NewMarket Q2 2024 Earnings Call Transcript

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July 30, 2024

Key Takeaways

  • Net income increased to $112 million (or $11.63 per share) in Q2 2024, up from $100 million (or $10.36 per share) in Q2 2023.
  • Petroleum Additives operating profit rose to $148 million from $132 million a year ago, driven by lower raw material and operating costs and a 1% shipment increase despite slightly lower selling prices.
  • Following the AMPAC acquisition on January 16, Specialty Materials delivered Q2 sales of $38 million and an operating profit of $5 million versus a $5 million loss in Q1, noting that acquired inventory sold at no margin.
  • Strong cash flow funded $15 million in capital expenditures, $24 million in dividends and $171 million of revolver repayments, resulting in a net debt/EBITDA ratio of 1.6x within the 1.5–2x target range.
  • For 2024, capital expenditures are expected to be $50–70 million, with continued strength in Petroleum Additives, ongoing AMPAC integration and a focus on margin management, technology-driven products and supply-chain excellence.
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Earnings Conference Call
NewMarket Q2 2024
00:00 / 00:00

There are 2 speakers on the call.

Operator

Good afternoon, everyone, and welcome to the New Market Corporation Conference Call and Webcast to review Second Quarter 2024 Financial Results. At this time, all participants have been placed on a listen only mode. It is now my pleasure to turn the floor over to your host, Bill Skroback. Sir, the floor is yours.

Speaker 1

Thank you, Matthew, 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 at 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 Q2 of 2024 was $112,000,000 or $11.63 a share compared to net income of $100,000,000 or $10.36 a share for the same period in 2023.

Speaker 1

Petroleum Additives net sales were $670,000,000 compared to $684,000,000 for the Q2 of last year. Petroleum Additives operating profit for the quarter was $148,000,000 compared to $132,000,000 for the Q2 of 2023. The profit increase 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 Q2 of 2024 with the same period in 2023. We're pleased with the strong performance of our petroleum additives business.

Speaker 1

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 or 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 Q2 of 2024 were $38,000,000 Specialty Materials operating profit for the Q2 of 2024 was $5,000,000 compared to a loss of $5,000,000 for the Q1 of 2024. The Specialty Materials results reflect the sale of AMPAC finished goods inventory that we acquired at closing.

Speaker 1

This inventory was recorded at fair value on the acquisition date and when sold during the first half of twenty twenty four generated no margin. We expect any of this remaining inventory to be sold during the Q3 of 2024. We will see substantial variation in quarterly results for AMPACT 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 quarter.

Speaker 1

We funded capital expenditures of $15,000,000 and we paid dividends of $24,000,000 Since the AMPAC acquisition, we have made payments of $171,000,000 dollars on our revolving credit facility. As of June 30, 2024, our net debt to EBITDA ratio was 1.6, which is within our target range of 1.5 to 2 times. For 2024, we expect to see capital expenditures in the $50,000,000 to $70,000,000 range. 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.

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 objective. We believe the fundamentals and 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. Matthew, that concludes our planned comments. We are available for questions via email or by phone, so please feel free to contact me directly.

Speaker 1

Thank you all again and we will talk to you next quarter.

Operator

Thank you. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

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