Avient (AVNT) Q2 FY26 earnings call: guidance and Q&A

Could you break down the 4.3% organic growth into volume versus price components for Q2, and how that might evolve?

In Q2, organic growth was approximately 1/4 volume and 3/4 price. Management expects this ratio to flip by Q4, with volume contributing roughly 70% and price 30%, indicating increasing volume momentum.

“the growth was at 4.3% organic growth total and about 1/4 of that was volume and 3/4 was price. But I think the more important thing is as we go from Q2 to Q4, that ratio of volume to price goes to -- flip-flops to almost 70% volume and 30% price in Q4”

asked by Emily Fusco · answered by Ashish Khandpur

How much of the recent price increases does Avient expect to retain if raw material costs decline?

Avient expects to retain most of the price increases, citing past success post-COVID. While some negotiation always occurs, no material amount of price is expected to revert, as raw material uncertainty persists and customers understand the need to pass on inflation.

“our teams have shown that we can keep the price longer and retain it. This happened after COVID situation, and we don't -- there's always some cases where the pricing plays a role in business negotiation, but we don't expect any material amount of price to go back, and we try to -- we will -- we have confidence we can maintain it.”

asked by Emily Fusco · answered by Ashish Khandpur

What were the biggest surprises or factors that led to the significant upside in Q2 results?

The primary driver was better-than-expected volume growth. Management had projected 1-2% negative volume, but it turned out to be approximately +1% positive. Pricing execution was as expected, and FX was only slightly favorable.

“the biggest piece was the volume growth. If you remember, there was a question in our earnings call, which asked about Q2 volumes, and we were projecting between 1% to 2% volume negative in the quarter, and that turned out to be more like plus 1% positive, more or less.”

asked by Frank Mitsch · answered by Ashish Khandpur

Was there any pre-buying by customers in Q2 that might have inflated volume, or was it purely underlying demand?

Management is confident there was no significant pre-buying, stating any such effect would be minuscule. They noted strong July results, reinforcing the belief that Q2 demand was underlying.

“we don't think there was much prebuying and that -- we're pretty confident of that. If anything, it will be very miniscule, which is always within error bars, $2 million, $3 million or something like that. Hard to say that part. But at a big level, we are not seeing that.”

asked by Frank Mitsch · answered by Ashish Khandpur

How much of the SEM margin growth was due to end-market mix, productivity, or pricing, excluding the maintenance impact?

Excluding the 100 basis points benefit from planned maintenance, the remaining 200 basis points of margin expansion in SEM was split between price/mix favorability and net productivity gains. Management expects continued margin expansion of about 100 basis points year-over-year in H2 for the segment.

“So the planned maintenance that we talked about had about 100 basis points benefit for the quarter. So the remaining 200 basis points is split between price/mix favorability in the quarter as well as net productivity gains.”

asked by Peter Osterland · answered by Giuseppe Di Salvo

Can you quantify the size of the data center opportunity for Avient?

The addressable opportunity from high-performance computing and electronics (including data centers) is close to $1 billion with the current portfolio. Another $1 billion comes from infrastructure (wire, cable, pipe, fittings). Avient's business in this area is currently around $100 million and growing fast, with electronics expected to reach $60 million this year and potentially double in the next 2-3 years.

“for us, the SEM or the actual addressable opportunity with our current portfolio that is it's close to $1 billion for the data center and electronics part. That's just from high-performance computing and electronics. And then there's another $1 billion that is from an infrastructure piece, which is wire and cable and other pipe and fittings kind of businesses where we sell some of our products.”

asked by Abigail Eberts · answered by Ashish Khandpur

Why is the implied Q4 guidance range so wide, given the specificity for Q3?

The Q3 guidance is approximate, and the full-year EPS range isn't solely attributable to Q4. Q4 has less visibility for sales and order book, year-end seasonality, and potential normalization of net price benefits, warranting a wider range.

“as you get into the fourth quarter, we do have less visibility, as I said, for sales and the order book at that point. And you also have year-end seasonality with holidays and how things could play out, as well as the potential for narrowing or maybe normalizing of the net price benefit as we get into the fourth quarter.”

asked by Ghansham Panjabi · answered by Giuseppe Di Salvo