Ingevity Corp Webinar Series - Industrial Specialties / Oilfield Technologies 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 I guess the first one would be on the oilfield side. So can you speak to who are your top, whatever, 2 or 3 biggest competitors? And I guess, presumably, if they're some of the larger kind of giants out there in the oilfield services area, how do you compete against them, given their scale versus your scale? How should we think about that? Michael P. Smith - Ingevity Corporation - Executive VP and President of Performance Chemicals, Strategy & Business Development Yes. Thanks, John. So let me first make a couple of comments, and then I'll turn it over to Nick. But as Nick referenced, if you're talking about the real giants in the oilfield service industry, we do not compete with them. They are our customers and they are our products, and they rely on us to provide them with the products and the technology that we need. And as Nick talked about, we work with them very closely and collaboratively to make sure that they have the derivative products that will either hit their oil-based mud formulations for whatever formation they're trying to work in or a multifunctional product that has corrosion benefits. And so, Nick, if you want to further take -- make any comments on competition or further add to the comment on our customer base.

Question: John Patrick McNulty - BMO Capital Markets Equity Research - Analyst : Okay. Fair enough. And then I guess on the -- yes, go ahead... Michael P. Smith - Ingevity Corporation - Executive VP and President of Performance Chemicals, Strategy & Business Development John, I thought it may be worth mentioning one other thing that sometimes can be confusing, and I know even Rich mentioned the small proportion in some regards that TOFA has in the overall broader oil and fats market. When it comes to oilfield applications, it's very clear that TOFA has a very specific technical advantages to some of those other fats and oils. So when it comes to competing in oilfield for fatty acid and fatty acid derivatives, TOFA products are the ones that customers consistently go to in order to get the functionality that they need.

Question: John Patrick McNulty - BMO Capital Markets Equity Research - Analyst : Yes. No, that definitely helps. And can you speak to the pricing environment that you're seeing? Because I think that would certainly be indicative of how either resilient or, in some cases, not so resilient that the business may be in kind of a recessionary period? Michael P. Smith - Ingevity Corporation - Executive VP and President of Performance Chemicals, Strategy & Business Development Yes. So the rosin market is still tough. We've had a lot of, I'd say, stability in rosin, not from pricing. We don't think it's at a level that it should be. It's well below the kind of pricing level from about 4 years ago. Not to a point, maybe, I don't know, 18 months ago, 24 months ago, where things were pretty stable, but not where we believe that those price -- the prices should be. We have, as Rich said, seen since the beginning of this year, an increase in the pricing of Chinese gum rosin. It had fallen, let's see, well over 30% in pricing compared to 2 or 3 years ago. But since January, the Chinese gum market pricing has improved by about 20% off a very low base. We have yet to see that, that increase in Chinese gum rosin really manifest itself to our ability to increase price in the gum rosin market. And I think it's really a combination of the demand side as much as anything. We've always had some overhanging pressure from Chinese gum. We're pleased to see that, that is kind of relieving itself. But the demand weakness that we're seeing in some of the key markets and, of course, with the situation that has so greatly impacted so many industries with the COVID epidemic really has hurt the overall demand. So the pricing environment on the rosin side is still tough. Rich, I don't know if you'd like to add anything to those comments.

Question: John Patrick McNulty - BMO Capital Markets Equity Research - Analyst : Sure. And actually, I just had one last one. Just in terms of just a higher level for this portion of -- or these 2 portions of the business. Is there a way to think about the vitality index? Or what percent of your revenues is kind of tied to new products that you've come up within, in the last 5 years? It looks like there's a decent focus on innovation and kind of consistently pushing into derivatives. Is there a way to think about how that's playing out and maybe where it was, say, 3 or 5 years ago? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.