NewMarket Q1 2024 Earnings Call Transcript

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Provided by Quartr
April 25, 2024

Key Takeaways

  • Newmarketer reported Q1 net income of $108 million (EPS $11.23), up from $98 million (EPS $10.90) in Q1 2023.
  • Petroleum Additives sales were $677 million with operating profit rising to $151 million, driven by lower raw material and operating costs despite softer selling prices.
  • The company completed the ~$700 million acquisition of American Pacific Corporation, adding a new Specialty Materials segment that generated $17 million in sales and a $5 million operating loss due to inventory fair‐value adjustments.
  • Solid cash flow funded $14 million in capex and $24 million in dividends, with an 11% dividend increase approved; net debt/EBITDA stood at 1.9x following credit facility refinancing.
  • Management will maintain focus on cost control, inventory optimization, technology investment, and successful AMPAC integration to support long‐term growth.
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Earnings Conference Call
NewMarket Q1 2024
00:00 / 00:00

There are 2 speakers on the call.

Operator

Greetings. Welcome to Newmarker Corporation's Conference Call and Webcast to review First Quarter 2024 Financial Results. At this time, all participants are in a listen only mode. Please note this conference is being recorded. I will now turn the conference over to your host, Bill Strobacs, Vice President and CFO at Newmarketer Corporation.

Operator

Bill, you may begin.

Speaker 1

Thank you, Paul, 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, I 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 filed our 10 Q this morning. It contains significantly more details on the operations and performance of our company. Please take time to review it. I will be referring to the data that was included in last night's earnings release. Net income for the Q1 of 2024 was $108,000,000 or $11.23 a share compared to net income or $98,000,000 or 10 point $9 a share for the Q1 of last year.

Speaker 1

Petroleum additive sales for the 1st 3 months of 2024 were $677,000,000 compared to $700,000,000 for the same period in 2023. Petroleum additives operating profit for the Q1 was $151,000,000 compared to $132,000,000 for the Q1 of 2023. The increase was mainly due to lower raw material and operating costs, partially offset by lower selling prices and product mix. Shipments increased 5% between quarterly periods with increases in both lubricant additives and fuel additive shipments across all regions except Latin America, which reported a decrease in lubricant additive shipments and North America, which reported a decrease in fuel additive shipments. We're pleased with the strong performance of our petroleum additive business during the Q1 of 2024.

Speaker 1

It is the 6th consecutive quarter with operating profit over $100,000,000 We are seeing evidence that our efforts to control operating costs are taking hold. Throughout 2024, managing our operating costs, our inventory levels and our portfolio profitability, while continuing our investment in technology will remain priorities. We completed the acquisition of American Pacific Corporation or AMPAC on January 16, 2024 for approximately $700,000,000 Our first quarter results include 76 days of AMPAK operations. The financial results of our AMPAC business are included in our new Specialty Materials segment. Specialty Materials sales for the first quarter of 2024 were $17,000,000 and we reported an operating loss of 5,000,000 dollars The loss primarily results from the sale of AMPAK finished goods inventory we acquired.

Speaker 1

This inventory was recorded at fair market value on the acquisition date and sold during the Q1 generating no margin. We may see substantial variation in our quarterly results for AMPAC on an ongoing basis due to the nature of the business, and we anticipate full year results to be consistent with our pre acquisition expectations. We generated solid cash flows from operations during the quarter. We funded capital expenditures of $14,000,000 and we paid dividends of $24,000,000 In February, our Board approved an 11% increase in our quarterly dividend rate. The acquisition of AMPAC was funded by cash on hand and borrowings of approximately $690,000,000 under our then existing revolving credit facility.

Speaker 1

On January 22, 2024, we replaced that facility with a new $900,000,000 revolving credit facility and entered into a $200,000,000 unsecured term loan. As of March 31, 2024, our net debt to EBITDA ratio was 1.9, which is within our target operating range of 1.5 to 2.0. We anticipate continued strength in our Petroleum Additives segment. We look forward to the successful integration of AMPAC into the Newmarket family of companies. As a team, we will remain focused on maintaining long term relationships with our customers, developing new products and technology to meet their needs, both now and in the future, and providing top quality customer service.

Speaker 1

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 a world class supply chain capability will continue to be beneficial for all our stakeholders. Thank you for joining me for the call today. Paul, that concludes our planned comments. We are available for questions via e mail 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. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

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