Core Insights - Quaker Houghton has been recognized as one of America's Most Responsible Companies for the third consecutive year, highlighting its commitment to corporate responsibility and sustainability [1][2] Company Overview - Quaker Houghton is the global leader in industrial process fluids, operating in over 25 countries and serving thousands of advanced and specialized companies across various industries including steel, aluminum, automotive, aerospace, and mining [3] - The company employs approximately 4,400 individuals, including chemists, engineers, and industry experts, focusing on delivering high-performing, innovative, and sustainable solutions [3] Recognition and Commitment - The recognition by Newsweek is based on environmental, social, and governance performance indicators derived from sustainability reports and an independent perception survey [1] - The CEO emphasized that this award reflects the company's disciplined approach and the investments made towards achieving meaningful progress in corporate responsibility [2]

Core Insights - The SCCM Small Cap Value Equity Strategy reported a strong performance in Q3 2025, with a gross return of 14.4% and a net return of 14.2%, outperforming the Russell 2000 and Russell 2000 Value indices which returned 12.4% and 12.6% respectively [1] Company Overview - Quaker Chemical Corporation (NYSE:KWR) is recognized as a global leader in industrial process fluids, lubricants, and specialty chemicals, serving various industries including metalworking, steel, automotive, and aerospace [3] - The company has a market capitalization of $2.368 billion, with its stock closing at $136.15 per share on November 24, 2025 [2] Performance Metrics - Quaker Chemical Corporation experienced a one-month return of 2.48%, but its shares have declined by 13.72% over the past 52 weeks [2] Business Model and Strategy - Quaker Houghton has established a resilient business model characterized by high customer retention, strong pricing power, and disciplined execution through economic cycles [3] - The management effectively navigates raw material volatility while expanding margins through operational efficiencies and innovation-driven product differentiation [3] Market Position and Growth Potential - The company's exposure to industrial production, infrastructure investment, and reshoring trends positions it to benefit from a sustained recovery in global manufacturing [3] - Continued penetration in international markets, especially in emerging economies, along with prudent capital allocation and sustainability initiatives, supports durable earnings growth and attractive long-term compounding potential [3] Financial Health - Quaker Houghton boasts a strong balance sheet and solid free cash flow generation, which, combined with expanding strategic partnerships, positions it as a high-quality franchise likely to outperform in the next phase of the economic cycle [3]

Financial Data and Key Metrics Changes - Adjusted EBITDA increased by 5% year-over-year, reaching $83 million, with adjusted earnings per share up 10% to $2.08 [4][15][20] - Net sales for the third quarter were $494 million, a 7% increase from the prior year, driven by a 3% increase in organic volumes and a 5% contribution from acquisitions [15][20] - Gross margins were reported at 36.8%, slightly down from 37.3% in the same quarter last year, but improved sequentially from the second quarter of 2025 [15][16] Business Line Data and Key Metrics Changes - The Asia-Pacific segment showed strong performance with an 18% year-over-year increase in sales, driven by a 3% organic growth and contributions from the Dipsol acquisition [17][18] - The Americas segment saw a 1% increase in net sales year-over-year, but organic volumes were flat due to softer end market activity [18][19] - The AMEA segment experienced a 2% organic sales growth, with double-digit growth in advanced solutions [18] Market Data and Key Metrics Changes - End market activity declined by a low single-digit percentage compared to the prior year, with production levels across major markets down similarly [6][12] - The company outperformed its underlying end markets, achieving a 7% year-over-year increase in sales despite market softness [6][14] Company Strategy and Development Direction - The company is focused on operational discipline and strategic execution, aiming for sustainable long-term growth through innovation and customer service [4][10] - There is a strong emphasis on capital allocation, with a reduction in net leverage to 2.4 times and a commitment to returning cash to shareholders [5][12] - The company is positioning itself to capitalize on growth opportunities in emerging markets, particularly in Asia, with new facilities and R&D capabilities [10][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver growth despite a challenging macroeconomic environment, with expectations for continued momentum driven by share gains and cost actions [12][14] - There is an anticipation of a return to normal seasonal trends in the fourth quarter, with ongoing uncertainty from tariffs and global trade impacting customer operating rates [12][22] - The outlook for 2026 is cautiously optimistic, with expectations for market stabilization and continued share gains [14][41] Other Important Information - The company generated $51 million in operating cash flow during the third quarter, with capital expenditures of approximately $13 million [20][21] - The integration of the Dipsol acquisition is progressing well, contributing positively to the company's performance [7][34] Q&A Session Summary Question: Details on Asia-Pacific business and margin performance - Management highlighted strong growth in Asia-Pacific, with ongoing new business wins and some margin pressures due to raw material costs [27][31] Question: Opportunities in advanced solutions and market share - The company is excited about growth in advanced solutions, particularly with the Dipsol acquisition, and is well-positioned to capture market share [32][34] Question: Q4 outlook and organic growth expectations - Management expressed confidence in Q4 performance, expecting revenue and earnings growth year-over-year, despite normal seasonal impacts [35][38] Question: Customer investment trends and market dynamics - The outlook for 2026 is based on stability in end markets, with expectations for continued share gains rather than significant market growth [41][42] Question: Pricing strategy and share gain sustainability - The company aims to maintain a long-term share gain range of 2% to 4%, with strategic pricing decisions to support this goal [51][52] Question: Exposure to EVs and related market dynamics - The company is growing its presence in the EV market and sees opportunities in both ICE and EV segments [63][64]

Financial Performance - Q3 2025 - Net sales for Q3 2025 were $493.8 million, a 6.8% increase compared to $462.3 million in Q3 2024[12] - Non-GAAP earnings per diluted share for Q3 2025 were $2.08, a 10.1% increase compared to $1.89 in Q3 2024[12] - Adjusted EBITDA for Q3 2025 was $82.9 million, with adjusted EBITDA margins of 16.8%[12, 18] Financial Performance - YTD 2025 - Net sales for YTD 2025 reached $1.42 billion, a 1.8% increase compared to $1.3956 billion in YTD 2024[11, 12] - Non-GAAP earnings per diluted share for YTD 2025 were $5.37[11, 12] - Adjusted EBITDA for YTD 2025 was $227.4 million[11, 12] Leverage and Liquidity - The company's net debt stood at $703 million as of September 30, 2025[23] - The leverage ratio was 2.4x as of September 30, 2025, operating well within the bank's maximum permitted leverage of 4.0x[11, 23] - The company had cash and cash equivalents of $172 million[23] Sales Volume - Sales volumes increased by 3% year-over-year in Q3 2025, driven by new business wins across all regions[15]

Core Insights - Quaker Chemical (KWR) reported quarterly earnings of $2.08 per share, exceeding the Zacks Consensus Estimate of $1.94 per share, and up from $1.89 per share a year ago, representing an earnings surprise of +7.22% [1] - The company achieved revenues of $493.84 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 3.88% and increasing from $462.27 million year-over-year [2] - Quaker Chemical has underperformed the market, with shares down approximately 7.3% year-to-date compared to the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.84 on revenues of $467.45 million, and for the current fiscal year, it is $7.07 on revenues of $1.87 billion [7] - The estimate revisions trend for Quaker Chemical was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Chemical - Specialty industry, to which Quaker Chemical belongs, is currently ranked in the bottom 34% of over 250 Zacks industries, suggesting potential challenges for stocks in this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact investor sentiment and stock performance [5]

Financial Performance - Net sales for Q3 2025 reached $493,842,000, a 6.8% increase from $462,274,000 in Q3 2024[10] - Gross profit for Q3 2025 was $180,865,000, compared to $172,549,000 in Q3 2024, reflecting a 4.8% increase[10] - Operating income decreased to $46,641,000 in Q3 2025 from $51,718,000 in Q3 2024, a decline of 9.4%[10] - Net income attributable to Quaker Chemical Corporation for Q3 2025 was $30,469,000, down from $32,346,000 in Q3 2024, a decrease of 5.5%[10] - For the three months ended September 30, 2025, net income attributable to Quaker Chemical Corporation was $30.469 million, resulting in basic earnings per share of $1.75, compared to $32.346 million and $1.81 for the same period in 2024[90] - Adjusted EBITDA for Q3 2025 was $82.9 million, up from $78.6 million in Q3 2024, primarily due to increased net sales and consistent operating margins[131] - Non-GAAP net income for Q3 2025 was $36,270 thousand, up from $33,981 thousand in Q3 2024, reflecting an increase of 6.3%[197] Assets and Liabilities - Total assets increased to $2,816,797,000 as of September 30, 2025, up from $2,610,649,000 at the end of 2024, representing a growth of 7.9%[15] - Cash and cash equivalents decreased to $172,038,000 at the end of Q3 2025 from $188,880,000 at the end of 2024, a decline of 8.9%[15] - Long-term debt increased to $838,522,000 as of September 30, 2025, compared to $669,614,000 at the end of 2024, an increase of 25.2%[15] - Total debt as of September 30, 2025 was $875.234 million, an increase from $708.267 million as of December 31, 2024[96] - As of September 30, 2025, total net debt was approximately $703.2 million, calculated as total borrowings of $875.2 million minus cash and cash equivalents of $172.0 million[144] Cash Flow - Cash flows from operating activities for the nine months ended September 30, 2025, were $89,909,000, down from $141,514,000 for the same period in 2024, a decrease of 36.4%[19] - Cash used in investing activities was $193.0 million in the first nine months of 2025, compared to $55.8 million in the same period of 2024, primarily due to acquisitions totaling $164.2 million[141] - Cash provided by financing activities was $79.2 million in the first nine months of 2025, compared to $67.0 million used in financing activities in the prior year, driven by $168.9 million in net borrowings[142] Acquisitions - Quaker Chemical Corporation acquired Dipsol Chemicals Co., Ltd. for approximately $185.6 million, enhancing its capabilities in surface treatment and plating solutions[30] - The estimated fair value of total assets acquired from Dipsol is $172.526 million, with cash and cash equivalents amounting to $30.084 million[32] - The total liabilities assumed from Dipsol are valued at $37.504 million, resulting in goodwill of $53.042 million attributed to expected synergies[32][33] - The Company acquired Natech for approximately $6.5 million, allocating $2.1 million to intangible assets and recognizing $2.6 million of goodwill[36] - The acquisition of CSI was completed for about $3.9 million, with $1.4 million allocated to intangible assets and $1.7 million of goodwill recognized[37] - The Sutai Group was acquired for approximately $16.2 million, with $3.1 million allocated to intangible assets and $5.5 million of goodwill recognized[38] - The acquisition of IKV was valued at $35.2 million, with $15.0 million allocated to intangible assets and $16.4 million of goodwill recognized[39] Expenses and Charges - The company reported impairment charges of $88,840,000 for the nine months ended September 30, 2025, compared to no impairment charges in the same period of 2024[19] - The company incurred restructuring charges of $7.7 million in the third quarter of 2025, compared to $2.6 million in the same quarter of 2024, related to headcount reductions and facility closures[159] - Interest expense rose to $33.3 million in the first nine months of 2025, an increase of $1.4 million compared to $31.9 million in 2024, mainly due to higher outstanding borrowings[175] Segment Performance - The Americas segment generated net sales of $222,787 thousand for the three months ended September 30, 2025, representing a 1.8% increase from $220,275 thousand in the same period of 2024[51] - Americas segment net sales were $657.6 million in the first nine months of 2025, a decrease of $16.0 million or 2% compared to 2024, impacted by unfavorable foreign currency translation[186] - EMEA segment net sales increased to $413.1 million, a rise of $2.5 million or 1% compared to the first nine months of 2024, supported by acquisitions and favorable currency translation[187] - Asia/Pacific segment net sales reached $349.5 million, an increase of $38.0 million or 12% compared to the prior year, driven by acquisitions and organic sales growth[188] Tax and Regulatory Matters - The effective tax rate for the three months ended September 30, 2025 was 26.2%, a decrease from 28.9% in the same period of 2024[88] - Effective tax rate for the first nine months of 2025 was (169.5)%, compared to 29.7% in 2024, influenced by goodwill impairment charges and other factors[176] - The Company expects the provisions of the One Big Beautiful Bill Act, effective in 2025, to have no material impact on its consolidated financial statements[89] Risks and Challenges - Forward-looking statements indicate potential impacts from economic downturns, tariffs, and global supply chain constraints on business operations[203] - Risks include demand fluctuations for products and services due to customer production slowdowns and shutdowns[204] - The Company faces challenges from inflationary pressures and increases in raw material costs, affecting operational costs[206] - The Company is subject to various legislative and regulatory developments that could impact operations and financial condition[205]

Financial Performance - Q3 2025 net sales were $493.8 million, a 7% increase from $462.3 million in Q3 2024[3] - Q3 2025 net income was $30.5 million, or $1.75 per diluted share, compared to $32.3 million, or $1.81 per diluted share in Q3 2024[4] - Non-GAAP net income for Q3 2025 was $36.3 million, with non-GAAP earnings per diluted share at $2.08, reflecting a 10% increase year-over-year[6] - Adjusted EBITDA for Q3 2025 was $82.9 million, a 5% increase from $78.6 million in Q3 2024, with adjusted EBITDA margins at 16.8%[6] - Total net sales for Q3 2025 reached $493,842,000, a 6.8% increase from $462,274,000 in Q3 2024[31] - The company reported a net income of $30.5 million for the three months ended September 30, 2025, compared to $32.3 million for the same period in 2024[23] - GAAP earnings per diluted share for the three months ended September 30, 2025, is $1.75, compared to $1.81 for the same period in 2024[24] Sales and Market Trends - Organic sales volumes increased by 3% year-over-year, driven by new business wins of approximately 5% globally[6] - The Asia/Pacific segment saw a net sales increase of 18% year-over-year, primarily due to organic sales volume growth and contributions from acquisitions[10] - The company anticipates continued soft market conditions through year-end but expects year-over-year revenue and earnings growth in Q4 2025[8] Costs and Expenses - The company incurred restructuring and related charges of $7.7 million for the three months ended September 30, 2025[23] - Restructuring and related charges for Q3 2025 were $7,745,000, compared to $2,610,000 in Q3 2024, indicating an increase of 196.7%[31] - Interest expense increased to $10,941,000 in Q3 2025 from $10,347,000 in Q3 2024, reflecting a rise of 5.7%[31] Cash Flow and Debt - Cash flow from operating activities for the nine months ended September 30, 2025, was $89.9 million, down from $141.5 million in the same period of 2024[14] - As of September 30, 2025, total gross debt was $875.2 million, with net debt at approximately $703.2 million, resulting in a net leverage ratio of 2.4x[15] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $89,909 thousand, down from $141,514 thousand in the same period of 2024, a decrease of 36.4%[36] - Long-term debt rose to $838,522 thousand, an increase of 25.2% from $669,614 thousand at December 31, 2024[33] Equity and Assets - Total assets increased to $2,816,797 thousand as of September 30, 2025, up from $2,610,649 thousand at December 31, 2024, representing a growth of 7.9%[33] - Total equity increased to $1,366,883 thousand as of September 30, 2025, compared to $1,354,183 thousand at December 31, 2024, reflecting a growth of 0.9%[33] Impairment and Losses - The company reported a net loss of $23,160,000 for the nine months ended September 30, 2025, compared to a net income of $102,540,000 for the same period in 2024[31] - The company incurred impairment charges of $88,840,000 for the nine months ended September 30, 2025, with no impairment charges reported in the same period of 2024[31] - The company reported impairment charges of $88,840 thousand during the nine months ended September 30, 2025, which were not present in the same period of 2024[36] Future Outlook - The company plans to continue focusing on market expansion and new product development as part of its growth strategy[21] - The company anticipates maintaining sufficient liquidity and compliance with credit facility terms despite economic uncertainties and inflationary pressures[27]

Core Points - Quaker Houghton is set to release its third quarter 2025 earnings on October 30, 2025, after market close, with a subsequent investor call scheduled for October 31, 2025, at 8:30 a.m. (ET) [1] - The company is a global leader in industrial process fluids, operating in over 25 countries and serving advanced industries such as steel, aluminum, automotive, aerospace, and mining [2] - Quaker Houghton has approximately 4,400 employees, including chemists and engineers, focusing on innovative and sustainable solutions for its customers [2] Earnings Release and Investor Call - Earnings Release Date: October 30, 2025, after market close [1] - Investor Call Date: October 31, 2025, at 8:30 a.m. (ET) [1] - Participation Options: Live phone call or audio webcast available on the company's investor relations website [1] Dividend Announcement - The Board of Directors declared a quarterly cash dividend of $0.508 per share, representing a 4.7% increase over the previous dividend [5]

Group 1 - Quaker Chemical, operating as Quaker Houghton, is a leader in industrial process fluids, serving industries such as specialized steel, automotive, and mining [1] - The company specializes in products like metal removal fluids, rolling lubricants, and hydraulic fluids [1] Group 2 - The investment group European Small Cap Ideas focuses on high-quality small-cap investment opportunities in Europe, emphasizing capital gains and dividend income [1] - The group offers two model portfolios: the European Small Cap Ideas portfolio and the European REIT Portfolio, along with weekly updates and educational content [1]

Company Overview - Quaker Chemical is a global specialty chemical company focused on supplying high-value process fluids and solutions to industrial manufacturers, serving sectors such as steel, aluminum, automotive, aerospace, and mining across the Americas, EMEA, and Asia/Pacific regions [5]. - The company reported a total revenue of $1.83 billion and a net income of $(7.13) million for the trailing twelve months (TTM) [4]. Recent Developments - Luminus Management sold 42,585 shares of Quaker Chemical, valued at approximately $5.6 million, during the quarter ended September 30, 2025, and retained 60,466 shares worth about $8 million at quarter-end, making Quaker Chemical its 5th-largest equity position [2][3]. - Quaker Chemical's stake represented 7.2% of Luminus Management's reported assets under management (AUM) [3]. Financial Performance - Quaker Chemical's revenue showed a 4% year-over-year increase to $483.4 million in the second quarter, with acquisitions contributing 6 percentage points and higher volume adding 2 percentage points, although lower prices and a changing mix subtracted 4 percentage points [6][7]. - Despite the sales growth, the company's net income, adjusted for certain items, dropped 21.5% to $30 million [7]. Market Position - As of October 2, 2025, Quaker Chemical's shares were priced at $132.59, reflecting a 19% decline over the past year, underperforming the S&P 500 by 36.6 percentage points during the same period [3].