Diana Downey – Vice President of Investor Relations Jack Clem – Chief Executive Officer Charles Herlinger – Chief Financial Officer.

John Roberts – UBS Mike Sison – Keybanc Capital Markets Kevin Hocevar – Northcoast Research.

Good morning, everyone, and welcome to Orion Engineered Carbons’ Conference Call to discuss Third quarter 2017 Financial Results. I’m Diana Downey, Vice President of Investor Relations. With us today are Jack Clem, Chief Executive Officer; and Charles Herlinger, Chief Financial Officer.

We issued our earnings press release after the market closed yesterday and have posted the slide presentation to the Investor Relations portion of our website. We will be referencing this presentation during this call.

Before we begin, I remind you that some of the comments made on today’s call, including our financial guidance, are forward-looking statements. These statements are subject to the risks and uncertainties as described in the company’s filings with the SEC. Actual results may differ materially from those described during the call.

In addition, all forward-looking statements are made as of today, November 3, 2017, and the company does not undertake to update any forward-looking statements based on new circumstances or revised expectations.

Also non-IFRS financial measures discussed during this call are reconciled to the most directly comparable IFRS measures in the table attached to our press release. I will now turn the call over to Jack Clem..

Thank you, Diana. Good morning, and thank you for joining us for our third quarter 2017 earnings conference call. The agenda for today on Slide 3, calls for remarks on the key metrics of our third quarter, comments on the performance of our two Carbon Black business segments and our view of the current anticipated state of our markets.

Charles Herlinger will provide detail on our financial results, and discuss our outlook for the full year 2017. Following Charles, I will make a few closing comments about the year and then look forward a bit towards the positive direction we see for our business in 2018 and our strategic focus during the year.

We’ll then open the lines to take your questions. Starting with our third quarter highlights on Slide 4. Our two Carbon Black businesses executed well this quarter in the face of the Gulf Coast hurricane and some currency headwinds. Apart from these unfavorable impacts, I was pleased with the outcome of the quarter.

The underlying performance of the business was consistent with our expectations including end market demand and operational execution.

We enjoyed double-digit volume growth in our Specialty Carbon Black business, which was largely unaffected by Harvey, while volume in our Rubber Carbon Black declined about 5%, due to the expected impact from internal initiatives such as our French plant closing, the restructuring of our Korean rubber black footprint and the unexpected temporary impacts from hurricane Harvey on our operations and those of our customers.

Although, our overall volume was down slightly, we continue to generate strong cash flow from operations and maintained healthy adjusted EBITDA of €54.5 million. Net income in the third quarter improved to €13 million and earnings per share to €0.22, versus losses in the prior year quarter, which were largely result of one-off measures.

Adjusted earnings per share rose 3% to €0.34. Cash generation from operations of €35.9 million more than covered our CapEx, dividend and interest needs in the quarter. Thus we continue to reduce our leverage ratio bringing it down to a record low of 2.32.

Finally, we once again successfully repriced our debt and this time also lengthened the maturity of the debt package subsequent to the quarter’s end. Charles will provide more detail on this in his comments.

Slide 5 provides details on volumes and adjusted EBITDA for each of our two businesses, updated views of our regional production coverage and key profitability trend lines.

Specialty carbon black rose to 63% of our total EBITDA, the volume also grew to almost a fourth of our total volume this quarter, technical rubber grades also grew to 35% of our rubber volumes pushing the total volume of higher value added products to 51%, in line with our initiative to develop more of our capacity into these product segments.

As you can see on Slide 6, we had another great quarter in our specialty business. Volume increased by 11.4% to 66,600 tons led by strong demand in Europe and North America, as well as further capacity shifts from rubber to specialty production at our facilities in China and Korea.

Specialty revenue increased at a slightly faster rate, rising 12.4% to €106.5 million versus €94.7 million in the prior year’s quarter due to price increases to partially offset rising raw material.

Gross profit as well as adjusted EBITDA also grew, but we’re muted higher feedstock costs, as we experienced a spike in oil prices in the last three weeks of the quarter, and a negative foreign exchange translation impact. We have discussed our Korean network realignment with you and are pleased to note that this initiative remains well on track.

We have now fully rebuilt two production units to accommodate specialty grades and have begun work on the next. We remain on schedule with the plan to transfer all the selected grades to the larger facility in Yeosu. Then we will close the smaller plant, which is in a suburb of Seoul, clear the land and sell the real estate.

Demand remained strong across all segments of this business, especially in the polymer market. End market demand for coatings and specialized inks has also been solid.

Our facilities are running fairly full so in addition to our capacity rededication in Korea and China, we are undertaking several more steps to ensure adequate supply to our customers from our global production network. We cover Rubber Blacks on Slide 7.

Volumes were down 5.1% to 206.3 kmt, largely due to strategic initiatives we have undertaken to structurally improve this business segment. We closed a plant in France and rededicated capacity in Korea and China to specialties.

In addition, the quarter was impacted by hurricane Harvey with some of those negative effects also falling into the fourth quarter of this year, yet the business delivered a reasonable level of performance due to its underlying strength in the midst of some difficult circumstances.

This would not have been possible without the moves we made to improve pricing in 2017, while structurally reducing fixed cost. Rubber end markets were reasonably stable across all our regions, but particularly strong in Europe, where our plants are running full. U.S.

demand appear to be on par with previous quarters, but we took to hit from hurricane Harvey at our Orange, Texas facility. We had property damage at Orange and we’re forced to cease production, due to a system wide electrical grid outage followed then by mandatory evacuation order, which kept us out of the plan even after electricity was restored.

Fortunately, none of our personnel were injured in the storms with many of them both in Orange – in the Orange area and around our Houston office saw significant damage to their homes and their property.

The storm disrupted not only our production, but also the regional transportation system in the supply of other raw materials for some of our tire customers, which curtailed production until Gulf Coast polymer production was stabilized.

We estimate that we lost some 3,000 tons in the third quarter from the Gulf Coast plants, as a result of the storm and its aftermath, with a risk of further losses in the fourth quarter. We expect to recoup these losses though, latest and the latter part of this year.

Due to the pass-through effect for our index rubber sales and some base price increases, third quarter revenue increased to €178.6 million from €165.0 million in last year’s quarter. Gross profit decreased €2.8 million reflecting the unfavorable impacts earlier discussed and like our specialty business also saw a negative foreign exchange impact.

Gross profit per metric ton declined about €4 to €177 per ton. Adjusted EBITDA decreased about €2 million to €20.2 million. I’ll now turn the call over to Charles for more detail on our performance..

Thanks, Jack. Good morning, everyone. Turning to Slide 8 and our consolidated third quarter results.

Our overall volumes decreased by 1.5% or 4.2 kmt from the prior year’s quarter to 272.9 kmt with the components of this decline attributable to the closure of our Ambes France facility, the ongoing conversion of capacity in South Korea and both the direct and indirect impact of hurricane Harvey.

Revenue increased by 9.8% to €285.1 million in the quarter compared to €259.7 million last year mainly due to the pass-through of higher feedstock costs offset by foreign exchange translation impacts. Our overall contribution margin declined modestly in the third quarter falling 3.2% to €112.2 million versus €115.9 million in the prior year’s period.

As the top waterfall chart on the right hand side of the slide shows, the drop in contribution margin was driven by unfavorable feedstock mix and an unfavorable foreign exchange effect with volume and mix providing a partial offset.

Referring to the second waterfall chart on the right hand side, the €3.7 million contribution margin decline in the quarter was partially offset by the positive foreign exchange currency translation impact on our fixed costs and the low gross margin cost savings. As a result, our adjusted EBITDA decreased by 1.5% to €54.5 million.

Our adjusted EBITDA margin of 19.1% declined 220 basis points versus last year’s third quarter primarily due to the pass-through effect of higher feedstock costs increasing reported revenues.

The last waterfall chart on the right hand side of this slide analyzes net income development, which showed substantial improvement to €13 million versus the loss we reported in the prior year’s quarter, which reflected the cost associated with our global rubber footprint restructuring.

Now turning to Slide 9, which shows our year-to-date cash flow dynamics and our key balance sheet metrics as of September 30, 2017. Over the first three quarters of 2017, we generated €97 million in cash from operations, less of an increase in working capital of €22.2 million associated with rising oil prices.

Our uses of cash over the same period; which include capital expenditures, interest payments, required debt repayments and dividends; totaled €95.6 million. As a result, our year-end cash position prior to voluntary debt repayments increased slightly by €1.4 million.

Turning to our balance sheet as of September 30, 2017 the company had cash and cash equivalents of €55.8 million compared to €73.9 million on December 31, 2016.

The company’s non-current indebtedness as of the third quarter-end was €571.3 million with net debt at €528 million taking current Term Loan B and local debt into account, which represents a leverage ratio of 2.3 times LTM adjusted EBITDA, a new low for Orion as a public company.

Following the close of the quarter, we were able to reprice and extend the term of our Term Loan B debt by an additional three years to July 2024 thus reducing refinancing risk and improving our annual interest costs by €0.01 a share with the margin on the euro portion of this debt reduced from 2.75% to 2.5% thus to a level consistent with USD portion.

Our Term Loan B debt is now one of the very most tightly priced loans in our rating category. This represents a very tangible endorsement of our business model by our lenders. Now turning to Slide 10, which presents our full-year guidance and further cash flow detail regarding base business requirements and capital allocation.

Consistent with our established practice of tightening the range as the year progresses, we are tightening our full year guidance range for 2017 to adjusted EBITDA between €225 million and €230 million from our previous range of €220 million to €240 million.

Our underlying performance remains consistent with previous expectations, but currency effects have moved negatively while we’ve had to absorb the negative effects directly and indirectly associated with Harvey.

Absent the combination of these two negative impacts, our analysis indicates that changing the midpoint of the guidance range would not have been necessary. Our guidance midpoint is based on the assumption of stable volumes and the current headwinds in oil prices and exchange rates.

We see achieving the high end of this guidance range if the above assumptions hold and our rubber business is able to make up the majority of the ground lost associated directly and indirectly with Harvey.

For our base capital expenditures, our guidance remains at approximately €60 million with the total rising to about €75 million due to self-financing capital expenditures associated with the consolidation of our plants in Korea.

As previously stated, we expect that the cash proceeds derived from the sale of our plant site in Seoul will more than offset all capital expenditures and other cost associated with this consolidation project, but with some timing differences spanning a year or so. The remainder of our guidance metrics are unchanged as well.

We expect depreciation cost of €60 million and for amortization, €20 million. Our tax rate expectation on pretax income is around a 35% tax rate. On our last call, I mentioned that we have started the process of converting our internal and external financial reporting from euros to U.S. dollars based on U.S. GAAP rather than IFRS.

I can confirm that this project is progressing well and we are on track to achieve this transition quickly in 2018. This will then make us eligible for inclusion in the appropriate U.S. equity indices and thus hopefully expose our stock to demand from index driven investors.

I will now turn the call back to Jack, who will wrap up our prepared remarks before we head to Q&A..

Thank you, Charles. I’m pleased to report that as we come closer to the end of 2017, we expect to once again deliver profit growth for the year while delivering on our strategy to structurally improve this business. We’ve grown specialty and continue to grow the technical high value-added component of our rubber business.

We remain a strong cash generator and do a great job of managing our balance sheet even including another step forward during this current quarter to reduce our interest expense. Private equity ownership has now fallen under 40% following two secondary stock offerings this year. Larger float has resulted in more than tripling our trading volume.

Lower leverage and higher trading volumes in addition to solid performance has supported our share price, but we remain committed to actions that will address the valuation disparity between our businesses and that of our peers.

Slide 11 provides a summary of the operational and commercial drivers that give us confidence in the future development of Orion in that regard. These are the focus of this organization. The impact on our performance thus far is clearly evident on Slide 12. All of this work forms a solid foundation for our plans for 2018.

There we see some very positive signs regarding the supply/demand dynamics around the globe. Improving economies should be boosting demand in an environment where supply growth has been restrained and where in some locations it’s straining to meet demand.

As a result, we have seen positive developments in negotiations for the 2018 contracts with our major rubber customers in all regions. Negotiations began a bit earlier than normal this year and as of today are close to being finalized.

Our specialty segment is planning yet another strong year of above market growth based on their strategy of penetrating regional markets while expanding their portfolio of advanced and premium products.

So as we head toward the end of the year having accomplished much with no help from currency translation or energy price volatility, we are optimistic about 2018 because of our work to structurally improve the business, markets which are moving in our favor and some positive development in negotiation for 2018.

With that, as before, I close with thanks to our investors, our customers and our employees. Operator, please open the lines up for questions..

Thank you, sir. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question today comes from John Roberts of UBS. Please go ahead..

Thanks, guys. Nice quarter.

Now that your leverage is down, where do bolt-on acquisitions fit into your capital priorities?.

John, we’ve actually been on the hunt for bolt-on acquisitions since we’ve been a company. As you can imagine, we’ve been pretty judicious about what we’re looking for. The facility in China, that was good, but that was also a very natural bolt-on for us. But something that fits with us, we see would be particular play in specialty technology.

It could be a different type of process, we know they’re out there. There are some that are embedded in other organizations that we pursued and will continue to pursue those. We don’t really look for something that’s what you might call a second tier adjacency. We think opportunities upstream while they are possible, they are limited.

Downstream we’ve kind of shied away from because we think competition with customers could be problematic. So we look sort of in our space, which is largely the production of carbon black; but whether it would be a technology that fits our specialty business or an expansion of our footprint in even China is probably what makes the most sense for us.

We think with our balance sheet, with our leverage and with our cash generation; this would be entirely possible..

And then, Charles, you commented on the currency impact on the 2017 guidance. At the current rates, what would be the impact on 2018 EBITDA and earnings if you had that as well? And I know it all changes when you actually change your currency reporting..

Yes. That’s what I was going to say actually, John. Obviously it flips around perversely the other way. I mean obviously the euro and dollars assuming the trend were to continue would be worth more when you match the dollar earnings with the dollar share price.

Leaving that aside and just focusing on where we are now, I mean it’s the rule of thumb that we provide. In other words, a 5% change in the basket of our currencies is about €6 million or so of EBITDA. So, choose your poison in that sense. Obviously as we look into next year, it’s just one factor.

Jack talked about the positive vectors we see looking into next year. So currency will be, if it stays where it is, a bit against us because we’ll have a full year effect using that rule of thumb, but we’ll have a number of positives working in the other direction..

Thank you..

[Operator Instructions] Our next question comes from Mike Sison of Keybanc Capital Markets. Please go ahead..

Hey, guys, nice quarter. In terms of the Specialty Carbon Black, in the third quarter gross profit per ton fell 8%.

How much of that decline was related to the hurricanes and the spike in feedstock cost and then how much of that can you make up going forward?.

Very little of it is associated with the hurricane if any. We had some customers in the Houston area that were unable to take some products, some compound or master batch folks here in the Houston area, but those were pretty limited. So for the most part, we don’t really look to the hurricane situation as much of an impact on our specialty business.

The largest issues there I think we pointed out are FX, which had a compression factor over the prior quarter, and also just oil price. If you take oil price and you take FX, then you’ve really accounted for the majority of the difference in the margins that we saw from this quarter to the prior quarter or to the same quarter last year..

Right.

And then so in terms of pricing to get some of the feed – to get some raw materials, I’m sorry – the timing to get pricing to make up some of that squeeze, how long will that take and can you kind of catch-up on that in early 2018?.

It’s underway. We actually had some price initiatives that began in the middle of the year to push back in the third quarter. Not enough obviously as you can see and those continue underway right now into the fourth quarter and certainly they will execute in the first quarter of next year.

With the tightness that we see, particularly in some of the products where we’ve seen most of the price I guess compression of margin, those markets are getting pretty tight now namely U.S. and of course Europe continues to be tight.

So while we’ve seen reasonably stable margins at some of our high premium and advanced products, some of the grades that are not quite at high margins is where we see that, but that’s also where we see some of the tightening of the capacity.

So, when will we actually get it? We’ll get it as quickly as we possibly can, but the initiatives are underway right now. The notion is you could see some – I guess some additional improvement in the fourth quarter although it might be moderate.

Hopefully as we get into the contracts – get into the new contracts in 2018, we’ll see some restoration of these margins..

Right. And then just a quick follow-up. Volume growth continues to be impressive, up 11% I think in the third quarter and 2017 will be pretty strong, looks like fifth year in a row of really good volume growth.

What do you think the momentum is and potential for continued volume growth heading into 2018 with specialty?.

I’d just go back to what I said before. We thought that the growth rates in the first half of this year at double-digit rates were pretty heady and not likely something that we could sustain although it would be good if we could, but we also recognize some of the realities of the market.

The third quarter was a decent growth rate and kind of brought it to where I’d said earlier in conference calls sort of that middle to high-single digit figure for the full year at this point in time. I think for the most part, that’s sort of what we’ve signaled for the full year of 2017.

I think instead of a middle to high-single digit, it may be a middle to sort of high single digit as we get into 2018. We have a very solid team in place, some very solid plans and a lot of good execution going on right now.

I mean for the most part, we have put together the plans for next year and the notion is we will outstrip this 3% to 5% market growth rate that we talk about in the specialty business..

Right, thank you..

[Operator Instructions] Our next question is from Kevin Hocevar of Northcoast Research. Please go ahead..

Hey, good morning, everybody..

Hi, Kevin..

In the outlook, you gave some encouraging comments about the progress in 2018 contract negotiations with Rubber Carbon Black customers.

So, I was wondering if you could give us any color on that in terms of what type of benefits collectively that we could potentially expect in 2018? What type of positive impacts that could have or directionally would you expect it to be better than 2017 in terms of pricing progression? Just any more color you can give us there would be helpful..

Kevin, it’s probably premature to say given the fact that we are still – we haven’t finalized all the negotiations at this point in time although many of them are done and for the most part, we think that we’ve come out of this pretty well. The utilization rates were very tight in Europe and so we saw nice pricing moves in Europe from 2016 into 2017.

Our anticipation right now is that we’ll see another move in Europe from 2017 into 2018 given what we know about our contracts currently. That market is getting increasingly tight and even recently we’ve learned that there is a kind of a shift in the way the Russian economy is working right now.

So moving more of the tire production out of Russia because their economy is improving, the ruble seems to be strengthening, will help the tire production in a already very tight circumstance in Europe, which only bodes well for us because it takes away the imports into Europe and it also boosts our production within our target regions.

So, we think that’s good. Situation in the United States is one that we’ve said for quite some time we see this new tire building capacity coming on. We’ve been disappointed in the replacement tire market. It ultimately has to pick up at some point in time like we saw in Europe back in 2012, 2013.

So, we see utilization rates there tightening as well and I think our customer base for the most part has seen that also and has responded to it recognizing that this is something that has to happen.

I’m not going to be able to give you a specific number, but I would give you sort of a color that some of the advantages that we saw going from 2016 to 2017 sort of feel the same way from 2017 to 2018 in the rubber black business..

Actually great, perfect. And then as we think about as you look ahead into 2018 for the any capacity announcements in Rubber Carbon Black from competitors bringing on capacity. What type of capacity is coming online next year and how does that compare to – I think the growth rates are typically 2% to 4% on an average year in carbon black.

So, how does the capacity comparing – additions comparing if you call it a normal growth rate or whatever growth rate you would expect next year? Just trying to sense can the tight capacity remain into 2018 as – throughout 2018 as well?.

That’s our view at this point, Kevin, that what’s coming and it’s pretty public about what’s coming on out there. You have this Russian Onyx facility in Belarus, which has been delayed several times.

Appears to be targeted now for the middle of 2018 not the full capacity, but maybe 40,000 tons, 50,000 tons; I’ve forgotten exactly the number right now, but not the full capacity that they promised was supposed to come on in the middle of 2018, which frankly doesn’t really qualify for much action during 2018.

There is the joint venture between OCI and Hyundai, which is to come out in Korea. That was most recently publicized by the OCI Group to be coming on marginally in the first quarter of 2018, which doesn’t really qualify it because it can take anywhere from 3 months to 12 months to qualify these materials.

So, we don’t see that as a real factor in 2018. It could be, but it would primarily be probably in the Southeast Asian export markets for those guys. But that would also coincide with the closure of our capacity in Korea as we consolidate that Bupyeong facility down to the southern tip and our facility in Yeosu.

Apart from that, I mean those are kind of the two that have been floating around out there. There’s talk of some Indian expansion not really material for our market, but they’re also not going to be significant for 2018. Apart from that, there’s constraints in the United States so that’s going to be nothing that would come on.

And we know that there has been a couple of facilities come on in China, I think the Burlan facility came on in China and OCI’s joint venture came on in China as well.

Both of which are probably still in qualification periods right now but admittedly that’s probably not this much capacity coming on as that which has been shut down in China because the constraints on environmental and the requirements that the Chinese government have put out some of these operations, which have not only shut them down but also curtailed production when pollution gets really bad in that country.

So, it appears to be a very good picture right now for 2018 in terms of restraint supply and this – what I would call the secular growth rate in demand created in the rubber industry..

Got you. Sounds great, perfect. And then maybe just last question. The Korean especially capacity, you mentioned that that has been converted from rubber and is going through the qualification process with customers.

So, how – I know you just kind of talked about this on the rubber side, but how long does that take the qualification process on the specialty side? Is that in that 3-month to 12-month range and how much capacity does that just add to your specialty business and how should we think of that capacity ramping over in 2018, 2019 type timeframe?.

It’s the famous answer, it depends,. Some of the material has already qualified, some of it has already been transferred from the smaller plant to the larger plant, some will remain in qualification. Right now the schedule calls for most of the qualifications, if not all of them, to be wrapped up by the end of this year.

There could be some that work over to the early part of next year. But we remain in the position to be able to run that facility in Bupyeong, the smaller one in the suburb of Seoul. We’ve announced that we would run it at least until the middle of next year in order to supply the customers if we have issues with qualifications.

If we don’t and we have everything converted at that particular time, we’d move a little bit quicker on that, but that’s at least the timetable right now.

We have not converted everything in the southern tip yet so the critical path really is the construction and the investment necessary to bring those facilities from the capability of making just general rubber grades to these special and very advanced premium specialty grades.

In terms of capacity, we really haven’t revealed the specialty capacity in Korea, but we expect it to bump up a bit once we make this move. So while we’ll take some specialty capacity out when we close the smaller plant in the northern part of South Korea, we’ll actually increase overall the specialty capacity in the Peninsula..

Got you. Okay, perfect. Thank you very much..

[Operator Instructions] There appears to be no further questions at this time. I would like to turn the call back over to Jack Clem for closing remarks..

Well, we thank everybody for their attention this morning. I think as we reflect on the third quarter and our view towards the rest of this year, it is a successful quarter, a successful year.

As I said in my prepared remarks earlier between oil price moves, the volatility there as well as foreign exchange; we haven’t had any help, but yet working on our self-help projects I think has done a lot to make this organization capable of withstanding those kind of moves.

Moreover, as we’re all the way now into November of 2017, our eyes are turned to 2018.

We have plans in place now as I pointed out to continue this great acceleration of our specialty business, the work that we’ve done there, particularly addressing some of the price compression or margin compression that we’ve seen there and advancing a lot of the really good and premium products that we have in that business.

I’ve expressed some optimism with respect to the negotiations going from 2017 to 2018 in the tire markets, rubber markets particularly. I think that optimism is well founded and I think there’s been enough out in the press about the tight situation and the supply/demand dynamics right now are coming to our favor.

Apart from that, we also continue to work really hard on just improving the basic muscle of our organization with efficiency moves, the kind of activities that we’re taking on revamping our production network and so forth. So with that, we’re very optimistic – proud of the accomplishments of this year, optimistic about the next.

We appreciate all your attention this morning. And with that, operator, I think we’ll close the call out. Thank you..

Thank you..