Ingevity Corp (NGVT) Reports Q1 2024 Results: Challenges Persist Amid Strategic Repositioning
Reported net sales: $340.1 million, a decrease of 13% year-over-year, exceeding estimates of $318.96 million.
Net loss: $56.0 million, significantly below the estimated net loss of $10.35 million.
Diluted EPS: Reported a loss of $1.54 per share, considerably below the estimated loss of $0.32 per share.
Adjusted EBITDA: $76.9 million, down 26% from the previous year, with an adjusted EBITDA margin of 22.6%.
Free cash flow: Negative $28.7 million, reflecting seasonal inventory build and losses on crude tall oil resales.
Cost savings: Realized approximately $20 million in Q1, on track to achieve annual savings of $65 million to $75 million.
Full year guidance: Reiterated, with projected sales between $1.40 billion and $1.55 billion and adjusted EBITDA between $365 million and $390 million.
Ingevity Corp (NYSE:NGVT) released its 8-K filing on May 1, 2024, unveiling its financial outcomes for the first quarter of 2024. The chemical manufacturer, known for its specialty chemicals and materials used in various industries, reported a net sales of $340.1 million, a 13% decrease compared to the previous year, primarily due to strategic changes in its Performance Chemicals segment. This figure falls short of the analyst estimates which projected revenues of $318.96 million.
Ingevity Corp operates through three segments: Performance Chemicals, Advanced Polymer Technologies, and Performance Materials. The company's significant revenue comes from North America, with Performance Chemicals being the largest contributor through products used in applications such as asphalt paving and oil exploration.
Financial Performance and Strategic Challenges
The reported net loss stood at $56.0 million with a diluted loss per share (EPS) of $1.54, starkly contrasting the estimated EPS of $0.32. The adjusted earnings were $19.1 million with a diluted adjusted EPS of $0.52. The company faced substantial pre-tax restructuring charges of $64.8 million and losses on crude tall oil (CTO) resales amounting to $26.5 million, which significantly impacted the net results.
Despite these challenges, Ingevity's Performance Materials segment showed resilience with a 3% increase in sales, amounting to $145.1 million, driven by improved pricing and strong automotive carbon volumes. This segment achieved a remarkable EBITDA margin of 53.8%, benefiting from lower input costs and enhanced operational efficiency.
Segment Analysis and Future Outlook
The Advanced Polymer Technologies segment experienced a 27% decline in sales to $48.0 million due to weakened industrial demand, while Performance Chemicals sales dropped 21% to $147.0 million. The company's strategic repositioning, including the closure of the DeRidder, LA plant and exiting certain low-margin markets, was cited as a primary reason for the downturn in this segment.
John Fortson, president and CEO of Ingevity, commented on the quarter's performance, emphasizing the strength in Performance Materials and sequential volume growth in Advanced Polymer Technologies. Fortson remains optimistic about the seasonal improvement expected in Performance Chemicals and the ongoing strategic repositioning efforts.
Performance Materials maintained the momentum we saw at the end of 2023, with auto carbon volumes and pricing remaining strong, and the continued popularity of hybrid vehicles," said Fortson.
Liquidity and Financial Health
The first quarter saw a negative operating cash flow of $12.1 million and a free cash flow of negative $28.7 million, reflecting typical seasonal inventory builds and the financial strain from CTO resales. The company reported no share repurchases for the quarter, with $353.4 million remaining under the current $500 million Board authorization.
Ingevity reiterated its full-year 2024 guidance, expecting sales between $1.40 billion and $1.55 billion and adjusted EBITDA between $365 million and $390 million. This guidance reflects cautious optimism about the recovery in industrial markets in the latter half of the year.
In conclusion, while Ingevity faces significant challenges, its strategic initiatives and strong performance in certain segments may position it for recovery as market conditions improve. Investors and stakeholders will be watching closely to see how the company navigates these turbulent times.
Explore the complete 8-K earnings release (here) from Ingevity Corp for further details.
This article first appeared on GuruFocus.
