NewMarket (US:NEU)2026-02-12 17:13Financial 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]