Ingevity(US:NGVT)2025-11-06 21:24Financial Performance - Ingevity's net sales for Q3 2025 were $333.1 million, a slight decrease of $0.7 million compared to Q3 2024, driven by a volume decline of $1.4 million and unfavorable pricing and sales mix of $0.3 million[193][196]. - For the nine months ended September 30, 2025, net sales totaled $912.5 million, down $24.3 million from the prior year, primarily due to a volume decline of $37.3 million, partially offset by favorable pricing and sales mix of $11.9 million[193][197]. - Performance Materials net sales for Q3 2025 were $155.0 million, a 3% increase from $151.1 million in Q3 2024, driven by volume growth[218]. - Performance Chemicals net sales increased by $6.0 million (4%) in Q3 2025 to $139.9 million, primarily due to higher sales in the North American pavement market[223]. - Advanced Polymer Technologies net sales decreased by 22% in Q3 2025 compared to the prior year quarter, reflecting continued pressure from indirect tariff impacts and weak industrial demand[229]. - For the nine months ended September 30, 2025, net sales from Advanced Polymer Technologies decreased by $21.0 million, driven by a volume decline of $19.2 million (13%) and unfavorable pricing and sales mix of $3.1 million (2%) [233]. - Net sales from discontinued operations decreased by $72.1 million in the nine months ended September 30, 2025, driven by a volume decline of $67.8 million (40%) and unfavorable pricing and sales mix of $5.2 million (3%) [241]. - Total Advanced Polymer Technologies net sales for the nine months ended September 30, 2025, were $123.7 million, down from $144.7 million in 2024 [230]. - For the three months ended September 30, 2025, net sales from discontinued operations were $29.0 million, down from $43.1 million in 2024, reflecting a volume decline of $10.7 million (25%) [238]. Profitability and Expenses - Gross profit for Q3 2025 increased by $2.3 million, attributed to decreased manufacturing costs of $5.4 million and favorable foreign currency exchange of $2.8 million, despite LIFO charges of $6.6 million[198]. - For the nine months ended September 30, 2025, gross profit rose by $8.8 million, driven by decreased manufacturing costs of $22.7 million and favorable pricing and sales mix of $12.1 million, offset by LIFO charges of $16.2 million[199]. - SG&A expenses for Q3 2025 were $44.1 million (13% of net sales), up from $37.9 million (11% of net sales) in Q3 2024, representing a 16% increase[200]. - For the nine months ended September 30, 2025, SG&A expenses were $129.6 million (14% of net sales), an increase of 8% from $119.5 million (13% of net sales) in the same period of 2024[201]. - Research and technical expenses as a percentage of net sales increased to 2.1% in Q3 2025 from 1.9% in Q3 2024, with a total increase of $0.8 million[202]. - Segment EBITDA for Performance Materials decreased by $0.7 million (1%) in Q3 2025, with a margin decline to 51.5% due to higher variable compensation and foreign currency exchange[217]. - Segment EBITDA for Performance Chemicals increased by $0.5 million (2%) in Q3 2025, with a margin of 17.7% impacted by lower pricing in road markings products[223]. - Segment EBITDA increased by $9.8 million in 2025, driven by decreased manufacturing costs of $20.9 million and favorable pricing and sales mix of $11.7 million, partially offset by LIFO charges of $13.7 million and increased SG&A of $5.6 million [228]. - EBITDA from discontinued operations increased by $34.8 million in the nine months ended September 30, 2025, driven by LIFO liquidation benefit of $23.5 million and decreased manufacturing costs of $13.6 million [242]. Charges and Repositioning - The company expects to incur approximately $365 million in aggregate charges related to the Performance Chemicals repositioning, including $255 million in asset-related charges and $25 million in severance costs[186]. - As of September 30, 2025, the company has incurred $344.7 million associated with the repositioning actions, with $83.1 million of cash charges already paid[187]. - Since November 2023, Ingevity has realized total cash savings of approximately $103 million, with 70-80% attributed to cost of sales[188][189]. - The repositioning of the Performance Chemicals segment aims to improve profitability and reduce cyclicality, focusing on higher-margin product lines[185]. Cash Flow and Capital Management - Cash flow from operating activities for the nine months ended September 30, 2025, was $234.1 million, an increase of $170.0 million compared to $64.1 million in 2024[270]. - Capital expenditures for the nine months ended September 30, 2025, totaled $34.1 million, down from $52.7 million in 2024, with maintenance capital spending at $20.5 million[273]. - The company repurchased $25.2 million in common stock during the nine months ended September 30, 2025, with $328.4 million remaining under the 2022 repurchase authorization[267]. - As of September 30, 2025, cash and cash equivalents totaled $83.4 million, including $79.7 million held by foreign subsidiaries[263]. - The company expects to eliminate approximately $15 million in indirect costs associated with the industrial specialties product line by the end of 2026 through operational efficiencies[259]. - The undrawn capacity under the revolving credit facility was $477.0 million as of September 30, 2025, providing sufficient liquidity for planned operations[262]. Interest and Foreign Exchange - Total interest expense for the nine months ended September 30, 2025, was $56.4 million, down from $69.3 million in the same period of 2024[210]. - The company entered into a floating-to-fixed interest rate swap for a notional amount of $200 million, converting variable interest payments to a fixed rate of 3.84% until August 2026[279]. - As of September 30, 2025, the weighted average interest rate for variable borrowings was 5.75%, with a hypothetical 100 basis point increase resulting in an annual interest expense increase of approximately $4.1 million or 7%[280]. - A hypothetical 10% adverse change in the average exchange rates of the Brazilian real, Chinese renminbi, and euro to the U.S. dollar would have decreased net sales by approximately $10.8 million or 1% for the nine months ended September 30, 2025[278]. - A hypothetical 10% adverse change in the average exchange rates during the nine months ended September 30, 2024, would have decreased net sales by approximately $11.0 million or 1%[278]. Accounting and Reporting - The company believes that non-GAAP financial measures provide a more complete understanding of the factors affecting historical financial performance and projected future results [244]. - Net income from continuing operations for Q3 2025 was $40.8 million, a decrease from $47.5 million in Q3 2024, while net income from discontinued operations improved to $2.7 million from a loss of $154.7 million[248]. - Adjusted EBITDA from continuing operations for the nine months ended September 30, 2025, was $302.8 million, compared to $296.7 million for the same period in 2024, reflecting a slight increase[248]. - The company revised its 2025 net sales outlook to between $1.25 billion and $1.35 billion, with expectations of a ~2% decline in North America light vehicle production compared to 2024[258]. - Total Adjusted EBITDA outlook for 2025 is projected to be between $390 million and $405 million, reflecting continued pressure on the Advanced Polymers Technologies segment[260]. - The company has not substantially changed its critical accounting policies from those described in the 2024 Annual Report[277]. Risk Factors - Ingevity's operations are impacted by various risks, including global economic conditions, competition, and supply chain disruptions[183]. - Natural gas costs constituted approximately 4% of the cost of goods sold for the nine months ended September 30, 2025, with a hypothetical 10% increase in natural gas pricing resulting in an increase to cost of sales of approximately $2.1 million[282]. - The company had 1.5 million mmBTUS in open natural gas derivative contracts as of September 30, 2025, designated as cash flow hedges[282]. - The fair value of open natural gas derivative contracts was a net asset of $(0.8) million as of September 30, 2025[282]. - The fair value of the interest rate swap was $(0.3) million as of September 30, 2025, compared to $0.6 million at December 31, 2024[279].