itself, and that right now that's a gradual improvement, but it does look to be improvement.

John Tanwanteng: Got it. And to be clear, are you expecting improvements on the trucking and manufacturing side through 24 and 25, just given some uncertainty in the macro here? That's appearing to crop up.

Speaker Change: Got it and to be clear are you expecting on the.

Speaker Change: The trucking and manufacturing site improvements through 'twenty, four and 'twenty five just given some uncertainty in the macro here.

Speaker Change: Turning to crop up.

Corning Painter: Yeah, if you look at the freight wage data, it certainly suggests that we bottomed and we're coming up. You know, we're beyond even the second derivative. The first derivative is better, but, like, there's a long way to go. So we see that coming. I think the data speaks for itself in that right now, it's a gradual improvement, but it does look to be improving.

Speaker Change: If you look at the freight wage data. It certainly suggests that we bottomed and we're coming up we're.

Speaker Change: Beyond even the second derivative is the first derivative has improved but like there's a long way to go so we see that coming.

Speaker Change: I think the data speaks for itself in that right now that's a gradual improvement, but it does look good.

Corning Painter: Okay, and then finally just in terms of capacity and how you're positioning it, are you more likely to be switching rubber reactors to specialty as that trajectory continues to improve, or is there a change in the expectation there? Well, we'll see if this plays out during the course of the year, and we'll put effectively rubber and specialty business in competition for our reactor hours. And we'll see how that goes. But my point would be if there is softness on going in rubber, I don't think there will be for all the things I said. That would certainly give you a place to move it, but also beyond that, just simply rubber even improving specialty improving at the same time as we're seeing means just natural.

John Tanwanteng: Okay, and then finally, just in terms of capacity and how you're positioning it, are you more likely to be switching rubber reactors to specialty as that trajectory continues to improve, or is there a change in expectations?

Okay, and then finally, just in terms of capacity and how you're positioning. It are you more likely to be switching rubber reactors to specialty is that trajectory continues to improve or is there a change in the expectation there.

Corning Painter: Well, we'll see as this plays out during the course of the year, and we'll put effectively rubber and specialty businesses in competition for our reactor hours, and we'll see how that goes. But my point would be, if there is softness ongoing in rubber, I don't think there will be for all the things I said. That would certainly give you a place to move it. But also beyond that, just simply rubber even improving, specialty improving at the same time, as we're seeing, means it's just natural that some of that allocated capital or that capacity is going to be reallocated and tighten up the rubber market as well.

Speaker Change: Well, we'll see as this plays out during the course of the year and we will put effectively rubber and specialty business and competition for our reactor hours and we will see how that goes but my point would be if there is softness ongoing and Robert I don't think there will be for all of the things I said.

Alex: That would certainly give you a place to move it but also beyond that just simply rubber even improving specialty improving at the same time as we're seeing means it's just natural some of that Alex capital or that capacity is going to be reallocated and tighten up the rubber market as well.

John 101 Tag: Some of that allocator capital or that capacity is going to be reallocated, and tight enough the rubber market as well. Got it. Thanks, Owen. I'll jump back in. Thank you. Thanks, John.

John Tanwanteng: Got it. Thanks, Corning. I'll jump back in the queue.

Alex: Got it thanks, Darren ill jump back in queue.

Sean: Thanks, Sean.

John Roberts: The next question is from John Roberts from Misiho. Please go ahead. Thanks, John Roberts.

Operator: The next question is from John Roberts from Mizuho. Please go ahead.

Sean: The next question is from John Roberts from Mizuho. Please go ahead.

John Roberts: Thanks, John Roberts. I'm looking at the chart on slide 12, so it sounds like gross profit per ton for specialties has bottomed. I think you said it's going to be up sequentially, but it sounded like mixed, not really price broad spread improving. We're a long ways from where we were, you know, a little more than a year ago, so how do we get the margin to go back up materially here?

Thanks, John Roberts on for John Roberts.

John Roberts: I'm from John Roberts. I'm looking at the chart on slide 12. So it sounds like gross profit per tonne for specialty says bottomed. I think you said it's going to be up sequentially, but it sounded like mixed, not really bright, broad, bread improving. We're a long way from where we were a little more than a year ago.

[laughter].

John Roberts: I'm looking at the chart on slide 12, so it sounds like gross profit per ton for specialties has bottomed I think you said, it's going to be up sequentially, but it sounded like mix not really broad spread improving.

Speaker Change: We're a long ways from where we were.

Speaker Change: A little more than a year ago. So whats how do we get the margin to go back up up materially here do you have a lot of price increases going on and we're just going to slowly grind up with mix.

Jeff Klaik: So how do we get the margin to go back up material here? Do you have a lot of price increases going on, or we're just going to slowly grind up with mixed?

Jeff Glajch: Hey, John, Jeff. A couple of things. If you're looking at the trailing 12 months number, first off, you've got a pretty rough Q4 2023 in there, which is kind of dragging it down. That's the first thing.

Jeff Klaik: Hey, John.

Jeff Klaik: Jeff, a couple of things. If you're looking at the trailing 12 months number. First off, you've got a pretty rough Q4 2023 in there, which is kind of dragging it down. That's something the first thing. Second thing is the last two quarters; this past quarter has been above that. That's actually last two quarters have been above that, the 609 number. So we would expect that we'll turn up in Q3, and certainly by Q4, we should see a meaningful turn up. I think we talked last call about our expectation for the GP per tonne for specialty to be somewhere in the 650 to 700 range, which we would be in if it wasn't for that one really rough quarter in Q4, which was under 500.

Jeff: Hey, John Jeff.

Jeff: Couple of things if you're looking at the trailing 12 months number first off you've got a pretty rough Q4, 2023 in there which is kind of dragging it down.

Jeff Glajch: Second thing is the last two quarters; this past quarter has been above that. The last two quarters have been above that 609 number. So we would expect that to turn up in Q3. And certainly, by Q4, we should see a meaningful turnover. I think we talked last call about our expectation for the GP per ton per specialty to be somewhere in the 650 to 700 range, which we would be in if it wasn't for that one really rough quarter in Q4, which was under 500. So you should absolutely be seeing that turning up as we go through the rest of the year.

Speaker Change: The first thing second thing is the last two quarters.

Jeff: Last quarter has been above that extra last two quarters have been above that.

Jeff: 609 number so we would expect that we will turn up.

Jeff: In Q3, and certainly by Q4, we should see a meaningful turn it up I think we talked last.

Jeff: Calls about our expectation for the GP per ton for specialty to be somewhere in the $6 50 to 700 range, which we would be and if it wasn't for that one really rough quarter in Q4, which was under 500. So you should you should absolutely be seen that turning up.

Jeff Klaik: So you should absolutely be seeing that turning up as we go through the rest of the recovery to get back towards a 900ish number. I don't think we view the 900 number as a kind of a normal number. That had a pretty significant positive impact from co-gen if you look back into the 2022 and the first part of 2023. So I don't think we would expect to see that. And I think also if you go back a year or so when we saw our volume dip in 22 and early 23, what we saw dipping was some of the lower-end specialty products.

Jeff: The rest of the year.

Jeff Glajch: And we need a much stronger volume recovery to get back towards a 900-ish number. But having said that, I don't think we view the 900 number as any kind of normal number. That had a pretty significant positive impact on Cogen if you look back at 2022 and the first part of 2023. So I don't think we would expect to see that. And I think also, if you go back a year or so, when we saw our volumes dip in 2022 and early 23, what we saw dipping were some of the lower-end specialty products.

Jeff: And we need a much stronger volume recovery to get back towards the 900 ish number.

Jeff: That had.

Jeff: I don't think we view the 900 number is a as a kind of a normal number that had a pretty significant.

Jeff: Positive impact from co. Gen. If you look back at 2022 and the first part of 2023. So I don't think we would expect to see that and I think also if you go back a year or so when we saw our volumes dip in 'twenty two in early 'twenty three what we saw dipping with some of the lower end.

Speaker Change: Specialty products and as Corning mentioned, a few minutes ago, where we've seen a pickup which is good it's been in some of the lower in the polymer area. Some of the lower value master batch and either the coatings pick up that we have seen has been a little bit the lower end of coatings. So I don't think we don't.

Jeff Glajch: And as Corning mentioned a few minutes ago, where we've seen a pickup, which is good, has been in some of the lower-value master batch. And even the coatings pickup that we have seen has been a little bit in the lower end of coatings. So I don't think the 900 number is kind of a sustainable number. Not that we wouldn't strive for it. But I think realistically, you know, this year we're thinking 650 to 700. Then, perhaps, there's some upside to that as we look forward, but probably not to that 900 level.

Jeff Klaik: And as Courtney mentioned a few minutes ago, where we've seen a pickup, which is good, has been in some of the lower in the polymer area, some of the lower value master batch. And even the coatings pickup that we have seen has been a little bit lower end of coating. So I don't think that 900 number is kind of a sustainable number, not that we wouldn't strive for. But I think realistically this year we're thinking 650 to 700. There perhaps is some upside to that as we look forward, but probably back to that 900 level.

Speaker Change: We believe that 900 number is a as kind of a sustainable number and not that we wouldnt strive for but I think realistically. This year, we're thinking $6 50 to 700 that perhaps there's some upside to that as we look forward, but probably not to that 500 level.

Corning Painter: Thank you. Thanks, John.

Jeff: Great. Thank you.

John Roberts: Thanks, John.

Corning Painter: May I just build on that? So, we don't see an upper limit on what can be as we drive innovation and upgrade reactors and so forth; we can still move that on. It wasn't really obvious at the time where European electricity prices were going to land. They've come down significantly, and so that part of the co-generation story has been difficult there. And just keep in mind, because of the relatively small bond volume of specialty, we're not prepared to rubber. A movement in power prices is a much bigger impact on the GP for ton for specialty than in rubber.

Corning Painter: May I just build on that? So, we don't see an upper limit on what can be. As we drive innovation and upgrade reactors and so forth, we can still move that on. It wasn't really obvious at the time where European electricity prices were going to land. They've come down significantly, and so that part of the cogeneration story has been difficult in China. And just keep in mind, because of the relatively small volume of specialty, we're not compared to rubber. A movement in power prices has a much bigger impact on the GP per ton for specialty than for rubber.

Speaker Change: Maybe I'll just build on that so we don't see an upper limit on what can be as we drive innovation and upgrade reactors and so forth. We can still move that on it wasn't really obvious at the time, where European electricity prices were got a lab they've come down significantly and so that part of the code.

Speaker Change: Generation story has been difficult there and just keep in mind because of the relatively small volume of specialty, whereas compared to rubber a movement in power prices as a much bigger impact on the GP per ton for specialty then and Robert.

Operator: Next question. Great. Thank you. Once again, if you have a question, please press star, then one.

Operator: Next question. Great.

Speaker Change: Next question Great. Thank you.

Operator: Once again, if you have a question, please press star then 1. The next question is from John Tanwanteng from CJS Securities. Please go ahead.

Speaker Change: Once again, if you have a question. Please press Star then one.

John Tanwanteng: The next question is from John Tanwanteng from CJS Securities. Please go ahead. Hi, yeah, I was just wondering if you could discuss conditions on the ground in China right now and what your expectations are in the guidance that you've provided.

Speaker Change: The next question is from John Ken One tank from C. J S Securities. Please go ahead.

John Tanwanteng: Hi, yeah. I was just wondering if you could discuss conditions on the ground in China right now and what your expectations are for the guidance that you've provided.

Speaker Change: Hi, I was just wondering if you could discuss the conditions on the ground in China, right now and what your expectations are.

Speaker Change: And the guidance that you've provided.

Corning Painter: So, if we talk about China macro, I'd say China is still an area of greatly reduced economic confidence; people holding off to make investments. People worried about trade barriers and where they're going to export to. You start to see the government now trying to spur some domestic demand, which would ultimately, I think, be very good for China.

Speaker Change: So.

Corning Painter: If we talk about China macro, I'd say China is still an area of greatly reduced economic confidence, people holding off to make investments, people worried about trade barriers and where they're going to export to. You start to see the government now trying to spur some domestic demand, which would ultimately, I think, be very good for China. That's the bigger picture there. For us, the bigger picture is really about Huawei. We've had startup issues with that plan. I've talked about that before, getting it really to the higher grade value materials that we're aiming for. We've made progress on that. We'll have one more outage coming up where we can advance that further.

Speaker Change: If we're talking about China macro I'd say, China is still an area of greatly reduced economic confidence people holding off to make investments.

Speaker Change: People worried about trade barriers, and where theyre going to export to you start to see the government now trying to spur some domestic demand, which would ultimately I think be very good for China. That's the bigger picture there for US. The picture is really about why bay, we had startup issues with that plant I've talked about that before.

Corning Painter: That's the bigger picture there.

Corning Painter: For us, the picture is really about why they've had startup issues with that plan. I've talked about that before getting it really to the higher grade value materials that we're aiming for. We may progress in that.

Speaker Change: Or getting it really to the higher grade value materials that we're aiming for.

Speaker Change: We've made progress and that will have one more outage coming up where we advance that further but.

Corning Painter: We'll have one more outage coming up where we advance that further, but so for us, the opportunity there's a little bit more to getting why they're back on track.

John Tanwanteng: For us, the opportunity there is a little bit more to get Huawei back on track. I'd say the overall Chinese macro is not so great. The OEM bill is probably an area of some strength as they continue to export cars. There's something recently out about their impact on the market in Thailand. But I think, in general, it's a tough market.

Speaker Change: So for us the opportunity there is a little bit more to getting Y band back on track I would say the overall, China macro not so great.

Corning Painter: I'd say the overall China macro not so great. OEM Bill is probably an area of some strength as they continue to export cars. There's something recently out about their impact in the market in Thailand, but I think, in general, it's a tough market.

Speaker Change: OEM build is probably an area of some strength as they continue to export cars Theres something recently out about <unk>.

Speaker Change: Impact in the market in Thailand.

Speaker Change: But I think in general it's a tough market.

Unknown Executive: Okay, great.

Corning Painter: Okay, great. And maybe just a little bit more on what the mix is there in OE versus tire, and how do you expect that to play out?

Speaker Change: Okay great.

Corning Painter: Maybe just a little bit more on what the mix is there in OEM versus tire and how do you expect that to trend? Generally speaking, the amount of people drive a car in China is relatively lower than, let's say, in the United States and Europe. The impact of OEM is higher. We talk about here, you buy a car, you probably change the tires three or four times. I would say it's more like two or three times in Asia, typically, or in China in particular.

Speaker Change: Maybe just a little bit more on what the mix is there an OE versus tire.

Speaker Change: And how long do you expect that to trend.

John Tanwanteng: So generally speaking, the number of people who drive a car in China is relatively lower than, let's say, in the United States and Europe. So the impact of OE is higher. We talk about here, you know, you buy a car, you probably change the tires three or four times. You know, I would say it's more like two or three times in Asia, typically, or in China, in particular. So the replacement market has always been a little bit weaker, and we see overall tire sales for local tire companies, which is where we are in the qualification process, that that's tough going right now.

Speaker Change: So generally speaking.

Speaker Change: The amount of people drive a car in China.

Speaker Change: Is relatively lower than let's say in the United States and Europe. So the the impact of OE is higher we talk about here you buy a car you probably change the tires three or four times.

Speaker Change: Hey, it's more like two or three times in Asia typically are in China. In particular, so the replacement market has always been a little bit weaker and.

Corning Painter: So the replacement market has always been a little bit weaker, and we see overall tire for local tire companies, which is where we are in the qualification process, but that's tough going right now. Got it.

Speaker Change: And we see overall tire for local tire companies.

Speaker Change: Which is where we are in the qualification process that that's a tough going right now.

Speaker Change: Got it thank you.

Unknown Executive: Thank you.

Corning Painter: There are no further questions at this time. I would like to turn the call back over to Corning Painter for any closing remarks.

Corning Painter: There are no further questions at this time.

Corning Painter: There are no further questions at this time I would like to turn the call back over to Corning painter for any closing remarks.

Corning Painter: I would like to turn the call back over to Corning Painter for any closing remarks. Well, first of all, I appreciate everyone's time joining our call today, and you're very good at questions. It was a challenging quarter. When you have a quarter like that, it's important that we... Get the questions out; we address them. We think the underlying business is very strong, and the more we can talk to that transparently, the better this is going to be.

Corning Painter: Well, first of all, I appreciate everyone's time and joining our call today and your very good questions. It was a challenging quarter, but when you have a quarter like that, it's important that we get the questions out, and we address them. We think the underlying business is very strong and the more we can talk about that transparently, the better. We value our shareholders' views, and we look forward to speaking to you over the next couple of days and at some upcoming corporate access events, including the ZUHO conference in New York on August 14th, the UBS Global Materials and Jeffrey's Industrial Conferences in New York on September 4th and 5th, as well as some regional NDRs that we Thank you again. This concludes today's webinar.

Corning Painter: Well first of all I appreciate everyone's time and joining our call today and your very good questions. It was a challenging quarter, but when you have a quarter like that it's important that we do.

Corning Painter: Yes. The question is how we address them, we think the underlying business is very strong and the more we can talk to that transparently the better it's going to be.

Corning Painter: We value our shareholder reviews, and we look forward to speaking to you over the next couple of days and at some upcoming corporate access events, including the Suho's conference in New York on August 14th, the UBS Global Materials and Jeffries Industrial conferences in New York on September 4th and 5th, as well as some regional and VR's that we have in the pipeline and coming months. Thank you again.

Speaker Change: We value our shareholder views and we look forward to speaking to you over the next couple of days and had some upcoming corporate access events, including the Zoo Hose Conference in New York on August 14, the UBS global materials and Jefferies Industrial conferences in New York on September 4th and fifth as well as some regional <unk>.

Speaker Change: That we have in the pipeline in coming months. Thank you again.

Operator: This concludes today's conference call. You made us connect your lines. Thank you for participating, and have a pleasant day. Thank you very much for participating, and have a pleasant day.

Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Speaker Change: This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Operator: This concludes today's conference call.

unknown: [inaudible] 2021 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.

Speaker Change: Okay.

Speaker Change: [music].

Unknown Executive: Christopher Kapsch, Corning painter, Christopher Kapsch, Jonathan Tanwanteng, Michael Leithead, Christopher Kapsch, Corning painter, Christopher Kapsch, Jonathan Tanwanteng, Michael Leithead, Christopher Kapsch, Jonathan Tanwanteng,

Speaker Change: Okay.