Avient (AVNT) Q4 2025 Earnings Call Transcript

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Date

Feb. 12, 2026 at 8 a.m. ET

Call participants

• Chairman, President, and Chief Executive Officer — Ashish K. Khandpur
• Senior Vice President and Chief Financial Officer — Jamie A. Beggs

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Takeaways

• Adjusted EBITDA margin -- Expanded 80 basis points in the quarter and 50 basis points for the fiscal year ended Dec. 31, 2025, reaching a record 16.7%.
• Adjusted EPS -- Increased 14% for the quarter and 6% for the fiscal year, aided by lower interest expense and favorable currency.
• Adjusted EBITDA -- $545 million in fiscal 2025, representing 3.5% year-over-year growth as reported.
• Free cash flow -- $195 million generated, allowing debt reduction of $150 million and lowering net leverage to 2.6x.
• Organic sales -- Down 0.8% in the quarter and flat for the fiscal year; as reported, sales grew 1.9% in Q4 due to favorable FX.
• Strategic growth vectors -- Businesses prioritized as growth vectors grew high single digits in fiscal 2025, close to 10%, despite flat overall company sales.
• CAI segment organic sales -- Declined 3% in the quarter and 2% for the fiscal year, with negative demand in consumer, industrial, building and construction, and transportation segments.
• CAI segment EBITDA margin -- Declined 10 basis points in the quarter but improved 50 basis points for the fiscal year, driven by mix and operational streamlining.
• Specialty Engineered Materials (SEM) organic sales -- Increased 3% in Q4 and 2% for the fiscal year, driven by defense, healthcare, and telecom markets.
• SEM EBITDA margin -- Expanded 80 basis points in Q4 but declined 40 basis points in fiscal 2025 due to maintenance and investments.
• Defense market growth -- Defense sales grew double digits in both Q4 and 2024, and 8% in fiscal 2025; investments and process innovation enabled additional capacity without new facilities.
• Packaging market -- U.S. packaging sales grew 1% in Q4 after being down 10% in Q1 fiscal 2025; global packaging ended flat year over year.
• Regional performance -- Asia grew 3% in Q4, attributed to packaging and telecom; U.S.-Canada sales declined 1% (improving from a 5% decline); EMEA down 2%; Latin America down 5% due to weak consumer demand and challenging comparison.
• Innovation pipeline activity -- Over 50 patent filings in the last two years, compared to approximately 20 in earlier periods.
• 2026 guidance -- Adjusted EBITDA guidance of $555 million to $585 million (2%-7% projected growth) and adjusted EPS guidance of $2.93 to $3.17 (4%-12% projected increase); Q1 adjusted EPS outlook of $0.81.
• 2026 free cash flow -- Projected at $200 million to $220 million, with planned capex of $140 million (up $33 million), focused on expanding defense capacity.
• Productivity initiatives -- Delivered over $40 million savings in fiscal 2025, with about half the benefit expected as carryover into 2026; ongoing focus on sourcing, footprint optimization, Lean Six Sigma, and structural simplification.
• M&A strategy -- No acquisitions or divestitures for three consecutive years; focus remains on organic growth, with potential for selective M&A post-2026 as balance sheet strengthens.

Summary

Avient (NYSE:AVNT) reported record adjusted EBITDA margins for the fiscal year ended Dec. 31, 2025, and double-digit adjusted EPS growth for the fourth quarter, supported by favorable mix, productivity gains, and disciplined cost management. Growth vectors—particularly in defense, healthcare, and telecom—drove significantly higher sales rates compared to the overall portfolio, while innovation efforts resulted in expanded patent activity and product launches addressing new regulatory needs, such as non-PFAS solutions. Management articulated capital allocation priorities favoring continued debt reduction and investment in scalable internal capacity, with M&A on hold until leverage targets are met and strategic growth areas mature further.

• Khandpur stated, "we expanded our adjusted EBITDA margins year over year in each of the four quarters of 2025."
• Beggs highlighted, "Our guidance for 2026 projects another year of adjusted EPS and adjusted EBITDA growth, improved return on invested capital, and a reduction in net leverage."
• Khandpur disclosed, "growth vectors grew high single digits for us, and high single digits for growth vectors versus less than 1% or low single-digit kind of decline in the rest of the business."
• New capacity for Dyneema fiber production was unlocked through process innovation without immediate need for large new capital projects, with additional capacity investments scheduled through 2028.
• Patent filings exceeded 50 for the past two years, more than doubling previous annual levels, indicating a substantial increase in innovation output.
• Pricing power and mix improvements, especially in healthcare and defense, are expected to support further margin expansion in 2026 even in a low-growth demand scenario.

Industry glossary

• CAI (Color, Additives, and Inks): Segment providing custom colorants, additive systems, and specialty inks for plastic and polymer applications.
• SEM (Specialty Engineered Materials): Segment focused on high-performance polymer formulations for specialty end markets, including composites and advanced materials.
• Dyneema: Proprietary ultra-high-molecular-weight polyethylene fiber used primarily in defense and high-strength applications.
• NPVI (New Product Vitality Index): Internal company metric tracking the proportion of revenue from products launched within a specified recent period.
• GCA (Greater China Asia): Regional designation in Avient reporting, representing business performance covering China and surrounding Asian markets.
• PFAS: Per- and polyfluoroalkyl substances, a class of chemicals subject to increasing regulatory scrutiny and replacement innovation in specialty materials.

Full Conference Call Transcript

Joining me on the call today is our Chairman, President, and Chief Executive Officer, Ashish K. Khandpur, and Senior Vice President and Chief Financial Officer, Jamie A. Beggs. I will now hand the call over to Ashish to begin. Thank you, Joe, and good morning, everyone.

Ashish K. Khandpur: Strong execution by our teams, with favorable mix and management's tight cost control, led to 80 basis points of adjusted EBITDA margin expansion and a strong 14% adjusted EPS growth for the fourth quarter. With this result, we expanded our adjusted EBITDA margins year over year in each of the four quarters of 2025. Organic sales in Q4 were down slightly at 0.8%, and grew 1.9% as reported over the prior year due to favorable foreign exchange impact. As we had highlighted in our third quarter earnings call, we continue to see strong momentum in defense, healthcare, and telecom markets with business growing double digits in each.

In addition, packaging demand improved modestly, growing sales low single digits in the fourth quarter compared to being down low single digits in the third quarter. As expected, businesses in our other markets finished down versus the prior year. Moving to the right-hand side of the slide, for the full year 2025, sales were relatively flat year over year. Favorable product mix and our productivity initiatives led to 50 basis points of adjusted EBITDA margin expansion versus 2024, helping us achieve full year record high margins of 16.7%. Adjusted EBITDA finished at $545,000,000 for 2025 with 3.5% year-over-year growth as reported. Adjusted EPS grew 6% helped by lower interest expense and favorable foreign currencies.

Our team's highly disciplined cash management enabled us to generate $195,000,000 of free cash flow, enabling us to reduce our outstanding debt by $150,000,000 and end the year with a net leverage ratio of 2.6x. As you know, one of our key drivers to advance our strategy is innovation. Creating meaningful and differentiated products, especially in markets supported by secular trends, will not only help us grow faster, but also increase our profitability. Today, I would like to share some examples of recent innovations from our company. The first set of examples address the need and demand for non-PFAS products in applications currently using PFAS materials which are facing stringent regulations, especially in the United States and Europe.

Our teams recently developed and commercialized GlideTech technology which enables new non-PFAS and non-silicone lubricious materials for use in catheters, particularly those used in neurological and vascular applications. Our portfolio contains formulations that are ISO 10993-5 and USP 87 compliant in standard grades. These products deliver exceptional coefficient of friction reduction, are compatible with all common sterilization methods, and processable using conventional extrusion equipment. Another example in this space is non-PFAS polymer processing aids for polyolefin film used in packaging applications for personal care products. Here, we have innovated and launched a portfolio of products in 2025 and several other customer manufacturing qualifications are in progress currently.

We continue to gain more knowledge and experience in this new area working closely with our customers, and understanding the interplay between our innovative materials and their processes. The last example for today is a process innovation where we can unlock additional Dyneema fiber making capacity with tailored material properties using our existing manufacturing equipment. As you may recall, demand for our products in defense grew double digits in 2024, followed by high single digits growth in 2025. We expect this momentum to continue supported by the announced increases in defense spending over the next few years, especially in the United States and Europe.

Due to the success of our innovation, we will now be able to quickly unlock meaningful new capacity from our current manufacturing lines to support the anticipated growth in our defense growth vector. In addition, we plan to deploy incremental capital over the next two years to further expand capacity and support the growth we foresee from our Dyneema-based businesses. Jamie will share more about these investments in her section. Before we get to 2026, I would like to take a moment to reflect on our performance over the last two years. As you know, in 2024, we evolved our company strategy to prioritize organic growth, to be complemented by targeted M&A where it enhances our capabilities.

We also sharpened our focus on profitability to deliver both top line growth and margin expansion. 2023 to 2025 marked the first period of time in nearly twenty years where there has been no impact on financials from acquisitions or divestitures, providing clean and noise-free data to compare performance. I am happy to report that over the last two years, our strategy has gained significant traction with our prioritized growth vectors delivering substantial growth, with innovation beginning to show up in differentiated products and improved margins. Additionally, we continue to eliminate structural complexity and drive productivity to become a more agile and customer focused organization.

These actions have enabled us to deliver consistent improvements across our key financial metrics for the second consecutive year despite a volatile macro backdrop. Over the last two years, we have grown adjusted earnings per share by about 20% and expanded adjusted EBITDA margins by 70 basis points, 20 basis points in 2024, and an additional 50 basis points in 2025. As a result, ROIC has improved each year and is now up 90 basis points versus 2023. Our strong free cash flow generation and disciplined capital deployment also allowed us to reduce debt, bringing net leverage down from 3.1x in 2023 to 2.6x in 2025.

Importantly, we achieved these results while continuing to invest in the business, particularly in our prioritized growth vectors aligned with our strategy. As we move forward, we plan to continue advancing these value creation metrics.

Ashish K. Khandpur: As we have over the past eight quarters. With increasing traction from our growth vectors and innovation pipeline, we expect to scale revenue and margin expansion with greater ease over time. Coming specifically to 2026, our premise is that the macro environment will remain volatile, impacted by trade policies, geopolitics, and moving supply chains. We are cautiously optimistic about 2026 being a better year than 2025 from a market demand perspective. This is especially true for our Color Additives and Inks, or CAI, business, which showed negative 2% organic growth in 2025. Last year, some of the biggest markets for the CAI business, namely consumer, industrial, building and construction, and transportation, saw anemic demand while packaging was relatively flat.

With 2026 showing stronger than 2025 U.S. GDP growth projections, and several government initiatives in the United States like the new tax bill, focus on domestic manufacturing expansion, and the potential for easing interest rates, demand in our relevant markets is expected to improve. This would be a welcome scenario for our customers and our business, but at the same time, we are also focused on driving productivity in the organization to ensure we continue to drive our earnings and margin expansion in case market demand does not improve.

We grew our Specialty Engineered Materials segment sales by 2% in 2025 excluding foreign currency impact, and we believe there are several secular macro trends in this business that will support organic sales growth again this year. Before I hand the call over to Jamie, who will provide additional color on our 2025 segment and regional performance, as well as our guidance for 2026, I would like to thank the entire Avient team for their determination and outstanding efforts to successfully deliver in 2025. I have no doubt our team is up to the task to deliver an even stronger 2026. Jamie?

Jamie A. Beggs: Thank you, Ashish, and good morning, everyone.

Jamie A. Beggs: I will start with the fourth-quarter performance of our Color Additives and Inks segment. Continued strength in healthcare and improving packaging demand was not enough to offset demand conditions in consumer, industrial, and building and construction, which led to a 3% decline in organic sales for the segment during the quarter. EBITDA margins declined 10 basis points as productivity initiatives helped mitigate the impact of inflation and reduced demand.

Giuseppe Di Salvo: Specialty engineered

Jamie A. Beggs: Materials organic sales increased 3% as strong growth in defense, healthcare, and telecommunications more than offset lower sales in energy, industrial, and building and construction end markets. Healthcare continues to deliver strong growth, supported by our innovative and specified materials for use in medical devices, equipment, and supplies. Defense grew double digits in the quarter driven by strong U.S. and European demand and supported by new innovation, including next-generation materials in our Dyneema line that we have highlighted in the past. Favorable mix and productivity contributed to 80 basis points of margin expansion, which combined with higher demand and positive FX, resulted in 10% EBITDA growth.

In the fourth quarter, U.S.-Canada sales declined 1%, which is an improvement from the prior quarter's 5% year-over-year decline, as we saw positive growth in packaging. This, combined with continued underlying strength in healthcare, defense, and telecom demand, partially offset lower sales in the industrial, building and construction, and energy markets. Future policy changes and lower inflation could be positive factors that provide momentum to the region in 2026. Similar to the U.S.-Canada, EMEA also performed slightly better than the third quarter where organic sales only declined 2% on a year-over-year basis.

Positive growth in the consumer end market, primarily driven by an increase in small and large appliances, along with continued momentum for defense and healthcare, helped offset weaker industrial demand. Asia grew 3%, driven by strength in packaging and telecommunications. The secular trend of high performance computing creating new opportunities for our materials has helped offset weak consumer demand, particularly in textile applications. Latin America sales declined 5%, primarily due to softer consumer demand and a difficult year-over-year comparison where the region grew 14% in the fourth quarter last year. Turning to full year 2025 results, we navigated an uncertain macro environment while delivering bottom line growth through customer focus,

Jamie A. Beggs: innovation,

Jamie A. Beggs: productivity, and operational discipline. Full year CAI organic sales declined 2%. Steady growth in healthcare throughout 2025 helped offset softer demand in consumer, industrial, transportation, and building and construction. Packaging remained relatively resilient, ending the year flat versus 2024. EBITDA margins expanded 50 basis points, benefiting from favorable mix and productivity tied to our plant footprint optimization, as well as initiatives to streamline the organization, allowing us to serve our customers more efficiently. SEM organic sales grew 2%, driven by defense, healthcare, and telecommunications, partially offset by subdued consumer, industrial, and energy demand.

EBITDA margins declined 40 basis points, primarily reflecting planned maintenance in our Avient Protective Materials business, completed in 2025, and strategic investments in our growth vectors in this business. Turning to our 2026 outlook, our full-year guidance reflects the balance between encouraging demand trends across our portfolio and continued macro uncertainty and volatility. As Ashish mentioned in his comments, we are cautiously optimistic that some of our end markets negatively impacted in 2025 will start to improve in the coming year, including consumer, industrial, and building and construction. Favorable government policies and easing interest rates, as an example, could spur consumer and housing demand as we progress through the upcoming year.

With that being said, uncertainty remains with evolving global trade, labor markets, GDP growth rates, and foreign currency fluctuations. Accordingly, we are establishing full-year guidance for adjusted EBITDA of $555,000,000 to $585,000,000, which is up 2% to 7% year over year, as well as adjusted EPS of $2.93 to $3.17, which is up 4% to 12% over the prior year. This range includes our first-quarter adjusted EPS outlook of $0.81. Productivity will again play a role in supporting earnings growth and margin expansion in 2026. We will see carryover benefits from initiatives executed in 2025, along with new actions that are now underway.

In addition, we will monitor demand conditions and are prepared to enact additional actions should the demand environment not improve. Regarding free cash flow, we expect another strong year of cash generation with an anticipated range of $200,000,000 to $220,000,000 for the full year. This assumes capital expenditures of $140,000,000, which is approximately $33,000,000 more than 2025. This is driven primarily by the incremental investments to support growth in our defense business as Ashish highlighted earlier today. As we demonstrated in 2024 and 2025, we have consistently moved the key value creation metrics in the right direction, even in a tough macro environment.

Our guidance for 2026 projects another year of adjusted EPS and adjusted EBITDA growth, improved return on invested capital, and a reduction in net leverage. Our strategy of catalyzing the core and building platforms of scale continues to bear fruit and create value for our shareholders. With that, we will now open the line for Q&A.

Operator: Thank you. Press 11. If your question has been answered and you would like to remove yourself from the queue, please press 11 again. Our first question comes from Michael Joseph Sison with Wells Fargo. Your line is open.

Michael Joseph Sison: Hey, good morning. Nice quarter and nice finish for the year. Ashish, you sort of mentioned that some of these markets will improve or could potentially improve this year. Are you seeing any sort of green shoots in some of those, the consumer, industrial, transportation, and construction areas now? And then at the midpoint of your guidance, what improvement would you need to get to hit it?

Ashish K. Khandpur: Thanks, Mike, for the question. Part of the improvement that we are seeing in the U.S., especially we expect in Q1 for consumer and packaging to flip from negative to positive. Last year, packaging Q1 was pretty negative, down 10% in the U.S., and so the comps are pretty favorable, and so that is going to help us. But in general, we are seeing better conditions than we were seeing before on the packaging side. As you saw, in Q4 itself, packaging was up 1% in the United States, so that is a good sign. On the consumer side, it is still subdued, but probably getting a little bit better. Too early to say.

There is a little bit of noise in the system with the Asia situation with the Chinese New Year moving overall, and we generally do not want to make too many assumptions with respect to January itself because there might be some pull-ins from February based on the Chinese New Year situation, and so we would like to see January and February together on that one. But overall, January came marginally better, I would say definitely as well as we expected, marginally better. So that gives us some optimism at this point in time, but as I said, we are not reading much into it because there might be a little bit of noise in the data from Asia.

But overall, I think we are feeling that consumer and packaging should be at least turning positive in the first half of the year for sure, and for the United States, probably in first quarter. And then the other part of the question is on the guidance on midpoint. On the low end of the range, we expect that the consumer, industrial, and the building and construction markets will probably not improve. They stay as they are. In the midpoint, that assumes that there is modest growth in all of them, probably low single-digit kind of growth, and packaging also a little bit more modest growth.

And then on the high end of the range is a little more robust growth, so what typically we would grow in a good year. So that is probably the range that captures our EBITDA ranges and our sales range and everything.

Michael Joseph Sison: Got it. And then a quick follow-up. When you think about the last two years, you spent a lot of time on innovation, R&D, and trying to get your growth vectors to sort of get beefed up. So when you think about 2026, how much growth do you think you will generate from those initiatives? And are there any particular product lines or end markets that are going to drive that? Thank you.

Ashish K. Khandpur: Yes. We have been trying to highlight some of our innovation in multiple earnings calls like these, and today again, I highlighted a few new ones that did not exist a couple of years ago. The idea is to tell the audience that we are moving ahead on this. Our intellectual property filings, for example, the last two years, we have filed 50-plus patents, which includes initial patent filings, provisional patents, as well as PCT filings, so that is 50-plus for both the years. That compares to a number of 20-odd maybe two or three years ago, so you can see how much innovation is going on. That is an indirect measure.

From a financial perspective, if you take 2025, our growth vectors grew high single digits, almost closer to 10% versus closer to 5%, I would say, and the rest of the businesses actually did not grow. That gives you an idea of why we were still flat in a year that had so much low demand in most of our core markets. The big idea is that with these growth vectors, we are really now trying to build businesses of scale in markets that are supported by secular trends and growing at rates much faster than GDP, and that seems to be taking hold. So maybe that is where I will leave it.

Michael Joseph Sison: Thank you.

Operator: Thank you. Our next question comes from Laurence Alexander with Jefferies. Hey, guys. It is Dennis on for Laurence. Thanks for taking my question.

Dennis (for Laurence Alexander): You kind of went through some end markets, maybe I missed it, but you did not mention transportation and the outlook. What are we thinking there? Is it expected to improve at all?

Ashish K. Khandpur: Yes. Transportation for us, Laurence, was overall down 1% for the year. It is a little bit of a regional story. We grew in EMEA 1% versus the auto build was down 1%, and we grew in Asia 5%, which was consistent with the builds in the Asia market. In the United States, the market was down 1% for the year, but we were down 5%, and that is largely driven by the fact that we also have rail and commercial vehicles in our transportation, which were down significantly in the United States.

In the auto business, we are doing fine, consistent with how the market is doing, but the rail and the commercial vehicle piece brought us down a little bit. As I look into the future, we are watching transportation carefully. There was a lot of build that happened towards the end of last year in China especially. They are calling it supply-side structural reform where because of their structural reform, they were going to put restrictions on export of EV vehicles starting January 1. So a lot of material got pushed out at the end of the year, which we benefited from, and as I said, we grew 5% in Asia.

I think Q1 probably will be softer based on that, and then for the total year, flattish to low single digit is my projection.

Dennis (for Laurence Alexander): You kind of talked about not doing any divestitures or acquisitions in the last two years. Thank you very much for that color. I was wondering—obviously your focus is on organic and internal growth—but what should we expect going forward? Is it that there is not a lot out there, we are focused on our business, or what are your thoughts there?

Ashish K. Khandpur: One of the things that we are trying to do, Laurence, is build a few muscles of innovation and commercialization, and that has been going well for the last two years. You can see the teams getting better every day in customer focus and key account management, and then innovating from the market insight, and then understanding the value chains in these growth vectors, which some of them are quite new to us, is very important.

Before we put in any acquisitions—which we think at some point we will do, probably not this year, maybe something after that when we also have a better balance sheet situation than where we are today—by that time, we expect to understand the value chains in our growth areas much better, and then M&A would probably be something to complement or augment our strategy of organic growth versus a stand-alone M&A in a brand-new area.

Dennis (for Laurence Alexander): Alright. Thank you very much.

Michael Joseph Sison: Thank you.

Operator: Our next question comes from Frank Mitsch with Fermium Research. Your line is open.

Frank Mitsch: Thank you so much, and nice end to the year. If I could just follow up on that last question, it looks like you ended the year at a better net debt to EBITDA than perhaps was considered at the beginning of the year. You offered your thoughts, Ashish, on M&A. I am curious as to what your thoughts are with respect to debt paydown versus buybacks.

Ashish K. Khandpur: Thanks, Frank. One of the things that we have obviously been prioritizing is paying down the debt, as you mentioned. As I said, the next twelve months, no M&A. So most of the cash probably will still go toward paying more debt. We would like to make that situation stronger, so we expect to finish the year lower than 2.5x for sure, if not better than that. At that point, we will have more flexibility of buyback versus reduction and also looking at M&A at that point in time would make sense. But I would say that in the near term, you can expect us to keep paying the debt versus buyback.

Frank Mitsch: That would be my

Ashish K. Khandpur: strategy on deployment of the cash.

Frank Mitsch: Okay. Understood. I appreciate the color with respect to the patent filings. I am curious if we could ask it another way in terms of a vitality index, in terms of products introduced over the last four or five years and how you track that and where that stands today.

Ashish K. Khandpur: I do track that internally, Frank, but for me, that number is not as critical. I come from a company, as you know, where these vitality indices were talked about a lot. I think it is a good internal measure for us to keep tracking to see the health of the organization and whether the creativity of the organization is in play. But for me, you could have a couple of products that are big and are creating a lot of value. For us, it is more important what is creating growth.

Obviously, we have to do a lot of product development for replacement because the market needs that, but as we are bringing our strategy into this growth mode through growth vectors, especially in these new areas, the focus is on net new growth creation. Our NPVI, or new product vitality index, is pretty healthy. It is tracked internally, but I do not intend to speak about it.

The difference is that most of that NPVI has been based on replacement products versus products that create new growth, and I am trying to flip that around and say we need products that customers need for replacement on an ongoing basis—which is a very important part of our core business—but we now need to also create products which are going to create brand-new growth for this company. That is what some of the products I keep highlighting in some of our slides represent. These products did not exist a couple of years ago, and they are creating brand-new growth for us.

Frank Mitsch: That is very helpful. I am looking forward to any other metrics that you might be able to catch that transformation from replacement versus new growth down the line so we get a better handle on it. Thank you so much.

Operator: Thanks, Frank. Our next question comes from Aleksey Yefremov with KeyBanc Capital Markets. Your line is open.

Brian (for Aleksey Yefremov): Thanks, and good morning. This is Brian on for Alexi.

Brian (for Aleksey Yefremov): I just wanted to go back. I think you talked about some more productivity gains and maybe some cost cuts. I think there is some carryover from 2025, but you also mentioned some new actions. Can you help us understand, in terms of dollar-wise, how much is embedded in the guide for this year? How much is carryover from 2025, and how much are these new actions? What exactly are these actions that you are taking?

Jamie A. Beggs: Hi, Brian. Thanks for the question. Our productivity initiatives really center around four to five major programs. That includes sourcing savings, taking a look at our footprint and optimizing it, Lean Six Sigma program, as well as simplifying our structure. We accomplished a little over $40,000,000 of that productivity from last year. We expect about half of that to basically continue on into 2026 based on when those were initiated. As we take a look at guidance for the full year for 2026, it really is a lever that we will continue to evaluate depending on demand.

We are a big believer that we need to invest in the underlying growth of the business, and so you want to be a little bit cautious about cutting too deep on certain things. As we look at how demand evolves, we will assess those productivity initiatives. As we said in the commentary earlier today, we are taking a harder look at how demand will end up playing out. Our net inflation for the year is around $30,000,000, so that is a baseline. There could be more depending on how the year evolves.

Brian (for Aleksey Yefremov): Okay. Great. That is very helpful. Then I just wanted to ask in terms of the regional performance—Asia obviously stands out; it is the only region that grew organically in the fourth quarter. I just want to understand what is driving that. Is that largely the exposure you have on the semi front in packaging? Or is it something else? Thanks.

Ashish K. Khandpur: Asia in Q4 has been a good story because Q3 Asia was negative 1% for us, and in Q4, we flipped it positive to plus 3%, and that is largely coming from GCA, which also flipped from minus 1% to plus 4.5%. If you look into GCA, both packaging and telecom went in the right direction. I just visited our Asia team in January. I was there, and I was very pleasantly surprised to see how much market share they are gaining in a market that is not growing, especially in the food and beverage area. That brought us to slightly positive in packaging in GCA, which helped a lot because packaging is the biggest market there.

It is about 33% of Asia, of GCA. Then the other part is that in high performance computing, which Jamie mentioned in her remarks, we have been growing quite well in that secular trend, and materials that are used in semiconductor chip packaging and wafer packaging have been growing at double digits for us, which were also the case in Q4, which really helped Asia as well. Those were the two main reasons.

Operator: Our next question comes from Kristen Owen with Oppenheimer & Co. Your line is open.

Kristen Owen: Good morning. Thank you so much for the question. I wanted to pick up the thread, Jamie, on EBITDA expansion. You have done a really nice job of continuing to grow that margin in a tough environment. But as we look back to, say, 2024 Investor Day, you had this target out there of 20% EBITDA. If we were to revisit that target against the work that you have done on productivity since those targets were laid out, how do you think about the buckets of opportunity that you have to move further towards that 20% EBITDA margin target?

Jamie A. Beggs: Thanks for the question, Kristen. When we laid out in the Investor Day, we were sitting around a little over 16% EBITDA margins. Our goal is to get above 20% EBITDA margins. How we looked at how that would evolve over time would be about half of it related to operating leverage, another quarter related to moving up the value chain in terms of mix, and then another quarter from productivity. Obviously, the last couple of years have been more focused on the mix dynamic and the productivity dynamic.

In fact, if you take a look at the 50 basis points of expansion that we accomplished in 2025, there was not any operating leverage, as you can see our organic sales were basically flat for the year, but we did have quite a bit of price/mix and productivity. I would say about half and half between those two. As we look forward and we look at the opportunity to continue to expand margin, price/mix will continue to be a lever. We are very focused on productivity, especially in, I would say, a low demand environment.

I think you are going to see a pretty big uplift once the market starts to stabilize in some of our core markets such as consumer and building and construction and industrial. I think that would really boost that up. As I look forward to 2026, the majority of it at this juncture we are counting on the expansion coming from those two other areas.

Kristen Owen: That is super helpful. Maybe to double click on that macro piece, what catalyzes color here? You have talked about some of the big macro pieces, but is there anything from a portfolio standpoint—things like maybe the PFAS replacement products—that we should be thinking about driving that market outgrowth in color going forward?

Ashish K. Khandpur: Kristen, the big opportunities for color are in the area of functional additives, and PFAS is one example of that. The same things can be extended to certain kinds of flame retardants and can also be extended into foaming agents, which are used in building and construction materials. Functional additives are close to a half-billion-dollar business for us, so it is sizable in color. It is not insignificant. If we can grow that fast, based on attaching to some of these secular trends and our growth vectors, we feel that we have a good story. That is what we are pursuing.

Kristen Owen: Great. If you do not mind, if I could sneak one more in, just double click on the investment. Are you currently demand constrained in that, and what is driving the additional CapEx? That is my last question. Thank you.

Ashish K. Khandpur: We are not demand constrained, and we are driving as much as we can. This business is lumpy and sometimes shifts in quarters, as we have highlighted several times before. Defense has grown double digits, 14% in 2024 and 8% in 2025. We again expect a strong year from this business, continue to see strength there, and actually are making capacity investments. Innovation for debottlenecking the capacity is underway, as we highlighted today in one of the examples. We are then making some more CapEx investments that Jamie mentioned for $33,000,000 which will bring additional capacity in 2028. This business takes a while because it is very process intensive and needs a lot of equipment, so it does take time.

When we look into the future, we still see this business growing quite well over the next several years, and so we are making investment decisions now so that we are ready when the capacity continues to grow.

Operator: Thank you. Our next question comes from Michael Joseph Harrison with Seaport Research Partners. Your line is open.

Michael Joseph Harrison: Hi. Good morning. Congrats on a nice finish to the year. I was hoping to ask another question on the Dyneema process that you talked about and some of the changes you are making there. Can you give some more color on what exactly you are changing? You categorized it as a debottlenecking, but it also sounds like you have added some additional capabilities to really tailor some of those products to specific customer requirements or specific applications. Beyond that, are you able to share how much additional capacity you are going to be able to get as a result of that change?

Also, what does that mean for the margin performance of that Dyneema business, just from the debottlenecking and changes that you are making to process near term?

Ashish K. Khandpur: There are many questions there, Mike, and I will start by saying that I cannot disclose anything about the process. It is a trade secret because in process innovation, it is very hard to file and then police patents, so we keep it as a trade secret. That is pretty standard, and that is what we have done here as well. All I can tell you is that these fibers are made at a certain tenacity, which gives strength to the fiber, and that tenacity value is achieved—the slower you spin the fiber, the more crystallization can happen to the fiber, which can give it higher tenacity, and so on and so forth.

Typically, when you make high-performance fibers, you are slowing down your speed of the equipment significantly if you want to increase tenacity. I think our teams have figured out ways to not slow it down and continue to ramp it up at a fast rate. That is as much as I can tell on the process side. It is a slight modification of the equipment but also a process modification, and the team has worked on it diligently for more than a year to get us here. It is significant. It does give us enough capacity to buy time till 2028 when our new capacity would be needed. We were not expecting defense to grow like it has been growing.

We were thinking more like mid-single-digits growth, and it has been growing double digits or high single digits. So this debottlenecking is really helping us get there without compromising and not being able to serve our customers on time, while in the meantime, we are making these new investments so that we are ready when we run out of capacity.

Michael Joseph Harrison: Alright. That is helpful. On the healthcare business, just curious: a number of these GLP-1 drugs appear to be shifting from a weekly injection with an injector pen that I think you are involved with to either a monthly injection or even an oral dosage. Can you talk a little bit about your drug delivery product line within healthcare and whether you expect to see any impact from the evolution of how those GLP-1 drugs are administered?

Ashish K. Khandpur: Drug delivery for us is a couple of things. What you mentioned on GLP-1 biopens is one part of it. The other part is remote devices which are used for delivering drugs and glucose monitoring and so on and so forth. That is also part of healthcare. From a GLP perspective, it is too early for us to say. We believe, and our customers believe, that there is market for both oral and injection pens at this point in time. The injectors are also being utilized for other applications, not just for weight reduction, and the market overall growth is expanding and is continuing to be robust.

That is the signal we get from our customers, and so we are going with that premise at this point in time. Both in drug delivery devices, remote monitoring devices, as well as injector pen kind of devices, we seem to be doing quite well and expect that to continue at least for 2026.

Michael Joseph Harrison: Alright. Thanks very much.

Frank Mitsch: Thank you.

Operator: Thank you. Our next question comes from David Begleiter with Deutsche Bank.

Emily Fusco (for David Begleiter): Hi. This is Emily Fusco on for Dave Begleiter. What are your expectations for pricing in CAI and Specialty for 2026?

Jamie A. Beggs: So, Emily, when we think about pricing, we are obviously always doing value pricing. We take a look at both price and mix as we move forward. As we mentioned for 2025, we have had a lot of success in healthcare and in defense. That has driven a lot of our price/mix dynamic in 2025. We expect that to continue as we think about 2026. Other pricing initiatives that people think about include what is going on with raw materials. We have proven through at least the five or six years that I have been here that raw materials can enable us to capture some margin expansion.

We are always on top of it in terms of making sure that margin is not destructed based on where materials are. In our bridges, as I mentioned with Kristen's comment, we do expect some margin expansion in 2026 based on price/mix, and that really is a function of where we are selling our product, not because there are specific pricing initiatives going on other than our normal monitoring of where raw materials are and making sure that we are value pricing our products as they are created and differentiated from what else is in the market.

Emily Fusco (for David Begleiter): Perfect. Thank you.

Operator: Thank you. Our next question comes from Ghansham Panjabi with Robert W. Baird. Your line is open.

Ghansham Panjabi: Ashish, just going back to the fourth quarter, as it relates to the strategic growth vectors you have outlined in the past, how did that portion of the portfolio grow on a core sales basis in the fourth quarter relative to where you came in on a consolidated basis, which was roughly down 1%?

Giuseppe Di Salvo: Sorry. Growth vector growth versus the rest of portfolio.

Ashish K. Khandpur: In fourth quarter specifically?

Ghansham Panjabi: Yeah. Or you can speak to us for the year.

Ashish K. Khandpur: For the year, maybe it is better for me to talk about the year versus quarter because these growth vectors are launched in different parts of the year, so it can be unfavorable. As I mentioned, growth vectors grew high single digits for us, and high single digits for growth vectors versus less than 1% or low single-digit kind of decline in the rest of the business.

Ghansham Panjabi: Okay. Then as it relates to core sales for the following year, for 2026, did you break that up by segment?

Ashish K. Khandpur: Not sure if I heard that.

Jamie A. Beggs: No. We did not provide any specific guidance based on segments. We did provide a full-year range on EBITDA as well as EPS. We gave a little bit of color between the segments in terms of some of the end markets and where we are seeing strengths and weaknesses. Maybe just to reiterate, from an SEM perspective as well as a Color perspective, we expect things like healthcare to continue to perform well. SEM also has exposure to defense. That is also something that we continue to take a look at. We are looking to see how the evolution really comes about for consumer, industrial, and building and construction, which will be a key driver for the Color segment.

Ashish K. Khandpur: Very good. Thank you.

Giuseppe Di Salvo: Thank you.

Operator: We have time for one last question, and that question comes from Vincent Andrews with Morgan Stanley.

Turner Wills Hinrichs (for Vincent Andrews): Hi. This is Turner Hinrichs on for Vincent. I was just wondering if you could provide a little bit more regional color on what your 2026 guide considers for growth by region, particularly in Europe and Asia, considering you talked a lot about growth drivers in the U.S. economy so far?

Jamie A. Beggs: Turner, we did not give any specific guidance by region, just like the question that Ghansham asked based on segments. We were talking more about end markets. There is a lot of geopolitical uncertainty, trade tariffs, and other things going on as it impacts the U.S. in particular, and those are the things that we are watching closely, as well as whether or not the Fed will decrease rates and at what pace they will actually do that. You mentioned Europe and Asia specifically. As you can see from what happened in 2025 in Europe, we ended it down 1%. At this juncture, we are expecting similar levels until we see some type of potential recovery.

The Asia dynamic, as Ashish mentioned during the commentary, includes some really nice tailwinds in our packaging space and our telecommunications space. We expect with the underlying GDP there, although maybe slightly lower than what has been previously, it is still a growth part of the world. I would expect to continue to see growth in that area.

Ashish K. Khandpur: Great. Thanks for the color.

Operator: Thank you. This concludes the question and answer session. You may now disconnect. Everyone, have a great day.

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