NewMarket Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 1, 2024

Key Takeaways

  • Full-year 2023 net income rose to $389 million ($40.44/share) from $280 million ($27.77/share), despite Q4 net income dipping to $80 million ($8.38/share) from $91 million ($9.26/share).
  • Petroleum Additives operating profit increased to $514 million in 2023 from $378 million in 2022, driven by higher selling prices and favorable product mix, though shipments declined 10.7%.
  • Global shipment volumes fell amid economic weakness and inventory rationalization, with only Europe showing modest growth in fuel additive shipments.
  • Strong cash generation improved working capital by $134 million, enabled $361 million of debt repayments, and pushed net debt/EBITDA to 0.9 from 2.0, while returning $128 million to shareholders.
  • The acquisition of American Pacific Corporation for $700 million expands into critical performance additives for space launch and defense, supported by a new $900 million revolver and $250 million term loan.
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Earnings Conference Call
NewMarket Q4 2023
00:00 / 00:00

There are 2 speakers on the call.

Operator

Good day, and welcome to the Newmarket Corporation Scheduled Conference Call and Webcast to review the Q4 and Full Year 2023. At this time, all participants are placed on a listen only mode. And it is now my pleasure to turn the floor over to your host, Mr. Bill Skrobach. Sir, the floor is yours.

Speaker 1

Thank you, Ali, and thanks to everyone for joining me this afternoon. As a reminder, some of the statements made during this conference call may be forward looking. Relevant factors that could cause actual results to differ materially from those forward looking statements are contained in our earnings release and in our SEC filings, including our most recent Form 10 ks. During this call, we will also discuss the non GAAP financial measures included in our earnings release. The earnings release, which can be found on our website, includes a reconciliation of the non GAAP financial measures to the comparable GAAP financial measures.

Speaker 1

We intend to file our 2023 10 ks in the middle of February. It will contain significantly more details on the operations and performance of our company. Please review it. I will be referring to the data that was included in last night's release. Net income for the Q4 of 2023 was $80,000,000 or $8.38 per share compared to net income of $91,000,000 or $9.26 per share for the Q4 of 2022.

Speaker 1

Net income for 2023 was $389,000,000 or $40.44 per share compared to net income of $280,000,000 or $27.77 per share for 2022. Petroleum additive sales for the Q4 of 2023 were $642,000,000 compared to 6 $180,000,000 for the same period in 2022. Petroleum additives operating profit for the Q4 of 2023 was $110,000,000 compared to $117,000,000 for the Q4 of 2022. The decrease in operating profit was mainly due to higher operating costs and lower shipments, partially offset by lower raw materials costs. We also experienced lower selling prices offset by favorable product mix.

Speaker 1

It's also worth noting that the operating results for both 4th quarter periods were very strong when compared to our historical 4th quarter operating results. Sales for Petroleum Additives segment for 2023 were $2,700,000,000 compared to $2,800,000,000 in 2022. Petroleum Additives operating profit for 2023 was $514,000,000 compared to $378,000,000 for 2022. The increase in operating profit was a result of selling prices, including favorable product mix, partially offset by lower shipments and higher raw material and operating costs. Shipments decreased 10.7% when comparing 23% to 2022 with decreases in both lubricant additives and fuel additive shipments in all regions except Europe, which reported a small increase and fuel additive shipments.

Speaker 1

During 2023, our shipments were impacted by the overall global economic weakness and inventory rationalization, which persists in the chemical industry. We remain challenged by the ongoing inflationary environment and continue to experience increased operating costs. We are maintaining our focus on managing our operating costs, our inventory levels and our portfolio profitability, while continuing our investment in technology. We are very pleased with the performance of our petroleum additives business in 2023 and the work done by our team to achieve 4 quarters of strong operating profit. We generated solid cash flows throughout the year.

Speaker 1

Our working capital improved by $134,000,000 and we made payments of $361,000,000 on our revolving credit facility. We returned $128,000,000 to our shareholders through dividends of $85,000,000 and share repurchases of 43,000,000 As of December 31, 2023, our net debt to EBITDA ratio was 0.9, which was a significant improvement over the December ratio of 2.0 last year. On January 16, 2024, we completed the acquisition of American Pacific Corporation for approximately $700,000,000 AMPAK is the leading North American manufacturer of critical performance additives used in solid rocket motors for space launch and military defense applications. The acquisition was funded by cash on hand and borrowings under our revolving credit facility. We expect that AMPAC will be accretive to our net income in 2024.

Speaker 1

The additional borrowing associated with the Ambac acquisition increased our net debt to EBITDA ratio, but we remain within our target operating range of 1.5 to 20. On January 22, we entered into a new 5 year $900,000,000 revolving credit facility that replaced our prior $900,000,000 facility and also entered into a 2 year $250,000,000 unsecured term loan. This term loan gave us additional flexibility to repay borrowings under our revolving credit facility and support our business needs. As we look ahead to 2024 and beyond, We anticipate continued strength in our Petroleum Additives segment. We also look forward to the integration of AMPAC into the Newmarket family of companies.

Speaker 1

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. Ali, that concludes our planned comments. We are available for questions via email or by phone, so please feel free to contact me directly. Thank you all again and we will talk to you next quarter.

Operator

Thank you, sir. This concludes today's call. You may disconnect your lines at this time and have a wonderful day. And we thank you for your participation.

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