Ingevity 3Q 2019 results: net sales up 15.6% from year ago to $359.9 million

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Ingevity 3Q 2019 results: net sales up 15.6% from year ago to $359.9 million

October 24, 2019 - 08:56
Posted in:
    NORTH CHARLESTON, SC , Oct. 23, 2019 (Press Release) -
  • Net sales of $359.9 million were up 15.6% versus the prior year quarter’s sales of $311.2 million
  • Net income of $59.9 million was up 15.9% versus net income in the prior year quarter of $51.7 million; net income as a percentage of sales of 16.6% was level with the prior year quarter; diluted earnings per share were $1.41 compared to $1.16
  • Adjusted earnings of $62.2 million were up 26.2% versus adjusted earnings in the prior year quarter of $49.3 million; diluted adjusted earnings per share were $1.46 versus $1.15 in the prior year quarter
  • Adjusted EBITDA of $114.0 million were up 25.7% compared to third quarter 2018 adjusted EBITDA of $90.7 million; adjusted EBITDA margin of 31.7% increased 260 basis points versus third quarter 2018
  • Operating cash flow increased 25% to $118.7 million versus the prior year quarter; free cash flow in the quarter increased 40% to $97 million versus the prior year quarter
  • Total debt to last twelve months’ net income ratio is 7.3x; net debt to last twelve months’ adjusted EBITDA ratio is 2.9x
  • Company revises fiscal year 2019 guidance to sales from between $1.28 billion and $1.30 billion and adjusted EBITDA from between $390 million and $400 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.

Ingevity Corporation today reported third quarter net sales of $359.9 million, representing an increase of 15.6% versus $311.2 million in the prior year’s third quarter. Net income of $59.9 million, increased 15.9% versus $51.7 million in the previous year’s quarter. Ingevity’s third quarter net income margin of 16.6% was level to prior year. The third quarter diluted earnings per share were $1.41 compared to $1.16 in the prior year period.

Adjusted earnings of $62.2 million were up 26.2% versus prior year quarter of $49.3 million. Diluted adjusted earnings per share were $1.46, which exclude, net of tax, $0.05 related to both restructuring charges and costs associated with the acquisition of the Capa® caprolactone business. This compares to adjusted earnings per share of $1.15 in the prior year quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $114.0 million were up 25.7% versus third quarter 2018 adjusted EBITDA of $90.7 million. Adjusted EBITDA margin of 31.7% was up 260 basis points from the prior year’s third quarter adjusted EBITDA margin of 29.1%.

“In the face of challenging global economic conditions, we delivered a strong third quarter performance in line with our expectations,” said Michael Wilson, Ingevity’s president and CEO. “We posted earnings that were 26% higher on revenues that were up 16%. What’s more, we generated outstanding free cash flow of $97 million, up 40% versus the prior year’s quarter that reduced our leverage and brought our net debt to adjusted EBITDA down to 2.9 times.”

Performance Chemicals

Third quarter 2019 sales in the Performance Chemicals segment were $229.7 million, up $14.8 million, or 6.9%, versus the third quarter 2018. Segment EBITDA were $59.8 million, up $10.7 million, or 21.8%, versus the prior year quarter segment EBITDA. Segment EBITDA margin rose 320 basis points to 26.0%.

“Sales in most areas of the Performance Chemicals segment were negatively impacted by weak market fundamentals, especially in Europe and Asia,” said Wilson. “Against this backdrop, we benefitted from the acquisition of the Capa caprolactone business – which we refer to as engineered polymers – and continued margin improvement.”

Sales decreased in industrial specialties applications due to demand weakness, deliberately lower sales to low-margin ink applications, and oversupply of alternate materials. Oilfield applications sales decreased based on slowing North American drilling and production. Sales to pavement technologies applications were up slightly as improved weather conditions strengthened paving activity in North America; this was partially offset by reductions in overseas markets. “Sales for the engineered polymers product line were notably below the prior year’s period due primarily to weak market demand in Europe,” Wilson said. “However, our margins for these products are strong and have remained consistent quarter to quarter.”

Segment EBITDA benefitted from increases in volumes and price and mix, but were partially offset by slightly higher production costs.

Performance Materials

Third quarter 2019 sales in the Performance Materials segment were $130.2 million, up $33.9 million, or 35.2%, versus the third quarter 2018. Segment EBITDA were $54.2 million, up $12.6 million, or 30.3%, versus the prior year segment EBITDA. Segment EBITDA margin decreased 160 basis points to 41.6%.

“Once again, the Performance Materials segment turned in outstanding results,” said Wilson. “Because of the regulatory driven growth in this segment, results were not noticeably impacted by current economic conditions. In China, automakers continue to implement the nationwide China 6 gasoline vapor emission control standards at very strong pace. This has led to a step-change increase in sales for the Performance Materials segment in China and overall.”

Wilson said the segment is continuing to see strong growth in sales of its patented ‘honeycomb’ scrubber products used by automotive customers to meet U.S. and Canadian regulatory standards, and is realizing increases in Europe driven primarily by the European Union’s Euro 6d standard.

Segment EBITDA increased due to very strong volume increases, and price and mix, but were partially offset by the consumption of higher cost inventory associated with the Zhuhai, China, plant scale-up; plant spending related to planned maintenance outages at several facilities; and by increased legal expenses associated with protecting intellectual property.

Outlook

Ingevity revised its fiscal year 2019 guidance to sales from between $1.28 billion and $1.30 billion and adjusted EBITDA from between $390 million and $400 million.

“Despite challenging global macroeconomic conditions, we will, nevertheless, deliver strong year-over-year results for 2019,” said Wilson.

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, 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.