NewMarket Corporation (NYSE: NEU) reported a robust first quarter for 2024, with net income rising to $108 million, or $11.23 per share, up from $98 million, or $10.09 per share in the same quarter last year. The company's petroleum additives segment showed a strong performance with a 5% increase in shipments, contributing to an operating profit of $151 million.
Despite a slight decrease in sales, the segment's profitability was bolstered by lower raw material and operating costs. NewMarket also completed the acquisition of American Pacific Corporation (AMPAC), which is now reflected in its new specialty materials segment.
This addition, however, posted an operating loss of $5 million for the quarter due to the sale of inventory acquired at fair market value. The company remains optimistic about the integration of AMPAC and the ongoing strength of the petroleum additives business.
Key Takeaways
- Net income increased to $108 million, or $11.23 per share, in Q1 2024.
- Petroleum additives sales were $677 million with a 5% increase in shipments.
- Operating profit for petroleum additives rose to $151 million, driven by cost management.
- Specialty materials segment reported an operating loss of $5 million.
- The acquisition of AMPAC was completed for approximately $700 million.
- NewMarket introduced a new $900 million revolving credit facility and a $200 million unsecured term loan.
- The Board approved an 11% increase in the quarterly dividend rate.
Company Outlook
- Anticipate continued strength in the petroleum additives segment.
- Expect full year results for AMPAC to align with pre-acquisition expectations.
- Focus on integrating AMPAC into NewMarket and maintaining long-term customer relationships.
Bearish Highlights
- Specialty materials segment faced an initial operating loss due to inventory sales.
- Petroleum additives sales slightly decreased compared to the same period last year.
Bullish Highlights
- Sixth consecutive quarter with petroleum additives operating profit over $100 million.
- Successful cost control measures are showing positive results.
- Strong cash flows from operations, enabling capital expenditure funding and dividend payments.
Misses
- Decrease in lubricant additive shipments in Latin America and fuel additive shipments in North America.
Q&A Highlights
- The company did not hold a Q&A session but is available for questions via email or phone.
NewMarket Corporation's first quarter of 2024 has set a positive tone for the year, with the petroleum additives segment leading the way. The company's strategic acquisition of AMPAC, despite its initial impact on the specialty materials segment, is expected to contribute to NewMarket's growth in the long term. With a new credit facility in place and a prudent approach to managing its portfolio, NewMarket is poised to continue its focus on innovation, customer service, and operational efficiency.
InvestingPro Insights
NewMarket Corporation (NYSE: NEU) has demonstrated resilience and strategic growth in Q1 2024, as shown by its increased net income and strong petroleum additives segment performance. To further understand the company's financial health and investment potential, let's consider some key metrics and InvestingPro Tips.
InvestingPro Data:
- The company's Market Cap stands at $5.14 billion, reflecting its substantial size in the specialty chemicals industry.
- A P/E Ratio of 12.87 suggests that the stock may be undervalued when considering its earnings, a point also underscored by a low PEG Ratio of 0.43, indicating potential for growth relative to earnings.
- Despite a slight decline in revenue growth by -4.02% over the last twelve months as of Q1 2024, the company's Gross Profit Margin remains strong at 29.37%, which can be indicative of effective cost control measures.
InvestingPro Tips:
- NewMarket has a notable track record of raising its dividend for 5 consecutive years, signaling a commitment to returning value to shareholders. This aligns with the recent 11% increase in the quarterly dividend rate mentioned in the article.
- The stock is currently in oversold territory according to the RSI, which may interest value investors looking for potential entry points.
For investors seeking a deeper dive into NewMarket Corporation's financials and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/NEU. These tips can offer further insights and help in making a well-informed investment decision. And don't forget, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 11 more InvestingPro Tips listed for NewMarket Corporation that can provide a comprehensive analysis of the company's performance and outlook.
Full transcript - NewMarket Corp (NEU) Q1 2024:
Operator: Greetings. Welcome to NewMarket Corporation's Conference Call and Webcast to review First Quarter 2024 Financial Results. At this time, all participants are placed on a listen-only mode. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Bill Skrobacz, Vice President and CFO at NewMarket Corporations. Bill you may begin.
Bill Skrobacz: Thank you, Paul, and thanks to everyone for joining me this afternoon. As a reminder some of the statements made during this conference call may be forward-looking. Relevant factors that could cause actual results to differ materially from those forward-looking statements are contained in our earnings release and in our SEC filings including our most recent Form 10-K. During this call, I will also discuss the non-GAAP financial measures included in our earnings release. The earnings release, which can be found on our website includes a reconciliation of the non-GAAP financial measures to the comparable GAAP financial measures. We filed our 10-Q this morning. It contains significantly more details on the operations and performance of our company. Please take time to review it. I will be referring to the data that was included in last night's earnings release. Net income for the first quarter of 2024 was $108 million or $11.23 a share compared to net income or $98 million or $10.09 a share for the first quarter of last year. Petroleum additives sales for the first three months of 2024 were $677 million, compared to $700 million for the same period in 2023. Petroleum additives operating profit for the first quarter was $151 million, compared to $132 million for the first quarter of 2023. The increase was mainly due to lower raw material and operating costs, partially offset by lower selling prices and product mix. Shipments increased 5% between quarterly periods with increases in both lubricant additives and fuel additive shipments across all regions except Latin America, which reported a decrease in lubricant additive shipments in North America, which reported a decrease in fuel additive shipments. We're pleased with the strong performance of our petroleum additives business during the first quarter of 2024. It is the sixth consecutive quarter with operating profit over $100 million. We are seeing evidence that our efforts to control operating costs are taking hold. Throughout 2024, managing our operating costs, our inventory levels and our portfolio profitability while continuing our investment in technology will remain priorities. We completed the acquisition of American Pacific Corporation or AMPAC on January 16, 2024 for approximately $700 million. Our first quarter results include 76 days of AMPAC operations. The financial results of our AMPAC business are included in our new specialty materials segment. Specialty materials sales for the first quarter of 2024 were $17 million and we reported an operating loss of $5 million. The loss primarily results from the sale of AMPAC finished goods inventory we acquired. This inventory was recorded at fair market value on the acquisition date and sold during the first quarter generating no margin. We may see substantial variation in our quarterly results for AMPAC on an ongoing basis due to the nature of the business and we anticipate full year results to be consistent with our pre-acquisition expectations. We generated solid cash flows from operations during the quarter. We funded capital expenditures of $14 million and we paid dividends of $24 million. In February, our Board approved an 11% increase in our quarterly dividend rate. The acquisition of AMPAC was funded by cash on hand and borrowings of approximately $690 million under our then existing revolving credit facility. On January 22, 2024 we replaced that facility with a new $900 million revolving credit facility and entered into a $200 million unsecured term loan. As of March 31, 2024, our net debt to EBITDA ratio was 1.9, which is within our target operating range of 1.5 to 2.0. We anticipate continued strength in our petroleum additives segment. We look forward to the successful integration of AMPAC into the NewMarket family of companies. As a team we will remain focused on maintaining long-term relationships with our customers, developing new products and technology to meet their needs both now and in the future and providing top quality customer service. 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 a world-class supply chain capability will continue to be beneficial for all our stakeholders. Thank you for joining me for the call today. Paul that concludes our planned comments. We are available for questions via e-mail or by phone. So please feel free to contact me directly. Thank you all again and we will talk to you next quarter.
Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
End of Q&A:
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