Ingevity reports first quarter 2021 financial results

HIGHLIGHTS: (comparisons versus prior year)

• Ingevity delivers strong first quarter results based on demand improvement across its businesses
• Net sales of $320.3 million were up 11.1%
• Net income of $48.7 million was up 7.5%; net income margin was 15.2%, down 50 basis points
• Adjusted EBITDA of $105.4 million was up 14.3%; adjusted EBITDA margin of 32.9%, up 90 basis points
• Operating cash flow of $51.1 million was down 15.1%; free cash flow of $34.1 million was down 16.2%
• Company increases fiscal year 2021 guidance for sales to between $1.275 billion and $1.325 billion and adjusted EBITDA to between $410 million and $430 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, SC – Ingevity Corporation (NYSE:NGVT) reported its financial results for the first quarter 2021.

First quarter net sales of $320.3 million were up 11.1% versus the prior year first quarter. Net income of $48.7 million increased 7.5% and net income margin of 15.2% was down from 15.7% in the prior year. First quarter diluted earnings per share were $1.20 compared to $1.08 in the prior year period. First quarter operating cash flow of $51.1 million decreased 15.1% from the prior year period.

Adjusted earnings of $51.9 million were up 10.0% versus the prior year quarter. Diluted adjusted earnings per share were $1.27, which exclude, net of tax, $0.07 related primarily to restructuring and other charges, net, recognized during the quarter. This compares to diluted adjusted earnings per share of $1.12 in the prior year quarter. Adjusted EBITDA of $105.4 million was up 14.3% versus the first quarter 2020. Adjusted EBITDA margin of 32.9% was up 90 basis points from the prior year’s first quarter.

“In the first quarter, we grew revenues across the board in all of our businesses,” said John Fortson, president and CEO. “This was driven predominantly by increased volume and supported by price increases in certain key businesses. Automotive-based activated carbon sales were up sharply given last year’s first quarter automotive shutdowns in China. We experienced significant growth in Engineered Polymers across many end-use applications. The Industrial Specialties business – which now includes oilfield applications – was up slightly, and we are off to a good start to the paving season.

“We saw strong drop through on revenue,” continued Fortson, “and our first quarter adjusted EBITDA margin rose slightly. We generated solid operating cash flow and free cash flow, although both were down versus the prior year period due primarily to working capital build to support the strong sales in the quarter and upcoming seasonal requirements. We are pleased that we were able to both reduce debt and repurchase shares in the quarter.”

Performance Chemicals

First quarter 2021 sales in the Performance Chemicals segment were $179.6 million, up 7.5% versus the first quarter 2020. Segment EBITDA was $31.7 million, up 2.3% versus the prior year quarter due to higher volumes and pricing implemented during the quarter in response to raw material inflation, as well as sales mix. This was partially offset by higher freight and raw materials costs and a negative impact from foreign currency exchange. Segment EBITDA margin declined 90 basis points to 17.7%. Excluding the negative impact of foreign currency exchange, segment EBITDA growth would have more closely reflected sales growth.

“In Performance Chemicals, we drove a sharp increase in Engineered Polymers sales. We also experienced slight increases in both Industrial Specialties and Pavement Technologies sales,” said Fortson. “As a note, we have combined our sales of oilfield technologies products into Industrial Specialties.”

Quarterly sales for the Engineered Polymers products were up 27.0% due to improved polyurethanes demand in industrial equipment, automotive applications, electronic devices, medical equipment and footwear. The increase was largely due to higher volumes but was also supported by price improvement. Sales to pavement technologies applications were slightly higher than the prior year’s quarter and reached a first quarter record driven by growth in the company’s Evotherm® warm mix asphalt products. Sales were up slightly in Industrial Specialties due to increases in sales to lubricants, adhesives and dispersants customers. In addition, the business implemented price increases for rosin and tall oil fatty acid products.

Performance Materials

First quarter 2021 sales in the Performance Materials segment were $140.7 million, up 16.2% versus the first quarter 2020. Segment EBITDA was $73.7 million, up 20.4% versus the prior year period due to increases in volume, price and mix. Higher production and logistics costs to support the increased volumes were partially offset by foreign currency exchange benefits. Segment EBITDA margin increased 190 basis points to 52.4% despite moderate impact to Ingevity’s business in the first quarter due to raw material input availability issues in the automotive industry, including microchips.

“Strong automotive sales globally drove growth for our activated carbon products used in gasoline vapor emission control systems versus the prior year’s quarter which was affected by industry shutdowns in China,” said Fortson. “Ingevity’s sales in China this quarter nearly doubled versus the prior year period given the dramatic decrease in automotive production in China that occurred during February and March of 2020 due to COVID-19.

“In the U.S. and Canada,” Fortson continued, “double-digit vehicle sales growth is outpacing production and as a result, U.S. vehicle inventories declined to 10-year lows. In addition, the U.S./Canada vehicle sales mix shift to light trucks and SUVs from sedans continues at record high levels, approaching an 80-20 ratio. These factors contributed to our strong performance in the quarter.”

Outlook

Ingevity announced that it has increased its fiscal year 2021 guidance for sales from between $1.25 billion and $1.30 billion to sales between $1.275 billion to $1.325 billion, and for adjusted EBITDA from between $400 million and $420 million to adjusted EBITDA between $410 million to $430 million.

“We continue to make progress in the implementation of our Ingevity 2.0 growth strategy, as evidenced by the recent announcement of our strategic partnership with GreenGasUSA Holdings, LLC,” said Fortson.

“While our performance continues to improve, we are carefully watching issues related to transportation and logistics, raw material inflation, and automotive raw materials disruptions that could become stronger headwinds throughout the rest of the year,” said Fortson. “Based on our strong first quarter and continued optimism, we feel confident raising our guidance.”

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 two reporting segments: Performance Chemicals, which includes specialty chemicals and engineered polymers; and Performance Materials, which includes high-performance activated carbon. 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 1,750 people. The company is traded on the New York Stock Exchange (NYSE: NGVT). For more information visit www.ingevity.com.