NewMarket Corporation Reports Second Quarter and First Half 2021 Results

Rhea-AI Summary

NewMarket Corporation (NYSE:NEU) reported a net income of $52.0 million for Q2 2021, equating to $4.75 per share, a significant increase from $22.3 million or $2.05 per share in Q2 2020. For the first half of 2021, net income rose to $121.7 million or $11.13 per share, up from $107.9 million in 2020. The petroleum additives segment saw sales climb to $586.6 million, a 43.5% increase year-over-year. However, operating margins at 12.7% fell below historical averages due to rising raw material costs.

Positive

• Net income for Q2 2021 rose to $52.0 million, a 133% increase from Q2 2020.
• First half 2021 net income reached $121.7 million, compared to $107.9 million in 2020.
• Q2 sales for petroleum additives increased to $586.6 million, up 43.5% from $408.7 million in Q2 2020.
• Shipments rose 41.1% in Q2 2021, driven by growth in lubricant and fuel additives.

Negative

• Operating margin for petroleum additives in Q2 2021 was 12.7%, significantly lower than historical averages.
• Rising raw material costs pressured operating margins, impacting profitability.

NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the second quarter and first half of 2021.

Net income for the second quarter of 2021 was $52.0 million, or $4.75 per share, compared to net income of $22.3 million, or $2.05 per share, for the second quarter of 2020. Results for the second quarter of 2020 were severely impacted by the COVID-19 pandemic and the resulting government restrictions on the movement of people, goods and services to combat the spread of the virus in its early stages. For the first half of 2021, net income was $121.7 million, or $11.13 per share, compared to $107.9 million or $9.78 per share, for the first half of last year.

Sales for the petroleum additives segment for the second quarter of 2021 were $586.6 million, up from $408.7 million in the second quarter of 2020. Petroleum additives operating profit for the second quarter of 2021 was $74.2 million, compared to $33.1 million for the same period last year. The increase was due to higher shipments, lower conversion costs and favorable changes in selling prices, partially offset by higher raw material costs. Shipments increased 41.1% between periods, driven by increases in all world regions in both lubricant additives and fuel additives. Petroleum additives operating margin for the second quarter of 2021 was 12.7%, significantly lower than our historical average.

Petroleum additives sales for the first half of the year were $1.2 billion compared to sales in the first half of last year of $966.1 million. Petroleum additives operating profit for the first half of the year was $168.3 million compared to $146.7 million for the first half of 2020. The increase was due to higher shipments and lower conversion costs, partially offset by higher raw material costs. Shipments increased 19.1% between periods, due to increases in lubricant additives shipments. Fuel additives shipments were relatively flat between periods.

We are encouraged by our petroleum additives operating results and the strong shipments for the first half of 2021, but disappointed with our operating margins. Our product shipments for the first half of 2021 are the highest since the first half of 2018. However, we are seeing downward pressure on our operating margins due mainly to the steady increase in raw material costs throughout the year. While our efforts have been focused on recovering these cost increases, we have been experiencing the lag between when price increases go into effect and when margins start to improve. Margin improvement will continue to be a priority until we see margins consistently within our historical ranges.

During the first half of 2021, we funded capital expenditures of $44.4 million, and paid dividends of $41.5 million. In March 2021, we issued $400 million 2.70% senior notes that are due in 2031.

We remain 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. 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, July 29, 2021 to review second quarter results. You can access the conference call live by dialing 1-844-602-0380 (domestic) or 1-862-298-0970 (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 August 5, 2021 at 3:00 p.m. EDT by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay passcode number is 41908. 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/2001/41908. 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 2020 Annual Report on Form 10-K, which is 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)
		Second Quarter Ended June 30,								Six Months Ended June 30,
		2021				2020				2021				2020
Revenue:
Petroleum additives		$	586,587			$	408,703			$	1,151,485			$	966,075
All other		4,134				2,161				5,851				4,206
Total		$	590,721			$	410,864			$	1,157,336			$	970,281
Segment operating profit:
Petroleum additives		$	74,200			$	33,061			$	168,271			$	146,732
All other		17				(399		)		(647		)		(64		)
Segment operating profit		74,217				32,662				167,624				146,668
Corporate unallocated expense		(3,548		)		(5,467		)		(7,860		)		(9,698		)
Interest and financing expenses		(8,869		)		(7,005		)		(15,212		)		(14,109		)
Other income (expense), net		5,258				7,078				11,876				14,485
Income before income tax expense		$	67,058			$	27,268			$	156,428			$	137,346
Net income		$	51,952			$	22,349			$	121,664			$	107,890
Earnings per share - basic and diluted		$	4.75			$	2.05			$	11.13			$	9.78

NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share amounts, unaudited)
		Second Quarter Ended June 30,								Six Months Ended June 30,
		2021				2020				2021				2020
Net sales		$	590,721			$	410,864			$	1,157,336			$	970,281
Cost of goods sold		449,722				314,126				854,584				692,636
Gross profit		140,999				96,738				302,752				277,645
Selling, general, and administrative expenses		34,735				35,432				71,650				71,147
Research, development, and testing expenses		35,517				33,549				71,854				69,055
Operating profit		70,747				27,757				159,248				137,443
Interest and financing expenses, net		8,869				7,005				15,212				14,109
Other income (expense), net		5,180				6,516				12,392				14,012
Income before income tax expense		67,058				27,268				156,428				137,346
Income tax expense		15,106				4,919				34,764				29,456
Net income		$	51,952			$	22,349			$	121,664			$	107,890
Earnings per share - basic and diluted		$	4.75			$	2.05			$	11.13			$	9.78
Cash dividends declared per share		$	1.90			$	1.90			$	3.80			$	3.80

NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts, unaudited)
		June 30, 2021				December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents		$	153,864			$	125,172
Marketable securities		376,295				0
Trade and other accounts receivable, less allowance for credit losses		399,373				336,395
Inventories		457,957				401,031
Prepaid expenses and other current assets		35,982				35,480
Total current assets		1,423,471				898,078
Property, plant, and equipment, net		680,315				665,147
Intangibles (net of amortization) and goodwill		128,531				129,944
Prepaid pension cost		141,151				137,069
Operating lease right-of-use assets		64,980				61,329
Deferred charges and other assets		40,264				42,308
Total assets		$	2,478,712			$	1,933,875
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	259,209			$	189,937
Accrued expenses		69,185				78,422
Dividends payable		18,613				15,184
Income taxes payable		5,242				3,760
Operating lease liabilities		14,460				13,410
Other current liabilities		5,416				11,742
Total current liabilities		372,125				312,455
Long-term debt		990,551				598,848
Operating lease liabilities - noncurrent		50,489				48,324
Other noncurrent liabilities		216,337				214,424
Total liabilities		1,629,502				1,174,051
Shareholders' equity:
Common stock and paid-in capital (with no par value; issued and outstanding shares - 10,928,129 at June 30, 2021 and 10,921,377 at December 31, 2020)		1,748				717
Accumulated other comprehensive loss		(164,947		)		(173,164		)
Retained earnings		1,012,409				932,271
Total shareholders' equity		849,210				759,824
Total liabilities and shareholders' equity		$	2,478,712			$	1,933,875

NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
		Six Months Ended June 30,
		2021				2020
Net income		$	121,664			$	107,890
Depreciation and amortization		41,719				42,356
Unrealized (gain) loss on marketable securities		2,314				0
Cash pension and postretirement contributions		(5,184		)		(5,152		)
Working capital changes		(59,484		)		(60,072		)
Deferred income tax expense		6,654				3,322
Purchases of marketable securities		(387,653		)		0
Proceeds from sales and maturities of marketable securities		9,894				0
Capital expenditures		(44,394		)		(40,088		)
Issuance of 2.70% senior notes		395,052				0
Debt issuance costs		(3,897		)		(1,348		)
Net borrowings under revolving credit facility		0				47,059
Repurchases of common stock		0				(100,000		)
Dividends paid		(41,526		)		(41,916		)
All other		(6,467		)		5,616
Increase (decrease) in cash and cash equivalents		$	28,692			$	(42,333	)

NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
		Second Quarter Ended June 30,								Six Months Ended June 30,
		2021				2020				2021				2020
Net Income		$	51,952			$	22,349			$	121,664			$	107,890
Add:
Interest and financing expenses, net		8,869				7,005				15,212				14,109
Income tax expense		15,106				4,919				34,764				29,456
Depreciation and amortization		20,594				20,709				40,918				41,568
EBITDA		$	96,521			$	54,982			$	212,558			$	193,023

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210728005811/en/

FAQ

What was NewMarket Corporation's net income for Q2 2021?

NewMarket Corporation reported a net income of $52.0 million for Q2 2021.

How much did petroleum additives sales increase in Q2 2021?

Petroleum additives sales increased to $586.6 million in Q2 2021, a 43.5% rise from Q2 2020.

What were the earnings per share for NewMarket in the first half of 2021?

The earnings per share for NewMarket Corporation in the first half of 2021 were $11.13.

How did the operating margin in Q2 2021 compare to historical averages?

The operating margin for petroleum additives in Q2 2021 was 12.7%, which is significantly lower than historical averages.

What factors affected NewMarket's operating margins in 2021?

Operating margins were pressured by rising raw material costs, impacting overall profitability.