Ingevity Corp Q3 FY2024 earnings call

Bullet points:

• Luis emphasized executing business strategies, repositioning Performance Chemicals to exit lower-margin markets, and focusing on other segments.
• Mary discussed financials, including third quarter sales of $376.9 million (down 16%) due to repositioning and weather; restructuring charges; adjusted gross profit flat but margin higher; adjusted EBITDA margin improved; free cash flow $28.5 million; leverage expected to move to ~3.5x by year-end.
• Performance Materials delivered profitable sales growth at top-quartile margins.
• APT maintained solid EBITDA margins but was affected by mix changes, pricing pressures, and weak industrial demand.
• Performance Chemicals saw margin improvement but was impacted by high-cost CTO inventory and weather delays in Road Technologies.

Performance Materials: Sales of $151.1 million, up 3%; EBITDA $80.6 million, up 8%; EBITDA margin 53.3%. APT: Revenue $48.8 million, up 14%; EBITDA margin 20.1% (down from last year) due to pricing pressure, product mix, and foreign exchange. Performance Chemicals: Sales $177 million, down 31%; EBITDA $19.8 million, down 20%; EBITDA margin 11.2% (improved) due to repositioning but affected by industrial demand and weather.

Bullet points:

• Expect sales between $1.4 billion and $1.5 billion and adjusted EBITDA between $350 million and $360 million for Q4 2024.
• Challenged the team to deliver approaching $400 million of EBITDA for 2025 and reduce leverage to around 3x by year-end 2025.
• Will provide more details on 2025 initiatives in the February 2025 earnings call.

Bullet points:

• Industrial demand weakness affecting multiple segments.
• Weather impacts on Road Technologies project delays.
• High-cost CTO inventory impacting profitability.
• Foreign exchange rate movements affecting APT.
• Uncertainties in auto production forecasts.

Q: Can you speak to the volume of CTO sales in Q3, remaining inventory, and update on high-cost inventory completion?

A: CTO resales were nominal in Q3; expect to finish consuming high-cost inventory by end of first quarter 2025.

Q: Where is the spot price of CTO today and comparison to prior expectations?

A: Spot price of CTO plateaued in recent months, around $650-$750 range, significantly below contract costs but not back to pre-biofuels levels.

Q: Criteria for new CEO and update on search process?

A: Board has a committee conducting search; Luis will act as full-fledged CEO until right leader is found.

Q: Does portfolio review suggest selling PC or APT segments?

A: Reviewing portfolio to check composition and strategy, but current segments provide scale and diversity; no speculation on specific divestments.

Q: What drove margin improvement in Performance Chemicals from Q2 to Q3?

A: Mix shift to higher margin products and benefit from not having drag from Crossett facility shutdown.

Q: Quantify improvement bridge from 2024 to 2025 for Performance Chemicals?

A: Savings from Crossett closure expected $20-25M, plus $10M from corporate actions; CTO spot price decline and improved competitiveness, but pricing may adjust with CTO cost changes.

Q: How much of 2025 bridge is self-help vs. economy/auto build?

A: Focus on self-help from CTO contract exit, PC repositioning, and execution focus; uncertainties remain but team challenged to deliver ~$400M EBITDA in 2025.

Q: Metrics for good businesses in portfolio?

A: Too early to share specific metrics as review of portfolio is ongoing.