Ingevity Corporation reported its financial results for the second quarter of 2020.
Second quarter net sales of $270.6 million were down 23.3% versus the prior year second quarter. Net income of $20.2 million decreased 64.4% and net income margin of 7.5% was down from 16.1% in the prior year. The second quarter diluted earnings per share were $0.49 compared to $1.34 in the prior year period.
“Ingevity delivered second quarter financial results in line with the special, one-time guidance we provided at the end of the first quarter,” said Rick Kelson, Ingevity’s chairman of the board, interim president and CEO. “While we experienced a sharp decline in volumes attributable to the economic impact of the coronavirus, or COVID-19, our team remained focused and drove cost reductions that were able to partially bolster adjusted EBITDA.”
He added that the company generated operating cash flow of $48.9 million, which translated to solid free cash flow of $33.9 million.
Kelson said that the downturn in automotive sales and production in North America and Europe during the quarter significantly reduced revenues for its automotive activated carbon products. This was partially offset by an upturn in demand for similar products in China. He also pointed to reduced demand in industrial specialties applications – such as printing inks – and volatility in the oilfield drilling and production industry as other drivers of the revenue decline.
“As a countermeasure, we took strong steps toward reducing costs across the corporation,” said Kelson. “We implemented initiatives that will save us $35 million this year and will result in annualized savings of $12 million going forward.”
Adjusted EBITDA of $67.2 million was down 38% versus the second quarter 2019. Adjusted EBITDA margin of 24.8% was down 590 basis points from the prior year’s second quarter.
Sales decreased in Industrial Specialties applications due to demand weakness for printing inks as printed retail advertising declined. Reduced sales of tall oil fatty acid (TOFA) and continued pressure on tall oil rosin (TOR) prices also contributed.
Ingevity reaffirmed its fiscal year 2020 guidance of sales between $1.10 billion and $1.20 billion and adjusted EBITDA between $310 million and $350 million.
“Barring any further economic deterioration, we are confident in our ability to meet our current guidance,” said Kelson. “We continue to maintain a strong financial position. Most importantly, we are working on controlling what we can control in this challenging environment.”