Ingevity Corporation Q3 FY2025 earnings call

• Achieved milestone in strategic portfolio review with sale of Industrial Specialties business for $110 million, expected to close early 2026 and proceeds mostly for debt reduction.
• Performance Materials had strong quarter in dynamic global auto environment, encouraged by adoption of hybrids and fuel-efficient ICE platforms.
• Road Technologies had great quarter with record sales in North America pavement business.
• APT had strong margins with focus on operational improvements despite weak end market demand.
• Sixth consecutive quarter of year-over-year EBITDA margin expansion to 33%.
• Hired Ruth Castillo to lead Performance Materials business.
• Will host Investor Update on December 8 to share strategic portfolio review results and company outlook for next 2 years.

Total company sales in Q3 were $362 million, down about 4%. Performance Materials sales increased 3% primarily due to volume growth from improved global auto production. APT sales declined year-over-year due to tariffs and competitive dynamics in China. Road Technologies sales were up 5% with record sales in North America pavement business. Industrial Specialties is reported as discontinued operations with sale expected to close in early 2026. Performance Materials segment EBITDA and margin were down due to increased variable compensation and foreign exchange impact. APT had EBITDA margin of 26% in Q3. Road Technologies segment sales were up 5%. The divestiture of Industrial Specialties is expected to contribute ~$130 million in sales with ~6% EBITDA margin full year, and ~$40 million to free cash flow full year.

• Raised full year free cash flow guidance and expects net leverage to be around 2.6x by year-end.
• Adjusted full year outlook to narrow top end of sales and EBITDA range due to ongoing tariff uncertainty and slower industrial demand primarily impacting APT.
• Intends to use majority of proceeds from sale of Industrial Specialties business towards further debt reduction.

• Tariff uncertainty.
• Slower industrial demand primarily impacting APT.
• Supply chain challenges such as aluminum plant fires in North America and chip shortages in China.

Q: Regarding the full year outlook and how Performance Materials is impacted by supply chain challenges like aluminum plant fires in North America and chip shortages in China, and if it's accounted for in guidance?

A: Yes, results and outlook reflect impact from those supply chain challenges. Performance Materials has continued to deliver strong results quarter-over-quarter despite these challenges.

Q: About discontinued ops, what's implied in Q4 given no first half results and Q3 EBITDA contribution?

A: John Nypaver said can look at full year metrics for discontinued ops and David Li mentioned annualized EBITDA of mid-single-digit for the business and extrapolating Q3 to Q4 makes sense.

Q: About working capital post divestiture and net debt-to-EBITDA target?

A: Phil Platt said balance sheet includes impact of discontinued ops on working capital and shows clear indication, Mary Hall said finished quarter at 2.7x net leverage and expects year-end to be ~2.6x, David Li said majority of proceeds from sale will be used for debt reduction.

Q: About Performance Materials full year sales flat to slightly down and reasons like mix or pricing?

A: David Li said taken pricing as usual, market for automobiles is flattish to slightly down similar to PM business, Mary Hall added North America production forecast is still down a couple of percent year-over-year despite improvement.

Q: Update on Nexeon platform?

A: David Li said Nexeon's plant is expected to be up and running in the next few months, it's a far out R&D initiative not using activated carbon for first generation yet, but a strong partnership.