What changed in this filing

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Item 1. Business

2024-02-22 compared with 2023-02-28 · 182 added, 178 removed, 117 unchanged (75% of the section changed)

Ingevity provides products and technologies that purify, protect, and enhance the world around us.

Ingevity Corporation provides products and technologies that purify, protect, and enhance the world around us.

Through a diverse team of talented and experienced people, we develop, manufacture, and bring to market solutions that are largely renewably sourced and help customers solve complex problems while making the world more sustainable.

Our products are used in a variety of demanding applications, including automotive components that reduce gasoline vapor emissions, asphalt paving, road striping, oil exploration and production, agrochemicals, adhesives, lubricants, publication inks, coatings, elastomers, and bioplastics.

We operate in two reporting segments:

Performance Materials and Performance Chemicals.

Our products are used in a variety of demanding applications, including adhesives, agrochemicals, asphalt paving, bioplastics, coatings, elastomers, lubricants, pavement markings, publication inks, oil exploration and production and automotive components.

We operate in three reporting segments:

Performance Materials, Performance Chemicals and Advanced Polymer Technologies.

During the first quarter of 2023, we realigned our segment reporting structure to increase transparency for our investors and better align with how our chief operating decision maker intends to measure segment operating performance and allocate resources across our operating segments.

We separated our engineered polymers product line from the Performance Chemicals reportable segment into its own reportable segment, Advanced Polymer Technologies.

This reportable segment change also resulted in our Performance Chemicals reporting unit for goodwill being split into two separate reporting units for the purposes of goodwill impairment testing.

In November of 2023, we announced an initiative to reposition our Performance Chemicals segment to enhance profitability and earnings stability as we execute our corporate strategy to focus on higher margin and higher growth specialty products, diversify feedstocks and optimize our manufacturing network.

This initiative will result in the reduction, and in some cases exit, of historical primary end uses of our Industrial Specialties product line such as adhesives, publication inks, and oilfield as well as the closure of our Performance Chemicals' manufacturing facility in DeRidder, Louisiana.

Refer to the section:

Performance Chemicals , within Item 1:

BUSINESS for more information.

Throughout this Annual Report on Form 10-K, except where otherwise stated or indicated by the context, "Ingevity," the "Company," "we," "us," or "our" means Ingevity Corporation and its consolidated subsidiaries and their predecessors.

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Item 8 of this Form 10-K.

Performance Materials Performance Chemicals

Product Lines Pavement Technologies Industrial Specialties Engineered Polymers

Primary End Uses Gasoline vapor emissions control

Purification of food, water, beverages, and chemicals

Warm mix asphalt

Performance Materials Performance Chemicals Advanced Polymer Technologies

Product Lines Road Technologies (1)

Industrial Specialties

End-Use Markets Automotive

Food, Chemicals, and Water Purification Pavement Construction

Pavement Preservation

Pavement Reconstruction and Recycling

Thermoplastic pavement markings

Agrochemicals

Printing inks

Pavement Markings

Agricultural Chemicals

Paper Chemicals

Industrial Intermediates

Oilfield Coatings

Medical devices

2022 Revenue $548.5 million $1,119.8 million

Governmental Regulations

Our manufacturing operations are subject to regulation by governmental and other regulatory authorities with jurisdiction over our operations.

Substances Control Act ("TSCA") in the U.S.

and the Registration, Evaluation and Authorization of Chemicals ("REACH"), directives in the European Union, the United Kingdom ("UK"), and other countries.

It is not possible to quantify with certainty the material effects that compliance with these regulations may have upon the capital expenditures, earnings, or competitive position of Ingevity, but we currently anticipate that such compliance will not have a material adverse effect on any of the foregoing.

Environmental and other regulations and related legal proceedings have the potential to involve significant costs and liability for Ingevity.

I ntellectual Property

Intellectual property, including patents, closely guarded trade secrets, and highly proprietary manufacturing know-how, as well as other proprietary rights, is a critical part of maintaining our technology leadership and competitive edge.

Our business strategy includes filing patent and trademark applications where appropriate for proprietary developments, as well as protecting our trade secrets.

We actively create, protect, and enforce our intellectual property rights.

We are filing for and being granted patents for product and process developments for our Performance Materials business that we believe are both novel and consistent with trends in the technological development of engines.

Our Evotherm® Warm Mix Asphalt technology is supported by numerous global patents.

Additionally, our caprolactone and related technologies are supported by numerous global patents and trademarks, as well as proprietary manufacturing and technical know-how.

The protection afforded by our patents and trademarks varies based on country, scope, and coverage, as well as the availability of legal remedies.

Although our intellectual property taken as a whole is material to the business, there is no individual patent or trademark the loss of which could have a material adverse effect on the business.

On July 19, 2018, Ingevity filed suit against BASF Corporation (“BASF”) in the United States District Court for the District of Delaware (the “Delaware Proceeding”) alleging BASF infringed Ingevity’s patent covering canister systems used in the control of automotive gasoline vapor emissions (U.S.

RE38,844) (the “844 Patent”).

On February 14, 2019, BASF asserted counterclaims against Ingevity in the Delaware Proceeding, alleging two claims for violations of U.S.

antitrust law (one for exclusive dealing and the other for tying) as well as a claim for tortious interference with an alleged prospective business relationship between BASF and a BASF customer (the “BASF Counterclaims”).

The BASF Counterclaims relate to Ingevity’s enforcement of the 844 Patent and Ingevity’s entry into several supply agreements with customers of its fuel vapor canister honeycombs.

District Court dismissed Ingevity’s patent infringement claims on November 18, 2020, and the case proceeded to trial on the BASF Counterclaims in September 2021.

On September 15, 2021, a jury in the Delaware Proceeding issued a verdict in favor of BASF on the BASF Counterclaims and awarded BASF damages of approximately $28.3 million, which will be trebled under U.S.

antitrust law to approximately $85.0 million when the court enters judgment.

In addition, BASF may seek pre- and post-judgment interest and attorneys’ fees and costs in amounts that they will have to support at a future date.

We disagree with the verdict, including the court’s application of the law, and we intend to seek judgment as a matter of law in the Delaware Proceeding post-trial briefing stage and on appeal, if necessary.

In addition, we intend to challenge the U.S.

District Court’s November 2020 dismissal of our patent infringement claims against BASF.

Ingevity believes in the strength of its intellectual property and the merits of its position and intends to pursue all legal relief available to challenge these outcomes in the Delaware Proceeding.

The final resolution of these matters could take up to eighteen months.

There are a variety of seasonal dynamics, including global climate and weather conditions, that impact our businesses, though none have currently materially affected our financial results, except in the case of the pavement technologies product line, where roughly 70 to 75 percent of revenue is generated between April and September.

Limited (2) :

Adhesives, Oilfield and Lubricants

Automotive & Transportation

Industrial Equipment

Footwear & Apparel

Consumer Packaging

Medical & Health

$586.0 million $902.1 million $204.0 million

_______________

(1) Previously named Pavement Technologies

(2) In November of 2023 we announced an initiative to reposition our Performance Chemicals segment to enhance profitability and earnings stability as we execute our corporate strategy to focus on higher margin and higher growth specialty products, diversify feedstocks and optimize our manufacturing network.

This initiative will result in the reduction, and in some cases exit, of historical end-use markets of our Industrial Specialties product line such as adhesives, publication inks, and oilfield.

Refer to the section:

Performance Chemicals , within Item 1:

BUSINESS for more information.

There are a variety of seasonal dynamics, including global climate and weather conditions, that impact our businesses, though none have currently materially affected our financial results, except in the case of the road technologies product line, where roughly 70 to 75 percent of revenue is generated between April and September.

From a supply perspective, this seasonality is effectively managed through pre-season inventory build and active inventory management throughout the year.

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Although we believe that we currently have a stable natural gas supply and infrastructure for our operations, we are subject to volatility in the market price of natural gas.

We enter into certain derivative financial instruments to mitigate expected fluctuations in market prices and the volatility of earnings and cash flow resulting from changes to the pricing of natural gas purchases.

All of our manufacturing processes also consume a

significant amount of electricity.

Each of these facilities are located in regulated service areas that have stable rate structures with reliable electricity supply.

We enter into certain derivative financial instruments to mitigate expected fluctuations in market prices and the resulting volatility of earnings and cash flow.

All of our manufacturing processes also consume a significant amount of electricity and are located in regulated service areas that have stable electricity rate structures with reliable supply.

Leveraging Sustainability

Throughout our Performance Chemicals and Performance Materials portfolios, we are a leader in adding value to products made from renewable materials and in derivatizing technologies that impart desirable environmental benefits in their use.

To create a majority of our chemistries, we take crude tall oil from pine trees, hardwood sawdust (both co-products of the lumber, paper, and furniture-making industries), and vegetable oils and convert them into products that benefit customers, the environment, and society.

For the caprolactone-based products in our Performance Chemicals segment – although derived from traditional feedstocks – these solutions enable performance attributes in end-use markets that directly help customers and consumers meet sustainability goals.

The superior durability of capa-based polyurethane technologies extends product life and the biodegradable performance of our thermoplastic polycaprolactones offers compostable end of-life solutions.

Throughout our Performance Materials, Performance Chemicals, and Advanced Polymer Technologies portfolios, we are a leader in adding value to products made from renewable materials and in derivatizing technologies that impart desirable environmental benefits in their use.

To create a majority of our chemistries, we take crude tall oil ("CTO") from pine trees, hardwood sawdust (both co-products of the lumber, paper, and furniture-making industries), and plant based oils and convert them into products that benefit customers, the environment, and society.

For the caprolactone-based products in our Advanced Polymer Technologies segment – although derived from traditional feedstocks – these products provide solutions that enable performance attributes in end-use markets that directly help customers and consumers meet sustainability goals.

Ingevity’s products help customers reduce their ecological impact.

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Our automotive activated carbon products improve the air we breathe by recovering 8 million gallons of gasoline daily.

Our lubricant technologies increase tool life and simplify formulations.

And our alternative-fuel vehicle technology enables the use of renewable natural gas as fuel for pickup trucks and busses.

Our agriculture adjuvants provide enhanced performance in crop protection.

And our alternative-fuel vehicle technology enables the use of renewable natural gas as fuel for pickup trucks and buses.

The superior durability of caprolactone-based polyurethane technologies extends product life and the biodegradable performance of our thermoplastic polycaprolactones offers compostable end of-life solutions.

Our business is built on our ability to maximize the value and utility of materials over their lifecycle, and we will continue to enhance this value proposition through future acquisitions and new product development.

Human Capital Management

Our employees are critical to our success, and we strive to provide a safe, rewarding, and respectful workplace where our people are provided with opportunities to pursue career paths based on skills, performance, and potential.

Developed collaboratively by Ingevity employees in 2017, the IngeviWay is the cultural framework that shapes Ingevity’s future and enables our success.

It describes who we are, what we want to be, and what’s important to us as we work together to fulfill our purpose to purify, protect and enhance the world around us.

In early 2022, we reinforced our IngeviWay foundation by launching “The IngeviWay in Action,” an initiative that raises the bar on expectations to build, inspire and lead, and better aligns how we work as a team to create the Ingevity of the future.

By focusing on making a positive impact through everyday actions, “The IngeviWay in Action” bolsters the way we live our core values of safety and sustainability, maximize value for our people and our customers, continue our commitment to excellence, integrity and ethical behavior and drive to create innovative solutions.

Our employees are critical to our success, and we strive to provide a safe, rewarding, and respectful workplace where our people have opportunities to pursue career paths based on skills, performance, and potential.

Our success depends, in part, on our ability to attract, retain and motivate critical resources across production, technical, engineering, sales, and various functional disciplines.

If an ongoing failure to attract and retain individuals in key business roles and functions materialized, it could adversely affect our financial condition and operational results.

We currently employ approximately 2,050 employees, of whom approximately 77 percent are employed in the U.S.

Approximately 19 percent of our employees are represented by domestic (i.e., U.S.) labor unions under various collective bargaining agreements ("CBA").

Labor Relations and Collective Bargaining

We currently employ approximately 1,700 employees (excluding employees at our DeRidder, LA manufacturing facility which will be closed in 2024), of whom approximately 75 percent are employed in the U.S.

Approximately 56 percent of our production employees are represented by labor unions under various collective bargaining agreements ("CBA").

We engage in negotiations with labor unions for new CBAs from time to time based on expiration dates of agreements and statutory requirements.

We consider our relationships with all salaried, union-hourly, and non-hourly employees to be positive and collaborative.

During the second quarter of 2022, at our Covington, Virginia Performance Materials' facility, the International Brotherhood of Electrical Workers (“IBEW”) AFL-CIO Local Union 464 ratified a four-year CBA, which expires January 15, 2025.

In the third quarter of 2022, at our Covington Virginia Performance Materials' facility, the Covington Paper Workers Union, Local 675, affiliated with the Association of Western Pulp and Paper Workers ratified a four-year CBA which expires December 1, 2025.

In the fourth quarter of 2022, at our Charleston South Carolina Performance Chemicals’ facility:

(1) the United Steel, Paper, Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (“USW”) on behalf of its Local Union 9-0508-02, ratified a four-year CBA, which expires June 30, 2026, and (2) the International Association of Machinists and Aerospace Workers (“IAM”) and its Charleston Lodge No.

183, ratified a four-year CBA, which expires June 30, 2026.

In addition, the CBA at our Wickliffe, Kentucky Performance Materials facility with the USW, on behalf of its affiliated Local Union 0775, expired on February 1, 2023.

The parties began contract renewal negotiations in January 2023.

Diversity, Equity & Inclusion

At Ingevity, we are committed to fostering a culture where we recognize, celebrate, and welcome the ways in which each other's unique backgrounds, experiences and perspectives help us reach the best solutions for our customers.

To support us in developing practical and thoughtful ways to embed these principles into our everyday work, we created a dedicated team to advance diversity, equity, and inclusion ("DEI").

A strategic and intentional focus on DEI enhances the employee experience and satisfaction.

In 2023, the United Steel, Paper, Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, on behalf of its affiliated Local Union 0775 at our Wickliffe, Kentucky Performance Materials manufacturing facility ratified a four-year CBA, which expires on February 1, 2027.

Also in 2023, the IBEW LOCAL Union No.

1753 at our Charleston, South Carolina Performance Chemicals manufacturing facility ratified a four-year CBA, which expires on June 20, 2026.

The Advanced Polymer Technologies manufacturing facility in Warrington, United Kingdom is in the process of their annual negotiations with the GMB Union.

Further, the CBA at our Crossett, Arkansas Performance Chemicals manufacturing facility with the International Association of Machinists and Aerospace Workers Union ("IAM") expires on March 1, 2024.

These combined CBA impact approximately 40 percent of the workforce at these two locations.

The parties began contract renewal negotiations during the first quarter of 2024 and continue to operate under the same terms and conditions while negotiations are pending.

Diversity, Equity, Inclusion and Belonging

Ingevity is guided by our IngeviWay vision for how we work together to engage the diversity, knowledge, energy, talents and expertise of all employees.

This vision reflects our commitment to actively supporting an inclusive environment where all employees are heard, respected and empowered to grow to their fullest potential.

Driving meaningful and sustainable growth as a company includes attracting and retaining top talent with a broad range of skills, experience and ideas, and we are focused on increasing recruitment of diverse talent.

A strategic and intentional focus on diversity, equity, inclusion and belonging enhances the employee experience and satisfaction.

It also supports more effective innovation, enhanced customer experience, and a deeper understanding of the communities Ingevity serves.

Our diversity recruiting strategy is focused on ensuring everyone has an equitable experience by diversifying our talent pipeline through diverse candidate slates and interview teams as well as gender-neutral job descriptions.

We are also enhancing our partnerships with organizations such as the National Society of Black Engineers (NSBE), National Black MBA Association, Society of Women Engineers (SWE), Society of Hispanic Engineers (SHPE), Society of Asian Scientist and Engineers (SASE), Corporate Gray, an organization that focuses on military recruiting, and historically black colleges and universities to broaden our candidate pool.

Our focus on advancing the diversity makeup of our leadership continues to positively impact our growth and success.

Today, our board of directors is 30 percent women and 20 percent racially and ethnically diverse, and our executive team is 43 percent women-led and 14 percent racially and ethnically diverse.

Our Women’s Network employee resource group ("ERG") has served many years as a catalyst for building community, supporting personal and professional development, and strengthening our business impact internally and externally.

We also recently launched two new ERGs in support of our Black and Hispanic employees.

ERGs aim to foster a richer and more diverse workplace by promoting a positive and inclusive employee experience.

Performance Management

We evaluate employee performance holistically, looking at the progress against goals, behaviors, feedback, and direct contributions of the employee and their level of impact on the business.

Performance measurement includes accomplishments that supported the team, our company, internal and external customers, and our core values.

In 2022, we modified our approach to create a more formalized record of employee performance at mid-year and year-end, including a new requirement for everyone at Ingevity to request feedback from colleagues who have insight into the respective employee's performance and contributions.

We have a structured performance assessment review at least twice a year and continued to promote ongoing conversations between managers and employees to improve performance, drive business results, and increase employee engagement.

Performance conversations often occur monthly or more frequently.

The slight process enhancements allow Ingevity to cultivate a well-rounded view of each employee's strengths and identify opportunities for learning and growth.

We assess employee performance comprehensively, taking into account behaviors and direct input from the employee, feedback, and the individual's progress toward goals, as well as their level of business impact.

Achievements that bolster the team, our business, and our clients—internal and external—and our fundamental values are all included in the performance evaluation process.

Our method involves keeping a codified record of employee performance at mid-year and end-of-year.

It also includes a requirement for all Ingevity employees to ask for feedback from those who are aware of their performance and contributions.

In order to boost productivity, provide positive business outcomes, and raise employee engagement, we encourage managers and their employees to have regular discussions.

With our all-encompassing strategy, Ingevity is able to gain a comprehensive understanding of each worker's strengths and identify opportunities for growth and development.

Health & Safety

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We work hard to protect employees, contractors, and the communities where we operate from injuries, illnesses and incidents through the design and delivery of safe operations, continuous improvement of personal and process safety performance, management systems, and programs, a strong culture of compliance, and a commitment to zero harm to people and the environment.

In 2022, we continued our efforts to increase reporting of and response to near miss incidents to prevent more serious injuries before they could occur.

In 2023, we continued our efforts to increase reporting of and response to near miss incidents to prevent more serious injuries before they occur.

This included efforts to increase the number of near misses reported and an increase in reporting by a broader number of employees.

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Employees were trained on the importance of our Life-Saving Rules, put in place to prevent fatalities and serious injuries through leadership videos, monthly interactive training packages, and upgraded procedures, checklists, work permits, and audits.

Additionally, in North America where the majority of our bulk shipments are executed, we abide by the American Chemistry Council’s Responsible Care practices of transporting our chemicals safely.

We strategically utilize logistics providers that have committed to these higher standards of Safety, Security, Stewardship, and the Environment.

Additionally, in North America where the majority of our bulk shipments are executed, we abide by the American Chemistry Council’s Responsible Care practices for transporting our chemicals safely.

We strategically utilize logistics providers that have committed to these higher standards of safety, security, stewardship, and sustainability.

Governmental Regulations

Our manufacturing operations are subject to regulation by governmental and other regulatory authorities with jurisdiction over our operations.

These regulations include the discharge of materials into the environment, the handling, storage, transportation, disposal, and clean-up of chemicals and waste materials, and otherwise relating to the protection of the environment, as well as other operational regulations, such as the Occupational Safety and Health Act ("OSHA") and the Toxic Substances Control Act ("TSCA") in the U.S., and the Registration, Evaluation and Authorization of Chemicals ("REACH") directives in the European Union, the United Kingdom, and other countries.

Environmental and other regulations and related legal proceedings have the potential to involve significant costs and liability for Ingevity.

I ntellectual Property

Our business strategy includes filing patent and trademark applications where appropriate for proprietary developments, as well as protecting our trade secrets.

We actively create, protect, and enforce our intellectual property rights.

Our Evotherm® Warm Mix Asphalt technology is supported by numerous global patents.

Additionally, our caprolactone and related technologies are supported by numerous global patents and trademarks, as well as proprietary manufacturing and technical know-how.

The protection afforded by our patents and trademarks varies based on country, scope, and coverage, as well as the availability of legal remedies.

Although our intellectual property taken as a whole is material to the business, there is no individual patent or trademark the loss of which could have a material adverse effect on the business.

On July 19, 2018, we filed suit against BASF Corporation (“BASF”) in the U.S.

District Court for the District of Delaware (the “Delaware Proceeding”) alleging BASF infringed Ingevity’s patent covering canister systems used in the control of automotive gasoline vapor emissions (U.S.

RE38,844) (the “844 Patent”).

On February 14, 2019, BASF asserted counterclaims against us in the Delaware Proceeding, alleging two claims for violations of U.S.

The BASF Counterclaims relate to our enforcement of the 844 Patent and our entry into several supply agreements with customers of our fuel vapor canister honeycombs.

District Court dismissed our patent infringement claims on November 18, 2020, and the case proceeded to trial on the BASF Counterclaims in September 2021.

antitrust law to approximately $85.0 million.

On May 18, 2023, the court in the Delaware Proceeding entered judgment on the jury’s verdict, which commenced the post-trial briefing stage.

On February 13, 2024, the court in the Delaware Proceeding denied BASF’s motion for pre-judgment interest on its tortious interference claim as well as and our motion seeking judgment as a matter of law, or a new trial in the alternative.

In addition, BASF has indicated it will seek attorneys’ fees and costs in amounts that they will have to support at a future date.

Unless the judgment is set aside, BASF will be entitled to post-judgment interest pursuant to the rate provided under federal law.

We disagree with the verdict, including the court’s application of the law and entry of judgment and intend to appeal.

In addition, we may challenge the U.S.

District Court’s November 2020 dismissal of our patent infringement claims against BASF.

Ingevity believes in the strength of its intellectual property and the merits of its position and intends to pursue all legal relief available to challenge these outcomes in the Delaware Proceeding.

Final resolution of these matters could take up to 24 months.

Performance Materials

We engineer, manufacture, and sell hardwood-based, chemically activated carbon products, which are produced through a highly technical and specialized process primarily for use in gasoline vapor emission control systems in cars, trucks, motorcycles, and boats.

We engineer, manufacture, and sell hardwood-based, chemically activated carbon products which are produced through a highly technical and specialized process primarily for use in gasoline vapor emission control systems in internal combustion engines and hybrid electric vehicles including cars, trucks, motorcycles, and boats.

To maximize the productivity of our manufacturing assets, we also produce several other activated carbon products for food, water, beverage, and chemical purification applications.

Our automotive activated carbon products primarily take the form of granules, pellets, and honeycomb "scrubbers," which are primarily utilized in vehicle-based gasoline vapor emission control systems to capture gasoline vapors that would

otherwise be released into the atmosphere as volatile organic compounds.

The captured gasoline vapors are largely purged from the activated carbon and re-directed to the engine where they are used as supplemental power for the vehicle.

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Sawdust is readily available and is sourced through multiple suppliers to protect against supply disruptions and to maintain competitive pricing.

We also utilize phosphoric acid, which is used to chemically activate the hardwood sawdust.

We also utilize phosphoric acid to chemically activate the hardwood sawdust.

This phosphoric acid is sourced through multiple suppliers to protect against supply disruptions and to maintain competitive pricing.

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In 2023, our ten largest customers accounted for approximately 82 percent of sales.

We are the trusted source of these products for many of the world’s largest automotive parts manufacturers, including BorgWarner Inc.

(previously Delphi Technologies PLC), A.

We are the trusted source of these products for many of the world’s largest automotive parts manufacturers, including PHINIA Inc.

(previously BorgWarner Inc.), A.

Kayser Automotive System GmbH, Korea Fuel-Tech Corporation, MAHLE GmbH, and many other large and small component manufacturers throughout the global automotive supply chain.

Our process purification products are sold to approximately 60 customers globally.

We sell our automotive technologies and process purification products primarily through our own direct sales force in North America, Europe, South America, Asia, and a smaller, focused network of third-party distributors that have established a strong direct sales and marketing presence in North America and China.

Our food, water, beverage, and chemical purification products are sold to approximately 50 customers globally.

We sell our products primarily through our own direct sales force in North America, Europe, South America, Asia, and a smaller, focused network of third-party distributors that have established a strong direct sales and marketing presence in North America and China.

Our competitors include Norit, Kuraray Co., Ltd., and several domestic U.S.

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Performance Chemicals

Ingevity’s Performance Chemicals segment is comprised of three product lines:

pavement technologies, industrial specialties, and engineered polymers.

Our products are utilized in warm mix paving, pavement preservation, pavement reconstruction and recycling, road striping, adhesives, agrochemical dispersants, lubricants, printing inks, coatings, resins, elastomers, bioplastics, medical devices, oil well service additives, oil production and downstream applications, and other diverse industrial uses.

Our Performance Chemicals segment is comprised of two product lines:

road technologies (previously named pavement technologies) and industrial specialties.

Our products are utilized in pavement construction, pavement preservation, pavement reconstruction and recycling, road markings, agrochemical dispersants, paper chemicals, and other diverse industrial uses.

Our application expertise is often called upon by our customers to provide unique solutions that maximize resource efficiency.

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Sales are assigned to geographic areas based on the location of the party to which the product was shipped.

In 2023, Ingevity began a transformation of the Performance Chemicals’ industrial specialties product line.

In the spring of 2023, Ingevity ceased the processing of CTO at the Crossett Arkansas facility and converted the facility to the processing of a variety of plant based feedstocks.

In addition, during the fourth quarter of 2023, Ingevity announced the planned closure of the DeRidder, Louisiana CTO refinery and derivatives operations.

Once this transformation is complete, Ingevity’s participation in the rosin based adhesive and publication printing ink markets along with emulsifiers for drilling into the oilfield markets will be substantially reduced.

Raw Materials and Production

Our Performance Chemicals segment serves customers globally from seven manufacturing locations in the U.S.

and one in the UK.

Most of our industrial specialties and some of our pavement technologies products are derived from crude tall oil ("CTO"), a co-product of the kraft pulping process, where pine trees are used as the source of the pulp.

We also produce products derived from lignin, which is extracted from black liquor, another co-product of the kraft pulping process.

We typically source over 80 percent of our CTO needs through long-term supply contracts.

The remainder of our CTO needs is sourced through short-term contracts and spot purchases in the open market.

Most of our long-term contracted volumes are sourced through two primary parties:

WestRock and Georgia-Pacific LLC (“Georgia-Pacific”).

During 2022, we sourced approximately 75 percent of our CTO and CTO equivalent volumes of black liquor soap skimming ("BLSS"), the precursor to CTO, from WestRock and Georgia-Pacific combined.

These relationships with WestRock and Georgia-Pacific are strategically important to our Performance Chemicals business due to the limited supply of CTO globally, a significant portion of which we believe is already under long-term supply agreements with other consumers of CTO.

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.

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 that meets Ingevity’s quality standards.

Geopolitical risk factors could constrain CTO availability.

For example, sanctions imposed on Russia in 2022 have constrained the global CTO supply by approximately 10 percent.

Our Performance Chemicals segment serves customers globally from six manufacturing locations in the U.S.

Most of our industrial specialties and some of our road technologies products are derived from CTO, a co-product produced by softwood kraft pulp processors, such as WestRock and Georgia-Pacific LLC (“Georgia-Pacific”).

We also produce products derived from lignin, which is extracted from black liquor, another co-product of softwood kraft pulp processing.

We typically source our CTO needs primarily through supply contracts.

Most of our contracted volumes are sourced through two primary parties:

WestRock and Georgia-Pacific.

During 2023, we sourced approximately 82 percent of our CTO from WestRock and Georgia-Pacific combined.

CTO accounted for approximately 26 percent of our consolidated cost of sales and 51 percent of our consolidated raw materials purchases in 2023.

The supply of CTO is generally inelastic and governed by the volume of softwood kraft pulp processing around the world.

Also, there are regulatory pressures that may incentivize suppliers of CTO to sell CTO into alternative fuel markets (i.e., biofuels) rather than to historical end users such as Ingevity.

CTO-based biofuel has been deemed to meet the EU’s Renewable Energy Directive, second phase (“RED II”) biofuel sustainability criteria.

As a consequence of RED II, there has been a significant increase in demand for CTO and its derivatives, resulting in significantly increasing prices.

As a result of RED II and related government incentives, there has been a significant increase in demand for CTO and its derivatives during 2023.

The increased demand, combined with the rationalization of softwood kraft pulp processing during 2023, has created pressure on CTO pricing and driven the cost of CTO to unprecedented levels, higher by as much as 300 percent in some cases.

In addition to these developments in the EU, various pieces of legislation regarding the use of alternative fuels have been introduced in the U.S.

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and elsewhere may promote the use of CTO or its derivatives as a feedstock for the production of biofuels, further constraining supply.

Because the supply of CTO is inherently constrained by the volume of kraft pulp processing as discussed above, as well as the recent diversion of CTO for the production of alternative fuels, the availability of CTO supply as a raw material for the pine-based chemicals industry is under pressure.

This pressure has increased and we expect will continue to drive the cost of CTO to unprecedented levels.

CTO accounted for approximately 14 percent of our consolidated cost of sales and 22 percent of our full company raw materials purchases in 2022.

As described above, the pricing and availability of CTO are impacted by the limited supply of the product and competing demands for its use, both of which drive pressure on its price.

To diversify our raw material stream, we converted a portion of our Crossett, Arkansas CTO facility to run non-CTO-based alternative fatty acids ("AFA").

We currently sell AFA as well as AFA derivatives into end markets such as oilfield and industrial applications.

We have invested and will continue to invest, in AFA production capacity at our Crossett, Arkansas facility as we expand the commercialization of our product offerings in existing and new markets, which may include the biofuels market.

Our engineered polymers' products are caprolactone based, which is derived from cyclohexanone, a benzene derivative, and hydrogen peroxide, both of which are readily available in the market.

We maintain multiple suppliers of cyclohexanone to protect against supply disruptions and to maintain competitive pricing.

Our hydrogen peroxide is currently supplied by Solvay Interox Limited, a co-located supplier at our Warrington, UK facility under a long-term supply agreement.

The other key raw materials used in the Performance Chemicals business are maleic anhydride, pentaerythritol, and ethylene amines.

In 2023, we took further actions to diversify our raw materials stream and began a transformation of the Performance Chemicals’ industrial specialties product line.

In April 2023, we converted our Crossett, Arkansas CTO facility to run on non-CTO plant-based natural oils including soy, canola and palm-based oils.

We currently sell these products as well as derivatives into end markets for industrial applications.

We have invested in production capability at our Crossett, Arkansas facility as we expand the commercialization of our product offerings in existing and new markets, which may include the personal care;

home and industrial cleaners, as well as the biofuels market.

Additionally, in November 2023, we announced the planned closure of the DeRidder, Louisiana CTO facility.

With these combined actions we have CTO supply contracted for volumes that exceed our post-transformation manufacturing capacity.

We are evaluating our requirements and working with our suppliers to adjust our contracted volumes.

However, we expect to procure CTO volumes, under an existing long-term contract, in excess of production needs and will therefore need to balance our working capital requirements and sell, as necessary, excess CTO volumes to the open market.

The other key raw materials used in the Performance Chemicals business are maleic anhydride, ethoxylates, and ethylene amines.

These are sourced where possible through multiple suppliers to protect against supply disruptions and to maintain competitive pricing.

Markets Served

Pavement Technologies

Our pavement technologies product line produces a broad line of innovative additives and technologies utilized globally in road construction and pavement preservation, including pavement reconstruction and recycling.

Road Technologies

Our road technologies product line produces a broad line of innovative additives and technologies utilized globally in road construction and pavement preservation, including pavement reconstruction and recycling.

With the 2022 acquisition of Ozark Materials, LLC and Ozark Logistics, LLC (collectively, “Ozark Materials”), we have added road striping technologies to the portfolio.

Warm Mix Asphalt.

Road Construction.

Evotherm®, our premier road construction additive, is a warm mix asphalt technology that promotes adhesion by acting as both a liquid antistrip and a warm mix asphalt.

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Our cold in-place recycling additives allow our customers to reopen existing roadways faster, while also lowering overall costs and jobsite emissions.

Thermoplastic Pavement Markings.

Pavement Markings.

We provide alkyd and hydrocarbon premium-based thermoplastic road striping technologies which provide long service life, excellent adhesion, superior color, and retro-reflectivity.

Based on the customer and/or governmental agency requirements, the markings can be designed for varying levels of initial and retained performance properties.

We supply our pavement technologies products to approximately 650 customers in 65 countries through our own direct sales force, primarily in North America and Asia, as well as a network of third-party distributors.

We supply our road technologies products to approximately 850 customers in 60 countries through our own direct sales force, primarily in the Americas and Europe, as well as a network of third-party distributors.

In 2023, our ten largest customers accounted for 30 percent of the product line's sales.

Our largest customers include Colas SA, Ergon, Inc., Associated Asphalt Inc., and Idaho Asphalt Supply Inc.

Our primary competitors in pavement technologies are Nouryon Chemicals B.V., Arkema S.A., Kao Specialties Americas LLC, Sherwin-Williams Company, and PPG Industries Traffic Solutions.

Our largest customers include Ergon, Inc., The Heritage Group, and Idaho Asphalt Supply Inc.

Our primary competitors in road technologies are Nouryon Chemicals B.V., Arkema S.A., Kao Specialties Americas LLC, Sherwin-Williams Company, and PPG Industries Traffic Solutions.

We compete based on deep knowledge of our customers’ businesses and extensive insights into road-building technologies and trends globally.

We use these strengths to develop consulting relationships with government departments of transportation, facilitating new technology introduction into key markets around the world.

We use these strengths to develop consultative relationships with government departments of transportation, facilitating new technology introduction into key markets around the world.

Our combined expertise in the disciplines of chemistry and civil engineering provides us with a comprehensive understanding of the relationship between the molecular structure of our products and their impact on the performance of pavement systems.

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Industrial Specialties

Our industrial specialties product line produces and sells chemicals utilized in several industrial applications, including adhesive tackifiers, agrochemical dispersants, lubricant additives, printing ink resins, industrial intermediates, and oilfield.

We are a global supplier of tackifier resins, which provide superior adhesion to difficult-to-bond materials, to the adhesives industry.

Adhesive applications for our products include construction, product assembly, packaging, pressure-sensitive labels and tapes, hygiene products, and road markings.

Agrochemicals.

Our industrial specia lties product line produces and sells chemicals utilized in several industrial applications, including adhesive tackifiers, agrochemical dispersants, lubricant additives, printing ink resins, industrial intermediates, and oilfield.

Agricultural Chemicals.

We produce dispersants for crop protection products as well as other naturally derived products for agrochemicals.

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In addition, our crop protection products are approved for use as inert ingredients in agrochemicals by regulatory agencies throughout the world.

We supply lubricant additives and corrosion inhibitors for the metalworking and fuel additives markets.

Our lubricant products are multi-functional additives that contribute to lubricity, wetting, corrosion inhibition, emulsification, and general performance efficiency.

Our products are valued because of their ease in handling, robust performance, and improved formulation stability.

Printing Inks.

We are a leading supplier of ink resins from renewable resources to the global graphic arts industry for the preparation of printing inks.

Our products improve the gloss, drying speed, viscosity, adhesion, and rub resistance of the finished ink to the substrate.

We produce a wide array of resins, typically specifically tailored to a customer’s use, which can vary by application, pigment type, end-use, formulation, manufacturing, and printing process.

Paper Chemicals.

We are a North American supplier of rosin-based sizing agents for the production of packaging related paper.

We are a global supplier of tall oil-based products, we offer a broad range of resins, rosin soaps, mixed acids and fatty acids from renewable resources.

We currently supply specialty products to latex manufacturers, compounders and tire producers.

Specific to tire producers, our resins help improved fuel efficiency, wear and traction.

Industrial Intermediates.

Our functional chemistries are sold across a diverse range of industrial markets including, among others, paper chemicals, textile dyes, rubber, cleaners, mining, and nutraceuticals.

We supply oilfield well service additives to improve emulsion stability, aid in fluid loss control, for oil-based drilling muds.

Our functional chemistries are sold across a diverse range of industrial markets including, among others, textile dyes, rubber, cleaners, mining, and nutraceuticals.

Adhesives, Oilfield, and Lubricants.

We are a North American supplier of tackifier resins, which provide superior adhesion to difficult-to-bond materials, to the adhesives industry.

Adhesive applications for our products include construction, product assembly, packaging, pressure-sensitive labels and tapes, hygiene products, and road markings.

We supply oilfield well service additives to improve emulsion stability, and aid in fluid loss control for oil-based drilling muds.

Other specialty additives, typically used in deep water applications, include rheology modifiers and wetting agents that improve viscosity properties and aid in the efficiency of the drilling process.

We also supply corrosion inhibitors or their components for oil and gas production and downstream applications.

Crude oil and natural gas production are characterized by variable production rates and unpredictable changes due to the nature of the produced fluids including but not limited to water and salt content, as well as supply and demand balance.

Our corrosion inhibitors maximize production rates by reducing the downtime for key equipment and pipes due to corrosion.

We also supply specialty additives for corrosion inhibition formulations used to maximize production rates by reducing the downtime for key equipment and pipes due to corrosion.

We supply lubricant additives and corrosion inhibitors for the metalworking and fuel additives markets.

Our lubricant products are multi-functional additives that contribute to lubricity, wetting, corrosion inhibition, emulsification, and general performance efficiency.

We sell our industrial specialties products to approximately 500 customers around the globe in over 45 countries through our own direct sales representatives and third-party sales representatives and distributors.

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Our largest customers include Haliburton, Solenis, Flint Group, H.B.

Fuller Co., and Arboris.

Our competitors, which differ depending on the product, application, and region, include Kraton Corp., Eastman Chemical Co., ExxonMobil Corp., Borregaard ASA, Lawter, Inc., Repsol S.A., Firmenich SA, Lamberti S.p.A., Mobile Rosin Oil Company, Inc., as well as several others.

and ChampionX.

Our competitors, which differ depending on the product, application, and region, include Kraton Corp., Eastman Chemical Co., Borregaard ASA, Repsol S.A., Lamberti S.p.A., Cargill, Vantage, PMC, as well as several others.

Specific to our industrial specialty products, our customers select the product that provides the best balance of performance, consistency, and price.

Reputation and loyalty are also valued by our customers and allow us to win business when other factors are equal.

In adhesives, our products compete against other tackifiers, including other tall oil resin ("TOR") based tackifiers as well as tackifiers produced from gum rosin and hydrocarbon starting materials.

In addition, the choice of polymer used in an adhesive formulation drives the selection of a tackifier.

In agrochemicals, the selection of a dispersant is made early in the product development cycle and the formulator has a choice among our sulfonated lignin products, lower-quality lignosulfonates and other surfactants such as naphthalene sulfonates.

In adhesives, our products compete against other tackifiers, including other tall oil resin ("TOR") based tackifiers as well as

tackifiers produced from gum rosin and hydrocarbon starting materials.

In addition, the choice of polymer used in an adhesive formulation drives the selection of a tackifier.

In lubricants, we compete against other producers of distilled tall oil and additives.

In printing inks, our products compete against other resins that can be derived from TOR, gum rosin and, to a lesser extent, hydrocarbon sources.

In our industrial intermediates business, our tall oil fatty acid ("TOFA") competes against widely available fats and oils derived from tallow, soy, rapeseed, palm, and cotton sources.

In oilfield, we compete against other tall oil specialty additives used for oil-based drilling fluids or corrosion inhibition formulations in the drilling, production and downstream applications of oilfield.

We compete based on our ability to understand our customers’ applications and deliver solutions that aid in their improvement of the exploration drilling and production of oil and gas for end users.

Our scale and manufacturing flexibility help us deliver the creativity, expedience, and confidence that customers in oilfield technologies require.

E ngineered Polymers

Our engineered polymers product line includes caprolactone and caprolactone-based specialty polymers for use in coatings, resins, elastomers, adhesives, bioplastics, and medical devices.

Our coating products are used in automobile refinishing, sports floors, windmill blade coatings, and marine applications.

Our products enhance product performance by providing abrasion resistance, long durability, a high-quality finish, and enhanced performance in resin modification.

Our products are often preferred because they provide a combination of traits that allows customers to displace several combinations of other products.

Our resin products are used in acrylic resins, polyurethane, and inks.

Our products enhance product performance due to their protective properties, all-weather performance, and reduction or elimination of the need for solvents in formulations.

Our products tend to be preferred where superior or particular performance levels are required.

Our products are used in wheels, seals, mining screens, and polyurethane films.

Our products enhance product performance due to their resistance to wear and tear, ability to maintain form and function under pressure and temperature and excellent UV resistance.

Our products are often used in highly demanding applications where competing products do not reach the required performance levels.

Our products are used in hot-melts, fabric lamination, and miscellaneous footwear components.

Our products enhance product performance through their durability and substrate compatibility.

Our products are often preferred because they are found to be easier to process and apply compared to competitive offerings.

Our products are used in films, paper coatings, disposable cups, utensils, and packaging.

Our products enhance product performance due to the combination of their biodegradability, improved mechanical properties, and wide processability when used in combination with other bioplastic solutions.

Special grades are also available to help comply with food contact legislation in various regions and applications.

Medical Devices .

Our products are used in medical devices.

Our products enhance end-product performance due to their low melting point and ability to be thermoformed.

Our products improve process conditions and provide patient comfort compared to competitive thermoplastic offerings.

We sell our engineered polymers chemicals to over 300 customers around the globe through our own direct sales representatives and third-party sales representatives and distributors.

In 2022, our ten largest customers accounted for approximately 45 percent of the product line's sales.

Advanced Polymer Technologies

Our Advanced Polymer Technologies segment produces caprolactone and caprolactone-based specialty polymers for use in coatings, resins, elastomers, adhesives, bioplastics, and medical devices.

Advanced Polymer Technologies' net sales for 2023, 2022, and 2021 were $204.0 million, $244.7 million, and $185.8 million, respectively.

The chart below reflects our 2023 Advanced Polymer Technologies' net sales by geography.

Sales are assigned to geographic areas based on the location of the party to which the product was shipped.

Raw Materials and Production

Our Advanced Polymer Technologies segment serves customers globally from one manufacturing location in the U.K.

Our Advanced Polymer Technologies' products are caprolactone-based, which is derived from cyclohexanone, a benzene derivative, and hydrogen peroxide, both of which are readily available in the market.

We maintain multiple suppliers of cyclohexanone to protect against supply disruptions and to maintain competitive pricing.

Our hydrogen peroxide is currently supplied by Solvay Interox Limited, a co-located supplier at our Warrington, United Kingdom facility under a long-term supply agreement.

We sell our Advanced Polymer Technologies products to approximately 300 customers around the globe through our own direct sales representatives and third-party sales representatives and distributors.

In 2023, our ten largest customers accounted for approximately 47 percent of the segment's sales.

Our largest customers include polyurethane, adhesive, coatings, and bioplastics manufacturers.

Our primary caprolactone competitors are Daicel, Corp., Juren, and BASF SE, but we also face competition from other competing materials.

We compete based on performance as compared to the other competitive materials.

We also compete by strengthening our technology-focused relationships with our customers.

Our value proposition is focused on sustainability elements, either through the high durability performance our Capa polyols impart to polyurethane articles or via the biodegradability characteristics of our Capa thermoplastics which now hold certification in multiple environments.

We also add value through customer intimacy, a high focus on environmental, health, safety and quality performance and our supply chain capabilities.

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What changed 10-K

Item 1. Business