Ingevity Reports Preliminary 4Q, Full Year 2019 Financial Results

Ingevity Corporation reported fourth quarter net sales of $303.4 million, representing an increase of 8.9% versus $278.6 million in the prior year’s fourth quarter. Net income of $44.3 million increased 5.2% versus $42.1 million in the previous year’s quarter. Ingevity’s fourth quarter net income margin of 14.6% was down 50 basis points versus the prior year quarter.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $91.1 million were up 24.3% versus fourth quarter 2018 adjusted EBITDA of $73.3 million. Adjusted EBITDA margin of 30% was up 370 basis points from the prior year’s fourth quarter adjusted EBITDA margin of 26.3%.

“As expected, we finished the year with a strong performance in the fourth quarter,” said Michael Wilson, Ingevity’s president and CEO. “Despite continued macroeconomic pressure – particularly in industrial applications – we benefitted from growth in end-use applications that are driven more by regulation, technology adoption and infrastructure spending. We delivered improved profitability in the quarter with adjusted EBITDA up 24% on a revenue increase of 9%. As a result, our adjusted EBITDA for the year was above the midpoint of our most recent guidance.”

For the full year, net sales were $1.293 billion, representing an increase of 14.1% versus $1.134 billion in the prior year including the addition of the engineered polymer product line, formed through the first quarter 2019 acquisition of the Capa caprolactone business. Net income of $183.7 million was up 1.0% versus $181.8 million in the previous year. Ingevity’s full year net income margin of 14.2% was down 180 basis points compared to the prior year. The full year diluted earnings per share were $4.35 compared to $3.97 in the prior year period.

Adjusted earnings of $208.1 million were up 18.8% versus prior year of $175.2 million. Diluted adjusted earnings per share were $4.93, which exclude certain items, net of tax, of $0.58 per share which are primarily costs related to restructuring charges and costs associated with the engineered polymers acquisition, net of discrete tax benefits recognized during the year. This compares to adjusted earnings per share of $4.11 in the prior year. Adjusted EBITDA of $396.9 million was up 23.8% versus 2018 adjusted EBITDA of $320.5 million. The adjusted EBITDA margin of 30.7% was up 240 basis points from the prior year’s adjusted EBITDA margin of 28.3%.

“During 2019, we made significant progress on our strategic initiatives aimed at delivering organic and inorganic growth,” said Wilson. “We grew revenues by 14% and adjusted EBITDA by 24% despite a sluggish global industrial business environment.”

Wilson added that the strong cash flow enabled the company to significantly de-lever throughout the year. The company ended the year with a net debt to adjusted EBITDA ratio of 2.8 times.

Ingevity announced its fiscal year 2020 guidance to sales between $1.30 billion and $1.35 billion and adjusted EBITDA between $400 million and $420 million. Free cash flow will be between $200 million and $220 million.

“Our guidance reflects little to no improvement in the global macroeconomic environment, yet assumes limited impacts from the coronavirus in China, which remains unknown,” said Wilson. “That said, we expect our Performance Materials segment to deliver double-digit revenue growth and accretion in adjusted EBITDA margins.”