ASCENT INDUSTRIES CO. (ACNT) Risk Factors

Item 1A. Risk Factors

There are inherent risks and uncertainties associated with our business that could adversely affect our operating performance and financial condition. Set forth below are descriptions of those risks and uncertainties that we believe to be material, but the risks and uncertainties described are not the only risks and uncertainties that could affect our business. Reference should be made to "Forward-Looking Statements" above, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and our consolidated financial statements and related notes in Item 8 below.

Industry and Segment Risks

Our industry is highly competitive, and demand for our products and our financial results may be negatively impacted by changes in industry capacity utilization, shifts in production geography, raw material dynamics, and competition from other specialty chemical providers.

We operate in a highly competitive specialty chemicals marketplace. Our financial performance is sensitive to fluctuations in industry capacity utilization; pricing often declines when overall capacity exceeds demand, leading to underutilization and pressure on margins. Overcapacity in regions such as Asia, particularly when production is exported to other markets, can disrupt supply-demand balances globally and reduce demand for our products in key regions.

Our ability to compete effectively depends on maintaining advanced technical capabilities and continuously developing and commercializing innovative, high-value specialty chemical solutions for current and prospective customers. Growing competition from alternative products, especially those with enhanced environmental profiles or lower costs, or from substitutes that deliver similar performance could reduce demand for our offerings and adversely affect our market position, pricing power, and growth opportunities.

Variations in our product, customer, and geographic sales mix make it difficult to predict future performance.

Our net sales and gross margins fluctuate based on the specific mix of products, customers, and regions in any period, which can differ significantly from prior or expected periods. Gross margins are heavily influenced by this mix, as well as by competitive dynamics, product commoditization, rising input or logistics costs, inflation, regulatory changes, and other market factors. These variations have historically caused material period-to-period differences in results (particularly during economic downturns) and can complicate assessments of how external conditions or internal changes may impact our business. As a result, forecasting operating results remains challenging.

A substantial portion of our sales is dependent upon a limited number of customers with the top five customers accounting for approximately 51% of revenues for 2025 and 35% of revenues for 2024. An adverse change in, or termination of, the relationship with one or more of our top customers could materially and adversely affect our results of operations.

Industry dynamics, technological changes, and customer trends may lead to volatility in our results.

The specialty chemicals sector experiences rapid innovation, product obsolescence, pricing pressures, raw material volatility, and shifting supply-demand patterns. End markets such as oil & gas, coatings, personal care, and others are influenced by technological advances, regulatory shifts, consumer preferences for sustainable alternatives, and economic factors. Changes in customer formulations, processes, or specifications could render certain products less relevant or obsolete, while alternatives may emerge that reduce or eliminate the need for our solutions. These factors can cause significant fluctuations in sales, margins, and overall financial condition.

We must continue to enhance existing products, develop new ones, and accurately predict customer needs to remain competitive. Failure to do so effectively could materially and adversely affect our business.

Operations and Supply Chain Risks

Any interruption in our ability to procure raw materials, or significant volatility in the price of raw materials, could adversely affect our business and results of operations.

Our business depends on the timely availability of raw materials, and any interruption in our ability to procure such materials, or significant volatility in their pricing, could adversely affect our business, financial condition and results of operations.

We actively manage our sourcing strategy to mitigate supply risk and cost volatility, including maintaining relationships with multiple approved suppliers where commercially practicable, monitoring supplier performance and financial condition, and managing inventory levels. However, these efforts may not fully protect us from supply interruptions, capacity constraints,

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transportation disruptions, geopolitical developments, force majeure events, or other unforeseen circumstances affecting our suppliers.

While most of our raw materials are available from multiple sources, certain key inputs are obtained from a sole supplier or a limited number of qualified suppliers. The loss of, or significant reduction in supply from, any such supplier could require us to identify and qualify alternative sources, potentially resulting in increased costs, capital expenditures, or production delays. Any such disruption could adversely affect our ability to meet customer demand.

Raw material prices are subject to volatility due to changes in supply and demand, energy costs, global trade conditions, regulatory developments and other macroeconomic factors. Significant or sustained increases in raw material costs may adversely impact our margins if we are unable to timely pass such increases through to customers. Competitive market conditions, contractual arrangements, or customer purchasing behavior may limit our ability to fully recover cost increases or delay the timing of such recovery. In addition, volatility in raw material pricing may influence customer ordering patterns, which could affect our sales volumes and operating results.

Accordingly, any material disruption in our supply chain, inability to secure adequate raw material supply at acceptable prices and terms, or limitations in our ability to pass through cost increases could materially and adversely affect our business, financial condition and results of operations.

The financial health of our customers or suppliers could impair demand, pricing, collections, or our supply chain.

Our customers operate in competitive end markets and face pressures from their own competitors, shifting preferences, and economic conditions. These factors have historically led some customers to experience financial distress, including bankruptcy or receivership. Distressed customers may delay payments, seek concessions on pricing or terms, reduce volumes, or eliminate product lines, and prior payments may be subject to clawback in bankruptcy proceedings. Such developments could negatively affect our sales, margins, and cash flow.

Similarly, if key suppliers face insolvency or fail to meet obligations, we may need to secure replacement supplies at higher costs or on less favorable terms, with limited recovery options. Raw materials for our specialty chemicals are generally available from multiple sources, but some needs are met by sole or limited suppliers with terminable relationships. Interruptions, significant price volatility, or inability to pass through cost increases due to competition could adversely affect our business and results of operations.

Our operating results are sensitive to the availability and cost of energy and freight, which are important in the manufacture and transport of our products.

Our operating costs increase when energy or freight costs rise. During periods of increasing energy and freight costs, we might not be able to fully recover our operating cost increases through price increases without reducing demand for our products. In addition, we are dependent on third party freight carriers to transport many of our products, all of which are dependent on fuel to transport our products. The prices for and availability of electricity, natural gas, oil, diesel fuel and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control. Disruptions in the supply of energy resources could temporarily impair our ability to manufacture products for customers and may result in the decline of freight carrier capacity in our geographic markets, or make freight carriers unavailable or more expensive. Further, increases in energy or freight costs that cannot be passed on to customers, or adverse changes in our costs relative to energy and freight costs paid by competitors, has adversely affected, and may continue to adversely affect, our profitability.

We are dependent upon the continued operation of our production facilities, which are subject to a number of hazards.

Our manufacturing processes are dependent upon critical pieces of equipment. This equipment may, on occasion, be out of service as a result of unanticipated failures. We have experienced, and may in the future experience, material plant shutdowns or periods of reduced production as a result of such equipment failures. In addition, our production facilities are subject to hazards associated with the manufacture, handling, storage and transportation of materials and products, including leaks and ruptures, explosions, fires, inclement weather and natural disasters, unscheduled downtime and environmental hazards. As well, some of our production capabilities are highly specialized, which limits our ability to shift production to another facility. The occurrence of incidents in the future may result in production delays, failure to timely fulfill customer orders or otherwise have a material adverse effect on our business, financial condition or results of operations.

Capital projects are complex and subject to delays, cost overruns, or underperformance.

Our capital expenditures support maintenance, upgrades, and expansions of manufacturing facilities and equipment. These projects involve complexities such as construction timelines, equipment commissioning, customer quality certifications, and

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demand forecasting. Delays, budget overruns, or failure to achieve expected returns are possible. Some projects rely on government incentives or funding, which could change or be unavailable. If we lack sufficient capital or face higher-than-anticipated needs due to technology shifts or competition, we may struggle to maintain or expand capabilities in key markets.

Ascent relies on information technology systems that are vulnerable to disruption and cybersecurity threats.

Our operations depend heavily on IT systems for efficient functioning and, in some cases, core business processes. We outsource significant portions of IT management, including infrastructure, networks, data centers, end-user support, backups, and security to third-party providers. Any prolonged failure or disruption of these systems, whether ours or a third party's, could cause substantial operational interruptions, damage our reputation, and harm our financial results.

Given the nature of our business and customer base, we are a potential target for evolving cybersecurity threats, including those from hackers, insiders, or advanced tools such as artificial intelligence. While we maintain controls, policies, and procedures to mitigate these threats, they may not always prevent breaches or detect issues promptly. A significant breach could result in loss or theft of proprietary information, intellectual property, customer/supplier data, or employee information, triggering legal notifications, litigation, regulatory penalties, remediation costs, and harm to customer relationships, brand reputation, and financial performance.

If we fail to maintain an efficient cost structure, our profitability may suffer.

Our competitiveness and profitability depend on controlling costs across manufacturing, operations, sales, and support functions. We pursue ongoing efficiency and cost-reduction initiatives, which may involve facility optimizations, workforce adjustments, or process changes. These efforts require significant management focus and carry risks, including employee relations issues or failure to achieve targeted savings. If we cannot sustain efficiencies amid market price pressures, our margins and financial performance could decline.

Natural disasters, pandemics, or other catastrophic events could disrupt operations and materially affect our results.

Events such as severe weather (hurricanes, floods, storms), earthquakes, pandemics, or other catastrophes at our facilities, those of suppliers, customers, or in key regions could interrupt production, supply chains, or demand. Past events, including hurricanes and global health crises such as COVID-19, have impacted volumes, costs, and operations. Future occurrences could similarly harm results, financial position, and cash flows, depending on severity, duration, and broader economic effects.

Government Regulation Risks

Evolving ESG expectations and requirements could increase costs and create new risks.

Heightened emphasis on environmental, social, and governance (ESG) factors require ongoing investment in tracking, reporting, and progress toward sustainability goals amid changing standards. Third-party ESG ratings influence investor decisions, and failure to meet expectations could harm our reputation. Disclosure rules, which are rapidly growing in complexity and number, demand resources and may necessitate revisions to methodologies, goals, or reported data. Compliance with emerging climate or environmental regulations could drive additional capital spending, operating expenses, or product changes, with potentially material costs.

Our operations expose us to the risk of environmental, health and safety liabilities and obligations, which could have a material adverse effect on our financial condition or results of operations.

We are subject to numerous federal, state and local environmental protection and health and safety laws governing, among other things:

•the generation, use, storage, treatment, transportation, disposal and management of hazardous substances and wastes;

•emissions or discharges of pollutants or other substances into the environment;

•investigation and remediation of, and damages resulting from, releases of hazardous substances; and

•the health and safety of our employees.

Under certain environmental laws, we can be held strictly liable for hazardous substance contamination of any real property we have ever owned, operated or used as a disposal site. We are also required to maintain various environmental permits and licenses, many of which require periodic modification and renewal. Our operations entail the risk of violations of those laws and regulations, and we may not have been in the past or will be at all times in the future, in compliance with all of these requirements. In addition, these requirements and their enforcement may become more stringent in the future.

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We have incurred, and expect to continue to incur, additional capital expenditures (in addition to ordinary or other costs and capital expenditures) to comply with applicable environmental laws. Our failure to comply with applicable environmental laws and permit requirements could result in civil and/or criminal fines or penalties, enforcement actions, and regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, such as the installation of pollution control equipment, which could have a material adverse effect on our financial condition, results of operations or cash flows.

We are currently, and may in the future be, required to investigate, remediate or otherwise address contamination at our current or former facilities. Many of our current and former facilities have a history of industrial usage for which additional investigation, remediation or other obligations could arise in the future and that could materially adversely affect our business, financial condition, results of operations or cash flows. In addition, we are currently, and could in the future be, responsible for costs to address contamination identified at any real property we used as a disposal site.

Although we cannot predict the ultimate cost of compliance with any of the requirements described above, the costs could be material. Non-compliance could subject us to material liabilities, such as government fines, third-party lawsuits or the suspension of non-compliant operations. We also may be required to make significant site or operational modifications at substantial cost. Future developments also could restrict or eliminate the use of or require us to make modifications to our products, which could have a significant negative impact on our results of operations. At any given time, we are (or may be) involved in claims, litigation, administrative proceedings and investigations of various types involving potential environmental liabilities, including cleanup costs associated with hazardous waste disposal sites at our facilities. We cannot assure you that the resolution of these environmental matters will not have a material adverse effect on our results of operations. The occurrence and ultimate costs and timing of environmental liabilities are difficult to predict. Liability under environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis. We could incur significant costs, including cleanup costs, civil or criminal fines and sanctions and third-party claims, as a result of past or future violations of, or liabilities under, environmental laws.

We could be subject to third party claims for property damage, personal injury, nuisance or otherwise as a result of violations of, or liabilities under, environmental, health or safety laws in connection with releases of hazardous or other materials at any current or former facility. We could also be subject to environmental indemnification claims in connection with assets and businesses that we have acquired or divested.

There can be no assurance that any future capital and operating expenditures to maintain compliance with environmental laws, as well as costs incurred to address contamination or environmental claims, will not exceed any current estimates or adversely affect our financial condition and results of operations. In addition, any unanticipated liabilities or obligations arising, for example, out of discovery of previously unknown conditions or changes in laws or regulations, could have an adverse effect on our business, financial condition or results of operations.

We may be adversely affected by changes in tax laws or tax rates.

Our business, which involves manufacturing operations, custom chemical production, and sales to industries such as coatings, adhesives, pulp & paper, textiles, automotive, water treatment, construction, heavy industrial, petrochemical, food processing, pharmaceutical, oil & gas, and others, may be impacted by factors outside our control. These include changes in tax laws or tax rates, as well as conditions in financial services and capital markets, including counterparty risk from suppliers or customers, rising interest rates that could increase borrowing costs for capital-intensive manufacturing, inflation affecting raw material and energy costs (e.g., petroleum-derived inputs), deflation impacting pricing, and fluctuations in currencies relevant to our international sales or sourcing.

Macroeconomic challenges, such as volatility in financial and capital markets, unemployment levels, and the U.S. and other governments' ability to manage rising debt, may persist and exert pressure on the broader economy. This could lead to shifts in tax policies or rates, reduced demand for our specialty chemicals, supply chain disruptions, higher input costs, or competitive pressures.

There can be no assurance that changes in tax laws or tax rates will not materially affect our future cash taxes, effective tax rate, deferred tax assets and liabilities, or overall profitability.

Tariff and Trade Environment may significantly affect our industry and business, and economic decline can materially impact our financial results.

The recently imposed U.S. tariffs did not materially impact our fiscal 2025 results, but their effects and the potential imposition of modified or additional tariffs may, among other things, create new trade barriers that disrupt supply chains, raise costs, weaken consumer confidence and impact consumer demand for our products, and impact our ability to export our

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products, all of which could have an adverse effect on our business and financial results. The extent of the impact of tariffs on the Company’s business is highly uncertain and difficult to predict. We are closely monitoring the rapidly evolving tariff landscape and are working diligently with key suppliers to mitigate risks. Deterioration in general economic conditions that in turn diminishes consumer confidence or discretionary income may reduce our sales, or we may decide to lower pricing for our products, which could adversely affect our financial results, including increasing the potential for future impairment charges. In addition, economic uncertainty may also increase certain costs of operation, such as financing costs, energy costs and insurance premiums, which in turn may impact our results of operations. We cannot predict the strength of global economies or the timing of economic recovery, either globally or in the specific markets in which we compete.

Human Capital Risks

Certain of our employees are covered by collective bargaining agreements, and the failure to renew these agreements could result in labor disruptions and increased labor costs.

As of December 31, 2025, we had 54 employees represented by unions which is approximately 27% of the aggregate number of Company employees. These employees are represented by local unions affiliated with the UFCW. Collective bargaining contracts for the UFCW locals are in effect through 2027. Although we believe that our present labor relations are strong, our failure to renew these agreements on reasonable terms as the current agreements expire could result in labor disruptions and increased labor costs, which could adversely affect our financial performance.

Failure to attract and retain key personnel may adversely impact our strategy and execution and financial results.

Our ability to operate effectively, execute our business strategy and achieve future growth depends significantly on our ability to identify, attract, recruit, develop and retain qualified employees. The loss of key personnel, or our failure to successfully identify, attract, recruit, develop and retain talent in a competitive labor market, could adversely affect our operations, customer relationships and financial performance.

Our future success also depends on maintaining a workforce with the technical expertise, operational experience and commercial knowledge necessary to support our manufacturing processes, product development efforts and customer engagement activities. Competition for skilled personnel, including experienced production employees, engineers, technical service professionals and commercial leadership, may increase labor costs and limit our ability to staff our facilities and support growth initiatives. If we are unable to maintain a stable and capable workforce, our competitiveness and ability to execute our strategic objectives could be materially adversely affected.

We also face risks associated with the actions taken in response to pandemics, including those associated with workforce reductions, and may experience difficulties with hiring additional employees or replacing employees following a pandemic, which may be exacerbated by the tight labor market. In addition, pandemics have, and may again result in quarantines of our personnel or an inability to access facilities, which could adversely affect our operations.

Our operations present significant risk of injury and other liabilities.

The industrial activities conducted at our facilities present significant risk of serious injury or even death to our employees or other visitors to our operations, notwithstanding our safety precautions, including our material compliance with federal, state and local employee health and safety regulations, and we may be unable to avoid material liabilities for any such incidents. We maintain various forms of insurance, including insurance covering claims related to our properties and risks associated with our operations, but there can be no assurance that the insurance coverage will be applicable and adequate, or will continue to be available on terms acceptable to us, or at all, which could result in material liability to us for any injuries or deaths.

Financial and Strategic Risks

Our recent exit from the Tubular Products Segment may result in unexpected costs, liabilities, or disruptions that could adversely affect our financial condition and results of operations.

In the past year, we have completely exited our Tubular Products Segment, which previously included our Welded Pipe & Tube operations. This exit involved the cessation of operations, divestiture of assets, and winding down of related activities across facilities in Tennessee and North Carolina. As a result of this strategic shift, we are now solely focused on our Specialty Chemicals Segment. While this exit was intended to streamline our operations and allocate resources to higher-growth areas, it exposes us to several risks. We may incur unanticipated costs related to the wind-down process. Additionally, we could face potential liabilities from discontinued operations, such as product liability claims, contractual disputes, or regulatory investigations arising from historical activities in industries like oil and gas, chemical, petrochemical, and water treatment, where our tubular products were used. Any such claims or obligations could require significant financial resources to resolve and may not be fully covered by insurance. Furthermore, the loss of revenue and diversification from the Tubular

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Products Segment, which served diverse markets including automotive, power generation, and mining, increases our dependence on the Specialty Chemicals Segment. This concentration could amplify the impact of adverse events in the chemicals industry, such as raw material price volatility, supply chain disruptions, or shifts in demand from end markets like pulp and paper, coatings, and oil and gas. If we are unable to successfully mitigate these risks or if the benefits of the exit do not materialize as anticipated, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

The inability to successfully complete or integrate future acquisitions or strategic investments may harm our results.

As part of our strategy to expand and strengthen our specialty chemicals platform, we may pursue acquisitions, joint ventures, or other investments. Success in these efforts requires identifying suitable opportunities, negotiating favorable terms, securing financing, completing transactions, and integrating operations effectively. There is no guarantee that we will achieve these objectives or realize the anticipated benefits, such as revenue growth, cost synergies, or enhanced capabilities.

Acquisitions and investments can expose us to unforeseen liabilities from the acquired entity or partner, including disputes over intellectual property, environmental or tax obligations, or other unknown issues that emerge post-transaction. Depending on deal structure, we may assume or become liable for such matters, which could materially harm our business, financial condition, or results of operations.

We may repurchase or redeem our equity or debt securities, which could affect market dynamics for those securities and reduce our liquidity.

From time to time, we may repurchase shares of our common stock or redeem debt instruments through open-market transactions, accelerated programs, private negotiations, tender offers, or other methods. The decision to pursue such actions, along with their timing and scale, depends on market conditions, our liquidity needs, contractual limitations, and other considerations. These activities could influence the trading market for our securities and potentially constrain our available liquidity.

Growth and transformation initiatives may demand substantial resources and, if unsuccessful, could materially harm our business.

We regularly assess opportunities to grow, optimize, or transform our operations, which may include acquisitions, partnerships, divestitures, restructurings, new facilities, or other changes. These efforts often require significant capital, potentially increasing debt levels, and introduce new risks. If initiatives do not deliver expected outcomes, we could face heightened financial strain, reduced liquidity, limited market access, or dilution of shareholder value.

Implementation challenges may include management distraction, strained relationships, higher costs, regulatory hurdles, or inexperience in new areas. We may also fall short of projected cost savings, revenue growth, or other benefits despite significant investment.

Impairment in the carrying value of our fixed assets or intangible assets could adversely affect our financial condition and consolidated results of operations.

We evaluate the useful lives of our fixed assets and intangible assets to determine if they are definite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the lease term, future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures and the expected lives of other related groups of assets. We cannot accurately predict the amount and timing of any impairment of assets. Should the value of goodwill, fixed assets or intangible assets become impaired, there could be an adverse effect on our financial condition and consolidated results of operations.

We have identified and may continue to discover material weaknesses in our internal controls over financial reporting, which may adversely affect investor confidence in the accuracy and completeness of our financial reports and consequently the market price of our securities.

We have identified and may continue to discover material weaknesses in our internal controls over financial reporting, which may adversely affect investor confidence in the accuracy and completeness of our financial reports and consequently the market price of our securities. As a public company, we are required to design and maintain proper and effective internal controls over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and provide a management report on the internal controls over financial reporting, which must be attested to by our

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independent registered public accounting firm. We have identified material weaknesses in our internal controls over financial reporting, and may not detect errors on a timely basis and our financial statements may be materially misstated.

The process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 is challenging and costly. In the future, we may not be able to complete our evaluation, testing, and any required remediation in a timely fashion. If we continue to identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we continue to be unable to assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities could be negatively affected, and we could become subject to investigations by the Financial Industry Regulatory Authority, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Intellectual Property Risks

Protecting our intellectual property is critical to our success.

We safeguard our intellectual property through patents, trade secrets, confidentiality agreements, and robust physical and cybersecurity measures. Enforcing or defending these rights can involve substantial costs. Intellectual property protections vary by jurisdiction, and in some countries where we operate, they may be weaker than in the United States. Failure to secure, maintain, or defend our rights, particularly amid evolving technologies such as artificial intelligence, or successful third-party infringement claims against us could materially affect our business, financial condition, and results.

General Risk Factors

Our business is exposed to risks associated with the use of Artificial Intelligence (AI) tools.

We leverage artificial intelligence (“AI”) tools across our business operations to accelerate foundational business case development for new products and new markets, evaluate strategic and operational scenarios, and enhance innovation and process improvement initiatives. While AI presents opportunities to improve efficiency, decision-making and competitive positioning, its adoption also introduces a range of risks that could adversely impact our business, financial condition and results of operations.

These risks include, but are not limited to, potential competitive disadvantages if peers more effectively leverage AI to accelerate innovation, product development or operational performance. The use of AI may also expose us to legal, regulatory and reputational risks, particularly in jurisdictions with evolving or inconsistent regulatory frameworks governing AI, data privacy and cybersecurity. Additionally, the deployment of AI tools, whether by us or by customers using AI-enabled solutions, may result in unintended consequences such as biased, inaccurate or incomplete outputs; loss, misuse or compromise of confidential information or intellectual property; and challenges in asserting, defending or protecting intellectual property rights.

These risks may be amplified by increasing regulatory scrutiny and potential compliance obligations, which could result in increased costs, operational constraints or limitations on our ability to deploy AI technologies effectively. There can be no assurance that our use of AI will yield the anticipated benefits or that we will be able to successfully manage or mitigate the associated risks.