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AVIENT CORP (AVNT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered a modest beat: adjusted EPS of $0.80 vs guidance $0.79 and Wall Street consensus $0.781*, with sales of $866.5M vs consensus $852.4M*, and adjusted EBITDA margin expanded 30 bps to 17.2% .
  • Guidance narrowed: FY25 adjusted EPS $2.77–$2.87 (prior $2.70–$2.94) and adjusted EBITDA $545–$560M (prior $540–$570M); Q3 adjusted EPS guided to $0.70 .
  • Cash flow strong: $113M cash from operations in Q2 supported $50M of debt repayment; management remains on track to reduce total debt $100–$200M by year-end .
  • Operational bright spots: double-digit growth in Defense and Healthcare offset consumer weakness; SEM organic sales +6% with Defense a quarterly record, while CAI margins +100 bps despite lower sales .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EPS and revenue beats with margin expansion: adjusted EPS $0.80 (vs $0.76 LY) and adjusted EBITDA margin 17.2% (+30 bps YoY) on disciplined cost controls and favorable mix .
  • Defense and Healthcare strength: “Defense and healthcare demand remained resilient, growing double digits in the quarter, more than offsetting weak demand in consumer” — Dr. Ashish Khandpur .
  • Balance sheet progress: $113M CFO in Q2 and $50M debt repaid; plan to reduce total debt $100–$200M by year-end remains intact .

What Went Wrong

  • Consumer weakness worsened: consumer down 8% in Q2 and expected to remain negative year-over-year into H2; U.S./Canada down double digits .
  • SEM margin headwind: ~$3M planned maintenance in Avient Protective Materials compressed SEM margins in Q2; higher-cost inventory also weighed, though margins expected to expand in H2 .
  • Raw material inflation: pigments and performance materials up low-to-mid single digits; flame retardants pricing “more than three times vs last year” due to tight supply from China; some costs passed through to customers .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$849.7 $746.5 $826.6 $866.5
GAAP Diluted EPS ($)$0.36 $0.52 ($0.22) $0.57
Adjusted EPS ($)$0.76 $0.49 $0.76 $0.80
EBITDA ($USD Millions)$116.5 $134.2 $45.6 $142.2
Adjusted EBITDA ($USD Millions)$143.3 $110.0 $144.7 $148.9
Adjusted EBITDA Margin %16.9% 14.7% 17.5% 17.2%
Gross Margin ($USD Millions)$257.6 $259.5 $263.2 $277.9
Adjusted Gross Margin ($USD Millions)$279.2 $236.2 $270.9 $281.7
Adjusted Gross Margin %32.9% 31.6% 32.8% 32.5%
Q2 2025 Actual vs S&P Global ConsensusConsensus*Actual
Revenue ($USD Millions)$852.4*$866.5
Primary EPS ($)$0.781*$0.80
EBITDA ($USD Millions)$146.8*$148.9 (Adj.)

Consensus values marked with * retrieved from S&P Global.

Segment Breakdown

SegmentQ2 2024 Sales ($M)Q2 2025 Sales ($M)Q2 2024 EBITDA ($M)Q2 2025 EBITDA ($M)
Color, Additives & Inks (CAI)$542.0 $538.6 $107.9 $112.7
Specialty Engineered Materials (SEM)$308.1 $329.7 $63.6 $62.6
Corporate($0.4) ($1.8) ($54.1) ($32.6)

KPIs

KPIQ2 2025Notes
Cash from Operations ($M)$113 Strong quarterly CFO supported debt paydown
Debt Repayment ($M)$50 On track for $100–$200M reduction by YE25
Dividend per Share ($)$0.27 Declared for October 8, 2025 payout
FY25 CapEx ($M)~$110 Maintained
FY25 Free Cash Flow ($M)$190–$210 New explicit range in Q2 call

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025$2.70–$2.94 $2.77–$2.87 Narrowed (mid-point unchanged at ~$2.82)
Adjusted EBITDA ($M)FY 2025$540–$570 $545–$560 Narrowed (mid-point slightly lower: $555 → $552.5)
Adjusted EPSQ3 2025N/A$0.70 New
CapEx ($M)FY 2025N/A~$110 Maintained (explicitly reaffirmed)
Free Cash Flow ($M)FY 2025N/A$190–$210 New
Total Debt Reduction ($M)FY 2025$100–$200 $100–$200 Maintained
Dividend per Share ($)Q3/Oct 2025N/A$0.27 Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 & Q1 2025)Current Period (Q2 2025)Trend
Tariffs/MacroMinimal direct impact expected due to local sourcing/manufacturing . Macro uncertainties (policy, FX, rates) noted .“Minimal direct impact from tariffs” reiterated; monitoring evolving trade environment .Persisting uncertainty; mitigated operational exposure
Healthcare growthStrong in 2024; continued growth in Q1 (Asia +9%, LatAm +17%) .Double-digit growth; 17% in Q2 across medical devices, supplies, drug delivery .Accelerating
DefenseQ1 lap of outsized defense orders in prior year .Quarterly record defense sales; double-digit growth .Improving
ConsumerU.S./Canada down; Q1 U.S. -3% .Consumer down 8% in Q2; broadening weakness beyond U.S./Canada .Deteriorating
Asia/ChinaAsia +9% in Q1 .Asia +3% organic in Q2; caution on China supplier structural reform tightening credit/payment terms .Mixed growth; rising caution
R&D/InnovationStrategy to amplify innovation; Investor Day outlined platforms .Patent filings up; healthcare materials/tubing and flame-retardant innovations highlighted .Sustained execution
Raw materialsFX headwind noted; basket inflation commentary evolving .1–2% raw inflation expected; pigments & FRs inflating; FRs >3x YoY due to tight China supply .Inflationary pressure in select inputs
Balance sheet/liquidityPlan to pay down $100–$200M debt by YE25 .$50M repaid in Q2; revolver moved from ABL to cash-flow to increase available liquidity .Deleveraging, liquidity prudence

Management Commentary

  • “Adjusted EPS slightly ahead of our guidance, in spite of the uncertain macro-economic backdrop… adjusted EBITDA margins expanded 30 bps to 17.2%” — Dr. Ashish Khandpur .
  • “We expect momentum from our high profit portfolios in defense and healthcare… contribute to continued margin expansion… narrowing our full year guidance range” — Jamie Beggs .
  • “We still expect minimal direct impact from tariffs as we primarily source raw materials and manufacture our products locally” — Dr. Khandpur .
  • Innovation highlights: low-temp foaming agents for decking/packaging; lubricious healthcare materials for tubing; advanced flame-retardant materials launched earlier in 2025 — Dr. Khandpur .

Q&A Highlights

  • Tariffs/pre-buying: No evidence of pre-buying; customers maintaining tight inventories with ~20–30 days order visibility .
  • Raw materials: Basket inflation 1–2% expected; hydrocarbons easing but pigments/FRs rising; FRs pricing >3x YoY due to supply constraints in China .
  • Volumes outlook: H2 volume improvement expected, especially in SEM; CAI similar to H1; healthcare/defense/telecom to drive H2 .
  • SEM Q2 margin impact: ~$3M planned maintenance and higher-cost inventory flowed through; H2 margins expected to expand, potentially ~100 bps YoY .
  • Liquidity: Revolver shift from ABL to cash-flow improved available liquidity commensurate with current business profile; costs roughly similar .

Estimates Context

  • Q2 2025: Actual adjusted EPS $0.80 vs consensus $0.781* — bold beat; revenue $866.5M vs $852.4M* — bold beat; adjusted EBITDA $148.9M vs $146.8M* — modest beat .
  • Q3 2025: Company guided adjusted EPS to $0.70 vs consensus $0.690* — slight positive point guide .
  • FY 2025: EPS guidance $2.77–$2.87 vs consensus $2.812* — guidance brackets consensus mid-point, narrowed range adds visibility .
    Consensus values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Mix and productivity are driving margin resilience: adjusted EBITDA margin at 17.2% despite mixed demand; expect further expansion YoY in H2 per management .
  • Narrative shift toward high-profit vectors: Defense and Healthcare growth offsets consumer; SEM positioned to recover margins post-maintenance .
  • Guidance signals confidence while bracketing consensus: narrowed FY25 ranges and Q3 EPS guide provide clearer near-term guardrails; watch for estimate revisions .
  • Input cost dynamics are a watch-point: pigments and flame retardants inflation (FRs >3x YoY) may pressure spreads; pass-throughs in place but monitor China supply .
  • Balance sheet optionality improving: $113M CFO in Q2 and $50M debt repaid; deleveraging plan intact; revolver structure enhances liquidity .
  • Regional/market cadence matters: consumer weakness broadening; Asia growth moderates with China structural reforms; healthcare remains secular tailwind .
  • Near-term trading lens: modest beats plus narrowed guide and margin expansion are constructive; stock likely sensitive to H2 execution in SEM margins and healthcare/defense order cadence .