RICHMOND, Va.--(BUSINESS WIRE)--NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company's operations for the third quarter and first nine months of 2023.
Net income for the third quarter of 2023 was $111.2 million, compared to net income of $63.2 million for the third quarter of 2022. Third quarter 2023 earnings per share increased to $11.60, up from $6.32 per share in the same period last year. For the first nine months of 2023, net income was $308.5 million, or $32.05 per share, compared to net income of $189.0 million, or $18.60 per share, for the first nine months of 2022.
Petroleum additives sales for the third quarter of 2023 were $663.7 million, compared to $692.7 million for the same period in 2022. Petroleum additives operating profit for the third quarter of 2023 was $139.8 million, compared to $83.0 million for the third quarter of 2022. The increase in operating profit was mainly due to selling prices, including favorable mix, as well as lower raw material costs, partially offset by lower shipments and higher operating costs. Shipments were down 7.7% between quarterly periods, with decreases in both lubricant additives and fuel additives shipments. When comparing the third quarter of 2023 to the same period in 2022, lubricant additives shipments were down in all regions except North America, while all regions except Europe reported decreases in fuel additives shipments.
Sales for the petroleum additives segment for the first nine months of 2023 were $2.0 billion, compared to $2.1 billion in 2022. Petroleum additives operating profit for the first nine months of 2023 was $404.0 million, compared to $261.1 million for the same period in 2022. The increase in operating profit was a result of selling prices, including favorable mix, partially offset by lower shipments and higher operating costs. Shipments decreased 13.5% when comparing the first nine months of 2023 to the same period in 2022, with decreases in both lubricant additives and fuel additives shipments in all regions except Europe, which reported an increase in fuel additives shipments.
Our shipments have been impacted the last several quarters by the overall global economic weakness and inventory rationalization that is affecting the chemical industry. We continue to be challenged by the ongoing inflationary environment impacting us, including our raw material and operating costs. During this period, we have remained focused on controlling operating costs, continuing our investment in technology, and managing our inventory levels, as well as our customer portfolio.
Overall, we are very pleased with the strong performance of our petroleum additives business during the first nine months of 2023. We continue to operate with low leverage and generated solid cash flows during this period. Our working capital improved by $71.9 million, we paid dividends of $63.5 million, and we made payments of $225.0 million on our revolving credit facility. In addition, we repurchased 119,075 shares of our common stock for $42.9 million. Our Net Debt to EBITDA ratio decreased to 1.1 as of September 30, 2023, a significant improvement over the December 31, 2022 ratio of 2.0.
We continue to make decisions to promote long-term value for our shareholders and customers, and we remain focused on our long-term objectives. We believe the fundamentals of how we run our business - a long-term view, safety-first culture, customer-focused solutions, technology-driven product offerings, and world-class supply chain capability - will continue to be beneficial for all our stakeholders.
Sincerely,
Thomas E. Gottwald
The petroleum additives segment consists of the North America (the United States and Canada), Latin America (Mexico, Central America, and South America), Asia Pacific, and Europe/Middle East/Africa/India (Europe or EMEAI) regions.
The Company has disclosed the non-GAAP financial measures EBITDA, Net Debt, and Net Debt to EBITDA, as well as the related calculations in the schedules included with this earnings release. EBITDA is defined as income from continuing operations before the deduction of interest and financing expenses, income taxes, depreciation (on property, plant and equipment) and amortization (on intangibles and lease right-of-use assets). Net Debt is defined as long-term debt, including current maturities, less cash and cash equivalents and marketable securities. Net Debt to EBITDA is defined as Net Debt divided by EBITDA for the rolling four quarters ended as of the specified date. The Company believes that even though these items are not required by or presented in accordance with United States generally accepted accounting principles (GAAP), these additional measures enhance understanding of the Company's performance and period to period comparability. The Company believes that these items should not be considered an alternative to our results determined under GAAP.
As a reminder, a conference call and Internet webcast is scheduled for 3:00 p.m. EDT on Thursday, October 26, 2023, to review third quarter 2023 financial results. You can access the conference call live by dialing 1-888-506-0062 (domestic) or 1-973-528-0011 (international) and requesting the NewMarket conference call. To avoid delays, callers should dial in five minutes early. A teleconference replay of the call will be available until November 2, 2023, at 3:00 p.m. EDT by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay passcode number is 49169. The call will also be broadcast via the Internet and can be accessed through the Company's website at www.NewMarket.com or www.webcaster4.com/Webcast/Page/2001/49169. A webcast replay will be available for 30 days.
NewMarket Corporation, through its subsidiaries Afton Chemical Corporation and Ethyl Corporation, develops, manufactures, blends, and delivers chemical additives that enhance the performance of petroleum products. From custom-formulated additive packages to market-general additives, the NewMarket family of companies provides the world with the technology to make engines run smoother, machines last longer, and fuels burn cleaner.
Some of the information contained in this press release constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although NewMarket's management believes its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from expectations.
Factors that could cause actual results to differ materially from expectations include, but are not limited to, the availability of raw materials and distribution systems; disruptions at production facilities, including single-sourced facilities; hazards common to chemical businesses; the ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; sudden, sharp, or prolonged raw material price increases; competition from other manufacturers; current and future governmental regulations; the loss of significant customers; failure to attract and retain a highly-qualified workforce; an information technology system failure or security breach; the occurrence or threat of extraordinary events, including natural disasters, terrorist attacks, wars and health-related epidemics such as the COVID-19 pandemic; risks related to operating outside of the United States; political, economic, and regulatory factors concerning our products; the impact of substantial indebtedness on our operational and financial flexibility; the impact of fluctuations in foreign exchange rates; resolution of environmental liabilities or legal proceedings; limitation of our insurance coverage; our inability to realize expected benefits from investment in our infrastructure or from future acquisitions, or our inability to successfully integrate future acquisitions into our business; the underperformance of our pension assets resulting in additional cash contributions to our pension plans; and other factors detailed from time to time in the reports that NewMarket files with the Securities and Exchange Commission, including the risk factors in Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2022, which is available to shareholders upon request.
You should keep in mind that any forward-looking statement made by NewMarket in the foregoing discussion speaks only as of the date on which such forward-looking statement is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. We have no duty to, and do not intend to, update or revise the forward-looking statements in this discussion after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that the events described in any forward-looking statement made in this discussion, or elsewhere, might not occur.
NEWMARKET CORPORATION AND SUBSIDIARIES | ||||||||||||||||
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION | ||||||||||||||||
(In thousands, except per-share amounts, unaudited) | ||||||||||||||||
Third Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net Sales: | ||||||||||||||||
Petroleum additives | $ | 663,719 | $ | 692,693 | $ | 2,047,679 | $ | 2,074,018 | ||||||||
All other | 3,431 | 3,356 | 7,390 | 8,222 | ||||||||||||
Total | $ | 667,150 | $ | 696,049 | $ | 2,055,069 | $ | 2,082,240 | ||||||||
Segment operating profit: | ||||||||||||||||
Petroleum additives | $ | 139,820 | $ | 83,023 | $ | 404,026 | $ | 261,130 | ||||||||
All other | (764 | ) | (41 | ) | (2,761 | ) | (205 | ) | ||||||||
Segment operating profit | 139,056 | 82,982 | 401,265 | 260,925 | ||||||||||||
Corporate unallocated expense | (6,389 | ) | (4,167 | ) | (19,690 | ) | (15,389 | ) | ||||||||
Interest and financing expenses | (9,221 | ) | (8,369 | ) | (30,249 | ) | (24,859 | ) | ||||||||
Loss on early extinguishment of debt | 0 | 0 | 0 | (7,545 | ) | |||||||||||
Other income (expense), net | 11,036 | 9,883 | 33,014 | 26,312 | ||||||||||||
Income before income tax expense | $ | 134,482 | $ | 80,329 | $ | 384,340 | $ | 239,444 | ||||||||
Net income | $ | 111,247 | $ | 63,226 | $ | 308,454 | $ | 189,016 | ||||||||
Earnings per share - basic and diluted | $ | 11.60 | $ | 6.32 | $ | 32.05 | $ | 18.60 | ||||||||
NEWMARKET CORPORATION AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
(In thousands, except per-share amounts, unaudited) | ||||||||||||
Third Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
Net sales | $ | 667,150 | $ | 696,049 | $ | 2,055,069 | $ | 2,082,240 | ||||
Cost of goods sold | 465,445 | 547,742 | 1,459,682 | 1,621,294 | ||||||||
Gross profit | 201,705 | 148,307 | 595,387 | 460,946 | ||||||||
Selling, general, and administrative expenses | 37,386 | 35,192 | 114,671 | 109,303 | ||||||||
Research, development, and testing expenses | 31,894 | 34,388 | 99,008 | 106,035 | ||||||||
Operating profit | 132,425 | 78,727 | 381,708 | 245,608 | ||||||||
Interest and financing expenses, net | 9,221 | 8,369 | 30,249 | 24,859 | ||||||||
Loss on early extinguishment of debt | 0 | 0 | 0 | 7,545 | ||||||||
Other income (expense), net | 11,278 | 9,971 | 32,881 | 26,240 | ||||||||
Income before income tax expense | 134,482 | 80,329 | 384,340 | 239,444 | ||||||||
Income tax expense | 23,235 | 17,103 | 75,886 | 50,428 | ||||||||
Net income | $ | 111,247 | $ | 63,226 | $ | 308,454 | $ | 189,016 | ||||
Earnings per share - basic and diluted | $ | 11.60 | $ | 6.32 | $ | 32.05 | $ | 18.60 | ||||
Cash dividends declared per share | $ | 2.25 | $ | 2.10 | $ | 6.60 | $ | 6.30 | ||||
NEWMARKET CORPORATION AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands, except share amounts, unaudited) | ||||||||
September 30,
| December 31,
| |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 102,560 | $ | 68,712 | ||||
Trade and other accounts receivable, less allowance for credit losses | 427,764 | 453,692 | ||||||
Inventories | 503,411 | 631,383 | ||||||
Prepaid expenses and other current assets | 31,859 | 38,338 | ||||||
Total current assets | 1,065,594 | 1,192,125 | ||||||
Property, plant, and equipment, net | 649,968 | 659,998 | ||||||
Intangibles (net of amortization) and goodwill | 124,620 | 126,069 | ||||||
Prepaid pension cost | 323,055 | 302,584 | ||||||
Operating lease right-of-use assets, net | 64,272 | 62,417 | ||||||
Deferred charges and other assets | 62,886 | 63,625 | ||||||
Total assets | $ | 2,290,395 | $ | 2,406,818 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 215,108 | $ | 273,289 | ||||
Accrued expenses | 72,301 | 89,508 | ||||||
Dividends payable | 18,894 | 17,850 | ||||||
Income taxes payable | 6,058 | 16,109 | ||||||
Operating lease liabilities | 13,963 | 15,569 | ||||||
Other current liabilities | 5,880 | 11,562 | ||||||
Total current liabilities | 332,204 | 423,887 | ||||||
Long-term debt | 779,401 | 1,003,737 | ||||||
Operating lease liabilities - noncurrent | 49,093 | 46,968 | ||||||
Other noncurrent liabilities | 157,754 | 169,819 | ||||||
Total liabilities | 1,318,452 | 1,644,411 | ||||||
Shareholders' equity: | ||||||||
Common stock and paid-in capital (with no par value; issued and outstanding shares - 9,590,151 at September 30, 2023 and 9,702,147 at December 31, 2022) | 1,557 | 0 | ||||||
Accumulated other comprehensive loss | (66,782 | ) | (71,995 | ) | ||||
Retained earnings | 1,037,168 | 834,402 | ||||||
Total shareholders' equity | 971,943 | 762,407 | ||||||
Total liabilities and shareholders' equity | $ | 2,290,395 | $ | 2,406,818 | ||||
NEWMARKET CORPORATION AND SUBSIDIARIES | ||||||||
SELECTED CONSOLIDATED CASH FLOW DATA | ||||||||
(In thousands, unaudited) | ||||||||
Nine Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
Net income | $ | 308,454 | $ | 189,016 | ||||
Depreciation and amortization | 57,665 | 62,160 | ||||||
Cash pension and postretirement contributions | (7,132 | ) | (7,111 | ) | ||||
Working capital changes | 71,900 | (198,637 | ) | |||||
Deferred income tax benefit | (16,336 | ) | (33,685 | ) | ||||
Capital expenditures | (34,793 | ) | (40,402 | ) | ||||
Net (repayments) borrowings under revolving credit facility | (225,000 | ) | 218,000 | |||||
Repurchases of common stock | (42,864 | ) | (150,754 | ) | ||||
Dividends paid | (63,457 | ) | (63,790 | ) | ||||
Proceeds from sales and maturities of marketable securities | 0 | 372,846 | ||||||
Redemption of 4.10% senior notes | 0 | (350,000 | ) | |||||
Loss on early extinguishment of debt | 0 | 7,545 | ||||||
Cash costs of 4.10% senior notes redemption | 0 | (7,099 | ) | |||||
Loss on marketable securities | 0 | 2,977 | ||||||
Purchases of marketable securities | 0 | (787 | ) | |||||
All other | (14,589 | ) | (11,611 | ) | ||||
Increase (decrease) in cash and cash equivalents | $ | 33,848 | $ | (11,332 | ) | |||
NEWMARKET CORPORATION AND SUBSIDIARIES | ||||||||||||
NON-GAAP FINANCIAL INFORMATION | ||||||||||||
(In thousands, unaudited) | ||||||||||||
Earnings Before Interest, Depreciation, and Amortization (EBITDA) | ||||||||||||
Third Quarter Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
Net Income | $ | 111,247 | $ | 63,226 | $ | 308,454 | $ | 189,016 | ||||
Add: | ||||||||||||
Interest and financing expenses, net | 9,221 | 8,369 | 30,249 | 24,859 | ||||||||
Income tax expense | 23,235 | 17,103 | 75,886 | 50,428 | ||||||||
Depreciation and amortization | 16,760 | 20,143 | 56,623 | 60,998 | ||||||||
EBITDA | $ | 160,463 | $ | 108,841 | $ | 471,212 | $ | 325,301 | ||||
Net Debt to EBITDA | ||||||||||||
September 30, | December 31, | |||||||||||
2023 | 2022 | |||||||||||
Long-term debt, including current maturities | $ | 779,401 | $ | 1,003,737 | ||||||||
Less: Cash and cash equivalents | 102,560 | 68,712 | ||||||||||
Net Debt | $ | 676,841 | $ | 935,025 | ||||||||
Rolling Four Quarters Ended | ||||||||||||
September 30, | December 31, | |||||||||||
2023 | 2022 | |||||||||||
Net Income | $ | 398,976 | $ | 279,538 | ||||||||
Add: | ||||||||||||
Interest and financing expenses, net | 40,592 | 35,202 | ||||||||||
Income tax expense | 93,654 | 68,196 | ||||||||||
Depreciation and amortization | 76,400 | 80,775 | ||||||||||
EBITDA-Rolling Four Quarters | $ | 609,622 | $ | 463,711 | ||||||||
Net Debt to EBITDA | 1.1 | 2.0 | ||||||||||
Contacts
William J. Skrobacz
Investor Relations
Phone: 804.788.5555
Fax: 804.788.5688
Email: investorrelations@newmarket.com
