NewMarket Corporation (NYSE: NEU) has announced its financial results for the second quarter of 2024, with net income showing an increase to $112 million or $11.63 per share, up from $100 million or $10.36 per share in the same period last year. The company's petroleum additives segment reported a slight increase in shipments and a profit rise due to lower costs, despite a drop in selling prices. The newly acquired AMPAC contributed to the specialty materials segment's sales and a turnaround from a loss to a profit. NewMarket also reported strong cash flows, significant debt reduction, and a net debt to EBITDA ratio within the targeted range. The company expects continued strength in its petroleum additives segment and successful integration of AMPAC.
Key Takeaways
- NewMarket Corporation's net income for the second quarter of 2024 increased to $112 million.
- Earnings per share rose to $11.63, compared to $10.36 in Q2 2023.
- Petroleum additives net sales reached $670 million, with operating profit increasing to $148 million.
- Specialty materials sales were at $38 million, with operating profit at $5 million, reflecting the AMPAC acquisition.
- The company remains within its target net debt to EBITDA ratio of 1.6 times.
- Capital expenditures for 2024 are projected to be between $50 million and $70 million.
Company Outlook
- Anticipates continued strength in the petroleum additives segment.
- Expects full year 2024 results for AMPAC to align with pre-acquisition expectations.
- Projects capital expenditures in the $50 million to $70 million range for 2024.
- Focuses on long-term value for shareholders and customers with a commitment to safety, customer-centric solutions, and technology-driven products.
Bearish Highlights
- Reported a decrease in petroleum additives net sales compared to the second quarter of the previous year.
- Specialty materials segment initially recorded no margin from AMPAC finished goods due to fair value accounting at acquisition.
Bullish Highlights
- Increased petroleum additives shipments by approximately 1% from Q2 2023.
- Lower raw material and operating costs contributed to increased profits.
- Successful turnaround in specialty materials operating profit post-AMPAC acquisition.
Misses
- Decline in petroleum additives selling prices.
- Specialty materials segment faced challenges with AMPAC inventory initially generating no margin.
Q&A highlights
- No Q&A session details provided in the summary.
NewMarket Corporation's second-quarter performance exhibited resilience, with an uptick in net income and a positive shift in its specialty materials segment. The company's strategic acquisition of AMPAC and its emphasis on cost management have laid the groundwork for sustained growth. The financial stewardship demonstrated by the reduction in net debt and the maintenance of a healthy net debt to EBITDA ratio reflects NewMarket's commitment to financial prudence. Investors and stakeholders can look forward to the company's ongoing efforts to bolster its market position through its core business strategies and the integration of its new acquisition.
InvestingPro Insights
NewMarket Corporation's (NYSE: NEU) recent financial results reveal a company on a solid growth trajectory, with a particular emphasis on maintaining a robust dividend policy and a healthy balance sheet. Here are some key insights from InvestingPro that investors may find valuable:
- Dividend Reliability: NewMarket has a commendable track record of increasing its dividend, having done so for 5 consecutive years, and has maintained dividend payments for 19 consecutive years. This consistency underscores the company's commitment to returning value to shareholders and suggests confidence in its long-term financial health.
- Valuation and Profitability: The company is currently trading at a low P/E ratio of 13.26 relative to its near-term earnings growth, indicating that it may be undervalued by the market. Additionally, NewMarket's valuation implies a strong free cash flow yield, which is a positive sign for investors looking for companies with the potential for cash generation. With analysts predicting profitability this year, and the company having been profitable over the last twelve months, the financial outlook remains promising.
InvestingPro Data also provides a snapshot of NewMarket's financial health:
- The company's Market Cap stands at $5.43 billion.
- NewMarket has a Price to Earnings Growth (PEG) Ratio of 0.69, suggesting that the stock may be undervalued given its earnings growth potential.
- The Price / Book ratio is at 4.41, which is on the higher side, reflecting a premium that investors are willing to pay for the company's net assets.
For those interested in a deeper analysis, InvestingPro offers additional tips and metrics on NewMarket Corporation. Visit https://www.investing.com/pro/NEU to explore further insights and make more informed investment decisions.
Full transcript - NewMarket Corp (NEU) Q2 2024:
Operator: Good afternoon, everyone. And welcome to the NewMarket Corporation Conference Call and Webcast to review Second Quarter 2024 Financial Results. At this time, all participants have been placed on a listen only mode. It is now my pleasure to turn the floor over to your host, Bill Skrobacz. Sir, the floor is yours.
Bill Skrobacz: Thank you, Matthew. 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 Web site 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 second quarter of 2024 was $112 million or $11.63 a share compared to net income of $100 million or $10.36 a share for the same period in 2023. Petroleum additives net sales were $670 million compared to $684 million for the second quarter of last year. Petroleum additives operating profit for the quarter was $148 million compared to $132 million for the second quarter of 2023. The profit increase was mainly due to lower raw material and operating costs, as well as increased shipments partially offset by lower selling prices. Shipments increased approximately 1% when comparing the second quarter of 2024 with the same period in 2023. We're pleased with the strong performance of our petroleum additives business. 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. We completed the acquisition of American Pacific Corporation or AMPAC on January 16, 2024. The financial results of our AMPAC business since the date of acquisition are included in our specialty materials segment. Specialty material sales for the second quarter of 2024 were $38 million. Specialty materials operating profit for the second quarter of 2024 was $5 million compared to a loss of $5 million for the first quarter of 2024. The specialty materials results reflect the sale of AMPAC finished goods inventory that we acquired at closing. This inventory was recorded at fair value on the acquisition date and when sold during the first half of 2024 generated no margin. We expect any of this remaining inventory to be sold during the third quarter of 2024. We will see substantial variation in quarterly results for AMPAC due to the nature of its business, and we anticipate full year 2024 results to be consistent with our pre-acquisition expectations. We generated solid cash flows from operations during the quarter. We funded capital expenditures of $15 million and we paid dividends of $24 million. Since the AMPAC acquisition, we have made payments of $171 million on our revolving credit facility. As of June 30, 2024, our net debt to EBITDA ratio was 1.6 times, which is within our target range of 1.5 times to 2 times. For 2024, we expect to see capital expenditures in the $50 million to $70 million range. We anticipate continued strength in our petroleum additive segment. We also look forward to the ongoing integration of AMPAC into the new market family of companies. We continue to make decisions to promote long term value for our shareholders and customers and we remain focused on our long term objective. We believe the fundamentals and 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. Matthew that concludes our planned comments. We are available for questions via email 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. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
End of Q&A:
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