Earnings call transcript: NewMarket Q1 2025 earnings beat expectations

NewMarket Corporation reported strong financial results for the first quarter of 2025, with earnings per share (EPS) of $13.26, surpassing market expectations. The company’s revenue reached $700.95 million. Following the announcement, NewMarket’s stock rose by 4.92% in after-hours trading, reflecting investor confidence in the company’s performance and future prospects. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.4, supported by strong profitability metrics and solid balance sheet fundamentals.

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Key Takeaways

• NewMarket’s Q1 2025 EPS of $13.26 exceeded forecasts.
• Revenue for the quarter was $700.95 million.
• The stock price increased by 4.92% after the earnings announcement.
• Specialty materials sales saw a significant year-over-year increase.
• The company plans a $100 million investment in expanding its AMPACT facility.

Company Performance

NewMarket Corporation demonstrated robust performance in the first quarter of 2025, with net income rising to $126 million from $108 million in the same period last year. This 16.7% year-over-year increase was driven by a strong showing in specialty materials sales, which jumped to $54 million from $17 million in Q1 2024. While petroleum additive sales declined to $646 million from $677 million the previous year, the company maintains impressive profitability metrics, with a gross profit margin of 31.8% and a return on equity of 36% over the last twelve months.

Financial Highlights

• Revenue: $700.95 million
• Earnings per share: $13.26, up from $11.23 in Q1 2024
• Net income: $126 million, a 16.7% increase year-over-year
• Net debt to EBITDA ratio improved to 1.1 from 1.9

Earnings vs. Forecast

NewMarket’s EPS of $13.26 surpassed market forecasts, reflecting a positive surprise for investors. The revenue figure of $700.95 million also aligned well with expectations, reinforcing the company’s strong financial health.

Market Reaction

Following the earnings announcement, NewMarket’s stock price rose by 4.92%, closing at $604.37. This movement brought the stock closer to its 52-week high, indicating strong investor confidence. The positive market reaction was likely influenced by the company’s earnings beat and growth in specialty materials sales. InvestingPro analysis suggests the stock is currently trading near its Fair Value, with a low P/E ratio of 12.5x relative to its near-term earnings growth potential.

Outlook & Guidance

NewMarket remains committed to long-term value creation through continued investment in technology and its supply network. The company is focusing on expanding its AMPACT facility, which is expected to increase production capacity by over 50% by 2026. This strategic initiative aims to capitalize on the growing demand for solid rocket motors in military and space sectors.

Executive Commentary

• Tim Fitzgerald emphasized the strategic importance of AMPACT, stating, "We view Ampak as a strategic national asset with a mission-critical role in global safety, security, and space programs."
• He also highlighted the company’s focus on efficiency: "We remain committed to improving efficiency and managing operating costs."
• Fitzgerald reiterated NewMarket’s dedication to customer-centric solutions and technological advancements.

Risks and Challenges

• Macroeconomic uncertainties and international trade tensions could impact future performance.
• Declining petroleum additive sales in key regions like Asia Pacific and North America pose a challenge.
• The company must navigate potential supply chain disruptions to maintain growth momentum.

Overall, NewMarket Corporation’s Q1 2025 results reflect strong financial performance and strategic initiatives aimed at sustaining growth. The positive market reaction underscores investor confidence in the company’s direction and future prospects. The company has maintained dividend payments for 20 consecutive years, with a current dividend yield of 1.91% and impressive dividend growth of 22.2% over the last twelve months.

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Full transcript - NewMarket Corp (NEU) Q1 2025:

Ollie, Conference Call Operator: Greetings, and welcome to today’s Newmarket Corporation scheduled conference call and webcast to review first quarter twenty twenty five financial Results. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Tim Fitzgerald. Sir, the floor is yours.

Tim Fitzgerald, Executive (likely CFO or CEO), Newmarket Corporation: Thank you, Ollie, and thanks, 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 ks. During this call, we 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 for the first quarter of twenty twenty five yesterday, and it contains significantly more details on the operations and performance of our company. Today, I will be referring to the data that was included in last night’s press release. Net income for the first quarter of twenty twenty five was $126,000,000 or $13.26 per share compared to net income of $108,000,000 or $11.23 per share for the first quarter of twenty twenty four. Petroleum additive sales for the first quarter of twenty twenty five were $646,000,000 compared to $677,000,000 for the same period in 2024. Petroleum additives operating profit for the first quarter of twenty twenty five was $142,000,000 compared to a record first quarter operating profit of $151,000,000 in 2024.

The decrease in operating profit was mainly due to lower shipments in the quarter. Lubricant additive shipments decreased in Asia Pacific and North America, while Europe and Latin America reported slight increases. Fuel additive shipments were lower in all regions except Asia Pacific, which reported a small increase. Despite the lower shipments, we continue to focus on operational efficiency, which has allowed us to maintain strong operating profit levels. We are very pleased with the performance of our petroleum additives business during the first quarter of twenty twenty five and the work done by our team to achieve these results.

However, we remain challenged by the ongoing macroeconomic environment and are monitoring the uncertainty around international trade relations and tariffs. We remain committed to improving efficiency and managing operating costs. Our focus continues to be on investing in technology and our supply network to meet customer demands, enhancing our operational efficiency and improving our portfolio profitability. We report the financial results of our AMPAC business in our Specialty Materials segment. Specialty Materials sales were $54,000,000 for the first quarter of twenty twenty five compared to $17,000,000 for the first quarter of twenty twenty four.

Specialty Materials operating profit was $23,000,000 for the first quarter of twenty twenty five compared to an operating loss of $5,000,000 for the first quarter of twenty twenty four. Specialty materials sales and operating profit for the first quarter of twenty twenty four reflect financial results since the acquisition of Ampak on 01/16/2024. As previously stated, we will see substantial variation in quarterly results for the Specialty Materials segment on an ongoing basis due to the nature of its business. As discussed in Ampact’s April twenty first, twenty twenty five press release, and as approved earlier today by the New Market Board of Directors, we plan to make a capital investment of up to $100,000,000 at our AMPACT facility in Cedar City, Utah. This investment will allow AMPACT to construct an additional production line, increasing capacity by more than 50%.

With a projected completion date in 2026, the increased production capacity will allow Ampak to meet the growing demand of solid rocket motors for US military and space launch programs while also addressing the needs of US allies in these critical areas. We view Ampak as a strategic national asset with a mission critical role in global safety, security, and space programs. This investment assures capacity to meet our customers’ growing needs while adding additional redundancy and security of supply in our production system. Our company generated solid cash flows throughout the quarter, which allowed us to return $83,000,000 to our shareholders through share repurchases of $57,000,000 and dividends of $26,000,000 As of 03/31/2025, our net debt to EBITDA ratio was 1.1, which is a significant improvement over the 1.9 times we reported at the end of Q1 twenty twenty four. As we look ahead to 2025, we are committed to making decisions that promote long term value for our shareholders and customers while staying focused on our long term objectives.

We believe that the core principles guiding our business, a long term perspective, a safety first culture, customer focused solutions, technology driven products, and a world class supply chain will continue to benefit all our stakeholders. Ali, 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.

Ollie, Conference Call Operator: Thank you. Ladies and gentlemen, this does conclude today’s call. You may disconnect your lines at this time. Have a wonderful day, and we thank you for your participation.

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