The London Company, an investment management company, released “The London Company Large Cap Strategy” fourth-quarter 2025 investor letter. In Q4 2025, US equities ended the third consecutive quarter of higher returns, with the Russell 3000 Index rising 2.4%. A copy of the letter can be downloaded here. The market highlighted how investors balanced the optimism on earnings growth and concerns regarding AI returns and cooling macroeconomic factors. Against this backdrop The London Company Large Cap portfolio ...

Core Insights - The company reported a pre-tax income of $113 million for Q4 2025, down from $134 million in Q4 2024, with a full-year pre-tax income of $561 million compared to $584 million in 2024, reflecting a decline of 4% [1] - Net income for Q4 2025 was $81 million or $8.65 per share, compared to $111 million or $11.56 per share in Q4 2024, with full-year net income at $419 million or $44.44 per share, down from $462 million or $48.22 per share in 2024 [1] - The increase in effective tax rate was a primary driver for the decline in net income, as detailed in the 10-K filing [1] Petroleum Additives Segment - Sales for petroleum additives in Q4 2025 were $585 million, down from $626 million in Q4 2024, with operating profit at $107 million compared to $136 million in the same period last year [1] - For the full year, petroleum additives sales were $2.5 billion, down from $2.6 billion in 2024, with operating profit decreasing to $520 million from $592 million [1] - Shipment volumes declined by 6% in Q4 and 4.9% for the full year, attributed to market softness and lower selling prices [1] Specialty Materials Segment - Specialty materials sales for Q4 2025 were $49 million, up from $27 million in Q4 2024, with operating profit increasing to $7 million from approximately $2 million [1] - Full-year sales for specialty materials reached $182 million, compared to $141 million in 2024, with operating profit rising to $47 million from $17 million [1] - The growth in specialty materials was driven by higher volume demand at AMPAC and the acquisition of Calca Solutions, with a commitment of approximately $1 billion to this segment [1] Financial Performance and Shareholder Returns - The company generated solid cash flows in 2025, returning $183 million to shareholders through share repurchases of $77 million and dividends of $106 million [1] - Total debt was reduced by $88 million compared to 2024, with a net debt to EBITDA ratio of 1.1 times, down from 1.2 at the end of 2024 [1] - The strong cash flow performance supports continued investment in growth, efficiency, acquisitions, and shareholder returns [1]

Core Viewpoint - NewMarket reported a decline in net income and earnings per share for both the fourth quarter and full year of 2025, primarily due to a higher effective tax rate impacting profitability [5][8]. Financial Performance - Fourth-quarter 2025 net income was $81 million, or $8.65 per share, down from $111 million, or $11.56 per share, in the same period of 2024 [3][8]. - For the full year 2025, net income totaled $419 million, or $44.44 per share, compared to $462 million, or $48.22 per share, in 2024 [3][8]. - Pre-tax income for Q4 2025 was $113 million, down from $134 million in Q4 2024, while full-year pre-tax income was $561 million, a 4% decline from $584 million in 2024 [4][8]. Segment Performance - The Petroleum Additives segment saw Q4 sales decrease to $585 million from $626 million, with operating profit falling to $107 million from $136 million, attributed to a 6% decline in shipments, lower selling prices, and higher unit costs [7][9]. - Full-year sales for Petroleum Additives were $2.5 billion, down from $2.6 billion in 2024, with operating profit declining to $520 million from $592 million [8][9]. - Specialty Materials segment experienced growth, with Q4 sales rising to $49 million from $27 million in 2024, driven by increased volume at AMPAC and the acquisition of Calca [11][12]. Cash Flow and Capital Allocation - NewMarket generated solid cash flows in 2025, enabling $183 million in shareholder returns through share repurchases and dividends [14][15]. - The company reduced total debt by $88 million compared to 2024, with net debt to EBITDA at 1.1 times as of December 31, 2025 [14]. Strategic Outlook - Looking ahead, NewMarket anticipates continued strength in both Petroleum Additives and Specialty Materials, focusing on long-term value creation for shareholders and customers [16].

Core Viewpoint - NewMarket Corporation reported its fourth quarter and full year 2025 financial results, highlighting a decline in pretax income and net income due to increased income taxes [4]. Financial Performance - Pretax income for Q4 2025 was $113 million, down from $134 million in Q4 2024, marking a decrease of approximately 15.7% [4]. - For the full year 2025, pretax income was $561 million, compared to $584 million in 2024, reflecting a decline of about 4% [4]. - Net income for Q4 2025 was reported at $81 million, equating to $8.65 per share [4].

Financial Data and Key Metrics Changes - Pre-tax income for Q4 2025 was $113 million, down from $134 million in Q4 2024, with full-year pre-tax income at $561 million compared to $584 million in 2024, reflecting a decline of 4% [3] - Net income for Q4 2025 was $81 million, or $8.65 per share, compared to $111 million, or $11.56 per share in Q4 2024; full-year net income was $419 million, or $44.44 per share, down from $462 million, or $48.22 per share in 2024 [3][4] Business Line Data and Key Metrics Changes - Petroleum Additives sales for Q4 2025 were $585 million, down from $626 million in Q4 2024; operating profit for this segment was $107 million, compared to $136 million in the same period last year [4][5] - For the full year, Petroleum Additives sales were $2.5 billion, down from $2.6 billion in 2024, with operating profit at $520 million compared to $592 million in 2024 [6] - Specialty Materials sales for Q4 2025 were $49 million, up from $27 million in Q4 2024, with operating profit increasing to $7 million from about $2 million [7][8] - Full-year Specialty Materials sales were $182 million, compared to $141 million in 2024, with operating profit rising to $47 million from $17 million [9] Market Data and Key Metrics Changes - Shipments in the Petroleum Additives segment declined by 6% in Q4 2025 and 4.9% for the full year, attributed to market softness and strategic decisions to manage profitability [5][6] Company Strategy and Development Direction - The company is focused on investing in technology, optimizing inventory levels, and improving portfolio profitability, with a commitment of approximately $1 billion towards expanding capacity in the Specialty Materials segment [9][10] - The company aims to promote long-term value for shareholders and customers, emphasizing a safety-first culture, customer-focused solutions, and technology-driven products [11] Management's Comments on Operating Environment and Future Outlook - Management noted challenges from ongoing inflation, tariffs, and market softness impacting shipments, but expressed confidence in the strength of the petroleum additives and specialty materials segments [6][10] - The company generated solid cash flows in 2025, allowing for shareholder returns through share repurchases and dividends, while also reducing total debt by $88 million [10] Other Important Information - The effective tax rate increased in 2025 compared to 2024, significantly impacting net income and EPS [4] - The company reported a net debt to EBITDA ratio of 1.1 times as of December 31, 2025, slightly down from 1.2 at the end of 2024 [10] Q&A Session Summary - No specific questions or answers were provided in the content, indicating that the conference call concluded without a Q&A segment [12]

Financial Data and Key Metrics Changes - Pre-tax income for Q4 2025 was $113 million, down from $134 million in Q4 2024. For the full year, pre-tax income was $561 million in 2025, compared to $584 million in 2024, a decline of 4% [3] - Net income for Q4 2025 was $81 million, or $8.65 per share, compared to $111 million, or $11.56 per share for Q4 2024. Full year net income for 2025 was $419 million, or $44.44 per share, down from $462 million, or $48.22 per share in 2024 [3][4] Business Line Data and Key Metrics Changes - Petroleum Additives sales for Q4 2025 were $585 million, down from $626 million in Q4 2024. Operating profit for this segment was $107 million in Q4 2025, compared to $136 million in Q4 2024, driven by a 6% decline in shipments and lower selling prices [4][5] - For the full year, Petroleum Additives sales were $2.5 billion in 2025, down from $2.6 billion in 2024. Operating profit for 2025 was $520 million, compared to $592 million in 2024, with shipments down by 4.9% [5][6] - Specialty Materials sales for Q4 2025 were $49 million, up from $27 million in Q4 2024, with operating profit increasing to $7 million from about $2 million in the same period [7] - Full year sales for Specialty Materials were $182 million in 2025, compared to $141 million in 2024, with operating profit rising to $47 million from $17 million [9] Market Data and Key Metrics Changes - The company experienced market softness throughout 2025, impacting shipments and profitability in the Petroleum Additives segment [6] - The Specialty Materials segment showed growth due to higher volume demand at Ampac and the acquisition of Calca Solutions [9] Company Strategy and Development Direction - The company is focused on investing in technology, optimizing inventory levels, and improving portfolio profitability. It has committed approximately $1 billion to expand capacity in the Specialty Materials segment [9] - The company aims to promote long-term value for shareholders and customers, emphasizing a safety-first culture and technology-driven products [11] Management's Comments on Operating Environment and Future Outlook - Management noted challenges from ongoing inflation, tariffs, and market softness impacting shipments. However, they expressed confidence in the performance of the Petroleum Additives and Specialty Materials segments [6][10] - The company generated solid cash flows in 2025, allowing for shareholder returns through share repurchases and dividends, while also reducing total debt [10] Other Important Information - The effective tax rate increased in 2025 compared to 2024, contributing to the decline in net income [4] - The company reported a net debt to EBITDA ratio of 1.1 times as of December 31, 2025, slightly down from 1.2 at the end of 2024 [10] Q&A Session Summary - No specific questions or answers were provided in the content, indicating that the conference concluded without a Q&A segment [12]

Financial Performance - Consolidated net sales for 2025 amounted to $2.7 billion, a decrease of $61 million, or 2.2%, from 2024 [167] - Petroleum additives net sales for 2025 were $2.5 billion, down 3.9% from 2024, with significant decreases in Asia Pacific (10.3%) and North America (6.2%) [169] - The specialty materials segment reported net sales of $182 million for 2025, an increase from $141 million in 2024, primarily due to increased shipment volumes [174] - Operating profit for the petroleum additives segment decreased to $520 million in 2025, down from $592 million in 2024, reflecting lower product shipments and higher operating costs [178] - Selling, general, and administrative expenses (SG&A) increased by $5 million, or 3.8%, in 2025, with SG&A as a percentage of net sales rising to 5.2% [182] - Other income increased to $57 million in 2025 from $51 million in 2024, primarily due to changes in net periodic benefit costs [188] - Income tax expense rose to $142 million in 2025 from $122 million in 2024, with an effective tax rate increase to 25.3% from 20.8% [189] - Cash generated from operating activities was $569 million in 2025, up from $520 million in 2024 [192] Investments and Acquisitions - The company completed the acquisition of Calca on October 1, 2025, and AMPAC on January 16, 2024, contributing to the specialty materials segment's performance [162] - The company acquired Calca for $213 million in 2025, funded by cash from operating activities [193] - The company has committed approximately $1 billion to the specialty materials segment through acquisitions and capacity expansion [247] Capital Expenditures and Future Plans - Capital expenditures increased to $78 million in 2025 from $57 million in 2024, with an estimated range of $100 million to $150 million for 2026 [213] - The company plans to expand AMPAC's ammonium perchlorate production capabilities with a project costing up to $100 million, expected to increase capacity by over 50% [214] Debt and Financing - Long-term debt decreased to $883 million at December 31, 2025, from $971 million at December 31, 2024, resulting in a total long-term debt percentage of 33.2% [209] - The average interest rate for borrowings under the revolving credit facility was 5.3% in 2025, down from 6.5% in 2024 [206] - Total long-term debt as of December 31, 2025, is $883 million, with $288 million under a revolving credit facility [265] - A hypothetical 10% increase in variable interest rates would result in an additional interest expense of $1 million [265] - A hypothetical 100 basis point decrease in interest rates would change the fair value of the debt by $24 million [266] - Interest and financing expenses decreased to $40 million in 2025 from $57 million in 2024, primarily due to lower average debt outstanding and interest rates [187] Market and Economic Conditions - The company continues to monitor macroeconomic conditions, particularly international trade relations and tariffs, assessing potential impacts on operations [163] - The petroleum additives segment is expected to face operating performance impacts in 2026 due to market softness, but solid results are anticipated [244] - Political and economic conditions may cause fluctuations in raw material demand and costs, affecting profitability [268] Environmental and Legal Matters - Environmental expenses increased to approximately $44 million in 2025 from $37 million in 2024, primarily included in cost of goods sold [216] - Environmental obligations are being monitored, with accruals adjusted as necessary based on changing requirements [259] - The company is committed to maintaining consistent accruals for environmental matters as they evolve [259] - Legal proceedings are not expected to have a material adverse effect on the company's financial condition [260] Employee and Compensation - The company maintains a projected compensation increase rate of 3.5% as of December 31, 2025 [232][241] Pension and Benefit Plans - The actual investment return for U.S. qualified pension plans exceeded the expected return by approximately $37 million in 2025 and $54 million in 2024 [226] - The expected long-term rate of return on postretirement plans was 4.0% as of December 31, 2025, compared to 8.0% for pension plans [228] - Cash contributions to U.S. pension plans are expected to be approximately $4 million in 2026, with an additional $1 million for postretirement benefit plans [233] - Net periodic benefit income for pension and postretirement plans is expected in 2026, with a potential $8 million impact from a 100 basis point change in expected return rates [229] - The discount rate for all plans was 5.875% as of December 31, 2025, with a 100 basis point decrease potentially reducing forecasted 2026 income by approximately $6 million [230][231] - The U.K. pension plan's expected long-term rate of return was 7.8% at December 31, 2025, with a 100 basis point change affecting forecasted income by approximately $2 million [236][238] Risk Management - The company is exposed to foreign currency risks with primary exposures including the Euro, British Pound, and Japanese Yen, and had no outstanding forward contracts as of December 31, 2025 [267] - The company utilizes various raw materials, and changes in their costs due to market conditions could negatively impact operating profit [268] - The company manages market risks through regular operating and financing methods, including derivative financial instruments [263]

Core Insights - The Petroleum Additives segment experienced a 6% decline in Q4 shipments due to broader market softness and a strategic exit from low-margin businesses to protect profitability [1] - Operating profit in the core additives segment was negatively impacted by higher unit costs as the company reduced production volumes to optimize inventory levels [1] - The Specialty Materials segment showed significant growth, driven by increased demand at AMPAC and the acquisition of Calca Solutions on October 1, 2025 [1] - Despite a decline in 2025 results compared to a record-breaking 2024, the business remains resilient amid ongoing inflation and tariff impacts [1] - The company has allocated approximately $1,000,000,000 to the Specialty Materials segment to develop a high-technology growth engine alongside its legacy additives business [1] - A higher effective tax rate in 2025 was a primary factor contributing to the year-over-year decline in net income and earnings per share [1]

Financial Performance - Income before income tax expense for Q4 2025 was $113.2 million, down from $134.2 million in Q4 2024[4] - Net income for Q4 2025 was $81.3 million, or $8.65 per share, compared to $110.7 million, or $11.56 per share, in Q4 2024[4] - Net income for Q4 2025 was $81,285, a decrease of 26.6% from $110,739 in Q4 2024; total net income for 2025 was $418,747, down 9.4% from $462,413 in 2024[23] - Earnings per share for Q4 2025 were $8.65, down from $11.56 in Q4 2024; total earnings per share for 2025 were $44.44, compared to $48.22 in 2024[23] Sales Performance - Petroleum additives sales for Q4 2025 were $585.1 million, a decrease of 6.6% from $626.1 million in Q4 2024[5] - Full year 2025 petroleum additives sales totaled $2.5 billion, down from $2.6 billion in 2024, with a 4.9% decline in shipments[6] - Specialty materials sales for Q4 2025 increased to $48.5 million from $27.1 million in Q4 2024, driven by increased volumes and acquisitions[7] - Full year 2025 specialty materials sales reached $182.5 million, up from $141.2 million in 2024, with operating profit rising to $47 million from $17.5 million[8] - Net sales for Q4 2025 were $635,403, a decrease of 2.0% from $654,647 in Q4 2024; total net sales for 2025 were $2,725,169, down 2.2% from $2,786,558 in 2024[23] Profitability - Gross profit for Q4 2025 was $190,779, representing a gross margin of 30.0%, compared to $207,686 and a margin of 31.7% in Q4 2024; total gross profit for 2025 was $857,400, down 3.3% from $886,346 in 2024[23] - Operating profit for Q4 2025 was $110,028, a decline of 17.1% from $132,761 in Q4 2024; total operating profit for 2025 was $543,725, down 7.8% from $590,036 in 2024[23] Cash Flow and Investments - The company generated strong operating cash flows, paying dividends of $105.9 million and repurchasing $77.2 million in common stock in 2025[11] - The company is committed to investing approximately $1 billion in the specialty materials segment to enhance capacity and efficiency[10] - Capital expenditures for 2025 were $77,637, up from $57,319 in 2024; acquisition of businesses net of cash acquired was $213,447 in 2025, significantly lower than $681,479 in 2024[25] Debt and Assets - The net debt to EBITDA ratio improved to 1.1 as of December 31, 2025, after reducing long-term debt by $87.9 million[11] - Total assets increased to $3,492,465 in 2025, up 11.6% from $3,129,541 in 2024[24] - Total liabilities rose to $1,714,222 in 2025, an increase of 2.8% from $1,667,958 in 2024[24] - Net debt decreased to $805,793 in 2025 from $893,805 in 2024, with a net debt to EBITDA ratio of 1.1 compared to 1.2 in 2024[27] Dividends - Cash dividends declared per share increased to $3.00 in Q4 2025 from $2.50 in Q4 2024; total dividends paid for 2025 were $105,931, compared to $95,902 in 2024[23] Future Outlook - The company plans to expand production in the specialty materials segment, expecting increased capacity to come online by the end of 2026[12]

Core Viewpoint - NewMarket Corporation reported a decline in net income for both the fourth quarter and full year of 2025, primarily due to a higher effective income tax rate and market softness in the petroleum additives segment [1][2]. Financial Performance - For the fourth quarter of 2025, net income was $81.3 million, or $8.65 per share, down from $110.7 million, or $11.56 per share in the same period of 2024 [1][3]. - Full year 2025 net income was $418.7 million, or $44.44 per share, compared to $462.4 million, or $48.22 per share in 2024 [1][3]. - Income before income tax expense for the fourth quarter was $113.2 million, compared to $134.2 million in 2024, and for the full year, it was $560.6 million, down from $584.1 million in 2024 [1][3]. Segment Performance - Petroleum additives sales for Q4 2025 were $585.1 million, down from $626.1 million in Q4 2024, with operating profit decreasing to $106.8 million from $135.7 million [1][3]. - Full year petroleum additives sales were $2.5 billion, down from $2.6 billion in 2024, with operating profit at $520.1 million compared to $591.9 million in 2024 [1][3]. - Specialty materials sales for Q4 2025 increased to $48.5 million from $27.1 million in Q4 2024, with operating profit rising to $7.3 million from $1.5 million [1][3]. - Full year specialty materials sales were $182.5 million, up from $141.2 million in 2024, with operating profit increasing to $47.0 million from $17.5 million [1][3]. Cash Flow and Investments - The company generated strong operating cash flows in 2025, paying dividends of $105.9 million and repurchasing common stock for $77.2 million [1][3]. - Capital expenditures for 2025 were $77.6 million, and long-term debt was reduced by $87.9 million, resulting in a Net Debt to EBITDA ratio of 1.1 as of December 31, 2025 [1][3]. Future Outlook - The company anticipates continued solid results from the petroleum additives segment despite current market challenges and plans to invest in technology and expand production capacity in the specialty materials segment [1][2]. - The company is monitoring the macroeconomic environment, particularly international trade relations and tariffs, to assess potential impacts on operations [1][2].