What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-02-19 compared with 2020-02-26 · 291 added, 330 removed, 144 unchanged (81% of the section changed)

5 unchanged sentences

In such case, the trading price of our common stock could decline.

General Business and Economic Risks

We may be adversely affected by general global economic and financial conditions beyond our control.

Our businesses may be affected by a number of factors that are beyond our control such as general economic and business conditions, changes in tax laws or tax rates and conditions in the financial services markets including counterparty risk, insurance carrier risk, rising interest rates, inflation, deflation, fluctuations in the value of local currency versus the U.S.

dollar or the impact of a stronger U.S.

dollar which may negatively impact our ability to compete.

Macro-economic challenges, including conditions in financial and capital markets and levels of unemployment, and the ability of the U.S.

and other countries to deal with their rising debt levels may continue to put pressure on the economy or lead to changes in tax laws or tax rates.

There can be no assurance that changes in tax laws or tax rates will not have a material impact on our future cash taxes, effective tax rate or deferred tax assets and liabilities.

Adverse developments in global or regional economies could drive an increase or decrease in the demand for our products that could increase or decrease our revenues, increase or decrease our manufacturing costs and ultimately increase or decrease our results of operations, financial condition and cash flows.

As a result of negative changes in the economy, customers, vendors or counterparties may experience significant cash flow problems or cause consumers of our products to postpone or refrain from spending in response to adverse economic events or conditions.

If customers are not successful in generating sufficient revenue or cash flows or are precluded from securing financing, they may not be able to pay or may delay payment of accounts receivable that are owed to us or we may experience lower sales volumes.

Our financial condition and results of operations could be materially and adversely affected by any of the foregoing.

Operational and Market Risks

The Novel Coronavirus (COVID-19) pandemic has and may continue to have an adverse effect our business, financial condition, results of operations, cash flows and stock price.

COVID-19 continues to spread in areas where we operate and transact business and the related pandemic continues to impact our operations and financial results.

We have been classified as an essential business in the jurisdictions that have made this determination to date and have been allowed to continue our operations.

However, our facilities - as well as the operations of our suppliers, customers and third-party sales representatives and distributors - have been, and will continue to be, disrupted by governmental and private sector responses to the COVID-19 pandemic.

This includes business shutdowns, work-from-home orders and social distancing protocols, travel or health-related restrictions, as well as quarantines, self-isolations, and disruptions to transportation channels.

Additional government shutdown orders or stay-at-home directives, or an outbreak among or quarantine of the employees in any of our facilities, could cause significant interruptions to, or temporary closures of our operations and could materially adversely affect our ability to adequately staff and maintain our operations.

Furthermore, we may be unsuccessful at continuing to manage our business effectively due to the extended period of working from home by some of our employees.

Working remotely may eventually lead to inefficiencies, as well as technology and security risks.

Additionally, we are unsure if the extended period during which our employees are unable to travel to our facilities or those of our customers and suppliers may negatively impact our business.

Disruptions to the operations of our suppliers have at times, and may again, negatively impact our ability to purchase goods and services for our business at efficient prices and in sufficient amounts.

Additionally, the operations of our customers have been, and could be further, disrupted, which can result in customers attempting to delay or cancel orders, reduce future orders or seek extended payment terms.

Furthermore, the negative impact of the COVID-19 pandemic on the global economy, adverse changes in the industries that our products serve or adverse changes in the financial condition of our customers could further adversely impact demand for our products, particularly in the automotive industry and industrial and consumer applications.

During 2020, many of our customers experienced extensive disruptions due to the COVID-19 pandemic, which directly impacted sales of our products, most particularly in the automotive industry during the second quarter of 2020.

In addition, the significant decrease in energy prices resulting from the COVID-19 pandemic, including crude oil and gas prices, negatively impacted and could further impact the activities of our oilfield customers, resulting in a corresponding adverse effect on demand for our oilfield products.

Furthermore, the markets for our engineered polymers products have also been negatively impacted due to reduced global industrial and consumer demand, and the markets for our industrial specialties products have also been negatively impacted due to reduced global industrial demand.

The extent of the impact that the COVID-19 pandemic will continue to have on our business and financial results will depend on various uncertainties and future developments, including the ultimate duration, severity and spread of the virus in the countries where we operate and transact business, additional actions taken by government authorities in their efforts to contain or treat the virus and to mitigate the economic disruptions and the global economic downturn resulting from the pandemic, the speed at which vaccines are deployed and their effectiveness against COVID-19 variants.

These impacts, together with the other factors discussed, are highly uncertain and cannot be predicted, however they have and may continue to have an adverse effect on our business, financial condition, results of operations, cash flows and a negative impact on our stock price.

There can be no assurance that any decrease in sales resulting from the COVID-19 pandemic will be offset by increased sales in subsequent periods.

If increasingly more stringent air quality standards worldwide are not adopted, our growth could be impacted.

Environmental standards drive the implementation of gasoline vapor emission control systems by automotive manufacturers.

Given increasing societal concern over global warming and health hazards associated with poor air quality, there is growing pressure on regulators across the globe to take meaningful action.

For those countries that have not significantly regulated gasoline vapor emissions, enacting more stringent regulations governing gasoline vapor emissions represents a significant upside to the Company’s automotive carbon business.

However, regulators may react to a variety of considerations, including economic and political, that may mean that any such more stringent regulations are delayed or shelved entirely, in one or more countries or regions.

As the adoption of more stringent regulations governing gasoline vapor emissions is expected to drive significant growth in our automotive carbon applications, the failure to enact such regulations will have a significant impact on the growth prospects for these products.

I n order to compete successfully, we must develop new products and technologies meeting evolving market and customer needs;

disruptive technologies could reduce the demand for the Company’s products.

Our industries and the end-use markets into which we sell our products experience periodic technological change and product improvement.

Our future growth will depend on our ability to gauge the direction of commercial and technological progress in key end-use markets and on our ability to fund and successfully develop, manufacture and market products in such changing end-use markets.

If we fail to keep pace with the evolving technological innovations in our end-use markets on a competitive basis, including with respect to innovation with regard to the development of alternative uses for, or application of, products developed that utilize such end-use products, our financial condition and results of operations could be adversely affected.

Similarly, we face competition in our applications.

Disruptive technology involving new or superior solutions could reduce the demand for the Company’s products.

Adverse conditions in the automotive market may adversely affect demand for our automotive carbon products.

Sales of our automotive activated carbon products are tied to global automobile production levels.

Automotive production in the markets we serve can be affected by macro-economic factors such as interest rates, fuel prices, shifts in vehicle mix (including shifts toward alternative energy vehicles), consumer confidence, employment trends, regulatory and legislative oversight requirements and trade agreements.

For example, the global economic downturn in 2008/2009, led to a drastic reduction in vehicle sales and an even greater reduction in vehicle production as OEMs right-sized their inventories to meet the lower sales volumes.

Furthermore, primarily during the first half of 2020, the COVID-19 pandemic led to a significant reduction in vehicle production and vehicles sales were negatively impacted by government shutdown orders and stay-at-home directives.

Regional disruptions due to localized natural disasters or multi-month strikes at suppliers or OEMs can also

significantly impact vehicle production and therefore demand for our automotive carbon products.

Additionally, if the COVID-19 pandemic continues, it could negatively impact demand for automotive sales, which would adversely impact sales of our carbon products, as was the case in the second quarter of 2020.

The extent to which COVID-19 pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including the severity of the COVD-19 pandemic, actions to contain COVID-19 or treat its impact, among others.

The Company’s pavement technologies product line is heavily dependent on government infrastructure spending.

A significant portion of our customers’ revenues in our pavement technologies business is derived from contracts with various foreign and U.S.

governmental agencies, and therefore, when government spending is reduced, our customers’ need for our products is similarly reduced.

While we do not do business directly with governmental agencies, our customers provide paving services to, for example, the governments of various jurisdictions within North America, South America, Europe, China, Brazil and India, and revenue either directly or indirectly attributable to such government spending continues to remain a significant portion of our revenues.

Government business is, in general, subject to special risks and challenges, including:

delays in funding and uncertainty regarding the allocation of funds to federal, state and local agencies, delays in the expenditures and delays or reductions in other state and local funding dedicated for transportation projects;

other government budgetary constraints, cutbacks, delays or reallocation of government funding;

long purchase cycles or approval processes;

our customers’ competitive bidding and qualification requirements;

changes in government policies and political agendas;

and international conflicts or other military operations that could cause the temporary or permanent diversion of government funding from transportation or other infrastructure projects.

The Company’s engineered polymers product line is reliant on cyclical end-markets, such as the automotive market and the apparel market, which are impacted by changes in consumer and industrial demand.

Our engineered polymers product line end-markets are subject to constant and rapid technology changes, changes in consumer preferences, evolving standards, and changes in product supply and demand.

For example, demand for our engineered polymers products in the automotive market, where our products are formulated into automotive resins and coatings and various components, may be affected by technological advances, changing automotive OEM specifications and global automobile production levels.

In the footwear market, demand for our engineered polymers products, where our products are sold into footwear adhesives, may be affected by consumer discretionary spending and changes in consumer preferences.

The impact of these changes may lead to increased competition from competing and substitute products and downward pricing pressures on our customers, and therefore, our engineered polymers product offerings.

Additionally, if the COVID-19 pandemic continues, it could negatively impact demand for consumer and industrial demand, which would continue to adversely impact sales of our engineered polymers products.

The Company’s oilfield technologies business is significantly affected by trends in oil and natural gas prices that affect the level of exploration, development and production activity.

Demand for our oilfield technologies services and products is particularly sensitive to the level of exploration, development and production activity of, and the corresponding capital spending by, oil and natural gas companies, including national oil companies.

The level of exploration, development and production activity is directly affected by trends in oil and natural gas prices, which historically have been volatile.

Crude oil prices have declined significantly during 2020.

Pricing moved from $58 per barrel in January to a low of $16 per barrel in April to $48 per barrel in December.

Pricing is not currently forecasted to change significantly from these levels during 2021.

While these pricing levels show recovery from the lows reached during the first half of 2020, they remain off their highs seen in the last decade.

Any prolonged low pricing environment for oil and natural gas is likely to result in reduced demand for our oilfield technology products, which may have a material adverse effect on our results of operations.

The Company’s printing inks business serves customers in a market that is facing declining volumes and downward pricing.

The use of inks in which our printing ink resins are used, such as those made for magazines and catalogs, has significantly decreased, as the printing industry has experienced a reduction in demand due to various factors including competition from alternative sources of communication, including email, the Web, electronic readers, interactive television and electronic retailing.

The impacts of these changes have led to continued intense competition and downward pricing pressures on printing inks, and therefore, our ink products.

A prolonged period of low energy prices may materially impact our results of operations.

The price of energy may directly or indirectly impact demand, pricing or the profitability for certain Ingevity products.

As petroleum oil prices fall or change rapidly, Ingevity products may be disadvantaged due to the fact that CTO and BLSS are thinly traded commodities with pricing commonly established for periods ranging from one quarter to one year periods of time.

Due to this, alternative technologies which compete with product offerings provided by Ingevity may be advantaged from time to time in the marketplace.

Protracted periods of high volatility or sustained oversupply of petroleum oil may also translate into increased competition from petroleum-based alternatives which would otherwise be consumed in petroleum transportation fuel blends.

In addition, pricing for competing naturally derived oils such as palm or soybean is likely to provide further pressure on pricing of the Company’s products during periods of depressed petroleum prices.

We face competition from producers of substitute products and new technologies, and new or emerging competitors.

In the Performance Materials segment, there is competition from various other activated carbon manufacturers.

These competitors are actively trying to develop more advanced and alternative activated carbon products that would more effectively compete with our products in the automotive applications.

There is also competition in the automotive applications from non-activated carbon competitors or product offerings.

For example, at least one OEM is using sealed tanks in certain subsets of its vehicles to comply with the Tier 3/LEV III regulations.

While the sealed tank fuel systems generally require a similarly sized pelleted activated carbon canister to deal with refueling emissions, in most cases, they do not use an extruded honeycomb to meet current U.S.

and California regulations.

There is also emerging competition in the "honeycomb" space, which may impact sales of the Company's products.

If a competitor were to succeed in developing products that are better suited for automotive evaporative emissions capture applications and/or a competitive technology, such as, but not limited to, sealed gas tanks, were to be implemented across a material number of vehicle platforms, our financial results could be negatively impacted.

In addition, growth in alternative vehicles, such as all-electric vehicles and hydrogen fuel cell vehicles, which do not use gasoline, may also adversely affect the demand for our products.

In the Performance Chemicals segment, hydrocarbon resins and gum rosin-based products compete with TOR-based resins in the adhesives and printing inks markets.

The price of gum rosin has a significant impact on the market price for TOR and rosin derivatives and the price of gum rosin is driven by labor rates, land leasing costs and various other factors that are not within our control.

Hydrocarbon resins, for example, C5 resins, are co-products from isoprene (synthetic rubber).

Availability and pricing are determined by the supply and demand for synthetic rubber as well as crude oil prices as the feedstock for isoprene and various other factors that are not within our control.

Animal and vegetable-based fatty acids compete with TOFA products in lubricant and industrial specialties.

The market price for TOFA products is impacted by the prices of other fats and oils and the prices for other fats and oils is driven by actual and expected harvest rates, crude oil prices and the biofuel market.

Other monomers, thermoplastics and polyols compete with our caprolactone based products.

The price for our products is impacted by the prices of competitive substitutes which are influenced by petroleum prices as well as other supply and demand factors.

Additionally, the Company faces competition from competitors that are actively developing new technologies and competing products across the segment.

A significant investment by a competitor in a competitive technology or product line could negatively impact our financial results.

Disruptions at any of our manufacturing facilities could negatively impact our production, financial condition and results of operations.

An operational disruption in any of our facilities could negatively impact production and our financial results.

The occurrence of a natural disaster, such as a hurricane, tropical storm, earthquake, tornado, severe weather, flood, fire, as well as risk that may result from climate change, could cause operational disruptions.

Additionally, other unanticipated problems such as labor difficulties, health epidemics (including the COVID-19 pandemic), equipment failure, cyberattack or other cybersecurity incident, capacity expansion difficulties or unscheduled maintenance could also cause operational disruptions of varied duration.

These types of disruptions could materially adversely affect our financial condition and results of operations to varying degrees dependent upon the facility, the duration of the disruption, our ability to shift business to another facility or find alternative sources of materials or energy.

In certain cases, we have some products that are only made at one facility.

For example, in the case of our Waynesboro, Georgia facility, while we have some redundancies within the facility, we only have one facility that makes our extruded honeycomb products.

In the case of our Warrington, UK facility, while we have some redundancies within the facility, we only have one facility that makes our caprolactone products.

As other examples, in our Charleston SC facility, we source black liquor from an adjacent paper mill to isolate and subsequently modify lignin to serve

our agriculture customers while we make the vast majority of our ink resin products in our DeRidder, Louisiana facility.

While we have redundancies within these facilities, we have limited ability to make these products at other facilities.

Finally, the COVID-19 pandemic is causing travel disruptions, quarantines and/or closures, which could result in disruptions to our manufacturing and production operations at our facilities, as well as those of our suppliers and customers.

Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles.

We are dependent upon third parties for the provision of certain critical operating services at several of our facilities.

We are dependent upon third parties for the provision of certain critical operating services at our Covington, Virginia Performance Materials facility and at the following Performance Chemicals facilities:

Crossett, Arkansas;

North Charleston, South Carolina;

and Warrington, UK.

We are dependent on:

(i) the WestRock Covington, Virginia paper mill (“WestRock VA Paper Mill”) for the provision of electricity, water, compressed air, steam and wastewater treatment to our Covington Performance Materials facility;

(ii) the WestRock North Charleston, South Carolina paper mill (“WestRock SC Paper Mill”) for the provision of water, compressed air, steam and wastewater treatment at our North Charleston Performance Chemicals facility;

(iii) the Georgia-Pacific Crossett, Arkansas paper mill and chemicals plant (collectively, “Georgia-Pacific Mill”) for the provision of natural gas, water, compressed air and wastewater treatment to our Crossett Performance Chemicals facility;

and (iv) Solvay Plant for the provision of water, compressed air, nitrogen, natural gas, electricity, steam, and wastewater treatment and waste management at our Warrington Performance Chemicals facility.

We have existing long-term contractual arrangements covering these services for our Covington, Crossett, North Charleston and Warrington facilities.

The provision of these services would be at risk if any of the counterparties were to idle or permanently shut down the associated mill, or if operations at the associated mill were disrupted due to natural or other disaster, or by reason of strikes or other labor disruptions, or if there were a significant contractual dispute between the parties.

In the event that WestRock VA Paper Mill, WestRock SC Paper Mill, Georgia-Pacific Mill or Solvay Plant were to fail to provide the contracted services, we would be required to obtain these services from other third parties at an increased cost or to expend capital to provide these services ourselves.

The expenses associated with obtaining or providing these services, as well as any interruption in our operations as a result of the failure of the counterparty to provide these services, may be significant and may adversely affect our financial condition and results of operations.

Furthermore, in the event that WestRock VA Paper Mill wastewater treatment operations do not comply with permits or applicable law and the WestRock VA Paper Mill is unable to determine the cause of such compliance, then we will be responsible for between 10 percent and 50 percent of the costs and expenses of such noncompliance (increasing in 10 percent increments per violation during each twelve month period) despite representing less than 3 percent of the total wastewater volume.

These costs and expenses may be significant and may adversely affect our financial condition and results of operations.

Additionally, (i) our Covington Performance Materials facility is located on real property leased from WestRock pursuant to a long-term lease agreement, and is surrounded by the WestRock VA Paper Mill, (ii) a portion of our North Charleston Performance Chemicals facility is located on real property leased from WestRock and is adjacent to the WestRock SC Paper Mill;

(iii) our Crossett Performance Chemicals facility is located on real property leased from Georgia-Pacific pursuant to a long-term lease agreement, and is surrounded by the Georgia-Pacific Paper Mill and (iv) our Warrington, UK Performance Chemicals facility is located on real property leased from Solvay pursuant to multiple long-term lease agreements, and is surrounded by the Solvay Plant.

In the event we were to have a dispute with WestRock, Georgia-Pacific or Solvay regarding the terms of the relevant lease agreements, or we were otherwise unable to fully access or utilize the leased property, the associated business disruption may be significant and may adversely affect our financial condition and results of operations.

We are also dependent on third parties for the disposal of brine, which results from our own conversion of BLSS into CTO.

If these service providers do not perform under their contracts, the costs of disposing of brine ourselves, including, for example, the transportation costs, could be significant.

We are dependent on certain customers.

We have certain large customers in particular businesses, the loss of which could have a material adverse effect on the applicable segment’s sales and, depending on the significance of the loss, our results of operations, financial condition or cash flows.

Sales to the Company’s ten largest customers (across both segments) accounted for 36 percent of total sales for 2020.

No customer accounted for more than 10 percent of total sales for 2020.

With some exceptions, our business with those large

customers is based primarily upon individual purchase orders.

As such, our customers could cease buying our products from us at any time, for any reason, with little or no recourse.

If a major customer or multiple smaller customers elected not to purchase products from us, our financial condition and results of operations would be materially adversely affected.

We are dependent on attracting and retaining key personnel.

The Company is dependent upon its production workers, as well as upon engineering, technical, sales and application specialists, together with experienced industry professionals and senior management.

Our success depends, in part, on our ability to attract, retain and motivate these key performers.

Our failure to attract and retain those making significant contributions could adversely affect our financial condition and results of operations.

Work stoppages and other labor relations matters may have an adverse effect on our financial condition and results of operations.

Many of our production employees are governed by collective bargaining agreements (“CBAs”).

From time to time the Company engages in negotiations to renew CBAs as those contracts are scheduled to expire.

During the first quarter of 2020, at our Wickliffe, Kentucky Performance Materials' manufacturing facility, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC ratified a three-year collective bargaining agreement ("CBA"), which expires February 1, 2023.

Additionally, at our Crossett, Arkansas Performance Chemicals' manufacturing facility, the International Association of Machinists and Aerospace Workers Union ("IAM") agreed to extend the existing CBA by one year until January 15, 2021, in exchange for economic considerations.

The Company and IAM resumed negotiations in Crossett in the first quarter of 2021, and the parties continue to operate under the expired CBA.

In addition, at our Covington, Virginia Performance Materials' manufacturing facility, the CBA with Covington Local Union 464 of the International Brotherhood of Electrical Workers ("IBEW") agreement expired on January 15, 2021 and the CBA with Covington Local 675 affiliated with The Association of Western Pulp and Paper Workers ("AWPPW") will expire on December 1, 2021.

The Company and Covington IBEW began negotiations in the first quarter of 2021, and the parties continue to operate under the expired CBA.

Negotiations with the Covington AWPPW will begin in the fourth quarter of 2021.

While the Company has generally positive relations with its labor unions, there is no guarantee the Company will be able to successfully negotiate new union contracts without work stoppages, labor difficulties or unfavorable terms.

If we were to experience any extended interruption of operations at any of our facilities because of strikes or other work stoppages, our results of operations and financial condition could be materially and adversely affected.

In addition, due to the co-location of our Covington, Crossett, North Charleston, and Warrington facilities within the WestRock VA Paper Mill, Georgia-Pacific Mill, WestRock SC Paper Mill and Solvay Plant facilities, a strike or work stoppage at any of these facilities could cause disruptions at our facilities, and our results of operations could be materially and adversely affected.

As we rely on information technologies to conduct our business, security breaches and other disruptions could compromise our information and expose us to liability, which could cause our business and reputation to suffer.

We rely on information technologies, some of which are managed by third parties, to manage the day-to-day operations and activities of our business, operate elements of our manufacturing facilities, manage our customer and vendor transactions, and maintain our financial, accounting and business records.

In addition, we collect and store certain data, including proprietary business information, and may have access to confidential or personal information that is subject to privacy and security laws and regulations.

The secure processing, maintenance and transmission of sensitive, confidential and personal data is critical to our operations and business strategy.

We follow industry best practices and have instituted a system of security policies, procedures, capabilities, and internal controls designed to protect this information.

Additionally, we engage third-party threat detection and monitoring services which includes a global cyber security incident response team and our auditor conducts periodic ISO 27001 gap assessments on our information technology systems.

Despite our security design and controls, and those of our third-party providers, we may be vulnerable to cyber- attacks, computer viruses, security breaches, inadvertent or intentional employee actions, system failures and other risks that could potentially lead to the compromising of sensitive, confidential or personal data, improper use of our, or our third-party provider systems, solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, and operational disruptions.

In addition, the global regulatory environment pertaining to information security and privacy is increasingly demanding, with new and changing requirements, such as the European Union’s General Data Protection Regulation (“GDPR”), California Consumer Privacy Act (“CCPA”), and the China Cybersecurity Law.

GDPR, which applies to the collection, use, retention, security, processing, and

transfer of personally identifiable information of residents of European Union (“EU”) countries, mandates new compliance obligations, and imposes significant fines and sanctions for violations.

CCPA requires companies to provide new data disclosure, access, deletion and opt-out rights to consumers in California.

Implementing and complying with these laws and regulations may be more costly or take longer than we anticipate, or could otherwise affect our business operations.

Such breaches, cyber incidents and disruptions, or failure to comply with laws and regulations related to information security or privacy, could result in legal claims or proceedings against us by governmental entities or individuals, significant fines, penalties or judgements, disruption of our operations, remediation requirements, changes to our business practices, and damage to our reputation, which could adversely affect our business, financial condition or results of operations.

Complications with the design or implementation of our new enterprise resource planning (“ERP”) system could adversely impact our business and operations.

We are in the process of a complex, multi-year implementation of a new ERP system necessary due to the finite life of the existing operating system.

The ERP system implementation requires the integration of the new ERP system with multiple new and existing information systems and business processes in order to maintain the accuracy of our books and records and to provide our management team with information important to the operation of our business.

Such an initiative is a major financial undertaking and will require substantial time and attention of management and key employees.

The implementation of the ERP system may prove to be more difficult, costly, or time consuming than expected, and it is possible that the system will not yield the benefits anticipated.

Failure to successfully design and implement the new ERP system as planned could harm our business, financial condition, and operating results.

Additionally, if we do not effectively implement the ERP system as planned or the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be negatively affected.

Supply Chain Risks

Disruptions within our supply chain could negatively impact our production, financial condition and results of operations.

We could be adversely affected by disruptions within our supply chain and transportation network.

Our products are transported by truck, rail, barge or ship by third-party providers.

The costs of transporting our products could be negatively affected by factors outside of our control, including rail service interruptions or rate increases, extreme weather events, tariffs, rising fuel costs and capacity constraints.

Significant delays or increased costs affecting these transportation methods could materially affect our financial condition and results of operations.

Disruptions at our suppliers could lead to short term or longer rises in raw material or energy costs and/or reduced availability of materials or energy, potentially affecting our financial condition and results of operations.

For example, Solvay is our primary provider of hydrogen peroxide to our Warrington, UK Performance Chemicals facility, which is co-located with the Solvay Warrington, UK chemical plant (“Solvay Plant”).

Disruptions at the Solvay Plant impacting Solvay’s ability to supply hydrogen peroxide could adversely affect our financial condition and results of operations.

See also “—General Business and Economic Risks—Our engineered polymers product line may be adversely affected by the UK’s withdrawal from the European Union” and “ Operational and Market Risks - We are dependent upon third parties for the provision of certain critical operating services at several of our facilities.”

Our Performance Chemicals segment is highly dependent on CTO, which is limited in supply;

lack of access to sufficient CTO would impact our ability to produce CTO-based products.

The availability of CTO is essential to the Company’s Performance Chemicals segment.

Availability of CTO is directly linked to the production output of kraft mills using pine as their source of pulp, which is the predominant fiber source for packaging grades of paper as well as fluff pulp for personal care products.

As a result, there is a finite global supply of CTO-with global demand for softwood pulp driving the global supply of CTO, rather than demand for CTO itself.

Most of the CTO made available for sale by its producers in North America is covered by long-term supply agreements, further constraining availability.

In 2016, we entered into a long-term supply agreement with WestRock pursuant to which we purchase all of the BLSS and CTO output from WestRock’s existing (at the time of separation) kraft mills, subject to certain exceptions.

This agreement includes pricing terms based on market prices.

Pricing for the products in our agreement with WestRock is based on the prevailing market prices of products at the time of purchase.

The pricing formulas are subject to certain pricing floors as set forth in the agreement with WestRock.

the take-or-pay requirements of the agreement with WestRock, in adverse market conditions we could be required to purchase BLSS and CTO from WestRock at prices where our results of operations could be materially and adversely affected.

In 2018, we entered into a 20-year CTO supply agreement with Georgia-Pacific , pursuant to which we purchase the lesser of 125,000 tons of CTO and the aggregate output of CTO produced and originating at certain of Georgia-Pacific’s paper mills.

Pricing for the CTO in our agreement with Georgia-Pacific is a market-based price, subject to ongoing adjustments.

Given the take-or-pay requirements of the agreement with Georgia-Pacific, in adverse market conditions we could be required to purchase CTO from Georgia-Pacific at prices where our results of operations could be materially and adversely affected.

If any of our suppliers (including WestRock or Georgia-Pacific) fail to meet their respective obligations under our supply agreements or we are otherwise unable to procure an adequate supply of CTO, we would be unable to maintain our current level of production and our results of operations would be materially and adversely affected.

Beginning in 2025, either party to the WestRock agreement may provide a notice to the other party terminating the WestRock agreement five years from the date of such notice.

Beginning one year after such notice, the quantity of products provided by WestRock under the agreement will be gradually reduced over a four-year period based on the schedule set forth in the agreement.

In addition, from 2022 until 2025, either party may provide notice to remove a kraft mill as a supply source.

The two largest kraft mills under the WestRock agreement currently supply approximately 17 to 19 percent and 18 to 20 percent , respectively, of the total amount of products supplied under our agreement with WestRock.

If WestRock exercises its rights to terminate the agreement or remove a kraft mill as a supply source, and we are unable to arrange for a substitute supply of CTO, we would be unable to continue to produce the same quantity of products and our results of operations could be materially and adversely affected.

There are other pressures on the availability of CTO.

Some pulp or paper mills may choose to consume their production of CTO to meet their energy needs or reduce their carbon footprint rather than sell the CTO to third parties.

Also, as described below, there are regulatory pressures that may incentivize suppliers of CTO to sell CTO into alternative fuel markets rather than to historical end users such as Ingevity.

Furthermore, weather conditions have in the past and may in the future affect the availability and quality of pine trees used in the kraft pulping process and therefore the availability of CTO meeting Ingevity’s quality standards.

For example, the combined impact of Hurricane Katrina in August 2005 and Hurricane Rita in September 2005 caused significant damage to forests throughout the southern U.S.

This significantly affected the availability and quality of the supply of CTO during late 2005 and into 2006.

In addition, Hurricanes Florence and Michael in 2018 disrupted vendor operations and reduced availability of CTO supply well into 2019.

The European Union’s Directive 2009/28 on the promotion of the use of energy from renewable resources (“Renewable Energy Directive” or “RED”), which will be repealed on July 1, 2021 (the “RED”), and the new Directive replacing Directive 2009/28, which has to be implemented by Member States by June 30, 2021 (the “RED II”)) and similar legislation in the U.S.

and elsewhere may incentivize the use of CTO as a feedstock for production of alternative fuels.

In December 2008, the EU adopted the Renewable Energy Directive, which established a 20 percent EU-wide target for energy consumed from renewable sources relative to the EU’s gross final consumption of energy, as well as a 10 percent target for energy consumed from renewable sources in the transport section.

In order to reach these targets, the RED established mandatory targets for each Member State and required each Member State to adopt a national renewable energy action plan setting forth measures to achieve its national targets.

The RED also established sustainability criteria for biofuels, which must be satisfied in order for the consumption of a fuel to count toward a Member State’s national targets.

CTO-based biofuel currently satisfies the RED’s biofuel sustainability criteria.

In spring 2015, the EU adopted amendments to the Renewable Energy Directive.

RED now expressly lists CTO as a residue-type feedstock whose use in biofuel would make that biofuel eligible for double counting towards national targets of the Member States, and at least two Member States additionally have or plan fiscal incentives for the domestic marketing of CTO-based and other qualifying biofuels.

In 2018, the EU adopted RED II (effective 2021-2030) which increased the target for energy consumed from renewable sources in the transport section to 14 percent by 2030.

Advanced biofuels must comprise 0.2% of the transport sector by 2022 and 3.5% by 2030.

CTO remains an expressly listed feedstock for advanced biofuels and may be doubled counted toward these goals.

RED II requires Member States shall prepare plans to set national targets and growth trajectories for their contributions to the EU-wide target.

The RED II now includes language to consider the potential for undue market distortion for the raw materials used to meet these targets.

In addition to these developments in the European Union, various pieces of legislation regarding the use of alternative fuels have been introduced in the United States at both the Federal and State level.

Currently, none of the legislation mandates or provides incentives for the use of CTO as a transportation fuel.

Some regional cap and trade programs may incentivize the use of CTO in stationary sources.

Future legislation in the U.S.

and elsewhere may promote the use of CTO as a feedstock for production of alternative fuels.

Because the supply of CTO is inherently constrained by the volume of kraft pulp processing, any diversion of CTO for production of alternative fuels would reduce the available supply of CTO as the principal raw material of the pine chemicals industry.

As described above, the Company is highly dependent on CTO as an essential raw material, and if the Company is unable to procure an adequate supply of CTO due to competing new uses such as for biofuel production, the Company’s results of operations would be materially and adversely affected.

Pricing for CTO is subject to particular pricing pressures by reason of limited supply and competing demands for end use, and we may be limited in our ability to pass on increased costs to our customers.

Pricing for CTO (which accounted for approximately 11 percent of all of our cost of sales and 37 percent of our raw materials purchases for 2020) is subject to particular pricing pressures by reason of the limited supply elasticity of the product and competing demands for its use, all of which drive pressure on price:

• CTO is a product of the kraft pulping process, and the global supply of CTO is inherently constrained by the volume of kraft pulping processing;

• CTO can be burned as alternative fuels, either in support of the originating pulp mill operations, by energy companies or biofuel companies;

• Regulations or other incentives that mandate or encourage the consumption of CTO for use in biofuels or alternatives.

We may not have the ability to pass through any increases in our cost of CTO to our customers in the form of price increases or other adjustments, with a resulting material adverse effect on our results of operations.

Additionally, we may be placed at a competitive disadvantage relative to our competitors who rely on different primary raw materials or who have more favorable terms with their suppliers.

We are also dependent on other raw materials, and these are also subject to pricing pressures;

lack of access to these raw materials and inability to pass on price increases could adversely affect our financial condition and results of operations.

The Company is dependent on other raw materials, including, but not limited to, hardwood sawdust, phosphoric acid, ethylene amines, black liquor, nonylphenol, hydrogen peroxide, cyclohexanone, and pentaerythritol .

Raw material costs are a significant operating expense of the Company.

The cost of raw materials can be volatile and subject to increases as a result of, among other things, changing economic conditions, political or policy considerations, supply and demand levels, instability in energy producing nations, and natural events such as extreme weather events or even insect infestations.

Any interruption in the supply of the raw materials on which we depend, and any increases in the cost of raw materials that we are not able to pass on to customers in the form of price increases or other adjustments, may materially impact our financial condition and results of operations.

International Operations Risks

We are exposed to the risks inherent in international sales and operations.

In 2019, sales outside of the U.S.

In 2020, sales to customers outside of the U.S.

made up approximately 50 percent of our total sales, and we sell our products to customers in approximately 75 countries.

6 unchanged sentences

• political and economic instability;

• unforeseen public health crises, such as pandemic and epidemic diseases (including the recent outbreak of coronavirus disease 2019 (COVID-19) ("Coronavirus") in China);

• unforeseen public health crises, such as pandemic and epidemic diseases (including the COVID-19 pandemic);

• import and export restrictions, tariffs, and other trade barriers or retaliatory actions;

46 unchanged sentences

has indicated its intent to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements.

Additionally, the United Kingdom (“UK”) and the European Union (“EU”) will be negotiating a free trade agreement.

Additionally, the UK and the EU have negotiated the EU-UK Trade and Cooperation Agreement and are in the process of implementing.

Furthermore, the U.S.

10 unchanged sentences

On January 31, 2020, the UK ceased to be a member of the EU, an event generally referred to as “Brexit”.

The UK and the EU are currently in a transition period until December 31, 2020 during which time all EU law continues to apply to, and in, the UK as if it were an EU member state.

The transition period may be extended for up to two years, however recent UK legislation provides that the UK cannot agree to any such extension.

Currently, the UK and the EU are negotiating a new free trade agreement.

If no agreement is reached, trade relations between the EU and the UK will default to World Trade Organization (“WTO”) rules following the transition period.

In addition, unless otherwise negotiated with individual countries, after the transition period the UK will lose the benefit of all EU free trade agreements with other countries and such trade relations will similarly default to WTO rules.

As a result, the long-term nature of the UK’s relationship with the EU and these other countries remains unclear and there is considerable uncertainty if and when any trade agreements will be agreed upon and implemented and how any such trade agreements will impact our business.

The effects of this uncertainty also continues to impact the political and economic environment in the UK and across other EU member states, and may impair our ability to transact business.

This uncertainty could also continue to affect the UK, the EU and worldwide economic or market conditions and contribute to the instability in global financial markets, and the value of the pound sterling or other currencies, including the Euro.

Additionally, a significant portion of the regulatory regime that applies to our operations in the UK is derived from EU directives and regulations, including REACH.

Pursuant to domestic UK legislation, these laws and regulations will be incorporated into UK law following the transition period.

However, the regulatory frameworks of the UK and the EU may subsequently change and potentially divergent national laws and regulations may develop.

This may have adverse practical and/or operational implications for our engineered polymers product line, including the potential disruption to supply chains, additional compliance and operational costs, required product modifications and necessary operational changes.

Effective January 1, 2021, the EU and the UK form two separate markets and two distinct regulatory and legal spaces, creating new barriers to trade in goods and services and to cross-border mobility and exchanges.

Even though the UK reached an agreement with the EU on the terms of their future cooperation, as reflected in the EU-UK Trade and Cooperation Agreement (“TCA”) and related documents, it is unclear how the TCA will actually be implemented, how it will affect the nature of the UK’s relationship with the EU and how it will impact our business.

The scope and implementation of the UK’s arrangements with other countries is also unclear.

This uncertainty could continue to affect UK, EU and worldwide economic or market conditions and could contribute to instability in global financial markets and the value of the pound sterling or other currencies, including the Euro.

Additionally, the regulatory frameworks of the UK and the EU may subsequently change and potentially divergent laws and regulations may develop, including those relating to UK REACH and EU REACH.

This may have adverse practical and/or operational implications for our engineered polymers product line, including potential disruption to supply chains, additional compliance and operational costs, required product modifications and necessary operational changes.

The trade uncertainties stemming from Brexit and the impact of possible regulatory changes may adversely affect our engineered polymers operations, results of operations and financial condition.

Risks Related to Ingevity’s Business

We are dependent on attracting and retaining key personnel.

The Company is dependent upon its senior management, as well as upon engineering, technical, sales and application specialists, together with experienced industry professionals.

Our success depends, in part, on our ability to attract, retain and motivate these key performers.

Our failure to attract and retain those making significant contributions could adversely affect our financial condition and results of operations.

If increasingly more stringent air quality standards worldwide are not adopted, our growth could be impacted.

Environmental standards drive the implementation of gasoline vapor emission control systems by automotive manufacturers.

Given increasing societal concern over global warming and health hazards associated with poor air quality, there is growing pressure on regulators across the globe to take meaningful action.

Adverse conditions in the automotive market may adversely affect demand for our automotive carbon products.

Sales of our automotive activated carbon products are tied to global automobile production levels.

For example, the global economic downturn in 2008/2009 led to a drastic reduction in vehicle sales and an even greater reduction in vehicle production as OEMs right-sized their inventories to meet the lower sales volumes.

Regional disruptions due to localized natural disasters or multi-month strikes at suppliers or OEMs can also significantly impact vehicle production and therefore demand for our automotive carbon.

Additionally, if the recent Coronavirus outbreak continues, it could negatively impact demand for Chinese automotive sales, which would adversely impact sales of our automotive carbon products.

The extent to which the Coronavirus outbreak impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including the severity of the Coronavirus, actions to contain the Coronavirus or treat its impact, among others.

The Company’s printing inks business serves customers in a market that is facing declining volumes and downward pricing.

In recent years, the use of inks in which our printing ink resins are used, such as those made for magazines and catalogs, has significantly decreased, as the printing industry has experienced a reduction in demand due to various factors including the global economic downturn of 2008 and 2009, which severely impacted volumes, and competition from alternative sources of communication, including email, the Web, electronic readers, interactive television and electronic retailing.

The impacts of these changes have led to continued intense competition and downward pricing pressures on printing inks, and therefore, our ink products.

The Company’s pavement technologies product line is heavily dependent on government infrastructure spending.

A significant portion of our customers’ revenues in our pavement technologies business is derived from contracts with various foreign and U.S.

governmental agencies, and therefore, when government spending is reduced, our customers’ need for our products is similarly reduced.

Government business is, in general, subject to special risks and challenges, including:

other government budgetary constraints, cutbacks, delays or reallocation of government funding;

long purchase cycles or approval processes;

our customers’ competitive bidding and qualification requirements;

changes in government policies and political agendas;

and international conflicts or other military operations that could cause the temporary or permanent diversion of government funding from transportation or other infrastructure projects.

The Company’s oilfield technologies product line is significantly affected by trends in oil and natural gas prices that affect the level of exploration, development and production activity.

The level of exploration, development and production activity is directly affected by trends in oil and natural gas prices, which historically have been volatile.

Crude oil prices have declined significantly since 2014, with West Texas Intermediate oil spot prices declining from a high of $108 per barrel in June 2014 to a low of $27 per barrel in February 2016, a level which had not been experienced since 2003.

Pricing has climbed to a trading range of $55 to $58 per barrel in the November 2019 to January 2020 time frame.

Unless potential hostilities between the U.S.

and Iran escalate, pricing is not currently forecasted to change significantly from these levels during 2020.

While these pricing levels are significantly above the February 2016 levels, they remain off their highs seen in the last decade.

Our engineered polymers product line end-markets are subject to constant and rapid technology changes, changes in consumer preferences, evolving standards, and changes in product supply and demand.

I n order to compete successfully, we must develop new products and technologies meeting evolving market and customer needs;

disruptive technologies could reduce the demand for the Company’s products.

Our industries and the end-use markets into which we sell our products experience periodic technological change and product improvement.

Similarly, we face competition in our applications.

Disruptive technology involving new or superior solutions could reduce the demand for the Company’s products.

Acquisition Risks

The Caprolactone Acquisition may expose us to unknown liabilities.

On February 13, 2019, we acquired all the shares of Perstorp UK Ltd.

and, as a result, we are generally subject to all of its liabilities, subject to a warranty and indemnity insurance policy and remedies in the Caprolactone Agreement.

We may learn additional information about the Caprolactone Business that adversely affects us, such as unknown liabilities, including liabilities under environmental or tax laws, or issues that could affect our ability to comply with other applicable laws.

If previously unknown liabilities or other obligations of the Caprolactone Business emerge in the future, and available remedies are not sufficient, our business could be materially affected.

The inability to make or effectively integrate future acquisitions may affect our results.

As part of our growth strategy, we may pursue acquisitions of complementary businesses and product lines or invest in joint ventures.

The ability to grow through acquisitions or other investments depends upon our ability to identify, negotiate, complete and integrate suitable acquisitions or joint venture arrangements.

If we fail to successfully integrate acquisitions into our existing business, our financial condition and results of operations could be adversely affected.

Legal and Regulatory Risks

From time to time we may be engaged in legal actions associated with our intellectual property rights and automotive carbon business, including associated potential counterclaims;

8 unchanged sentences

Our patents and other intellectual property rights may be challenged, invalidated, circumvented and rendered unenforceable or otherwise compromised.

We are currently involved in several legal actions relative to intellectual property associated with our "canister bleed emissions" patent.

These have resulted in counterclaims against us, including claims alleging antitrust and interference with business relations, which we are vigorously defending.

These and other legal actions to protect, defend or enforce our intellectual property rights could result in significant costs and diversion of our resources and our management’s attention, and we may not prevail in any such suits or proceedings.

In November 2020, we received an adverse decision finding some, but not all, of the claims in our “canister bleed emissions” patent invalid in our infringement action against BASF Corp in the U.S.

District Court for the District of Delaware.

We intend to challenge the decision, however in the meantime we anticipate the decision having limited impact on our commercial operations or financial results through patent expiration in March 2022.

A failure to protect, defend or enforce our intellectual property could have an adverse effect on our financial condition and results of operations.

5 unchanged sentences

The failure of our patents or confidentiality agreements to protect our proprietary technology, know-how or trade secrets could result in significantly lower revenues, reduced profit margins or loss of market share.

We are currently involved in several legal actions relative to intellectual property associated with our "canister bleed emissions" patent.

These have resulted in counterclaims against us, including anti-competition claims, which we are vigorously defending.

A failure to protect, defend or enforce our intellectual property rights, or an adverse decision in any counterclaim, could have an adverse effect on our financial condition and results of operations.

Our Performance Chemicals segment is highly dependent on CTO, which is limited in supply;

lack of access to sufficient CTO would impact our ability to produce CTO-based products.

The availability of CTO is essential to the Company’s Performance Chemicals segment.

As a result, there is a finite global supply of CTO-with global demand for softwood pulp driving the global supply of CTO, rather than demand for CTO itself.

Most of the CTO made available for sale by its producers in North America is covered by long-term supply agreements, further constraining availability.

At the time of the Separation, we entered into a long-term supply agreement with WestRock pursuant to which we purchase all of the BLSS and CTO output from WestRock’s existing (at the time of separation) kraft mills, subject to certain exceptions.

This agreement includes pricing terms based on market prices.

Pricing for the products in our agreement with WestRock is based on the prevailing market prices of products at the time of purchase.

The pricing formulas are subject to certain pricing floors as set forth in the agreement with WestRock.

Given the take-or-pay requirements of the agreement with WestRock, in adverse market conditions we could be required to purchase BLSS and CTO from WestRock at prices where our results of operations could be materially and adversely affected.

In 2018, we entered into a 20 year CTO supply agreement with Georgia-Pacific , pursuant to which we purchase the lesser of 125,000 tons of CTO and the aggregate output of CTO produced and originating at certain of Georgia-Pacific’s paper mills.

Pricing for the CTO in our agreement with Georgia-Pacific is a market-based price, subject to ongoing adjustments.

Beginning in 2025, either party to the WestRock agreement may provide a notice to the other party terminating the WestRock agreement five years from the date of such notice.

In addition, from 2022 until 2025, either party may provide a one-year notice to remove a kraft mill as a supply source.

The two largest kraft mills under the WestRock agreement currently supply approximately 17 to 19 percent and 15 to 17 percent , respectively, of the total amount of products supplied under our agreement with WestRock.

There are other pressures on the availability of CTO.

Some pulp or paper mills may choose to consume their production of CTO to meet their energy needs or reduce their carbon footprint rather than sell the CTO to third parties.

Also, as described below, there are regulatory pressures that may incentivize suppliers of CTO to sell CTO into alternative fuel markets rather than to historical end users such as Ingevity.

For example, the combined impact of Hurricane Katrina in August 2005 and Hurricane Rita in September 2005 caused significant damage to forests throughout the southern U.S.

This significantly affected the availability and quality of the supply of CTO during late 2005 and into 2006.

In addition, Hurricanes Florence and Michael in 2018 disrupted vendor operations and reduced availability of CTO supply well into 2019.

We may not realize the growth opportunities that are anticipated from the Caprolactone Acquisition.

The continued benefits that are expected to result from the Caprolactone Acquisition will depend, in part, on our ability to further realize the anticipated growth opportunities.

Our success in realizing these growth opportunities, and the timing of this realization, depends on the successful integration of the Caprolactone Business.

There is a significant degree of difficulty and management distraction inherent in the process of integrating an acquisition as sizable as the Caprolactone Business, and while integration is largely complete, the remaining process of integrating operations could cause an interruption of, or loss of momentum in, our and the Caprolactone Business’ activities.

Members of our senior management have and may be required to continue to devote considerable amounts of time to this integration process, which will decrease the time they will have to manage other aspects of our business, service existing customers, attract new customers and develop new products or strategies.

If we are not able to effectively complete the integration process, or if any significant business activities are interrupted as a result of the integration process, our business could suffer.

There can be no assurance that we will successfully or cost-effectively integrate the Caprolactone Business.

The failure to do so could have a material adverse effect on our business, financial condition or results of operations.

Even if we are able to integrate the Caprolactone Business successfully, this integration may not result in the realization of the full benefits of the growth opportunities that we currently expect from this integration, and we cannot guarantee that this benefit will be achieved within anticipated time frames or at all.

For example, the associated costs of the Caprolactone Acquisition may be greater than we expect.

Additionally, global market conditions and Brexit may continue to negatively impact the Caprolactone Business.

Any of these would offset the anticipated benefit from the Caprolactone Acquisition.

The Caprolactone Acquisition may expose us to unknown liabilities.

On February 13, 2019, we acquired all the shares of Perstorp UK Ltd.

and, as a result, we are generally subject to all of its liabilities, subject to a warranty and indemnity insurance policy and remedies in the Caprolactone Agreement.

If previously unknown liabilities or other obligations of the Caprolactone Business emerge in the future, and available remedies are not sufficient, our business could be materially affected.

and elsewhere may incentivize the use of CTO as a feedstock for production of alternative fuels.

In December 2008, the European Union (“EU”) adopted the Renewable Energy Directive, which established a 20 percent EU-wide target for energy consumed from renewable sources relative to the EU’s gross final consumption of energy, as well as a 10 percent target for energy consumed from renewable sources in the transport section.

The RED also established sustainability criteria for biofuels, which must be satisfied in order for the consumption of a fuel to count toward a Member State’s national targets.

CTO-based biofuel currently satisfies the RED’s biofuel sustainability criteria.

In spring 2015, the EU adopted amendments to the Renewable Energy Directive.

based and other qualifying biofuels.

In 2018, the EU adopted RED II (effective 2021-2030) which increased the target for energy consumed from renewable sources in the transport section to 14 percent by 2030.

Advanced biofuels must comprise 0.2% of the transport sector by 2022 and 3.5% by 2030.

CTO remains an expressly listed feedstock for advanced biofuels and may be doubled counted toward these goals.

RED II requires Member States shall prepare plans to set national targets and growth trajectories for their contributions to the EU-wide target.

The RED II now includes language to consider the potential for undue market distortion for the raw materials used to meet these targets.

Currently, none of the legislation mandates or provides incentives for the use of CTO as a transportation fuel.

Some regional cap and trade programs may incentivize the use of CTO in stationary sources.

Future legislation in the U.S.

and elsewhere may promote the use of CTO as a feedstock for production of alternative fuels.

Pricing for CTO (which accounted for approximately 10 percent of all of our cost of sales and 32 percent of our raw materials purchases for 2019) is subject to particular pricing pressures by reason of the limited supply elasticity of the product and competing demands for its use, all of which drive pressure on price:

• CTO is a product of the kraft pulping process, and the global supply of CTO is inherently constrained by the volume of kraft pulping processing;

• CTO can be burned as alternative fuels, either in support of the originating pulp mill operations, by energy companies or biofuel companies;

• Regulations or other incentives mandate or encourage the consumption of biofuels as alternatives, including CTO.

Additionally, we may be placed at a competitive disadvantage relative to our competitors who rely on different primary raw materials or who have more favorable terms with their suppliers.

We are also dependent on other raw materials, and these are also subject to pricing pressures;

lack of access to these raw materials and inability to pass on price increases could adversely affect our financial condition and results of operations.

Raw material costs are a significant operating expense of the Company.

A prolonged period of low energy prices may materially impact our results of operations.

The price of energy may directly or indirectly impact demand, pricing or the profitability for certain Ingevity products.

Due to this, alternative technologies which compete with product offerings provided by Ingevity may be advantaged from time to time in the market place.

We face competition from producers of substitute products and new technologies, and new or emerging competitors.

In the Performance Materials segment, there is competition from various other activated carbon manufacturers.

These competitors are actively trying to develop more advanced and alternative activated carbon products that would more effectively compete with our products in the automotive applications.

There is also competition in the automotive applications from non-activated carbon competitors or product offerings.

For example, at least one OEM is using sealed tanks in certain subsets of its vehicles to comply with the LEV III/Tier 3 regulations.

While the sealed tank fuel systems generally require a similarly sized pelleted activated carbon canister to deal with refueling emissions, in most cases, they do not use a extruded honeycomb to meet current U.S.