q1 19 earnings call...q1 19 earnings call 2 note regarding forward-looking statements; non-us gaap...

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Q1 19 EARNINGS CALL

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Note Regarding Forward-Looking Statements; Non-US GAAP MeasuresThis presentation contains and refers to certain forward-looking statements with respect to our financial condition, results of operations and business. These statements constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among others, statements concerning the potential exposure to market risks, statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions and statements that are not limited to statements of historical or present facts or conditions. Forward-looking statements are typically identified by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “objectives,” “outlook,” “probably,” “project,” “will,” “seek,” “target” and other words of similar meaning.

These forward-looking statements include, without limitation, statements about the following matters: • our strategies for (i) strengthening our position in specialty carbon blacks and rubber carbon blacks, (ii) increasing our rubber carbon black margins and (iii) strengthening the competitiveness of our operations; • the installation of pollution control technology in our U.S. manufacturing facilities pursuant to the EPA consent decree described herein; • the outcome of any in-progress, pending or possible litigation or regulatory proceedings; and • our expectation that the markets we serve will continue to grow.

All these forward-looking statements are based on estimates and assumptions that, although believed to be reasonable, are inherently uncertain. Therefore, undue reliance should not be placed upon any forward-looking statements. There are important factors that could cause actual results to differ materially from those contemplated by such forward-looking statements. These factors include, among others: • negative or uncertain worldwide economic conditions;• volatility and cyclicality in the industries in which we operate; • operational risks inherent in chemicals manufacturing, including disruptions as a result of severe weather conditions and natural disasters; • our dependence on major customers; • our ability to compete in the industries and markets in which we operate; • our ability to develop new products and technologies successfully and the availability of substitutes for our products; • our ability to implement our business strategies; • volatility in the costs and availability of raw materials(including but not limited to any and all effects from restrictions imposed by the MARPOL convention and respective International Maritime Organization (IMO) regulations in particular to reduce sulphur oxides (SOx) emissions from ships) and energy; • our ability to realize benefits from investments, joint ventures, acquisitions or alliances; • our ability to realize benefits from planned plant capacity expansions and site development projects and the potential delays to such expansions and projects; • information technology systems failures, network disruptions and breaches of data security; • our relationships with our workforce, including negotiations with labor unions, strikes and work stoppages; • our ability to recruit or retain key management and personnel; • our exposure to political or country risks inherent in doing business in some countries; • geopolitical events in the European Union, and in particular a “no-deal Brexit” which may impact the Euro; • environmental, health and safety regulations, including nanomaterial and greenhouse gas emissions regulations, and the related costs of maintaining compliance and addressing liabilities; • possible future investigations and enforcement actions by governmental or supranational agencies; • our operations as a company in the chemical sector, including the related risks of leaks, fires and toxic releases; • market and regulatory changes that may affect our ability to sell or otherwise benefit from co-generated energy; • litigation or legal proceedings, including product liability and environmental claims; • our ability to protect our intellectual property rights and know-how; • our ability to generate the funds required to service our debt and finance our operations; • fluctuations in foreign currency exchange and interest rates; • the availability and efficiency of hedging; • changes in international and local economic conditions, including with regard to the Euro, dislocations in credit and capital markets and inflation or deflation; • potential impairments or write-offs of certain assets; • required increases in our pension fund contributions; • the adequacy of our insurance coverage; • changes in our jurisdictional earnings mix or in the tax laws or accepted interpretations of tax laws in those jurisdictions; • our indemnities to and from Evonik ; • challenges to our decisions and assumptions in assessing and complying with our tax obligations; • our status as a foreign private issuer; and • potential difficulty in obtaining or enforcing judgments or bringing actions against us in the United States.

You should not place undue reliance on forward-looking statements. We present certain financial measures that are not prepared in accordance with Generally Accepted Accounting Standards (US GAAP) or the accounting standards of any other jurisdiction and may not be comparable to other similarly titled measures of other companies. These non-US GAAP measures are Contribution Margin, Contribution Margin per Metric Ton, Adjusted EBITDA, Adjusted EPS, Net Working Capital and Capital Expenditures. Adjusted EBITDA, Adjusted EPS, Contribution Margins and Net Working Capital are not measures of performance under US GAAP and should not be considered in isolation or construed as substitutes for revenue, consolidated profit (loss) for the period, operating result (EBIT), gross profit or other US GAAP measures as an indicator of our operations in accordance with US GAAP. For a reconciliation of these non-US GAAP financial measures to the most directly comparable US GAAP measures, see Appendix.

Forward-looking Adjusted EBITDA and Adjusted EPS included in this presentation are not reconcilable to their respective most directly comparable US GAAP measure without unreasonable efforts, because we are not able to predict with reasonable certainty the ultimate amount or nature of adjustment items in the fiscal year. These items are uncertain, depend on many factors and could have a material impact on our US GAAP reported results for the guidance period.

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•Q1 performance maintained sequentially but down from strong prior year

•Road map for full year results: Drive business recoveryExecute profit improvement plan Leverage technical leadership

Q1 2019 Overview and Full Year

Specialty Rubber

•Customer restocking

•Mix improvement

•China stabilizing

•Margin / Pricing actions

•MRG recovery

•Key market supply/demand trend positive

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Capital Allocation

• Capex budgeting is a dynamic process• Must do: Safety, maintenance and compliance projects• Further value enhancement: Growth, productivity, share buy back, debt paydown• Ample scope for improvement projects in core Carbon Black business• Ability to pace value enhancement projects

• Maintain Stable Dividend

• EPA• Continuing negotiations with Evonik; if no near term agreement is reached likely

initiate German arbitration in Q2• Decision by arbitrators not expected for several years• Settlement during arbitration possible• Incremental capital outlay estimates provided in March 2019 will exceed the limits of

the Evonik indemnity

• Stay within Leverage Targets

Capital Allocation is a top priority

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Cashflow Positive

($millions)

Lower End of Guidance

Upper End of Guidance

Adjusted EBITDA 280 300

Cash Requirements:

Less: Capex -140 -150

Less: Cash Tax -37 -43

Less: Debt Service -27 -27

Dividends -48 -48

Other -15 -15

Net Cash Change +13 +17

• Plan to be Cashflow positive despite EPA capex spend

• Assumption that working capital is flat for the year

Roadmap to be cashflow positive without EPA reimbursement this year

6

Orion Q1 2019 Development versus Prior Year

• Strong development of base price increases mainly driven by Rubber segment

• Negative mix effects associated with customer destocking in premium Specialty grades mainly in China and EMEA, and weakened demand for MRG (Rubber) products particularly in China

• Reduction in volumes attributable to a weaker trading environment

• Translation related FX losses due to stronger US Dollar particularly against Euro

• Negative feedstock differentials compared to a year ago

In $

Q1 2018 Adjusted EBITDA ($millions)

76.0

Base Price and Mix 8.0

Volume Impacts -11.9

Foreign Exchange Translation Impacts

-5.1

Other (includes feedstock, energy impacts and freight)

-2.4


64.6

Q1 2019 to Q1 2018 Comparison

* Based on development of key economic indicators summarized on slide 28 with oil prices assumed to remain at average levels experienced in Q1 2019

Business quality maintained in soft market

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Successful 4-Year Track Record as a Public Company…

Volume KMT*

770841 808 803

189212 234 254

500

600

700

800

900

1000

1100

2015 2016 2017 2018

RCB SCB

232247

257

294

200

220

240

260

280

300

2015 2016 2017 2018

0.74 0.74

0.77

0.80

0.70

0.72

0.74

0.76

0.78

0.80

0.82

2015 2016 2017 2018

Delivered Value in Challenging Business EnvironmentRevenue ($million)

1,2351,139

1,328

1,578

500

700

900

1100

1300

1500

1700

2015 2016 2017 2018

1.321.50 1.56

2.21

0.00

0.50

1.00

1.50

2.00

2.50

2015 2016 2017 2018

Adjusted EPS ($)

Adjusted EBITDA ($million)

Dividend per Share ($)

* Volumes adjusted for production rationalization and consolidation

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…Significant Achievements Over the Past 4 Years as a Public Company

• Volumes up 10% since 20151

• Adj. EBITDA progression every year despite oil price and FX volatility

• Significant deleveraging through strong cash flow and long term growth; 3.0x at year end 2014 to 2.2x at year end 2018

• Specialty market leadership and capability

• Rubber Carbon Black pricing power and volume growth ex-plant consolidation

• Improved manufacturing footprint as a result of targeted rationalizations leading

to high utilization and accretive EBITDA

• Further positioned towards index inclusion: US Dollar and US GAAP conversion

1) adjusted for plant rationalizations

Orion Positioned Well in a Dynamic Economic Environment

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A Strong Financial Foundation

Positioned for the Future

• Leverage target of 2.0x-2.5x net debt to adjusted EBITDA

• Strong liquidity with no material near term maturities: Term Loan B and RCF mature in 2024

• RCF extended to April 2024 consistent with Term Loan B debt; strong subscription demand led to 60 bps lower rate and upsizing from EUR175m to EUR250m

• Working to improve rubber carbon black business model

• Believe we now satisfy all Russell Index criteria

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1Q 2019 Consolidated Operating Results1)

Metric 1Q19 1Q18 Y/Y 4Q18 Seq

Volume (kmt) 262.8 286.1 -8.2% 256.2 2.6%

Revenue ($/Millions) 384.7 406.7 -5.4% 386.0 -0.3%

Contribution Margin ($/Millions) 136.3 150.2 -9.2% 129.4 5.3%

Contribution Margin/ton ($) 518.7 524.8 -1.2% 505.1 2.7%

Income from Operations(EBIT) ($/Millions)

34.7 45.3 -23.5% 26.7 30.1%

Adj. EBITDA ($/Millions) 64.6 76.0 -15.0% 64.4 0.2%

Adj. EBITDA Margin 16.8% 18.7% -190bps 16.7% 10bps

Net Income ($/Millions) 19.0 26.8 -29.2% 20.4 -7.1%

EPS (Basic) ($) 0.32 0.45 -$0.13 0.34 -$0.02

Adjusted EPS ($) 0.40 0.58 -$0.18 0.48 -$0.08

1) See Appendix for reconciliation of non-US GAAP measures to the most directly comparable US GAAP measure

Performance maintained sequentially; down against strong comparator in Q1 2018

• Volumes remain at Q4 2018 levels, down 4.0% versus Q1 2018 adjusted for Korean plant consolidation

• Adjusted EBITDA at Q4 2018 level, down 15.0% versus a year ago reflecting mainly volume, mix and FX

• Ex-FX

• Adjusted EBITDA at $69.7m

• CM/Ton Q1 at $553 up 5% reflecting pricing

• Other metrics reflect Adj. EBITDA development

Highlights

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1Q 2019 Consolidated Operating Results1)

150.2

136.3

8.011.9

8.9

1.1

1Q18 Price/Mix Volume FX Feedstock 1Q19

76.0

64.6

13.9

4.0 3.7 1.0 3.2

1Q18 ContributionMargin

FX onFixed Costs

SG&A Fixed Costs Other InclBelow Margin

1Q19

Net Income ($/M) 2)

Contribution Margin Variance ($/M) Adjusted EBITDA Variance ($/M)Not to scale Not to scale

1) See Appendix for reconciliation of non-US GAAP measures to the most directly comparable US GAAP measure2) 2019 effective tax rate 30.1%

26.8

19.0

11.4

0.9 1.9 0.70.1

1Q18 Adj EBITDA Tax Finance Costs Depreciation Other 1Q19

Not to scale

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2019 Cash Flow & Balance Sheet Highlights

57.160.9

26.2 22.5

11.9 12.0

Cash at 12/31/18 Cash Flow fromOperations

Capex Dividends Net FinancingActivity

Cash at 03/31/19

YTD 2019 Cash Flow Generation ($/M)

1) Represents cash before deduction of short and long term liabilities 2) Excludes benefit relating to Term Loan B amount derived from FX

Balance Sheet Highlights as of 3/31/2019 (in $/M unless

noted)

Cash & Cash Equivalents 60.9

Net Working Capital 282.8

Total Debt (long term) 635.3

Total Liabilities and Equity 1,273.4

Net Debt 636.2

Net Debt/LTM Adjusted EBITDA 2.25

1)

Operating cash flow remains strong

2)

1)

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Specialty Carbon Black Business


Volume (kmt)

64.0 69.1 -7.4% 60.8 5.3%

Revenue ($/Millions)

131.6 141.7 -7.1% 126.9 3.7%

Gross Profit($/Millions)

41.4 54.0 -23.3% 39.1 5.8%

Gross Profit/ton($)

647.1 781.2 -17.2% 643.6 0.5%

Adj. EBITDA ($/Millions)

29.4 40.3 -27.1% 29.0 1.3%

Adj.EBITDA/ton ($)

459.6 583.8 -21.3% 477.5 -3.8%

Adj. EBITDA Margin

22.3% 28.5% -620bps 22.9% -60bps

Highlights

689.8762.4 782.7

660.8

781.2856.1

744.9

643.6 647.1

500.0

700.0

900.0

Q1 2017 Q2 1027 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

Quarterly Gross Profit Per Ton ($)

• Volumes down compared to a strong Q1 2018 but some recovery sequentially

• Gross Profit per Ton reflects mix, and lower fixed cost adsorption as well as negative FX

• Ex-FX


• GP/Ton Q1 at $703

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Specialty Development versus Prior Year: Expectations for Remainder 2019

• Weaker trading environment particularly in APAC

• Translation related FX losses mainly due to stronger US Dollar versus Euro

• Negative differentials, and timing of pass-through of feedstock costs

In million $


40.3

Price (includes feedstock related) and Mix

1.6

Volume Impacts -5.4


-2.8


-4.3


29.4


Expectations for remaining quarters of 2019*

• Gradual restocking of customer supply chains particularly in China expected, thus improved mix and volumes, and GP/mT margins

• Pick up in fiber business

• Improved recovery of feedstock costs during remainder of year

• Tight cost control

• FX assumed at Q1 level


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Rubber Carbon Black Business


Volume (kmt)

198.8 217.0 -8.4% 195.4 1.7%

Revenue ($/Millions)

253.1 265.0 -4.5% 259.1 -2.3%

Gross Profit($/Millions)

56.6 58.4 -3.2% 56.5 0.1%

Gross Profit/ton($)

284.5 269.2 5.7% 289.2 -1.6%

Adj. EBITDA ($/Millions)

35.2 35.7 -1.4% 35.4 -0.7%

Adj.EBITDA/ton ($)

176.9 164.3 7.7% 181.3 -2.4%

Adj. EBITDA Margin

13.9% 13.5% 40bps 13.7% 20bps

Highlights

236.9214.2 208.3

250.9 269.2 263.3301.7 289.2 284.5

100.0

300.0

Q1 2017 Q2 1027 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

Quarterly Gross Profit Per Ton ($)

• Adjusted for plant consolidation volumes down by 2.8% versus PY, up by 1.7% sequentially

• Gross Profit: lower MRG volumes, negative FX and differentials off-set successful base price increases

• Ex-FX


• GP/Ton Q1 at $300

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Rubber Development versus Prior Year: Expectations for Remainder of 2019

• Targeted base price increases realized

• Reduction in volumes mainly MRG in China and EMEA

• FX Translation significant impact


Expectations remaining quarters of 2019*

• Gradual recovery of MRG business even with subdued economic activity

• Continued upward development of Gross Profit/mT with loading and mix recovery

• Tight cost control

• FX assumed at Q1 level

• Negative feedstock impacts to persist, with the pass through of Marpol/IMO 2020 effects


In million $


35.7

Base Price and Mix 6.4

Volume Impacts -6.5


-2.3


1.9


35.2

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IMO 2020

Current forward curve

IMO2020: marine fuel oil sulfur limit decreases from 3.5% to 0.5%, January 1, 2020• Availability and market flows of low sulfur CBO have already begun to change • Feedstock density (impacts yield) challenges include year round diesel production and lighter slate

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Initiatives

Operating, capital allocation and shareholder initiatives driving performance in 2019 and beyond

TimingOperating:

PIP: Profit Improvement Plan team 2019Pricing Excellence: Value pricing and raw material cost recovery 2019Portfolio renewal: New coatings product DoneWin with customers: Drive customer qualifications now 2019Prepare for future: Debottleneck Gas Black 2019/20

Incentive Plan:Annual - stronger emphasis on regional and plant EBITDA In PlaceLong Term - based on ROCE and TSR In Place

Capital Allocation:Pace capex spend 2019/20Route to annual cashflow positive 2019/20Continue improving long term liquidity with RCF refinancing Done

Shareholder:Russell Index Compliant

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Guidance

* We have made no decision about any buyback. Change in basic share count from 59.5 million from end of Q1 2019 due to LTIP shares issued in 2019.

Parameters for full year 2019Impact

Adjusted EBITDA $280 million – $300 million

Cash Capex ~$150 million

Depreciation & Amortization $95 million

Tax Rate 30.1%

Debt Service $27 million

Basic Share Count at 12/31/2019 60.0 million*

Diluted Share Count at 12/31/2019 61.4 million*

Working Capital Cashflow No net impact on cash flow for year

FX Based on Q1 average rate

Oil Prices Based on Q1 average levels

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APPENDIX

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Orion and Corporate Stewardship

Employee Safety• Consistent, top quartile performance

among peers in managing OSHA recordable and lost time injury rates

• Advanced injury prevention systems based on behavioral based methodology

• Industry-wide cooperation in confirming the safety of Carbon Black employee exposure

Governance• Sarbanes Oxley compliant according to US

SEC regulations

• SAP based authorization process mature and strictly controlled

• Whistleblower program functional and responsible to the Audit Committee of the Board of Directors

Environmental• Concluded negotiations with US EPA

Consent decree in place

• Upgraded Qingdao plant with most advanced emissions control equipment

• Remediation advancing at closed French and Korean facilities

Management Compensation• Long-term incentive program in place

based on ROCE performance and relative shareholder return over three-year period

• Annual compensation pegged to industry benchmarks with variable compensation based on key financial performance metrics

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Gross Sales by Producing Location Gross Sales by Region Where SoldRegion 1Q18 1Q19 Region 1Q18 1Q19

EMEA 61.9% 62.1% EMEA 41.9% 44.5%Americas 20.1% 19.2% Americas 22.2% 24.1%

Asia 18.0% 18.7% Asia 35.9% 31.4%Total 100% 100% Total 100% 100%

Gross Sales by Region - Specialty

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Gross Sales by Producing Location Gross Sales by Region Where SoldRegion 1Q18 1Q19 Region 1Q18 1Q19

EMEA 41.0% 38.9% EMEA 39.4% 41.0%Americas 33.8% 40.9% Americas 32.1% 39.2%

Asia 25.2% 20.2% Asia 28.5% 19.8%Total 100% 100% Total 100% 100%

Gross Sales by Region - Rubber

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Strength of Orion’s Specialty Business

41.0%

23.0%

36.0%

EMEA

Americas

Asia

Key End Markets(% of Gross Sales)

Polymers 55.1%

Coatings14.1%

Special Applications3.5%

Dealer/Distributor 14.0%

Printing Systems13.3%

FY 2018 Gross Sales by Region Where Sold

30.1%

35.5%

30.4%

27.4%

2015 2016 2017 2018

Adjusted EBITDA Margin

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Strength of Orion’s Rubber Business

39.3%

36.2%

24.5%

EMEA

Americas

Asia

FY 2018 Gross Sales by Region Where Sold

Key End Markets(% of Gross Sales)

Tire & Technical Tire71.8%

Distributor/Dealer3.8%

MRG24.4%

12.8%

13.4%13.1%

14.0%

2015 2016 2017 2018

Adjusted EBITDA Margin

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Amend & Extend of RCF – Key Items

Orion Engineered Carbons GmbH, OEC Finance US LLC, Orion Engineered Carbons Intl. GmbH

Orion Engineered Carbons GmbH, OEC Finance US LLC, Orion Engineered Carbons Intl. GmbH

Revolving Credit Facility Revolving Credit Facility

EUR 250mn EUR 175mn

25 April 2024 25 April 2021

1st priority security on certain current and hereinafter acquired material assets of each subsidiary of OEC S.A. (Parent) with certain exceptions)

1st priority security on certain current and hereinafter acquired material assets of each subsidiary of OEC S.A. (Parent) with certain exceptions)

≥ 80% Guarantor Coverage test based on the gross assets and Consolidated EBITDA (in each case, excluding goodwill, intragroup items and investments in Subsidiaries of any Loan Party)

≥ 80% Guarantor Coverage test based on the gross assets and Consolidated EBITDA (in each case, excluding goodwill, intragroup items and investments in Subsidiaries of any Loan Party)

> 3.25x: 270 bps≤ 3.25x and > 2.75x: 240 bps≤ 2.75x and > 2.25x: 215 bps≤ 2.25x and > 1.75x: 190 bps (initial)≤ 1.75x: 165 bps

> 2.80x: 300 bps≤ 2.80x and > 2.30x: 275 bps≤ 2.30x : 250 bps

35% of applicable margin 35% of applicable margin

0 % 0 %

45 bps old money fee / 75 bps new money fee 50 bps old money fee / 100 bps new money fee

First Lien Leverage Ratio of max. 5.5x, tested if RCF utilisation is > 35%

First Lien Leverage Ratio of max. 5.5x, tested if RCF utilisation is > 35%

None None

Borrowers

Amount

Maturity

Security

Financial Covenants

Margin p.a.

subject to net leverage

Upfront Fee

Instrument

Guarantees

Summary of key terms

Commitment Fee

Floor

Other Amendments

New RCF – effective April 10, 2019 Prior RCF

27

Debt Maturity Profile

• OEC‘s debt consists mainly of a Term Loan B (‘TLB’) split between USD and EUR tranches

• USD denominated TLB virtually converted into Euro by entering into cross-currency swaps (May 2018)

• The TLB includes an amortization of 1% p.a. with the remainder falling due in July 2024

• Next to the TLB, OEC has the new EUR 250m RCF in place (effective April 2019) which matures in April 2024

0.000

100.000

200.000

300.000

400.000

500.000

600.000

700.000

FY-19 FY-20 FY-21 FY-22 FY-23 Apr 24 Jul 24

Term Loan USD Term Loan EUR Local bank loans Undrawn RCF

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Assumptions Incorporated Into Guidance

Global Light Vehicle Production Forecast

Region Y/Y % Change

NAFTA -2.8%

Europe -2.0%

China 0%

Korea -1%

GDP

Region Y/Y Change

US -0.7ppts

Europe -0.6ppts

China -0.3ppts

Korea -0.3ppts

FX Rates vs USD

Region Y/Y % Change

Euro -4.1%

Korean Won -2.7%

Brazilian Real -4.3%

Chinese Renminbi -0.9%

So African Rand -7.3%

Differentials

Region Y/Y % Change

US 44.1%

Europe 51.9%

Translational Foreign Currency:

5% change in basket of currencies (Euro, Korean Won Brazilian Real, South African Rand)

-Impacts NWC by $5 – 6 million-Impacts annual Adjusted EBITDA by $12 million

Feedstock Price Changes:

$10/bbl change impacts NWC over 3 months by $23 – 26 million

Rules of Thumb

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Rubber Carbon Black Market Outlook – 2019 and Beyond

US

Demand

Supply

Demand growth from new tire plants, US EPA 114

RUS

Demand

Supply

Limited capacity addition; CBO market changes

EU

Demand

Supply

Market slow down driven by OE, but new (tire) capacity

CN

Demand

Supply

Some recovery during 2HY 2019; limited CBO supply due to steel restr.

KOR

Demand

Supply

Slow market and new capacity, high exports

JP/SEA

Demand

Supply

Continued demand growth, CB imports required, some new capacity

IND

Demand

Supply

Healthy demand growth (infrastruc-ture), capacity adds (green&brownfield)

LA

Demand

Supply

Continued market recovery, but some political risks continued

ZA

Demand

Supply

Moderate growth for Africa; growing tire exports

Exports

Rubber Carbon Black demand is likely to outgrow capacity additions in the mid-term future

Source: Orion Engineered Carbons best estimate based on announced plans

30

Historical Non-US GAAP Metrics Reconciliation

1 Includes costs such as raw materials, packaging, utilities and distribution - Variable manufacturing costs are assigned to products based on actual cost of consumption. Fixed manufacturing costs are assigned to products based on production line time. SG&A costs are assigned to products based on designated personnel costs or consistently allocated based on the drivers of these costs

2 Finance costs, net consists of Finance income and Finance costs3 Consulting fees related to the Group strategy include external consulting fees from establishing and implementing our operating, tax and organizational strategies including merger and acquisition strategies.4 Other non-operating is primarily restructuring related and includes expenses related to Long Term Incentive Plan

31

Non-US GAAP Metric Definitions

In this presentation we refer to Adjusted EBITDA, Contribution Margin, Contribution Margin per ton, Net Working Capital, Capital Expenditures and Adjusted EPS, which are financial measures that have not been prepared in accordance with Generally Accepted Accounting Standards (US GAAP) or the accounting standards of any other jurisdiction and may not be comparable to other similarly titled measures of other companies. We refer to these measures as “non-GAAP” financial measures. Adjusted EBITDA is defined as operating result (EBIT) before depreciation and amortization, adjusted for acquisition related expenses, restructuring expenses, consulting fees related to group strategy, share of profit or loss of joint venture and certain other items. Adjusted EBITDA is used by our management to evaluate our operating performance and make decisions regarding allocation of capital because it excludes the effects of certain items that have less bearing on the performance of our underlying core business. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under US GAAP. Some of these limitations are: (a) although Adjusted EBITDA excludes the impact of depreciation and amortization, the assets being depreciated and amortized may have to be replaced in the future and thus the cost of replacing assets or acquiring new assets, which will affect our operating results over time, is not reflected; (b) Adjusted EBITDA does not reflect interest or certain other costs that we will continue to incur over time and will adversely affect our profit or loss, which is the ultimate measure of our financial performance and (c) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently. Because of these and other limitations, you should consider Adjusted EBITDA alongside our other US GAAP-based financial performance measures, such as consolidated profit or loss for the period.

Contribution Margin is calculated by subtracting variable costs (such as raw materials, packaging, utilities and distribution costs) from our revenue. We believe that Contribution Margin and Contribution Margin per Metric Ton are useful because we see these measures as indicating the portion of revenue that is not consumed by such variable costs and therefore contributes to the coverage of all other costs and profits.

Adjusted EPS is defined as profit or loss for the period adjusted for acquisition related expenses, restructuring expenses, consulting fees related to group strategy, certain other items (such as amortization expenses related to intangible assets acquired from our predecessor and foreign currency revaluation impacts) and assumed taxes, divided by the weighted number of shares outstanding. Adjusted EPS provides guidance with respect to our underlying business performance without regard to the effects of (a) foreign currency fluctuations, (b) the amortization of intangible assets which other companies may record as goodwill having an indefinite lifetime and thus no amortization and (c) our start-up and initial public offering costs. Other companies may use a similarly titled financial measure that is calculated differently from the way we calculate Adjusted EPS.

We define Net Working Capital as the total of inventories and current trade receivables, less trade payables. Net Working Capital is a non-US GAAP financial measure, and other companies may use a similarly titled financial measure that is calculated differently from the way we calculate Net Working Capital..

32

INVESTOR RELATIONS CONTACT DETAILS

DIANA DOWNEYINVESTOR-

[email protected]

q1 19 earnings call...q1 19 earnings call 2 note regarding forward-looking statements; non-us gaap...

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