Avient Corporation

Good morning, ladies and gentlemen, and welcome to the Aviant Corporation's webcast to discuss companies' second quarter 2022 results. My name is Catherine, and I'll be your operator for today. At this time, I'll participate and listen on the 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 DeSalvo, Vice President, Treasurer, Investor Relations. Please proceed.

Thank you, Catherine, and good morning to everyone joining us on the call today. Before beginning, we'd like to remind you that statements made during this webcast may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements will give current expectations or forecasts of future events and are not guaranteed as a 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 that differ materially from those expressed in or implied by the forward-looking statements. Please refer to the investor presentation for this webcast for a number of factors that could cause actual results to differ. During the discussion today, the company used both GAAP and non-GAAP financial measures. Please refer to the presentation posted on the Avian website where the company describes the non-GAAP financial measures and provides a reconciliation for historical non-GAAP measures 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 Bice. We have another quarter of positive results to share today. We'll also provide some updates on our recent announcement to acquire the DSM Protective Materials business, which at times we'll refer to as Dyneema, as well as the status of the potential sale of the distribution business, both of which are progressing well. Bob will share more with you after Jamie covers our second quarter results.

Thanks, Joe, and good morning, everyone. Our second quarter performance delivered what was our highest level of sales, adjusted operating income, and adjusted EPS for our second quarter reporting period. Sales grew 5% to $1.3 billion against a backdrop of challenging circumstances. Demand conditions in Europe were impacted by the uncertainty created by the war in the Ukraine, and sales in Asia were negatively impacted by the extended lockdowns in China due to their zero COVID policy. Three of our plants in Shanghai were shut down for all of April and May, as were many of our customers. Despite these challenges, adjusted EPS grew 13% to $0.98 per share, exceeding our prior guidance of $0.92 per share. This was driven by better than expected demand in the Americas and our ability to stay ahead of inflation. From a segment perspective, Keller grew operating income 16%, excluding foreign exchange. This was driven by 25% growth in health care applications, a continued recovery in our screen printing ink business, and synergies from the integration of the clearant color business. Specialty engineered materials results were in line with expectations for the quarter. Recall that as we began the year, we acknowledged flowing demand for certain outdoor applications, and this remains true in quarter two. Primary difference between Q1 and Q2 is weaker sales in Europe. What is encouraging for the balance of the year is the uptick in demand we are seeing for composites for 5G and electrical infrastructure as well as growth in healthcare sales. The distribution business delivered another excellent quarter driven by demand for healthcare applications and expanding margins. As you know, the majority of the business is in North America, where demand trends have been very favorable. The next slide highlights our key growth drivers of sustainable solutions, healthcare, composites, and our presence in Asia and Latin America. The previously mentioned shutdowns in China obviously impacted the growth in Asia. In fact, Asia was down, but Latin America was up 15% as we were seeing solid demand in the Americas. The lockdowns also impacted our growth in sustainable solutions. Excluding the impact of those shutdowns, sustainable solutions increased 12% in the quarter. And lastly, we have split out the impact of outdoor high-performance solutions within the SEM segment, and you can see very good growth in the other composite applications I just referenced. The EBITDA bridge on the next slide really does three things. First, you can see that we continue to realize price more than offsetting inflation. Second, you can see the specific pockets of demand decline that most significantly impacted us in the quarter. Most notably, the lockdowns in Shanghai, loss of sales into Russia, and a broader transportation decline. Lastly, weaker foreign exchange, primarily the Euro, was a negative of $7 million for the quarter. To wrap up our comments on Q2 performance on slide eight, we bridge EPS year over year. Here you can see the EPS impact by segment, as well as the effect of weaker foreign currencies. We also highlight that while interest expense was lower, this was offset by a higher tax rate due to a higher percentage of income earned in the Americas. Truly great work by the team to achieve a record second quarter by navigating through challenging macroeconomic conditions. Before I turn the call over to Bob, we also announced in our press release and issued just today our most recent sustainability report. This year's report is our most comprehensive yet. It's also the most inclusive in terms of ESG metrics and data that we know are of growing interest to our investors and all of our stakeholders for that matter. It includes enhanced disclosures that align with current ESG frameworks and emphasizes our commitment to the UN Global Compact. In addition, it lays out the details of our sustainability strategy, which centers on people, products, planet, and, of course, performance. We have made specific investments in ESG initiatives that drive value for the business, Our efforts have been recognized by ESG rating firms as well as other research firms, placing us ahead of many companies in our space. With ISS, we are ranked in the top 10% on social and in the top 20% on environmental impacts as compared to our peer groups. Likewise, Sustainalytics now has us in the top 16%. We've also been rated in the top 5% of America's most responsible companies by Newsweek, essentially placing us among the best of the best. We are really proud of these ratings and accolades. It means we have a clean house and a really strong foundation to build upon. But what we're most excited about in terms of ESG and sustainability is that it truly drives growth for our company and positions us extremely well for the evolving road ahead. I highly encourage you to open our latest sustainability report. We believe it's a true indicator of where we are as a company and how sustainability will continue to create value into the future. I'll now turn the call over to Bob to provide details on our outlook for the year, as well as updates on Dyneema and distribution.