Avient Corporation

Good morning, ladies and gentlemen, and welcome to AVN Corporation's webcast to discuss the company's fourth quarter 2021 results. My name is Carmen, and I'll be your operator for today. At this time, all participants are in a listening 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, Carmen, and good morning and welcome to our fourth quarter 2021 earnings call. Before beginning, we'd like to remind you that statements made during this webcast may be considered forward-looking statements. Forward-looking statements will give current expectations or forecasts of future events and are not guarantees of future performance. They are 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 forelooking statement. Also, during the discussion today, we will use both GAAP and non-GAAP financial measures. Please refer to the presentation posted on the Aviant website where the company describes non-GAAP measures and provides a reconciliation to their most directly comparable GAAP financial measures. Joining me today is our Chairman, President, and Chief Executive Officer, Bob Patterson. and Senior Vice President and Chief Financial Officer, Jamie Beggs. Now I will turn the call over to Bob for some opening comments.

Thanks, Joe. Good morning to everyone joining us on the call today. Today we are reporting record fourth quarter results to finish out an incredible year where we delivered our highest level of sales and adjusted EPS in our company's history. Our financial performance reflects the deliberate transformation of our portfolio towards specialty solutions as well as a focus on execution during a very challenging year. 2021 marked our first full year as Avian Corporation. As you know, we selected this new name in July of 2020 following the acquisition of Clarence Color Business, the largest in our history. Avian truly represents who we are today as a specialty formulator of sustainable solutions, and it has served as a galvanizing force in bringing together two world leaders who are truly better together. We finished the year a little better than expected with adjusted EPS of 58 cents for the quarter versus our prior guidance of 54 cents. Many themes from our prior quarter discussions carried forward as we have been able to overcome unprecedented inflation, supply chain disruptions, and workforce shortages to deliver bottom line growth. From a demand perspective, we did see a decline in transportation, primarily in Europe, as well as a decline in sales of outdoor high-performance applications, which we expected. And Jamie will speak to that in a moment when we discuss segment performance and our outlook. For the full year, adjusted EPS was $3.05, an all-time record, and a 58% increase over 2020. We achieved this with sales of $4.8 billion and adjusted operating income of $429 million. Each of our three segments contributed to our results this year with strong double-digit growth across the board. Specialty engineering materials grew operating income 40%, driven by high demand for our composites and other specialty solutions, serving the consumer and healthcare markets. Color additives and inks grew revenue by 18%, and operating income by 34%, Including $54 million in synergies from the Clariant Color integration, the segment expanded operating income to over $300 million for the first time. Distribution achieved significant revenue growth of 47% and operating income expansion of 33%, also to reach record-level performance this year. Notably, healthcare continues to be a significant driver for us and now represents 26% of distribution sales. Our differentiated performance is the culmination of a multi-year strategy to become a truly global specialty formulator. The bridge on slide 7 shows the key drivers of revenue growth and highlights the relative margin contribution of each. You can also see that like many companies, we have experienced significant wage inflation over time to serve our customers and experienced increased costs associated with supply chain disruptions. But as you will see on slide eight, we have more than covered these costs with associated pricing. We are a formulator, and what stands out for me this year about our performance is our ability to execute. And the simplicity of this slide makes everything look easy, but it certainly isn't. The magnitude of these cost increases have been substantial, and so has our efforts to overcome and deliver despite them. And this required constant dedication and collaboration among our entire workforce suppliers, and customers. Our global footprint, flexibility in our operations, and dedicated employees have been a difference maker as we led through these unprecedented times. We have turned these challenges into opportunities as our teams work relentlessly throughout the year to deliver for all our stakeholders. And I want to thank them for their efforts to deliver a record year. Over the years, we have been strategic in how we position our portfolio both in terms of the types of products we create as well as where we sell them. We have focused on specialty applications with advanced performance characteristics and shifted toward end markets that have high growth potential. Not only has this been an important contributor to our recent sales growth, but the benefits of improved mix and clarient synergy capture have meaningfully increased margins despite inflationary pressures. The Clariant color acquisition has been a tremendous success. The business grew our presence in our focused end markets of healthcare, packaging, and consumer, which not only fared well during the pandemic, but also served as key growth areas for us. When we announced the Clariant deal in December of 2019, we were acquiring a little over $130 million of EBITDA. In 2021, which was our first full year of ownership, Clarity and related synergy capture contributed $205 million of EBITDA, a 54% increase. Margins have expanded 400 basis points. And when you look at the purchase price multiple, you can see tremendous return on investment with more to come. The integration has exceeded our high expectations with respect to how well our two teams have come together. This has enabled us to accelerate the pace and level of synergy capture. And for those of you who participated at our investor day in December, we provided an update to our anticipated cost synergies, which we now expect to approximate $85 million. And these are just the cost synergies. We are even more excited about the revenue synergies yet to come as we continue to integrate our commercial teams. The shared passion for solving our customers' toughest material issues material science challenges is becoming more and more apparent every day. And this really is at the heart of what we mean when we say better together. These material challenges continue to evolve. And historically, the questions like how do I make my product stronger or lighter or both, or how do I advance shelf life with additives and improve shelf appeal with colorants remains. However, we now get one more question, which is always, how do we do these things while at the same time improving the sustainability of our products? For us, we have invested heavily in sustainable solutions, and it's been the fastest growing part of our business over the last five years. Lightweighting has been a huge contributor to that growth. And when we say that, oftentimes you think transportation, and that's true. However, lightweighting has also been very important in growing and a growing role in packaging. Eco-conscious materials have also grown tremendously as we help our customers use more recycled content and or improve the recyclability of their products. There are eight primary ways utilizing science, design, and formulation that we help customers with their sustainability goals. And in 2021, our sustainable solutions portfolio grew 16% over the prior year. and now account for nearly 30% of color and engineering materials segment sales. We would not be able to share this kind of success with you if it was not for our culture. As a leadership team, we firmly believe that culture is everything. It's the driving force behind our record financial performance, and I'm proud to report that we received our third consecutive Great Place to Work certification in December. Our global associates have built a truly exceptional culture here at Avian. It's one that is inclusive and increasingly diverse. It's innovative and bold, as our people bring ideas to life for a greater good and a more circular economy. It's also a culture that loves to take care of our customers and each other, which is exactly what we have done this year. I'll have some closing comments in a moment, but now Jamie will go into more detail related to our fourth quarter results and provide our initial outlook for 2022.