Ascent Industries NASDAQ: ACNT reported higher second-quarter sales and a return to positive adjusted EBITDA as its specialty chemicals business expanded and the recently acquired Midwest Graphic Sales business began contributing to results. Management said the quarter reflected broad-based improvement in volume, pricing, revenue and profitability, although gross-margin pressure and working-capital use remained key areas of focus.
Second-quarter net sales rose 37.6% year over year to $25.7 million, an increase of $7 million. Pounds shipped increased 15.2%, while average selling prices rose about 23%. Midwest Graphic Sales, acquired May 4, contributed $1.9 million of sales during the quarter.
Excluding Midwest, Ascent’s legacy business grew approximately 28% from a year earlier, according to President and CEO Bryan Kitchen. He said June was the company’s strongest chemical-sales month since March 2023, while the second quarter was its strongest sales quarter since the third quarter of 2022.
“We’re building a better business, not just a bigger one,” Kitchen said, describing the company’s goal of generating more recurring product revenue, higher margins, more predictable cash flow and stronger returns on invested capital.
Commercial Pipeline and Operating Improvements
Ascent converted 17 commercial opportunities across 13 customers during the quarter into roughly $5.8 million of annualized revenue. Kitchen said the company achieved a 26% conversion rate, above what he characterized as a 10% to 15% specialty-chemicals industry benchmark.
About 44% of commercial wins came from the company’s core technologies, while 73% of project wins came from existing customers. The active selling-project pipeline reached a record $140 million, up approximately 33% sequentially. The increase included commercial opportunities brought in through the Midwest acquisition as well as growth in the legacy business pipeline.
Management also highlighted efforts to manage inflation in petroleum-based raw materials and freight costs. Kitchen said approximately 65% of Ascent’s raw-material spending is petroleum based, leaving the company exposed to cost pressure during heightened geopolitical tensions in the Middle East. The company’s sourcing and commercial teams worked to preserve customer supply and implement price increases where contracts allowed, he said.
Ascent remains on track with a platform-wide optimization initiative expected to produce $3 million to $5 million in annualized gross-profit improvement at run rate. The company expects the measures to be fully institutionalized by the end of 2026. One process-engineering project increased the effective capacity of a key reaction asset by more than 500,000 pounds annually, Kitchen said.
Midwest Acquisition Adds Sales and Margin
Management said Midwest Graphic Sales was immediately accretive to earnings and entered Ascent’s portfolio with a gross margin of approximately 26%. The acquired business has retained key customers, secured its first new customer since joining Ascent and implemented pricing actions across its portfolio, Kitchen said.
Back-office integration was completed one quarter ahead of the company’s original commitment, while cost-synergy initiatives and the transition of manufacturing into Ascent’s network remain on schedule, according to management. Kitchen also said the combined businesses recently secured a field-trial program with a large prospective customer, though he noted that the effort remains at an early stage.
Profitability Improves, but Gross Margin Declines
Adjusted EBITDA from continuing operations was $1.5 million, or 5.7% of sales, compared with an adjusted EBITDA loss of about $300,000 in the prior-year quarter. Selling, general and administrative expense declined by roughly $900,000 year over year to $5.5 million, improving to 21.5% of sales from 34.5%.
Chief Financial Officer Ryan Kavalauskas said Ascent’s longer-term objective is to reduce SG&A to approximately 15% of revenue on a run-rate basis through cost discipline, standardized processes and growth across the platform.
Gross profit increased 14% to $5.5 million, but gross margin fell to 21.6% from 26.1% a year earlier. For the first half, gross profit rose 5% to $8.4 million, while gross margin declined 320 basis points to 18.5%.
Kavalauskas attributed the margin decline to higher material costs, freight inflation and conversion costs associated with scaling new and expanding programs. Material costs increased by about 127 basis points as a percentage of sales, while other cost-of-goods-sold expenses increased by roughly 193 basis points.
The company has taken pricing and sourcing actions, but Kavalauskas said there is typically a delay before those measures are fully reflected in reported results. He said management’s near-term priority is improving sourcing, pricing realization, throughput, production planning and network utilization so that revenue growth converts more consistently into margins and cash flow.
Ascent expects a moderate gross-margin contraction in the fourth quarter compared with the stronger second- and third-quarter periods, reflecting seasonal patterns and program turnover within portions of its custom-manufacturing portfolio.
Liquidity, Working Capital and Capital Allocation
Ascent ended June with $28.1 million in cash and cash equivalents, no borrowings under its revolving credit facility and $17.9 million of remaining revolver availability, for total liquidity of about $46 million.
Cash declined approximately $29.5 million from year-end, primarily due to $14.6 million spent on the Midwest acquisition, $6.9 million in share repurchases and $1.2 million of capital expenditures. Operating activities used $7.7 million of cash in the first half, largely because of working-capital needs.
The company’s cash conversion cycle increased to 75 days, up 12 days from the prior year. Management is targeting an initial five-day improvement, which it estimates could release about $1 million to $1.5 million of cash depending on the mix of working-capital improvements. Ascent aims to bring the cycle toward 70 days over time.
Management expects cash to recover into the mid-$30 million range before additional discretionary capital deployment as operating cash use moderates and deferred escrow proceeds are received. The company said it expects an $800,000 escrow related to the American Stainless Tubing sale has already been received, while $4.5 million associated with the Bristol Metal transaction is expected to be released in October 2026.
During the second quarter, Ascent repurchased about 210,000 shares for $2.9 million at an average price of $13.80 per share. First-half repurchases totaled about 506,000 shares for $6.9 million, leaving approximately 1.5 million shares available under its authorization at quarter-end.
Kavalauskas said the company’s capital-allocation priorities are liquidity, working capital, internal investment, strategic acquisitions and share repurchases, in that order. In the near term, he said the highest-return use of capital is improving cash conversion and restoring gross margin while making existing growth less cash intensive.
About Ascent Industries (NASDAQ:ACNT)
Ascent Industries Co an industrials company, produces and distributes stainless steel pipe and tube and specialty chemicals in the United States and internationally. The company operates through two segments, Tubular Products and Specialty Chemicals. It manufactures welded pipes and tubes, primarily from stainless steel, duplex, and nickel alloys; and ornamental stainless steel tubes for automotive, commercial transportation, marine, food services, construction, furniture, healthcare, and other industries.
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