Ingevity reports second quarter 2017 financial results

NORTH CHARLESTON, S.C.–(BUSINESS WIRE)–August 02, 2017– Ingevity Corporation (NYSE:NGVT) today reported second quarter net sales of $260.3 million and net income of $35.8 million, representing 13.8 percent of sales. Sales increased 6.1 percent versus $245.4 million in the prior year’s second quarter and net income increased 38.2 percent versus $25.9 million last year. The second quarter diluted earnings per share were $0.76. Diluted adjusted earnings per share were $0.78 excluding restructuring and other costs of $0.02 per share. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $67.2 million were up 14.9 percent versus second quarter 2016 adjusted EBITDA of $58.5 million. Ingevity’s second quarter adjusted EBITDA margin of 25.8 percent was up 200 basis points from the prior year’s second quarter adjusted EBITDA margin of 23.8 percent.

“We delivered strong financial results in the second quarter,” said Michael Wilson, Ingevity’s president and CEO. “Halfway through the year, our Performance Materials segment is realizing the growth we anticipated in the global automotive market. In addition, we’re achieving better than expected results in our Performance Chemicals segment due to our strong execution and improving market fundamentals.”

Wilson said that revenues and earnings were driven predominantly by volume gains. Earnings were further augmented by a lower cost structure put in place via strategic initiatives over the past 18 months, in addition to lower raw material costs — particularly for crude tall oil (CTO) — and manufacturing efficiencies. These positive impacts were partially offset by higher selling, general and administrative (SG&A) costs and negative foreign currency exchange impacts.

Performance Chemicals
Second quarter 2017 sales in the Performance Chemicals segment were $170.8 million, down $0.4 million, or 0.2 percent, versus the second quarter 2016. Segment operating profit was $26.4 million, up $3.4 million, or 14.8 percent, versus the prior year quarter segment operating profit. Segment EBITDA were $31.5 million, up $2.9 million, or 10.1 percent, versus the prior year quarter segment EBITDA.

“Despite flat revenue, we grew segment EBITDA in our Performance Chemicals segment by double digits due to higher oil field volumes, lower costs and higher manufacturing efficiency. This reflects continuing strength in the markets for higher value, derivatized products,” Wilson said. “Sales to oilfield customers, which were driven by increased drilling in the U.S., were offset by lower sales to industrial specialties applications. Sales to pavement application customers in the quarter were in line with a particularly strong quarter in 2016.”

Performance Materials
Second quarter 2017 sales in the Performance Materials segment were $89.5 million, up $15.3 million, or 20.6 percent, versus the second quarter 2016. Segment operating profit was $30.7 million, up $4.5 million, or 17.2 percent, versus the prior year quarter segment operating profit. This translated to a segment operating margin of 34.3 percent versus 35.3 percent in the prior year period. Segment EBITDA were $35.7 million, up $5.8 million, or 19.4 percent, versus the prior year segment EBITDA.

“Adoption of Ingevity’s solutions for U. S. Environmental Protection Agency (EPA) Tier 3 and California LEV III standards for gasoline vapor emission control helped drive a 20.6 percent increase in segment sales and a 19.4 percent increase in adjusted EBITDA,” said Wilson. “These include our ‘honeycomb’ scrubbers made at our Purifications Cellutions joint venture and our activated carbon sheets.”

Wilson said that earnings in the Performance Materials segment were also aided by the scale-up and increased utilization at the company’s Zhuhai, China, facility, and were partially offset by higher plant spending in support of higher volumes. The segment’s EBITDA margin of 39.9 percent was down slightly year over year as earnings on higher net sales were negatively impacted by foreign exchange translation losses during the quarter. Excluding these inter-company foreign exchange impacts, segment EBITDA margins were 42.3 percent versus 40.7 percent in the prior year period.

Outlook
Ingevity raised its fiscal year 2017 guidance for sales from between $930 million and $950 million to $940 million and $955 million. The company also raised its guidance for adjusted EBITDA from between $215 million and $225 million to between $220 million and $230 million.

“Six months in, we have much better visibility into our full-year performance,” said Wilson. “The growth in our Performance Materials business and the strong execution of the turnaround in Performance Chemicals support our confidence in reaching our revised year-end targets.”

Ingevity: Purify, Protect and Enhance
Ingevity provides specialty chemicals and high-performance carbon materials and technologies that help customers solve complex problems. These products are used in a variety of demanding applications, including asphalt paving, oil exploration and production, agrochemicals, adhesives, lubricants, printing inks and automotive components that reduce gasoline vapor emissions. Through a team of talented and experienced people, Ingevity develops, manufactures and brings to market products and processes that purify, protect and enhance the world around us. Headquartered in North Charleston, S.C., Ingevity operates from 25 locations around the world and employs approximately 1,500 people. The company is traded on the New York Stock Exchange (NYSE: NGVT). For more information, visit www.ingevity.com.