NewMarket Corporation Reports Second Quarter and First Half 2024 Results

Rhea-AI Summary

NewMarket (NYSE:NEU) reported strong Q2 and H1 2024 results. Q2 net income was $111.6 million ($11.63 per share), up from $99.6 million in Q2 2023. H1 net income reached $219.4 million ($22.87 per share), compared to $197.2 million in H1 2023. Petroleum additives operating profit increased to $147.8 million in Q2 and $298.7 million in H1, driven by lower costs and increased shipments.

The company completed the acquisition of AMPAC on January 16, 2024, which is now part of the specialty materials segment. This segment reported Q2 sales of $38.0 million and operating profit of $5.0 million. NewMarket has reduced debt by $171 million since the AMPAC acquisition, with a Net Debt to EBITDA ratio of 1.6 as of June 30, 2024.

Positive

• Q2 net income increased to $111.6 million ($11.63 per share) from $99.6 million in Q2 2023
• H1 net income rose to $219.4 million ($22.87 per share) from $197.2 million in H1 2023
• Petroleum additives operating profit grew to $147.8 million in Q2 and $298.7 million in H1
• Shipments increased 2.7% in H1 2024 compared to H1 2023
• Debt reduction of $171 million since AMPAC acquisition
• Net Debt to EBITDA ratio of 1.6, within target range of 1.5 to 2.0

Negative

• Petroleum additives sales decreased to $669.8 million in Q2 2024 from $684.0 million in Q2 2023
• H1 2024 petroleum additives sales declined to $1.3 billion from $1.4 billion in H1 2023
• Lower selling prices partially offset gains in the petroleum additives segment

Insights

Financial Analyst

NewMarket 's Q2 2024 results demonstrate solid financial performance and strategic progress. The company reported net income of $111.6 million, or $11.63 per share, up from $99.6 million in Q2 2023. This 12% year-over-year increase in net income is noteworthy, indicating improved profitability despite a slight decrease in petroleum additives sales.

The petroleum additives segment, NewMarket's core business, showed resilience with operating profit increasing to $147.8 million from $132.1 million in Q2 2023. This 11.9% growth in operating profit, despite a 2.1% decrease in sales, suggests effective cost management and operational efficiency. The company attributes this to lower raw material and operating costs, as well as increased shipments, partially offset by lower selling prices.

The acquisition of American Pacific (AMPAC) in January 2024 marks a strategic expansion into specialty materials. While the segment reported an operating profit of $5.0 million in Q2, it's important to note that this includes the sale of acquired inventory at fair value, which generated no margin. Future quarters should provide a clearer picture of AMPAC's contribution to NewMarket's bottom line.

NewMarket's financial health appears robust, with strong cash flows enabling $171 million in debt reduction since the AMPAC acquisition. The Net Debt to EBITDA ratio of 1.6 falls within the company's target range of 1.5 to 2.0, indicating a balanced approach to leverage.

Investors should monitor the integration of AMPAC and its impact on overall profitability, as well as the company's ability to maintain its strong performance in the petroleum additives segment amidst market fluctuations.

Market Research Analyst

NewMarket's Q2 2024 results offer intriguing insights into market dynamics affecting the petroleum additives and specialty materials sectors. The 1% increase in petroleum additives shipments suggests a modest but positive trend in demand, potentially indicating a gradual recovery or stabilization in end markets such as automotive and industrial lubricants.

The company's ability to improve profitability despite lower selling prices is particularly noteworthy. This could indicate either a favorable cost environment for raw materials or successful implementation of efficiency measures. However, investors should be cautious about the sustainability of this trend, as raw material costs can be volatile.

The acquisition of AMPAC represents a strategic diversification into specialty materials, primarily serving the aerospace and defense industries. This move could provide NewMarket with exposure to different market cycles and potentially higher-margin products. The specialty materials segment's $38.0 million in sales for Q2 is a modest but meaningful addition to the company's revenue mix.

Looking ahead, NewMarket's anticipation of "continued strength" in the petroleum additives segment suggests confidence in near-term market conditions. However, the company's warning about "substantial variation in quarterly results for AMPAC" highlights the potential for volatility in the specialty materials segment, which investors should factor into their expectations.

The global economic environment, including factors such as automotive production rates, industrial activity and defense spending, will likely continue to influence NewMarket's performance across both segments. Investors should closely monitor these macroeconomic indicators alongside company-specific developments for a comprehensive view of NewMarket's market position and growth prospects.

• Second Quarter Net Income of $112 Million and Earnings Per Share of $11.63
• First Half Petroleum Additives Operating Profit of $299 Million
• First Half AMPAC Results Consistent with Pre-Acquisition Expectations
• Debt Reduction of $171 Million Since AMPAC Acquisition

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 second quarter and first half of 2024.

Net income for the second quarter of 2024 was $111.6 million, or $11.63 per share, compared to net income of $99.6 million, or $10.36 per share, for the same period last year. For the first half of 2024, net income was $219.4 million, or $22.87 per share, compared to $197.2 million, or $20.45 per share, for the same period in 2023.

Petroleum additives sales for the second quarter of 2024 were $669.8 million, compared to $684.0 million for the same period in 2023. Petroleum additives operating profit for the second quarter of 2024 was $147.8 million, compared to $132.1 million for the second quarter of 2023. The increase in petroleum additives operating profit was mainly due to lower raw material and operating costs as well as increased shipments, partially offset by lower selling prices. Shipments increased approximately 1% when comparing the second quarter of 2024 to the same period in 2023.

Petroleum additives sales for the first half of 2024 were $1.3 billion, compared to $1.4 billion in the first half of 2023. Petroleum additives operating profit for the first half of 2024 was $298.7 million, compared to $264.2 million in the same period last year. The drivers for the increase in operating profit between these periods were consistent with those affecting the second quarter comparison discussed above. Shipments increased 2.7% when comparing the first half of 2024 with the same period in 2023, with increases in both lubricant additives and fuel additives shipments.

We are pleased with the strong performance of our petroleum additives business during the first half of 2024. We are seeing the favorable results of our ongoing focus on margin management. Managing our operating costs, our inventory levels, and our portfolio profitability will remain priorities throughout 2024.

We completed the acquisition of American Pacific Corporation (AMPAC) on January 16, 2024. The financial results of our AMPAC business since the date of acquisition are included in our specialty materials segment. Specialty materials sales for the second quarter of 2024 were $38.0 million. Specialty materials operating profit for the second quarter of 2024 was $5.0 million, compared to a loss of $5.0 million in the first quarter of 2024.

For the first half of 2024, the specialty materials segment reported sales of $55.1 million and operating profit slightly above breakeven. The specialty materials second quarter and first half 2024 results reflect the sale of AMPAC finished goods inventory that we acquired at closing. This inventory was recorded at fair value on the acquisition date and, when sold during the first half of 2024, generated no margin. We expect to see substantial variation in quarterly results for AMPAC due to the nature of its business, and we anticipate full year 2024 results to be consistent with our pre-acquisition expectations.

We generated solid cash flows from operations during the first half of 2024, we funded capital expenditures of $28.5 million, and we paid dividends of $48.0 million. Since the AMPAC acquisition, we have made payments of $171 million on our revolving credit facility. As of June 30, 2024, our Net Debt to EBITDA ratio was 1.6, which is within our target operating range of 1.5 to 2.0.

We anticipate continued strength in our petroleum additives segment. We also look forward to the ongoing integration of AMPAC into the NewMarket family of companies. We continue to make decisions to promote long-term value for our shareholders and customers, and we remain focused on our long-term objectives. We believe the fundamentals of how we run our business - a long-term view, safety-first culture, customer-focused solutions, technology-driven product offerings, and 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 specialty materials segment, which consists of the AMPAC business, operates primarily in North America.

The Company has disclosed the non-GAAP financial measures EBITDA, Net Debt, and Net Debt to EBITDA, as well as the related calculations 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). Net Debt is defined as long-term debt, including current maturities, less cash and cash equivalents. Net Debt to EBITDA is defined as Net Debt divided by EBITDA for the rolling four quarters ended as of the specified date. The Company believes that even though these items are not required by or presented in accordance with United States generally accepted accounting principles (GAAP), these additional measures enhance understanding of the Company’s performance and period to period comparability. The Company believes that these items should not be considered an alternative to our results determined under GAAP.

As a reminder, a conference call and webcast is scheduled for 3:00 p.m. ET on Tuesday, July 30, 2024, to review second quarter 2024 financial results. You can access the conference call live by dialing 1-888-506-0062 (domestic) or 1-973-528-0011 (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 6, 2024, at 3:00 p.m. ET by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay passcode number is 50848. 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/2001/50848. A webcast replay will be available for 30 days.

NewMarket Corporation is a holding company operating through its subsidiaries, Afton Chemical Corporation (Afton), Ethyl Corporation (Ethyl), and American Pacific Corporation (AMPAC). The Afton and Ethyl companies develop, manufacture, blend, and deliver chemical additives that enhance the performance of petroleum products. AMPAC is a manufacturer of specialty materials primarily used in solid rocket motors for the aerospace and defense industries. The NewMarket family of companies has a long-term commitment to its people, to safety, to providing innovative solutions for its customers, and to making the world a better place.

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 industries; failure to protect our intellectual property rights; sudden, sharp, or prolonged raw material price increases; competition from other manufacturers; current and future governmental regulations; the loss of significant customers; termination or changes to contracts with contractors and subcontractors of the U.S. government or directly with the U.S. government; 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, wars and health-related epidemics; 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 acquisitions, or our inability to successfully integrate 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 Annual Report on Form 10-K for the year ended December 31, 2023, which is available to shareholders at www.newmarket.com.

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 us. 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,
			2024				2023				2024				2023
Net Sales:
Petroleum additives		$	669,826			$	683,969			$	1,347,090			$	1,383,960
Specialty materials			38,010				0				55,057				0
All other			2,392				1,161				4,817				3,959
Total		$	710,228			$	685,130			$	1,406,964			$	1,387,919
Segment operating profit:
Petroleum additives		$	147,819			$	132,138			$	298,728			$	264,206
Specialty materials			4,972				0				5				0
All other			(1,374	)			(1,022	)			(1,455	)			(1,997	)
Segment operating profit			151,417				131,116				297,278				262,209
Corporate unallocated expense			(3,985	)			(6,810	)			(9,542	)			(13,301	)
Interest and financing expenses			(15,910	)			(10,255	)			(31,564	)			(21,028	)
Other income (expense), net			11,472				10,659				24,515				21,978
Income before income tax expense		$	142,994			$	124,710			$	280,687			$	249,858
Net income		$	111,620			$	99,624			$	219,352			$	197,207
Earnings per share - basic and diluted		$	11.63			$	10.36			$	22.87			$	20.45

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,
			2024			2023			2024			2023
Net sales		$	710,228		$	685,130		$	1,406,964		$	1,387,919
Cost of goods sold			491,773			489,492			972,144			994,237
Gross profit			218,455			195,638			434,820			393,682
Selling, general, and administrative expenses			42,840			37,438			87,205			77,285
Research, development, and testing expenses			28,663			33,958			59,863			67,114
Operating profit			146,952			124,242			287,752			249,283
Interest and financing expenses, net			15,910			10,255			31,564			21,028
Other income (expense), net			11,952			10,723			24,499			21,603
Income before income tax expense			142,994			124,710			280,687			249,858
Income tax expense			31,374			25,086			61,335			52,651
Net income		$	111,620		$	99,624		$	219,352		$	197,207
Earnings per share - basic and diluted		$	11.63		$	10.36		$	22.87		$	20.45
Cash dividends declared per share		$	2.50		$	2.25		$	5.00		$	4.35

NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts, unaudited)
		June 30, 2024				December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents		$	87,632			$	111,936
Trade and other accounts receivable, less allowance for credit losses			495,516				432,349
Inventories			492,638				456,234
Prepaid expenses and other current assets			39,455				39,051
Total current assets			1,115,241				1,039,570
Property, plant, and equipment, net			759,357				654,747
Intangibles (net of amortization) and goodwill			763,467				124,642
Prepaid pension cost			385,363				370,882
Operating lease right-of-use assets, net			73,867				70,823
Deferred charges and other assets			52,776				48,207
Total assets		$	3,150,071			$	2,308,871
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	270,789			$	231,137
Accrued expenses			85,114				76,546
Dividends payable			21,410				19,212
Income taxes payable			15,097				6,131
Operating lease liabilities			14,866				15,074
Other current liabilities			12,240				16,064
Total current liabilities			419,516				364,164
Long-term debt			1,172,732				643,622
Operating lease liabilities - noncurrent			58,009				55,058
Other noncurrent liabilities			264,466				168,966
Total liabilities			1,914,723				1,231,810
Shareholders' equity:
Common stock and paid-in capital (with no par value; issued and outstanding shares - 9,594,110 at June 30, 2024 and 9,590,086 at December 31, 2023)			2,052				2,130
Accumulated other comprehensive loss			(34,097	)			(21,071	)
Retained earnings			1,267,393				1,096,002
Total shareholders' equity			1,235,348				1,077,061
Total liabilities and shareholders' equity		$	3,150,071			$	2,308,871

NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
		Six Months Ended June 30,
			2024				2023
Net income		$	219,352			$	197,207
Depreciation and amortization			55,130				40,558
Cash pension and postretirement contributions			(5,781	)			(5,020	)
Working capital changes			(40,696	)			52,494
Deferred income tax benefit			(7,461	)			(11,301	)
Capital expenditures			(28,533	)			(26,006	)
Acquisition of business, net of cash acquired			(681,479	)			0
Net borrowings (repayments) under revolving credit facility			279,000				(88,000	)
Proceeds from term loan			250,000				0
Dividends paid			(47,972	)			(41,879	)
Debt issuance costs			(2,251	)			0
Repurchases of common stock			0				(42,864	)
All other			(13,613	)			(12,978	)
(Decrease) increase in cash and cash equivalents		$	(24,304	)		$	62,211

NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
		Second Quarter Ended June 30,						Six Months Ended June 30,
			2024			2023			2024			2023
Net Income		$	111,620		$	99,624		$	219,352		$	197,207
Add:
Interest and financing expenses, net			15,910			10,255			31,564			21,028
Income tax expense			31,374			25,086			61,335			52,651
Depreciation and amortization			28,938			19,897			54,193			39,863
EBITDA		$	187,842		$	154,862		$	366,444		$	310,749
Net Debt to EBITDA
								June 30,			December 31,
									2024			2023
Long-term debt, including current maturities								$	1,172,732		$	643,622
Less: Cash and cash equivalents									87,632			111,936
Net Debt								$	1,085,100		$	531,686
								Rolling Four Quarters Ended
								June 30,			December 31,
									2024			2023
Net Income								$	411,009		$	388,864
Add:
Interest and financing expenses, net									47,895			37,359
Income tax expense									108,782			100,098
Depreciation and amortization									90,950			76,620
EBITDA-Rolling Four Quarters								$	658,636		$	602,941
Net Debt to EBITDA									1.6			0.9

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240725012672/en/

William J. Skrobacz

Investor Relations

Phone: 804.788.5555

Fax: 804.788.5688

investorrelations@newmarket.com

Source: NewMarket Corporation

FAQ

What was NewMarket's (NEU) Q2 2024 earnings per share?

NewMarket (NEU) reported earnings per share of $11.63 for Q2 2024.

How did NewMarket's (NEU) petroleum additives segment perform in H1 2024?

NewMarket's petroleum additives segment reported operating profit of $298.7 million in H1 2024, up from $264.2 million in H1 2023, with a 2.7% increase in shipments.

When did NewMarket (NEU) acquire AMPAC?

NewMarket (NEU) completed the acquisition of American Pacific (AMPAC) on January 16, 2024.

What was NewMarket's (NEU) debt reduction since the AMPAC acquisition?

NewMarket (NEU) reduced its debt by $171 million since the AMPAC acquisition.