Ingevity(US:NGVT)2022-02-26 01:30Financial Data and Key Metrics Changes - Company achieved a revenue growth of 14% year-over-year and a 3% increase in Q4 compared to the previous year, driven by robust volumes in Performance Chemicals despite a decline in Performance Materials automotive emission products [7][15] - Adjusted EBITDA reached a record $422 million with an adjusted EBITDA margin of 30.3%, reflecting a compound annual growth rate of over 20% since 2016 [16][17] - Free cash flow was down compared to 2020 but increased by more than 17% from 2019, with net debt to adjusted EBITDA reduced to 2.2x from 2.5x at year-end 2020 [18] Performance by Business Segment - Performance Chemicals segment saw a revenue increase of 24% in Q4 and for the full year, with sales reaching $204 million and $875 million respectively, driven by strong demand and price increases [20] - Performance Materials segment experienced an 18% decline in Q4 sales to $132 million due to ongoing microchip shortages affecting automotive production, although full-year sales were slightly up due to price increases [26][28] Market Data and Key Metrics Changes - North American vehicle production ended 2021 at 13 million, with IHS forecasting 15.2 million for 2022, indicating a cautious outlook due to ongoing microchip shortages [54] - The company noted that the automotive industry is directing limited microchip volumes to more profitable vehicles, which benefits Ingevity's product mix [27] Company Strategy and Industry Competition - Company is focused on leveraging operational excellence to gain market share, particularly in adhesives, where significant share gains were reported [11][77] - Strategic investments in growth initiatives, including new product launches and alternative fatty acid production, are expected to drive future sales growth [12][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate supply chain challenges and inflationary pressures, with expectations for revenue growth in Performance Chemicals and a cautious outlook for Performance Materials due to microchip supply constraints [30][31] - The company plans to continue investing in growth while returning capital to shareholders, with guidance for 2022 sales between $1.525 billion and $1.6 billion and adjusted EBITDA between $430 million and $460 million [30] Other Important Information - The company improved its ESG ratings and increased the number of USDA certified bio-based products in its portfolio by 50% [13] - Management highlighted the successful introduction of new products in the Pavement Technologies segment, achieving its 10th consecutive year of sales growth [23] Q&A Session Summary Question: Revenue mix in Engineered Polymers and margin expectations - Management indicated a continued focus on driving derivative sales in Engineered Polymers, with expectations for a favorable mix [37] Question: Pricing and inflation outlook for Performance Materials - Management confirmed that significant price increases were implemented and more pricing adjustments are expected in 2022 to offset inflation [60] Question: Auto unit sales expectations for 2022 - Management referenced IHS forecasts of 15.2 million vehicles for 2022, with a focus on North America's highest value market [54] Question: Exposure to Eastern Europe and conflict impacts - Management noted that Eastern Europe accounts for only 4% of sales, indicating limited direct impact from the situation in Ukraine [55] Question: Update on regulatory growth in Brazil and Euro 7 mandate - Management expressed confidence in regulatory growth in Brazil and provided updates on the Euro 7 mandate timeline [57] Question: Share gains in adhesives - Management highlighted significant market opportunities in adhesives, particularly in road striping and packaging, with expectations for continued growth [77]