NGVT - Earnings call transcript Q4 2017

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Ingevity Fourth Quarter and Full Year Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Mr. Dan Gallagher. ahead. go Please

Daniel Gallagher

Good XXXX Kayla. posted Welcome Ingevity's our to presentation Thank Conference morning, Call. Quarter website. of section Earnings the we Earlier Fourth onto you, Investors everyone. this a morning,

so, done so file follow already haven't can you I encourage download you call. you the on would along this to If

statements. of could visiting earnings see materially earnings from release publicly and you'll undertakes SEC our actual our these in that today's differ You Ingevity forward-looking statements by Events to XX-K Presentations. release filings, any deck, ir.ingevity.com contained are revision can find Form that On most our XX-Q. obligation that our and recent may to Relevant Form and contain results to these forward-looking call under in no cause it Slide factors number X disclaimer including projections forward-looking them Investor update measures, the this or non-GAAP refer made to occurring website. during of comparable to comparable reflect call, this GAAP to and non-GAAP the section measures after be these call to financial supplement, circumstances Throughout measures. and in on of our earnings are intended Definitions reconciliations call. may date can found the for, are and of to statements we which release financial and events financial our measures GAAP substitute included Relations not

President CFO. are President and Wilson, and Michael CEO; is agenda today Fortson, X. Slide on Executive John me Our Vice With number and

guidance. XXXX. our discuss He'll perspectives segments the current some on John review and comment will the for questions. join of over our the President status closing and we and the our open it Mike Performance our full will Q&A and Materials, And President Michael of of to some X outlook will remarks Then Chemicals; I'll for on XXXX Michael. Michael that, turn line make Woodcock, brief Ed financial Smith, session. then First, with quarter the the performance highlights will Performance year. of before for give

Michael Wilson

in Good and everyone. Ingevity. joining you this continued Thank morning, Dan. for us morning Thanks, interest for your

Slide and full year note turn quarter, highlights our expectations. an you'll all, you'll our outstanding for to and some exceeded If X, financial XXXX. in had results we All the quarter

know, in This typically due the quarter is U.S. may our the you market, Performance the business. seasonality period to is Chemicals slower a As paving predominantly which impacts sales. fourth of

products addition, carbon are in typically to slower fourth auto In quarter the of our production holidays. sales modestly U.S. due automotive

realized Performance the foreign season. based than quarter patterns by and higher higher the products revenue However, to the and was quarter million auto forecast in up Performance in currency from were year's Materials lower sales and our when applications Canadian impacts. increases to increase. and were about year's price weather pavement We in stronger to driven sales reflects strong What's on more, $XX adjusted were segment costs addition we previous U.S. a Volumes, of paving EBITDA benefits increase. than $XX all and the to compared material versus demand. XX% prior These mix, the to enhanced contributed product Revenues delivered quarter. extended the exchange quarter, raw million, due higher Chemicals of productivity which X% that expected the

well, XX% see results. was fourth an and we orchestrated representing On drove XXXX EBITDA XX% year. Also of XX.X%. of up XXX prior outstanding marked points Performance achieved new full margin X%, the an an the financial Clearly, delivered created in strategic increased Chemicals strong our of results plans that segment, adjusted the growth quarter EBITDA of our noteworthy in business, maintained of basis increase and on a Materials Ingevity. for executed one revenues in our margin adjusted XX.X% the operating year the margin a we increase turnaround was structure Our you'll quarter XXX sales, points. from and leveraged XXXX Performance for We basis of adjusted lower-cost EBITDA slide,

number lift rig U.S. according the count, with fundamentally third even time our previous U.S. X, its up oilfield were in as Performance year. the this to even are this Hughes, segment on business. you compared though As market rig Sales fourth very sales drilling versus to quarter. to to $XXX up when continued about The Chemicals continuing XX% the we performance is activity conditions see year. quarter, the the continued to year's Baker in count rebound And million, increased. experience prior customers good X% last can versus Slide quarter Segment is to

we earlier, As season capitalized as the weather pavement on paving to mentioned extended that sales North increased in applications America. patterns I

to sales our quarter, mix continued South adoption Evotherm, see the experienced We rebound in in technology. asphalt increased a in warm of we And America.

and As the inks, these include prior down others, a printing industrial X% applications, posted and quarter. lubricants chemicals, adhesives, period. record almost versus result, the into business agricultural year specialties were Sales a fourth

We tall continued demand, or to rosin fatty Because this to oil rosin our we refineries run acids, limited to industrial TOFA, the see headwinds the businesses. specialties. meet in availability of

oilfield As pavement. meeting a TOFA the into we result, such we demand in diverted profitable as more and applications, had

products. aren't industrial are in segment sales growth Again, noting, price oil, to a As as lubricants or a EBITDA mix $XX XX%. specialties thing our in costs result, was and and crude tall this CTO, continuing the for we necessarily Segment strong result higher productivity. up dispersants bad see agricultural a Worth a of lower of was whole. of lower volumes for plant benefits, million applications higher-margin

to we a full the able of fruition Chemicals, reversal in trajectory bring year the business. Performance in to significant were For the

ago. EBITDA well, EBITDA versus the turning $XXX up margin, million Our Performance adjusted year points financial translated $XXX almost XX.X% held segment XXX their This of is million, the is increase, which of executed XX% plan modest a on up results. versus basis cost was team On Chemicals year. now up stronger this revenue X% line XXXX. almost Segment sales and from in a prior to

base our soon. that announced is It the Lastly, the of regulatory is process, review are the Trade the chemicals stages FTC the belief and close with review will Federal this on in confident pine our transaction Commission. acquisition late we in Georgia-Pacific's business is we of proceeding

guidance as For we close QX. are assuming pine a to purposes, as in forward team G-P late Ingevity the possible. welcoming look to We chemicals soon

performance. Canada. U.S. number honeycomb gasoline control standards strength meeting Performance can vapor you of on see again automotive solutions, segment on use the Materials our As record-setting of rose in in our Slide our emission turned sales for once Revenues designed and in the X,

throughout has larger growth in been and increasingly a light has to the in primarily volume aided shift the an increase the previous vehicles. been and Canada. America in implementation of case the and due years, has vehicle these production by dynamic been U.S. year, In to North this As stringent regulations sales

XXXX, forecasts third the for was quarter. in in production as the for imbalance. correct of quarter was to the However, there more weakening catalyst sought automakers inventory fourth conservative a This an

the When increase this our increase was X%. and it X%, by quarter, in driver production quarter, and and auto increase you respectively, business. However, North for the quarter in for the full drove how regulatory revenues compare XX% versus year down decreased is speaks year, in about prior fourth it U.S. XXXX, in the said, that strong the demand American production. quarter still of to XX% the to an in sequential That the year's unanticipated

and year In a was is versus This ago. basis prior quarter. from to XX% volumes, XXX fewer points The adjusted fact, EBITDA the $XX which EBITDA was outages. of a by adjusted million production up year's increase driven exchange up currency XX.X% translated favorable margin,

year the provide translated were up like point, EBITDA X. a full essentially prior our with outlook for of year. XXXX. up This I'd on turn Performance $XXX to At the XX% For XXXX. segment adjusted if versus Materials, EBITDA in which this to sales perspectives Segment XX% XX% was million some XXXX, you'll margin, to $XXX Slide is number million, level versus

For acquisition business pine by X primary the earnings of a driver. Obviously, be revenues and factors. driven expect Performance Chemicals, Georgia-Pacific's we chemicals will increased

acquisition announced, the estimate indicated As presentation, than run we million. we rate was $XXX of revenues our in more when

XX%, delivered acquisition million expect $XX targeting of the with and accretive will We be X. be margins near year we synergies to in to be immediately

are XXXX continued which moderately both should strong, customers anticipate adoption oilfield higher to as technologies for TOFA and to applications. in conditions production by of digits, spur levels higher Evotherm, high sales be grow products to products. technology, again along by in spending. improved single the expected pavement mix asphalt of mix nearing increased U.S. warm of to market to to through is our sales activity. our led also well relatively record derivatized result with infrastructure Sales forecast mid- continue as U.S. Higher in favorable oil should We increased prices are demand volume

construction. from declines and states base. metalworking half in stable We industrial X X Within in have volumes likely China see also overall, divert should increases volume, and modest we innovative aid approved in experienced gas to to for and U.S. our applications. specialties the a over pavement past tax last Europe inks. to we've price In the growth which TOFA relatively of road experiencing lubricants higher-margin customer and growth growth diverse to of years. we to continue We're We'll applications, in sales And dispersants to improving global see in flat demand years, anticipate Brazil. and in oilfield expect continued the our of offset funding over potential contrast agricultural should for fluids declines continue adhesives the

materials, are or As our year. raw for crude contracts CTO, oil, the for tall set

agreements will in market line As lower provide CTO costs previously with us supply our levels. noted, with more

under some I More Outside In the margin year. increase supply will contribute growth this CTO, the we through with raw to the from offset we we of importantly, of to we and Chemicals inflationary of other price deliver EBITDA other double-digit Ultimately, Georgia-Pacific. improvement. costs, CTO to XXXX increases versus are Performance to prior factors contract increases. percentage addition the will seeing expect expect mentioned material in which seek in summary, long-term

core In growth double-digit to in Chemicals segment, regulatory expect this timing the in effects to businesses Performance realize the before XXXX XXXX. In of should Performance addition, changes. acquisition, growth temporarily of the we moderate Materials. our to due low Switching G-P EBITDA

step-up required there the the rate. for will Tier adoption no of adoption is in in required continue standard, year XXXX the which LEV is along automakers the III path U.S. While X,

regulations vehicles the implementation not years, come mandated the required XXXX While model is out. until XX% XXXX for implementation XX% model year

of addition, million American In a we're from inventory U.S. for forecast expecting XX.X XX.X million the softening and North to down from range vehicles correction, demand million, XX.X XXXX XXXX. auto the successful Current in continuing despite production.

due of to Tier upside from any until principally to margin utilization in XXXX. occur double-digit any were near-X Ingevity's would these standards regulatory China revenue are this higher segment, the EBITDA XXXX, X still we used however, implementation higher improvement All to it if drive not solutions LEV sales Lastly, guidance. which to overall. with are we growth Therefore, anticipate emission the again adoption X be and the new U.S. principal anticipating meet of early honeycomb continued along in the requirements. III should This asset of regulatory in pieces scrubbers, all,

capital site, investment in Virginia Covington, a call the XXXX. our plans Lastly, for kiln downtime result which our in higher fall in of plant will replacement

in Treasurer, Executive point, in of guidance facility financial will discussed, capital-light, building and previously new Jiangsu, I'll high-return in capacity and continuing detailed John? At extrusion capital as turn Vice invest Georgia, our to a investment. in Performance be Fortson, our We for call which, President, a review CFO our and this expand Materials over Waynesboro, China, John is to status XXXX. to our for the more

John Fortson

Michael. you, everyone. Good Thank morning,

and our quarter First, fiscal the I'll financial provide performance color on year. some over additional of the

capital Second, our generation structure. cash I'll review and

Finally, on I some provide our for will XXXX. discuss additional guidance details and

expense, in and drive to of We segment year chemicals measures they research Slide XX% fourth of the year Michael XX% over Turning profile. and have segment strong percentage quarter show and and year. of technical and segment. helped above in as turned as benefit with strengthen segments the Materials full SG&A, CTO The for both costs the Georgia-Pacific across businesses XX% segment's quarter margin full the as quarter as well a margins which including Performance performance and margin as In of full Performance as sales, us above both margins a number net the $XX up confident debt. Chemicals XX% year outstanding. we when the executed grow. well the deliver $XX.X $XX.X Savings to in to remain million improvements interest our other expense fourth continued We down million in margins to in $XX.X X, the paid mentioned, compared million, last XXXX. ability was that year was will for to the million for with XX% to Net transaction, cost-control accelerate down XXXX in from was the

year benefit GAAP million due was impacted U.S. reform. Our tax to $XX.X tax tax rate for favorably the the XX%, by

tax Our adjusted from the tax reform, impact rate, was XX%. U.S. excluding the

Regarding chemical our we U.S., specialty U.S. X United in here tax manufacturing invested Ingevity in deferred and U.S.-based created are tax reform, materials as are the a which manufacturer, heavily States. X as a whole. of the liabilities for have plants

As a tax rate tax This valued were to million liabilities XX%. result to benefit and remeasurement deferred of results. reform, tax in $XX.X year-end resulted of these a our a U.S. tax remeasured XX% at deferred quarter-

of entity, affected foreign provisions the chemical our newly as a companies requiring Ingevity, large record like reform tax a we spun deemed were not does repatriation to foreign accumulated earnings. have many U.S. of Therefore, peers. by specialty not Additionally, earnings,

we million, $X.XX shareholders share diluted. For net income fully Ingevity's of is to which adjusted the attributable recorded year, per $XXX.X

$XXX.X for which However, restructuring share diluted. tax cost, attributable net and adjusted onetime acquisition-related with was is income million, GAAP gain when per associated associated $X.XX and a separation, costs fully with reform the

per bought Over authorization. XX,XXX shares year $XX.XX a share our on back have we of share. XXXX, average repurchase $X.X and cost the the remaining share weighted on at during repurchases we In spent course million $XX.X million total, of

million December outstanding the quarter XX.X For were had ended million, balance XX.X December you'll find basic and the both sheet Slide we Diluted outstanding. shares XX.X respectively. information. X, XX, the million and On quarter XX year cash some key and ended flow year and shares for

capital million of The million for expectations, generation job China. a supply spending. quarter on inventory increased reduced our of discipline rein below functions, cash our and certain these of This intentional the were forecast free modest and million profit the for kept in and terrific did operating the due tight Working levels advance $XX large part Our in the of finished team the capital expenditures due demand course from $XX our in exceeded million Capital year. operations $XXX increased and over spite and is ago. team year $XX a inventories to and the expenditures in year build the CTO in increased chain at in strongly to expenditures. quarter managing and and the have goods sales were carbon a in year operations

inventory build we this ensure supply is China's near-term critical have sufficient However, for to available needs.

reduced year since As previously this mentioned, net because of our million with strong million, cash net $XX finished debt $XXX million leverage $XXX X.X debt of our the We and generation, our year of times. net and we've spin. by the

the $XX.X million. Wickliffe million at to finished Total cash the continues of points. $XXX basis $XX debt for was quarter related to rate borrowing including be Our plus equivalents cash LIBOR net $XX million and in IDB. restricted additional XXX We cash IDB with the and million

$XXX had facility revolving us. credit available to of we our XX, December of million million As $XXX

capital returning value company and to to in efficiency of And we with operate focused feel after-tax high-ROIC is critical for employing are finished creating ROIC an year XX.X%. company, capital a we on We we has long-term the are as shareholders. fortunate invested that As high-growth both very a opportunities. our

information to XX-K, be XX. expect our which Additional we file February on will on available

XXXX. year guidance Slide fiscal XX, see for to you'll our Turning

that numbers these Michael G-P of the the All of described include acquisition the proposed and benefits timing earlier.

EBITDA reported to XX% We XX% million between between number. our and $XXX billion and to billion, of be $XXX up over are and from revenue million. sales sales We XXXX forecasting project $X.XX $X.XX adjusted of

in will in growth impact XXXX. year next the moderating we regulatory mentioned, Michael Materials step-up in are XXXX, fiscal requirement as As Performance forecasting

Chemicals expect in albeit augmented consistent However, slower at growth Sales to to pavement the also less customers Performance acquisition in grow the oilfield expected the of a is to applications G-P recovery assets. than grow strongly, continue, by with to we to Sales expected to rates. pace technology historical are continue XXXX. or more

are industrial We specialties regarding end a posture conservative markets. taking

oversupply in a of there, the start are are we acids and fatty to We year. a conservative of XXXX, the the in off taking however, view capacity as resin Asia start introduction hydrocarbon good we given additional

at the EBITDA, pending of As an for are G-P midpoint effects XX% range, acquisition. forecasting the of adjusted including we the increase the of

anticipating margin about As growth. revenue XXXX, in Chemicals lower we Performance despite think segment we continued expansion are our

We are Chemicals also better our expecting margin Performance improvements to operating CTO. in continued segment profitability a and due from tailwinds

to for to guidance continued This change tax the XX% XX%, code. We be reform within revision and expect to is the impacts around be tax result our tax future to rate and the cash rate of XXXX a the XX%. direct subject tax adjusted to U.S. assessment

Our capital of $XX our the in are of well $XX This the range. XXXX to the be market as China demand meet as in North investment increased continued we million result expected to million a in scrubbers for prepare as America. expenditures to is demand honeycomb

As this Covington. a Waynesboro the to $XXX modestly range, facility Michael flow will we China, in increased down and capital cash to capacity capital due should spin in our in year said, expanding be million Free Jiangsu, the for kiln this the million building from $XX placing in principally expenditures. year our

turn a X.XX repurchases. absent anticipate still and Given or generation, any adjusted outside to year acquisitions ending Michael. of between to Xx, the cash the the with net we EBITDA call I debt will significant back now share

Michael Wilson

we it off strong John. optimistic performance XXXX, another kick Thanks, In summary, Ingevity. we will be year as are for

holding strategies line on our efficiently is costs. growth implementing while the Our and on focus operating

you. Thank our to We very you this we'll for call believe company. open operator, point share up for At strongly potential to continue hope Ingevity. We long-term the questions. our in enthusiasm the

Operator

Jim Please first ahead. Instructions] go Our with line SunTrust. question the [Operator comes of Sheehan from

Jim Sheehan

my question. morning, Good taking Thanks guys. for

Michael Wilson

Jim. morning, Good

Jim Sheehan

in talk Performance you're expansion that outlook? assuming the likely experience in you'll Materials you margin your about in XXXX Could

Michael Wilson

it's we think what I said Yes, just historically.

in accrete business margins expect near-term the gradually We horizon. that over to

Jim Sheehan

outlook is in price Can on price is looks talk there Performance the increases in Chemicals, the rate prices. and you market. that also some increases? get you TOFA do you'll about It for think the like likely TOR capture What

Michael Wilson

want don't I dynamics increase of Jim, prefer terms or our Yes. more question in plans we price see. that outcomes. your talk about market specifically to expected answer I to

we months, as That you're XX past and to continue considerably aware, as think, for rebound in favorable the see derivatives. TOFA I we market, the over oilfield. with tightened dynamics has discussed,

a as market from rosin the demand see to continue being fairly tepid We standpoint.

all So have months, the we in half seen gum we XX of really, the look second side, the and said prices improvements last that Chinese being at on supply - when rosin in over, XXXX. the

So sort on in that's current think, countered Asia. the some increase of come most side, that's on. production additional happened resin leading that's palm in favorable the by oil in the is which crop, And factor I hydrogenated the is and FAST oil then, the hydrocarbon capacity oversupply probably significant to

we're So also most pressures, with freight around that first backdrop inflationary items. of for some time a in other - experiencing dynamics, the market and energy, against number like of particularly companies logistics years,

to we increases, that the clearly, are offset can for to most we'll to value going try capture margin try we and So also those our products.

Jim Sheehan

China? Great. early XXXX in the is not that? that provinces of some in early about China. making adoption? provinces And are in What adoption about the for adoption - in Can much you Materials, from you about noises talked Performance your Any outlook there expecting talk

Michael Wilson

has and which, province Beijing Hebei again, that Well province, the early province China. surrounds adoption Beijing announced is the only in

for Ed, September regulation the the has everyone, XXXX think, decided national again, And a go Hebei XXXX, to full I XXXX? reminder adoption midyear by as midyear So or its China-wide requires early. to province whereas

Ed Woodcock

January X, XXXX.

Michael Wilson

I'm X, XXXX. sorry, January

There to provinces time is I date still chatter announcement. There be to So the may is go province for would that has only not this early. But prefer other specific speculate. that. a continues that to Hebei made

Jim Sheehan

you. Thank

Operator

go And Please our the comes with Jon of line next Tanwanteng ahead. question from CJS Securities.

Jon Tanwanteng

XX% that beginning what's is Good at exiting and U.S. Congrats that for to kind your outlook hit a is milestone had a there of in they year? the ask kind on I hit. mandated morning, quarter. it great wanted no - adoption of gentlemen. of XXXX holding your just What's this built the to rate given at modeling

Michael Wilson

great that. comment John. let question, going I'm a Woodcock Ed That's to on

Ed Woodcock

second that's we'll half Yes, John, first into half our see the half or impacts expectation that of XXXX, is volumes more in versus first at half. increased second least dampening but the

Michael Wilson

So, you on but works, it's a John, a this not if year, model way about the it's think year. on calendar

model typically, of being began half XXXX year the introduced for example, vehicles XXXX. in second So

for So for there the by X that the the the time won't quarters But make first we through of should help XXXX. Does to XXXX back half of get higher sense? - mandate XXXX, vehicles adoption. a be model us step-up

Jon Tanwanteng

XX% That's what a before to for And think the rate I your were modeling Got helpful. help tax year-over-year. tax then just us comparison it. reform? cash mentioned is for XXXX. What purposes, understand benefit you the Just

Michael Wilson

you want John, to take do that?

John Fortson

the we at had our rate was 'XX XX%. our cash about XX%, were rate I of mean, tax XX%. effective tax XXs, we kind historically, Yes. looking low in for fact, - being in And

truthfully. So same next we, looked year absent roughly for I would've any changes, it think the

Jon Tanwanteng

there, That's model any what and perfect. seeing whatever end seasonality are And the the number so levels there? what to Is update and industry business relative two, Okay, at yours? is the in? And it update can then drivers we markets Any oilfield same the helpful. [indiscernible]? on or they're rosin they just Georgia-Pacific,

Michael Wilson

do Yes, clearly, the yet great is transaction Smith I don't mean, know. not But John, I in few we terms the guess, of perhaps just response. what visibility have closed. a we has to Mike comments as preface

Mike Smith

have business last be from financial - we indicated pavement learn I August. believe in very segment. the able to sure. Yes, much Their we should does have to and line everything that a we not been strong obtain, performance what

be that and that it throughout going be the kind the will and overall, year. when But more the in performance dynamics given improved impacted So business business, expect the improve we'll overall less take on we to in business of some their is respect, forward. seasonably over, strong stable to able we continue

Jon Tanwanteng

Thank you much. very Great.

Operator

Oppenheimer. Please go from comes with Zaffino And line ahead. of Ian our question next the

Unidentified Analyst

on is Hey, good Ian. Mark This for guys. morning,

dig just a I little bit. into pavement to guess, I wanted So

identified is of So on is Thanks. areas more a guys know, XXXX, Or strong these growth more was I just you pockets? capabilities? like, I going on growth. like, the demands technological few just of new this, wondering, it into the from adoption

Michael Wilson

historical question. to in technologies, it's It's single of pavement look That's mid- you infrastructure delivered at at than Yes, growth Mark. a rate sort spending much rate great high that the When digits. growing the we've clearly is overall. in higher

we strong this So really it. story. believe for technology particularly of driving what's a is It's Evotherm do line our adoption And products. warm mix asphalt

And other and continuing. outside say is being I it a incrementally that's just business this is but is geographic - market growth So positive. would improving by the mind U.S.-predominant keeping augmented thing the mean, - that's is that I for some us business, geographies in conditions that U.S.

Unidentified Analyst

you then guide. helpful. the little EBITDA I like, do and guys but lower be one mentioned it. know, just very that free a got That's quick then, tax have a cash higher, higher Okay, like, is flow you bit going on And rate. CapEx to

else there there to is that's I million range? $XXX the kind to wondering So was just it million anything in $XX holding of

John Fortson

build. There's this Well, a working is a - capital there's also John.

Unidentified Analyst

Right.

of Okay, from working okay. like, capital. get meaningful Is That's want exactly what to build I kind there, to.

Okay...

John Fortson

of alluded over building the as of going - we remarks, And inventory be into XXXX. demand The dramatic to you step Right. course the prepared quite is in or - sort we pickup call the right, are in XXXX. when to

it's glitch, want and important of we once an of timing about temporary itself reverse will But It increase. why comment capital to but it's so this. Ed, a on working happens. thing. backside get maybe our the sort you see that you'll So

Ed Woodcock

we're Xst other on there to those for adopt as Yes. earlier, opportunities Michael to responsibility But that. if going implementation. to province And about when products be January. talked any speculate able provinces have to of I is mean, and to forward move and so provinces earlier of Hebei with supply and are earlier, an our implement available scheduled it's not

Michael Wilson

being intentionally early just Yes, to recap. working It really Performance be done to build and talking Mark, isolated Materials. capital and in John about somewhat any China. so is prepared potential strategically, Ed sure that is are we're to The for adoption just

Mike Smith

I mean, on. would to build argue mean, I I just that.

they their the I and of you managing can't working they've done but Chemicals so. incredible you have segment, inventories an know If at job a guys capital, done Performance job. look see down actually great it,

Unidentified Analyst

Okay, got build like, the in prepare sort the the it. for XXXX? like, like, of building guess, half there, to in the I - or, through second I first through guess, like, expectation half XXXX, what's more

Michael Wilson

I would think, it in be we peak China, year end the gradually the And occur demand inventory really as to those said, will XXXX. throughout that see John start to of forward, at as the draw and expect again, inventories going should we down.

Unidentified Analyst

Okay, very terrific. guys. you, helpful. Thank That's

Operator

with [Operator comes next question ahead. go the Sison from line Our Instructions] of Please Mike KeyBanc.

Mike Sison

Hey, XXXX. guys. Nice on the

Materials, a impressed, I'm Performance in So was EBITDA growth revenue slow little can bit. that you pretty grow double digits, given it sounds like

'XX going to revenue? 'XX a honeycomb of is be does better why of versus slowing honeycomb as in some result - So the why

Michael Wilson

as over all first X So first question, requirement is quarters the the there XXXX. to is was comparisons, XXXX, XXXX Mike, in at model relevant quarters an again, earlier you right? a the step-up look answer year-over-year describing of I to regulatory XXXX the Well, adoption vehicles, of in an year X when

what So X should the continue year-over-year saw of we we with XXXX. see quarters, above of growth moderating quarters the last to half the mandate regulatory there's in in those year, second X as through then no of a growth

Mike Sison

Got it.

of potential been worked 'XX automakers you some be that specked And have in to regulated have is and - in, Okay. then I into the guess, China, the and XXXX? vehicles need or of some with earliest you the

Michael Wilson

process the prepared that? making the of you they all say we're point OEMs. of and be product of understatement regulations, add to of design because in pending selection them. Chinese domestic would selection timing I in implementation. an with No, of color this automaker in be The order vast to majority some that is would to working say, at changes, international think I canister would time, are it any or them, the the every And for of whether Ed,

Ed Woodcock

well our anticipated. have carbon they're most the on what they the their say we been over that XX% would finalized I probably made. gaining to platforms. And And of is originally And of relative in Yes. share choices finalizing. we're way cases, estimate

Mike Sison

And business, at? and recovered And where potential question one What's Great. being at where on quite at pretty we're side that you a oilfield. think quick one big oil oil as then the noted, of prices about is I has now the drilling that the for a in bit for chemicals here. terms time. business you as recall

Michael Wilson

range Look, and in really reason to Mike, shale I that anywhere an producers above probably, U.S. have and say think today as are they long continue drilling a you economic as the prices oil could producing. $XX stay barrel,

quite supply hard range would going it's of it So and very ultimately year-over-year what segment. in it's in to basis to for we I increase on actually to happen global strong demand we predict stays just as is happen what's expect in, the demand on sort we're long going as oil to crude pricing, to continue but to demand. going don't percentage strong 'XX And anticipating to see versus XXXX. saw we're we're the But 'XX. that same oilfield bullish a growth think in

Mike Sison

Great. Thank you.

Operator

ahead. the from comes Please Jefferies. next Daniel of our And go Rizzo with line question

Daniel Rizzo

How guys. are Hey, you?

Michael Wilson

Morning, Dan.

Daniel Rizzo

lot on Europe? standards in Europe any was about just the outlook new on in there's U.S., I Any change the I and color a talked and what's there? if know you've adoption China in wondering going but

Michael Wilson

Euro the But did Well, we there's what X adopt China standard, change right? last from no reported.

Ed Woodcock

Yes. Europe.

Michael Wilson

not sorry, I'm is question? the that

Ed Woodcock

Yes.

said You China.

Michael Wilson

of Europe, which I'm Euro the No, from going capturing days. China. X is did particle essentially they adopt standard, X emissions to in X day sorry.

half vehicles, basis. doubles is needed about XX the of Again, just amount essentially are those about per-vehicle that on million reminder, diesel. of be So it would carbon a as a Europe

So timing of and/or And just X. than remind Ed, a market implementation China. the that much North Euro me smaller it's America the of

Ed Woodcock

Yes. September And is It's for putting volume sooner. there any XXXX. in of upside OEMs no

we be a XXXX a to and XXXX So expect not that impact impact.

Daniel Rizzo

any? is of tailwind gas or was if from I it Is to engine wondering that the that's is - been mean, or shift now? that I - you're is in if talked The is a Europe, gasoline just before? seeing the about there diesel something shift to impact that

Michael Wilson

think of diesel for it's other long also from big at because No, think have I vehicles the the I vehicles, this continued a us. way. to shift mean, it point. going the adoption which a I as tailwind mover you electric as is gasoline don't away is goes

just trend in big all, but mover. diesel favorable, So not is all a the

Daniel Rizzo

then if And I excuse - me, still go? contracts the all and rolled have so? Or more Okay. or last off But this. in there's to old ones, year they missed finally, CTO all have you the

Michael Wilson

all source time, rolling dozen CTO mills. CTO basis. of be a contracts on or terms a In more we any from pulp are Those could supply, given

we XX% in of the was So chemicals XX-year and the agreement, once course, business the which neighborhood renewed. that acquisition, exception I with supply we're company, they're off the a running capacity. secured spin G-P of in pine And Mike, obviously, of constantly the requirements those The of And a is period. that, agreement X agreement in place rolling supply have will which have at our XX-year somewhere XXXX. from time the WestRock to are close also is assuming G-P, combined the think, being we through that beginning we

John Fortson

correct. That's

Daniel Rizzo

you Thank much. very Okay.

Operator

Instructions] next Chris comes [Operator Our question ahead. with line of go Kapsch the Please from Capital. Loop

Chris Kapsch

for may couple on Yeah, I be Ed, a China. actually, good what's of follow-ups, in had going on morning.

of market higher in the Or maybe terms there we standard you about your you're that and shares getting Can just BWC believe this is drivers over that compliance more there again today. just it the more - what that's for talk favor? before about opting mentioned in mentioned just regime you're are? to you it the the China You your environmental gaining serious as Is tilting carmakers approach something are X product? in

Ed Woodcock

we've X for greater low-risk it a providing doing life design what years, themselves. to has that that vehicle last the more Yes, think Chris, a been I products performance the set product within vehicle allow of flexibility relates of and

for history And the perform the regulation, them also of products penalties China meet a need pass be able of used regulation, new a have if not vehicle. stiff into Our do a to is there being the long, and regulation. because vehicles life for to this there as long the to is moves meet

the that and in been China. it's what blocking that for customers we've our doing we've recognized been in this it's the and been overall, life we've basically doing So being application just by tackling

Michael Wilson

would high-absorption, I tend advantage. which do products, seen I Chris, stringent regulations our think move add, towards and again have carbon Yes, them we to a to products. higher the more require And higher-performing BWC plays

Chris Kapsch

sort plant then will build that those export sort of to to being you're, standard. the produced make think qualification prior. just having And some, was say necessary I sense. with there safe inventory products now fully through this stages But to of That you're Right. that ahead at the that this sounds you of fact mode there - of Is plant? transitioning like, hit the with guess, some that's it associated adoption the

Michael Wilson

demand facility guess again, to keep the that to every of We from improve we Chris, in to keep plant. begin continue productivity new to the see China. of operating we in and regulations do the facilities, But our have both like need Well, to working and efficiency it other - we operate see Zhuhai. the

still to to China there in referring position the things degree So our terms countries But we a earnings you're demand. We're about product quarter in export. from and - costs. in into export guidance. to export incurring we're embedded terms continue call, from quarter the third the the fourth really we those to costs consume going additional until point in that some the outlook think I some of other back talked is at this terms our in of are to those of VAT in But to

Chris Kapsch

then speaking of And just Okay. to guidance, impending the include acquisition.

any the near-term bit second, highly a that you visibility it the your is get confident timing pointed degree you talked in conditions you I better have associated - closing the high about out, that guess, is of also synergy you've like no - the that And approved. in is approval. to now expresses, level twofold. little 'XX guidance, is that it's guidance in confidence question deal? those the capture, reflect this of it going case, some of that there think, One, the there but does the of capturing I acquisition As sounds have that - terms are I with of

Michael Wilson

again, like, put clear, is any Yes, way the confident any regulatory no, no associated to first later highly with than that we'll best the requirements certainty will the to are expect, QX. this in it, process. But close don't there I able all, at of to acquisition be We have we that of of guess, we that sort end it, point, that. know on everything remediation

assume purposes, for I of that sort end is I'll think. the modeling assumption - just again, it safest it's of in our of year. your that's think, I probably the QX to for So guidance balance And there, leave

Chris Kapsch

- is there And anything... but

Michael Wilson

is we believe obviously, synergies, the there will to those as of terms to our as quickly we the timing in in and degree that with XXXX capture move that possible guidance. that In close, opportunity it's

Operator

next comes Sheehan SunTrust. our the question line And Jim with from go ahead. Please of

Jim Sheehan

Thanks.

With amortization assume the for XXXX? in we Chemicals acquisition, for should depreciation what and Performance

Mike Smith

of judgment be and the process. get file Obviously, we and to once formas you Jim, the have intangibles, allocations when of actually pro the we the once historical look, still closed, lot there's a obviously, but see that will view. just you'll, So the acquisition deal Yes, I I'd would tell on going get until stuff we on the right? a you'll and take to through that reserve up, is get see number financials, goodwill closed better able rather variables we the moving you

Jim Sheehan

outlook regulations ramping the honeycomb use Okay. for that would outside And require of you can scrubbers U.S.? you talk of to U.S.? When expect the the outside product the the about longer-term

Michael Wilson

point Jim, no require we be that. predict that outside - would are use Canada. this of At honeycomb that there scrubber time, and regulations to speculating the in U.S.

Jim Sheehan

at are to point. a that competitive off in have still you honeycomb scrubber, patent advantage doing What your in terms And then the you that once in IP ensure of the the certain market expires? patent rolls

Michael Wilson

items. And frame. XXXX longer-term getting we issue raise to process some the to filed There've barriers. in protect the issued IP least that the would think continue without where you beyond the protection, about products to patents, to at now, webcast innovate been we also market I a short, the applicable. of a performance patent, that day least continue one At will dial time in performance same recently every technical at recently guess, of our it's encourage Investor talk of later our today that provide through improve and We're details Day. I some our to of our that login to further Well, portion patent into or the going time, we to of number

Jim Sheehan

happen level CapEx, you that Does or your in this stepping on $XX stay to And to what year, at expect it up moderate? XXXX? million do

John Fortson

it about - then I capacity side. we level spending but a of this back. on talked more for just be over necessarily I material additional elevated and what begin than mean, additional it's and year. moving expansion not above, Because - we'll at there will a in will not think in got more remain we've It's XXXX, process XXXX, the

well. We additional as have plans

Jim Sheehan

Thank you.

Operator

Instructions] [Operator

Michael Wilson

and like of invite the In interest are your in outlook for Investor closing, long-term this would to questions, everyone Since to time our I'd thank webcast I New today Okay. you very for Day there to our Ingevity. like morning. no join York. about more We positive remain presentations

website your and our begin The link www.ingevity.com. Relations our the You will section Standard p.m. interest afternoon. again, at X Time in Investor in time at Thank webcast can Eastern this via of access for Ingevity. presentations you,

Operator

Ladies XX, Wednesday, gentlemen, that Replay after does through will today. for and conclude be available conference our XX:XX XXXX. March

does AT&T You dial numbers access at are again Those any (XXX) (XXX) teleconference dialing XXX-XXXX. may access time entering may replay Thank International AT&T conference (XXX) conclude the access by participation the Executive today. and and the code for XXX-XXXX for using XXXXXX. XXXXXX. code gentlemen, system X your and participants Teleconference. XXX-XXXX (XXX) our Ladies with and you for XXX-XXXX that X

disconnect. You may now

Ingevity (NGVT) 21 Feb 182017 Q4 Earnings call transcript