Avient Corporation

Good morning, ladies and gentlemen, and welcome to Aviance Corporation webcast to discuss the company's second quarter 2021 results. My name is Gigi, and I will be your operator for today. At this time, all participants are in listen-only mode. We will have a question and answer session following the company's prepared remarks. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Joe DiSalvo, Vice President, Treasurer and Investor Relations. Please proceed.

Thank you, Gigi. And good morning and welcome to our second quarter 2021 earnings call. Before beginning, we'd like to remind you that statements made during this webcast may be considered forelooking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forelooking statements will give current expectations or forecasts of future events and are not guarantees of future performance. They're based on management's expectation and involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statement. Also during the discussion today, the company will use both GAAP and non-GAAP financial measures. Please refer to the presentation posted on the ABN website where the company describes the non-GAAP measures and provides a reconciliation for historical non-GAAP financial measures to their most directly comparable GAAP financial measures. In addition, unless otherwise stated, comparisons to the prior year will be pro forma for the Clarion Master Batch acquisition, as if the business had been together during all periods referenced. Joining me today is our Chairman, President, and Chief Executive Officer, Bob Patterson, and Senior Vice President and Chief Financial Officer, Jamie Beck. Now I will turn the call over to Bob for some opening comments.

Thanks, Joe, and good morning, everyone. Today we are reporting record second quarter results. that reflect the transformation of our portfolio and demonstrate the success of our key growth platforms. The most recent piece of that transformation occurred when we acquired Clarion's color business a year ago this month and we became Aviant. The first year of integration has been a tremendous success, which not only shows up in our numbers, but in the engagement we see in our associates around the world. This momentum has served us well. as we have seen unprecedented demand for our solutions grow against a backdrop of challenging conditions. Our team has come together to deliver world-class service to our customers through creativity and flexibility in our operations, as we have managed through a myriad of supply chain disruptions. We truly are better together and well on our path to a record year as we turn these challenges into opportunities. Obviously, the second quarter of 2020 was a low point during the pandemic. The year-over-year comparisons reflect that with sales up 42% and adjusted EPS up 107%. What you can't see here is a very compelling story of how we delivered record revenue of $1.2 billion and 87 cents of adjusted EPS while handling inflation as well as the incremental costs associated with the previously mentioned supply chain challenges. And these have been substantial, but so have our efforts to overcome and offset them, both of which you will see in future slides this morning. Our performance continues to be underpinned by our four-pillar strategy that guided the investments we made to transform our portfolio to one that is more specialized, focused on sustainable solutions, and concentrated on high-growth end markets. And it's working. All three of our segments contributed to delivering these record second quarter results. Color additives and inks grew operating income 59% from robust demand across all markets and for our sustainable solutions. And we have also achieved significant synergies with the ongoing integration with Clarion. Specialty engineer materials more than doubled operating income driven by continued growth of our composite technologies. We see ongoing strength in consumer applications, as well as increased demand for our fiber optic cable solutions used in telecom for 5G and other infrastructure build-outs. Our distribution segment delivered record second quarter operating income of $24 million, an increase of 60% over the prior year. And we reached a notable milestone with nearly 50% of the segment sales coming from healthcare and consumer end markets. Over the years, our portfolio has undergone a tremendous and deliberate transformation with an increased focus on specialty applications. As you know, these require more sustainable solutions and advanced performance characteristics. And not only has this been an important contributor to our recent sales growth, but the benefits of improved mix and our pricing actions are improving margins despite the inflationary pressures we've seen. When we contemplated the acquisition of the clarion color business, we knew there was an opportunity to improve margins to the same level of performance as the legacy poly one color business. In the first year of ownership, we have made significant progress in this regard. One driver of this improved performance is the acceleration of synergy capture between the two teams, where we realized $11 million in the quarter. And we are on track to deliver over $45 million in 2021. Beyond synergy capture, we see an intense focus on innovation, sustainable solutions, and pricing excellence across both businesses. There is so much energy and excitement that is being generated from the combined organizations. And I got to experience that firsthand earlier this month when I visited our legacy clearance site in West Chicago. Seeing and interacting with our people and our team further validated everything we've known. And we did that during our diligence and after a year of integration, we know and now do confirm we are better together. It was invigorating to see not only our production facility, but to explore our ColorWorks Innovation Center, where designers have the opportunity to see, touch, feel, and watch their color designs come to life. What impressed me most about the visit was how our teams are supporting our customers' sustainability initiatives. The single most requested service is to help our customers use more recycled content and packaging And let me elaborate. Recycled material has a natural grayish look to it. Quite simply, this has to be overcome with additional color concentrates and additives to achieve a similar level of brilliance and differentiation for shelf appeal that brand owners demand. And this isn't easy. But think of this as a sales and margin multiplier we call a plus factor. The more recycled content is used, the more color and additives required. These capabilities were a key driver behind our decision to double down on color last year when we acquired the Clariant Master Batch business, who was and is a clear market leader in this space. And the trend toward using more recycled content bodes well for us and our long-term expectation of driving 8% to 12% growth from sustainable solutions. Our second quarter results are no exception as we achieve substantial growth in these sustainable solutions as well as the other three key areas of focus, healthcare, composites, and growth in Asia and LATAM. You can also see the contribution margins associated with each area and that we are lapping the effects of COVID response applications sold in the prior year. From an end market perspective, over half our revenue is tied to strategic end markets such as consumer health care and packaging. In particular, consumer demand over the prior year grew 67%, primarily for outdoor high performance applications. The health care and packaging space also performed exceptionally well during the quarter. Now, these two percentages may look relatively small on this page, but recall These were two end markets that outperformed in the second quarter of last year during the early days of the pandemic. Overall, I'm very pleased with our results for the quarter. I view the next couple slides as perhaps the most insightful as we quantify and illustrate how we have overcome inflation and cost increases related to supply chain disruptions. The combination and magnitude of these two factors is unprecedented during my 13 years with the company, and I can't say enough about how well our teams have handled both. Given our recent performance and continued strong demand conditions, we have increased our outlook for the rest of the year and raised our full year projections to $3 of adjusted EPS. I'll turn the call over to Jamie now to provide more details.