Ingevity reports fourth quarter and full year 2023 financial results

Fourth Quarter (comparisons versus prior year period):

• Net sales of $371.7 million decreased 3.1%
• Net loss of $116.8 million and diluted loss per share of $3.23, including restructuring charges of $107.5 million; adjusted earnings of $7.8 million and diluted adjusted earnings per share (EPS) of $0.21
• Adjusted EBITDA of $61.8 million and adjusted EBITDA margin of 16.6%
• Accelerated the repositioning of the Performance Chemicals segment including the shutdown of the DeRidder, Louisiana, crude tall oil (CTO) refinery completed in early February of 2024 with the remaining assets to be shut down during the first half of the year
• Implemented significant cost savings actions

Full Year (comparisons versus prior year period):

• Net sales of $1.69 billion increased 1.4%
• Net loss of $5.4 million and diluted loss per share of $0.15, including restructuring charges of $145.3 million; adjusted earnings of $144.7 million and diluted adjusted EPS of $3.94
• Adjusted EBITDA of $396.8 million and adjusted EBITDA margin of 23.5%
• Share repurchases of $92.1 million
• Operating cash flow of $205.1 million with free cash flow of $95.3 million

Guidance:

Company announces full year 2024 guidance for sales between $1.40 billion and $1.55 billion and adjusted EBITDA between $365 million and $390 million.

The results and guidance in this release include non-GAAP financial measures. Refer to the section entitled “Use of non-GAAP financial measures” within this release.

NORTH CHARLESTON, S.C.–(BUSINESS WIRE)–Ingevity Corporation (NYSE: NGVT) today reported its financial results for the fourth quarter and full year 2023.

Fourth quarter (Q4) net sales of $371.7 million were 3% lower versus the prior year as higher volumes in the Performance Materials segment and the Road Technologies business line (formerly known as Pavement Technologies) were more than offset by lower volumes in the Advanced Polymer Technologies segment (APT) and the Industrial Specialties business line. Q4 net loss of $116.8 million includes restructuring charges of $107.5 million primarily associated with the repositioning of our Performance Chemicals segment. Adjusted EBITDA of $61.8 million was down 17% reflecting higher raw material costs, primarily CTO in Performance Chemicals, and lower volumes attributed to weak industrial demand in the Industrial Specialties business line and APT. Q4 adjusted EBITDA margin was 16.6%. Diluted loss per share in Q4 was $3.23 compared to diluted earnings per share (EPS) of $0.41 in the prior year quarter. Diluted adjusted EPS in Q4 was $0.21 compared to diluted adjusted EPS of $0.57 in the prior year quarter.

Full year (FY) net sales of $1.69 billion were up 1% compared to last year, as higher pricing across all segments, the addition of the road markings business and higher volumes in Performance Materials offset decreased volumes in APT and the Industrial Specialties business line. The company reported a FY net loss of $5.4 million, reflecting the actions taken during the year to reposition the Performance Chemicals segment and reduce costs, resulting in $145.3 million of restructuring charges. FY adjusted EBITDA was $396.8 million, down 12%, with adjusted EBITDA margin of 23.5%. FY diluted loss per share was $0.15 compared to diluted EPS of $5.50 in the prior year. FY diluted adjusted EPS was $3.94 compared to diluted adjusted EPS of $6.01 in the prior year. FY results, when compared to the prior year, were predominately impacted by significantly higher CTO costs and lower volumes as a result of the slowdown in global industrial demand.

“2023 was a record year for Performance Materials driven by increased global auto production and the growing popularity of hybrid electric vehicles, and the Road Technologies business line posted another strong year as the team’s strategic focus on expanding technology adoption keeps driving steady growth,” said John Fortson, President and CEO. “The global industrial slowdown negatively impacted volumes in Advanced Polymer Technologies and the Industrial Specialties business line, which also faced unprecedented increases in CTO costs. I remain confident that as we execute the growth strategy we shared last year, the strength we delivered in Performance Materials and Road Technologies will continue and our APT segment and Industrial Specialties business line are positioned for more profitable growth in less cyclical end markets.”

Performance Materials

Sales in Performance Materials were up 15% for Q4 at $152.8 million due primarily to increased volumes in China and improved pricing in automotive end markets. Segment EBITDA was $78.1 million in Q4, up 36% driven by favorable product mix and increased volumes, resulting in segment EBITDA margin of 51.1%, up 780 basis points versus prior year. FY sales were up 7% to a record $586.0 million driven by increased pricing and improved global auto production. FY segment EBITDA was also a record at $286.6 million, up 14%, with segment EBITDA margin of 48.9% versus 46.0% in 2022. FY segment EBITDA benefited from the favorable product mix shift to more profitable automotive end markets, increased price, and lower SG&A that more than offset higher input costs.

“Performance Materials was firing on all cylinders delivering record sales and segment EBITDA for the year, reflecting the staying power of this segment and the rebound of global auto production from 2020 lows. We are encouraged to see consumer preferences trending towards hybrid vehicles and the stability of internal combustion engine demand. Our technology helps enable the transition to electric vehicles while protecting the environment, and based on recent comments from OEMs, the transition may take longer than previously thought, which will benefit Ingevity. We continue to focus on developing solutions where our activated carbon will support battery electric vehicles as well,” said Fortson.

Advanced Polymer Technologies

Sales in the Advanced Polymer Technologies segment were $42.4 million in Q4, down 29% due primarily to volume weakness in many of the segment’s end markets. Segment EBITDA for the quarter was down 46% to $7.9 million and segment EBITDA margin of 18.6% was lower as improved input costs were not enough to offset the impact of lower volume. FY sales were $204.0 million, down 17% for the year, reflecting global market weakness. Segment EBITDA for the year was a record $44.5 million, higher by 11%, as lower input costs, disciplined price management, and cost saving initiatives drove a 550 basis point improvement in segment EBITDA margin to 21.8%.

“The Advanced Polymer Technologies team achieved record segment EBITDA for the year and significantly improved the segment’s profitability even as they faced lower demand in end markets such as footwear and industrial equipment. As we move into 2024, they will remain focused on increasing the use of our technology in areas like bioplastics, which continue to see growing adoption in end markets like apparel, agricultural chemicals, and consumer packaging, while maintaining the improved margin profile achieved last year,” said Fortson.

Performance Chemicals

Sales in the Performance Chemicals segment were $176.5 million in Q4, down 8%. Road Technologies business line sales increased 13% to $53.4 million due primarily to increased technology adoption, however, this growth was more than offset by a 15% decline in Industrial Specialties business line sales to $123.1 million driven by lower volumes in industrial end markets and pricing actions taken to manage inventory levels in rosin end markets. Segment EBITDA was negative $24.2 million due primarily to sharply higher CTO costs and sluggish demand for rosin-based products. FY sales were up 3% to $902.1 million. Road Technologies business line sales increased by 53% to $369.8 million as our legacy business continued to grow volumes, and benefited from the acquisition of the Ozark road markings business in late 2022. Industrial Specialties business line sales were $532.3 million, 16% lower than the prior year, as lower volumes attributed to reduced end market demand, primarily in rosin-based markets, more than offset price increases. FY segment EBITDA was down 59% to $65.7 million due to the higher CTO costs and weaker volumes.

“2023 was the tale of two business lines for Performance Chemicals,” said Fortson. “Our Road Technologies business line had a record year as they integrated road markings into their portfolio and grew our legacy pavement business. In our Industrial Specialties business line, the team faced prolonged demand weakness and saw unprecedented increases in CTO costs but they pushed price to help offset these increases. We continue to make progress in using alternative oleo feedstocks to reduce our reliance on CTO and offer a more diverse product portfolio for use in higher margin, less cyclical end markets.”

Liquidity/Other

Full year operating cash flow was $205.1 million with free cash flow of $95.3 million. Share repurchases for the year were $92.1 million, and $353.4 million remains available under the July 2022 $500 million Board authorization. There were no share repurchases in the quarter. Net debt ratio at the end of the year was 3.3 times, as debt repayments were more than offset by lower adjusted EBITDA.

Full Year 2024 Guidance

Ingevity announced its 2024 guidance of sales between $1.40 billion and $1.55 billion and adjusted EBITDA between $365 million and $390 million. The revenue and adjusted EBITDA guidance excludes the anticipated resales of excess CTO in 2024, which are non-core to our business, and will be reported in GAAP Other (Income) Expense, net.

“Our Performance Materials segment and Road Technologies business line have good momentum from last year and are positioned for strong growth going into 2024, and we have taken significant steps to accelerate the repositioning of our Performance Chemicals segment and reduce costs,” said Fortson. “Uncertainties do remain, particularly around the global industrial recovery which would primarily impact APT and Industrial Specialties, but we are committed to maximizing Ingevity’s profitability. While 2024 will be a transitional year for Performance Chemicals as we complete the execution of our repositioning strategy, we will continue to focus on higher-growth end markets like bioplastics in APT and expect another year of strong results in Performance Materials,” said John Fortson.

Ingevity: Purify, Protect and Enhance

Ingevity provides products and technologies that purify, protect and enhance the world around us. Through a team of talented and experienced people, we develop, manufacture and bring to market solutions that help customers solve complex problems and make the world more sustainable. We operate in three reporting segments: Performance Chemicals, which includes specialty chemicals and road technologies; Advanced Polymer Technologies, which includes caprolactone polymers; and Performance Materials, which includes activated carbon. Our products are used in a variety of demanding applications, including adhesives, agrochemicals, asphalt paving, bioplastics, coatings, elastomers, lubricants, pavement markings, oil exploration and production and automotive components. Headquartered in North Charleston, South Carolina, Ingevity operates from 31 countries around the world and employs approximately 1,700 people. The company’s common stock is traded on the New York Stock Exchange (NYSE:NGVT). For more information, visit Ingevity.com. Follow Ingevity on LinkedIn.

Additional Information

The company will host a live webcast on Thursday, February 22, at 9:00 a.m. (Eastern) to discuss fourth-quarter and full year 2023 fiscal results. The webcast can be accessed here or on the investors section of Ingevity’s website. You may also listen to the conference call by dialing 833 470 1428 (inside the U.S.) and entering access code 690825. Callers outside the U.S. can find global dial-in numbers here. For those unable to join the live event, a recording will be available beginning at approximately 2:00 p.m. (Eastern) on February 22, 2024, through February 21, 2025, at this replay link.

Use of non-GAAP financial measures: This press release includes certain non‐GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non‐GAAP financial measures to GAAP financial measures are provided within the Appendix to this presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided. The company does not attempt to provide reconciliations of forward-looking non-GAAP guidance to the comparable GAAP measure because the impact and timing of the factors underlying the guidance assumptions are inherently uncertain and difficult to predict and are unavailable without unreasonable efforts. In addition, Ingevity believes such reconciliations would imply a degree of certainty that could be confusing to investors.

Forward-looking statements: This press release contains “forward‑looking statements” within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements generally include the words “will,” “plans,” “intends,” “targets,” “expects,” “outlook,” “guidance,” “believes,” “anticipates” or similar expressions. Forward‑looking statements may include, without limitation, anticipated timing, charges and costs of the closure of our DeRidder, Louisiana plant; the potential benefits of any acquisition or investment transaction, expected financial positions, guidance, results of operations and cash flows; financing plans; business strategies and expectations; operating plans; capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost‑reduction initiatives, plans and objectives; litigation related strategies and outcomes; and markets for securities. Actual results could differ materially from the views expressed. Factors that could cause actual results to materially differ from those contained in the forward‑looking statements, or that could cause other forward‑looking statements to prove incorrect, include, without limitation, charges, costs or actions, including adverse legal or regulatory actions, resulting from, or in connection with, the closure of our DeRidder, Louisiana plant; losses due to resale of CTO at less than we paid for it; adverse effects from general global economic, geopolitical and financial conditions beyond our control, including inflation and the Russia‑Ukraine war and Israel‑Gaza war; risks related to our international sales and operations; adverse conditions in the automotive market; competition from substitute products, new technologies and new or emerging competitors; worldwide air quality standards; a decrease in government infrastructure spending; adverse conditions in cyclical end markets; the limited supply of or lack of access to sufficient raw materials, or any material increase in the cost to acquire such raw materials; issues with or integration of future acquisitions and other investments; the provision of services by third parties at several facilities, including the impact of WestRock’s shutdown of its North Charleston paper mill; supply chain disruptions; natural disasters and extreme weather events; or other unanticipated problems such as labor difficulties (including work stoppages), equipment failure or unscheduled maintenance and repair; attracting and retaining key personnel; dependence on certain large customers; legal actions associated with our intellectual property rights; protection of our intellectual property and other proprietary information; information technology security breaches and other disruptions; complications with designing or implementing our new enterprise resource planning system; government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies, tariffs and the chemicals industry; and losses due to lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes, and the other factors detailed from time to time in the reports we file with the Securities and Exchange Commission (the “SEC”), including those described in Part I, Item 1A. Risk Factors in our most recent Annual Report on Form 10‑K as well as in our other filings with the SEC. These forward‑looking statements speak only to management’s beliefs as of the date of this press release. Ingevity assumes no obligation to provide any revisions to, or update, any projections and forward‑looking statements contained in this press release.

Contacts

Caroline Monahan

843-740-2068

[email protected]

Investors:
John E. Nypaver, Jr.

843-740-2002

[email protected]

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