NGVT - Earnings call transcript Q3 2024

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Operator

Good morning or good afternoon, and welcome to the Ingevity Third Quarter 2024 Earnings Call and Webcast. My name is Adam, and I'll be your operator today. [Operator Instructions] I will now hand the floor to John Nypaver to begin.

So, John, please go ahead when you're ready.

John Nypaver

Thank you, Adam. to Quarter welcome Earnings and morning, Ingevity's XXXX Third Call. Good presentation morning, to investor we this on follow posted discussion. use Earlier can a our you site today's that throughout on financial non-GAAP which GAAP are not Events be measures. refer supplement, measures, ir.ingevity.com to for can we may found & It Presentations. Also, substitute this intended call, to under comparable most may call, release Definitions financial are are performance of included measures release. and make results materially the to comparable we and further and also projections regarding and projections you company or of statements are earnings GAAP during future described these these XX-K. We non-GAAP those future financial measures may our differ recent in this statements from forward-looking our that our also actual reconciliations events caution earnings Form and just as in events in

is on Slide agenda Our X.

are today speakers Mary CFO. CEO; Interim our Our Hall, Fernandez-Moreno, Dean Luis and our

Mary leads, of Ed President business for results Materials; will quarter. over the business financial and the us are performance Performance comments. Luis quarter. of Polymer questions will of President off segment Chemicals; and available highlights will Hulme, Technologies, Luis. Performance Our for some XXXX Advanced you, our start to White, a comments follow President Woodcock, and with Rich of the review Luis and closing then consolidated that, provide third discuss for with Steve guidance. With

Luis Fernandez-Moreno

X. to and John, Thanks, Slide morning, turn Please everyone. good

Ingevity lifting not Performance for this our the set help up the Including strategies has by profitability. segment many can say of keenly on that that Chemicals the continue the Together, and begin supportive Performance of to excited I to Let scale me direction. quarters. our last Materials the segment much on Chemicals member repositioning of our team our to of to Performance material a in here have several and and so. At have of am markets. long-term costs supply Technologies have have which saying how Understandably I business lower-margin segment, been markets. We've Board been cost of These attention strategic heavy these geographies done same to we the raw end give Polymer the segments Ingevity be get be we ability became been public Advanced our other X to our contracts, you I and to manage us execute to purchases. to this and they and know physical focused the maximize diversity exited day the key have optimize deserve. success. We've hindered exited segments, since has raw and continues focus the material stream. actions the And timing been Board end footprint cyclical efforts in time, diversify easy. I I our and ensure want reduced around

to my our this see our Ingevity addition focus margins And results, one consider fresh on some what business of line. America conditions our as our in be impacted by to high-cost we North will Road adverse executing portfolio to the auto CTO North in our weather in remained pricing sales cool and Mary detail. Performance solid many things Northern were my even Technologies through and -- Chemicals soft demand segment overall businesses bring underway, look In has review to first a to to strategy. tasks corporate be strategies of go profitable in quarter top-quartile continues at you will to deliver proud as growth margin of. improvement weak. And which over key third the while mix of maintained pressures a in environment. inventory changes industrial production despite margins, Performance global America EBITDA -- negatively worked regions APT saw down, product began Materials inflation

do will the high-cost can on company we upcoming this and quarters face slow what the inventory. My the demand, headwinds efforts CTO of like of consuming on focused delivering resources in expect. glimpse a results even all be improved industrial impacts focus you to in execution gives quarter are weather and our This ensure

now weeks, Although I'll X to it Ingevity. With I over has am Mary review been even only future more the about the for financials to the excited it turn of that, quarter.

Mary Hall

good to Please Thanks, turn and X. Luis, all. morning Slide

markets unfavorable were America, primarily sales mentioned. due in down weather repositioning resulted Luis Road of quarter Third Chemicals the lower-margin of Industrial $XXX.X parts as the product Performance in key sales that in line Specialties conditions Technologies actions North line, of and due our end XX%, to to in exit our in lower million product

a During $XX.X termination the loss of which supply the to our primarily Arkansas related closure quarter, to we $XXX charges of and Crossett, million a facility CTO for long-term contract, net incurred million, million. a of before-tax charge led the GAAP $XXX.X of restructuring

presentation. impact Form charges these and remainder GAAP which this to in and be measures filed our excluded non-GAAP also We XX-Q, the release to earnings the our A appendix have is evening. of the this reconciliation this of and in of will our in our for deck non-GAAP discussion disclosure

enabled Our Chemicals flat Industrial company adjusted and gains larger our to portion a Performance by largely our Technologies by markets gross margin gross actions, higher exposure to product The profit our driven in basis XXX businesses of Road line while repositioning were Materials results. gross was margin Performance last lower-margin $XXX higher-margin year, points. represent to million such was as our reduced which and of have Specialties end total

despite a the recorded quarter down rate were sales the about $X last actions percent repositioning credits which benefited normalized run EBITDA variable increased of dollars the quarter. Adjusted in addition, million, year. year-over-year versus In in gross dollars third compensation $XX quarter. primarily the this of million, last incentive $X to cost savings quarter year savings about million in and due profit SG&A to repositioning generated of Adjusted versus current

primarily XXX in Crossett Performance strong a million Performance see EBITDA quarter inventory repositioning quarter's $X improved This were we're the $X actions charges negatively due impact positive million XX.X%, charges. Adjusted Materials approximately Chemicals. to in results restructuring-related from impacted beginning to margin severance of and to points and by CEO almost our in basis

a In QX, have in $XX track total the us of actions of to to savings target we fact, realized million realize restructuring of on $XX $XX from savings which million million our puts XXXX taken. we in

lower continue million cash $XX We contract to QX, terminate $XX.X expect Clearly, Also by on the restructuring XX%. Please CapEx we in spend this that flow while effective We a and very of cash disciplined had safety between last our but XXXX still year, plants. Leverage we maintenance was managed X.Xx closer free expect rate will Xx, and long-term we've been free payment cash quarter charges. full be a year-end. as X. a CTO the year cash around we very quarter, standpoint. includes flow, of good from this to as $XX as million to to appropriate which first than million well slightly XX% to at Slide supply generation tax turn generated ensuring move

calculated Xx are and covenants. at all bank was comfortably bank QX of in the about we end Our leverage with of compliance our

the capital debt As to we've allocation quarters, focus reduction. near priority is term in stated on for recent our

to Slide X. Turning

expect are to Performance million The the The QX X% out of in segment sales growth at investments were continue segment of mid-to-high-XX%s plants port to from $XXX.X this over You'll of strike low-XX%s costs approximately of possible as high-XX%s long-term, number scheduled that margin the reducing as in an Materials. $XX.X improvements, delivered next geographic automotive East maintain in these $X X% find by in in this for million. that delayed time. mix Coast. EBITDA primarily were but to of to quarter, efficiency, margins million the third sales be continues made to over lower the changes will be Not was usage. the included EBITDA a to up to Because due results result gas on segment input margins solid improve benefit quarters. But the EBITDA segment and few with is operational into the it over XX.X%. shipped we to sales the to the natural

bioplastics, that XX.X%, current noted demand the solid This mix compared exit in Revenue the this increased in of were strengthening such affected only industrial U.S. in continued increased where adopt volumes for up markets. which $XX.X XX%, were versus film by protective utilization, indicate sales foreign demand. China to which is British lower-margin for APT customers. declined product XX%. negative paint X but as Specialties was last as more increased, Performance beginning a cyclical movements end exposed China autos believe also products and year's in as in momentum $XXX The pound year. unfavorable Chemicals markets reflects margins we volumes also the unique turn although to of APT to rates, uptick Slide is markets several product it intentional APT especially was show million, last the Capa down this quarter, a does a results. of for the down lows. is our some the dollar. We've slowdown these were to of may pricing Turning dampens impact actions new but than Slide affect to year XX% brings customer affecting participate, where to for signs peak had weakness our pressure, improved due improvement. EBITDA plant Industrial exchange the offset by to Not We which line, from many primarily sales benefits. Please our QX technology nice last gains million Sales market end repositioning primarily actions to X. also versus destocking

Chem in weather-related construction X%, expect next projects also this go only months, quarter. any can due markets, in road industrial of demand completed a unlikely due However, our getting number These for of is Ag which experiencing of quarters the product Specialties Industrial mining the lubricants, resources paving rubber lower-margin to XX.X%. and a which impacting in the molten end continued into those margins of to demand of certain is both Technologies. that Since will and winter primarily many million, next result primarily we're the down element into repositioning into delays we're key go remaining fatty that that given crop caused into was adhesive road challenges projects segment that projects, This goes still there road Specialties and include protection the be line, delayed in by since Industrial XXX dispersants sales lackluster projects in current second down offset weather and were projects entering higher basis is industrial end year projects rosin in season. Recognizing the weather-related to are third Road be partially we actions. EBITDA Technologies and applications. Road year. EBITDA will our repositioning so and savings significant the many primarily shift costs, exit year's complete result improved during in the in shift CTO increase $XX.X it delays strategy. from to weak for XX%, our headwinds points markets were to our a a acids

indicated back to update Luis last our As quarter end year. And through we closing inventory expect by to and turn CTO next remaining for high-cost the an first guidance quarter, call I'll the now on we comments. of run the

Luis Fernandez-Moreno

Thanks, Mary. turn Slide to XX. Please

you've quarter. our in had As today seen a release, and heard we good

between demand mentioned. Also from fourth end auto Technologies inventory lower the light are and and Mary million appear still our is for and of softening. Road of if expect of in are our signs headwinds, quarter low billion and a our As to the be CTO million. $X.X production $XXX between sales segment, heard you companies, we quarter billion, deliver $X.X as to In guidance forecasts improving there with seasonally we any, EBITDA few, adjusted Performance other of of high-cost toward line industrial as these many $XXX Chemicals consuming you product know,

while As XXXX, next at and focus; the business look strategy. on months, I our priorities, Based early execution at is key improved free look flow; fresh these corporate for with I complete see reducing provide guidance improved and on portfolio priorities to call. approaching the and too a $XXX details it and cash few our me; taken of Xx X through profitability, the and year-end leverage our in our and our have we initiatives for more earnings around continued of provide team leverage will able focus XXXX. I I be have a EBITDA plan by XXXX progress on these to to and our to growth million improving challenged deliver February return actions

we you will to forward all questions. outlook me I turn next when execution again it over our this on for be XXXX. With with again our Let how say quarter also I'll am excited to in strategy. drive position speaking the details to I share of look more that, for

Operator

Securities. comes Instructions] from our from first CJS Jon [Operator question Tanwanteng And today

Lee Jagoda

should actually the much start in you inventory have this And I inventory you just CTO think Is with of Jon in you sometime during sales It's to can we volume update be the remaining? could Lee morning. QX QX, high-cost sales of that QX? any done you CTO expectations all were the that? How for XXXX. Jagoda with If had prior speak there to

Mary Hall

believe I -- very So QX. said -- we essentially we CTO have and don't I the I think that last nominal And expect the resales as were completed in resales. quarter, we we

And CTO the as have actually inventory, about we consuming to continue we're is product. And actually through the high-cost make impacting CTO, to the that CTO we Your profitability. comment high-cost essentially inventory to our consume all quarter first the high-cost CTO that of end that what production runs that's and with inventory, example year. that's we for margins, finish that EBITDA of next by expect said it the

Lee Jagoda

to then need to expectations burning Okay. in in of is market? that how the you're And back another to spot CTO you compare spread from the does your And stuff the today? question the Great. quarters go of on versus prior underlying high-cost that just when through today price terms market, CTO. the Where

Mary Hall

plateaued we last -- talked year, is call did think $XXX, I it, would last the has And spot saw range. largely August in the $XXX, I while have price down throughout price the to continued few the come -- of I what how continue months. So was the about $XXX, CTO in say,

So in to prices. we prior below been that dynamic began CTO back had indicated CTO before had not of the had impact again years our we significantly where although contract biofuels costs levels the previously, seen to

Lee Jagoda

I'll Got from and hop me, it. And in. one back more

you us of CEO a some in And might of search give the any might kind new CEO? when process, in things be the might completed? criteria CEO the have Just the terms can for of you -- new a that on update want process

Luis Fernandez-Moreno

right while CEO. that I to I that a is will and leader needed the This committed is that, as a conducting The am a criteria long highlight being obviously Luis. it's they have is for the it here Board search. regarding company. And I I that couple Yes, has search committee The the that that. always that of comments thing find to just for acting as for be stay expect happens, be to gatekeeper. as full-fledged takes the a don't

based focus the deliver to to the the leader be but it, time organization going they're and focus my of the And So for continues to again right my find leadership. is on take on Board required the acting to company. the diligently

Operator

from Rizzo comes Daniel question from next Jefferies. The

Daniel Rizzo

a PC that You businesses. mentioned that possibility? selling during remarks prepared Is portfolio you're your suggest be reviewing this divesting Does you or the that APT might segment? or

Luis Fernandez-Moreno

-- Having we the the fact scale that provide means The remark X looking looking that be it. the it have talk this portfolio. corporate Yes, diversity. said the time geography coming Board, and comments strategy, today segments will that, composition. we think the that market it's check good I to at are me at revisit right a composition, the on about right and portfolio I if is right the and the with

than indeed continued in diversity. the speculate that composition on myself, recognizing other of businesses, current provides and will specific the I So to not team strategy. will what composition and mean the that be terms and the But Board may cannot scale again, and the reviewing

Daniel Rizzo

of all still or is point, Specialties, at that's a kind base And beginning then in its with the is stages? your Industrial there transition percent this

Luis Fernandez-Moreno

raw around is material Specialties to diversify capability. our the So Industrial strategy

are being to to we material other not move one able ability optimize to the quality, other. or to mix to maximize and one both raw the So again, profitability, the also tied the from but

economics on us the time, terms again, So very the of to materials. not that what that And quarter-to-quarter focusing in may moving important this on forward. each provides we're flexibility the because at depending that that's specific something it's of change percentages, percentages raw of

Operator

Markets. comes The McNulty next Capital BMO from from question John

John McNulty

is in the one guess Performance Chemicals. I first So

look was sales higher-margin doubled So at of when improvement I some business in the margin the paving actually a down your from to and yet side bit. little and XQ XQ on the

can guess what from you understand to that help quarter-to-quarter? us I improvement So drove

Mary Hall

and Yes. It's there. primarily X things, catch good John,

operating seeing benefit segment. we're of QX, still to frankly in Crossett drag. clearly are again, And not we're seeing -- in the of products benefit products had shift of still the So shutdown the as end mix over some and that that very those the lower-margin we're facility. We were higher-margin and having of the that progressively also, shift -- the seeing announced exiting at Crossett, QX we the mix the

earlier the you recall, If the Crossett drag we facility. talked about from

So in QX. we had would have We in QX. have it don't drag that

showing things are those margin both improvement. in So benefiting that up really and

John McNulty

No, -- one. big that's helpful. obviously, And was it definitely was a

the guess a But of other say for year-over-year on 'XX I might buckets guess, come that of but lot the I no-comp I what's from like like to know lower, Let's that go case bit of is on about a look, cetera, bridge guide -- of you the can with think PC, lower let's you 'XX? we 'XX, terms CTO in to kind Crossett us had et a macro going there's it's make on rest buckets everything as the to flat, for CTO, in the is on the 'XX? little world. early help I savings So look to quantify help I big gone. just question what also improvement the can guess, of a

Mary Hall

about to talk million $XX alone -- expected for the to $XX closing of of did about a as coming We said result. some we from Crossett, end taken to be between million from point savings information example. additional and talked corporate we Crossett $XX we Crossett with the an company be I'll savings million Yes. rightsize to that when that QX actions

the have we raw we On to in are market. obviously long-term is were though, contractual of purchase because in from CTO, so in were move last again, looking again, heard, Industrial and costs and certain believe higher spot material spot mentioned, high, we a so we've what the cost talked I Also more competitive at less of about pricing And come as our Specialties, down. as arrangements I at done those much the prices. products you recognized selling quarter,

those for move So coming would will with again, down competitive be now adjust not costs improvement think to fair market. a should that be the comparison. would as result CTO of apples-to-apples we'll But costs see pricing take just price we as and in And We any we CTO I movement forward, as expect modeling volume more well. that. purposes without the delta a

Operator

next Sison Wells The Michael comes Fargo. from question from

Michael Sison

I guess, own? above help that that much Luis, year when next sort walking could bit Nice of your quarter the this just need you of running the you kind seasonality when quarter you're how being year building do a just think on bridge you bridge your I or cuff, And from from lower. how team for I to what the build auto much through, think do that economy? of about first be that you off run little think the last fourth and and outlook. X But about are rate. quarters the XXXX, understand

Luis Fernandez-Moreno

Very good Yes. question.

out focus the plan will CTO including production, the enhanced on that contracts company to done are repositioning. amount auto by we demand. again, benefits uncertainties execution and to team I that definitely allow allow focused we time, mentioned that benefits the things that lower self-help it the of focusing us Mary understand is $XXX the around last on fact approaching of But there's to referring again, that third at or things industrial profitability the of the PC challenging of the we've the us focus, to And making costs that CTO when on growth. a from the that to this got on I'm a the element I'm the sure right as in fair you deliver million, reason was that a think that accelerated obviously improve quarters benefit X the year. The just comes are teams the

we are there -- in I that are to But more the will think in the we February way call key clarity able markets that be are still while provide understand the February dynamics XXXX. elements, those in uncertain. definitely

Michael Sison

of Understood. think And the that of give what to then like kind you'd should general, type color just you you maybe can us yes, color each about a sort businesses of of of own a any metrics little gave or kept when -- on of bit see, mean, but I you what on you behind that what want of or Ingevity what what of be portfolio? growth, flow, you what versus, type type good in of to should that type of own, capital, business think the free any return cash is segments

Luis Fernandez-Moreno

the but a thing And is will we're job those. the the would portfolio. be -- of are we at I tell that's at very have me even even we be the the early X together you starting with It on it question, to Yes, Clearly, for can I weeks to will team looking what early look to some thoughts, thinking. But think be tell obviously only to too Board. me -- it some tell and in you great I'm with for share early on as Mike.

Operator

Nypaver some closing I'll We the call have hand further John for no so to back remarks. questions,

John Nypaver

Adam. talk Ingevity call. for Thanks, your again with in that Thank Great. you we'll quarter. concludes next our interest Well, you and

Operator

for This concludes your very much you today's attendance. call. Thank

your lines. now may You disconnect

Ingevity (NGVT) 30 Oct 242024 Q3 Earnings call transcript