- Second Quarter Net Income of $99.6 Million and Earnings Per
Share of $10.36
- First Half Petroleum Additives Operating Profit of $264.2
Million
- 7% Increase in Dividend Declared During the Second
Quarter
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 2023.
Net income for the second quarter of 2023 was $99.6 million
compared to net income of $66.5 million for the second quarter of
2022. Second quarter 2023 earnings per share increased to $10.36,
up from $6.54 per share in the same period last year. For the first
half of 2023, net income was $197.2 million, or $20.45 per share,
compared to net income of $125.8 million, or $12.28 per share, for
the first half of 2022.
Petroleum additives sales for the second quarter of 2023 were
$684.0 million, compared to $721.0 million for the same period in
2022. The decrease was primarily due to lower shipments, partially
offset by increased selling prices. Petroleum additives operating
profit for the second quarter of 2023 was $132.1 million, compared
to $91.2 million for the second quarter of 2022. The increase in
operating profit was mainly due to increased selling prices,
partially offset by lower shipments and higher operating costs.
Shipments were down 16.7% between quarterly periods, with decreases
in both lubricant additives and fuel additives shipments. All
regions contributed to the decrease in lubricant additives
shipments, while North America was the primary contributor to the
decrease in fuel additives shipments.
Petroleum additives sales for the first half of both 2023 and
2022 were $1.4 billion. Petroleum additives operating profit for
the first half of 2023 was $264.2 million, compared to $178.1
million for the first half of 2022. The increase in operating
profit was a result of increased selling prices, partially offset
by lower shipments and higher operating and raw material costs.
Shipments decreased 16.1% when comparing the first half of 2023 to
the same period in 2022, with decreases in both lubricant additives
and fuel additives shipments in all regions. Shipments have been
lower than our expectations over the last few quarters, as we
continue to see the effects of customer destocking and global
economic weakness.
The petroleum additives operating margin for the rolling four
quarters ended June 30, 2023 was 16.8%, which is back within our
historical range and reflects the benefits of our focus on cost
control and margin recovery. However, we are still challenged by
higher operating costs due to the ongoing inflationary environment.
Cost control and margin management remain high priorities for
us.
We generated solid cash flows in the first half of 2023 and
continue to operate with low leverage. Our working capital improved
by $52.5 million, we paid dividends of $41.9 million, which
included a 7% increase to our quarterly dividend rate, and we
repurchased 119,075 shares of our common stock for $42.9 million
(of which $14.4 million was spent in the second quarter of 2023).
Our Net Debt to EBITDA ratio decreased to 1.4 as of June 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, July 27, 2023, to review
second 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 August 3, 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 48659. 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/2001/48659.
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)
Second Quarter Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Net Sales:
Petroleum additives
$
683,969
$
721,021
$
1,383,960
$
1,381,325
All other
1,161
2,618
3,959
4,866
Total
$
685,130
$
723,639
$
1,387,919
$
1,386,191
Segment operating profit:
Petroleum additives
$
132,138
$
91,185
$
264,206
$
178,107
All other
(1,022
)
(262
)
(1,997
)
(164
)
Segment operating profit
131,116
90,923
262,209
177,943
Corporate unallocated expense
(6,810
)
(7,332
)
(13,301
)
(11,222
)
Interest and financing expenses
(10,255
)
(7,084
)
(21,028
)
(16,490
)
Loss on early extinguishment of debt
0
0
0
(7,545
)
Other income (expense), net
10,659
9,101
21,978
16,429
Income before income tax
expense
$
124,710
$
85,608
$
249,858
$
159,115
Net income
$
99,624
$
66,472
$
197,207
$
125,790
Earnings per share - basic and
diluted
$
10.36
$
6.54
$
20.45
$
12.28
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,
2023
2022
2023
2022
Net sales
$
685,130
$
723,639
$
1,387,919
$
1,386,191
Cost of goods sold
489,492
566,163
994,237
1,073,552
Gross profit
195,638
157,476
393,682
312,639
Selling, general, and administrative
expenses
37,438
38,489
77,285
74,111
Research, development, and testing
expenses
33,958
35,396
67,114
71,647
Operating profit
124,242
83,591
249,283
166,881
Interest and financing expenses, net
10,255
7,084
21,028
16,490
Loss on early extinguishment of debt
0
0
0
7,545
Other income (expense), net
10,723
9,101
21,603
16,269
Income before income tax
expense
124,710
85,608
249,858
159,115
Income tax expense
25,086
19,136
52,651
33,325
Net income
$
99,624
$
66,472
$
197,207
$
125,790
Earnings per share - basic and
diluted
$
10.36
$
6.54
$
20.45
$
12.28
Cash dividends declared per
share
$
2.25
$
2.10
$
4.35
$
4.20
NEWMARKET CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts,
unaudited)
June 30, 2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents
$
130,923
$
68,712
Trade and other accounts receivable, less
allowance for credit losses
436,250
453,692
Inventories
537,380
631,383
Prepaid expenses and other current
assets
35,550
38,338
Total current assets
1,140,103
1,192,125
Property, plant, and equipment, net
655,864
659,998
Intangibles (net of amortization) and
goodwill
125,424
126,069
Prepaid pension cost
318,765
302,584
Operating lease right-of-use assets,
net
62,381
62,417
Deferred charges and other assets
63,607
63,625
Total assets
$
2,366,144
$
2,406,818
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
222,969
$
273,289
Accrued expenses
72,923
89,508
Dividends payable
18,898
17,850
Income taxes payable
8,522
16,109
Operating lease liabilities
14,525
15,569
Other current liabilities
11,201
11,562
Total current liabilities
349,038
423,887
Long-term debt
916,179
1,003,737
Operating lease liabilities -
noncurrent
47,715
46,968
Other noncurrent liabilities
160,472
169,819
Total liabilities
1,473,404
1,644,411
Shareholders' equity:
Common stock and paid-in capital (with no
par value; issued and outstanding shares - 9,589,239 at June 30,
2023 and 9,702,147 at December 31, 2022)
0
0
Accumulated other comprehensive loss
(54,757
)
(71,995
)
Retained earnings
947,497
834,402
Total shareholders' equity
892,740
762,407
Total liabilities and shareholders'
equity
$
2,366,144
$
2,406,818
NEWMARKET CORPORATION AND
SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW
DATA
(In thousands, unaudited)
Six Months Ended
June 30,
2023
2022
Net income
$
197,207
$
125,790
Depreciation and amortization
40,558
41,670
Loss on early extinguishment of debt
0
7,545
Loss on marketable securities
0
2,977
Cash pension and postretirement
contributions
(5,020
)
(4,863
)
Working capital changes
52,494
(114,665
)
Deferred income tax benefit
(11,301
)
(21,036
)
Purchases of marketable securities
0
(787
)
Proceeds from sales and maturities of
marketable securities
0
372,846
Capital expenditures
(26,006
)
(27,807
)
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
(88,000
)
121,000
Repurchases of common stock
(42,864
)
(90,782
)
Dividends paid
(41,879
)
(42,860
)
All other
(12,978
)
(15,742
)
Increase (decrease) in cash and cash
equivalents
$
62,211
$
(3,813
)
NEWMARKET CORPORATION AND
SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
Earnings Before Interest, Depreciation,
and Amortization (EBITDA)
Second Quarter Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Net Income
$
99,624
$
66,472
$
197,207
$
125,790
Add:
Interest and financing expenses, net
10,255
7,084
21,028
16,490
Income tax expense
25,086
19,136
52,651
33,325
Depreciation and amortization
19,897
20,251
39,863
40,855
EBITDA
$
154,862
$
112,943
$
310,749
$
216,460
Net Debt to EBITDA
June 30,
December 31,
2023
2022
Long-term debt, including current
maturities
$
916,179
$
1,003,737
Less: Cash and cash equivalents
130,923
68,712
Net Debt
$
785,256
$
935,025
Rolling Four Quarters
Ended
June 30,
December 31,
2023
2022
Net Income
$
350,955
$
279,538
Add:
Interest and financing expenses, net
39,740
35,202
Income tax expense
87,522
68,196
Depreciation and amortization
79,783
80,775
EBITDA-Rolling Four Quarters
$
558,000
$
463,711
Net Debt to EBITDA
1.4
2.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230725750369/en/
William J. Skrobacz Investor Relations Phone:
804.788.5555 Fax: 804.788.5688 Email:
investorrelations@newmarket.com
NewMarket (NYSE:NEU)
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