Ingevity Corporation Common Stock

Hello and welcome to the Ingevity fourth quarter and full year 2023 earnings call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star followed by one on your telephone keypad. And I hand it over to your host, John Nyparva, to begin. Please go ahead.

Thank you, Alex. Good morning and welcome to Ingevity's fourth quarter and full year 2023 earnings call. Early this morning, we posted a presentation on our investor site that you can use to follow today's discussion. It can be found on ir.engevity.com under events and presentations. Also, throughout this call, we may refer to non-GAAP financial measures, which are intended to supplement, not substitute, for comparable GAAP measures. Definitions of these non-GAAP financial measures and reconciliations to comparable GAAP measures are included in our earnings release. We may also make forward-looking statements regarding future events and future financial performance for the company during this call. And we caution you that these statements are just projections and actual results or events may differ materially from those projections as further described in our earnings release. Our agenda is on slide three. Our speakers today are John Fortson, our President and CEO, and Mary Hall, our CFO. Our business leads, Ed Woodcock, President of Performance Materials, Rich White, President of Performance Chemicals, and Steve Hume, President of Advanced Polymer Technologies, are available for questions and comments. John will start us off with some highlights for the year. Mary will follow with a review of our consolidated financial performance and the business segment results for the fourth quarter and full year. John will then provide closing comments and our 2024 guidance. Our prepared comments will focus on full year results. but we are happy to take questions on the quarter during the Q&A portion of the call. With that, over to you, John.

Thanks, John, and hello, everyone. On slide four, you can see what are highlights of Ingevity's 2023. In a challenging year, our most profitable businesses performed incredibly well. As you all know, the broader industrial markets experienced a major downturn last year, and we were not immune. We have also been grappling with unprecedented CTO raw inflation, in our performance chemical segment. Despite all that, we accomplished a lot last year. Performance materials posted their highest sales in EBITDA ever. Global auto production is getting closer to pre-2020 levels, with a good part of that growth a result of China and other Asian countries exporting more vehicles. Another growth driver is the increased production of hybrid automobiles and more fuel-efficient internal combustion engines. Consumers around the world are showing an increased preference for these options. Even though the engines in these vehicles are smaller than traditional ICE engines, we get similar value for our content in hybrids and more fuel-efficient ICE engines as we do in traditional ICE engines because of the value our technology brings to the evaporative emissions solution. Advanced polymer technologies, which we reported as its own segment in 2023, was impacted by the industrial slowdown. Their traditional end markets, what we refer to as old economy when speaking about APT, are industrial in nature and volume is down across the board. But Steve's focus is on new economy markets, which are end markets that present exciting growth opportunities where the sustainable nature of CapriLactone technology has added value. This includes markets such as high-tech paint protective film on autos, where Kappa provides durability, And food packaging, where CAPA is used to improve flexibility and, more importantly, improve the biodegradability of the package in multiple environments. That biodegradable quality is also being recognized by more and more apparel companies as a solution for sustainable fabrics to help address landfill issues and microplastics that come from synthetic fibers. While these markets are small today, they are growing very rapidly and will play a big part of the future of this business. Importantly, the team revamped their cost structure in a way that we believe will allow them to sustainably maintain EBITDA margins in the mid 20% over time. Pavement Technologies also had a terrific year with record sales. Since we have now fully integrated the road markings business we acquired in 2022, we have renamed the pavement business line to Road Technologies. This name change better describes our expanded product reach. Rogue Technologies benefited from increased pricing and sales not only in the U.S., but in other regions around the globe. We are excited about what our integrated offering can provide to customers. With the backdrop of 2023 of a global industrial demand slowdown and unprecedented CTO costs, the industrial specialties business had a tough 2023. As a result, we accelerated the repositioning of our performance chemical segment. which included the conversion of our Crosset, Arkansas plant to run 100% on non-CTO oleo feedstocks and announced the closure of our Derrida, Louisiana performance chemical site. As an update, the Derrida refinery ceased operations on February 4th. With this refinery shutdown and the conversion of our Crosset site, we have taken approximately 300,000 tons of CTO refining capacity offline. which represents roughly 30% of total U.S. refining capacity. We took these actions to focus our people and capital on higher growth, less cyclical in markets. In a few moments, I'll share our guidance for 2024. But to set the stage, we expect strong performance and performance materials and road technologies within performance chemicals. As we mentioned last quarter, we will sell excess CTO at a loss. and we will be presenting our results and guidance in a way that reflects our core operations while giving transparency to the excess CTO impact. We took decisive actions in 2023 and believe the company will begin to see the benefits this year. With that, I'll turn it over to Mary.