Ingevity 1Q 2019 results: net sales up 17.7% from year ago to $276.8 million

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Ingevity 1Q 2019 results: net sales up 17.7% from year ago to $276.8 million

May 03, 2019 - 06:47
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    NORTH CHARLESTON, SC , May 1, 2019 (Press Release) -
  • Net sales of $276.8 million were up 17.7% versus the prior year quarter’s sales of $235.2 million
  • Net income of $22.7 million was down 36.6% versus net income in the prior year quarter of $35.8 million primarily due to acquisition costs; net income as a percentage of sales was 8.2%, compared to 15.2% in the prior year quarter; diluted earnings per share were $0.54 compared to $0.72
  • Adjusted earnings of $41.9 million were up 23.6% versus adjusted earnings in the prior year quarter of $33.9 million; diluted adjusted earnings per share were $0.99 versus $0.79 in the prior year quarter
  • Adjusted EBITDA of $83.5 million were up 24.4% compared to first quarter 2018 adjusted EBITDA of $67.1 million; adjusted EBITDA margin of 30.2% increased 170 basis points versus first quarter 2018
  • Company maintains fiscal year 2019 guidance for sales from between $1.30 billion and $1.36 billion and adjusted EBITDA from between $390 million and $410 million

Ingevity Corporation today reported first quarter net sales of $276.8 million, representing an increase of 17.7% versus $235.2 million in the prior year’s first quarter. Net income of $22.7 million, decreased 36.6% versus $35.8 million in the previous year’s quarter primarily due to higher costs related to our acquisition of the CapaTM caprolactone business from Perstorp Holding AB. Ingevity’s first quarter net income margin was 8.2% versus 15.2% in the first quarter of 2018. The first quarter diluted earnings per share were $0.54 compared to $0.72 in the prior year period.

Adjusted earnings of $41.9 million were up 23.6% versus prior year quarter of $33.9 million. Diluted adjusted earnings per share were $0.99 excluding certain items of $0.45 per share which are primarily costs related to the acquisition of the Capa caprolactone business, net of discrete tax benefits recognized during the quarter. This compares to adjusted earnings per share of $0.79 in the prior year quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $83.5 million were up 24.4% versus first quarter 2018 adjusted EBITDA of $67.1 million. Adjusted EBITDA margin of 30.2% was up 170 basis points from the prior year’s first quarter adjusted EBITDA margin of 28.5%.

“Our first quarter performance was in line with our expectations,” said Michael Wilson, Ingevity’s president and CEO. “We benefitted from continued strong growth in our Performance Materials segment and from price and mix improvements in our legacy Performance Chemicals applications. In addition, our newly acquired engineered polymers product line contributed significantly to the Performance Chemicals segment. In terms of our adjusted EBITDA, the positive revenue impacts were partially offset by higher selling, general and administrative, or SG&A, costs – including legal expenses – and higher logistics and transportation costs. Nonetheless, we drove strong revenue drop-through posting a 24% increase in adjusted EBITDA on an 18% increase in revenues and achieved an adjusted EBITDA margin of 30%.

“We are continuing to execute on our strategy and maintaining our focus on earnings growth and margin accretion,” Wilson continued. “This includes intentionally transitioning to higher margin specialty applications while backing away from volumes that don’t meet our profitability objectives.”

Performance Chemicals

First quarter 2019 sales in the Performance Chemicals segment were $167.7 million, up $28.0 million, or 20.0%, versus the first quarter 2018. Segment EBITDA were $32.3 million, up $7.4 million, or 29.7%, versus the prior year quarter segment EBITDA. Segment EBITDA margin rose 150 basis points to 19.3%.

“Increased sales to oilfield applications were driven primarily by demand for production chemicals as opposed to drilling chemicals,” Wilson said. “Sales in industrial specialties applications decreased as we selectively shed sales to low-margin applications and focused on higher profit opportunities. And, sales to pavement technologies customers were fundamentally flat versus the prior year’s period in what is a seasonally slower quarter.”

Wilson said that the largest contributor to the Performance Chemicals segment’s results was the addition of the engineered polymers product line, formed through the acquisition of the Capa caprolactone business which closed mid-quarter. “The engineered polymers team didn’t skip a beat and delivered results slightly higher than our expectations.”

Performance Materials

First quarter 2019 sales in the Performance Materials segment were $109.1 million, up $13.6 million, or 14.2%, versus the first quarter 2018. Segment EBITDA were $51.2 million, up $9.0 million, or 21.3%, versus the prior year segment EBITDA. Segment EBITDA margin rose 270 basis points to 46.9%.

“Adoption of Ingevity’s patented U.S. Tier 3 and LEV III gasoline vapor emission solutions, particularly our ‘honeycomb’ scrubber products, by automotive customers once again fueled growth in our Performance Materials segment,” Wilson said. “Our growth in this application enabled us to achieve a record segment EBITDA for any quarter, despite reduced North American and Chinese auto production in the period.”

Wilson added that implementation by automakers of the nationwide China 6 gasoline vapor emission control standard is beginning to benefit sales and product mix in the Performance Materials segment. “During the quarter, sales volumes of pelletized carbon used in base evaporative emissions canisters increased dramatically. This trend signals the impending broad implementation of more stringent standards by OEMs in China in advance of the nationwide regulation,” he said.

Outlook

Ingevity maintained its fiscal year 2019 guidance for sales from between $1.30 billion and $1.36 billion and adjusted EBITDA from between $390 million and $410 million.

“Despite some moderate macroeconomic headwinds, we’re exactly where we expected to be at this stage of the year,” Wilson said. “We’re working to enhance margins and profitability in Performance Chemicals, rapidly integrate the engineered polymers product line, and deliver on the growing global demand in Performance Materials. We expect to turn in another strong performance in 2019.”

Ingevity: Purify, Protect and Enhance

Ingevity provides specialty chemicals, high-performance carbon materials and engineered polymers that purify, protect, and enhance the world around us. Through a team of talented and experienced people, Ingevity develops, manufactures, and brings to market products and processes 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, publication inks, coatings, elastomers, bio-plastics 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.