Ingevity Corp Outlook for Pine Chemicals and Rosin Industry Dynamics Webinar Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: John Patrick McNulty - BMO Capital Markets Equity Research - Analyst : So it looks like you kind of have a lot of puts and takes when it comes to the outlook for margins over the next few years where you've got some kind of higher value applications you're looking at, but you also see some inflation potential around some of the raw materials. So I guess when you kind of parse through all of it, I guess, how should we be thinking about the margin trajectory, say, over the next 2 to 3 years for the InSpec business? Michael P. Smith - Ingevity Corporation - Executive VP and President of Performance Chemicals, Strategy & Business Development So thanks, John. And look, on today's call, we're not going to try to get into a lot of detail with future margin projections. As we've noted and as often happens, we have expectations on some inflationary cost pressure in some areas, and we're going to continue to work on enhancing with high-margin products. And importantly, as we've had really good success this year, and we continue to drive that forward for the rest of the year and into next year on pricing for our products. So we're really pleased. You've seen the type of progress we've made in Performance Chemicals over the last 5 years. And we're focused on both driving the top line where we can, but making sure that we've got good sustainable Specialty Chemical markets. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 25, 2021 / 2:00PM, NGVT.N - Ingevity Corp Outlook for Pine Chemicals and Rosin Industry Dynamics Webinar

Question: John Patrick McNulty - BMO Capital Markets Equity Research - Analyst : Got it. Fair enough. And then maybe when you look at some of the growth opportunities, it seems like a lot of these can be done with almost no capital just given kind of the footprint that you've got or no incremental capital. Is that a fair assumption like -- or are we missing something on that? Michael P. Smith - Ingevity Corporation - Executive VP and President of Performance Chemicals, Strategy & Business Development John, I think that that's broadly accurate. We do intend to have some modest additional capital as we, let's say, retrofit to some degree our biorefineries so we can efficiently and effectively use larger quantities of alternative fatty, other inputs for alternative fatty acids and derivatives. But you can think about that in terms of piping and tanks as opposed to distillation columns and significant investments in reactors.

Question: Paretosh Misra - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : I believe you said that there's a preference for TOFA in biofuel in Europe. Can you elaborate on that a little bit, please? Do they allow in Europe a higher percentage of TOFA as feedstock? And does it also show up in higher domestic pricing of TOFA in Europe versus, say, other geographies? Michael P. Smith - Ingevity Corporation - Executive VP and President of Performance Chemicals, Strategy & Business Development Okay. Let me unpack that question just a little bit. First, so there's no misunderstanding. We wanted to reference TOFA specifically a little bit in contrast to CTO because we don't want people to be thinking that it's essentially CTO going into biofuels. That's not what's happening. It's in that product sort of line, they're primarily looking for the TOFA in order to be put into the biofuel pool, if you will. Within that biofuel pool, there are a lot of different products. There are other vegetable-based products, there is unused cooking oil that gets used. So there's a lot of different bio-based products. TOFA just being one of them. And frankly, within it, TOFA is relatively small compared to a lot of the other biofuel inputs that get used in Europe. So hopefully, that provides a little bit of context and no confusion versus some of the script comments.

Question: Paretosh Misra - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Yes, yes, very, very clear, very comprehensive. And then just as a follow-up on that, when you said in Europe, the pricing is not as attractive for value in use versus some others. I guess you're referring to the other like the pavement and other derivatives that you're already doing, right?

Question: Paretosh Misra - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Got it. Very good, very clear. And maybe just as a last one You talked about the supply/demand on the TOFA side. Can you just talk a bit more on the supply side as to what you see in the years ahead? Like are you aware of any other competitor building a biorefinery or are spending money for some big expansion? Michael P. Smith - Ingevity Corporation - Executive VP and President of Performance Chemicals, Strategy & Business Development Well, yes, we monitor and understand that there have been announcements. There's been an announcement here in North America of an intention for someone to build a refinery that may start up in 2023. So we are making sure we keep a close eye on that. That refinery as has been described in the press is one that is just focused on sort of TOR and TOFA, not derivatives at this point, but we're obviously keeping an eye on that. The size of it is certainly not going to be anywhere near the kind of plant network that we have, but we want to make sure that we are really well positioned. Our intention is to maintain our market share and drive our growth and keep a really valuable business in any competitive environment.