Ingevity reports decline in sales, profit due to lower demand
By: ICN Bureau
Last updated : August 06, 2020 12:52 pm
Slowdown in the automotive sector caused by pandemic led to lower sales in second quarter
Ingevity Corporation reported a drop in its second quarter earnings and profit due to sharp decline in volumes caused by economic impact of Covid-19.
The company’s revenues fell 23.3% year over year to $270.6 million in the quarter on account of weaker demand, especially in the automotive industry, fuelled by the economic impacts of the coronavirus pandemic.
Company's profit was down by 64.4% year on year and stood at $20.2 million or 49 cents per share in second-quarter 2020 as against $56.8 million or $1.34 per share a year ago.
Adjusted earnings per share for the reported quarter were 63 cents. Adjusted EBITDA declined 38% year over year to $67.2 million in the quarter.
“Ingevity delivered second quarter financial results in line with the special, one-time guidance we provided at the end of the first quarter,” said Rick Kelson, Ingevity’s chairman of the board, and interim president and CEO. “While we experienced a sharp decline in volumes attributable to the economic impact of the coronavirus, or COVID-19, our team remained focused and drove cost reductions that were able to partially bolster adjusted EBITDA.” He added that the company generated operating cash flow of $48.9 million, which translated to solid free cash flow of $33.9 million.
Kelson said that the downturn in automotive sales and production in North America and Europe during the quarter significantly reduced revenues for its automotive activated carbon products. This was partially offset by an upturn in demand for similar products in China. He also pointed to reduced demand in industrial specialties applications – such as printing inks – and volatility in the oilfield drilling and production industry as other drivers of the revenue decline.
“As a countermeasure, we took strong steps toward reducing costs across the corporation,” said Kelson. “We implemented initiatives that will save us $35 million this year and will result in annualized savings of $12 million going forward.”
Revenues from the Performance Chemicals division declined 18.9% year over year to $186.2 million in the quarter under review. Softened demand in Industrial Specialties and Oilfield Technologies was offset by relatively reasonable strength in Pavement Technologies and Engineered Polymers.
Revenues from the Performance Materials unit decreased 31.4% to $84.4 million. The sales decline in North America was partly offset by the rebounding automotive business in China.
The company reaffirmed its sales guidance for 2020 of between $1.1 billion and $1.2 billion. It also anticipates adjusted EBITDA of $310-$350 million for the year.