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AVIENT CORP (AVNT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered organic sales growth (+2% ex-FX) and in-line adjusted EPS ($0.76), while GAAP EPS was a loss due to an $86.3M impairment from ceasing S/4HANA; adjusted EBITDA margin expanded 20 bps to 17.5% .
  • Versus consensus, adjusted EPS was essentially in line (0.76 vs 0.76*) and revenue was a slight miss ($826.6M vs $828.5M*); mix strength in packaging offset U.S. consumer and transportation softness . Values retrieved from S&P Global.
  • Guidance maintained: FY 2025 adjusted EBITDA $540–$570M and adjusted EPS $2.70–$2.94; Q2 adjusted EPS guided to $0.79 amid ongoing macro/tariff uncertainty; plan to pay down $100–$200M of debt by year-end .
  • Regional divergence persists: Asia (+9%) and Latin America (+17%) strong; EMEA +2%; U.S./Canada -3% on weaker consumer sentiment; packaging drove growth across regions via share gains .

What Went Well and What Went Wrong

What Went Well

  • Packaging outperformed across regions (personal care double-digit and beverage mid-single-digit growth), driving Color segment organic sales +3% and adjusted EBITDA +7% ex-FX; margins expanded 50 bps on mix and cost initiatives .
  • Latin America (+17%) and Asia (+9%) organic sales growth; EMEA notched a fourth consecutive quarter of growth (+2%), supported by share gains and healthcare strength .
  • Cost discipline and productivity agenda (Lean Six Sigma, footprint optimization) underpin margin expansion; management targets ~$30M savings in 2025 .

What Went Wrong

  • U.S./Canada organic sales declined 3% on weaker consumer sentiment; consumer end market was flattish with double-digit declines in U.S./Canada across staples and discretionary .
  • Transportation was weak in U.S. and EMEA (double-digit declines) due to lower vehicle production; SEM adjusted EBITDA declined 4% ex-FX on unfavorable mix (defense lapping a record Q1 2024) .
  • FX headwind ($0.03) and slightly higher depreciation/ effective tax rate (~$0.02) pressured adjusted EPS; raw materials inflation was ~+$4M in Q1 and management now models 1–2% inflation for FY .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$815.2 $746.5 $826.6
GAAP EPS ($USD)$0.41 $0.52 ($0.22)
Adjusted EPS ($USD)$0.65 $0.49 $0.76
Adjusted EBITDA ($USD Millions)$130.0 $110.0 $144.7
Adjusted EBITDA Margin (%)15.9% 14.7% 17.5%
Q1 2025 vs EstimatesConsensus*ActualSurprise
Adjusted EPS ($USD)0.76*0.76 In-line
Revenue ($USD Millions)828.5*826.6 -$1.9M (miss)
EBITDA ($USD Millions)143.3*144.7 (Adj.) +$1.4M (beat)

Values retrieved from S&P Global.

Segment Breakdown ($USD Millions)Q1 2024Q1 2025
Color, Additives & Inks Sales$515.3 $519.7
Specialty Engineered Materials Sales$314.4 $308.4
Segment EBITDA – CAI$96.7 $100.3
Segment EBITDA – SEM$73.0 $68.6
Corporate EBITDA($31.4) ($122.9)
Total EBITDA$137.4 $45.6
KPIs and Operating MetricsQ1 2024Q1 2025
Adjusted Gross Margin %33.6% 32.8%
Adjusted Operating Margin %12.1% 12.1%
Organic Sales Growth – Asia—+9%
Organic Sales Growth – Latin America—+17%
Organic Sales Growth – EMEA—+2%
Organic Sales Growth – U.S./Canada—(3%)
Cash from Operations ($USD Millions)($42.8) ($51.1)
Capital Expenditures ($USD Millions)$24.5 $12.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSQ2 2025N/A$0.79 New
Adjusted EPSFY 2025$2.70–$2.94 $2.70–$2.94 Maintained
Adjusted EBITDAFY 2025$540–$570M $540–$570M Maintained
CapExFY 2025N/A~$110M New
Free Cash FlowFY 2025N/A$190–$210M New
Debt PaydownFY 2025N/A$100–$200M by YE New
Quarterly DividendQ2 2025$0.27 (Q4 rate) $0.27 declared Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (Prior-2)Q4 2024 (Prior-1)Q1 2025 (Current)Trend
Tariffs/MacroBroad-based growth; demand strong across regions Uncertainties in policy, FX, rates; wider outcome set Minimal direct tariff exposure; <~$100M sales and raw materials exposed; demand volatility expected Uncertainty rising; direct exposure limited
PackagingStrong, contributing to regional growth —Personal care double-digit; beverage mid-single-digit; global growth; share gains Positive momentum, share gains
DefenseStrong demand in EMEA —Down 5% on tough comp; outlook high-single-digit growth; new Dyneema grades launched Near-term comp lapping, medium-term growth
Healthcare——Double-digit growth; resilient demand Strengthening
Transportation——Weak in U.S./EMEA; Asia +16% in EV; expected to turn flattish to slight positive in 2H as comps ease Weak now; improving 2H
Cost ControlMargin expansion both segments Margin expansion both segments ~$30M savings targeted; SG&A flattish YoY Ongoing self-help
FCF/Debt—2024 adjusted FCF $155.7 FCF $190–$210M; debt paydown $100–$200M Balance sheet strengthening
Raw Materials——~$4M inflation in Q1; FY +1–2% modeled Mild inflation

Management Commentary

  • “Organic sales grew 2% in the quarter, driven by resilient demand in packaging… adjusted EBITDA margins expanded 20 basis points to 17.5%.” – Dr. Ashish Khandpur .
  • “We expect second quarter adjusted EPS of $0.79… We are keeping our full year guidance range unchanged for adjusted EBITDA of $540 to $570 million and adjusted EPS of $2.70 to $2.94… intend to pay down between $100 to $200 million of debt by year-end.” – CFO Jamie Beggs .
  • “We primarily source raw materials and manufacture our products locally… we expect minimal direct impact from tariffs… working… to offset raw material or tariff-related inflation.” – Dr. Ashish Khandpur .
  • “Color expanded adjusted EBITDA margins by 50 basis points through sales growth, favorable mix and cost improvement initiatives.” – CFO Jamie Beggs .

Q&A Highlights

  • Defense outlook: despite a -5% Q1 decline on tough comps, management expects double-digit growth in 1H and high-single-digit for FY, supported by new Dyneema launches and diversification into law enforcement .
  • Transportation weakness: low to mid-single-digit declines in 1H in U.S./EMEA in line with build rates; Asia strength (EV) drove +16% growth; comps ease in 2H should lead to flattish/slight positive .
  • Consumer softness: double-digit declines in U.S./Canada across staples and discretionary; other regions up; trend expected to persist into Q2 .
  • Tariff mitigation: reformulation, local sourcing alternatives, pricing where needed; exposure not expected to be material .
  • SG&A trajectory: flattish vs last year with quarter-to-quarter seasonality; ongoing cost controls to offset wage inflation and growth investments .
  • Raw materials: ~$4M Q1 inflation; FY +1–2% inflation expected (pigments/additives up; olefins down) .
  • Cash flow seasonality: Q1 cash outflow tied to bonus timing; FCF builds in 2H as working capital normalizes .

Estimates Context

  • Q1 2025: Adjusted EPS in line (0.76 vs 0.76*), revenue slight miss ($826.6M vs $828.5M*); adjusted EBITDA modestly above consensus ($144.7M vs $143.3M*) . Values retrieved from S&P Global.
  • Q2 2025: Company guides adjusted EPS $0.79 versus consensus $0.78*; consensus revenue ~$852.4M* (company did not provide revenue guidance) . Values retrieved from S&P Global.
  • FY 2025: Company maintained adjusted EPS $2.70–$2.94 and adjusted EBITDA $540–$570M; consensus EPS ~$2.81* and EBITDA ~$544.2M* suggest guidance brackets the street . Values retrieved from S&P Global.
  • Implications: Street likely tweaks mix assumptions—raising packaging/healthcare contributions and trimming U.S. consumer/transportation—while keeping FY ranges broadly intact given management’s cost/self-help levers and controlled tariff exposure .

Key Takeaways for Investors

  • Mix resilience and cost discipline are offsetting U.S. demand softness, supporting margin expansion and in-line EPS delivery; packaging and healthcare are the growth vectors to watch .
  • Guidance continuity amid macro uncertainty is a positive signal; Q2 EPS guide above street by a hair and FY ranges maintained, reducing downside estimate risk near term .
  • Balance sheet de-risking is a potential catalyst (planned $100–$200M debt paydown) alongside sustained dividend ($0.27/quarter) .
  • Defense lull is comp-driven; management’s high-single-digit FY growth outlook, Dyneema innovation, and law-enforcement diversification suggests recovery through 2H .
  • Transportation weakness is concentrated in U.S./EMEA; Asia EV strength and easier comps should improve 2H trajectory, but visibility remains short (20–30 days order book) .
  • FX and mild raw material inflation are manageable headwinds (Q1 FX -$0.03 EPS; raw materials +$4M; FY +1–2% inflation) with mitigation via sourcing and reformulation .
  • Near-term trading: watch macro/tariff headlines vs packaging/healthcare order trends; medium-term thesis leans on self-help, portfolio mix shift, and execution against FY guidance bands .