Ingevity (NGVT) reports selected preliminary Q3 results

Ingevity Corporation (NYSE: NGVT) today reported selected preliminary financial results for the third quarter.

• Ingevity’s results were driven by global automotive demand and production rebound versus weak second quarter, continued strong paving activity, cost reduction actions and strong execution
• Third quarter net sales of $332 million were down 7.8% versus the prior year quarter driven by the economic impacts of COVID-19
• Net income of $70 million was up 16.7% versus prior year quarter; net income as a percentage of sales was 21.1%, compared to 16.6% in the prior year quarter
• Third quarter adjusted EBITDA of $128 million were up 11.9% versus the prior year quarter; adjusted EBITDA margin of 38.5% is up 680 basis points
• Operating cash flow of $90 million; free cash flow of $74 million
• Company increases and narrows fiscal year 2020 guidance for adjusted EBITDA to between $355 million and $365 million; narrows guidance for sales to between $1.15 billion and $1.20 billion

(Consensus sees Q3 revenue of $316.6 million)

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Ingevity Corporation (NYSE: NGVT) today reported selected preliminary financial results for the third quarter.

“Ingevity’s third quarter results were driven by strong rebounds in automotive sales and production worldwide versus a weak second quarter, along with continued strong paving activity, cost reduction actions and strong execution,” said John Fortson, president and CEO. “These positives were partially offset by a weakened economic environment due to COVID-19 that particularly impacted our Performance Chemicals businesses. Nonetheless, our adjusted EBITDA and adjusted EBITDA margin were records for the third quarter.”

Third quarter net sales of $332 million were down 7.8% versus the prior year third quarter. Net income of $70 million increased 16.7% and net income margin of 21.1% was up from 16.6% in the prior year. The third quarter diluted earnings per share were $1.69 compared to $1.41 in the prior year period.

Adjusted earnings of $74 million were up 19.3% versus the prior year quarter. Diluted adjusted earnings per share were $1.79, which exclude, net of tax, $0.10 related primarily to restructuring and other charges, net, recognized during the quarter. This compares to diluted adjusted earnings per share of $1.46 in the prior year quarter. Adjusted EBITDA of $128 million were up 11.9% versus the third quarter 2019. Adjusted EBITDA margin of 38.5% was up 680 basis points from the prior year’s third quarter.

The company generated operating cash flow of $90 million, which translated to free cash flow of $74 million.

Performance Chemicals
“With the exception of our pavement technologies business, our Performance Chemicals segment was negatively impacted by a weak economy resulting from COVID-19,” said Fortson. “We continue to control costs which resulted in our adjusted EBITDA margins remaining solidly in the mid 20s.”

Sales to pavement technologies applications were slightly higher than the prior year and set a quarterly record. While paving sales in North America were essentially flat, sales in China and Europe, Middle East and Africa (EMEA) were up sharply, albeit from smaller bases. Sales for engineered polymers products were down due to reduced industrial demand globally. Footwear and medical device sales were down, while sales to bioplastics customers continued to show growth. Sales decreased in industrial specialties applications due to continued demand weakness for printing inks and other end-use applications. Additionally, sales to oilfield technologies customers were cut sharply in line with reduced drilling in North America; sales in oil production applications were down moderately.

Third quarter 2020 sales in the Performance Chemicals segment were $188 million, down 18.2% versus the third quarter 2019. Segment EBITDA were $47 million, down 21.1% versus the prior year quarter due to lower volumes which were partially offset by price/mix. Segment EBITDA margin declined 90 basis points to 25.1%.

Performance Materials
“Automakers – particularly in the U.S. and Canada – rebounded sharply,” said Fortson. “The industry continues to work to refill the vehicle pipeline, and as such, demand for our gasoline vapor emission control solutions has risen dramatically versus the second quarter.” As a result, the company’s quarterly production of honeycomb scrubbers used to meet the U.S. and Canadian regulatory standards were a quarterly record.

Sales of Performance Materials products in China were up strongly as automakers there have bounced back from COVID-related shutdowns and the implementation of the China 6 standard has been completed.

Third quarter 2020 sales in the Performance Materials segment were $144 million, up 10.4% versus the third quarter 2019. Segment EBITDA were $80 million, up 48.3% versus the prior year period due to the sharp increase in volumes and price/mix improvement. Segment EBITDA margin increased 1,430 basis points to 55.9%.

Outlook
Ingevity narrowed its fiscal year 2020 guidance for sales from between $1.10 billion and $1.20 billion to between $1.15 billion and $1.20 billion, and increased and narrowed its guidance for adjusted EBITDA from between $310 million and $350 million to between $355 million and $365 million.

“We remain confident in our business through the end of the year,” said Fortson. “While we may see continued weakness on the revenue line, given the cost controls we’ve implemented, we expect our adjusted EBITDA and adjusted EBITDA margins to remain favorable. And while uncertainty remains regarding global economic strength, we believe in the strength of our strategy and our team’s ability to execute on the opportunities.”

Preliminary Results
We have provided the preliminary estimated financial results contained in this press release and the accompanying financial schedules because our financial closing procedures for the three months ended September 30, 2020 are not yet complete. The preliminary estimated financial information contained herein and in the accompanying financial schedules does not represent a comprehensive statement of our results of operations or financial condition as of or for the three months ended September 30, 2020 and is based solely on information available to us as of the date of this press release. Our results of operations and financial condition as of and for the three months ended September 30, 2020 may vary from our current expectations and may be different from the information described above as our quarterly financial statement preparation process is not yet complete and additional developments and adjustments may arise between now and the time the financial statements and other disclosures for this period are finalized, including all disclosures required by GAAP. In addition, these preliminary estimated financial results are not necessarily indicative of the results to be achieved for the remainder of 2020 or in any future period. There can be no assurance that these estimates will be realized, and estimates are subject to risks and uncertainties, many of which are not within our control. The information contained herein and in the accompanying financial schedules should not be viewed as a substitute for full financial statements prepared in accordance with GAAP or as a measure of performance. Accordingly, you should not place undue reliance on such financial information.

Ingevity: Purify, Protect and Enhance
Ingevity provides specialty chemicals, high-performance carbon materials and engineered polymers that purify, protect and enhance the world around us. Through a team of talented and experienced people, Ingevity develops, manufactures, and brings to market products and processes that help customers solve complex problems. These products are used in a variety of demanding applications, including asphalt paving, oil exploration and production, agrochemicals, adhesives, lubricants, publication inks, coatings, elastomers, bioplastics and automotive components that reduce gasoline vapor emissions. Headquartered in North Charleston, South Carolina, Ingevity operates from 25 locations around the world and employs approximately 1,850 people. The company is traded on the New York Stock Exchange (NYSE: NGVT). For more information visit www.ingevity.com.

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