NewMarket Corporation Reports Results for Third Quarter and First Nine Months of 2020

Rhea-AI Summary

NewMarket Corporation (NYSE:NEU) reported a net income of $95.8 million for Q3 2020, up from $67.8 million in Q3 2019, attributing the increase to lower costs, despite challenges in shipments. The company’s net income for the first nine months was $203.7 million, slightly down from $204.2 million in the prior year. Petroleum additives operating profit rose to $102.2 million in Q3 2020, boosted by lower raw material costs. However, sales for the segment fell to $510.3 million from $550.6 million YoY, due to decreased shipments. NewMarket remains committed to long-term investments and operational safety amidst the pandemic.

Positive

• Q3 2020 net income increased to $95.8 million, up from $67.8 million in Q3 2019.
• Operating profit for petroleum additives rose to $102.2 million compared to $94.8 million YoY.
• Despite challenges, the company funded $60.1 million in capital expenditures and returned $101.4 million to shareholders through dividends and stock repurchases.

Negative

• Sales for petroleum additives fell to $510.3 million in Q3 2020, down from $550.6 million in Q3 2019.
• Shipments decreased by 3.2% YoY, primarily due to declines in fuel additives shipments.
• Year-to-date net income declined slightly from $204.2 million to $203.7 million.

RICHMOND, Va.--(BUSINESS WIRE)--NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the third quarter and first nine months of 2020.

Net income for the third quarter of 2020 was $95.8 million, or $8.77 per share, compared to net income of $67.8 million, or $6.06 per share, for the third quarter of 2019. Third quarter net income includes a gain of $16.5 million related to the sale of a non-operating parcel of real estate. For the first nine months of 2020, net income was $203.7 million, or $18.52 per share, compared to net income of $204.2 million or $18.26 per share, for the first nine months of last year.

Petroleum additives operating profit for the third quarter of 2020 was $102.2 million, compared to $94.8 million for the same period last year. The increase was due to lower raw material costs, selling, general, and administrative costs, and research and development costs, partially offset by changes in selling prices, higher conversion costs, and lower shipments. Petroleum additives operating profit for the first nine months of the year was $248.9 million compared to $285.6 million for the first nine months of 2019. The decrease was due to lower shipments, higher conversion costs, and changes in selling prices, partially offset by lower raw material costs, selling, general, and administrative costs, and research and development costs.

Sales for the petroleum additives segment for the third quarter of 2020 were $510.3 million, down from $550.6 million in the third quarter of 2019. The decrease was due mainly to lower shipments and selling prices. Shipments decreased 3.2% between periods, mainly driven by decreases in fuel additives shipments. Petroleum additives sales for the first nine months of the year were $1.5 billion compared to sales in the first nine months of last year of $1.6 billion. The decrease was due mainly to lower shipments and selling prices. Shipments decreased 7.5% between periods, with decreases in both lubricant additives and fuel additives shipments.

Our third quarter 2020 operating results reflected continued improvement in some of the key drivers that affect the performance of our business, consistent with what we began to see near the end of the second quarter. With gasoline consumption and miles driven continuing to show improvement and industrial production beginning to rebound, specifically related to automobile plants reopening and producing vehicles, demand for both our lubricant and fuel additives has increased steadily throughout the quarter. While our second quarter results were significantly impacted by the economic disruption due to the COVID-19 pandemic and the related government restrictions, these improvements in the third quarter of 2020 helped to drive an increase in shipments compared to the second quarter of over 25%. The pace and stability of improvement will depend heavily on economic recovery and the rate at which government restrictions are lifted and remain lifted.

During the first nine months of 2020, we funded capital expenditures of $60.1 million, paid dividends of $62.7 million, and repurchased 270,963 shares of our common stock for a total of $101.4 million.

Throughout the economic downturn associated with the COVID-19 pandemic, the chemical industry and our products have been recognized as essential for the transportation of goods and services. Our operating facilities have continued to function safely during 2020. We have procedures in place at each of our facilities to help ensure the well-being of our employees, as we see our responsibility to protect their health and safety as a top priority. Because of the commitment and dedication of our employees and our ability to remain operational throughout 2020, we have been able to work closely with our customers to ensure their supply demands are met throughout this unusual period.

As we navigate the current economic downturn, our business decisions will continue to be focused on the long-term success of our company, including emphasis on satisfying customer needs, generating solid operating results, and promoting the greatest long-term value for our shareholders, customers and employees. Those decisions include investing in capital improvements and research and development in support of our customers, using cash prudently to provide shareholder value, including dividends and repurchases of common stock, and ensuring we are well-positioned to stay the course with a strong balance sheet, conservative fiscal policies, and a dedicated team. We believe the fundamentals of how we run our business – a long-term view, safety and people first culture, customer-focused solutions, technology-driven product offerings, and a world-class supply chain capability – will continue to be beneficial for all our stakeholders.

Sincerely,

Thomas E. Gottwald

The petroleum additives segment consists of the North America (the United States and Canada), Latin America (Mexico, Central America, and South America), Asia Pacific, and Europe/Middle East/Africa/India (Europe or EMEAI) regions.

The Company has disclosed the non-GAAP financial measure EBITDA and the related calculation in the schedules included with this earnings release. EBITDA is defined as income from continuing operations before the deduction of interest and financing expenses, income taxes, depreciation (on property, plant and equipment) and amortization (on intangibles and lease right-of-use assets). The Company believes that even though this item is not required by or presented in accordance with United States generally accepted accounting principles (GAAP), this additional measure enhances understanding of the Company’s performance and period to period comparability. The Company believes that this item should not be considered an alternative to net income determined under GAAP.

As a reminder, a conference call and Internet webcast is scheduled for 3:00 p.m. EDT on Thursday, October 29, 2020, to review third quarter 2020 financial results. You can access the conference call live by dialing 1-844-407-9500 (domestic) or 1-862-298-0850 (international) and requesting the NewMarket conference call. To avoid delays, callers should dial in five minutes early. A teleconference replay of the call will be available until November 5, 2020 at 3:00 p.m. EST by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay ID number is 38031. The call will also be broadcast via the Internet and can be accessed through the Company’s website at www.NewMarket.com or www.webcaster4.com/Webcast/Page/2001/38031. A webcast replay will be available for 30 days.

NewMarket Corporation, through its subsidiaries Afton Chemical Corporation and Ethyl Corporation, develops, manufactures, blends, and delivers chemical additives that enhance the performance of petroleum products. From custom-formulated additive packages to market-general additives, the NewMarket family of companies provides the world with the technology to make engines run smoother, machines last longer, and fuels burn cleaner.

Some of the information contained in this press release constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although NewMarket’s management believes its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from expectations.

Factors that could cause actual results to differ materially from expectations include, but are not limited to, the availability of raw materials and distribution systems; disruptions at production facilities, including single-sourced facilities; hazards common to chemical businesses; the ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; sudden or sharp raw material price increases; competition from other manufacturers; current and future governmental regulations; the gain or loss of significant customers; failure to attract and retain a highly-qualified workforce; an information technology system failure or security breach; the occurrence or threat of extraordinary events, including natural disasters; terrorist attacks and health-related epidemics such as the COVID-19 pandemic; risks related to operating outside of the United States; political, economic, and regulatory factors concerning our products; the impact of substantial indebtedness on our operational and financial flexibility; the impact of fluctuations in foreign exchange rates; resolution of environmental liabilities or legal proceedings; limitation of our insurance coverage; our inability to realize expected benefits from investment in our infrastructure or from recent or future acquisitions, or our inability to successfully integrate recent or future acquisitions into our business; the underperformance of our pension assets resulting in additional cash contributions to our pension plans; and other factors detailed from time to time in the reports that NewMarket files with the Securities and Exchange Commission, including the risk factors in Item 1A. “Risk Factors” of our 2019 Annual Report on Form 10-K and Part II. Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, which are available to shareholders upon request.

You should keep in mind that any forward-looking statement made by NewMarket in the foregoing discussion speaks only as of the date on which such forward-looking statement is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. We have no duty to, and do not intend to, update or revise the forward-looking statements in this discussion after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that the events described in any forward-looking statement made in this discussion, or elsewhere, might not occur.

NEWMARKET CORPORATION AND SUBSIDIARIES
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION
(In thousands, except per-share amounts, unaudited)
		Third Quarter Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Revenue:
Petroleum additives		$	510,280			$	550,626			$	1,476,355			$	1,644,129
All other			2,589				5,191				6,795				11,721
Total		$	512,869			$	555,817			$	1,483,150			$	1,655,850
Segment operating profit:
Petroleum additives		$	102,186			$	94,765			$	248,918			$	285,620
All other			2,015				(77	)			1,951				92
Segment operating profit			104,201				94,688				250,869				285,712
Corporate unallocated expense			(5,565	)			(6,473	)			(15,263	)			(15,842	)
Interest and financing expenses			(6,466	)			(6,987	)			(20,575	)			(22,740	)
Other income (expense), net			25,448				6,230				39,933				17,827
Income before income tax expense		$	117,618			$	87,458			$	254,964			$	264,957
Net income		$	95,794			$	67,805			$	203,684			$	204,184
Earnings per share - basic and diluted		$	8.77			$	6.06			$	18.52			$	18.26

NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share amounts, unaudited)
		Third Quarter Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net sales		$	512,869			$	555,817			$	1,483,150			$	1,655,850
Cost of goods sold		346,262				393,090				1,038,898				1,169,421
Gross profit		166,607				162,727				444,252				486,429
Selling, general, and administrative expenses		34,690				38,122				105,837				109,916
Research, development, and testing expenses		33,113				36,387				102,168				106,748
Operating profit		98,804				88,218				236,247				269,765
Interest and financing expenses, net		6,466				6,987				20,575				22,740
Other income (expense), net		25,280				6,227				39,292				17,932
Income before income tax expense		117,618				87,458				254,964				264,957
Income tax expense		21,824				19,653				51,280				60,773
Net income		$	95,794			$	67,805			$	203,684			$	204,184
Earnings per share - basic and diluted		$	8.77			$	6.06			$	18.52			$	18.26
Cash dividends declared per share		$	1.90			$	1.90			$	5.70			$	5.40

NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts, unaudited)
		September 30, 2020				December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents		$	117,701			$	144,397
Trade and other accounts receivable, less allowance for credit losses			328,677				335,826
Inventories			370,104				365,938
Prepaid expenses and other current assets			37,880				33,237
Total current assets			854,362				879,398
Property, plant, and equipment, net			648,685				635,439
Intangibles (net of amortization) and goodwill			130,423				131,880
Prepaid pension cost			145,450				133,848
Operating lease right-of-use assets			58,420				60,505
Deferred charges and other assets			42,782				44,062
Total assets		$	1,880,122			$	1,885,132
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	187,572			$	178,773
Accrued expenses			74,797				77,350
Dividends payable			18,444				19,217
Income taxes payable			5,362				10,632
Operating lease liabilities			13,270				14,036
Other current liabilities			9,454				8,887
Total current liabilities			308,899				308,895
Long-term debt			608,702				642,941
Operating lease liabilities - noncurrent			45,004				46,792
Other noncurrent liabilities			193,991				203,406
Total liabilities			1,156,596				1,202,034
Shareholders' equity:
Common stock and paid-in capital (with no par value; issued and outstanding shares - 10,921,389 at September 30, 2020 and 11,188,549 at December 31, 2019)			287				1,965
Accumulated other comprehensive loss			(162,898	)			(162,748	)
Retained earnings			886,137				843,881
Total shareholders' equity			723,526				683,098
Total liabilities and shareholders' equity		$	1,880,122			$	1,885,132

NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
		Nine Months Ended September 30,
		2020				2019
Net income		$	203,684			$	204,184
Depreciation and amortization			63,045				65,500
Cash pension and postretirement contributions			(7,717	)			(7,308	)
Working capital changes			(33,493	)			(35,997	)
Deferred income tax expense			5,405				3,982
Capital expenditures			(60,133	)			(37,132	)
Net repayments under revolving credit facility			(34,678	)			(126,262	)
Repurchases of common stock			(101,434	)			0
Dividends paid			(62,667	)			(60,418	)
Proceeds from sale of land			20,000				0
Gain on sale of land			(16,483	)			0
All other			(2,225	)			382
(Decrease) increase in cash and cash equivalents		$	(26,696	)		$	6,931

NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
		Third Quarter Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net Income		$	95,794			$	67,805			$	203,684			$	204,184
Add:
Interest and financing expenses, net		6,466				6,987				20,575				22,740
Income tax expense		21,824				19,653				51,280				60,773
Depreciation and amortization		20,414				21,500				61,982				64,646
EBITDA		$	144,498			$	115,945			$	337,521			$	352,343