Ingevity Raises Outlook as Margins Expand Despite Sales Decline
The specialty-chemicals maker projected as much as $245 million in 2026 free cash flow, excluding a litigation settlement.
Ingevity (NGVT), the specialty chemicals maker, raised its full-year outlook after second-quarter adjusted EBITDA from continuing operations increased 14% to $115.0 million. Its adjusted EBITDA margin widened 610 basis points to 36.6%, as pricing, product mix, volumes and improved asset utilization offset the effects of a divestiture.
Net sales fell 5% to $314.1 million, primarily because Ingevity sold its Road Markings business on April 15. Sales rose 5% excluding that operation, showing growth in the remaining portfolio despite the reported decline. Gross profit increased to $139.0 million from $127.8 million, lifting gross margin about 570 basis points to 44.3%.
Adjusted earnings from continuing operations increased to $61.5 million, or $1.74 a diluted share, from $44.9 million, or $1.22 a share, a year earlier. GAAP net income from continuing operations was $39.8 million, or $1.13 a diluted share, compared with a $141.4 million loss that included a $183.8 million goodwill impairment. The latest quarter included a $32.1 million noncash impairment in Advanced Polymer Technologies and $2.9 million of portfolio-realignment costs, while restructuring charges declined.
Performance Materials remained the largest earnings contributor, with sales rising 4% to $160.6 million and segment EBITDA increasing 6% to $86.1 million. Higher volumes, annual pricing actions and a favorable mix tied to consumer demand shifting from battery-electric vehicles toward hybrids helped lift its margin to 53.6%. Advanced Polymer Technologies sales rose 14% to $49.3 million, while EBITDA climbed to $11.2 million from $2.0 million as pricing, derivative-product mix and plant utilization improved.
Pavement Technologies sales declined 22% to $104.2 million following the Road Markings sale, though sales increased 3% excluding the divested business. Higher pricing, volumes and North American demand outweighed weakness in China and South America. Segment EBITDA fell to $25.4 million after the sale removed $6.0 million of prior-year EBITDA, but margin expanded three percentage points to 24.4%. The divestiture generated about $63 million in net proceeds and an $8.6 million quarterly gain, extending a portfolio shift that began with January's sale of the CTO refinery and most Industrial Specialties operations.
Operating cash flow was negative $13.8 million, compared with positive $79.0 million a year earlier, principally because of a $113.2 million litigation-settlement payment. Excluding the settlement, Ingevity reported $89.1 million of free cash flow, up $22.3 million. Net leverage improved to 2.5 times, reaching the upper end of the company's long-term target range, while quarterly stock repurchases totaled about $35 million.
Ingevity now expects 2026 net sales of $1.05 billion to $1.15 billion, adjusted EBITDA of $380 million to $400 million and diluted adjusted earnings of $5.00 to $5.45 a share. It projects free cash flow of $220 million to $245 million excluding the litigation settlement. The company also disclosed a municipal water-treatment contract for PFAS filtration, providing an early commercial use for its carbon technology beyond its established automotive markets.