Ingevity reports preliminary fourth quarter and full year 2020 financial results

Rhea-AI Summary

Ingevity Corporation (NYSE: NGVT) reported strong fourth quarter results for 2020, with net sales of $325.6 million, up 7.3% year-over-year. Net income rose 14.7% to $50.8 million, with diluted EPS at $1.23. The company benefitted from robust automotive sales and a shift to trucks in North America, although revenues from oilfield technologies and international paving were down. Full-year net sales decreased 5.9% to $1.216 billion, but adjusted EBITDA increased 2.4% to $397.9 million. For 2021, Ingevity's guidance projects sales of $1.25-$1.30 billion and adjusted EBITDA of $400-$420 million.

Positive

• Fourth quarter net sales increased 7.3% to $325.6 million.
• Net income rose 14.7% to $50.8 million with a net income margin of 15.6%.
• Fourth quarter diluted EPS increased to $1.23 from $1.05.
• Fourth quarter adjusted EBITDA margin reached a record 34.1%, up 410 basis points.
• Free cash flow improved significantly, resulting in operating cash flow of $153.3 million, up 79.3%.

Negative

• Full-year 2020 net sales decreased 5.9% to $1.216 billion.
• Adjusted earnings fell 1.5% compared to the prior year.

Ingevity Corporation (NYSE: NGVT) today reported its financial results for the fourth quarter and full year 2020.

“We finished the year strongly and delivered solid fourth quarter results,” said John Fortson, president and CEO. “Our businesses were resilient despite challenging conditions. Strong automotive production and sales in China and a highly favorable shift to trucks and SUVs in the U.S. and Canada were significant tailwinds. In addition, we benefitted from promising increases in sales of engineered polymers and slight growth in North American paving sales.”

Strength in automotive, engineered polymer and North American pavement product sales was partially offset by reduced revenues in the oilfield and printing inks markets, and international pavement sales, all of which were highly affected by the COVID-weakened economic environment.

“The cost-reduction actions we took midyear are continuing to benefit our profitability,” Fortson said. “Our fourth quarter adjusted EBITDA margin rose solidly and was a fourth quarter record.” The company generated excellent free cash flow in the quarter due to improved performance and strong working capital management.

Fourth quarter net sales of $325.6 million were up 7.3% versus the prior year fourth quarter. Net income of $50.8 million increased 14.7% and net income margin of 15.6% was up from 14.6% in the prior year. Fourth quarter diluted earnings per share were $1.23 compared to $1.05 in the prior year period. Fourth quarter operating cash flow of $153.3 million increased 79.3% from the prior year period.

Adjusted earnings of $55.1 million were up 18.5% versus the prior year quarter. Diluted adjusted earnings per share were $1.33, 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 $1.10 in the prior year quarter. Adjusted EBITDA of $110.9 million were up 21.7% versus the fourth quarter 2019. Adjusted EBITDA margin of 34.1% was up 410 basis points from the prior year’s fourth quarter.

Full year 2020 net sales of $1.216 million were down 5.9% versus the prior year. Net income of $186.2 million increased 1.4% and net income margin of 15.3% was up from 14.2% in the prior year. The full year diluted earnings per share were $4.48 compared to $4.35 in the prior year.

Adjusted earnings of $202.6 million were down 1.5% versus the prior year. Diluted adjusted earnings per share were $4.88, which exclude, net of tax, $0.40 related primarily to restructuring and other charges, net, recognized during the year. This compares to diluted adjusted earnings per share of $4.93 in the prior year. Adjusted EBITDA of $397.9 million were up 2.4% versus 2019. Adjusted EBITDA margin of 32.7% was up 200 basis points from the prior year.

Performance Chemicals

“In Performance Chemicals, sales in engineered polymers rose solidly versus the prior year quarter,” said Fortson. “This was offset by sharp reductions in oilfield technologies applications and smaller decreases in industrial specialties and paving applications.”

Quarterly sales for engineered polymers products were up more than 10% due to improved demand in industrial equipment, bioplastics and automotive applications. Sales to pavement technologies applications were slightly lower than the prior year in what is a seasonally slower period. Paving in North America was up slightly while the company’s sales in China, Latin America, Europe, the Middle East and Africa were down modestly. Sales decreased in industrial specialties applications due to continued demand weakness for printing inks and other applications like rubber and sterols. This was partially offset by strengthening volumes for rosin products in adhesives and paper chemicals and improved pricing for tall oil fatty acid. Additionally, sales to oilfield technologies customers continued to reflect weakness in North American drilling activity.

Fourth quarter 2020 sales in the Performance Chemicals segment were $164.9 million, down 5.9% versus the fourth quarter 2019. Segment EBITDA were $26.6 million, down 17.9% versus the prior year quarter due to lower volumes and price/mix. This was partially offset by improved plant throughput and some foreign currency exchange benefits. Segment EBITDA margin declined 240 basis points to 16.1%.

Full year 2020 sales in the Performance Chemicals segment were $706.1 million, down 12.0% versus 2019. Segment EBITDA were $148.7 million, down 19.0% versus the prior year. Segment EBITDA margin declined 180 basis points to 21.1%.

Performance Materials

“Strong automotive production and sales in China and a highly favorable shift to trucks and SUVs in the U.S. and Canada continue to be significant tailwinds for our activated carbon solutions for gasoline vapor emission control,” said Fortson. “In the U.S. and Canada, sales of our ‘honeycomb’ scrubbers are strong as automakers complete implementation of the U.S. Environmental Protection Agency’s Tier 3 standards. Our scrubber plant in Waynesboro, Georgia, continues to set new production records. In addition, U.S. vehicle inventories remain at 9-year lows and the U.S./Canada shift to light trucks and SUVs set a monthly record of 79% in December.”

Sales in China for the October to November period were up as auto sales and production have both continued to post monthly year-over-year increases since May 2020. December data for China is not yet available. The company’s carbon production facility in Zhuhai, China, also set a monthly production record in December.

Fourth quarter 2020 sales in the Performance Materials segment were a record $160.7 million, up 25.4% versus the fourth quarter 2019. Segment EBITDA were $84.3 million, up 43.6% versus the prior year period due to the sharp increase in volume and a strong increase in price/mix. While the segment saw the benefit of its low variable cost structure, the quarter also included reduced legal expenses to defend its intellectual property. Segment EBITDA margin increased 670 basis points to 52.5%.

Full year 2020 sales in the Performance Materials segment were $510.0 million, up 4.0% versus 2019. Segment EBITDA were $249.2 million, up 16.8% versus the prior year. Segment EBITDA margin increased 540 basis points to 48.9%.

Outlook

Ingevity announced its fiscal year 2021 guidance to sales between $1.25 billion and $1.30 billion and adjusted EBITDA between $400 million and $420 million. Free cash flow will be at or above $200 million.

“Our guidance reflects growth versus 2020’s performance despite economic pressure from COVID-19,” said Fortson.

For the Performance Chemicals segment, the company expects revenues and segment adjusted EBITDA to be flat to up slightly. “We anticipate moderate growth in demand for pavement technologies and engineered polymers based on strong paving project backlog, continued Evotherm® warm mix technology adoption and increased demand for thermoplastics,” said Fortson. Increased demand for merchant rosin is also expected. These increases will be partially offset by continued demand weakness in oilfield technologies.

“We expect our Performance Materials segment to deliver double-digit revenue growth,” he said. Ingevity anticipates the growth in this segment due to continued industry efforts to refill the vehicle inventory pipeline and despite the absence of any significant new gasoline vapor emission control regulations. EBITDA margins will likely return to more historical levels as the industry returns to a more normalized production pace.

“Overall, despite challenging global macroeconomic conditions, we will deliver strong results in 2021,” said Fortson. “2020 was a challenging year but it demonstrated our ability to be flexible and drive performance through consistent execution, and that’s something we’ll continue into 2021.”

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.

Additional Information

The company will host a live webcast on Thursday, February 11, 2021, at 10 a.m. (Eastern Time) to discuss fourth quarter and full year 2020 fiscal results. The webcast can be accessed through the investors section of Ingevity’s website, or via this link: Ingevity Q4 2020 earnings webcast. You may also listen to the conference call by dialing 877-407-2991 (inside the U.S.) or 201-389-0925 (outside the U.S.), at least 10 minutes prior to the start of the event. Information on how to access the webcast and conference call, along with a slide deck containing other relevant financial and statistical information, will be posted to the investors section of Ingevity’s website prior to the call. For those unable to join the live event, a replay of the webcast will be available beginning at approximately 2 p.m. (Eastern Time) on February 11, 2021, through March 11, 2021: Ingevity Q4 2020 earnings webcast replay.

Use of Non-GAAP Financial Measures: This presentation includes certain non‐GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non‐GAAP financial measures to GAAP financial measures are provided within the Appendix to this presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided.

Cautionary Statements About Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements generally include the words “will,” “plans,” “intends,” “targets,” “expects,” “outlook,” or similar expressions. Forward-looking statements may include, without limitation, expected financial positions, results of operations and cash flows; financing plans; business strategies and expectations; operating plans; impact of COVID-19; synergies and the potential benefits of the acquisition of Perstorp Holding AB’s Capa® caprolactone business (the “acquisition”); capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost-reduction initiatives, plans and objectives; markets for securities and expected future repurchases of shares, including statements about the manner, amount and timing of repurchases. Actual results could differ materially from the views expressed. Factors that could cause actual results to materially differ from those contained in the forward-looking statements, or that could cause other forward-looking statements to prove incorrect, include, without limitation, adverse effects from the COVID-19 pandemic; risks that the expected benefits from the acquisition may not be realized or will not be realized in the expected time period, the risk that the acquired business will not be integrated successfully and the risk of significant transaction costs and unknown or understated liabilities; adverse effects of general economic and financial conditions; risks related to international sales and operations; impacts of currency exchange rates and currency devaluation; compliance with U.S. and foreign regulations concerning our operations outside the U.S.; changes in trade policy, including the imposition of tariffs; adverse conditions in the global automotive market or adoption of alternative and new technologies; competition from producers of alternative products and new technologies, and new or emerging competitors; competition from infringing intellectual property activity; worldwide air quality standards; a decrease in government infrastructure spending; the impact of adverse conditions in cyclical end markets on demand for engineered polymers products; declining volumes and downward pricing in the printing inks market; the limited supply of or lack of access to sufficient crude tall oil; a prolonged period of low energy prices; the impact of the United Kingdom’s withdrawal from the European Union; the provision of services by third parties at several facilities; supply chain disruptions; natural disasters, such as hurricanes, winter or tropical storms, earthquakes, tornados, floods, fires; other unanticipated problems such as labor difficulties, equipment failure or unscheduled maintenance and repair; attracting and retaining key personnel; protection of intellectual property and proprietary information; information technology security breaches and other disruptions; complications with designing and implementing our new enterprise resource planning system; government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies, tariffs and the chemicals industry; and lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes, and the other factors detailed from time to time in the reports we file with the SEC, including those described under "Risk Factors" in our Annual Report on Form 10-K and other periodic filings. These forward-looking statements speak only as of the date of this press release. Ingevity assumes no obligation to provide any revisions to, or update, any projections and forward-looking statements contained in this press release.

INGEVITY CORPORATION
Condensed Consolidated Statements of Operations (Unaudited)
	Three Months Ended December 31,								Twelve Months Ended December 31,
In millions, except per share data	2020				2019				2020				2019
Net sales	$	325.6			$	303.4			$	1,216.1			$	1,292.9
Cost of sales	198.2				192.4				750.6				810.9
Gross profit	127.4				111.0				465.5				482.0
Selling, general and administrative expenses	41.5				40.8				149.4				163.1
Research and technical expenses	5.8				4.7				22.6				19.7
Restructuring and other (income) charges, net	5.2				(0.2)				18.5				1.8
Acquisition-related costs	0.1				2.0				1.8				26.9
Other (income) expense, net	(4.0)				(2.0)				(4.1)				(4.3)
Interest expense, net	12.4				10.6				42.2				46.9
Income (loss) before income taxes	66.4				55.1				235.1				227.9
Provision (benefit) for income taxes	15.6				10.8				48.9				44.2
Net income (loss)	$	50.8			$	44.3			$	186.2			$	183.7
Per share data
Basic earnings (loss) per share	$	1.24			$	1.06			$	4.51			$	4.39
Diluted earnings (loss) per share	$	1.23			$	1.05			$	4.48			$	4.35

FAQ

What were Ingevity's Q4 2020 financial results?

Ingevity reported Q4 2020 net sales of $325.6 million, net income of $50.8 million, and diluted EPS of $1.23.

How did Ingevity's full-year 2020 performance compare to 2019?

Full-year 2020 net sales were down 5.9% at $1.216 billion, while net income increased by 1.4%.

What is Ingevity's guidance for fiscal year 2021?

Ingevity expects 2021 sales guidance between $1.25 billion and $1.30 billion, with adjusted EBITDA between $400 million and $420 million.

How did Ingevity's Performance Materials segment perform in Q4 2020?

The Performance Materials segment reported record sales of $160.7 million in Q4 2020, up 25.4% from the prior year.