Ingevity to close US DeRidder TOFA site amid cost reductions

Lucas Hall

01-Nov-2023

HOUSTON (ICIS)–Ingevity on Wednesday announced further repositioning of its Performance Chemicals business, including the closure of its US DeRidder, Louisiana, site amid company-wide cost reduction actions, President and CEO John Fortson said in a press release.

The actions are the next steps in a strategy focusing on higher-margin and higher-growth specialty production, diversifying feedstocks and optimising the company’s manufacturing network, the company said.

As part of the strategy the company is exiting certain commodity-oriented markets that are primarily rosin-based and reducing its exposure to structurally more expensive crude tall oil (CTO) impacted by the biofuels market.

Ingevity expects to close the DeRidder site by the end of H1 2024.

The company will operate a dual CTO and Alternative Fatty Acid (AFA) refinery network to maximise profitability and reduce raw material cost volatility.

“Going forward, we will continue to strengthen and diversify the Performance Chemicals business through the introduction and expansion of complementary and new product offerings based on alternative chemistries, such as soy and canola-based fatty acids,” said Fortson.

Ingevity estimates business and corporate savings of $65-75m, inclusive of approximately $35m in savings previously announced, and expected to be fully realised in 2024.

The company expects to record charges associated with the DeRidder closure and restructuring of approximately $280m, with approximately $180m of the total charges to be non-cash.

The actions taken are expected to result in a steady state Performance Chemicals segment EBITDA margin of 15-20% and total Ingevity margin of 25-30%.

In April Ingevity shut its Crossett, Arkansas, site, which historically processed crude tall oil (CTO), to transition production fully to alternate soy, palm and canola fatty acids, otherwise known as alternative fatty acids.

Derived from animal fats and greases like tallow or vegetable oils like palm and coconut, fatty acids are mainly used in cosmetics and toiletries, as well as for the production of lubricants and plasticizers in rubber and polymer processing.

TOFA is derived from CTO, a byproduct of pine wood pulping used by many paper mills.

Thumbnail shows detergents, which are made from fatty acids. Image by Alexander Zemlianichenko/AP/Shutterstock.

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