Highlights:
Full year 2022 was a record year for both net sales and EBITDA, driven by growth across all business segments; fourth quarter results were negatively impacted primarily by significant customer destocking in the second half of the quarter.
Fourth Quarter (comparisons versus prior year period):
Net sales of $383.6 million increased 14.2%;
Net income of $15.6 million and diluted earnings per share (EPS) of $0.41; adjusted earnings of $21.5 million and diluted adjusted EPS of $0.57
Adjusted EBITDA of $74.3 million and adjusted EBITDA margin of 19.4%
Share repurchases of $6.0 million
Full Year (comparisons versus prior year period):
Net sales of $1.67 billion increased 19.9%
Net income of $211.6 million and diluted EPS of $5.50; adjusted earnings of $231.4 million and diluted adjusted EPS of $6.01
Adjusted EBITDA of $452.6 million and adjusted EBITDA margin of 27.1%
Share repurchases of $145.2 million
Operating cash flow of $313.1 million with free cash flow of $170.6 million
Guidance:
Company announces full year 2023 guidance for sales between $1.9 billion and $2.1 billion and adjusted EBITDA between $495 million and $515 million.
Ingevity Corporation reported its financial results for the fourth quarter and full year 2022.
2022 was a record year for Ingevity as both Performance Chemicals and Performance Materials delivered their best ever sales and EBITDA, despite persistent cost inflation, continued COVID-19 and supply chain disruptions, a war in Ukraine, and an especially challenging fourth quarter.
Fourth quarter (Q4) net sales of $383.6 million rose over 14% versus the prior year quarter. This growth reflects price increases across all businesses implemented throughout the year to address higher input costs, partially offset by significant volume declines in the latter half of Q4 attributed to customer destocking, particularly in certain higher-value product lines of the Performance Chemicals segment. As a result, Q4 net income decreased 47% to $15.6 million compared to prior year and adjusted EBITDA decreased 7% to $74.3 million with adjusted EBITDA margin of 19.4%. Diluted earnings per share (EPS) in Q4 was $0.41 compared to diluted EPS of $0.74 in the prior year quarter. Diluted adjusted EPS in Q4 was $0.57 compared to diluted adjusted EPS of $0.78 in the prior year quarter.
Record full year (FY) net sales of $1.67 billion were up 20% compared to last year, as higher selling prices and a mix shift to higher-value products helped the company offset inflationary cost pressures and supply chain disruptions. FY net income of $211.6 million increased 79% versus the prior year. Excluding the pre-tax litigation expense of $85.0 million in 2021, FY 2022 net income increased 16%. FY adjusted EBITDA increased 7% to $452.6 million with adjusted EBITDA margin of 27.1%. FY diluted EPS was $5.50 compared to $2.95 in the prior year. FY diluted adjusted EPS was $6.01 compared to diluted adjusted EPS of $5.23 in the prior year.
“I am extremely proud of our team’s resilience and persistence in successfully navigating 2022’s difficult business environment. Our record performance translated to strong free cash flow which we used to return significant cash to shareholders and fund growth initiatives, including our acquisition of Ozark Materials in Q4, which expands our Pavement Technologies business into road markings,” said John Fortson, president and CEO. “We remain focused on delivering consistent growth over time to our shareholders.”
Performance Chemicals
Sales in the Performance Chemicals segment were $250.8 million in Q4, up 23%. FY sales were $1.12 billion, up 28% for the year, reflecting price increases across all product lines and the continued shift to higher-value specialty products. All business lines in the segment posted record sales numbers for the year.
Industrial Specialties, which is the company’s largest business, posted sales of $143.9 million in Q4, up 12%, and FY sales of $633.8 million, up 28%. The slower growth in Q4 was due to a sharp decline in sales volume attributed to significant customer destocking in the second half of the quarter, particularly in higher-value adhesives product lines. Also, while Q4 is a seasonally low quarter for Pavement Technologies, many municipalities and agencies depleted their budgeted dollars for paving projects in Q4, adding to the slowdown. The Pavement Technologies business Q4 revenue growth of 43% to $47.3 million was due to the acquisition of Ozark Materials in early October. FY sales of $241.3 million increased 23%, reflecting a strong 2022 paving season. Engineered Polymers Q4 sales were especially strong, up 41% to $59.6 million, due to additional price increases and volume growth in the quarter. FY sales were up 32% to $244.7 million as end-market demand supported higher prices and increased volumes, primarily in automotive and footwear & apparel.
Q4 segment EBITDA was $16.8 million, down 22% or $4.8 million, compared to last year reflecting customer destocking of higher-value products late in the quarter, resulting in segment EBITDA margin of 6.7%. FY segment EBITDA was $200.4 million, up 16%, with EBITDA margin of 17.9% versus 19.8% in 2021 with the decline attributed to inflationary pressures and supply chain disruptions throughout the year.
“Performance Chemicals delivered a record sales year as we implemented price increases across all business lines to offset cost inflation and supply chain disruptions that continued throughout the year,” said Fortson. “Q4 was particularly challenging as volumes declined sharply in certain higher-value product lines in the latter half of the quarter as customers aggressively managed their inventories in light of recession concerns.”
Performance Materials
Sales in Performance Materials were flat for Q4 at $132.8 million due primarily to China’s COVID-19 outbreaks which disrupted sales in the region, and FX headwinds. Segment EBITDA was $57.5 million in Q4 and flat to prior year due to continued higher raw material and energy costs and the timing of price increases, which resulted in segment EBITDA margin of 43.3%, down slightly versus prior year. FY sales were up 6% to $548.5 million, driven by improved volume in automotive products. FY segment EBITDA was $252.2 million, up 1%, with segment EBITDA margin of 46.0% versus 48.3% in 2021 as higher input costs more than offset higher volumes.
“Performance Materials delivered record sales and EBITDA for the year, while battling high input costs and COVID-19 outbreaks. Our results demonstrate the resiliency of the business and the team that runs it,” said Fortson.
Liquidity/Other
Full year operating cash flow was $313.1 million with free cash flow of $170.6 million. Share repurchases for the quarter were $6.0 million and $145.2 million for the year, and $444.7 million remains available under the July 2022 $500 million Board authorization. Net leverage at the end of the year was 2.9 times, reflecting increased borrowing for the Ozark Materials acquisition which closed early in the fourth quarter.
Full Year 2023 Guidance
Ingevity announced its 2023 guidance of sales between $1.9 billion to $2.1 billion and adjusted EBITDA between $495 million to $515 million.
“2023 kicked off to a slower start but we expect to see order patterns normalize and to benefit from a recovery in key end-markets such as auto and adhesives. This expected recovery combined with the continued strength in markets such as oilfield, footwear and apparel, and pavement, including a full year of Ozark Materials, gives us confidence in our growth outlook for 2023,” said Fortson.
