NewMarket Corporation (NYSE:NEU) Q1 2025 Earnings Conference Call April 24, 2025 3:00 PM ET Company Participants Timothy Fitzgerald - Vice President & Chief Financial Officer Conference Call Participants Operator Greetings. And welcome to today's NewMarket Corporation scheduled conference call and webcast to review first quarter 2025 financial results. At this time, all participants are on a listen-only mode. Please note, this conference is being recorded. I will now turn the conference over to your host, M ...

Financial Performance - Consolidated net sales for Q1 2025 totaled $700.9 million, a slight increase of $4.2 million, or 0.6%, from Q1 2024[89] - Petroleum additives segment net sales decreased by 4.7% to $645.5 million in Q1 2025, primarily due to lower product shipments[92] - Specialty materials segment reported net sales of $53.7 million in Q1 2025, significantly higher than $17.0 million in the same period of 2024, driven by higher product volumes[96] - Operating profit for petroleum additives decreased by 5.8% to $142.1 million in Q1 2025, reflecting lower product shipments and higher operating costs[100] - Specialty materials segment achieved an operating profit of $23.2 million in Q1 2025, compared to an operating loss of $5.0 million in the same period of 2024[107] Cash Flow and Capital Management - Cash and cash equivalents increased by $40.8 million to $118.3 million as of March 31, 2025, compared to December 31, 2024[114] - Cash provided from operating activities for Q1 2025 was $120.3 million, including $26.6 million of higher working capital requirements[118] - Cash used in investing activities totaled $13.0 million in Q1 2025, with total capital spending expected to be between $70 million and $100 million for the year[122] - Cash used in financing activities was $68.5 million in Q1 2025, including $57.1 million for stock repurchases and $50.0 million principal payment on senior notes[125] - Long-term debt increased to $990.6 million at March 31, 2025, compared to $971.3 million at December 31, 2024[126] - The leverage ratio was 1.31 at March 31, 2025, well below the maximum requirement of 3.75 to 1.00[128] - Total long-term debt as a percentage of total capitalization decreased from 39.9% at December 31, 2024, to 39.5% at March 31, 2025[130] Investment and Growth Strategy - Research and development investment increased by $2.0 million in Q1 2025, representing 5.1% of net sales compared to 4.6% in Q1 2024[105] - The company continues to prioritize investments in technology and operational efficiency to enhance portfolio profitability throughout 2025[86] - A capital investment of up to $100 million is planned to expand AMPAC's ammonium perchlorate production capacity by over 50%, scheduled for completion in 2026[123] - Significant investments in the petroleum additives business focus on operational efficiencies and technology development to enhance global reach[136] - The petroleum additives segment is expected to grow at an annual rate of up to 2%, with the company aiming to exceed this growth rate[135] Tax and Shareholder Value - The effective tax rate increased to 23.3% in Q1 2025 from 21.8% in Q1 2024, primarily due to prior year tax items[112] - The company continues to evaluate cash utilization strategies, including stock repurchases and dividends, to enhance shareholder value[139]

Financial Performance - Net income for Q1 2025 was $125.9 million, or $13.26 per share, up from $107.7 million, or $11.23 per share in Q1 2024, representing a 16.1% increase in net income[3][21] - Net income for Q1 2025 increased to $125,949,000, up from $107,732,000 in Q1 2024, representing a growth of 16.8%[23] - EBITDA for Q1 2025 was $203,207,000, compared to $178,602,000 in Q1 2024, reflecting an increase of 13.8%[24] Sales Performance - Petroleum additives sales decreased to $645.6 million in Q1 2025 from $677.3 million in Q1 2024, a decline of 4.7%[4][20] - Specialty materials sales surged to $53.7 million in Q1 2025, compared to $17.0 million in Q1 2024, marking a significant increase of 215.3%[5][20] Operating Profit - Operating profit for petroleum additives was $142.1 million in Q1 2025, down from $150.9 million in Q1 2024, a decrease of 5.2%[4][20] - Specialty materials operating profit improved to $23.2 million in Q1 2025 from an operating loss of $5.0 million in Q1 2024[5][20] Cash Flow and Dividends - Cash flows generated in Q1 2025 allowed for stock repurchases of $57.1 million and dividends of $26.1 million[6][9] - Dividends paid in Q1 2025 totaled $26,057,000, compared to $23,986,000 in Q1 2024, marking an increase of 8.7%[23] Debt and Financial Ratios - Net Debt was reduced by $21.5 million in Q1 2025, resulting in a Net Debt to EBITDA ratio of 1.1[6][12] - Net Debt decreased to $872,302,000 as of March 31, 2025, down from $893,805,000 at the end of 2024, indicating a reduction of 2.8%[25] - The Net Debt to EBITDA ratio improved to 1.1 in Q1 2025, compared to 1.2 in Q4 2024, showing enhanced financial leverage[25] Capital Expenditures and Investments - A capital investment of up to $100 million was approved to expand ammonium perchlorate production capacity by over 50%, projected for completion in 2026[7] - Capital expenditures for Q1 2025 were $13,016,000, slightly down from $13,564,000 in Q1 2024[23] Asset Management - Total assets increased to $3.23 billion as of March 31, 2025, compared to $3.13 billion at the end of 2024[22] - The company reported an increase in cash and cash equivalents by $40,777,000 in Q1 2025, compared to an increase of $5,130,000 in Q1 2024[23] Interest and Financing - Interest and financing expenses for Q1 2025 were $10,700,000, down from $15,654,000 in Q1 2024, a decrease of 31.3%[24] Working Capital Management - Working capital changes resulted in a cash outflow of $26,590,000 in Q1 2025, compared to $21,434,000 in Q1 2024, indicating a worsening in working capital management[23] Business Acquisitions - The company did not acquire any businesses in Q1 2025, contrasting with a significant acquisition cost of $683,924,000 in Q1 2024[23] Operational Focus - The company is focused on enhancing operational efficiency and investing in technology to meet customer needs throughout 2025[8][10]

Financial Performance - Consolidated net sales for 2024 amounted to $2.8 billion, an increase of $88 million, or 3.3%, from 2023[167]. - Net sales for 2024 were $2,786,558 thousand, an increase from $2,698,419 thousand in 2023, representing a growth of approximately 3.3%[281]. - Gross profit for 2024 was $886,346 thousand, up from $772,513 thousand in 2023, indicating a gross margin improvement[281]. - Operating profit increased to $590,036 thousand in 2024 from $483,045 thousand in 2023, reflecting a growth of about 22.2%[281]. - Net income for 2024 reached $462,413 thousand, compared to $388,864 thousand in 2023, marking an increase of approximately 18.9%[281]. - Earnings per share for 2024 were $48.22, up from $40.44 in 2023, representing a growth of about 19.4%[281]. - Comprehensive income for 2024 was $516,354,000, compared to $439,788,000 in 2023, reflecting a growth of 17%[285]. - Total assets increased to $3,129,541,000 in 2024, up from $2,308,871,000 in 2023, representing a 36% growth[287]. - Cash flows from operating activities of $519,592,000 in 2024, down from $576,823,000 in 2023[292]. Segment Performance - Petroleum additives net sales for 2024 were $2.6 billion, approximately 2.0% lower than 2023, with a decrease of $54 million attributed to lower selling prices and unfavorable foreign currency impact[169][172]. - The petroleum additives segment generated net sales of $2,636,242 in 2024, a decrease of 2.0% from $2,689,709 in 2023[355]. - Segment operating profit for petroleum additives was $591,854 in 2024, an increase of 14.9% from $514,428 in 2023[355]. - The specialty materials segment reported operating profit of $17 million for the period from the AMPAC acquisition date of January 16, 2024, to December 31, 2024[183]. - Specialty materials revenue is mainly derived from U.S. government contractors, with total sales of $141,243 in 2024[339]. Acquisition and Investments - The company completed the acquisition of AMPAC for approximately $697 million on January 16, 2024[161]. - The acquisition of AMPAC Intermediate Holdings, LLC was completed on January 16, 2024, for approximately $697 million, expanding the company's presence in mission-critical sectors[327]. - The fair value of net assets acquired from AMPAC included $650 million in intangibles and goodwill, with $256 million recognized as goodwill attributable to access to resilient sectors[330]. - The identified intangible assets from the AMPAC acquisition included a customer base valued at $275 million and formulas and technology valued at $60 million[328]. - The company acquired a business for $681,479,000 in 2024, marking a significant investment in growth[292]. Expenses and Costs - Interest and financing expenses increased to $57 million in 2024 from $37 million in 2023, primarily due to higher average debt outstanding and interest rates[184]. - Selling, general, and administrative expenses (SG&A) increased by $5 million, or 4.2%, in 2024 compared to 2023, with SG&A as a percentage of net sales at 4.8%[181]. - Research and development (R&D) investment decreased by approximately $13 million, representing 4.7% of net sales in 2024 compared to 5.1% in 2023[182]. - Environmental operating and clean-up costs were approximately $37 million in 2024, down from $41 million in 2023[210]. - Research, development, and testing expenses for 2024 were $124,898 thousand, a decrease from $137,998 thousand in 2023[281]. Cash Flow and Capital Structure - Cash generated from operating activities was $520 million in 2024, down from $577 million in 2023[188]. - Cash and cash equivalents decreased from $112 million at the end of 2023 to $77 million at December 31, 2024[191]. - Long-term debt increased from $644 million at December 31, 2023 to $971 million at December 31, 2024, representing an increase in total long-term debt percentage from 37.4% to 39.9%[205]. - The company had working capital of $655 million at December 31, 2024, with a current ratio of 2.75 to 1, down from $675 million and a current ratio of 2.85 to 1 at the end of 2023[206]. - Cash dividends paid in 2024 were $95,902,000, up from $85,034,000 in 2023, reflecting a 10% increase[289]. Pension and Retirement Plans - The pension benefit obligation was reported at $561 million as of December 31, 2024[272]. - The company expects net periodic benefit income for its pension and postretirement plans during 2025, with a discount rate assumption of 5.875% as of December 31, 2024[222]. - The expected aggregate cash contributions to the U.S. pension plans are projected to be approximately $4 million in 2025, with an additional $1 million for postretirement benefit plans[225]. - An actuarial gain of $16 million occurred during 2024, while an actuarial loss of $3 million was recorded in 2023 on plan liabilities due to changes in assumptions[229]. Market and Growth Outlook - The petroleum additives segment is expected to grow annually up to 2%, with the company planning to exceed that growth rate[236]. - The company aims to provide a 10% compounded return per year for shareholders over any ten-year period, focusing on a customer-centric strategy and technology-driven product offerings[235].

Financial Performance - Net income for Q4 2024 was $110.7 million, or $11.56 per share, up from $80.4 million, or $8.38 per share in Q4 2023, representing a 37.5% increase in net income year-over-year[4] - Full year net income for 2024 was $462.4 million, or $48.22 per share, compared to $388.9 million, or $40.44 per share in 2023, reflecting a 19% increase in net income[4] - Net income for the twelve months ended December 31, 2024, was $462,413 thousand, up from $388,864 thousand in 2023, reflecting a year-over-year increase of about 19%[25] - EBITDA for the twelve months ended December 31, 2024, reached $758,430 thousand, compared to $602,941 thousand in 2023, indicating a growth of approximately 25.7%[26] Sales and Revenue - Petroleum additives sales for Q4 2024 were $626.1 million, a decrease from $642.0 million in Q4 2023, while operating profit increased to $135.7 million from $110.4 million due to lower operating costs[5] - Total petroleum additives sales for 2024 were $2.6 billion, down from $2.7 billion in 2023, but operating profit rose to $591.9 million from $514.4 million, driven by efficiency efforts[6] - Specialty materials sales for Q4 2024 were $27.1 million, with full year sales reaching $141.2 million, exceeding pre-acquisition expectations[8] Acquisitions and Investments - The company completed the acquisition of American Pacific Corporation (AMPAC) on January 16, 2024, contributing positively to the specialty materials segment[8] - The company plans to continue investing in technology and enhancing operational efficiency in 2025 to meet customer needs and improve portfolio profitability[7] Debt and Cash Management - The company reduced net debt by $373 million since the AMPAC acquisition, with a Net Debt to EBITDA ratio of 1.2, below the target range of 1.5 to 2.0[11] - Long-term debt rose to $971,281 thousand in 2024 from $643,622 thousand in 2023, an increase of about 50.9%[27] - Net Debt to EBITDA ratio increased to 1.2 in 2024 from 0.9 in 2023, indicating a higher leverage position[27] - Cash and cash equivalents decreased to $77,476 thousand in 2024 from $111,936 thousand in 2023, a decline of approximately 30.8%[24] Capital Expenditures and Dividends - Capital expenditures for 2024 were $57,319 thousand, compared to $48,293 thousand in 2023, reflecting an increase of approximately 18.5%[25] - Cash dividends declared per share increased to $2.50 for Q4 2024, up from $2.25 in Q4 2023, and for the full year, dividends were $10.00 compared to $8.85 in 2023[23] - Dividends paid increased to $95,902 thousand in 2024 from $85,034 thousand in 2023, a rise of about 12.5%[25] Asset Management - Total assets increased to $3,129,541 thousand in 2024 from $2,308,871 thousand in 2023, representing a growth of approximately 35.5%[24] - Inventories increased to $505,426 thousand in 2024, up from $456,234 thousand in 2023, representing an increase of about 10.8%[24] - Accumulated other comprehensive income improved to $32,870 thousand in 2024 from a loss of $21,071 thousand in 2023, indicating a significant recovery[24]

Financial Data and Key Metrics Changes - Net income for Q3 2024 was $132 million, or $13.79 per share, compared to $111 million, or $11.60 per share, for the same period last year, representing a year-over-year increase in net income [3] - Petroleum additives sales for Q3 2024 were $663 million, slightly down from $664 million in Q3 2023, while operating profit for petroleum additives increased to $157 million from $140 million in the same period last year [3] Business Line Data and Key Metrics Changes - Specialty materials sales were $59 million for Q3 2024 and $114 million for the first nine months of 2024, with an operating profit of $16 million for both periods [4] - The increase in petroleum additives operating profit was primarily due to lower raw material and operating costs, despite lower selling prices [3] Market Data and Key Metrics Changes - The company reported strong cash flows during the quarter, with dividends paid amounting to $24 million and capital expenditures of $14 million [5] - As of September 30, 2024, the net debt-to-EBITDA ratio was 1.4, slightly below the target operating range of 1.5 to 2 [5] Company Strategy and Development Direction - The company remains focused on margin management, operating cost control, inventory levels, and portfolio profitability as priorities throughout 2024 [4] - The acquisition of American Pacific Corp. (AMPAC) on January 16, 2024, is expected to contribute to the specialty materials segment, with anticipated substantial variation in quarterly results due to the nature of AMPAC's business [4][5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fundamentals of the business, emphasizing a long-term view, safety-first culture, customer-focused solutions, technology-driven product offerings, and world-class supply chain capability [6] - The company anticipates capital expenditures in the range of $50 million to $70 million for 2024 [5] Other Important Information - The financial results of the AMPAC business have been reported since the date of acquisition, with the acquired inventory sold generating no margin [4][5] - The company thanked its employees for their efforts in integrating AMPAC into the organization [6] Q&A Session Summary - The conference call concluded with an invitation for questions via email or phone, indicating the management's openness to further discussions [7]

Financial Performance - Net sales for the petroleum additives segment decreased by 1.8% to $2.0 billion for the first nine months of 2024 compared to the same period in 2023, primarily due to lower selling prices[61] - Consolidated net sales for the third quarter of 2024 totaled $724.9 million, an increase of 8.7% from $667.2 million in the third quarter of 2023[64] - The acquisition of AMPAC was completed for approximately $697 million on January 16, 2024, contributing $59.1 million to net sales in the third quarter of 2024[61] - Specialty materials segment net sales for the first nine months of 2024 were $114.2 million, reflecting the operations of AMPAC since acquisition[71] - The company reported a negligible decrease of 0.1% in petroleum additives net sales for the third quarter of 2024 compared to the same quarter in 2023[66] - The volume of product shipments for petroleum additives increased by 1.8% when comparing the first nine months of 2024 to the same period in 2023[70] Profitability and Costs - Petroleum additives operating profit increased by 12.9% for the first nine months of 2024, reflecting lower raw material and operating costs[61] - The petroleum additives segment gross profit increased by $47.7 million for the first nine months of 2024 compared to the same period in 2023[75] - Cost of goods sold as a percentage of net sales decreased to 66.6% in Q3 2024 from 69.6% in Q3 2023, contributing to an operating profit margin increase to 23.8% from 21.1%[77] - SG&A expenses increased by $1.4 million in Q3 2024 compared to Q3 2023, representing 4.8% of net sales for both periods[77] - R&D investment increased by $0.3 million in Q3 2024 compared to Q3 2023, accounting for 4.9% of net sales, while it decreased by $7.0 million for the first nine months of 2024 compared to the same period in 2023[77] Financing and Debt - The company entered into a new $900 million revolving credit facility and a $250 million unsecured term loan on January 22, 2024[61] - Long-term debt increased to $1.1 billion as of September 30, 2024, compared to $643.6 million at December 31, 2023[87] - As of September 30, 2024, the company had $191 million outstanding under its revolving credit facility and $250 million under the term loan[92] - The company had no outstanding variable rate debt under its revolving credit facility as of December 31, 2023, indicating no interest rate risk at that time[92] - Interest and financing expenses rose to $14.2 million in Q3 2024 from $9.2 million in Q3 2023, primarily due to higher average debt and interest rates[79] Tax and Other Income - Income tax expense for Q3 2024 was $36.8 million, up from $23.2 million in Q3 2023, with an effective tax rate increase to 21.8% from 17.3%[81] - Other income increased to $13.8 million in Q3 2024 from $11.3 million in Q3 2023, reflecting components of net periodic benefit cost[80] Cash Flow and Investments - Cash and cash equivalents decreased by $31.6 million to $80.3 million as of September 30, 2024, compared to December 31, 2023[82] - Cash used in investing activities totaled $724.2 million in the first nine months of 2024, primarily for the acquisition of AMPAC for $681.5 million[85] Market Outlook - The company anticipates a long-term growth rate of up to 2% in the petroleum additives market and plans to exceed this growth rate[91] - If the variable portion of interest rates hypothetically increased by 10%, the effect on the company's earnings and cash flow would be $2.3 million[92]

Financial Performance - Third quarter net income was $132.3 million, or $13.79 per share, compared to $111.2 million, or $11.60 per share, in the same period last year, representing a 19.0% increase in net income [1] - Net income for the nine months ended September 30, 2024, was $351,674 thousand, compared to $308,454 thousand for the same period in 2023, reflecting a year-over-year increase of about 14% [16] - EBITDA for the nine months ended September 30, 2024, was $579,151 thousand, up from $471,212 thousand in 2023, marking a growth of around 23% [17] Sales and Operating Profit - Petroleum additives sales for the third quarter of 2024 were $663.0 million, slightly down from $663.7 million in the same period of 2023 [2] - Operating profit for petroleum additives in the third quarter of 2024 was $157.5 million, up from $139.8 million in the same period last year, reflecting a 12.8% increase [2] - For the first nine months of 2024, petroleum additives operating profit was $456.2 million, compared to $404.0 million in the same period of 2023, indicating a 12.9% increase [2] - Specialty materials sales were $59.1 million for the third quarter of 2024 and $114.2 million for the first nine months of 2024, with an operating profit of $16.0 million [3] Debt and Leverage - The company reduced debt by $259 million since the acquisition of American Pacific Corporation (AMPAC) on January 16, 2024 [4] - Long-term debt rose significantly to $1,085,006 thousand as of September 30, 2024, compared to $643,622 thousand at December 31, 2023, indicating an increase of approximately 68.5% [18] - Net debt increased to $1,004,696 thousand as of September 30, 2024, from $531,686 thousand at December 31, 2023, which is an increase of approximately 88.8% [18] - The net debt to EBITDA ratio increased to 1.4 as of September 30, 2024, compared to 0.9 in the previous year, indicating a higher leverage position [19] Cash and Assets - Cash and cash equivalents decreased to $80,310 thousand as of September 30, 2024, down from $111,936 thousand at December 31, 2023, representing a decline of approximately 28.3% [15] - Total assets increased to $3,166,284 thousand as of September 30, 2024, up from $2,308,871 thousand at December 31, 2023, representing a growth of approximately 37.2% [15] - Total current liabilities increased to $401,953 thousand as of September 30, 2024, from $364,164 thousand at December 31, 2023, which is an increase of about 10.4% [15] - The company reported a decrease in cash and cash equivalents of $31,626 thousand for the nine months ended September 30, 2024, compared to an increase of $33,848 thousand in the same period of 2023 [16] Capital Expenditures and Dividends - The company reported capital expenditures of $42,700 thousand for the nine months ended September 30, 2024, compared to $34,793 thousand in the same period of 2023, reflecting an increase of about 22.5% [16] - Cash dividends declared per share increased to $2.50 in the third quarter of 2024, up from $2.25 in the same period last year [14] Strategic Focus - The company remains focused on margin management, operating costs, inventory levels, and portfolio profitability as priorities throughout 2024 [3]

Group 1 - The investment group European Small Cap Ideas focuses on high-quality small-cap investment opportunities in Europe, emphasizing capital gains and dividend income for continuous cash flow [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] - An active chat room is available for discussions on the latest developments of the portfolio holdings [1] Group 2 - The article does not provide any specific investment recommendations or advice regarding suitability for particular investors [2] - It highlights that past performance is not indicative of future results, emphasizing the importance of independent analysis [2]

Financial Data and Key Metrics Changes - Net income for Q2 2024 was $112 million or $11.63 per share, compared to $100 million or $10.36 per share in Q2 2023, reflecting a year-over-year increase [3] - Petroleum additives net sales were $670 million, down from $684 million in the same period last year, while operating profit increased to $148 million from $132 million due to lower raw material and operating costs [3][4] - The net debt to EBITDA ratio as of June 30, 2024, was 1.6 times, within the target range of 1.5 to 2 times [5] Business Line Data and Key Metrics Changes - Petroleum additives shipments increased approximately 1% year-over-year, contributing to the operating profit increase despite lower selling prices [3] - Specialty materials sales for Q2 2024 were $38 million, with an operating profit of $5 million, a recovery from a loss of $5 million in Q1 2024, attributed to the sale of AMPAC inventory [4] Market Data and Key Metrics Changes - The company anticipates continued strength in the petroleum additive segment, indicating a positive outlook for this market [5] Company Strategy and Development Direction - The company completed the acquisition of American Pacific Corporation (AMPAC) on January 16, 2024, and is focused on integrating AMPAC into its operations while managing costs and inventory levels [4][5] - The company emphasizes a long-term view with a focus on safety, customer solutions, technology-driven products, and supply chain capabilities [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing integration of AMPAC and expects full-year 2024 results to align with pre-acquisition expectations [4] - The company remains committed to promoting long-term value for shareholders and customers [5] Other Important Information - Capital expenditures for 2024 are expected to be in the range of $50 million to $70 million, with solid cash flows from operations reported during the quarter [5] Q&A Session Summary - No specific questions or answers were recorded during the Q&A session [8]