NewMarket Reports Strong Q1 Additives Performance From Investing.com

NewMarket Corporation (NYSE: NEU) reported a strong first quarter of 2024, with net income rising to $108 million, or $11.23 per share, compared to $98 million, or $10.09 per share, in the same quarter last year. The company’s petroleum additives segment performed strongly, with shipments increasing 5%, contributing to operating income of $151 million.

Despite the slight decline in sales, segment profitability was supported by lower raw material and operating expenses. NewMarket also completed the acquisition of American Pacific Corporation (AMPAC), which is now reflected in its new specialty materials segment.

However, this addition resulted in an operating loss of $5 million for the quarter due to the sale of acquired inventory at fair market value. The Company remains optimistic about the integration of AMPAC and the continued growth of its petroleum additives business.

Key Findings

• Net income increased to $108 million, or $11.23 per share, in the first quarter of 2024.
• Sales of petroleum additives amounted to $677 million with shipments growing by 5%.
• Operating profit from sales of petroleum additives increased to $151 million due to cost management.
• The Specialty Materials segment reported an operating loss of $5 million.
• The AMPAC acquisition cost approximately $700 million.
• NewMarket introduced a new $900 million revolving credit facility and a $200 million unsecured term loan facility.
• The Board of Directors approved an increase in the quarterly dividend rate by 11%.

Company prospects

• Expect continued growth in the petroleum additives segment.
• Expect AMPAC’s full-year results to be in line with pre-acquisition expectations.
• Focus on integrating AMPAC into NewMarket and maintaining long-term customer relationships.

Bearish moments

• The Specialty Materials segment experienced an initial operating loss due to inventory sales.
• Sales of petroleum additives decreased slightly compared to the same period last year.

Bullish moments

• For the sixth consecutive quarter, petroleum additives operating income exceeded $100 million.
• Successful cost control measures produce positive results.
• Strong cash flow from operations to fund capital expenditures and pay dividends.

Promakhov

• Declining lubricant additive supplies in Latin America and fuel additive supplies in North America.

Questions and answers

• The company did not host a Q&A session but is available for questions via email or phone.

NewMarket Corporation’s first quarter of 2024 set a positive tone for the year, with the petroleum additives segment leading the way. The strategic acquisition of AMPAC, while initially impacting the specialty materials segment, is expected to support NewMarket’s growth over the long term. With a new line of credit and a smart approach to managing its portfolio, NewMarket is poised to continue its focus on innovation, customer service and operational efficiency.

InvestingAbout Insights

NewMarket Corporation (NYSE: NEU) demonstrated resilience and strategic growth in the first quarter of 2024, as evidenced by increased net income and strong performance in its Petroleum Additives segment. To better understand a company’s financial health and investment potential, let’s look at some key metrics and InvestingPro tips.

InvestingPro data:

• The company has a market capitalization of $5.14 billion, reflecting its significant size in the specialty chemicals industry.

• The AP/E ratio of 12.87 suggests the stock may be undervalued when considering its earnings, which is also highlighted by the low PEG ratio of 0.43, indicating growth potential relative to earnings.

• Despite a slight decline in revenue growth of -4.02% over the trailing twelve months to the first quarter of 2024, the company’s gross margin remains strong at 29.37%, which could indicate effective cost control measures.

InvestingPro Tips:

• NewMarket has a remarkable track record of raising its dividend for 5 consecutive years, demonstrating its commitment to returning profits to shareholders. This is consistent with the recent 11% increase in the quarterly dividend rate mentioned in the article.

• The stock is currently in oversold territory, according to RSI data, which could be of interest to value investors looking for potential entry points.

For investors wanting to dive deeper into NewMarket Corporation’s financial performance and future prospects, additional InvestingPro tips are available at https://www.investing.com/pro/NEU. These tips can provide additional information and help you make an informed investment decision. And don’t forget to use the coupon code PRONEWS24 to receive an additional 10% discount on annual or biennial Pro and Pro+ subscriptions. There are 11 more InvestingPro tips listed for NewMarket Corporation that can provide a comprehensive analysis of a company’s performance and prospects.

Full transcript – NewMarket Corp (NEU), Q1 2024:

Operator: Hello. Welcome to NewMarket Corporation’s first quarter 2024 earnings call and webcast. At this time, all participants are switched to listening-only mode. [Operator Instructions] Please note that the conference is being recorded. I now turn the call over to your host, Bill Skrobach, Vice President and Chief Financial Officer of NewMarket Corporations. Bill, you can start.

Bill Skrobacz: Thank you, Paul, and thank you to everyone who joined me this afternoon. Please be advised that some statements made during this call may be forward-looking statements. Relevant factors that could cause actual results to differ materially from forward-looking statements are contained in our statement of operations and in our SEC filings, including our most recent Form 10-K. During this call, I will also discuss the non-GAAP financial measures included in our income statement. The income statement, which can be found on our website, includes a reconciliation of non-GAAP financial measures to comparable GAAP financial measures. This morning we asked a 10 question question. It contains significantly more detail about our company’s activities and results. Please take a moment to review it. I’ll be referring to the numbers that were included in the earnings report last night. Net income for the first quarter of 2024 was $108 million, or $11.23 per share, compared with net income or $98 million, or $10.09 per share, for the first quarter last year. Sales of petroleum additives in the first three months of 2024 were $677 million, compared to $700 million in the same period in 2023. Petroleum additives operating income for the first quarter was $151 million, compared to $132 million for the first quarter of 2023. The increase was primarily due to lower raw material and operating costs, which was partially offset by lower selling prices and product mix. Shipments increased 5% quarter-on-quarter with shipments of both lubricant additives and fuel additives increasing in all regions except Latin America, which reported a decrease in lubricant additives shipments in North America, which reported a decrease in lubricant additives shipments. fuel. We are pleased with the strong performance of our petroleum additives business in the first quarter of 2024. This is the sixth consecutive quarter in which operating income exceeded $100 million. We see evidence that our efforts to control operating expenses are succeeding. Throughout 2024, priorities will continue to be managing our operating costs, inventory levels and the profitability of our portfolio while continuing to invest in technology. We completed the acquisition of American Pacific Corporation, or AMPAC, on January 16, 2024 for approximately $700 million. Our first quarter results include 76 days of AMPAC operations. The financial results of our AMPAC business are included in our new specialty materials segment. Specialty materials sales in the first quarter of 2024 were $17 million and we reported an operating loss of $5 million. The loss primarily resulted from the sale of our purchased AMPAC finished goods inventory. These inventories were recorded at fair market value at the date of acquisition and were sold during the first quarter without a profit. We may see material changes in our quarterly AMPAC results on an ongoing basis due to the nature of the business, and we expect full-year results to be consistent with our pre-acquisition expectations. We generated robust cash flows from operating activities during the quarter. We funded capital expenditures of $14 million and paid dividends of $24 million. In February, our Board of Directors approved an 11% increase in the quarterly dividend rate. The acquisition of AMPAC was financed with cash on hand and borrowings of approximately $690 million under its then-existing revolving credit facility. On January 22, 2024, we replaced this facility with a new $900 million revolving credit facility and entered into a $200 million unsecured term loan facility. As of March 31, 2024, our net debt to EBITDA ratio was 1.9, which is within our target operating range of 1.5 to 2.0. We expect continued growth in the petroleum product additives segment. We look forward to the successful integration of AMPAC into the NewMarket family of companies. As a team, we will remain focused on maintaining long-term relationships with our customers, developing new products and technologies to meet their needs both now and in the future, and providing the highest quality customer service. We believe that our business fundamentals, long-term vision, safety culture, customer-centric solutions, technology-based product offerings and world-class supply chain capabilities will continue to benefit all of our stakeholders. Thank you for joining me on today’s call. Paul, who concludes our scheduled comments. We are available for questions by email or phone. So please don’t hesitate to contact me directly. Thanks again everyone and we’ll talk to you next quarter.

Operator: Thank you. This concludes today’s conference. During this time, you can disconnect your lines. Thank you for your participation.

End of questions and answers:

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