NewMarket (NEU) Q3 2026 Earnings Call Transcript

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DATE

Thu, Oct 29, 2026

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - Thomas E. Gottwald
• Investor Relations - Tim Fitzgerald

TAKEAWAYS

• Net Income -- $124.1 million, increasing from $100.3 million due to higher operating profit and a lower effective tax rate.
• Earnings Per Share -- $13.50, representing growth from $10.67 in the third quarter of 2025.
• Petroleum Additives Sales -- $651.0 million, remaining relatively flat compared to $649.1 million last year despite an 8% decline in shipments.
• Petroleum Additives Operating Profit -- $130.9 million, compared to $131.3 million in the prior-year period, as surcharges offset supply chain disruption costs.
• Specialty Materials Sales -- $62.0 million, growing from $38.2 million driven by the acquisition of Calca Solutions and shifts in shipment mix.
• Specialty Materials Operating Profit -- $16.4 million, up from $6.0 million in the third quarter of 2025.
• Nine-Month Net Income -- $375.9 million, compared to $337.5 million for the same period in 2025.
• Petroleum Additives Nine-Month Sales -- $1.9 billion, compared to $1.9 billion in the first nine months of the previous year.
• Petroleum Additives Nine-Month Operating Profit -- $415.3 million, compared to $413.2 million reported in 2025.
• Specialty Materials Nine-Month Sales -- $187.3 million, up from $133.9 million in the prior-year period.
• Specialty Materials Nine-Month Operating Profit -- $51.2 million, increasing from $39.7 million last year.
• Shipment Volume -- down 8% in the petroleum additives segment during the quarter, reflecting market softness in lubricant additives.
• Year-to-Date Shipment Volume -- down 6% in the petroleum additives segment, driven by a strategic reduction in low-margin business and quarterly market softness.
• Capital Expenditures -- $88.5 million for the first nine months, focused on capacity expansion projects.
• Share Repurchases -- $126.4 million, used to buy back more than 200,000 shares of common stock.
• Dividends Paid -- $83.1 million for the first nine months of the year.
• Net Debt to EBITDA -- 1.0x as of Sept. 30, 2026, improving from 1.1x at the end of 2025.
• Total Assets -- $3.6 billion, including $77.3 million in cash and cash equivalents.
• Long-Term Debt -- $830.1 million, decreasing from $883.4 million at the end of 2025.
• Cost of Goods Sold -- $494.1 million for the quarter, compared to $480.7 million in the prior-year period.

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RISKS

• Fitzgerald stated, "Our teams continue to manage through a dynamic operating environment characterized by geopolitical uncertainty, supply chain disruptions, changing trade relations and tariffs, and softer lubricant additive demand," noting these factors drove shipment volume declines.

SUMMARY

NewMarket Corporation (NYSE:NEU) reported increased net income for the third quarter and first nine months of 2026, driven by higher operating profit and a reduced effective tax rate. The company managed headwinds in its petroleum additives segment, including market softness and supply chain disruptions, by implementing surcharges and strategically reducing low-margin business. Growth in the specialty materials segment followed the October 2025 acquisition of Calca Solutions and shifts in shipment mix. Management focused capital allocation on shareholder returns through dividends and share repurchases while continuing to fund capacity expansion projects in its aerospace and defense-related specialty materials business. These expansion initiatives for ammonium perchlorate and high-purity hydrazine remain scheduled for completion by the end of 2026.

• Management attributed the net income increase to a combination of improved operating profit and a reduced effective tax rate for both the third quarter and the nine-month period.
• Within the petroleum additives segment, NewMarket implemented surcharges to offset increased costs resulting from Middle East supply chain disruptions and volatile raw material, utility, and logistics expenses.
• Fitzgerald stated, "We expect these projects to be completed by the end of 2026 and further strengthen our ability to support critical aerospace and defense applications," regarding capacity expansions for ammonium perchlorate and high-purity hydrazine.
• The company reported that the decline in nine-month petroleum additives shipments was partially intentional, following a strategic evaluation to reduce low-margin business lines.
• The specialty materials segment grew year over year following the integration of Calca Solutions, though management noted that quarterly results for this segment would likely remain variable.

INDUSTRY GLOSSARY

• Ammonium Perchlorate: An inorganic compound used as an oxidizer in solid rocket propellants.
• High-purity Hydrazine: A specialized chemical propellant used in aerospace and defense applications.
• Lubricant Additives: Chemicals added to base oils to improve performance, protect surfaces, and extend the life of machinery.
• Petroleum Additives: Chemical formulations including lubricant and fuel additives that enhance the performance of petroleum products.
• Driveline Systems: Components in a vehicle that transfer power from the transmission to the wheels, including axles and differentials.
• Antiknock Compounds: Fuel additives used to reduce engine knocking and increase the octane rating of gasoline.

Full Conference Call Transcript

Operator: Please note, this conference call is being recorded. I will now turn the call over to NewMarket Corporation management.

Tim Fitzgerald: Thank you, 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 2026 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 yesterday's press release. Net income for the third quarter of 2026 was $124 million, or $13.50 per share, compared to net income of $100 million, or $10.67 per share for the third quarter of 2025. Net income for the first nine months of 2026 was $376 million, or $40.64 per share, compared to net income of $337 million, or $35.78 per share for the same period in 2025.

Higher operating profit and a reduced effective tax rate were the primary drivers behind the increase in net income for both the third quarter and the first nine months of 2026. Petroleum additives sales for the third quarter of 2026 were $651 million, compared to $649 million for the same period in 2025. Petroleum additives operating profit for the third quarter of 2026 was $131 million, essentially flat compared to the third quarter of 2025. Despite the broader market softness in lubricant additives that resulted in an 8% decline in shipments, we successfully implemented surcharges to offset higher costs incurred due to the supply chain disruptions in the Middle East.

Petroleum additives sales were $1.9 billion for both the first nine months of 2026 and 2025. Petroleum additives operating profit for the first nine months of 2026 was $415 million, compared to $413 million in 2025. Shipments were down 6% for the first nine months compared to the prior-year period, reflecting both the first half impact of our strategic decision to reduce low-margin business and the current market softness. We are pleased with the performance of our petroleum additives business during the first nine months of 2026. Our teams continue to manage through a dynamic operating environment characterized by geopolitical uncertainty, supply chain disruptions, changing trade relations and tariffs, and softer lubricant additive demand.

We remain focused on operational efficiency, cost control, margin management, and continued investment in technology and our global manufacturing and supply network. Specialty materials sales for the third quarter of 2026 were $62 million, compared to $38 million for the same period in 2025. Specialty materials operating profit for the third quarter of 2026 was $16 million, compared to $6 million for the third quarter of 2025. The increase in both sales and operating profit compared to the third quarter of 2025 reflects a shift in shipment mix, as well as the inclusion of the Calca Solutions business acquired on October 1st, 2025.

As we have noted before, quarterly results for the specialty materials segment will continue to vary due to the nature of the business. For the first nine months of 2026, specialty materials sales were $187 million, compared to $134 million for the same period in 2025. Specialty materials operating profit increased to $51 million, compared to $40 million in the prior-year period. We continue to be pleased with the performance of our specialty materials segment and remain excited about the capacity expansion projects underway for both ammonium perchlorate and high-purity hydrazine. We expect these projects to be completed by the end of 2026 and further strengthen our ability to support critical aerospace and defense applications.

Our operations generated solid cash flow during the first nine months of 2026, allowing us to invest in growth while continuing to return capital to our shareholders. During the period, we funded $88 million of capital expenditures, paid $83 million in dividends, and repurchased more than 200,000 shares for approximately $126 million. Our net debt-to-EBITDA ratio improved to 1x at September 30th, 2026. As we look ahead to the remainder of 2026, we continue to monitor the impact of the conflict in the Middle East, the broader macroeconomic environment, and ongoing developments in international trade relations and tariffs.

The surcharges and operational actions implemented earlier this year remain in place, and we will continue adjusting our approach as market conditions evolve. While the operating environment remains dynamic, we believe these actions position us well to continue delivering solid results. Our dedicated team continues to make decisions that promote long-term value for our shareholders and customers while remaining focused on our long-term objectives. We believe the fundamentals of how we run our business, including a long-term perspective, a safety-first culture, customer-focused solutions, technology-driven products, and world-class supply chain capabilities, will continue to benefit all our stakeholders. 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. Ladies and gentlemen, this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

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