On July 29, 2024, NewMarket Corp (NEU, Financial) released its 8-K filing detailing the financial results for the second quarter and first half of 2024. NewMarket Corp is a holding company that, through its subsidiaries, manufactures and sells petroleum additives. These additives are used in lubricating oils and fuels to enhance their performance in machinery, vehicles, and other equipment.
Performance Overview
NewMarket Corp reported a net income of $111.6 million for Q2 2024, translating to $11.63 per share, compared to $99.6 million, or $10.36 per share, for the same period last year. For the first half of 2024, net income was $219.4 million, or $22.87 per share, up from $197.2 million, or $20.45 per share, in the first half of 2023.
Petroleum Additives Segment
Petroleum additives sales for Q2 2024 were $669.8 million, slightly down from $684.0 million in Q2 2023. However, the operating profit for this segment increased to $147.8 million from $132.1 million in the same period last year. This increase was primarily due to lower raw material and operating costs, as well as increased shipments, which were partially offset by lower selling prices. Shipments increased by approximately 1% year-over-year.
For the first half of 2024, petroleum additives sales were $1.3 billion, compared to $1.4 billion in the first half of 2023. The operating profit for this segment rose to $298.7 million from $264.2 million in the same period last year, driven by similar factors affecting the second quarter. Shipments increased by 2.7% year-over-year.
Specialty Materials Segment
The specialty materials segment, which includes the recently acquired American Pacific Corporation (AMPAC), reported sales of $38.0 million for Q2 2024. The operating profit for this segment was $5.0 million, compared to a loss of $5.0 million in Q1 2024. For the first half of 2024, the segment reported sales of $55.1 million and an operating profit slightly above breakeven.
Financial Achievements
NewMarket Corp has made significant strides in debt reduction, paying down $171 million since the AMPAC acquisition. As of June 30, 2024, the company's Net Debt to EBITDA ratio was 1.6, within their target range of 1.5 to 2.0. The company also generated solid cash flows from operations, funded capital expenditures of $28.5 million, and paid dividends of $48.0 million.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 |
|---|---|---|---|---|
| Net Sales | $710.2M | $685.1M | $1.41B | $1.39B |
| Gross Profit | $218.5M | $195.6M | $434.8M | $393.7M |
| Operating Profit | $147.0M | $124.2M | $287.8M | $249.3M |
| Net Income | $111.6M | $99.6M | $219.4M | $197.2M |
| Earnings Per Share | $11.63 | $10.36 | $22.87 | $20.45 |
Balance Sheet and Cash Flow
As of June 30, 2024, NewMarket Corp reported total assets of $3.15 billion, up from $2.31 billion at the end of 2023. The increase in assets was primarily driven by the acquisition of AMPAC. The company's long-term debt stood at $1.17 billion, up from $643.6 million at the end of 2023, reflecting the financing of the AMPAC acquisition.
Commentary
"We are pleased with the strong performance of our petroleum additives business during the first half of 2024. We are seeing the favorable results of our ongoing focus on margin management. Managing our operating costs, our inventory levels, and our portfolio profitability will remain priorities throughout 2024," said Thomas E. Gottwald, Chairman and CEO of NewMarket Corp.
Analysis
NewMarket Corp's performance in the first half of 2024 demonstrates its resilience and strategic focus on margin management. The increase in operating profit despite a slight decline in sales indicates effective cost management and operational efficiency. The successful integration of AMPAC and the significant debt reduction further strengthen the company's financial position.
Value investors may find NewMarket Corp's consistent profitability, strategic acquisitions, and prudent financial management appealing. The company's focus on long-term value creation and its robust performance in the petroleum additives segment position it well for future growth.
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Explore the complete 8-K earnings release (here) from NewMarket Corp for further details.
