- Second Quarter Net Income of $52.9
Million and Earnings Per Share of $4.53
- First Half Net Income and Earnings
Per Share down 10.4% and 9.5% versus First Half of 2017
- Continued Margin Compression Due to
Raw Material Costs
- 322,753 Shares Repurchased in the
First Half of 2018
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 2018.
Net income for the second quarter of 2018 was $52.9 million, a
decrease of 15.7% compared to net income of $62.7 million for the
second quarter of 2017. Earnings per share declined 14.4% to $4.53
per share from $5.29 per share in the prior year period. For the
first half of 2018, net income was $113.5 million, or $9.67 per
share, compared to net income of $126.7 million, or $10.69 per
share, for the first half of last year.
Sales for the petroleum additives segment for the second quarter
of 2018 were $596.2 million, up 9.6% versus the same period last
year, due mainly to higher shipments, increased selling prices, and
foreign currency exchange. Petroleum additives operating profit for
the second quarter of 2018 was $71.5 million, a 21.6% decrease over
second quarter operating profit last year of $91.3 million. The
decrease was due mainly to higher raw material and conversion costs
plus, unfavorable changes in foreign currency exchange, which were
only partially offset by increased selling prices and shipments.
Petroleum additives operating margin for the quarter was 12.0%
compared to 16.8% in the prior-year quarter. During the quarter, we
continued to see raw material prices increase as they have over the
past several quarters. Shipments between quarterly periods were up
2.3% from the same period last year with increases in both
lubricant additives and fuel additives shipments. Europe and Latin
America were the main regions contributing to the increase in
lubricant additives shipments, and Europe was the primary driver of
the increase in fuel additives shipments.
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
$1.1 billion, or an increase of 9.1%. This increase was due mainly
to higher shipments, foreign currency exchange and increased
selling prices. Petroleum additives operating profit for the first
half of the year was $155.7 million compared to $186.7 million for
the first half of 2017, or a decrease of 16.6%. The decrease was
due mainly to higher raw material costs and conversion costs.
Petroleum additives operating margin for the first six months of
2018 was 13.2% compared to 17.2% in the prior-year six month
period. Shipments increased 1.3% between periods, with increases in
lubricant additives shipments partially offset by decreases in fuel
additives shipments. Europe, Latin America and Asia Pacific were
the main regions contributing to the increase in lubricant
additives shipments. Europe and North America were the primary
drivers for the decrease in fuel additives shipments, partially
offset by increases in Latin America.
The disappointing operating margins we have experienced this
year in our petroleum additives business are directly related to
the continued increases in raw material costs we have seen over the
past two years. Although we have made some progress in adjusting
our selling prices to offset the effects of the higher costs, we
have not been able to adjust sufficiently to offset the cost
increases and the lag between when price increases go into effect
and when we begin to see margin recovery. This lag will continue
until we see a period where raw material costs stabilize in the
marketplace. Margin improvement will remain our top priority
throughout the rest of this year.
During the first half of 2018, we funded capital expenditures of
$42.6 million, paid dividends of $40.8 million and repurchased
322,753 shares of our common stock for a total of $123.3 million,
through a combination of borrowing under our revolving credit
facility, cash on hand, and cash from operations.
We are committed to providing 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 of
our stakeholders.
Sincerely,
Thomas E. Gottwald
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 9, 2018, to review
second quarter 2018 financial results. You can access the
conference call live by dialing 1-877-407-9210 (domestic) or
1-201-689-8049 (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 16, 2018 at 3:00 p.m. EDT by dialing
1-877-481-4010 (domestic) or 1-919-882-2331 (international). The
replay ID number is 34112. The call will also be broadcast via the
Internet and can be accessed through the Company’s website at
www.NewMarket.com or www.investorcalendar.com. 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
manufacturing facilities, including single-sourced facilities; the
ability to respond effectively to technological changes in our
industry; failure to protect our intellectual property rights;
failure to attract and retain a highly-qualified workforce; hazards
common to chemical businesses; competition from other
manufacturers; sudden or sharp raw material price increases; the
gain or loss of significant customers; 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 fluctuations in foreign exchange rates; an
information technology system failure or security breach;
political, economic, and regulatory factors concerning our
products; current and future governmental regulations; resolution
of environmental liabilities or legal proceedings; 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; 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 2017 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 EndedJune 30, Six Months
EndedJune 30, 2018 2017 2018
2017 Revenue: Petroleum additives $ 596,202 $
544,153 $ 1,183,110 $ 1,084,186 All other (a) 2,750 3,035
5,087 5,820
Total $
598,952 $ 547,188 $
1,188,197 $ 1,090,006 Segment
operating profit: Petroleum additives $ 71,530 $ 91,255 $
155,670 $ 186,668 All other (a) 406 815 329
1,850
Segment operating profit 71,936
92,070 155,999 188,518 Corporate unallocated
expense (4,967 ) (4,681 ) (10,631 ) (11,027 ) Interest and
financing expenses (5,565 ) (5,360 ) (10,729 ) (10,932 ) Other
income (expense), net 8,161 3,261 16,237 6,964
Income before income tax expense $
69,565 $ 85,290 $
150,876 $ 173,523 Net
income $ 52,885 $ 62,728
$ 113,450 $ 126,665
Earnings per share - basic and diluted $
4.53 $ 5.29 $ 9.67
$ 10.69
Notes to Segment Results and Other Financial
Information
Certain prior year amounts have been reclassified to reflect the
adoption of Accounting Standard Update No. 2017-07,
"Compensation-Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost". There was no impact to income before
income tax expense.
(a) "All other" includes the results of our tetraethyl lead
(TEL) business, as well as certain contracted manufacturing and
services.
NEWMARKET CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
INCOME
(In thousands, except per-share amounts,
unaudited)
Second Quarter EndedJune 30, Six Months
EndedJune 30, 2018 2017 2018
2017 Net sales $ 598,952 $ 547,188 $ 1,188,197 $
1,090,006 Cost of goods sold 453,093 383,717 885,555
757,693 Gross profit 145,859 163,471 302,642 332,313
Selling, general, and administrative expenses 41,999 39,373 82,912
79,853 Research, development, and testing expenses 36,729
37,019 71,024 75,149 Operating profit 67,131 87,079
148,706 177,311 Interest and financing expenses, net 5,565 5,360
10,729 10,932 Other income (expense), net 7,999 3,571
12,899 7,144
Income before income tax expense
69,565 85,290 150,876 173,523 Income
tax expense 16,680 22,562 37,426 46,858
Net
income $ 52,885 $ 62,728
$ 113,450 $ 126,665
Earnings per share - basic and diluted $ 4.53
$ 5.29 $ 9.67
$ 10.69 Cash dividends declared per share
$ 1.75 $ 1.75 $
3.50 $ 3.50
Notes to Consolidated Statements of Income
Certain prior year amounts have been reclassified to reflect the
adoption of Accounting Standard Update No. 2017-07,
"Compensation-Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost". There was no impact to net
income.
NEWMARKET CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts,
unaudited)
June 30, 2018 December 31, 2017
ASSETS Current assets: Cash and cash equivalents $ 109,789 $
84,166 Trade and other accounts receivable, less allowance for
doubtful accounts ($182 - 2018; $215 - 2017) 372,156 335,317
Inventories 379,551 383,097 Prepaid expenses and other current
assets 31,343 31,074
Total current assets
892,839 833,654 Property, plant, and
equipment, at cost 1,450,101 1,474,962 Less accumulated
depreciation and amortization 800,664 822,681
Net
property, plant, and equipment 649,437
652,281 Intangibles (net of amortization) and
goodwill 139,179 144,337 Prepaid pension cost 77,731 66,495
Deferred income taxes 4,149 4,349 Deferred charges and other assets
10,495 11,038
Total assets $
1,773,830 $ 1,712,154
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 143,918 $ 159,408 Accrued expenses 94,635
107,999 Dividends payable 18,523 19,055 Income taxes payable 11,722
16,340 Other current liabilities 11,221 13,991
Total current liabilities 280,019
316,793 Long-term debt 759,843 602,900 Other
noncurrent liabilities 181,487 190,812
Total
liabilities 1,221,349 1,110,505
Shareholders' equity: Common stock and paid-in capital (without par
value; issued and outstanding shares - 11,465,814 at June 30, 2018
and 11,779,978 at December 31, 2017) 0 0 Accumulated other
comprehensive loss (144,942 ) (145,994 ) Retained earnings 697,423
747,643
Total shareholders' equity
552,481 601,649 Total liabilities
and shareholders' equity $ 1,773,830
$ 1,712,154
NEWMARKET CORPORATION AND
SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW
DATA
(In thousands, unaudited)
Six Months EndedJune 30, 2018
2017 Net income $ 113,450 $ 126,665 Depreciation and
amortization 35,220 24,623 Cash pension and postretirement
contributions (13,756 ) (12,936 ) Noncash pension and
postretirement expense 3,223 4,055 Working capital changes (74,506
) (51,376 ) Capital expenditures (42,601 ) (85,211 ) Net borrowings
(repayments) under revolving credit facility 157,000 (129,574 )
Issuance of 3.78% senior notes 0 250,000 Repurchases of common
stock (123,316 ) 0 Dividends paid (40,821 ) (41,484 ) All other
11,730 1,119 Increase in cash and cash equivalents
$ 25,623 $ 85,881
NEWMARKET CORPORATION AND
SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
Second Quarter EndedJune 30, Six Months
EndedJune 30, 2018 2017 2018
2017 Net Income $ 52,885
$ 62,728 $ 113,450 $
126,665 Add: Interest and financing expenses, net 5,565
5,360 10,729 10,932 Income tax expense 16,680 22,562 37,426 46,858
Depreciation and amortization 17,270 12,045 34,649
24,079
EBITDA $ 92,400 $
102,695 $ 196,254 $
208,534
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180808005509/en/
NewMarket CorporationBrian D. PaliottiInvestor
RelationsPhone: 804-788-5555Fax:
804-788-5688investorrelations@newmarket.com
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