Avient hikes guidance after strong Q2, sees restocking in packaging and consumer

HOUSTON (ICIS)–Avient has raised its 2024 guidance for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) following stronger-than-expected Q2 results:

New 2024 guidance	Previous 2024 guidance	2023 Adjusted EBITDA
$515-540 million	$510-535 million	$501.8 million

In the second quarter, Avient saw broad-based 5% organic sales growth in both of its segments: Color, Additive & Inks (CAI), and Specialty Engineered Materials (SEM).

Both segments gained market share and benefited from inventory restocking in certain end-markets, CEO Ashish Khandpur and CFO Jamie Beggs told analysts during Avient’s Q2 earnings call on Tuesday.

Tight cost control and raw material price deflation helped expand the adjusted EBITDA margin by 100 basis points year on year to 16.9% in the second quarter, they said.

The better-than-expected performance was led by CAI, which saw improved demand and favorable raw material costs.

MARKETS
In terms of end-markets, growing sales into two of Avient’s largest markets, packaging (+8%) and consumer (+10%), had the greatest impact in the second quarter, said Khandpur.

Both markets benefited from “some restocking”, particularly in Europe, he added.

Sales growth in buildings and construction and healthcare was also strong.

Although the macroeconomic indicators for building and construction remained weak, both the SEM and CAI segments gained market share and won new business in the US and Canada, Khandpur said.

Meanwhile, destocking in the healthcare market has finally run its course, with Avient’s sales into that market up 10% year on year in the second quarter.

Sales into the defense end-market continued to be driven by the global conflicts and certain NATO programs, with full-year sales growth expected in the low double digits, he said.

The telecommunications and energy markets, which together account for about 7% of Avient’s total sales, however, remained “challenged”, with sales down in the double digits in the second quarter as customers reduced inventories.

Telecommunications should improve in the second half as demand in the US has started to improve more recently, Khandpur said.

In energy, Avient is seeing improving trends in the third quarter, in particular for applications designed to improve the reliability of the electrical transmission grid, he said.

Artificial intelligence (AI) was raising electricity consumption, driving demand for electricity generation and distribution, with positive derivative effects on the materials Avient supplies to energy markets, he noted.

Electric mobility and electrification are happening, and Avient aims to “become part of those fast-growing markets”, he added.

LATIN AMERICA OPPORTUNITY
Avient’s sales in Latin America grew by 19% year on year in the second quarter, driven by sales into the region’s packaging market.

That market saw strong demand in food & beverage and cleaning applications on the back of the recent floods in Brazil, as well as high temperatures and drought conditions in Mexico.

Latin America currently accounts for only about 6% of the company’s total sales.

However, going forward, Avient expects its Latin American packaging business to benefit from the near-shoring trend.

The company’s position in the region is “strategic”, allowing it to serve original equipment manufacturers (OEMs) and brand owners who are looking to near-shore production and supply chains in light of global trade conflicts and political uncertainties, Beggs noted.

RAW MATERIALS
Avient realized about $35 million in raw material price deflation in the first half of 2024, Beggs said.

However, the company does not expect this benefit to be repeated in the second half as it has started to see “modest levels of inflation” across the majority of its raw materials, including polyethylene (PE) and polypropylene (PP), as well as pigments and certain performance additives, she said.

Primary raw materials used in Avient’s manufacturing operations include polyolefin and other thermoplastic resins, titanium oxide (TiO2), inorganic and organic pigments, specialty additives and ethylene.

The executives did not comment on the current stock market turmoil and analysts on Tuesday’s call did not ask about this.

Thumbnail photo of Avient CEO and president Ashish Khandpur; photo source: Avient