NewMarket (NEU) Q3 2025 Earnings Call Transcript

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DATE

Friday, October 31, 2025 at 3 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Timothy Fitzgerald

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RISKS

• Chief Executive Officer Fitzgerald cited "the ongoing inflationary environment and the impact of tariffs" as adverse external pressures on profitability.
• Market softness and a 4.1% quarterly, and 4.6% nine-month, decline in shipments directly curtailed segment revenues and profits.
• Onetime charges from manufacturing optimization initiatives negatively affected Petroleum Additives operating profit for the quarter.

TAKEAWAYS

• Net income -- $100 million, or $10.67 per share, down from $132 million, or $13.79 per share, reflecting a year-over-year decline.
• Petroleum Additives sales -- $649 million, compared to $663 million, with shipments declining by 4.1% and operating profit decreasing to $131 million from $157 million, primarily due to onetime charges related to global manufacturing optimization and higher R&D spending.
• Petroleum Additives shipments -- Down 4.6% for the first nine months, driven by market softness and a strategic reduction in low-margin business.
• Petroleum Additives nine-month results -- Sales totaled $1.9 billion, compared to $2 billion; operating profit was $413 million, down from $456 million, with the same drivers as the quarter.
• Specialty Materials segment sales -- $38 million, compared to $59 million; operating profit fell to $6 million from $16 million due to lower volume and ongoing variability in quarterly results.
• Specialty Materials segment nine-month results -- Sales were $134 million, versus $114 million (for the partial reporting period in 2024), and operating profit increased to $40 million from $16 million.
• Acquisition -- The company acquired Calca Solutions, LLC, a domestic leader in ultrapure and high-purity hydrogen propellants for aerospace and defense, expanding its Specialty Materials segment.
• Investment commitment -- Approximately $1 billion committed to Specialty Materials acquisitions and capacity expansion since 2024.
• Shareholder returns -- $155 million returned via $77 million in share repurchases and $78 million in dividends during the first nine months.
• Net debt reduction -- Net debt reduced by $213 million, bringing the net debt-to-EBITDA ratio down to 0.9x by September 30, 2025.
• Dividend increase -- Board approved a 9% increase in the quarterly dividend from $2.75 to $3 per share, effective for the dividend payable January 2, 2026.
• Macroeconomic challenges -- Chief Executive Officer Fitzgerald cited ongoing "inflationary environment and the impact of tariffs" as continuing obstacles, alongside persistent market softness affecting shipments.

SUMMARY

NewMarket Corporation (NYSE:NEU) reported year-over-year declines in net income and operating profit across both Petroleum Additives and Specialty Materials segments, with shipment volumes and sales pressured by market softness and external cost headwinds. The acquisition of Calca Solutions, LLC, and continued investment in Specialty Materials signal a strategic focus on high-technology end markets. The company reduced net debt and increased its quarterly dividend, reflecting ongoing capital discipline and a commitment to shareholder returns.

• Chief Executive Officer Fitzgerald emphasized, "We are very pleased with the performance of our petroleum additives business during the first 9 months of 2025. However, we remain challenged by the ongoing inflationary environment and the impact of tariffs as well as softness in the market impacting shipments."
• Management highlighted ongoing investments in technology and manufacturing optimization aimed at long-term efficiency gains, despite near-term cost impacts.
• Chief Executive Officer Fitzgerald stated that quarterly variability in Specialty Materials segment performance is expected to persist, reflecting the nature of the business.
• The company reiterated its focus on "a long-term perspective, a safety-first culture, customer-focused solutions, technology-driven products and a world-class supply chain" as guiding corporate principles.

INDUSTRY GLOSSARY

• Petroleum additives: Chemical formulations blended with fuels or lubricants to enhance performance, durability, or efficiency in engines and industrial applications.
• Specialty materials: High-value, application-specific chemical or material products, often involving advanced or mission-critical uses such as aerospace or defense.
• Ultrapure and high-purity hydrogen propellants: Specialized chemical products used as fuel in aerospace and defense systems, requiring extreme purity standards for reliable performance.

Full Conference Call Transcript

Timothy Fitzgerald: 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, 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 third quarter of 2025 earlier today, 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 third quarter of 2025 was $100 million or $10.67 per share compared to net income of $132 million or $13.79 per share for the third quarter of 2024. Net income for the first 9 months of 2025 was $337 million, or $35.78 per share compared to net income of $352 million or $36.66 per share for the first 9 months of 2024.

Petroleum additives sales for the third quarter of 2025 were $649 million compared to $663 million for the same period in 2024. Petroleum additives operating profit for the third quarter of 2025 was $131 million compared to $157 million for the third quarter of 2024, which was a record quarter for this segment. The decrease in operating profit compared to prior year was primarily driven by onetime charges during the quarter, including those related to optimizing our global manufacturing network which will enable us to deliver products to our customers more efficiently in the years ahead.

A 4.1% decline in shipments between quarterly periods and an increase in research and development investments to support our customer needs also contributed to the decrease in petroleum additives operating profit. For the first 9 months of 2025, sales for the Petroleum Additives segment were $1.9 billion, compared to $2 billion for the same period in 2024. Petroleum additives operating profit for the first 9 months of 2025 was $413 million compared to $456 million for the same period in 2024. The drivers for the decrease in operating profit were consistent with those affecting the third quarter comparison.

Shipments were down by 4.6% when comparing the first 9 months of 2025 with the same period in 2024, driven by softness in the market and our strategic decision to manage the profitability of our portfolio by reducing low-margin business. We are very pleased with the performance of our petroleum additives business during the first 9 months of 2025. However, we remain challenged by the ongoing inflationary environment and the impact of tariffs as well as softness in the market impacting shipments. We continue to focus on investing in technology to meet customer needs, optimizing our inventory levels and improving our portfolio profitability. We report the financial results of our AMPAC business in our Specialty Materials segment.

Specialty Materials sales for the third quarter of 2025 were $38 million, compared to $59 million for the same period in 2024. Specialty Materials operating profit for the third quarter of 2025 was $6 million compared to $16 million for the third quarter of 2024. The decrease in operating profit was mainly due to lower volume within the quarter. 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 the business. For the first 9 months of 2025, sales for the Specialty Materials segment were $134 million compared to $114 million for the period of January 16 to September 30, 2024.

Specialty Materials operating profit for the first 9 months of 2025 was $40 million compared to $16 million for the period of January 16 to September 30, 2024. As previously announced, we expanded our investment in the Specialty Materials segment through the October 1, 2025 acquisition of Calca Solutions, LLC. Calca is the nation's leading producer of ultrapure and high-purity hydrogen mission-critical propellant used in advanced aerospace and defense applications. Since 2024 through our acquisitions of AMPAC and Calca and our investments to expand capacity at both operations, we have committed approximately $1 billion to this resilient high-technology Specialty Materials segment.

Our company generated solid cash flows throughout the first 9 months of 2025, which allowed us to return $155 million to our shareholders through share repurchases of $77 million and dividends of $78 million. We also reduced our net debt by $213 million in the first 9 months of 2025, driving our net debt-to-EBITDA ratio down to 0.9x as of September 30, 2025. This strong cash flow performance enables us to continue to provide value to our shareholders through reinvestment of capital into our businesses for growth and efficiency, acquisitions, share repurchases and dividends.

Yesterday, the company's Board of Directors approved raising the quarterly dividend by 9%, up from $2.75 per share on our common stock to $3 per share for the dividend that is payable January 2, 2026. We anticipate continued strength in our Petroleum Additives and Specialty Materials segments. We are committed to making decisions to 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 of our stakeholders. Matthew, 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'll 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.

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