Company: NGVT
Filing Date: 2025-08-05
Form Type: 10-Q
Source: 0001653477-25-000108
Chunk: 74

Company: Ingevity Corp
Filing Date: 2025-08-05
Form: 10-Q
Item: Part I, Item 1
Chunk 74
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 fundamentals change. Accordingly, product margins and the level of our profitability tend to fluctuate with the changes in these commodity prices. 

44

Crude tall oil price risk

Our results of operations are directly affected by the cost of our raw materials, particularly CTO, which, excluding CTO resales, represented 7 percent and 16 percent of our condensed consolidated cost of sales for the six months ended June 30, 2025 and 2024, respectively. Raw material CTO spend was approximately $8 million and $18 million during the three and six months ended June 30, 2025. Comparatively, total raw material CTO spend was approximately $55 million and $111 million during the three and six months ended June 30, 2024. Pricing for CTO is driven by the limited supply of the product and competing demands for its use, both of which drive pressure on its price. Our gross profit and margins have been and could continue to be adversely affected by increases in the cost of CTO if we are unable to pass the increases on to our customers. Based on average pricing during the three and six months ended June 30, 2025, a hypothetical unhedged, unfavorable 10 percent increase in the market price for CTO would have increased our cost of sales by approximately $0.8 million (zero percent) and $1.8 million (zero percent), respectively, which we may not have been able to pass on to our customers. Comparatively, based on average pricing during the three and six months ended June 30, 2024, a hypothetical unhedged, unfavorable 10 percent increase in the market price for CTO would have increased our cost of sales by approximately $5.5 (two percent) and $11.1 million (two percent), respectively. The repositioning of the Performance Chemicals reportable segment and the termination of the long-term CTO supply contract have significantly reduced the company's volume requirements and exposure to CTO beginning in 2025.

Natural gas price risk

Natural gas, both direct and indirect, is our largest form of energy costs constituting approximately four percent of our cost of goods sold for the six months ended June 30, 2025. Increases in natural gas costs, unless passed on to our customers, would adversely affect our results of operations. If natural gas prices increase significantly, our business or results of operations may be adversely affected. We enter into certain derivative financial instruments to mitigate expected fluctuations in market prices and