Ingevity Reports First Quarter 2019 Financial Results

Ingevity Corporation 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 the acquisition of the Capa 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.
 
“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.”
 
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%.
 
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.”
 
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 US 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.”
 
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.”