AVIENT CORP Q3 FY2024 earnings call

• Financial performance: Third quarter sales $815 million, 8% growth y-o-y, 8.5% organic growth excluding FX. Adjusted EBITDA $130 million, 6% growth y-o-y. Adjusted EPS $0.65, up 14% y-o-y. - Regional growth: US/Canada (41% of sales) grew 9%, Latin America grew 27%, EMEA grew 5%, Asia grew 11%. - Organizational changes: Streamlined Color Additives and Inks segment under single global leader, reorganized R&D, strengthened leadership team, and changed compensation structure. - Customer focus: Tailored commercial tactics to regions, aiming to be more customer-centric and agile.

Color, Additives and Inks segment grew sales 7%. Packaging end market, ~one-third of segment sales, was up low double digits, with growth in Americas (especially Latin America for personal care packaging) and recovery in Europe. Building and construction sales grew double digits. Adjusted EBITDA grew 9% and EBITDA margins expanded by 40 basis points. Specialty Engineered Materials segment grew sales 10% organically. Approximately one-third of growth from Dyneema applications, another one-third from composite materials in building/construction and energy, and remaining one-third from consumer/health care. Adjusted EBITDA grew 12% and EBITDA margins expanded by 40 basis points.

• Revised full-year adjusted EBITDA range: $525 million to $530 million. Adjusted EPS range: $2.63 to $2.67, representing 11%-13% growth over prior year. - Fourth quarter adjusted EPS guidance: $0.46 to $0.50 per share, with $0.12 headwind from variable compensation accruals. - Interest expense expected ~$104 million for full year, slightly lower than previous guidance. - EMEA expected muted sales growth due to automotive weakness and defense comps.

• Telecom and transportation challenges: Telecom remains challenged and likely to stay so for a few quarters, transportation growth not seen due to global car build reductions and inventory issues. - EMEA macroeconomic factors: Weakness in automotive market and difficult defense sales comps. - Volatility in certain businesses: Fiber-Line in telecom has been slower to evolve and faces competition from China, causing challenges.

Q: How were the end markets in Q3?

A: Seven of nine segments grew, with telecom and transportation challenging.

Q: What's driving growth in building and construction?

A: Composite panels for housing, modular rooms, decking applications.

Q: Gross margins for CAI and Q4 expectations?

A: Partly due to less raw material deflation and incentive accrual reset, expecting slightly smaller expansion in Q4.

Q: Growth in Asia and Europe?

A: Asia driven by consumer, healthcare, industrial; Europe by market share gain, healthcare, defense, building/construction.

Q: Reorganization cost savings and reinvestment?

A: Reorganization for growth, savings likely to contribute to margin expansion and digital strategy.

Q: Free cash flow and working capital in Q4?

A: Q4 typically generates cash, working capital use of cash ~$10-15 million full year.

Q: New business wins and innovation pipeline?

A: ~50% growth from new business development in high-growth areas and market share gains.

Q: Telecom business and capital deployment?

A: Fiber-Line faces challenges, part of portfolio but bigger thrust not on this side.

Q: Latin America growth and M&A?

A: Latin America growing, no M&A plans currently.

Q: Balance sheet and share repurchases?

A: Target leverage ~2.5x, share repurchases not on table until leverage target met