Ingevity Corp Q3 2020 Earnings Call Transcript

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

Question: Peter Kirk Lukas - CJS Securities, Inc. - Analyst : It's Pete Lukas for John. Just one on the pavement side. How dependent are you on federal stimulus shoring up state budgets in terms of your outlook for 2021 there? Michael P. Smith - Ingevity Corporation - Executive VP and President of Performance Chemicals, Strategy & Business Development Well, federal spending, clearly very important, and there has been a 1-year continuation on that. And like a lot of areas of the federal government, there's certainly some uncertainty in terms of the priorities and execution as we get into next year. But we're very optimistic that with all of the focus on infrastructure projects across the board of federal government that they're going to get behind further increasing infrastructure spending. And I think that in time, that should be -- continue to be a favorable tailwind for our Pavement Technology business.

Question: Peter Kirk Lukas - CJS Securities, Inc. - Analyst : Great. Very helpful. And congrats again on a great quarter.

Question: John Patrick McNulty - BMO Capital Markets Equity Research - Analyst : So you highlighted that the strong cash flows that you guys have really generated kind of does put you in a position to actually kind of refocus capital maybe away from debt reduction and into either M&A or buybacks again. I guess can you speak to if you have a preference at this point? I REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2020 / 2:00PM, NGVT.N - Q3 2020 Ingevity Corp Earnings Call mean obviously, your stock has been under a lot of pressure. Yet at the same time, there does seem to be a focus by the market on growth, and growth can come inorganically as well as organically. So can you speak to kind of how you're thinking about that capital deployment? And also, can you give us a little bit of color as to what you see in terms of the M&A pipeline that you may have been developing?

Question: John Patrick McNulty - BMO Capital Markets Equity Research - Analyst : Got it. Fair enough. And then I guess on one of the trends that you're looking for in terms of growth opportunities, one of the comments you put down was on the natural gas containment side. Is that tied into some of that -- some of the -- I believe you were running a couple of pilot programs for fleets and that type of thing around using natural gas for vehicles. Is that kind of what you're getting at? And can you give us an update as to how some of those pilot programs are working and if we can see this actually start to really kind of ring the cash register as we look out over the next 12 months or so?

Question: John Patrick McNulty - BMO Capital Markets Equity Research - Analyst : Got it. And if I can maybe ask one, just last question. In terms of some of the big focus from an ESG perspective, from the regulators, it does seem like things have kind of accelerated at a pretty quick clip over the last 6 to 9 months. And a lot of stimulus is tied to more green initiatives, things like that. I guess when you look at the opportunity for new gasoline vapor emission standards, do you have any greater confidence in terms of potential new standards coming in, whether it's in Europe or China? Or is it too early to tell at this point? Can you speak to that for us? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2020 / 2:00PM, NGVT.N - Q3 2020 Ingevity Corp Earnings Call

Question: Paretosh Misra - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Can you just remind us as to where we are in terms of U.S. Tier 3 adoption? Is there any incremental that's left for next year? And then also, what's the latest that you are hearing on new regulations in Brazil?

Question: Paretosh Misra - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Got it. Okay. And then just a quick follow-up on this outage at Covington. Can you remind me what exactly you make there? And while that factory is down, are you -- can you make those volumes elsewhere? Or you just built inventories in anticipation?

Question: Paretosh Misra - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Understood. And last one for me. How are you affected by exchange rate? Is weak dollar a good thing for you?

Question: Jonathan Luft - Eagle Capital Management - Analyst : And first of all, John, congrats on the new role. I think the Board made a great decision naming you CEO.

Question: Jonathan Luft - Eagle Capital Management - Analyst : So my first question, maybe if you could just talk a little bit about the competitive environment in Performance Materials. Are you seeing anyone new or any new emerging competitors either in the U.S. or, more importantly, in China?

Question: Jonathan Luft - Eagle Capital Management - Analyst : Okay. Great. And John, I was hoping you could talk a little bit more about the ability for Ingevity to use sustainability as a competitive advantage. Is it something -- what specifically are you trying to address there? And is that something that customers are coming to you? Or is this your own initiative? How does this benefit -- yes.

Question: Jonathan Luft - Eagle Capital Management - Analyst : Perfect. Seems like a nice tailwind.