管理層發言
Good morning, ladies and gentlemen, and welcome to Avient Corporation's webcast to discuss the company's second quarter 2026 results. My name is Michelle, and I will be your operator for today. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Patrick Davis from Avient's Investor Relations team. Please go ahead.
Thank you, and good morning to everyone joining us on the call today. Before we begin, we would like to remind you that statements made during this webcast may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements will give current expectations or forecasts of future events and are not guarantees of future performance. They're based on management's expectation and involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. We encourage you to review our most recent reports, including our 10-K or any applicable amendments for the complete discussion of these factors and other risks that may affect our future results. During the discussion today, the company will use both GAAP and non-GAAP financial measures. Please refer to the presentation posted in the Investor Relations section of the Avient website, where the company describes the non-GAAP measures and provides a reconciliation for historical non-GAAP financial measures to their most directly comparable GAAP financial measures. A replay of this call will be available on our website. Information to access the replay is listed in today's press release, which is available at avient.com in the Investor Relations section. On the call today is our Chairman, President and Chief Executive Officer, Dr. Ashish Khandpur; and Joe Di Salvo, Senior Vice President, Chief Financial Officer. I will now hand the call over to Ashish to begin.
Thank you, Patrick, and good morning, everyone. I want to begin by acknowledging the hard work of the entire Avient team and thank them for delivering a strong quarter, which was a story of successful execution, managing inflation and navigating supply chain disruptions. Our team continues to perform with discipline, poise and determination under a very dynamic and volatile environment. In the second quarter, our team delivered $0.96 of adjusted EPS, $0.09 ahead of expectations, driven by better-than-expected volume growth. Organic sales grew 4.3% with double-digit increase in adjusted EBITDA year-over-year. By remaining close to our customers, we delivered profitable growth across the portfolio. Market share gains, new product innovations and pricing actions contributed to positive organic sales, including volume growth in both business segments. Asia was a particular standout, growing organic sales 18% over the prior year quarter, driven by secular tailwinds in electronics and high-performance computing as well as new business gains in functional additives. Both business segments showed double-digit organic growth in Asia. Operating leverage from revenue growth, combined with our continued focus on company-wide productivity initiatives, drove Q2 adjusted EBITDA margins to a record 18.3%, an expansion of 110 basis points year-over-year. These results contributed to 20% adjusted EPS growth year-over-year, validating the success of our strategy while also demonstrating the consistency of our team's operational execution. Strong cash flow generation in the quarter enabled debt paydown of $50 million as we continue to prioritize strengthening our balance sheet. Our first half results shown on the right-hand side of the slide, reflect the compounding power of our business model, where 1.2% organic sales growth and 70 basis points of margin expansion generated 4.7% adjusted EBITDA growth and 9.1% adjusted EPS growth, excluding the impact of foreign currency translation. The underlying demand environment continues to vary by end market, but our strategy and execution are enabling us to outperform those conditions in many areas. Let me walk through the trends we are seeing across our businesses. Packaging, our largest end market, representing 23% of company sales, grew double digits in the second quarter. Along with solid pricing execution, we continue to see growth from innovation and new business wins. We are seeing strong customer interest in our non-PFAS polymer processing aids for personal health and beauty and food packaging applications as well as continued growth in electronics. Given the strength of our project pipeline, we expect our packaging business to keep the growth momentum in the second half of the year. In consumer, demand trends are stabilizing. Sales grew mid-single digits in the second quarter, driven by the U.S. and Asia and for both consumer discretionary and staples submarkets. At the same time, our global key account prioritization and focus on winning business with large local Asia customers continue to create share gains and business growth for us. We expect growth to continue in the second half, supported by improving market demand, ongoing share gains and favorable comparisons as the year progresses. As we mentioned last quarter, demand in Defense remains healthy, supported by a strong project pipeline spanning both the United States and Europe. After a slower start in the year in the first quarter, activity picked up in the second quarter, where our defense business grew even against a strong comparison of 19% growth in the second quarter of 2025. We expect this business to grow mid- to high-single digits for the year. Building and construction continued its strong performance in the second quarter with double-digit growth driven by share wins and new business development. This business is benefiting from data center and broader infrastructure investment trends as well as new application development by our teams for composite lightweighting for residential markets. We expect the strong momentum to continue in the second half of the year. Our healthcare business grew double digits in each of the prior 2 years. As we highlighted in our last earnings call, we are seeing some rebalancing of inventory levels by our customers, especially for drug delivery and remote monitoring devices. While this dynamic weighed on first half results, the underlying demand and secular trends supporting growth remain intact. Our teams continue to build a strong project pipeline, working closely with leading pharmaceutical and medical device and equipment companies. We expect growth to return in the second half, led by demand strength, especially in the medical devices and equipment applications. Industrial also improved in the second quarter, returning to modest growth led by strength in Asia. With more favorable comparisons ahead, we expect that growth momentum to continue through the balance of the year. Transportation demand remains soft, reflecting lower vehicle production rates and weaker demand in marine applications. We do not expect this trend to change in the third quarter or perhaps for the entire second half of the year. In energy and telecom, demand trends continue to improve, supporting our expectation for growth in second half of the year. Within telecom, we are seeing increasing activity tied to high-performance computing and electronic applications. Our energy business is expected to benefit from electrical infrastructure projects in the United States. We expect both energy and telecom to grow high single digits to double digits in the third quarter. Overall, we are encouraged by the improving demand trends across much of our portfolio. Combined with continued execution of our strategy through focus on customers, innovation, commercial excellence and targeted share wins, these trends support our confidence in our updated full-year guidance. Importantly, much of our progress in first half was driven by factors within our control rather than being dependent on a broader macro recovery. That focus on execution has enabled us to deliver consistent improvements across the business despite a volatile operating environment. As we update our outlook for the year, we also think it is important to step back and look at the broader picture since we adopted our new strategy beginning in early 2024. This slide highlights the financial outcomes our strategy has delivered over the past 3 years and the progress we have made in building a stronger, more resilient business at Avient. We have systematically expanded margins, grown earnings, generated strong cash flow and strengthened our balance sheet each year, all while continuing to invest in innovation and our prioritized growth vectors. These results demonstrate the effectiveness of our strategy, the compounding power of our business model and our ability to drive operational performance through actions within our control even amid volatile and uncertain market conditions. A good example is Europe, where we have been executing a focused strategy to improve profitability by streamlining structure, reducing complexity, driving productivity and operational discipline and executing portfolio actions. As a result, EMEA adjusted EBITDA margins are expected to improve by more than 400 basis points from 2023 to 2026, reaching more than 18% with systematic improvement each year along the way. This brings the region's margins in line with the broader portfolio and demonstrates our ability to create value even in more challenging demand environments. Importantly, these results are not driven by any single initiative. They reflect the combined impact of customer focus, innovation, portfolio management and targeted share gains with key accounts while collaborating across our 2 business segments to represent one Avient to our customers. Innovation remains a critical component of our growth strategy, and we believe there remains substantial opportunity ahead as our commercialization and innovation capabilities continue to mature. The next slide highlights how we are leveraging innovation and customer collaboration to capture attractive growth opportunities in high-value applications that intersect with important secular trends across our prioritized markets. We recently launched a new range of dielectric materials under our Preperm portfolio, specifically for humanoid robots and intelligent driving vehicles. Robots and autonomous cars are increasingly reliant on their radar systems to detect and respond quickly to their surroundings, other cars, pedestrians and objects. Traditionally, radar housings or radomes have relied on glass-fiber-reinforced materials. However, these materials distort signals at higher frequencies, typical of these new and emerging applications and are susceptible to warpage during manufacturing, resulting in lower yields and higher production costs. Preperm materials are designed to offer extremely low loss or signal distortion in higher electromagnetic frequencies and are preferred by robot and car radar manufacturers for enabling cleaner signal transmission at higher rates and low latency delays. In addition to meeting and exceeding customer requirements on performance, Preperm materials also provide easier manufacturability with greater impact resistance, low warpage and laser assembly compatibility. We are currently developing radome solutions for various humanoid robot and autonomous vehicle radar manufacturers, customizing properties to best fit their applications and easily adapting to their existing manufacturing processes. We continue to expand this materials platform for a variety of applications and manufacturing processes supporting this fast-growing area. Now I would like to turn it over to Joe to cover our second quarter financial results and outlook.
Thank you, Ashish. The innovation example you just highlighted reflects how we are translating our capabilities into commercial wins for value creation across the portfolio. With that context, let me walk through our second quarter segment results. Color, Additives and Inks delivered a strong quarter, generating 5% organic sales growth and 9% adjusted EBITDA growth, excluding the impact of foreign currency translation. Through innovation and targeted new business wins, we continue to expand our position with existing customers while capturing attractive new growth opportunities. The team also delivered excellent commercial and operational execution, remaining highly responsive to customer needs while proactively managing inflationary pressures and supply chain challenges. As a result, the combination of volume-driven revenue growth, favorable mix, pricing execution and ongoing productivity initiatives generated meaningful operating leverage, expanding adjusted EBITDA margin 80 basis points to 21.7% and segment adjusted EBITDA of $125 million. Specialty Engineered Materials delivered 3% organic sales growth in the quarter, driven by continued strength in high-performance computing, electronics and infrastructure-related applications, all of which are benefiting from attractive secular growth trends. We also saw double-digit growth in consumer sales during the quarter, driven by stabilizing demand and new business wins with global OEMs in personal care and electronics. Defense also remained a contributor to growth, particularly in the U.S., where project activity improved following delays associated with the government shutdown earlier this year. The combination of growth in these high-value applications contributing to favorable mix and productivity initiatives resulted in adjusted EBITDA of $76 million, an increase of 20% compared to the prior year. Margin expansion of 310 basis points also benefited from lapping of approximately $3 million of planned maintenance expense incurred in the second quarter of 2025. While that maintenance expense provided a meaningful benefit to the year-over-year margin comparison, underlying profitability trends remain healthy, and we expect continued margin expansion in the second half. Turning to regional performance. I believe that the first to second quarter sequential trends provide the best indication of current business momentum. As many of you know, the first and second quarters are typically fairly comparable from a seasonal demand perspective. Against this backdrop, we delivered 8% sequential organic revenue growth globally. While pricing actions contributed to this performance, what is particularly encouraging is the growth in both Asia and United States exceeded the impact of pricing, indicating improving underlying demand and continued market share gains. Asia grew 20% sequentially, while the United States and Canada increased 7% sequentially, driven by strength in both the CAI and SEM business segments. Europe and Latin America also delivered positive sequential growth of 3% and 12%, respectively. With that as context, let me turn to our updated financial guidance for 2026. We are raising our full year guidance of adjusted EBITDA, EPS and free cash flow. We now expect adjusted EBITDA to be in the range of $575 million to $603 million, adjusted EPS to be in the range of $3.10 to $3.25 per share and free cash flow to be in the range of $210 million to $230 million. The updated outlook reflects our first half performance and the momentum we are carrying forward into the second half of the year. While our outlook incorporates continued macroeconomic uncertainty, including inflation and geopolitical developments, we remain confident in our ability to deliver within the guidance range based on our team's execution, customer engagement and current business momentum. We also updated our capital expenditure outlook to a range of $120 million to $130 million compared to our prior expectation of $140 million. This change primarily reflects the timing of certain capital projects and does not change our commitment to investing in our prioritized growth portfolios. Even at the updated level, our capital expenditures are expected to be above the $107 million invested in 2025, driven by strategic growth investments. In addition, our strong cash flow generation continues to support balance sheet improvement. During the second quarter, we repaid $50 million of debt, bringing our total debt reduction over the last 12 months to $200 million. Looking ahead, for the full year of 2026, we expect to repay a total of $100 million to $150 million of debt, which is inclusive of the $50 million paid in the second quarter, supporting our expectation for net leverage to exit the year in the range of 2.2 to 2.4x. Lastly, for the third quarter, we expect adjusted EPS of approximately $0.80 per share, representing growth of 14% versus the prior year quarter. With that, we will now move to the Q&A portion of today's call.
分析師問答
And our first question will come from David Begleiter with Deutsche Bank.
This is Emily Fusco on for Dave. Maybe just if you could, of the organic growth, how much was volume versus price and just kind of give some more color by segment.
Yes. So Emily, the growth was 4.3% organic growth total and about one-quarter of that was volume and three-quarters was price. As we go from Q2 to Q4, that ratio of volume to price flips to almost 70% volume and 30% price in Q4, with Q3 somewhere in between. We are seeing good volume growth coming through. And as we said earlier in our first quarter earnings call, we will be net price benefit every quarter, and that continues to be the case on the price side.
Got it. Okay. And on pricing, once raw materials come down or maybe return somewhere near pre-conflict level, how much of that price do you expect to retain?
Our teams have shown that we can keep price longer and retain it. This happened after the COVID situation. There are always cases where pricing plays a role in business negotiation, but we don't expect any material amount of price to go back, and we are confident we can maintain it. We do see uncertainty and some raw materials are still moving, so things haven't fully stabilized, and our customers understand that. We have high confidence we can keep the price. We work with our customers not to take any extra price, but we also want to make sure we are able to pass on any inflation we are seeing through and hopefully do a little better than that.
And our next question is going to come from Frank Mitsch with Fermium Research.
Nice results. Ashish, given the order—the magnitude of the upside that you posted here in the second quarter, a lot obviously went right since we spoke on May 7. I was wondering if you could let us know what the two or three biggest surprises that led to that big upside for the second quarter were.
Yes, Frank, I think the biggest piece was the volume growth. If you remember, there was a question in our earnings call about Q2 volumes, and we had been projecting between 1% to 2% volume negative in the quarter, and that turned out to be more like plus 1% positive, more or less. So that was the biggest reason for the upside. Pricing came out exactly like our teams had projected. FX was a little bit favorable, but not as big as the volume contribution. So I would say those were the two biggest factors: volume and a bit of FX.
Okay. Great. And on the volume side, did you get any sense—or do you have any sense that the second quarter might have benefited from prebuy as pricing went up? Is there any sense that the demand you saw in the second quarter was underlying demand and no sense of any inventory building by your customers?
We don't think there was much prebuying; we're pretty confident of that. If anything, it would be very minuscule—within error bars, maybe $2 million or $3 million. At a big level, we are not seeing material prebuying. We just got our July results, and we started the quarter as we had projected and pretty strong. So we don't believe there was any prebuying at a level that would influence results going forward.
And the next question will come from Pete Osterland with Truist.
I just wanted to start with the margin growth in Engineered Materials. It looks like very high incrementals there, even excluding the maintenance impact you called out. So I was just wondering, could you give us a sense of how much of that margin growth was end market mix versus productivity versus pricing? And where do you see segment margins going from here?
Pete, thanks. The planned maintenance we talked about had about a 100 basis point benefit for the quarter. The remaining 200 basis points is split between price/mix favorability in the quarter as well as net productivity gains. As we get into the back half of the year, we've modeled the segment to expand margins around 100 basis points in the second half.
Very helpful. And then I just wanted to ask, considering what looks like some moderation of expectations in certain growth vectors like healthcare, but then you've got strong momentum in data center infrastructure. I'm just trying to figure out, overall, how is your end market mix expected to impact margins in the second half and then maybe into next year?
Maybe I'll take that. We expect margin growth for Avient for the total company and within each of the two business segments. In the first half, the company is up 70 basis points year-over-year. We expect to finish positive margin expansion in both business segments by year end. For some flavor: we grew organic sales in seven of the nine markets we play in during Q2, and we expect eight markets to grow in Q3. We are seeing momentum driven by volume, innovation and share wins. Our growth vectors outperformed last year and we expect them to continue to outperform this year, especially on the volume side as we win new business and enter new markets. We are bullish on margin expansion and top-line growth.
And our next question will come from Laurence Alexander with Jefferies.
It's Dan Rizzo on for Laurence. So ROIC was up to 9.6%, which is great. I thought a few years ago you gave a ROIC target. I don't know if that's true or not, but if it is, or even if it's not, is there a target of what you think you can get to if things keep going the way they're going?
Dan, we gave a target probably back in 2018, which was a much different portfolio at the time—prior to the Clariant acquisition and the Avient Protective Materials acquisition and the divestiture of two segments. We have not given a current target. We've been reporting on ROIC as we focus to continue to expand it and grow it. After the two acquisitions in 2020 and 2022, ROIC took a step backwards, and we've been focused on expanding it, which you can see in our consistent performance over the last few years.
Okay. Sorry, I just really dated myself. I didn't realize it was that long ago. But anyway, industrial was up, and you saw some volume improvement. I was wondering if that's more from new wins and just kind of more market penetration or if there's some restocking going on just after some softness. I guess my real question is how sustainable it is beyond maybe a quarter or two?
Industrial was largely a story out of Asia for Q2. As we go into Q3 and Q4, the comps become very favorable from last year, so the growth we're projecting is both comp-driven and volume-driven. In Asia we saw demand in 3D printing and newer trends such as smart glasses, where our teams are winning new business. We also expect Industrial to grow in the United States in the second half; EMEA remains challenged on the industrial side. For example, industrial was down 8% in Q3 of last year, so comps are favorable, which gives us confidence in year-over-year growth for that business.
And our next question is going to come from Mike Harrison with Seaport Research.
Ashish, you called out the non-PFAS polymer processing aids as an important innovation in your packaging business. It sounds like you're getting some more commercial traction there. I'm just curious what portion of your customers are looking to move in this direction to remove PFAS? And are there any regions where there either currently is some regulatory push to make these changes or an expected regulatory change that would take PFAS out?
In Europe, especially around August 2026, the expectation is that anything used in food packaging should be non-PFAS—that is, no PFAS should be intentionally added. There can always be trace PFAS inherently, but we are not adding PFAS in processing. This regulation is driving our non-PFAS business for flexible food-contact packaging. Additionally, many multinational customers are proactively moving away from PFAS even where it is not mandatory. We're seeing traction across personal beauty and healthcare packaging as well. We are in trials with many customers; qualifications take time and typically require months of production-line testing. Once qualified, the switching costs create a strong moat. It's a small business today—a few million dollars this year—but it's our first new commercial rollouts in this area and we expect it to continue to grow.
All right. That's very helpful. And then I was just curious on the U.S. and Canada, you noted that organic sales were down 2% year-over-year. I assume the volumes were a little bit worse than that, but it sounds like maybe the sequential trends are improving. So can you help us understand—can you provide a look on kind of the May, June, July time frame? What kind of improvements are you seeing? And any color on what markets specifically are improving would be helpful.
Volumes in U.S. and Canada were down almost 4% in Q2, but we expect volumes to be mid-single-digit positive in Q3 and Q4. The trend has been improving, and July results started the quarter strong as projected. We expect healthy volume-driven growth in the U.S. and Canada in the second half.
And our next question is going to come from Ghansham Panjabi with Baird.
Ashish, can you just give us a sense as to where you are in your pricing initiatives in context of the raw material spike earlier this year? And then specific to 2Q, how does that net out for price/cost in total? The reason I'm asking is, obviously, EBITDA margin stepped up quite a bit at 110 basis points in 2Q, and it was 20 basis points in 1Q. I'm curious as to whether the price/cost favorability was a big differential between the two quarters.
We implemented price increases around March and our teams moved fast on them. We started seeing results in Q2, where we were net price positive. About 3% to 3.5% of the 4.3% organic growth in Q2 came from price. As we go into Q3, there will be more raw material inflation play through because of timing, but we will also see more pricing come through, so net-net we expect to be price positive in Q3 as well. In Q4, pricing will subside a bit and volume will be the dominant driver. Overall, we expect every quarter this year to be net price positive, with the price-volume mix shifting from price dominance in Q2 to volume dominance by Q4.
Okay. That makes sense. Obviously, a very complex operating backdrop. Going back to 4Q guidance, you're very specific with Q3 guidance as you were for Q2 as well. But it's a very wide range, at least on an implied basis for Q4. What's underlying that? Is it just your inventory destocking, your view on volumes? What's driving that big range for Q4?
Ghansham, the Q3 guidance at approximately $0.80 is based on our visibility for the quarter now, and there's still a range of a few cents around that. I wouldn't put the entire $0.15 adjusted EPS full-year range all into Q4. As you get into Q4, there is less visibility on sales and the order book, and you have year-end seasonality with holidays and how things could play out. Also, the net price benefit could normalize in Q4. We left a modest range to account for those uncertainties.
And the next question comes from Abigail Eberts with Wells Fargo.
You called out data centers as a tailwind across both telco and building and construction. Can you give us a feel for the size of this opportunity for you?
For us, the SEM-addressable opportunity with our current portfolio for data center and electronics is close to $1 billion from high-performance computing and electronics. There's another roughly $1 billion from infrastructure—wire and cable and other pipe and fittings businesses where we sell products. So across the value chain, it's about $2 billion directly addressable for us. Our business is close to $100 million this year in that area; we've doubled our electronics business over the last three years, and electronics is expected to finish close to $60 million this year. We expect to continue strong growth and similar doubling over the next two to three years if industry growth rates are sustained. We're focused on making more of our portfolio relevant to this area, organically and potentially inorganically.
And our last question will come from Vincent Andrews with Morgan Stanley.
This is Turner on for Vincent. Joe, you mentioned SEM should expand margins by 100 basis points in the second half. Is this half-over-half or year-over-year? And do you mind talking a little bit more about underlying assumptions between price/cost mix shift between different applications or end markets and volume leverage?
Thanks, Turner. The 100 basis points I referred to is year-over-year for the SEM segment in the back half. It's primarily driven by mix as well as productivity benefits we've been executing over the last 18 to 24 months. Defense demand in the first half was up low-single digits but lapping tough comps from last year; in the back half, we expect greater year-over-year growth from defense as well as continued momentum in electronics and high-performance computing, which are higher-margin parts of the portfolio. So favorable mix and productivity will continue to help margin expansion, though at a lower degree than the quarter-over-quarter surge we saw—about 100 basis points for the segment in the back half.
Awesome. And as a follow-up, you all have previously said net leverage below 2.5x opens the door to buybacks and potentially M&A. Now that you're guiding to 2.2 to 2.4x, how are you thinking about the go-forward capital deployment between further debt paydown, buybacks or acquisitions?
We have prioritized debt reduction and strengthening the balance sheet, and we're getting close to the target leverage range we wanted, which is important in a high interest rate environment. Our ROIC is improving and we have confidence we can continue to improve it. We continue to make organic growth investments and pay dividends. Now that we're closer to our target leverage, we have more optionality and flexibility. We can continue to pay down debt, buy back stock if we think it's the right use of capital, or pursue acquisitions that make the portfolio more relevant and drive growth and margin expansion. All three are on the table; we have started processes on all fronts, but there's nothing imminent to model right now.
Thank you. This does conclude today's conference call. Thank you for participating, and you may now disconnect.