Q1 2025 Orion SA Earnings Call
Please stand by we're about to begin.
Speaker Change: Good day, everyone, and welcome to the Orion First Quarter 2025 earnings results conference call. At this time, all participants are in a listen-only mode. Later, there will be a question in the answer session.
Speaker Change: You may cue for a question at any time by pressing the star key followed by the number one on your telephone keypad. You may remove yourself from the cue by pressing star two.
Speaker Change: Please be advised that today's call is being recorded. Should you require operator assistance, you may press star zero.
Speaker Change: I now like to turn the floor to Chris Kapsch, Vice President of Investor Relations. Please go ahead.
Speaker Change: Thank you, Jamie. Good morning, everyone. This is Chris Kapsch, VP of Invest relations at Orion. Welcome to our conference call to discuss our first quarter of 2025 earnings results. Joining our call today are Corning Painter, Orion's Chief Executive Officer, and Jeff Glyck, our Chief Financial Officer.
Speaker Change: We issued our first quarter results after the market closed yesterday and we posted a slide presentation to the investor relation portion of our website.
Speaker Change: Before we begin as you know, we are obligated to remind you that some of the comments made on today's call are forward-looking statements.
Speaker Change: These statements are subject to the risks and uncertainties as described in the company's following with the securities and exchange commission and our actual results may differ from those described during the call. In addition, all forward-looking statements are made as of today, May 8, 2025.
Speaker Change: The company is not obligated to update any board looking statements based on new circumstances or revives expectations .
Speaker Change: All non-GAF financial measures discussed during this call are reconciled to the most directly comparable GAF measures in the table to tax to our press release and the quarterly earnings deck. Any non-GAF financial measures presented in these materials should not be considered as alternatives to financial measures required by GAF.
Corning Painter: With that, I will turn the call over to Corning Painter.
Corning Painter: Good morning. Thank you, Chris, and thank you all for your interest in Orion and for joining our call today.
Corning Painter: Before getting into some details regarding the first quarter results, we want to discuss three central themes to help you get a sense for how we're positioned as global trade continues to rebalance around the world.
Corning Painter: First, we'll touch upon Q1 results in a broad sense. Yes, a challenging start to the year, but the numbers are not indicative of a stronger underlying performance and certainly Orion's greater potential.
Corning Painter: Second, we'll discuss how we expect the current tariffs to affect our value chains.
Corning Painter: But in a bigger picture sense, also about how the new paradigm on global train policies will likely benefit the carbon black industry, given his regional and localized nature and Orion in particular.
Corning Painter: Finally, we fully recognize the increased likelihood of an economic recession with this possibility and although we do not see a pronounced weakening in our autobokes at this juncture, we are taking additional protective measures to manage costs in bolster free cash flow.
Corning Painter: These, coupled with other dynamics within our business, enable us to reaffirm our free cash flow guidance for the year.
Corning Painter: On slide three of the earnings deck, we convey several items affecting first quarter results, including multiple unplanned plant outages which impacted productivity, absorption levels and other transient costs.
Corning Painter: As well as adverse timing effects, mainly tied to contractual pass-throughs or raw materials.
Corning Painter: Collectively, these factors massed at least $10 million of greater earnings power in the first quarter alone, employing our businesses' Q1 underlying earnings power, being more in the mid-70 million dollar range of EBITDA.
Corning Painter: Even that higher level wouldn't showcase the earnings capacity of Orion because of the impact of elevated imports on Western tire manufacturers.
at least for now.
Corning Painter: We expect some of the mix and timing issues that affected our P&L to lessen in Q2.
Corning Painter: Further, our overall operations have improved sequentially and this should contribute favorably moving forward.
Business Conditions were mixed in Q1. [inaudible]
Corning Painter: Roberts' demand was off to a slow start. Roberts volumes improved more than 2% year over year, but it would have done better if not for persistent headwinds from still elevated tire imports into our key markets. [inaudible]
Corning Painter: On this slide, you can see industry data showing US production of tires being down low double digit percentages in the first two quarter months of the quarter, and they remain from madly below pre-COVID-19 levels.
Corning Painter: Our specialty segment addresses a much more diverse variety of men markets, and here we would characterize demand as choppy.
Corning Painter: We see some degree of cautiousness with certain downstream value chains, such as those feeding into the automotive space including coatings in certain polymer markets.
Corning Painter: If looking through the transient items affecting our costs in the quarter, overall gross profit metrics were generally in line with our expectations.
Corning Painter: This includes the modest GP pretend drag from the rubber lanes we picked up contractually for 2025, which helped the volumes but contributed negatively from a geographic mix standpoint.
Corning Painter: More generally, and we've continued conviction around the inherently greater earnings power and enterprise value, we continue to repurchase shares in the quarter.
Corning Painter: I'm slide four of the deck. We want to share our current view of how tariffs may affect our business. I'll be with the same caveat that most companies are offering around a high degree of uncertainty as to the final tarot environment as well as underlying economic conditions.
Thank you.
Corning Painter: On the left hand side, we graphically depict how we believe our manufacturing footprint will gain in the new trade paradigm.
Corning Painter: Using a framework put forward by industry observers, on the x-axis, you consider if your region is in an importer or exporter of the final product, such as tires.
Corning Painter: The Y-Axis considers if your region is in an importer X-porter of your specific product.
Corning Painter: Obviously, as the trade paradigm shifts, being a manufacturer in a region that is in that quarter of the final product is the place to be.
Corning Painter: The US is a net importer of tires and that puts us on the right side of this axis.
Corning Painter: The US is more or less in balance on carbon black but it always has the threat of imports.
Corning Painter: That puts us and our customers in a strategically advanced position.
Corning Painter: In Europe , where both carbon black and tires are imported, local manufacturing stands to gain even more.
Corning Painter: Where as globalization has arguably hurt Orion in the recent past, given our under-indexing to Asian markets, the ongoing shift should become a structural tailwind for our business over time.
and continuing on slide four.
Corning Painter: and perhaps getting a little more granular on the tariffs. As contemplated today, including last week's fine tuning to assist the automotive OEMs while maintaining 25% tariffs on other
Corning Painter: and animal causes for placement tires. Terrace, again, should be a net positive for Orion.
Corning Painter: Remember, it would not take a major rebalancing of tire trade flows to positively affect our demand function. We are not making the case that the U.S. is ever going to be anything close to self-sufficient with tire making capacity.
Corning Painter: Currently, more than 60% of replacement tires in the US are imported, primarily from Southeast Asian countries in Mexico.
Corning Painter: A similar percentage flows into Europe , primarily coming from China. Even modest rebalancing of trade flows would help our demand function to benefit meaningfully.
Corning Painter: Now, when will we see the benefit? Data shows tire imports into Western regions remained elevated in the first months of 2025.
Corning Painter: It's a widely held view that tire imports will slow and the channel inventory will be drawn down resulting in a demand inflection starting in 2025 second half.
Corning Painter: We are well positioned to serve that upside, should it materialize.
Corning Painter: Slide 5 centuates a couple of these key points more finally. Sure, the initial tariffs that were announced were more extensive than almost anyone have contemplated.
precipitating market volatility and macro uncertainty.
Corning Painter: But since the recent fine tuning to lessen the impact on auto OEMs, but while also keeping the 25% tariff on certain auto content including replacement tires.
Corning Painter: We see the current framework as a bit of a Goldilocks scenario for Orion and for our customers.
Corning Painter: Potentially not too disruptive for the broader economy, but offering significant protection for auto industry workers, including those entire plants.
Corning Painter: In a recent conversation, a customer expressed similar views, but also expressed near-term concern of how Freight Bowls.
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Speaker Change: Orion's potential direct exposure to the U.S. tariff costs is quite manageable as we procure essentially all raw materials locally.
Speaker Change: We do also export several special degrees from plants and other regions into the U.S.
Speaker Change: This is a very small percentage of our specialty portfolio and we believe the differentiated nature of these grades translates into sufficient pricing power to offset potential tariff exposures.
Speaker Change: An additional point, the rebalancing benefit we are discussing here is structural in nature. So we expect this shift and benefit to our business to build over the next couple of years as the US and ultimately European entire manufacturing benefits.
Speaker Change: In the near term, with odds of a recession having increased, it's worth highlighting the resilience our business has demonstrated in prior recessions.
Speaker Change: As I referenced in our annual report commentary, which was recently posted to our website.
Speaker Change: We believe our business is overall volume performance through the COVID pandemic in 2021, as well as the Great Recession in 2008 and 2009, showcase that resilience in our portfolio.
Speaker Change: Our aggregate volumes declined 15% during 2020 when the COVID-19 pandemic was shut down.
Shut down the global town.
Speaker Change: Overrebounded more than 11% in 2021 despite still to do economic conditions.
Speaker Change: Looking further back during the global financial crisis after a very strong 2008, when volumes gained more than 25 percent. Orion's overall volumes declined about 14 percent in 2009.
Speaker Change: In 2010, volumes recovered nearly 15% to levels almost on par with par-key 2008 levels, and they were just about 23% higher than 2007 levels.
moving to slide six [inaudible]
Speaker Change: The factors in our controls slide that we shared in the fourth quarter presentation back in February and being used here as some of us scorecard.
Speaker Change: We had stated that if we execute on the factors we control ourselves and we would be able to optimize performance regardless of the backdrop.
So, how does it look thus far into 2025? Bye.
Speaker Change: Here we can put a check mark next to the commercial strategy line. Volumes from additional lanes we were awarded have helped, but to be fair these have more or less been offset by continued pressure on key Western customers where tire production remains down.
Speaker Change: Still, the subtle customer portfolio rebalancing should be beneficial as the global trade paradigm shift is discussed.
Speaker Change: We completed Headcount Reduction Measures in Q1. We were leading to start with but expect and annualize $5 to $6 million a run rate of savings.
Speaker Change: We did not add back the separation costs to our adjusted EBITDA, like many companies do.
Speaker Change: Looking forward, we're taking additional actions with the goal of doubling that savings through a variety of means.
Speaker Change: We've made good progress in resolving operational challenges at our new facility in China, and we still expect a positive e-thus contributions to any mayor.
Speaker Change: Our devoidal making projects and differentiated grades are largely behind us and we have refined the algorithm that helps us decide which grade should be run on which reactors to optimize mix and asset equalization.
Speaker Change: In an area where we have considerable progress to make, however, is with improving plant reliability and this journey is underway. We're also making progress in driving operational and yield improvements within our network of manufacturing plants.
Speaker Change: This will be evident when our plans are more stable. As Jeff will touch upon in the Q1 Financial Review, on the plan's land downtime was a major factor in impacting results in the first quarter driven by equipment failures.
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Speaker Change: One strength we have is the commitment of our people, and I'd like to recognize our team and the board of our Texas in particular.
Speaker Change: They work through a number of challenges with aged equipment in the corner. [inaudible]
Speaker Change: Several of us were at the site in March and conducted, amongst other things, a surprise crisis management tabletop drill. Later, that very day, a wildfire tore through the area, threatening our plan, and taking out the power lines on the edge of our production site.
Speaker Change: I would like to thank the border team for their housekeeping which made us less vulnerable and for their quick actions to safely secure the plant in this real crisis.
Speaker Change: and would also like to thank the team at Panhandle Northern Railroad for their quick action to replace a repressal bridge that was completely destroyed in the fire. Well done by all of you.
His worth framing the opportunity we see in reliability. David Olin.
Speaker Change: Many of our plants are aged, and with age comes some fragility and unpredictability [inaudible]
Speaker Change: On top of that, the addition of the EPA equipment in the U.S. in recent years.
Speaker Change: Essentially overlaying a new unit operation on top of our existing footprint served to stress some of our plans even more. This is not unique to Orion we've disclosed in the past but the industry's overall effective capacity was likely primped by at least 200 basis points by the EPA in position.
Speaker Change: Back Compliance Bird, which we as shoulder disproportionately relative to our competitors, has contributed to the failure of equipment that was designed long before, retrofitting these plans for our air emission controls equipment was ever contemplated.
Speaker Change: Cross, Absorption, Restart Scrap, and other impacts from these equipment issues and other plant downtime collectively at a major impact on Q1 results.
Thank you for joining us.
Speaker Change: We recognize the need to flip the script on this Donary.
Speaker Change: Looking forward, we have a pathway for improvement, including the distinct portfolio of maintenance projects that are prioritized to protect our business and customers.
Speaker Change: As we shift from being reactive, as was the case in Q1, like literally fighting fires, to focusing our small project spend on replacement and preventative maintenance efforts, we will see the improvement. Moreover, as we enhance many of these unit operations,
Speaker Change: Will also see parallel opportunities to try better process shields in quality levels.
Speaker Change: Quantifying the anticipated benefit from these manufacturing and operational excellence issues, we foresee that potential to improve utilization rates by as much as 50 to 100 basis points annually.
Speaker Change: Moreover, inflight enhancements are expected to enhance or to achieve as much as 250 basis points of underlying margin upside over the next several years, all else being equal.
Speaker Change: Encouragingly, we've had an early success in implementing this more systematic and holistic approach to operational effectiveness.
Speaker Change: Our plant in Brazil is served as a pilot and these results have been tremendous.
Speaker Change: with all operating metrics improving sharply, including uptime performance, to manage quality issues in greater throughput, which has helped us being awarded with additional lanes in that region.
Speaker Change: We intend to deliberately extrapolate our success in South American operations to other plans in our network.
Speaker Change: Let me now pass the call over to Jeff to discuss our continued focus on free cash flow as well as the Q1 results Jeff.
Jeff Glajch: Thanks, Corning. Slide 7 is important. We are focused on our free cash flow, improving $100 million compared with 2024 and being free cash flow positive in 2025.
Jeff Glajch: Despite the lower even the guidance, we are reaffirming our full year free cash flow expectations.
Jeff Glajch: We are not going to let the increased market uncertainty undermine our commitment here.
Jeff Glajch: In addition to the further belt tightening measures that Corning mentioned, we have also reduced our 2025 cap-expanding expectations by $10 million to $150 million down $57 million from 2024.
Jeff Glajch: Furthermore, we have initiated programs that should improve our cash flow conversion.
Jeff Glajch: These actions should enable working capital to be a source of cash in 2025, and while penciling in a modest improvement 2025 walks for working capital, the current oil prices prevail, the benefits should be materially higher.
Jeff Glajch: On slide 8, we share KPIs for the overall business and a year-over-year even to bridge.
Jeff Glajch: Volumes were of 1% compared with last year's first quarter and improved 10% sequentially.
Jeff Glajch: We had expected better volumes and believed demand was constrained by factors which I will discuss shortly.
Jeff Glajch: Notably, the most pronounced volume improvement came from low margin regions, specifically South America and Asia.
Here we benefited from additional lanes and improved operations respectively.
Jeff Glajch: But these volumes came with an adverse regional mix impact, which shows up as a headwind to our volume, to volume our epithet rich.
Jeff Glajch: The biggest challenge in the quarter were higher costs, primarily a function of unplanned downtime due to the footprint failures and unfavorable timing, which were partly offset by a favorable 2-1
Jeff Glajch: Despite the dollar's recent weakness, it was stronger on the average throughout Q1 compared to Q1 at 2024, so this represented a headwind in our EBITDA comparison.
Jeff Glajch: This should inflect starting in queue to assuming current FX rates continue.
Jeff Glajch: Slide 9 shows our rubber segment results. We saw a 2.5% volume improvement compared to last year and 13% sequential improvement.
Jeff Glajch: These metrics reflect the benefit of our 2025 contractual mandates and the operational improvements in China most notably in our YB plan.
Jeff Glajch: However, as Corning mentioned, reduced local tire manufacturing in the EU and US a function of still allowing all the tire imports remains a headwind to our demand.
Thank you. Thank you.
Jeff Glajch: The rubber segment took the front of the cost issues in Q1. [inaudible]
Jeff Glajch: The impact from unplanned downtime and related effects were more than $13 million, even with a slight benefit from better co-generation.
Jeff Glajch: Notably, Koja would have contributed more if not for the equipment outages.
Jeff Glajch: Importantly, our gross profit per ton metric is impacted by roughly $80 from the downtime and past
Jeff Glajch: Looking through these items, the remaining lower GP for Tan was primarily due to regional and customer mix.
Jeff Glajch: This was in line with our expectations of plus or minus 5% from the structurally improved $400 for tone level achieved across the past couple of years.
Flytam highlights our specialty segment KPIs.
We have characterized specialty demand as shopping.
Jeff Glajch: Segment volumes improve 3% sequentially but decline 2% year over year.
Jeff Glajch: We expected better as volumes in North America were impacted by our operational challenges.
Jeff Glajch: We believe there is some evidence of cautiousness in certain supply, certain value chains, including the automobile of Coney's markets.
Jeff Glajch: This ties to Newville Automotive Forecast, which have been downgraded for Key Western Mark Regions.
Jeff Glajch: The even the bridge shown here is pretty much straightforward. However, the cost benefit in this walk came from a transient inventory revaluation, which more than offset the drag for the unplanned augeous.
This is not expected to continue in Q2.
On Slide 11, we provide our new guidance ranges. Thank you.
Jeff Glajch: The $20 million coming out of the midpoint of our event to range, that revision is roughly split across our Q1 actual results and Q2 expectations.
Jeff Glajch: The guidance reflects lower tire manufacturing reads in Europe and the Americas, as well as the preference by our customers for lower inventory levels.
Jeff Glajch: It does not anticipate the broader recession and we do not see that in our customers current order patterns.
Jeff Glajch: Our plans have been operating well in the current quarter and we do not expect a repeat of these two one operational issues.
Jeff Glajch: That said, demand in the month of April was just okay.
Jeff Glajch: Our overall order book for May looks promising with no signs that customers are gearing up for a recession.
Jeff Glajch: One downside in Q2 is that we expect a negative inventory adjustment based on lower oil prices in the quarter.
Of course, lower oil prices will also release working capital.
Jeff Glajch: We have reaffirmed our free cash flow guidance range of $40 to $70 million
Jeff Glajch: If current oil prices prevail, there would likely be additional upside in working capital and possibly push the cash flow metric toward the higher end of this range.
Jeff Glajch: Considering the conference we have on our free cash flow inflection, we bought back $16 million with a stock in Q1 and have bought back $105 million of stocks since the inception of our program in late 2022.
Jeff Glajch: Looking forward, we will likely shift our focus towards building cash and reducing debt given the economic uncertainty.
Slide 12 is self-explanatory depicting the reduced calf-expanding intention.
Corning Painter: With that, I will turn the call back over to Corning. Thanks, Jeff. So, okay, a challenging start to the year which we own, but I'd offer you three key takeaway.
Corning Painter: Number one, our underlying earnings capability was obscured. Business conditions are better than our numbers reflected this quarter.
Corning Painter: Number two, the Orion team remains committed to delivering free cashflow this year.
Corning Painter: Number three, we are the beneficiary of the changing global trade paradigm. There's a lot of noise out there, a pair of shifting this and that, but the direction this is moving is good for Orion.
Corning Painter: and with that we see an opportunity to exhibit more resilience than much of the broader chemical industry as we navigate this background.
With that, Jane, let's open it up for Q&A.
Speaker Change: Certainly, ladies and gentlemen, if you would like to ask a question at this time, simply press star one on your telephone keypad.
Corning Painter: At the very point your question has been answered, you may remove yourself from the queue by pressing star two. Again that is star one to signal and star two to remove yourself. We'll pause for just a moment.
Speaker Change: We'll take our first question from Josh Spector with UBS. Please go ahead.
Yeah, hi, good morning guys.
Josh Spector: I just wanted to ask on the outage impacts in 1Q, so I mean you sized them in around 13 million.
Speaker Change: Corning, you spent a lot of time talking about some of the challenges with older facilities and other things, but two questions here. One.
and then two, just...
Speaker Change: I'm going to talk about the nature of the reliability and the impacts that you've had.
Speaker Change: and the ability to avoid recurrence here. Is this something investors should be concerned about incrementally or do you feel that you've ring-fenced a lot of this or at least resolved this to prevent recurrence? Thanks.
Corning Painter: Sure, why do I think actually some of the second part of that question and I'll let Jeff speak on the numbers. So are fleets of plants are aged?
Corning Painter: and with that, as I said in the script, there comes some fragility and unpredictability, and that's always been in our number, that's always been our results.
Corning Painter: And what we saw in Q1 was just a clustering of many of these issues in one quarter, and they did go out co-gen, it was more impactful than it would have been at other times of the year. So I would say we see that as an usual, not that that hasn't ever happened with us before. I think it is
Corning Painter: But I wouldn't want to say to investor, geez, none of these plans are ever going to have equipment break it you get But we do think the clustering is unusual that we experienced in Q1 And as I've said the plans are operating well at this time and by and large the Q1 costs are contained in Q1
Corning Painter: But Jeff, Sure, I, Josh, on the 13 million, that was specific to rubber. Overall, the number was a little bit less than that, but 5 million that was due to the unplanned downtime.
Corning Painter: By two or three million was related to fixed cost absorption namely an inventory draw because of the unplanned downtime and it was about two or three million dollars of timing cost and they're also pretty well covers the the impact of the deal.
of the issues they had in Q1. [inaudible]
Okay, so that's helpful, and I guess…
Can you talk about the cadence?
Corning Painter: I mean, what's too cute? I guess we add back the outage impacts. You talked about demand, okay?
and you mentioned something around imitory.
Corning Painter: Impact. So what's the expectation that we should see in in 2Q and then do you need an improvement in macro environments to hit what you need to do for the rest of the year or frame the macro assumption there. Thanks.
Speaker Change: Joshua, I'll take the first part of that, maybe Corning can take the second part. So on the second quarter we did mention that you know these these one time events we think are past us. The one thing we will see in the second quarter as oil prices have declined from roughly $70 a barrel at the end of Q2 to right now roughly 60. We will see a bit of an inventory hit in the second quarter and that's that's incorporated into our guidance.
between the inventory hit and a little bit weaker demand.
Speaker Change: Expect to see a step up relative to that, as we get into the third quarter, again not having this impact of the lower oil price.
Thank you.
Speaker Change: Inventory Revaluation. I think one of the parts that's relevant here is, you know, got lower oil, which will have a negative impact on our ongoing earnings, excluding this inventory revaluation. We have what right now appears to be favorable foreign exchange, the two pretty much cancel out. So, going forward, that should, those two should cancel out, but we do have the one time impact of inventory revaluation in the second quarter.
Speaker Change: Then we'll see that building in terms of demand for manufacturing in the US and North America in general that that will be a plus for us. I think beyond that it's going to set us up for a promising 2026 world see our entire customers on more companies.
Speaker Change: Looking to boost their manufacturing plans for 2026, and with that they're being interested in security of supply.
Thank you.
We'll hear next from Laurence Alexander, excuse me, with Jeffries.
Speaker Change: Hi, this is Dan Rizzo, wonderful Laurence. Thanks for taking my question. I'm sorry, did you say the benefit from the tariffs?
Speaker Change: I mean, did you give a timeframe when you should start to see that with your customers? Did you say the second-hand player?
Speaker Change: Yeah, I think that's when we talk to other, when we talk to tire companies, that's the kind of number you hear about. I think I referenced it. We had a recent conversation with one. Surely there's been some inventory bill of the imported tires. That's going to have to be worked through the exact timing. It's a little hard to say. So we would expect them to see that in the second half. In fairness, the caveat that that tire customer said is they have some concerns about what was going to happen with freight traffic.
which we push at any other direction.
Speaker Change: Does something more have to happen or are tire companies considering building more in the U.S. and I mean, what's the cost and timeframe? I mean, when could there be like the structural change for that? [inaudible]
Speaker Change: Well, so what tire companies have been shifting capacity or building capacity in the U.S. and to a certain degree in Europe as well. So that trend is well underway.
Speaker Change: I think it was Michelin who was thinking of doing four expansions in Mexico. I wonder in this world if they would continue maybe with some of that but maybe shift more of that over to the US.
Speaker Change: We'll see is that time flame blaze out. We would expect to see I think handcooks announced that they'll be starting up their second line doing a TBR tires later this year. So that movement is happening and I think just a whole...
Speaker Change: Changing to direction of like just the whole paradigm about global trade, all that's going to continue to incend people to add capacity where the demand actually is.
Speaker Change: Okay. And then last question. So with you in your specialty black business, I mean you're not seeing customers grow down inventory there or kind of being a little more cautious because others have kind of, I mean it's been mixed but others have seen it seem to think so.
Speaker Change: Yeah, I would say the closest to the comments to seeing that behavior is we have seen distributors.
Speaker Change: Lowdown, a bit for us, so maybe that's consistent, but I, you know, choppy is the word, and like believe it or not, like ink was really strong. So, you know, I would just say you really have to see these trends play out for several quarters to have clarity on them. It's more choppy, I'd say crystal clear right now.
Thank you for your time.
Okay. Thank you very much.
Speaker Change: Our next question comes from John Roberts with Mizzouho, please go ahead.
John Roberts: Thank you. Is that run rate EBITDA of mid-70 million, also indicative of the June quarter conditions exclusive of the oil price inventory evaluation?
John Roberts: Bobby, we're relatively early in the corner, right, and it's a pretty dynamic time, but yeah, I'd say so.
John Roberts: and then South America has been under import tire pressure as well. Could you discuss your operations down there?
John Roberts: So, as I said, our actual operation of our facility has improved a lot over the last couple of years. Our operations are really pretty strong in South America right now. Obviously, we picked up some volume, but I would say I think it has been broader just in that market.
Thank you.
Speaker Change: And once again ladies and gentlemen, it is Star One if you would like to ask a question.
Speaker Change: We'll hear next from Jamfunting with C.J.S. Securities, please go ahead.
Speaker Change: A, this is Will on for John . Can you provide more detail on the headwind from timing of input costs and if that reverses out in future quarters?
Speaker Change: So probably one of the biggest moves we had was really just in natural gas in the quarter. There's always the potential for a slight mismatch, there's also differentials which can move slightly different from the oil prices, but I wouldn't expect that to be a headline and sometimes you lose one quarter you gain another.
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Speaker Change: Thank you. And then, you know, are you including any sort of net impact or benefit from tariffs in your outlook and how do you balance potential upside from, you know, reduced import competition against lower freight activity and potential lower replacements and lower auto sales.
Speaker Change: Yeah, we really go with what our customers are forecasting to us moving forward. And I would say in our customers' outlook, like everybody's cautious, everybody's concerned, but we don't see a real guidance from them about really seeing a recession in their business at this time.
Speaker Change: and at the same time nobody's like taken up their forecast because oh they think there's got to be a big huge increase in the second half. I'd say they're you know continuing with a slow build through the year.
Thank you.
Speaker Change: And ladies and gentlemen, as there are no further questions at this time, I'd like to turn the call back over to Corning Painter for any additional or closing comments.
Corning Painter: What's again, I'd like to thank you all for joining us today, and I'd like to highlight that we have multiple investor events coming up over the next month and a half, including an NDR in New York next week, a virtual CGS Securities Conference next Wednesday also, a Wells Fargo Industrial Conference in Chicago in early June , and a UBS virtual conference later in June .
Speaker Change: So a number of opportunities there, and we're looking forward to the chance to talk to most many of you and have some great engagement. Thank you all very much.
Speaker Change: Thank you. Once again, ladies and gentlemen, that will conclude today's call. Thank you for your participation. You may disconnect at this time and have a wonderful rest of your day.
[music]
Speaker Change: That's easy, Little John. Just a little bit. Oh, I wonder if Mama Mary did sit in bed with Little John. I think she must be alright. Maybe now you see how badly he keeps the wound. Oh, I just see.
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