Ingevity Corp. will close its chemicals plant in DeRidder, La., and cut business and support jobs as it reshapes its Performance Chemicals segment, the North Charleston company said Wednesday.

The moves affect about 180 people at the DeRidder plant and about 120 in business and support functions, Ingevity said. Combined with cuts made earlier this year, the reductions amount to almost 20% of Ingevity’s global workforce. The company employs about 1,900 people.

Ingevity’s board approved the closing Oct. 30, according to a filing with the Securities and Exchange Commission. The company expects to shut the plant by the end of the first half of 2024.

“What we are doing today is an important step toward achieving our strategic objectives of improving the profitability and reducing the cyclicality of the Performance Chemicals business and the company as a whole,” President and CEO John Fortson said.

Why DeRidder

The DeRidder plant makes a range of products from crude tall oil, mostly for Ingevity’s Industrial Specialties business. Crude tall oil is a co-product of the kraft pulping process that uses pine trees, Ingevity says in its annual report.

Ingevity said it is exiting some commodity-oriented markets that are mainly based on rosin. It is also cutting its reliance on crude tall oil, which it called structurally more expensive and said is being dramatically affected by the biofuels market. It plans to sell its excess supply. Going forward, it will run a refinery network that processes both crude tall oil and alternative fatty acids, and it plans to add products based on other chemistries, such as soy and canola-based fatty acids.

“Our decision is the result of a careful evaluation of various strategic options to address the cyclicality of our rosin-based end markets, as well as the significant structural changes and elevated pricing of CTO due to the biofuels market,” Fortson said.

He added: “Ingevity’s DeRidder operation played a key role in Ingevity’s history. Today’s announcement is a difficult but necessary step that the company must take as we continue to execute our strategic objectives to position Ingevity for long-term success.”

The cost and the savings

Ingevity expects about $280 million in charges: about $180 million in asset-related charges, about $15 million in severance and other employee costs, and about $85 million in other restructuring costs, including decommissioning, dismantling and removal, and contract terminations. About $180 million of the total will not involve cash.

The company expects total annual savings of $65 million to $75 million, including about $35 million from cuts it announced earlier, to be fully realized in 2024. It said the actions should leave the Performance Chemicals segment with a steady-state EBITDA margin of 15% to 20% and the whole company at 25% to 30%.

Ingevity did not say where the 120 business and support positions are based.

A weak quarter for industrial chemicals

The company also reported third-quarter results Wednesday. Net sales fell 7% to $446.0 million from a record a year earlier, and net income was $25.2 million, or 69 cents a share.

Industrial Specialties sales fell 30% to $126.3 million, which Ingevity blamed mainly on weak demand, particularly for rosin-based products. Pavement Technologies sales rose to $129.7 million. Performance Chemicals segment EBITDA fell 62% to $24.7 million.

The company’s activated carbon business, Performance Materials, did better. Its sales rose 2% to $147.2 million on stronger demand for automotive carbon in Asia and North America.

The WestRock connection

Ingevity, spun off from WestRock Co. in 2016, also changed its crude tall oil supply arrangement with its former parent Wednesday. Under an amendment filed with the SEC, the companies agreed to end the supply agreement on June 30, 2024, unless they agree by April 30, 2024, to extend it. The amendment also documents the earlier removal of WestRock’s Florence, S.C., mill as a supplier.

Closer to home, Ingevity listed “the impact of WestRock’s shutdown of its North Charleston paper mill” among the risks that could affect its results. Ingevity’s North Charleston chemicals plant sits beside that mill, which WestRock said in May it would close Aug. 31.