Orion (NYSE:OEC) reported fourth-quarter and full-year 2025 results that management said came in better than expected, driven by stronger-than-forecast volumes and improved specialty mix. Executives also outlined a 2026 outlook that reflects continued trough-like conditions in key end markets, while emphasizing actions aimed at sustaining positive free cash flow despite a planned decline in EBITDA.
Fourth-quarter outperformance and 2025 results
Chief Executive Officer Corning Painter said Orion finished 2025 with “better Q4 results than we had contemplated early in November,” primarily because customers’ demand was stronger than their forecasts. In the Rubber segment, tire factory curtailments “were not as pronounced as customers had indicated,” while Specialty benefited from better volume and mix.
Segment performance for 2025 included:
- Rubber: Adjusted EBITDA of $155 million. Volumes increased 4%, mainly on higher demand in South America and APAC, partially offset by lower demand in EMEA. Net sales decreased 3% on lower pricing. Adjusted EBITDA declined 20% due to adverse customer and regional mix and an unfavorable effect from the passthrough of lower oil prices.
- Specialty: Adjusted EBITDA of $94 million. Volumes decreased 5% due to weaker global demand. Net sales fell 4% on lower volumes and passthrough pricing, partially offset by favorable foreign currency translation. Adjusted EBITDA declined 14%, primarily due to lower demand.
Free cash flow, working capital, and balance sheet
Management repeatedly emphasized cash generation. Orion produced $55 million of free cash flow in 2025, which Painter credited to working-capital efficiencies. Puckett said free cash flow benefited from higher-than-expected fourth-quarter EBITDA, working capital initiatives, and “a little help from lower oil prices.”
On working capital, Puckett said initiatives delivered $64 million in the fourth quarter alone. He also said operating cash flow improved by $91 million year over year for 2025 and noted the company spent $46 million less on capital expenditures in 2025 compared with 2024.
Cash generation helped Orion reduce net debt by $40 million during the quarter. The company ended the year with $920 million of net debt and a leverage ratio of 3.7x, down from 3.8x at the end of the third quarter.
During Q&A, management addressed a rise in accounts payable, saying it was part of active working-capital management that includes reviewing payment terms extensions. Executives indicated payables would fluctuate by quarter but did not suggest an immediate reversal was required.
Industry backdrop and operational actions
Painter described 2025 as a “uniquely difficult backdrop” for the carbon black industry. He pointed to elevated tire imports into Western markets, consumer “trade down” to lower-value imported brands amid inflation pressures, soft freight activity affecting truck and bus tires, and persistently weak PMI impacting specialty demand. He said these factors contributed to challenging contract negotiations for 2026 supply agreements.
Orion outlined actions to navigate the downturn:
- Additional cost actions expected to generate $20 million in productivity, efficiency, and headcount savings.
- Sharply reducing capital expenditures to support free cash flow.
- Executing a plan to rationalize 3–5 production lines, with Painter stating the company has “already closed the lines we intend to.” He said closures were in the Americas and EMEA, but Orion chose not to specify locations.
- Operational excellence initiatives, including plant reliability improvements in North America of more than 200 basis points over 2025 and the use of “at least one AI tool” for process efficiency.
Painter said the company shifted strategy in customer negotiations, pivoting from trading volume for pricing toward a “hold share” approach. In response to analyst questions, he said Orion does not view the outcome as having “bought volume,” but rather as maintaining share so the company’s volumes track the overall industry rather than underperforming it.
2026 guidance and contract pricing dynamics
Orion issued 2026 guidance calling for Adjusted EBITDA of $160 million to $200 million for the full year. For the first half of 2026, the company expects Adjusted EBITDA of $90 million to $110 million, citing historical seasonality in which the first half typically produces about 55% of annual EBITDA.
The company expects 2026 free cash flow of $25 million to $50 million, despite lower EBITDA, based on continued working-capital execution and reduced capital spending. Capital expenditures are expected to be $90 million in 2026, down $70 million from 2025 levels, according to management.
In Rubber, management said 2026 contract pricing is “set and baked” into the outlook. In Q&A, Painter said pricing is the largest driver in the year-over-year bridge and acknowledged some volume and regional mix effects as well. He also said he would “definitely expect to get some of this back in 2027” if industry conditions improve, while noting that Rubber pricing is largely locked in under contracts for 2026, with limited spot opportunities.
Trade flows, freight indicators, and La Porte timeline
Painter said underlying indicators are improving, noting recent data suggesting U.S. tire imports may be subsiding. He also referenced an expected conclusion in June of a European investigation into alleged dumping of Chinese tires, and a separate European Commission probe into subsidization of Chinese-made tires exported to Europe.
As part of the company’s market discussion, Painter highlighted freight activity as a key driver for truck and bus tire demand, pointing to the Cass Freight Shipment Index showing three straight years of progressively lower North American freight activity, with 2025 levels below 2020 lows. He said there are indicators, including a rebound in spot freight rates, suggesting a potential inflection.
On its La Porte project tied to conductive carbons, management said the end market has been “dynamic,” citing a slowdown in electric vehicles and some pickup in battery energy storage. The company said it has slowed the project timeline to better align with demand and now expects completion and startup in 2027. In Q&A, management estimated the project could add roughly $10 million of annual depreciation when it comes online, and said most startup costs would be in 2027 rather than 2026.
Looking ahead, Painter said the company remains cautious in its assumptions and is planning as if the backdrop will not improve. He added that potential upsides during 2026 could include shifts in trade flows, reshoring activity, and a freight recovery, which could help set the stage for improved prospects into 2027.
About Orion (NYSE:OEC)
Orion Engineered Carbons SA, operating as Orion (NYSE: OEC), is a global producer of carbon black, a critical performance additive used to enhance the strength, durability and conductivity of various materials. The company’s products chiefly serve the tire and rubber industry, where carbon black imparts wear resistance and longevity, as well as the plastics, coatings, inks and battery components markets, where specialty grades deliver tailored conductivity and color properties.
Orion’s product portfolio is organized into two core segments: Rubber and Specialty and Chemical Specialties.
