- Second Quarter Net Income of $74.2 Million and Earnings Per
Share of $6.63
- Petroleum Additives Second Quarter Operating Profit of
$103.0 Million
NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive
Officer, Thomas E. Gottwald, released the following earnings report
of the Company’s operations for the second quarter and first half
of 2019.
Net income for the second quarter of 2019 was $74.2 million,
compared to net income of $52.9 million for the second quarter of
2018. Earnings per share increased to $6.63 per share from $4.53
per share in the prior year period. For the first half of 2019, net
income was $136.4 million, or $12.20 per share, compared to net
income of $113.5 million, or $9.67 per share, for the first half of
last year.
Sales for the petroleum additives segment for the second quarter
of 2019 were $560.8 million, down from $596.2 million versus the
second quarter of 2018. This decrease was due mainly to lower
shipments partially offset by increased selling prices. Petroleum
additives operating profit for the second quarter of 2019 was
$103.0 million, compared to $71.5 million for the same period last
year. The increase was due to changes in selling prices, and lower
raw material and conversion costs, partially offset by lower
shipments. Shipments were down 8.4% from the same period last year,
mainly due to decreases in lubricant additives shipments in Europe
and Latin America, and fuel additives shipments in Europe, North
America and Latin America.
Petroleum additives sales for the first half of the year were
$1.1 billion, compared to sales in the first half of last year of
$1.2 billion. Similar to the quarter, this decrease was due mainly
to lower shipments partially offset by increased selling prices.
Petroleum additives operating profit for the first half of the year
was $190.9 million compared to $155.7 million for the first half of
2018. The drivers for this increase were similar to those affecting
the quarterly comparison of operating profit. Shipments decreased
10.4% between periods, with decreases in both lubricant additives
and fuel additives shipments across all regions except Asia
Pacific, which reported an increase in fuel additives shipments.
Shipments have been lower in recent quarters due to decisions not
to renew certain low margin business, as well as softening global
demand for petroleum additives products, although we have begun to
see evidence that this trend is starting to reverse.
While we are encouraged by our strong operating results for the
second quarter and first half of 2019 compared to the same periods
last year, it is important we acknowledge the challenging economic
environment that drove disappointing results in the prior-year
periods. Petroleum additives operating margin for the rolling four
quarters ended June 30, 2019 was 15.8% which is at the lower end of
the historical ranges our shareholders have come to expect.
During the first half of 2019, we funded capital expenditures of
$23.2 million, paid dividends of $39.2 million, and repaid $87.3
million of borrowings on our revolving credit facility.
We have begun to see some turnaround from the challenging
economic environment we have faced over the past two years, which
was marked by sustained increases in raw material prices and
softening global demand. Until we see stability in this
environment, margin improvement will continue to be a top priority.
We have continued to manage our business to satisfy customer needs
while generating solid operating results, making decisions we
believe will promote the greatest long-term value for our
shareholders, customers and employees. We continue to believe that
the fundamentals of our industry as a whole remain unchanged, with
the petroleum additives market growing at 1% to 2% annually for the
foreseeable future. We continue to believe that we will exceed that
growth rate over the long term.
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 measure EBITDA
and the related calculation 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 and amortization. The Company believes
that even though this item is not required by or presented in
accordance with United States generally accepted accounting
principles (GAAP), this additional measure enhances understanding
of the Company’s performance and period to period comparability.
The Company believes that this item should not be considered an
alternative to net income determined under GAAP.
As a reminder, a conference call and Internet webcast is
scheduled for 3:00 p.m. EDT on Thursday, August 1, 2019, to review
second quarter 2019 financial results. You can access the
conference call live by dialing 1-844-602-0380 (domestic) or
1-862-298-0970 (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 August 8, 2019 at 3:00 p.m. EDT by dialing
1-877-481-4010 (domestic) or 1-919-882-2331 (international). The
replay ID number is 50411. The call will also be broadcast via the
Internet and can be accessed through the Company’s website at
www.NewMarket.com or www.investornetwork.com/event/presentation/50411.
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 or sharp raw material price
increases; competition from other manufacturers; the gain or loss
of significant customers; current and future governmental
regulations; failure to attract and retain a highly-qualified
workforce; the occurrence or threat of extraordinary events,
including natural disasters and terrorist attacks; risks related to
operating outside of the United States; the impact of substantial
indebtedness on our operational and financial flexibility; the
impact of fluctuations in foreign exchange rates; an information
technology system failure or security breach; resolution of
environmental liabilities or legal proceedings; political,
economic, and regulatory factors concerning our products;
limitation of our insurance coverage; our inability to realize
expected benefits from investment in our infrastructure or from
recent or future acquisitions, or our inability to successfully
integrate recent or 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 2018 Annual Report on Form 10-K,
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)
Second Quarter Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Revenue:
Petroleum additives
$
560,824
$
596,202
$
1,093,503
$
1,183,110
All other
2,593
2,750
6,530
5,087
Total
$
563,417
$
598,952
$
1,100,033
$
1,188,197
Segment operating profit:
Petroleum additives
$
102,992
$
71,530
$
190,855
$
155,670
All other
(342
)
406
169
329
Segment operating profit
102,650
71,936
191,024
155,999
Corporate unallocated expense
(4,275
)
(4,967
)
(9,369
)
(10,631
)
Interest and financing expenses
(7,741
)
(5,565
)
(15,753
)
(10,729
)
Other income (expense), net
6,057
8,161
11,597
16,237
Income before income tax
expense
$
96,691
$
69,565
$
177,499
$
150,876
Net income
$
74,174
$
52,885
$
136,379
$
113,450
Earnings per share - basic and
diluted
$
6.63
$
4.53
$
12.20
$
9.67
NEWMARKET CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
INCOME
(In thousands, except per-share amounts,
unaudited)
Second Quarter Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net sales
$
563,417
$
598,952
$
1,100,033
$
1,188,197
Cost of goods sold
392,584
453,093
776,331
885,555
Gross profit
170,833
145,859
323,702
302,642
Selling, general, and administrative
expenses
35,021
41,999
71,794
82,912
Research, development, and testing
expenses
37,137
36,729
70,361
71,024
Operating profit
98,675
67,131
181,547
148,706
Interest and financing expenses, net
7,741
5,565
15,753
10,729
Other income (expense), net
5,757
7,999
11,705
12,899
Income before income tax
expense
96,691
69,565
177,499
150,876
Income tax expense
22,517
16,680
41,120
37,426
Net income
$
74,174
$
52,885
$
136,379
$
113,450
Earnings per share - basic and
diluted
$
6.63
$
4.53
$
12.20
$
9.67
Cash dividends declared per
share
$
1.75
$
1.75
$
3.50
$
3.50
NEWMARKET CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts,
unaudited)
June 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
73,219
$
73,040
Trade and other accounts receivable, less
allowance for doubtful accounts
349,210
314,860
Inventories
376,481
396,341
Prepaid expenses and other current
assets
30,524
29,179
Total current assets
829,434
813,420
Property, plant, and equipment, net
629,724
644,138
Intangibles (net of amortization) and
goodwill
133,945
136,039
Prepaid pension cost
94,853
88,705
Operating lease right-of-use assets
55,739
0
Deferred income taxes
5,039
5,094
Deferred charges and other assets
18,251
9,878
Total assets
$
1,766,985
$
1,697,274
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
164,956
$
151,631
Accrued expenses
70,016
91,202
Dividends payable
17,884
17,923
Income taxes payable
11,481
6,431
Operating lease liabilities
13,537
0
Other current liabilities
5,605
4,114
Total current liabilities
283,479
271,301
Long-term debt
678,803
770,999
Operating lease liabilities -
noncurrent
42,157
0
Other noncurrent liabilities
173,370
165,067
Total liabilities
1,177,809
1,207,367
Shareholders' equity:
Common stock and paid-in capital (without
par value; issued and outstanding shares - 11,188,126 at June 30,
2019 and 11,184,482 at December 31, 2018)
949
0
Accumulated other comprehensive loss
(180,263
)
(181,316
)
Retained earnings
768,490
671,223
Total shareholders' equity
589,176
489,907
Total liabilities and shareholders'
equity
$
1,766,985
$
1,697,274
NEWMARKET CORPORATION AND
SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW
DATA
(In thousands, unaudited)
Six Months Ended June
30,
2019
2018
Net income
$
136,379
$
113,450
Depreciation and amortization
43,716
35,220
Cash pension and postretirement
contributions
(4,869
)
(13,756
)
Working capital changes
(27,079
)
(74,506
)
Deferred income tax expense (benefit)
4,154
(813
)
Capital expenditures
(23,219
)
(42,601
)
Net (repayments) borrowings under
revolving credit facility
(87,296
)
157,000
Repurchases of common stock
0
(123,316
)
Dividends paid
(39,158
)
(40,821
)
All other
(2,449
)
15,766
Increase in cash and cash equivalents
$
179
$
25,623
NEWMARKET CORPORATION AND
SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
Second Quarter Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net Income
$
74,174
$
52,885
$
136,379
$
113,450
Add:
Interest and financing expenses, net
7,741
5,565
15,753
10,729
Income tax expense
22,517
16,680
41,120
37,426
Depreciation and amortization
21,492
17,270
43,146
34,649
EBITDA
$
125,924
$
92,400
$
236,398
$
196,254
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190731006051/en/
FOR INVESTOR INFORMATION CONTACT: Brian D. Paliotti
Investor Relations Phone: 804.788.5555 Fax:
804.788.5688 Email: investorrelations@newmarket.com
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