NewMarket Q2 2024 Earnings Report

NewMarket EPS Results

• Actual EPS: $11.63
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

NewMarket Revenue Results

• Actual Revenue: $710.23 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

NewMarket Announcement Details

• Quarter: Q2 2024
• Date: 7/29/2024
• Time: After Market Closes
• Conference Call Date: Tuesday, July 30, 2024
• Conference Call Time: 3:00PM ET

NewMarket (NYSE:NEU) is a specialty chemicals and lubricants company headquartered in Richmond, Virginia. Through its Valvoline business, the company markets a broad portfolio of automotive aftermarket products, including engine oils, transmission fluids, greases and vehicle care solutions. Valvoline products are distributed through retail and commercial channels as well as a network of quick-lube service centers that provide oil changes, preventive maintenance and related services.

In its chemical additives segment, NewMarket develops, manufactures and sells performance additives for fuels, lubricants and industrial fluids. These additives are engineered to improve fuel economy, reduce emissions, extend equipment life and enhance engine cleanliness across on-road, off-road and marine applications. The division serves customers in transportation, energy, manufacturing and other heavy-duty industrial markets worldwide.

Founded in 1919, NewMarket has expanded its global footprint through strategic acquisitions and internal growth. The company operates manufacturing and technical centers in North America, Europe, Asia Pacific and Latin America to support local market needs and regulatory requirements. NewMarket’s leadership team emphasizes investment in research and development to advance formulation technologies that meet evolving environmental standards and performance expectations.

NewMarket Q2 2024 Earnings Call Transcript

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.

Presentation

[Matthew Zhao, Head of Investor Relations at NewMarket Corporation]

Good afternoon, everyone, and welcome to the NewMarket 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 Skrobach. Sir, the floor is yours.

[William Skrobacz, CEO at NewMarket Corporation]

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-K. 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. 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.

[William Skrobacz, CEO at NewMarket Corporation]

Net income for the second quarter of 2024 was $112 million, or $11.63 per share, compared to net income of $100 million or $10.36 per share for the same period in 2023. Petroleum additives net sales were $670 million, compared to $684 million for the second quarter of last year. Petroleum additives operating profit for the quarter was $148 million, compared to $132 million for the second quarter 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 second quarter of 2024 with the same period in 2023.

[William Skrobacz, CEO at NewMarket Corporation]

We're pleased with the strong performance of our petroleum additives business. 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 second quarter of 2024 were $38 million. Specialty materials operating profit for the second quarter of 2024 was $5 million, compared to a loss of $5 million for the first quarter of 2024. The specialty materials results reflect the sale of AMPAC's finished goods inventory that we acquired at closing.

[William Skrobacz, CEO at NewMarket Corporation]

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 any of this remaining inventory to be sold during the third quarter of 2024. We will 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 quarter. We funded capital expenditures of $15 million, and we paid dividends of $24 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 range of 1.5 to 2 times.

[William Skrobacz, CEO at NewMarket Corporation]

For 2024, we expect to see capital expenditures in the $50-$70 million range. We anticipate continued strength in our petroleum additive 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 object, excuse me, objectives. 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. Thank you all again, and we will talk to you next quarter.

[Matthew Zhao, Head of Investor Relations at NewMarket Corporation]

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

Participants

Executives

• Matthew Zhao, Head of Investor Relations
• William Skrobacz, CEO