NewMarket Corporation Reports First Quarter 2023 Results

27 April 2023
•Net Income of $97.6 Million and Earnings Per Share of $10.09
•Petroleum Additives Operating Profit of $132.1 Million
•Continued Focus on Cost Control and Margin Recovery
Richmond, VA, April 26, 2023 – NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the first quarter of 2023.
Net income for the first quarter of 2023 was $97.6 million, or $10.09 per share, compared to net income of $59.3 million, or $5.75 per share, for the first quarter of 2022.
Petroleum additives sales for the first quarter of 2023 were $700.0 million, compared to $660.3 million for the same period in 2022. Petroleum additives operating profit for the first quarter of 2023 was $132.1 million, compared to $86.9 million for the first quarter of 2022. The increase in operating profit was mainly due to increased selling prices, partially offset by higher raw material and operating costs and lower shipments. Shipments between quarterly periods were down 15.4%, with decreases in both lubricant additives and fuel additives across all regions except North America, which reported a small increase in fuel additives shipments. Shipments have been lower than our expectations over the last few quarters, due to a general economic slowdown and customer destocking.
During the first quarter of 2023, we funded capital expenditures of $11.9 million and returned $48.8 million to our shareholders through dividends of $20.3 million and share repurchases of $28.5 million (82,486 shares of our common stock). Our Net Debt to EBITDA ratio was 1.7 as of March 31, 2023.
We are encouraged by the sequential improvement in our petroleum additives operating profit the last two quarters. After being below our historical norms for the past six quarters, our operating margin for the rolling four quarters ended March 31, 2023 was 15.2%, which is at the lower end of the range of our long-term expectations. We have seen improvements in the supply chain disruptions which have impacted the petrochemicals industry and our company over the past several years. Inflation continues to be a concern, and cost control and margin recovery will remain high priorities.
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, April 27, 2023, to review first 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 May 4, 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 48134. 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/2001/48134. 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.
 
 
FOR INVESTOR INFORMATION CONTACT:

William J. Skrobacz
Investor Relations
Phone: 804.788.5555
Fax: 804.788.5688
Email: investorrelations@newmarket.com

 
 
 
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION
(In thousands, except per-share amounts, unaudited)
                   
    Three Months Ended March 31,
      2023 2022
Revenue:        
Petroleum additives     $699,991   $660,304  
All other      2,798   2,248  
Total     $702,789   $662,552  
Segment operating profit:        
Petroleum additives     $132,068   $86,922  
All other      (975)  98  
Segment operating profit     131,093   87,020  
Corporate unallocated expense     (6,491)  (3,890) 
Interest and financing expenses     (10,773)  (9,406) 
Loss on early extinguishment of debt     0   (7,545) 
Other income (expense), net     11,319   7,328  
Income before income tax expense     $125,148   $73,507  
Net income     $97,583   $59,318  
Earnings per share – basic and diluted     $10.09   $5.75  
 
 
 
 
 
 
 
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share amounts, unaudited)
                   
    Three Months Ended March 31,
      2023 2022
Net sales     $702,789   $662,552  
Cost of goods sold     504,745   507,389  
Gross profit     198,044   155,163  
Selling, general, and administrative expenses     39,847   35,622  
Research, development, and testing expenses     33,156   36,251  
Operating profit     125,041   83,290  
Interest and financing expenses, net     10,773   9,406  
Loss on early extinguishment of debt     0   7,545  
Other income (expense), net     10,880   7,168  
Income before income tax expense     125,148   73,507  
Income tax expense     27,565   14,189  
Net income     $97,583   $59,318  
Earnings per share – basic and diluted     $10.09   $5.75  
Cash dividends declared per share     $2.10   $2.10  
 
 
 
 
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts, unaudited)
               
  March 31,
2023		 December 31,
2022
ASSETS    
Current assets:    
Cash and cash equivalents $70,115   $68,712  
Trade and other accounts receivable, less allowance for credit losses
 457,203   453,692  
Inventories 566,136   631,383  
Prepaid expenses and other current assets 38,107   38,338  
Total current assets 1,131,561   1,192,125  
     
     
Property, plant, and equipment, net 658,092   659,998  
Intangibles (net of amortization) and goodwill 125,754   126,069  
Prepaid pension cost 310,753   302,584  
Operating lease right-of-use assets, net 60,350   62,417  
     
Deferred charges and other assets 64,261   63,625  
Total assets $2,350,771   $2,406,818  
LIABILITIES AND SHAREHOLDERS’ EQUITY    
Current liabilities:    
Accounts payable $212,277   $273,289  
Accrued expenses 72,336   89,508  
Dividends payable 17,861   17,850  
Income taxes payable 35,248   16,109  
  Operating lease liabilities  14,948   15,569  
Other current liabilities 5,826   11,562  
Total current liabilities 358,496   423,887  
Long-term debt 957,958   1,003,737  
Operating lease liabilities – noncurrent 45,588   46,968  
Other noncurrent liabilities 166,929   169,819  
Total liabilities 1,528,971   1,644,411  
Shareholders’ equity:    
Common stock and paid-in capital (with no par value; issued and outstanding shares – 9,625,959 at March 31, 2023 and 9,702,147 at December 31, 2022)
 0   0  
Accumulated other comprehensive loss (61,551)  (71,995) 
Retained earnings 883,351   834,402  
Total shareholders’ equity 821,800   762,407  
Total liabilities and shareholders’ equity $2,350,771   $2,406,818  
 
 
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
               
  Three Months Ended March 31,
  2023 2022
Net income $97,583   $59,318  
Depreciation and amortization 20,313   21,072  
Loss on early extinguishment of debt 0   7,545  
Loss on marketable securities 0   2,977  
Cash pension and postretirement contributions (2,290)  (2,099) 
Working capital changes 9,795   (66,987) 
Deferred income tax benefit (4,932)  (12,135) 
Purchases of marketable securities 0   (787) 
Proceeds from sales and maturities of marketable securities 0   372,846  
Capital expenditures (11,881)  (12,612) 
Redemption of 4.10% senior notes 0   (350,000) 
Cash costs of 4.10% senior notes redemption 0   (7,099) 
Net (repayments) borrowings under revolving credit facility (46,000)  51,000  
Repurchases of common stock (28,479)  (37,347) 
Dividends paid (20,292)  (21,570) 
All other (12,414)  (2,876) 
Increase in cash and cash equivalents $1,403   $1,246  
 
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
                   
         
Earnings Before Interest, Depreciation, and Amortization (EBITDA)        
    Three Months Ended March 31,
      2023 2022
Net Income     $97,583   $59,318  
Add:        
Interest and financing expenses, net     10,773   9,406  
Income tax expense     27,565   14,189  
Depreciation and amortization     19,966   20,604  
EBITDA     $155,887   $103,517  
         
Net Debt to EBITDA        
      March 31, December 31,
      2023 2022
Long-term debt, including current maturities     $957,958   $1,003,737  
Less: Cash and cash equivalents     70,115   68,712  
Net Debt     $887,843   $935,025  
         
      Rolling Four Quarters Ended
      March 31, December 31,
      2023 2022
Net Income     $317,803   $279,538  
Add:        
Interest and financing expenses, net     36,569 35,202
Income tax expense     81,572 68,196
Depreciation and amortization     80,137 80,775
EBITDA-Rolling Four Quarters     $516,081   $463,711  
         
Net Debt to EBITDA     1.7 2.0