NewMarket (US:NEU)2019-04-25 22:13Financial Data and Key Metrics Changes - Net income for Q1 2019 was $62.2 million or $5.57 per share, an increase of 2.7% in net income and 8.4% in EPS compared to Q1 2018 [5] - Petroleum additives net sales decreased to $532.7 million, down 9.2% from $586.9 million in the same period last year, attributed to a 12.5% decrease in shipments [5][6] - Operating profit for petroleum additives was $87.9 million, a 4.4% increase from $84.1 million in Q1 2018, driven by changes in selling prices and raw materials [6] - The effective income tax rate decreased to 23% from 25.5% year-over-year [7] Business Line Data and Key Metrics Changes - Shipments of lubricant and fuel additives decreased across all regions except for Asia Pacific, which saw an increase in fuel additive shipments [6] - The operating margin for the rolling four quarters, including Q1 2019, was 14.1%, with a focus on improving margins throughout 2019 [6][25] Market Data and Key Metrics Changes - The company experienced mid- to high single-digit declines in revenues in the United States and China, while EMEA and other foreign markets saw low teens declines [17] - Approximately 25% of the shipment decline can be attributed to identifiable one-off issues, particularly in regions with larger declines [18][20] Company Strategy and Development Direction - The company plans to continue focusing on margin improvement and expects capital expenditures in the range of $75 million to $85 million for 2019, consistent with 2018 levels [8][9] - Investments have been made in people, technology, technical centers, and production capacities to enhance capabilities and shareholder value [8][9] Management's Comments on Operating Environment and Future Outlook - Management views the current softness in demand as a short-term issue, with confidence in a recovery based on stable industry demand [12][13] - The company does not anticipate significant inventory trimming by customers, as demand is not highly sensitive to small economic changes [15] Other Important Information - Higher conversion costs were noted, attributed to general manufacturing costs across the network [28][29] - The tax rate for 2019 is expected to remain in the 23% to 24% range, similar to the first quarter [30] Q&A Session Summary Question: What is the reason for the double-digit declines in volumes in a growing market? - Management acknowledged the unusual nature of the declines and attributed it to short-term issues, with no significant loss of business [12][13] Question: What gives confidence in a reversal of the current trend? - Confidence stems from the stable nature of industry demand, which does not typically vary greatly year-to-year [13] Question: Can you provide details on the geographic revenue declines? - Larger declines in certain regions were attributed to identifiable one-off issues, with 25% of the change in shipments linked to these factors [18][20] Question: What is driving the positive performance in Asia Pacific? - The positive performance is attributed to a combination of economic growth and increased transportation modes driving fuel consumption [22] Question: How should margins be expected to progress sequentially? - Management is focused on margin recovery and aims to return to mid- to high-teens margins [25] Question: What are the factors behind higher conversion costs? - Higher conversion costs are due to a combination of factors, including general increases in production costs across the network [29] Question: What is the expected tax rate for 2019? - The tax rate is expected to be in the 23% to 24% range for the full year, consistent with Q1 [30]