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NewMarket Corporation Reports Fourth Quarter and Full Year 2022 Results

  • Full Year Net Income of $279.5 Million and Earnings Per Share of $27.77
  • Petroleum Additives Full Year Operating Profit of $378.2 Million
  • Continued Focus on Margin Recovery and Cost Control

NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the fourth quarter and full year of 2022.

Net income for the fourth quarter of 2022 was $90.5 million, or $9.26 per share. Net income for 2022 was $279.5 million, or $27.77 per share, compared to net income of $190.9 million, or $17.71 per share, for 2021.

Petroleum additives sales for the fourth quarter were $680.3 million and reached $2.8 billion for 2022, compared to $2.3 billion for 2021. Petroleum additives operating profit for the fourth quarter was $117.1 million and for 2022 was $378.2 million, compared to $281.1 million in 2021. For the year, the operating profit increase was mainly due to increased selling prices partially offset by higher raw material and operating costs. Shipments decreased 2.9% between periods, primarily due to decreases in lubricant additives shipments. Supply chain disruptions and new sanctions introduced during 2022 as a result of the Russia-Ukraine war were the primary contributors to the decline in shipments.

During 2022, we funded capital expenditures of $56.2 million and returned $291.8 million to our shareholders through dividends ($84.3 million) and share repurchases (668,553 shares of our common stock for a total of $207.5 million). We continue to operate with low leverage, with a Net Debt to EBITDA ratio of 2.0 as of December 31, 2022.

The last three years have been characterized by unprecedented factors, including the impact of the COVID-19 pandemic, worldwide supply chain disruptions, inflation, and war. Accordingly, we believe that it is useful to compare our 2022 results to 2019, the last full year before these factors. Petroleum additives sales in 2022 were $578.4 million higher than in 2019, an increase of 26%. Petroleum additives operating profit in 2022 was $19.0 million higher, an increase of 5% over 2019, and shipments in 2022 were 2.8% higher than 2019. Petroleum additives operating margin for 2022 was 13.7% versus 16.5% in 2019.

We are pleased by the performance of our petroleum additives business in 2022 and the work done by our team to navigate through the many challenges of the past three years. While our efforts to resolve supply chain issues to better meet our customers’ growing needs have shown improvement, we are still challenged by the inflationary environment and rising operating costs that we expect to continue into 2023. Margin recovery and cost control will remain priorities throughout 2023.

I want to thank our dedicated employees for their commitment to our business and to serving our customers. We continue to make decisions to promote 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 our stakeholders.

Sincerely,

Thomas E. Gottwald

The petroleum additives segment consists of the North America (the United States and Canada), Latin America (Mexico, Central America, and South America), Asia Pacific, and Europe/Middle East/Africa/India (Europe or EMEAI) regions.

The Company has disclosed the non-GAAP financial measures EBITDA, Net Debt, and Net Debt to EBITDA, as well as the related calculations 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 (on property, plant and equipment) and amortization (on intangibles and lease right-of-use assets). Net Debt is defined as long-term debt, including current maturities, less cash and cash equivalents and marketable securities. Net Debt to EBITDA is defined as Net Debt divided by EBITDA. The Company believes that even though these items are not required by or presented in accordance with United States generally accepted accounting principles (GAAP), these additional measures enhance understanding of the Company’s performance and period to period comparability. The Company believes that these items should not be considered an alternative to our results determined under GAAP.

As a reminder, a conference call and Internet webcast is scheduled for 3:00 p.m. EST on Wednesday, February 1, 2023, to review fourth quarter and full year 2022 financial results. You can access the conference call live by dialing 1-888-506-0062 (domestic) or 1-973-528-0011 (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 February 8, 2023, at 3:00 p.m. EST by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay passcode number is 47385. The call will also be broadcast via the Internet and can be accessed through the Company’s website at www.NewMarket.com or www.webcaster4.com/Webcast/Page/2001/47385. 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 production facilities, including single-sourced facilities; hazards common to chemical businesses; the ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; sudden, sharp, or prolonged raw material price increases; competition from other manufacturers; current and future governmental regulations; the gain or loss of significant customers; failure to attract and retain a highly-qualified workforce; an information technology system failure or security breach; the occurrence or threat of extraordinary events, including natural disasters, terrorist attacks, wars and health-related epidemics such as the COVID-19 pandemic; risks related to operating outside of the United States; political, economic, and regulatory factors concerning our products; the impact of substantial indebtedness on our operational and financial flexibility; the impact of fluctuations in foreign exchange rates; resolution of environmental liabilities or legal proceedings; limitation of our insurance coverage; our inability to realize expected benefits from investment in our infrastructure or from future acquisitions, or our inability to successfully integrate future acquisitions into our business; the underperformance of our pension assets resulting in additional cash contributions to our pension plans; 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 2021 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)

 

 

 

Fourth Quarter Ended December 31,

 

Twelve Months Ended December 31,

 

 

2022

 

2021

 

2022

 

2021

Revenue:

 

 

 

 

 

 

 

 

Petroleum additives

 

$

680,292

 

 

$

573,387

 

 

$

2,754,310

 

 

$

2,343,942

 

All other

 

 

2,267

 

 

 

3,180

 

 

 

10,489

 

 

 

12,168

 

Total

 

$

682,559

 

 

$

576,567

 

 

$

2,764,799

 

 

$

2,356,110

 

Segment operating profit:

 

 

 

 

 

 

 

 

Petroleum additives

 

$

117,114

 

 

$

40,656

 

 

$

378,244

 

 

$

281,055

 

All other

 

 

(1,577

)

 

 

(727

)

 

 

(1,782

)

 

 

(1,525

)

Segment operating profit

 

 

115,537

 

 

 

39,929

 

 

 

376,462

 

 

 

279,530

 

Corporate unallocated expense

 

 

(6,190

)

 

 

(4,623

)

 

 

(21,579

)

 

 

(21,214

)

Interest and financing expenses

 

 

(10,343

)

 

 

(9,661

)

 

 

(35,202

)

 

 

(34,218

)

Loss on early extinguishment of debt

 

 

0

 

 

 

0

 

 

 

(7,545

)

 

 

0

 

Other income (expense), net

 

 

9,286

 

 

 

4,325

 

 

 

35,598

 

 

 

23,453

 

Income before income tax expense

 

$

108,290

 

 

$

29,970

 

 

$

347,734

 

 

$

247,551

 

Net income

 

$

90,522

 

 

$

17,206

 

 

$

279,538

 

 

$

190,908

 

Earnings per share - basic and diluted

 

$

9.26

 

 

$

1.65

 

 

$

27.77

 

 

$

17.71

 

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per-share amounts, unaudited)

 

 

 

Fourth Quarter Ended December 31,

 

Twelve Months Ended December 31,

 

 

2022

 

2021

 

2022

 

2021

Net sales

 

$

682,559

 

$

576,567

 

$

2,764,799

 

$

2,356,110

Cost of goods sold

 

 

503,008

 

 

469,833

 

 

2,124,302

 

 

1,808,403

Gross profit

 

 

179,551

 

 

106,734

 

 

640,497

 

 

547,707

Selling, general, and administrative expenses

 

 

35,803

 

 

34,594

 

 

145,106

 

 

145,973

Research, development, and testing expenses

 

 

34,217

 

 

36,711

 

 

140,252

 

 

143,952

Operating profit

 

 

109,531

 

 

35,429

 

 

355,139

 

 

257,782

Interest and financing expenses, net

 

 

10,343

 

 

9,661

 

 

35,202

 

 

34,218

Loss on early extinguishment of debt

 

 

0

 

 

0

 

 

7,545

 

 

0

Other income (expense), net

 

 

9,102

 

 

4,202

 

 

35,342

 

 

23,987

Income before income tax expense

 

 

108,290

 

 

29,970

 

 

347,734

 

 

247,551

Income tax expense

 

 

17,768

 

 

12,764

 

 

68,196

 

 

56,643

Net income

 

$

90,522

 

$

17,206

 

$

279,538

 

$

190,908

Earnings per share - basic and diluted

 

$

9.26

 

$

1.65

 

$

27.77

 

$

17.71

Cash dividends declared per share

 

$

2.10

 

$

2.10

 

$

8.40

 

$

8.00

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts, unaudited)

 

 

 

December 31,

2022

 

December 31,

2021

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

68,712

 

 

$

83,304

 

Marketable securities

 

 

0

 

 

 

375,918

 

Trade and other accounts receivable, less allowance for credit losses

 

 

453,692

 

 

 

391,779

 

Inventories

 

 

631,383

 

 

 

498,539

 

Prepaid expenses and other current assets

 

 

38,338

 

 

 

38,633

 

Total current assets

 

 

1,192,125

 

 

 

1,388,173

 

Property, plant, and equipment, net

 

 

659,998

 

 

 

676,770

 

Intangibles (net of amortization) and goodwill

 

 

126,069

 

 

 

127,752

 

Prepaid pension cost

 

 

302,584

 

 

 

242,604

 

Operating lease right-of-use assets, net

 

 

62,417

 

 

 

68,402

 

Deferred charges and other assets

 

 

63,625

 

 

 

54,735

 

Total assets

 

$

2,406,818

 

 

$

2,558,436

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

273,289

 

 

$

246,097

 

Accrued expenses

 

 

89,508

 

 

 

85,103

 

Dividends payable

 

 

17,850

 

 

 

16,648

 

Income taxes payable

 

 

16,109

 

 

 

4,442

 

Operating lease liabilities

 

 

15,569

 

 

 

15,709

 

Current portion of long-term debt

 

 

0

 

 

 

349,434

 

Other current liabilities

 

 

11,562

 

 

 

7,654

 

Total current liabilities

 

 

423,887

 

 

 

725,087

 

Long-term debt

 

 

1,003,737

 

 

 

789,853

 

Operating lease liabilities - noncurrent

 

 

46,968

 

 

 

52,591

 

Other noncurrent liabilities

 

 

169,819

 

 

 

228,776

 

Total liabilities

 

 

1,644,411

 

 

 

1,796,307

 

Shareholders' equity:

 

 

 

 

Common stock and paid-in capital (with no par value issued and outstanding shares - 9,702,147 at December 31, 2022 and 10,362,722 at December 31, 2021)

 

 

0

 

 

 

0

 

Accumulated other comprehensive loss

 

 

(71,995

)

 

 

(82,227

)

Retained earnings

 

 

834,402

 

 

 

844,356

 

Total shareholders' equity

 

 

762,407

 

 

 

762,129

 

Total liabilities and shareholders' equity

 

$

2,406,818

 

 

$

2,558,436

 

NEWMARKET CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED CASH FLOW DATA

(In thousands, unaudited)

 

 

 

Twelve Months Ended December 31,

 

 

2022

 

2021

Net income

 

$

279,538

 

 

$

190,908

 

Depreciation and amortization

 

 

82,285

 

 

 

84,320

 

Loss on early extinguishment of debt

 

 

7,545

 

 

 

0

 

Loss on marketable securities

 

 

2,977

 

 

 

7,440

 

Cash pension and postretirement contributions

 

 

(9,748

)

 

 

(10,342

)

Working capital changes

 

 

(204,636

)

 

 

(116,355

)

Deferred income tax (benefit) expense

 

 

(42,645

)

 

 

1,978

 

Purchases of marketable securities

 

 

(787

)

 

 

(393,434

)

Proceeds from sales and maturities of marketable securities

 

 

372,846

 

 

 

10,957

 

Capital expenditures

 

 

(56,169

)

 

 

(78,934

)

Redemption of 4.10% senior notes

 

 

(350,000

)

 

 

0

 

Issuance of 2.70% senior notes

 

 

0

 

 

 

395,052

 

Cash costs of 4.10% senior notes redemption

 

 

(7,099

)

 

 

0

 

Debt issuance costs

 

 

0

 

 

 

(3,897

)

Net borrowings under revolving credit facility

 

 

213,000

 

 

 

148,000

 

Repurchases of common stock

 

 

(207,470

)

 

 

(196,220

)

Dividends paid

 

 

(84,263

)

 

 

(85,910

)

All other

 

 

(9,966

)

 

 

4,569

 

(Decrease) increase in cash and cash equivalents

 

$

(14,592

)

 

$

(41,868

)

NEWMARKET CORPORATION AND SUBSIDIARIES

NON-GAAP FINANCIAL INFORMATION

(In thousands, unaudited)

 

 

 

Fourth Quarter Ended December 31,

 

Twelve Months Ended December 31,

 

 

2022

 

2021

 

2022

 

2021

Net Income

 

$

90,522

 

$

17,206

 

$

279,538

 

$

190,908

Add:

 

 

 

 

 

 

 

 

Interest and financing expenses, net

 

 

10,343

 

 

9,661

 

 

35,202

 

 

34,218

Income tax expense

 

 

17,768

 

 

12,764

 

 

68,196

 

 

56,643

Depreciation and amortization

 

 

19,777

 

 

20,752

 

 

80,775

 

 

82,532

EBITDA

 

$

138,410

 

$

60,383

 

$

463,711

 

$

364,301

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

2022

 

2021

Long-term debt, including current maturities

 

 

 

 

 

$

1,003,737

 

$

1,139,287

Less:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

68,712

 

 

83,304

Marketable securities

 

 

 

 

 

 

0

 

 

375,918

Net Debt

 

 

 

 

 

$

935,025

 

$

680,065

Net Debt to EBITDA

 

 

 

 

 

 

2.0

 

 

1.9

 

 

 

 

 

 

 

 

 

 

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