NEU NewMarket Corporation

• Petroleum Additives Second Quarter Shipments Strong, Margins Compressed
• First Half Net Income of $121.7 Million and Earnings Per Share of $11.13
• Petroleum Additives First Half Operating Profit of $168.3 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 2021.

Net income for the second quarter of 2021 was $52.0 million, or $4.75 per share, compared to net income of $22.3 million, or $2.05 per share, for the second quarter of 2020. Results for the second quarter of 2020 were severely impacted by the COVID-19 pandemic and the resulting government restrictions on the movement of people, goods and services to combat the spread of the virus in its early stages. For the first half of 2021, net income was $121.7 million, or $11.13 per share, compared to $107.9 million or $9.78 per share, for the first half of last year.

Sales for the petroleum additives segment for the second quarter of 2021 were $586.6 million, up from $408.7 million in the second quarter of 2020. Petroleum additives operating profit for the second quarter of 2021 was $74.2 million, compared to $33.1 million for the same period last year. The increase was due to higher shipments, lower conversion costs and favorable changes in selling prices, partially offset by higher raw material costs. Shipments increased 41.1% between periods, driven by increases in all world regions in both lubricant additives and fuel additives. Petroleum additives operating margin for the second quarter of 2021 was 12.7%, significantly lower than our historical average.

Petroleum additives sales for the first half of the year were $1.2 billion compared to sales in the first half of last year of $966.1 million. Petroleum additives operating profit for the first half of the year was $168.3 million compared to $146.7 million for the first half of 2020. The increase was due to higher shipments and lower conversion costs, partially offset by higher raw material costs. Shipments increased 19.1% between periods, due to increases in lubricant additives shipments. Fuel additives shipments were relatively flat between periods.

We are encouraged by our petroleum additives operating results and the strong shipments for the first half of 2021, but disappointed with our operating margins. Our product shipments for the first half of 2021 are the highest since the first half of 2018. However, we are seeing downward pressure on our operating margins due mainly to the steady increase in raw material costs throughout the year. While our efforts have been focused on recovering these cost increases, we have been experiencing the lag between when price increases go into effect and when margins start to improve. Margin improvement will continue to be a priority until we see margins consistently within our historical ranges.

During the first half of 2021, we funded capital expenditures of $44.4 million, and paid dividends of $41.5 million. In March 2021, we issued $400 million 2.70% senior notes that are due in 2031.

We remain focused on the long-term success of our company, including emphasis on satisfying customer needs, generating solid operating results, and promoting the greatest long-term value for our shareholders, customers and employees. We believe the fundamentals of how we run our business – a long-term view, safety and people first culture, customer-focused solutions, technology-driven product offerings, and a 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 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 (on property, plant and equipment) and amortization (on intangibles and lease right-of-use assets). 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, July 29, 2021 to review second quarter 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 5, 2021 at 3:00 p.m. EDT by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay passcode number is 41908. 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/2001/41908. 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; current and future governmental regulations; the gain or 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 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 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 2020 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,

 

 

2021

 

2020

 

2021

 

2020

Revenue:

 

 

 

 

 

 

 

 

Petroleum additives

 

$

586,587

 

 

$

408,703

 

 

$

1,151,485

 

 

$

966,075

 

All other

 

4,134

 

 

2,161

 

 

5,851

 

 

4,206

 

Total

 

$

590,721

 

 

$

410,864

 

 

$

1,157,336

 

 

$

970,281

 

Segment operating profit:

 

 

 

 

 

 

 

 

Petroleum additives

 

$

74,200

 

 

$

33,061

 

 

$

168,271

 

 

$

146,732

 

All other

 

17

 

 

(399

)

 

(647

)

 

(64

)

Segment operating profit

 

74,217

 

 

32,662

 

 

167,624

 

 

146,668

 

Corporate unallocated expense

 

(3,548

)

 

(5,467

)

 

(7,860

)

 

(9,698

)

Interest and financing expenses

 

(8,869

)

 

(7,005

)

 

(15,212

)

 

(14,109

)

Other income (expense), net

 

5,258

 

 

7,078

 

 

11,876

 

 

14,485

 

Income before income tax expense

 

$

67,058

 

 

$

27,268

 

 

$

156,428

 

 

$

137,346

 

Net income

 

$

51,952

 

 

$

22,349

 

 

$

121,664

 

 

$

107,890

 

Earnings per share - basic and diluted

 

$

4.75

 

 

$

2.05

 

 

$

11.13

 

 

$

9.78

 

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,

 

 

2021

 

2020

 

2021

 

2020

Net sales

 

$

590,721

 

 

$

410,864

 

 

$

1,157,336

 

 

$

970,281

 

Cost of goods sold

 

449,722

 

 

314,126

 

 

854,584

 

 

692,636

 

Gross profit

 

140,999

 

 

96,738

 

 

302,752

 

 

277,645

 

Selling, general, and administrative expenses

 

34,735

 

 

35,432

 

 

71,650

 

 

71,147

 

Research, development, and testing expenses

 

35,517

 

 

33,549

 

 

71,854

 

 

69,055

 

Operating profit

 

70,747

 

 

27,757

 

 

159,248

 

 

137,443

 

Interest and financing expenses, net

 

8,869

 

 

7,005

 

 

15,212

 

 

14,109

 

Other income (expense), net

 

5,180

 

 

6,516

 

 

12,392

 

 

14,012

 

Income before income tax expense

 

67,058

 

 

27,268

 

 

156,428

 

 

137,346

 

Income tax expense

 

15,106

 

 

4,919

 

 

34,764

 

 

29,456

 

Net income

 

$

51,952

 

 

$

22,349

 

 

$

121,664

 

 

$

107,890

 

Earnings per share - basic and diluted

 

$

4.75

 

 

$

2.05

 

 

$

11.13

 

 

$

9.78

 

Cash dividends declared per share

 

$

1.90

 

 

$

1.90

 

 

$

3.80

 

 

$

3.80

 

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share amounts, unaudited)

 

 

 

June 30, 2021

 

December 31, 2020

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

153,864

 

 

$

125,172

 

Marketable securities

 

376,295

 

 

0

 

Trade and other accounts receivable, less allowance for credit losses

 

399,373

 

 

336,395

 

Inventories

 

457,957

 

 

401,031

 

Prepaid expenses and other current assets

 

35,982

 

 

35,480

 

Total current assets

 

1,423,471

 

 

898,078

 

Property, plant, and equipment, net

 

680,315

 

 

665,147

 

Intangibles (net of amortization) and goodwill

 

128,531

 

 

129,944

 

Prepaid pension cost

 

141,151

 

 

137,069

 

Operating lease right-of-use assets

 

64,980

 

 

61,329

 

Deferred charges and other assets

 

40,264

 

 

42,308

 

Total assets

 

$

2,478,712

 

 

$

1,933,875

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

259,209

 

 

$

189,937

 

Accrued expenses

 

69,185

 

 

78,422

 

Dividends payable

 

18,613

 

 

15,184

 

Income taxes payable

 

5,242

 

 

3,760

 

Operating lease liabilities

 

14,460

 

 

13,410

 

Other current liabilities

 

5,416

 

 

11,742

 

Total current liabilities

 

372,125

 

 

312,455

 

Long-term debt

 

990,551

 

 

598,848

 

Operating lease liabilities - noncurrent

 

50,489

 

 

48,324

 

Other noncurrent liabilities

 

216,337

 

 

214,424

 

Total liabilities

 

1,629,502

 

 

1,174,051

 

Shareholders' equity:

 

 

 

 

Common stock and paid-in capital (with no par value; issued and outstanding shares - 10,928,129 at June 30, 2021 and 10,921,377 at December 31, 2020)

 

1,748

 

 

717

 

Accumulated other comprehensive loss

 

(164,947

)

 

(173,164

)

Retained earnings

 

1,012,409

 

 

932,271

 

Total shareholders' equity

 

849,210

 

 

759,824

 

Total liabilities and shareholders' equity

 

$

2,478,712

 

 

$

1,933,875

 

NEWMARKET CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED CASH FLOW DATA

(In thousands, unaudited)

 

 

 

Six Months Ended June 30,

 

 

2021

 

2020

Net income

 

$

121,664

 

 

$

107,890

 

Depreciation and amortization

 

41,719

 

 

42,356

 

Unrealized (gain) loss on marketable securities

 

2,314

 

 

0

 

Cash pension and postretirement contributions

 

(5,184

)

 

(5,152

)

Working capital changes

 

(59,484

)

 

(60,072

)

Deferred income tax expense

 

6,654

 

 

3,322

 

Purchases of marketable securities

 

(387,653

)

 

0

 

Proceeds from sales and maturities of marketable securities

 

9,894

 

 

0

 

Capital expenditures

 

(44,394

)

 

(40,088

)

Issuance of 2.70% senior notes

 

395,052

 

 

0

 

Debt issuance costs

 

(3,897

)

 

(1,348

)

Net borrowings under revolving credit facility

 

0

 

 

47,059

 

Repurchases of common stock

 

0

 

 

(100,000

)

Dividends paid

 

(41,526

)

 

(41,916

)

All other

 

(6,467

)

 

5,616

 

Increase (decrease) in cash and cash equivalents

 

$

28,692

 

 

$

(42,333

)

NEWMARKET CORPORATION AND SUBSIDIARIES

NON-GAAP FINANCIAL INFORMATION

(In thousands, unaudited)

 

 

 

Second Quarter Ended June 30,

 

Six Months Ended June 30,

 

 

2021

 

2020

 

2021

 

2020

Net Income

 

$

51,952

 

 

$

22,349

 

 

$

121,664

 

 

$

107,890

 

Add:

 

 

 

 

 

 

 

 

Interest and financing expenses, net

 

8,869

 

 

7,005

 

 

15,212

 

 

14,109

 

Income tax expense

 

15,106

 

 

4,919

 

 

34,764

 

 

29,456

 

Depreciation and amortization

 

20,594

 

 

20,709

 

 

40,918

 

 

41,568

 

EBITDA

 

$

96,521

 

 

$

54,982

 

 

$

212,558

 

 

$

193,023

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210728005811/en/

FOR INVESTOR INFORMATION: Brian D. Paliotti Investor Relations Phone: 804.788.5555 Fax: 804.788.5688 Email: investorrelations@newmarket.com