Greetings, and welcome to the Orion Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. 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, Chris. You may begin.

Thank you, Devin, and good morning, everyone. This is Chris Kapsch, VP of Investor Relations at Orion. Welcome to our conference call to discuss third quarter 2024 results. Joining our call today are Corning Painter, Orion’s Chief Executive Officer; and Jeff Glajch, our Chief Financial Officer. We issued our 3Q earnings results after the market closed yesterday. We have posted a slide presentation to 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 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 the call. In addition, all forward-looking statements are made as of today, November 8. The company is not obligated to update any forward-looking statements based on new circumstances or revised expectations. All non-GAAP financial measures discussed during the call are reconciled to the most directly comparable GAAP measures in the tables attached to our press release and the quarterly earnings deck. Any non-GAAP financial measures presented in these materials should not be considered as alternatives to financial measures required by GAAP. I will now turn the call over to Corning Painter.

Good morning and thank you for taking time to join our call. We genuinely appreciate your interest, and we believe there are many positive things to discuss today. Our agenda includes my discussion of Q3 results at a high level, adjusted guidance and the contributing drivers, the current market backdrop and then some factors that will contribute to earnings growth next year. And we are encouraged about our prospects for 2025. I’ll also touch upon capital spending, free cash flow expectations and our capital allocation intention. I’ll then turn the call over to Jeff Glajch, who will walk you through our third quarter results in more detail before some concluding remarks and a Q&A session. Starting on Slide 3 of the earnings deck. We delivered adjusted EBITDA of $80 million, a 7% sequential improvement and 4% higher year-over-year. While pleased with this growth, these metrics do not really put the achievement in the proper context. Our production has improved. The single biggest thing holding us back is Rubber segment demand in the Americas and EMEA. The $80 million of EBITDA we delivered was our second best for any September quarter, just $400,000 shy of the best ever performance for Q3, which was in 2022. Notably, that year benefited from a particularly high cogeneration contribution in Europe where electricity prices climbed as a result of the war and related energy market uncertainties. The third quarter’s performance was despite overall company volumes being down a little more than 3% sequentially and 8% year-over-year. Our Rubber segment endured 11% lower volumes compared to a year ago. That variance alone equates to roughly $8 million to $10 million of EBITDA drag in this year’s Q3. One further point, U.S. tire production is around 20% below what we might consider mid-cycle economic conditions, like levels back in the 2017, 2018 time period. Framed another way, we’re delivering close to record results despite what we believe is trough demand conditions for the key markets we address. So we feel pretty good about what we achieved in Q3, considering demand. A number of factors supported our results, most notably improved costs and productivity in addition to the contractual pricing. Jeff will get into more detail here later in the call. Now why we feel good about the underlying operating performance this quarter, the industrial economy softened as this year has progressed. And our customers have signaled a weaker month of December. This is the primary basis for our additional guidance adjustment we conveyed in the earnings release, along with transient headwinds from lower oil prices which triggered an inventory revaluation impacting the third quarter. On Slide 4 of the deck, we share some additional color as we conclude 2024. The replacement tire market is the single largest we address. And on the passenger car portion of the space, sell-through units have remained relatively steady. Miles driven is the ultimate driver here, and the miles driven data in Western markets has remained stable. That said, higher production in our primary markets has been more challenging, lagging sell-through for now. The difference here is elevated tire imports. This affects our business because carbon black supply chains tend to be regional. For context, in the North American market, imported tires have historically comprised in the low to mid 50% of the total tire units sold, including passenger car and truck and bus tires. And this year, the trend has been closer to or even north of 60%. We continue to believe this dynamic will normalize over time as the higher value branded tire companies, our customers, those building their tires locally, adjust their marketing strategies to retain market share and shelf space in their channels to better appeal to consumers who have traded down to lower value tires. But we are not just hoping this imbalance normalizes. We can also influence and blunt the impact of this headwind through commercial strategy. And the outcome of our approach in this year’s negotiations is one of the positive expectations we have for 2025. I’ll get to that in a minute. Trade flows are also affected by government policy, and in the case of tires, you may have seen the recent Department of Commerce recommendation that antidumping duties be imposed on truck tires imported from Thailand into the U.S. There are more tires imported from Thailand than any other country. Shifting gears a bit. We think investors tend to focus more on passenger car market fundamentals than on the trucking industry. But volumetrically, despite more passenger car tire units, the truck and bus segment is just about as large as the passenger car market in terms of our Rubber segment demand. If looking at the freight industry fundamental trends, activity levels are seemingly off of their bottom following the post-COVID boom bust cycle, but they’re hardly robust. So we see inevitable recovery in this key end market as another source of upside to our demand looking forward. On Slide 5, I wanted to share some additional industry color and provide some preliminary commentary on how we’re thinking about 2025. We’re currently finalizing our 2025 budget. So this is top of mind. From a global vantage, the regions most important to Orion are the Americas and EMEA. Across the pond, the Eurozone manufacturing PMI has been below 50 for more than two years. Despite that, carbon black capacity utilization is expected to be snug less next year. This is primarily a position of the Russia and Belarus bans, coupled with the preference for reliable local supplies. In the Americas, the carbon black demand function has been weaker, impacted by elevated tire imports and the weak U.S. manufacturing sector more generally, as reflected in the U.S. PMI. On the supply side of things, we believe the carbon black industry’s effective capacity has been crimped over a number of years because of structural factors. There are several reasons for this, and we highlight just one in particular, the unintended consequences associated with the air emission controls in the U.S. and soon Canada. Beyond the competitor’s plant closure last year in lieu of upgrades, operating production facilities that have abatement equipment is simply more challenging. There is ample anecdotal evidence. This complexity results in more industry downtime. With this effect and for other reasons, we believe the industry’s effective capacity has been reduced by at least 100 to 200 basis points over the last five years. There is still at least one U.S. carbon black production facility that has not yet met its EPA emission standard deadline. Existing Canadian plants will now have to make similar investments within a few years as that country is harmonizing its emission standards with the U.S. EPA. We, however, do not have any production capacity in Canada. So this will not be a CapEx burden for Orion. These dynamics are worth mentioning because while current domestic utilization rates are subdued, we believe supply demand in North America will become tight as the industrial economy and tire production recover and as tire markets onshore more production. Meanwhile, there simply has not been an incentive for investment in expanding North American carbon black capacity, and it’s difficult to imagine any conventional greenfield or brownfield projects emerging to affect this inevitability. Okay, we know you’re going to ask. So let’s talk about the annual global tire contract negotiations. There’s a small number of mandates that are not quite finalized, but we are very close to being complete. This season’s cadence for our negotiations were more accelerated than normal, consistent with our commercial approach this year. We feel really good about the outcome. Based on commitments already in place from customers, we anticipate volume growth in 2025, even if overall markets we address are flat. We’re not going to discuss pricing given the commercial sensitivity and that some negotiations are still happening. But based on the aggregate outcome as of today, we expect our Rubber segment gross profit per ton will be comparable to 2024 levels. Should the economy strengthen as leading tire makers adjust their marketing strategies and/or if the higher import pressures abate potentially aided by tariffs, shipping rates or other dynamics, there would be an upside. Let’s shift to our Specialty business. Similar to Rubber, we’re encouraged about prospects for 2025. Debottlenecking efforts related to some coatings grades, where we have been constrained are largely complete. So that should translate to a positive next year as should our plant in Huaibei. Some of our capacity can serve both Specialty and Rubber segments. So as one market strengthens, it tightens the other market as well. Put another way, our Specialty and Rubber commercial teams are effectively competing for reactor time within our production network, enhancing return on assets. All things considered is Specialty. Looking to 2025, we’re expecting volume improvement in our broader portfolio, favorable pricing and mix productivity, and a positive contribution from the Huaibei plant to more than offset cost inflation, resulting in segment earnings growth next year. Just a couple of additional points on this slide. We already mentioned the countervailing duties that the Department of Commerce is marching towards in the truck tire market. Any additional tariffs should they emerge as an outcome of the U.S. presidential election would likely be supportive for our business, both from reduced tire imports and higher domestic freight traffic. We continue to see improving plant reliability through maintenance as latent earnings power for Orion. We think customers are looking to improve their supply chain resilience and our investments in maintenance and reliability despite that we have more to do, we’re part of the motivation for customers to give us additional mandates next year. Moving to Slide 6. I want to discuss capital allocation. We have not finalized our entire budget for next year, but we can comfortably say our CapEx is expected to be down about $30 million in 2025, with spending allocated almost exclusively to maintenance projects and finishing our specialty acetylene black project in La Porte, Texas. In 2026, investors should expect another $50 million to $60 million decline in capital spending. Outside of a couple of additional debottlenecking projects focused on niche specialty grades, we have sufficient aggregate capacity in place, and our focus will be to drive better returns from these assets not growth investments. With EBITDA likely to be higher next year and with CapEx declining, our free cash flow is poised to improve sharply. While our leverage ratio needs to come down a bit from the anticipated year-end levels of around 2.8 times to again reach our 2 to 2.5 times target range, we anticipate excess capital over the next two years being returned to shareholders. Just this quarter, we bought back $11 million worth of stock, or just more than 1% of our shares outstanding, and 5.4 million shares remain outstanding in our current authorization through mid-2027. I will now hand the call over to our CFO, Jeff Glajch, to discuss third quarter results.

Thank you, Corning. On Slide 7, Orion generated $80 million of adjusted EBITDA during the quarter, an improvement of 4% year-over-year and 7% sequentially despite 8% and 3% lower volumes, respectively. Our 6% year-over-year gross profit per ton improvement was partly from the favorable 2024 contractual pricing within our Rubber segment, but also a function of better absorption, variances and positive regional mix within our Specialty segment. The year-over-year EBITDA improvement was driven by better contractual pricing despite weaker Rubber segment volumes. Our adjusted net income and diluted EPS increased 12% and 14% on a sequential basis, outpacing the adjusted EBITDA improvement, thanks to a more favorable tax rate, which was related to jurisdictional mix. On Slide 8, we show the company’s year-over-year adjusted EBITDA bridge. As you can see, cogen no longer represents a challenging comp from the prior year period since power prices have stabilized. While the overall contribution across both segments was relatively flat, there was a benefit from regional volume mix within our specialty business that offset the decline in Rubber segment volumes. The price mix component on the bridge is primarily the year-over-year benefit from the 2024 rubber contract agreements. In the cost and others bucket, better absorption, variances and certain timing benefits roughly offset other costs, including inflation and a transient drag from the inventory revaluation, which was related to the recent decline in oil prices. On Slide 9, looking at the Rubber segment’s performance. The main story here is our improved profitability metrics, both on a year-over-year basis and sequentially despite the absence of stronger volumes. EBITDA was up 3% compared with last year and 12% sequentially despite Rubber volumes declining 11% year-over-year and 3% sequentially. As Corning described, our tire customers simply have not taken as much tonnage as they anticipated coming into the year. Notably, the demand softness is more pronounced in the Americas than EMEA. Despite these volume metrics, but encouragingly, our GP per ton improved 11% compared with last year’s third quarter and 4% sequentially. Similarly, adjusted EBITDA per ton was up nearly 16% both year-over-year and sequentially. The primary reasons for this improved profit metric are better absorption, our inventory levels were below safety stock on many grades, so we purposely build inventory. As well, our manufacturing plants ran more smoothly in the quarter. As a result, we had less planned and unplanned downtime.

On Slide 10, we show the year-over-year adjusted EBITDA drivers for the Rubber segment. As you can see, favorable pricing didn’t quite offset the impact of lower volumes. While our cost performance helped as a function of better fixed cost absorption, I just mentioned on the previous slide, and some timing considerations. These were partially offset by inventory revaluation associated with lower oil prices and cogeneration’s lower contribution owing to the previously discussed outages that persisted in Q3. On Slide 11 is the overview of our Specialty segment. Volume in this year’s third quarter were flat against last year’s Q3 when volumes have peaked nearly 15% versus the previous year. Constructively, the mix was favorable in the quarter, with a decline in volumes and some lower-value markets being more than compensated for with sales into high-margin applications, including coatings and printing inks. Geographical mix was also favorable, with improvements in the Americas and EMEA offsetting Asian trends where demand was soft. It is noteworthy that if not for the inventory revaluation on lower oil prices, GP per ton would have been closer to $650.

Slide 12 shows the year-over-year adjusted EBITDA bridge for Specialty. While we mentioned segment volumes were flat, the regional mix was favorable and for our business that is captured in the volume comparison. This was a function of improvement in Europe, where we tend to manufacture our most specialized grades serving more differentiated applications and some moderating demand in lower-value applications in Asia and North America. Favorable pricing and in-region mix also contributed to adjusted EBITDA growth, and these improvements were only partially offset by the transient inventory revaluation, higher inflationary-driven personnel costs and also strategic staffing needed to build out our global conductive carbons and battery team. Before discussing free cash flow for the full year on Slide 13, I thought this might be a logical time to touch on the fraud that transpired early in the quarter because this impacts our cash flow for the year and our balance sheet metrics. The Audit Committee of our Board has completed an independent third-party investigation, which confirmed the main facts, which we discussed in our 8-K filing on August 12, including no evidence of a cyber intrusion into our IT systems. In addition, immediate protective measures were put in place and subsequent remediation and control steps have been added. As shown on Slide 13, we concluded Q3 with a net debt leverage ratio of 3 times on a trailing 12-month basis, and this would have been closer to 2.8 times if not for the fraud event. Looking at cash flow drivers, we are still expecting CapEx spending to come in at $200 million for the year. As discussed previously, total CapEx is expected to be nearly halved by 2026. Due to the lower adjusted EBITDA levels, along with slightly higher working capital needs, we now expect free cash flow will be negative $35 million for 2024 before the impact of the fraud event. After adjusting for the tax effect from the fraud loss, negative free cash flow may be $75 million to $80 million for the year. We expect net debt to EBITDA to be closer to 2.8 by year-end 2024 as the typical Q4 seasonal working capital release occurs. Directionally, we expect to achieve our 2 to 2.5 targeted net leverage ratio within the next 12 to 24 months via higher EBITDA generation and free cash flow, even factoring in additional buyback activity.

Thanks, Jeff. Slide 14 picks Orion’s revised guidance for the full year, from which you can refer our fourth quarter adjusted EBITDA expectations are around $70 million, which would be our best fourth quarter ever. As discussed in our latest view reflects a cautionary stance for many customers. October was a solid month with overall company volumes up modestly both year-over-year and sequentially. Our customers are signaling a more pronounced seasonality this December. All of this said, we have a lot to be encouraged looking into 2025. As I said in the beginning of the call, and despite the negativity in our share price, we believe we are driving many positive developments in our business that will translate into higher earnings, returns and free cash flow. Simply lowering capital spending coupled with our business trajectory for 2025 would have a significant impact. With that, let’s open it up and take some questions.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from the line of Josh Spector with UBS. Please proceed with your question.

Hey, guys. Good morning. So I want to touch on the Rubber – I wanted to ask on the Rubber side first. So I guess, when you look at volumes today this quarter, last quarter and your comments around growth for next year, would you say your volumes are at a trough, meaning you don’t expect imports to be another negative impact into next year or something else in that regard? Your volume gains are from contract wins. And can you just square all this with your comments around flat gross profit per ton; was there some spread or price given up to gain those volumes? Or are we just uncertain on some of the contract outcomes and pricing?

Well, let me clarify. We’re well along the way. They’re not completely complete. And I think it’s inappropriate to say too much about pricing. What we wanted to convey there is that we’ve had a very positive negotiating cycle and one that we could build on for 2025. I feel like sometimes there is negativity around the increase this industry has achieved in terms of pricing. And is that all going to be given up? My point on that is not so. We do see some mix change in terms of who our customers are. That’s part of our strategy. We think that makes us less vulnerable to, let’s say, a consumer sell down a little bit. And I think in terms of volumes when we say it’s a trough, just looking at how high imports are right now, the ongoing effort of the global companies to retain their market share, coupled with the current regime in the United States in putting these tariffs in response to anti-dumping charges and then the likelihood of that going forward. I mean, I think you put all those things together, and it just sets up a pretty positive outlook for next year.

Okay. I guess, just to follow-up another time on the contract side or at least on the gross profit per ton side of things, I guess I just want to understand is, is that a conservative base that we should be thinking about in that we’re not losing price volumes gain and there could be upside with favorable contract negotiations? Or is that already baked into that assumption, some changes there may be offset by mix? Just not sure how conservative or not that expectation is.

Yes. So I remember a couple of years ago, we indicated, wow, earth-shattering change in the pricing negotiations. I would put these as positive, continuing to move us forward. I would not be looking at a repeat of what we achieved a couple of years ago and recognize we’re in the supply-demand section segment that we are. Also that we’ve potentially adjusted sort of where we’re playing in terms of the customer mix in the industry space. But all in all, and it’s also like they’re not completely done, Josh. So it’s just – it’s awkward to talk too much about exactly where things are coming in. But we’re well on our way, we’re ahead of schedule. That was our strategy and our approach for this year. We think that’s worked well for us. And we’ll give our real guidance when we do our Q4 results.

Understood. And I guess just on Specialty. I mean, I think you’re framing favorable markets for continued volume growth. Not many companies have been talking about coatings markets and plastics market assets favorable near-term. So how much of that is a comment of, I guess, you have Huaibei ramping and you had some cost issues this year versus you’re actually seeing growth in your end markets at this point in time?

Yes, we would see a couple of positives. Number one would be the debottlenecking demand in the specialties. I’d say, a long-term driver, you see this move to get rid of lead piping in the United States, which I think would be maintained in future administrations. That’s a real infrastructure, piping for the water systems, that sort of thing. So I think you can point to some specific drivers there and just a general sense of what manufacturing momentum.

Okay, thanks. I’ll turn it over.

Thank you. Our next question comes from the line of Laurence Alexander with Jefferies. Please proceed with your question.

Good morning. Can you give your perspective on the outlook for capacity addition either new plants or debottlenecking like just the rate of capacity additions by region over, say, the next three, five years? To what extent is there evidence that we’re getting near or at the level of reinvestment economics at least in some regions?

Hey, Laurence, thanks for the question. I think that it’s not just economics; it’s also the risk, it’s the uncertainty in the markets and all of that. So I think the only thing we’re going to see in the United States or North America, I’d say, would be people like ourselves who invest in maintenance and reliability and we could gain, I don’t know, half a point to one point a year of capacity just by better ability to run the plants consistently. And I’d say I see something similar in Europe. I mean, it’s just a lot of uncertainties with how the war is going to end. There are other exports into the marketplace and so forth. I don’t think – we saw the Indian market expand. They kind of have been saved by the war in the European theater, which now gives them an export market. I would think they would be cautious right now about their desire to expand. And then in China, okay, sometimes people look at that market differently. But I don’t think the current Chinese economy is really conducive to people expanding capacity there. So I really don’t think there’s a big incentive for like a new brownfield line or a new greenfield line in the Rubber Carbon Black space. I think all the sustainability stuff is a net question mark as well. As you well know, right, you’ve got this question with monolith and pyrolysis in the U.S. So all of those just add uncertainty, which I think discourage investment.

And then on the Specialty side, I mean, to the extent that you’re flagging already kind of the softish December. To what extent is that just typical winter – the last couple of years, you’ve seen the kind of end-of-year destock. Is it just that? Or are you seeing people say, well, you don’t renew trade dynamics, what policy will be, there’s going to be a bit of an information gap for six months, let’s pause on CapEx, pause on new product launches. I mean, to what extent are you seeing like a broader pause from customers’ uncertainty?

Yes. I would say customers have expressed to us even before the election that they just plan to take longer holiday outages in December. You shut down the whole factory, there’s certain economies that go with that. And that’s not just limited to Specialty; that’s Rubber as well. I saw that really as year-end thinking about what inventory levels they wanted more than a 2025 picture.

Okay, great, thanks.

Thank you, Laurence.

Thank you. Our next question comes from the line of John Roberts with Mizuho Securities. Please proceed with your question.

Thank you. In specialty Black, you mentioned regional mix effects. Could you elaborate on that? I think of the Rubber black being – business being regional, but specialties, I think, of being more global and more product mix effects?

John, that’s an excellent question. And you’re right, it is a more global market. But profitability in different markets can vary, right? So I would say, in general, profitability in Europe is higher on a per ton basis than in Asia. So kind of what we’re signaling there, it was just more strength in Europe, North America in that time period versus Asia. And we don’t put that in the mix line the way we show it. We – that’s really more in the volumes, so we call it out.

And is Europe more profitable? I mean very few companies have more profitable European businesses than other regions. Is that the mix in Europe is more coatings and inks in less plastic masterbatch and so forth?

I would say, I think many chemical companies would tell you that, okay, you’ve got the whole volume effect. But for a like-for-like product profitability, it often is a little more challenged in Asia than it is, let’s say, in Europe or North America. And that’s really what we’re referring to.

Okay. And then secondly, Trump has said he’s going to end the Ukraine war in I think Putin, I guess, has already called him and said, he’s ready to talk that’s there. How do you see Russia normalizing or if we go beyond 2025?

Right. So let’s say if there’s peace tomorrow, which let’s all be clear, right, would be a good thing for humanity. I think that Russia, Belarus, Ukraine, they used to do well over a third of the carbon black into Europe. Some tire companies bought as much as 50% of their carbon black from the Russians. I don’t ever see that going back. I don’t think anybody is going to want 50% of their supply chain coming out of Russia going forward, no matter what the price is. Now Russia was largely replaced by imports primarily from India, but also some from China as well as all the rest of us ramping up a bit. What I think we’d see in a situation where Russia was, let’s say, politically rehabilitated and came back, and I think that would take a little time, is that would just simply adjust the base where the imports are coming from. And that’s how I would look at that going forward.

Okay, so you think operating rates in Europe would be relatively unaffected? Maybe just to summarize that.

Yes. I think that anybody who’s got a plant in Europe, I think, is still going to be in a very good position to keep them running. I think that’s the rule – the learning of the last four or five years. And I think that will remain true.

Okay, thank you.

And I think like another, you currently see Russian product going to China, China project in Europe, like you can also just see supply chains potentially straight down a little bit.

Thank you.

Thank you. Our next question comes from the line of Jeff Zekauskas with JPMorgan. Please proceed with your question.

Thanks very much. In a world of higher tariffs for China and other Asian countries in the event that occurs, is that good or bad for you?

So for Orion specifically, our view is higher tariffs would be good for us. We have mainly local production. Our customers are impacted by imports as we talked about, a situation where there’s more manufacturing locally for the local markets. In general, it’s going to be a big plus for us.

Okay. And you were talking about the Thai anti-dumping investigation. So I think that there have been final determinations. So do you see that as altering the truck market and truck tire market in particular ways?

Well, so Thailand is not the only company – country that exports to the United States. But I think incrementally or sequentially, each one of these is a step in that direction. Have we – could I tell you, we’ve seen that impact and we can point to it exactly in our volumes at this point? No, of course not, right? That’ll take a couple months to work through the system. But I would just say it’s one of the factors that should get us back to more traditional levels of imports. Beyond that, right, there’s also the local manufacturers just adjusting where they’re positioning themselves within the top tier market in terms of a value proposition that’s going to be more appealing to customers. So a 40,000 mile tire instead of pushing 60,000 mile tires, as an example. And I think there’s just a number of factors that’s going to get that to revert to the norm. And we see that as an upside for us. Although that’s not what our assumptions necessarily are going to be for next year. We’ll wait and see between now and then when we do our guidance.

So you’ve spoken about being encouraged in your pricing negotiations. So in the United States for the last two years, tire production has been down. Where’s the positive leverage that the carbon black companies in the U.S. have? That is, as demand continues to fall, why isn’t it in the natural course of events that prices fall? Why do they hold or go up? What keeps them up?

So the positive factors out there are, of course, you’ve been talking, and we’ve seen the trend over the last couple of years, but we’re negotiating course for 2025, right? And there’s a difference right there. A positive factor for us is if we think on a global basis, people who have been relying on imported carbon black in Europe haven’t always necessarily liked it, right? So that’s an advantage for us in the European market. In the South American market, it would be supply chain reliability, I’d say, is a big part of the driver in terms of what people are thinking of. And then finally, we changed our commercial strategy a little bit this year to reflect a little bit the shifts of different companies and also just trying to move this thing through more quickly. And I think that was also a positive for us. So that’s how I would frame it.

Okay. Great. Thank you very much.

Yes. Maybe if you’re going to say one more thing, Josh, you continue to look – Josh, sorry, Jeff, you continue to look forward to the future. I mean, we continue to have expansions in North America and Europe without really carbon black expansions. And so that doesn’t really answer the question for 2025. However, there is some ramp at some of the newer sites for next year. And I think that’s just like an overall reminder in the back of the mind of every negotiator. They’re thinking about how they position themselves, not just for one year, but longer-term, who they’re sort of paired up with. So I think that’s a little bit of a positive as well.

Thank you so much.

Thanks, Jeff.

Thank you. Our next question comes from the line of Jon Tanwanteng with CJS Securities. Please proceed with your question.

Hi, good morning, guys. Thank you for taking my questions. I was wondering what kind of volumes do you think would come back to you and the industry? With the tariffs coming in line, maybe there’s some more; maybe there aren’t. But from that factor alone, assuming just demand was flat, is there an expectation of how much the importers might exit the market or how much you might be able to regain just in terms of share on volume?

Well, I mean, I think if we got tire imports just back to where they’ve traditionally been in the low 50s with the miles driven today, and if that was coupled with we saw manufacturing picking up, right, because it wouldn’t just be tariffs on tires, so you see truck traffic picking up, you’d be back to volumes like 2017, 2018, 2019. We would be heavily loaded, and we’d be at significantly improved EBITDA from where we are. So I don’t think it requires a lot to really get there. And again, let me stress, I don’t think the story here is just one about tariffs. I think the tire manufacturers are moving and working in this direction as well. We all have the same desired outcome in that regard. But clearly, I think you just need to get back to where you were in the late teens.

Okay, got it. And then, Jeff, just a quick question. What’s driving the increased working capital this year? My assumption with lower crude prices that might actually be a tailwind for you, I’m wondering what happened? Maybe I missed it earlier.

Sure. We built some inventory, particularly in the third quarter, as we mentioned on the call. And so that’s a big step. I think, as we go into Q4, as I noted, we expect to see – as we see some seasonal impacts, we perhaps will see inventory come down a little bit, but we’ll also see receivables come down, and you’ll see working capital. While it will be up year-over-year, it will be down from where it is right now.

And on inventory, I’d just like to stress, because we got some questions last time. We’re not talking huge movements in inventory, but we’ve had certain grades at certain locations where we’re below our target inventory levels. And really we’ve just been looking to recover that. And then there are some places, right, where we’ll have a step change come January and so getting ready for that as well.

Okay. Would you expect a reversal in entering 2025 or is that kind of mostly going to be a flattish?

I wouldn’t see a reversal. I mean, what you would expect in Q1 to have higher commercial activity, so let’s say just the customer portion of that would go up a little bit in Q1.

Yes, I think if you look across what we’re looking at 2025 is you will see quarterly swings, but across the year we don’t see a dramatic change in working capital for 2025. But you will see a step up in Q1 as we usually see in the first half of the year and then kind of works its way down through the second half of the year.

Got it. Thanks. And then Corning, sorry, just one more if I could sneak one in. To go back to the import question, do you see the industry building inventories, while before tariffs are put in place and then maybe some higher inventory entering the New Year or before that that needs to be burned off impacting you?

Right. So let’s first clarify what we mean by industry. There’s very, very, very little carbon black imported into the United States. So I don’t see any impact around that. We’re then talking about the tire market. You might recall last quarter one of the tire companies speculated that some of the step up in imports was just that people trying to move product before the tariffs hit. I think it’s quite likely you could see an intermittent kind of blip on imports if there’s a deadline of when they’re going to be inputted. I think that that could well happen. But nothing – all this is speculation based on the election. I want to be clear, like tariffs are true, it’s a net positive for us, it’s a net positive for this industry. They would be good; we can do good things without the tariffs and I just like to make that clear.

Got it. Thank you.

Thank you. Our next question is a follow-up question from the line of Josh Spector. Please proceed with your question.

Yes. Hi guys, just a quick one. I just wanted to ask specifically on Huaibei, just given some of the shutdown impacts and the requalification impacts this year, how much of a drag has that been in 2024? And I guess should we be thinking about that as a benefit to 2025? I’m not thinking about the volume side of it, more just what’s in your control on costs.

Sure. I would say you would expect that to be, I don’t know, low single to mid-digits impact for this year and I would expect a minimum of like a $10 million swing as we move to next year.

Can you explain that last point? So a $10 million swing even though a low single to mid-single digit impact, does that assume that you sell out some of those volumes or is that just…

Yes, I’m sorry. My positive swing would not just be cost related because we’d have the plant operating team costs; that kind of thing. But a positive swing would be including the loading as we reload that plant next year.

Okay. Got it. Thank you.

Josh, this is Jeff. Just to clarify a little further, we have talked that we feel over time that there’s probably about a $20 million benefit to Huaibei from where we are in 2024 to where we think we can be going forward. We think – as Corning said, roughly half of that we think we see in 2025. And then I think the rest of it, you could assume would hit probably in 2026.

Yeah.

Okay. Thank you.

Thank you. There are no further questions at this time. I’d like to turn the floor back over to Mr. Painter for closing remarks.

Okay. Thank you again for joining us. As you can tell, we’re very confident about our direction and our ability to significantly step up our free cash flow. We appreciate your interest and look forward to more detailed discussions with analysts and investors following this call today early next week. On the calendar, we’ll be at the Baird Conference in Chicago next week and in NDR the following week in the Boston area. We look forward to seeing many of you. Have a nice day.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.