Ingevity Q2 2025 slides: Margins expand despite sales decline, guidance raised

Ingevity Corporation (NYSE:NGVT) reported its second quarter 2025 results on August 5, showcasing significant margin improvement despite revenue challenges. The specialty chemicals company highlighted strong cash flow generation and continued deleveraging progress while raising its full-year guidance.

Executive Summary

Ingevity delivered adjusted EBITDA of $110 million in Q2 2025, representing a margin of 30.1% - an improvement of 420 basis points year-over-year. This margin expansion came despite a 6.5% decline in net sales to $365.1 million. The company generated robust free cash flow of $67 million and reduced its net leverage ratio to 3.0x from 4.0x in less than a year.

"Our results demonstrate continued execution on our strategic priorities, with significant margin improvement across our business and strong cash flow generation," the company noted in its presentation.

The stock closed at $40.85 on August 4, having gained 1.11% ahead of the earnings release. Year-to-date, Ingevity shares have traded between $28.49 and $51.67.

As shown in the following consolidated financial performance summary:

Segment Performance

Performance across Ingevity’s three business segments varied considerably in the quarter, with the company’s flagship Performance Materials segment maintaining strong margins while Advanced Polymer Technologies struggled.

The Performance Materials segment, which primarily serves automotive applications, delivered a 50.1% EBITDA margin despite a slight sales decline of 2.1% to $153.9 million. Segment EBITDA decreased 6.2% to $77.1 million, with higher sales in North America offset by declines in Asia and Europe.

As illustrated in the Performance Materials results:

The Advanced Polymer Technologies segment faced significant challenges, with EBITDA plummeting 90.8% to just $0.9 million and margins collapsing from 20.5% to 2.1%. This dramatic decline was primarily attributed to an extended planned outage to install new boilers, which should enhance operational efficiency going forward. The segment also faced headwinds from weak industrial demand and tariff-related pressures.

The APT segment’s performance breakdown shows:

In contrast, the Performance Chemicals segment showed remarkable improvement, with EBITDA surging 244.1% to $32 million and margins expanding from 5.0% to 19.1%. This improvement came despite a 9.5% sales decline to $167.9 million, reflecting the successful execution of repositioning actions and the full consumption of high-cost CTO inventory before the end of the quarter.

The Performance Chemicals segment’s dramatic improvement is shown here:

Financial Position & Cash Flow

Ingevity continued to strengthen its balance sheet in Q2, reducing its net debt ratio to 3.0x from 4.0x in Q1 2024. The company’s trailing twelve-month adjusted EBITDA increased to $388 million from $348 million in the same period.

Free cash flow improved significantly to $67 million in Q2 2025, compared to negative $29 million in Q1 2024. This improvement reflects both stronger operational performance and disciplined capital management. Year-to-date, the company has allocated $22 million to debt reduction and $67 million to capital expenditures.

The following chart illustrates the company’s deleveraging progress and capital allocation:

Forward Guidance & Strategic Initiatives

Based on its strong first-half performance, Ingevity raised the low end of its full-year EBITDA guidance range and increased its free cash flow projection. The company now expects:

• Revenue: $1.25-1.4 billion
• Adjusted EBITDA: $390-415 million
• Capital Expenditures: $50-70 million
• Free Cash Flow: $230-260 million
• Net Debt Ratio: Below 2.8x by year-end

The company cited an improved outlook for North American auto production as a key factor in its updated guidance. Performance Materials is expected to maintain EBITDA margins above 50% for the full year, while Advanced Polymer Technologies is projected to deliver margins between 15-20% despite revenue declines in the mid-to-high single digits.

For Performance Chemicals, Ingevity expects full-year EBITDA margins in the high-single to low-double digits, with Road Technologies revenue growing at a low-single-digit rate.

The guidance summary is presented here:

The company also noted that the sale process for its Industrial Specialties business and North Charleston CTO refinery is progressing well, with an update expected soon. This divestiture aligns with Ingevity’s strategy to focus on higher-margin businesses and accelerate deleveraging.

Ingevity’s Q2 results show continued progress from Q1, when the company reported an EPS of $0.99 on revenue of $284 million. The sequential improvement in both revenue and profitability suggests the company’s strategic initiatives are gaining traction despite ongoing market challenges.

Full presentation:

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