- Second Quarter Results Significantly Affected by COVID-19
Restrictions
- Second Quarter Shipments Down 24%, Driving Revenue and
Earnings Reductions
- Focus Remains on Investing in Long-Term Success of the
Company
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 2020.
Net income for the second quarter of 2020 was $22.3 million, or
$2.05 per share, compared to net income of $74.2 million, or $6.63
per share, for the second quarter of 2019. For the first half of
2020, net income was $107.9 million, or $9.78 per share, compared
to net income of $136.4 million or $12.20 per share, for the first
half of last year.
Sales for the petroleum additives segment for the second quarter
of 2020 were $408.7 million, down from $560.8 million in the second
quarter of 2019. Petroleum additives operating profit for the
second quarter of 2020 was $33.1 million, compared to $103.0
million for the same period last year. Shipments were down 24.4%
from the same period last year, with decreases in both lubricant
and fuel additives shipments. Lower shipments were the primary
driver of the lower operating profit. During the quarter, we saw no
significant impact on profits from changes in raw material
costs.
Petroleum additives sales for the first half of the year were
$966.1 million compared to sales in the first half of last year of
$1.1 billion. Petroleum additives operating profit for the first
half of the year was $146.7 million compared to $190.9 million for
the first half of 2019. Shipments decreased 9.6% between periods,
with decreases in both lubricant additives and fuel additives
shipments.
As we had anticipated and communicated in our first quarter 2020
earnings release, the second quarter of the year was significantly
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 April 2020, gasoline consumption
in the United States was at the lowest point it has been in over 50
years. Also at one point in April 2020, miles driven in the United
States reached a level that was about 50% lower than levels seen in
the first quarter of the year, and miles driven in most areas of
Western Europe reached levels that were about 50% to 90% lower than
levels seen in the first quarter. With dramatically less travel and
miles driven, and with less industrial production, specifically
with automobile plant closures, global demand for both lubricant
and fuel additives declined substantially. Shipments to customers
in the second quarter were down 25.1% from the first quarter of the
year. Our North America and Europe regions experienced the most
significant decreases in shipments when compared to both the same
quarter last year and the first quarter of 2020. While all three
months saw decreased shipments, our overall low point was in May.
In June, we saw some improvement, particularly in North America,
and in the Asia Pacific region where shipments were on par with
June 2019.
At this point we cannot predict how long the downturn will last,
though we have seen some signs of improvement. In addition to the
increased shipments in June, we are seeing substantial improvements
in miles driven in both North America and Western Europe, and
vehicle production is resuming around the world. The pace of
improvement will depend heavily on the rate at which government
restrictions are lifted and remain lifted. Our regions will see
varying effects on demand, based on our product portfolio, our
geographic coverage and the differing government responses to the
pandemic.
The chemical industry and our products are recognized as
essential for the transportation of goods and services. We are
mindful first and foremost of our responsibility to protect the
health and safety of our employees and have procedures in place at
each of our operating facilities to help ensure their well-being.
We are pleased that, with only a very few government-ordered,
short-term exceptions, all of our company locations around the
world continued to operate safely throughout the second quarter of
2020. Our employees have worked tirelessly to adapt and do what is
necessary to continue to operate safely around the world, and I am
proud of them. Because of their efforts, we have been able to work
diligently with our customers to ensure their supply demands are
met throughout this unusual period.
We have continued with our long-term plans to invest in both
capital improvements and research and development in support of our
customers, and with prudent use of cash to provide shareholder
value, including dividends and repurchases of common stock. We are
well-positioned to stay the course with a strong balance sheet,
conservative fiscal policies, and a dedicated team focused on the
future.
During the first half of 2020, we funded capital expenditures of
$40.1 million, paid dividends of $41.9 million, and repurchased
267,128 shares of our common stock for a total of $100.0 million,
through a combination of cash from operations and borrowings under
our revolving credit facility.
As we navigate the current economic downturn, our business
decisions will continue to be 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 30, 2020, to review
second quarter 2020 financial results. You can access the
conference call live by dialing 1-844-407-9500 (domestic) or
1-862-298-0850 (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 6, 2020 at 3:00 p.m. EDT by dialing
1-877-481-4010 (domestic) or 1-919-882-2331 (international). The
replay ID number is 35677. 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/2001/35677. 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 2019 Annual Report on Form 10-K and Part II. Item 1A. “Risk
Factors” of our Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2020, 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,
2020
2019
2020
2019
Revenue:
Petroleum additives
$
408,703
$
560,824
$
966,075
$
1,093,503
All other
2,161
2,593
4,206
6,530
Total
$
410,864
$
563,417
$
970,281
$
1,100,033
Segment operating profit:
Petroleum additives
$
33,061
$
102,992
$
146,732
$
190,855
All other
(399
)
(342
)
(64
)
169
Segment operating profit
32,662
102,650
146,668
191,024
Corporate unallocated expense
(5,467
)
(4,275
)
(9,698
)
(9,369
)
Interest and financing expenses
(7,005
)
(7,741
)
(14,109
)
(15,753
)
Other income (expense), net
7,078
6,057
14,485
11,597
Income before income tax
expense
$
27,268
$
96,691
$
137,346
$
177,499
Net income
$
22,349
$
74,174
$
107,890
$
136,379
Earnings per share - basic and
diluted
$
2.05
$
6.63
$
9.78
$
12.20
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,
2020
2019
2020
2019
Net sales
$
410,864
$
563,417
$
970,281
$
1,100,033
Cost of goods sold
314,126
392,584
692,636
776,331
Gross profit
96,738
170,833
277,645
323,702
Selling, general, and administrative
expenses
35,432
35,021
71,147
71,794
Research, development, and testing
expenses
33,549
37,137
69,055
70,361
Operating profit
27,757
98,675
137,443
181,547
Interest and financing expenses, net
7,005
7,741
14,109
15,753
Other income (expense), net
6,516
5,757
14,012
11,705
Income before income tax
expense
27,268
96,691
137,346
177,499
Income tax expense
4,919
22,517
29,456
41,120
Net income
$
22,349
$
74,174
$
107,890
$
136,379
Earnings per share - basic and
diluted
$
2.05
$
6.63
$
9.78
$
12.20
Cash dividends declared per
share
$
1.90
$
1.75
$
3.80
$
3.50
NEWMARKET CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts,
unaudited)
June 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents
$
102,064
$
144,397
Trade and other accounts receivable, less
allowance for credit losses
297,862
335,826
Inventories
354,821
365,938
Prepaid expenses and other current
assets
35,277
33,237
Total current assets
790,024
879,398
Property, plant, and equipment, net
639,344
635,439
Intangibles (net of amortization) and
goodwill
130,903
131,880
Prepaid pension cost
139,481
133,848
Operating lease right-of-use assets
55,935
60,505
Deferred charges and other assets
43,450
44,062
Total assets
$
1,799,137
$
1,885,132
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
127,401
$
178,773
Accrued expenses
62,004
77,350
Dividends payable
18,530
19,217
Income taxes payable
3,508
10,632
Operating lease liabilities
12,592
14,036
Other current liabilities
9,948
8,887
Total current liabilities
233,983
308,895
Long-term debt
690,292
642,941
Operating lease liabilities -
noncurrent
42,942
46,792
Other noncurrent liabilities
196,635
203,406
Total liabilities
1,163,852
1,202,034
Shareholders' equity:
Common stock and paid-in capital (with no
par value; issued and outstanding shares - 10,923,999 at June 30,
2020 and 11,188,549 at December 31, 2019)
281
1,965
Accumulated other comprehensive loss
(176,652
)
(162,748
)
Retained earnings
811,656
843,881
Total shareholders' equity
635,285
683,098
Total liabilities and shareholders'
equity
$
1,799,137
$
1,885,132
NEWMARKET CORPORATION AND
SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW
DATA
(In thousands, unaudited)
Six Months Ended
June 30,
2020
2019
Net income
$
107,890
$
136,379
Depreciation and amortization
42,356
43,716
Cash pension and postretirement
contributions
(5,152
)
(4,869
)
Working capital changes
(60,072
)
(27,079
)
Deferred income tax expense
3,322
4,154
Capital expenditures
(40,088
)
(23,219
)
Net borrowings (repayments) under
revolving credit facility
47,059
(87,296
)
Repurchases of common stock
(100,000
)
0
Dividends paid
(41,916
)
(39,158
)
All other
4,268
(2,449
)
(Decrease) increase in cash and cash
equivalents
$
(42,333
)
$
179
NEWMARKET CORPORATION AND
SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
Second Quarter Ended
June 30,
Six Months Ended
June 30,
2020
2019
2020
2019
Net Income
$
22,349
$
74,174
$
107,890
$
136,379
Add:
Interest and financing expenses, net
7,005
7,741
14,109
15,753
Income tax expense
4,919
22,517
29,456
41,120
Depreciation and amortization
20,709
21,492
41,568
43,146
EBITDA
$
54,982
$
125,924
$
193,023
$
236,398
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200729005976/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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