Ingevity Announces Further Repositioning of Its Performance Chemicals BusinessNov 02, 2023 01:30PM ● By David Dykes
Ingevity Corporation (NYSE: NGVT) President and CEO John Fortson on Nov. 1, 2023, announced a number of strategic actions designed to further reposition the company’s Performance Chemicals segment, including closure of a Southeastern plant and almost a 20 percent reduction in the company’s workforce.
“What we are doing today is an important step toward achieving our strategic objectives of improving the profitability and reducing the cyclicality of the Performance Chemicals business and the company as a whole,” Fortson said. “Today’s actions increase our focus on growing our most profitable Performance Chemicals businesses such as Pavement Technologies and accelerate our transition to non-crude tall oil (CTO)-based fatty acids (AFA)."
Fortson added, “Our decision is the result of a careful evaluation of various strategic options to address the cyclicality of our rosin-based end markets, as well as the significant structural changes and elevated pricing of CTO due to the biofuels market. Going forward, we will continue to strengthen and diversify the Performance Chemicals business through the introduction and expansion of complementary and new product offerings based on alternative chemistries, such as soy and canola-based fatty acids.”
The announcement includes permanent closure of the company’s DeRidder, La., production facility that manufactures a range of CTO-based products that are primarily for the Industrial Specialties business, which is reported within Ingevity’s Performance Chemicals segment.
North Charleston, S.C.-based Ingevity expects to close the DeRidder facility by the end of the first half of 2024.
The company also announced additional corporate and business cost reduction actions, which combined with those previously announced, are expected to result in total annual savings of $65 million to $75 million beginning in 2024.
As a result of the Performance Chemicals repositioning, Ingevity said it expects to incur aggregate charges of approximately $280 million, consisting of approximately $180 million in asset-related charges, approximately $15 million in severance and other employee-related costs and approximately $85 million in other restructuring costs, which include decommissioning, dismantling and removal charges and contract termination costs.
The company expects approximately $180 million of the total charges to be non-cash. The majority of non-cash charges and 50-60 percent of cash charges are expected to be recognized by the end of the first half of 2024.
Employees affected by the announcement include approximately 180 people at the DeRidder facility and approximately 120 people in business and support functions.
Together with the actions taken earlier in 2023, headcount reductions represent almost 20 percent of Ingevity’s global workforce.
“We are committed to working with our customers to minimize any disruption caused by this decision and remain focused on offering a broader portfolio of products in the future,” said Rich White, Ingevity senior vice president and president, Performance Chemicals.
Fortson added, “Ingevity’s DeRidder operation played a key role in Ingevity’s history. Today’s announcement is a difficult but necessary step that the company must take as we continue to execute our strategic objectives to position Ingevity for long-term success. I want to thank all current and former employees for their service and commitment to Ingevity.”
Meanwhile, Ingevity on Nov. 1, 2023, reported its financial results for the third quarter 2023.
Third quarter net sales of $446.0 million declined 7 percent versus the record prior year quarter, reflecting, company officials said, lower volumes due to weak industrial demand primarily impacting Advanced Polymer Technologies and the Industrial Specialties business line.
That was partially offset by improved North America and Asia sales in Performance Materials and increased pricing in the Pavement Technologies business line, the officials said.
Net income of $25.2 million and diluted earnings per share (EPS) of $0.69 decreased 67 percent and 65 percent, respectively, and were negatively impacted by lower operating earnings, restructuring and other charges recorded during the quarter, and higher interest expense associated with the Ozark acquisition, company officials said.
Adjusted EBITDA of $110.4 million was down versus the prior year quarter, with an adjusted EBITDA margin of 24.8 percent.
Performance Chemicals sales were $256.0 million, down 4 percent from the prior year.