Quaker Chemical (KWR) Q4 2025 Earnings Transcript

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DATE

Tuesday, February 24, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Joseph A. Berquist
• Chief Financial Officer — Thomas Coler

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TAKEAWAYS

• Volume Impact -- Weather and operational issues in December reduced total volume by approximately 1%; management stated volume would have been flat otherwise.
• Gross Margin -- Operational challenges in the Americas lowered gross margin by slightly over 1% for the region; total revenue impact from these issues estimated between $5,000,000 and $10,000,000.
• Segment Trends -- Americas and EMEA remained sluggish with no broad-based recovery, while Asia Pacific delivered organic share gains at roughly twice the rate of the other regions.
• Underlying Markets -- Purchasing Managers’ Index readings hovered around or below 50 in key regions, illustrating ongoing market flatness or slight weakness.
• Share Gain Algorithm -- Management is targeting 2%-4% annual outgrowth over end markets and acknowledged achieving the high end of this range in recent quarters.
• Revenue and EBITDA Growth Objective -- Leadership confirmed that the outlook calls for mid single-digit growth in both volume and revenue, and high single-digit EBITDA growth driven by continued scale.
• Acquisitions Tailwind -- The Dipsol acquisition, which closed in April 2025, is projected to contribute an additional 1%-2% of top-line growth in 2026 due to a full-year impact.
• FX Effects -- Currency translation is expected to provide minor positive impact, though offset by certain higher costs.
• Pricing and Raw Materials -- Contract repricing in Asia Pacific provided some relief in Q4; management indicated an outlook of "relative stability" for both sales prices and raw material costs into the next two quarters.
• Americas Volumes -- Excluding a specific customer outage, Americas volumes would have been flat; management noted some demand softness in Mexico due to tariff uncertainty.
• M&A Activity -- No imminent transactions are expected, and diligence expenses recognized in Q4 are not anticipated to recur in Q1.
• Gross Margin Recovery -- Management expects gross margin to rebound to a 36%-37% range following operational resolutions.
• EBITDA Margin Target -- Company continues to pursue an 18% EBITDA margin objective, with explicit actions cited such as consolidation of global manufacturing and streamlining support functions.

SUMMARY

Quaker Chemical Corporation (NYSE:KWR) described a relatively flat market environment, with explicit management focus on generating outperformance through organic share gains across all regions. The company credited acceleration in Asia Pacific wins for above-average market outgrowth, while the Americas and EMEA continue to track sluggish industrial conditions without indication of recovery. Acquisition-related contributions, notably from Dipsol, are expected to add incremental growth, and the company anticipates margin recovery following the resolution of operational disruptions that impacted the fourth quarter.

• Management said, "There is a line of sight to specific cost initiatives, mostly in these functional support areas," highlighting plans to improve profitability independent of market recovery.
• M&A remains part of the long-term strategy, but leadership emphasized discipline, stating, "we do not anticipate any of those to be this to a transaction. Nothing is imminent."
• Full-year guidance is anchored on internal business execution, with management stating gains are "not coming from the market" but from continued pipeline development and integration efforts.
• Americas demand may face lingering headwinds in the first half due to customer-specific outages and persistent uncertainty in Mexico linked to tariffs.

INDUSTRY GLOSSARY

• PMI (Purchasing Managers' Index): An economic indicator based on monthly surveys of private sector companies, used to signal the direction of manufacturing and service sectors.
• EBITDA Margin: A profitability ratio calculated as earnings before interest, tax, depreciation, and amortization divided by total revenue, indicating operating efficiency.
• Flat Rolled: Refers to steel or metal products rolled into sheets or strips, a segment where Quaker Chemical has higher participation than in construction-grade materials.
• USMCA: The United States–Mexico–Canada Agreement, a regional trade agreement affecting cross-border commerce and tariffs in North America.

Full Conference Call Transcript

Operator: Holders.

Joseph A. Berquist: And work towards reducing net leverage following last year's acquisitions. With that, I will turn it back over to Joseph A. Berquist. Thank you, Thomas Coler. We made significant progress toward achieving our strategic objectives in 2026, and we look forward to growing revenues and adjusted EBITDA in 2027.

Operator: With that,

Joseph A. Berquist: we would be happy to take your questions. Thank you. We will now be conducting a question and answer session.

Operator: You may press 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset. One moment while we poll for questions. Our first question is from Michael Joseph Harrison with Seaport Research Partners. Please proceed.

Michael Joseph Harrison: Hi. Good morning.

Joseph A. Berquist: Morning, Mike.

Michael Joseph Harrison: Joe, you mentioned the weather related operational issues that impacted Q4, and it sounds like they are now resolved. I am curious. Can you help quantify that for us? And, I guess, looking out to Q1, I am sure you have a bunch of snow right now in the Philadelphia area, and I am just curious. Is it possible that we have some additional weather related impacts to keep in mind as we start thinking about what Q1 looks like?

Joseph A. Berquist: Yeah. Thanks, Mike. Yeah. In the fourth quarter, I think, particularly in December, we had some usual things that you see in plants, frozen pipes, issues with trucks and the like, a boiler. Not to get too specific. But that, if you think about the impact of that, did set us back a couple days, I guess, in the month. And, as we said in the comments earlier, overall, the impact of that was somewhere around 1% on our volume, and we would have been essentially flat. That has really been resolved as we head into the first quarter. Now we had this big snow event yesterday.

Most of that was on the East Coast, and, thankfully, our manufacturing is really in the center of the country in Ohio and Michigan and Illinois, for the most part. So, there is a ripple effect with these things as trucks and raw materials move around the country, and it impacts our customers as well as us. But I do not expect that to be anything real impactful at this point.

Michael Joseph Harrison: Alright. And then you mentioned that during Q4, you were getting some pricing in Asia, which is good because I know that price mix number has been under some pressure. But I was curious if you could give us a sense of your expectations for pricing there and maybe also wrap in some commentary on what you are seeing in raw material. I believe some of these oleochemicals that had been pressuring your margins back kind of in the middle of the year seem to have started to come lower. But maybe just some thoughts on kind of price versus raw material cost dynamics into the next couple of quarters?

Joseph A. Berquist: Sure, Mike. Yeah. A raw material standpoint, we are seeing things stabilize. Our outlook into Q1, Q2 at this point is relative stability. I think what you saw in the fourth quarter is timing of some of our contracts there. We had issues throughout the year last year in Asia Pacific, particularly. Some of those issues just took a while to resolve because we had contracts, and we had to negotiate new contracts in the fourth quarter, get some pricing. I am not really looking at pushing pricing right now. I think things have stabilized and overall should be a pretty flat market as far as that goes.

Michael Joseph Harrison: Alright. And then I guess, just in terms of your outlook and expecting EBITDA growth in 2027, it looks like the sell side consensus right now is looking for something close to 10% growth over 2026. And I am just curious, is that what you are targeting internally? Or would you say that the market outlook at this point probably supports a lower growth rate than that 10% that is baked into consensus?

Joseph A. Berquist: Yeah. I mean, we do not give specific guidance on that, but what I could tell you, Mike, is just kind of the algorithm that I think about. The markets that we are in are not expected to really grow. Underlying markets, I think, potentially could even be slightly down in the first half of the year, maybe slightly up in the second half of the year, but overall kind of flat. We have been very happy with how the share gain, the new business acquisition has gone over the past several quarters and feel pretty confident as we head into this year that we will be able to continue that pace.

We mentioned in the comments earlier, our target there is sort of 2% to 4% outgrowth of the market. We have been on the higher end of that, and I would expect that to continue with the visibility that I have to the pipeline and how things are looking on that end. We made some acquisitions last year. Those really did not come into play until the second quarter. We will have an extra quarter of those in our numbers, and so call that a 1% to 2% tailwind. We think there is perhaps some percent favorability overall with FX for the year. Some puts and takes there, some higher cost, but also some translation that helps us.

I do expect our gross margins to recover from the fourth quarter to be in that range of 36% to 37%. And then overall, I think we mentioned also there is a little bit of variable comp rebuild, a little bit of inflation. We have some comments in his comments. The new Radnor facility or the new facility here in Philadelphia. So some depreciation and things like that coming online, but overall, really, the algorithm that we are shooting for is a sort of mid single digit volume and revenue growth. If we could do a little bit better than that, great.

And then get that leverage, as you said, to the high single digits on EBITDA as we scale everything into the business. Alright. Very helpful. Thanks very much.

Joseph A. Berquist: Sure, Mike. Thanks.

Operator: Our next question is from Laurence Alexander with Jefferies. Please proceed.

Laurence Alexander: Good morning. Could you characterize the M&A pipeline and I guess also, can you give us some sense of the regional mix in the pipeline?

Joseph A. Berquist: Yeah, Laurence. Good morning. I think we mentioned earlier that we did have some activity in the fourth quarter. Really, it was related to kind of second half of the year multiple opportunities that we looked at. Those were not really regional opportunities. I would call them multi regional or global opportunities. They were larger, and, as I also mentioned, we do not anticipate any of those to be this to a transaction. Nothing is imminent. The overall pipeline itself remains healthy. I would say, Laurence, there is always a balance for us. We look at things in kind of two different angles.

We have had a good track record of doing these bolt-on type of transactions, things that add, help us grow our total addressable market, give us capabilities that we do not have, really expanding that wallet that we could sell to our customers. Transformational things, I think, they come along few and far between. When they do come along, we like to participate. Our balance sheet is strong. We have the ability to do those types of things, but we are also going to be very disciplined and not do something that does not make sense for our shareholders.

Laurence Alexander: And similarly, just, I guess, on a regional basis, can you give a sense for are your share gains fairly evenly distributed or is it kind of more in one region? Is it tied to particular customer end market mixes, end customers with end markets, or competitors with certain end market exposure? Just trying to get a sense for whether there is any kind of generational or limiting factor on the share gains that we should be aware of?

Joseph A. Berquist: I mean, I would say the share gains themselves have been pretty broad based. It has been all three regions. So Americas, EMEA, and Asia Pac. The basis of it, Asia Pac is definitely higher than EMEA and Americas. Call it on almost a 2x basis higher in Asia Pac versus those other regions. Some of that is just what is happening there. You have a lot of growth in markets like India. China is not growing the way it used to in the past, but it is still growing. Relative to the Americas and EMEA, that means new lines coming on, even new customers that did not exist.

And we make it an intentional part of our strategy to be the incumbent when these new plants come online. So that really speaks to some of the reasons why we are seeing higher conversion rates in Asia Pac than the other parts of the world. But overall, it is all three regions, and I think the sales engine is working pretty well for us right now.

Laurence Alexander: Thank you.

Operator: Our next question is from David Begleiter with Deutsche Bank. Please proceed.

David Begleiter: Thank you. Good morning. So you mentioned you expect some markets to be maybe down slightly in the first half of the year. Which markets are those, and which markets could be up in the first half of the year?

Joseph A. Berquist: Yeah. I mean, I think I would say the Americas and EMEA both were sluggish toward the end of the fourth quarter, and we have seen that carry into Q1. There may be some weather disruptions here in Q1 for Americas. I do not think that is going to be anything that is material. But we are just not seeing any kind of broad based recovery in the manufacturing segment in Americas or EMEA right now. PMIs dipped below 50 and are hovering right around that number. So there is not a lot happening, David, in those markets right now.

And there is a normal seasonality that you have in Asia Pacific due to the lunar holiday that happens in February. But, on balance, I think when you put all that together, we think things are going to be relatively flat or if they are down, it would be very, very small incrementally down. The one area I would say is, we have some specific customer issues in Americas that are related to events that took place at their facilities last year. Those will probably carry into the second quarter as far as what we know right now. So that is an additional sort of headwind, I think, on Americas.

But again, if I had to put a magnitude around it, I think it is very low single digit type of headwind.

David Begleiter: Got it. And I was going to ask on that Americas volume being down 4%, can you parse out maybe underlying growth, underlying volumes in that business? And what that could be in Q1 and Q2 as well, ex the customer outage?

Joseph A. Berquist: Yeah. Underlying growth for Americas, so the markets that we are in, the composite, I think, we had it down about 1%. Metals market being up a couple percent, but auto down when we talk about the metals market. But even though that metals market was up a couple percent, there was the specific customer issue that then impacted us in North America. It is also a mix of the flat rolled content versus construction, I-beams, rebar. We tend to participate a lot more on the flat rolled side. So overall, down about 1% in the fourth quarter, and a mix of different things there.

The one other angle I would tell you, David, is just uncertainty around tariffs, I think, has impacted this USMCA region, Mexico particularly, with maybe a little bit lower demand down there just from the tariff impact.

David Begleiter: And just to be clear, ex your Q1 volume, your Q4 volumes in Americas would have been down roughly 1% ex the customer outage. Is that fair?

Joseph A. Berquist: We think we would have been flat excluding the customer outage in North America. So, there were organic share gains. Markets were down. We had organic share gains, and then we had these operational issues as well as the specific customer outage. So all of that on balance we think would have been flat.

David Begleiter: Perfect. Thank you.

Operator: Our next question is from Jonathan E. Tanwanteng with CJS Securities. Please proceed.

Jonathan E. Tanwanteng: I just wanted to clarify, you mentioned that you have these M&A expenses for diligence and several opportunities that are not expected to close or result in anything anytime soon. Does that mean you are still too early in the process, or did they trip up in diligence for one reason or another? And what is the outlook for your M&A this year following that?

Joseph A. Berquist: Yeah. I would not so I am not going to say anything more specific than that, Jonathan, other than we do not anticipate any of those costs carrying into Q1. And there is no imminent transaction. Nothing imminent.

Jonathan E. Tanwanteng: Unfortunately. Okay. Fair enough. And then I might have missed it if you called it out specifically. I think you just talked about the customer plant fire, but I was wondering if you could quantify the gross profit or the EBITDA impact associated with that, the disposals and the weather in the quarter if you kind of have a normalized earnings or profitability number.

Joseph A. Berquist: I do not have that number. I think the impact on gross margin, I guess, or operating margin in the Americas was, call it, a little over 1% on the gross margin percentage. The revenues, it is hard to quantify that, but, you know, it is less, I would say less than $10,000,000. Somewhere between $5,000,000 and $10,000,000 in that range.

Jonathan E. Tanwanteng: Okay. And that is for all three issues together.

Joseph A. Berquist: Yes. Yes, Jonathan.

Jonathan E. Tanwanteng: Okay. Got it. Thank you.

Operator: Our next question is from Arun Shankar Viswanathan with RBC Capital Markets. Please proceed.

Arun Shankar Viswanathan: Great. Thanks for taking my question. I hope you guys are well. So, I guess I just wanted to understand the outlook for both Q1 and the full year. So I guess for Q1, you mentioned for the first half, maybe you would be flat to slightly down, or you do not really see much change in the underlying markets. I guess you will continue to see share gains and business wins in Asia Pacific. But would that be offset by weakness in the other regions or softness in the other regions? And then maybe could you see some improvement in growth in the second half? And so you would be up for the year?

Or is the year on year growth mostly from the absence of maybe five to ten one-timers? How should we think about the opportunity for growth in 2027?

Joseph A. Berquist: Yeah. Thanks, Arun. No. I would say overall, all three of our segments, so all three regions, we expect to have positive share gains year over year. So it is not just Asia Pacific. Asia Pacific share gains are coming in at a higher rate maybe than those other two regions, but we do expect to perform in that 2% to 4% range. And we have been on a pretty good clip on the higher end of those ranges the past several quarters. As you mentioned, not expecting much help from the markets.

But if there was going to be underlying market growth, that would happen in the second half, as far as we could tell at this point in time. We do have the benefit now of full year run rate of these acquisitions that we made last year. So that is a 1% to 2% kind of tailwind there. And there has been business that we won last year that has sort of a snowball effect as that rolls into the new year. So yeah, we are targeting to grow our business this year, have organic volume growth year over year, have revenue growth year over year, and have EBITDA growth year over year in all three of our segments.

And, you know, just other than that, it is not coming from the market. It is really coming from our sales development in the pipeline and just continuing to execute in that area.

Thomas Coler: Yeah. And Arun, this is Thomas Coler. I would just add that, remember, we acquired Dipsol at deal close in April last year. So we do have the benefit of one additional quarter of acquisition from Dipsol here in 2026.

Arun Shankar Viswanathan: Okay. And to clarify, what was the amount of non-repeating items, I guess, in 2026 that should not be a drag for 2027.

Thomas Coler: Yeah. I think we specifically provided a number on that, Arun. I think what Joseph A. Berquist had mentioned in his remarks is that we believe our volume in Q4 would have been roughly flat had it not been for the weather related items and the customer outage.

Arun Shankar Viswanathan: Okay. And then, could I just ask on margins as well? Looks like there were some, again, maybe that was related to some of these extra costs. But I am sure you are facing maybe some labor and benefits inflation, a tariff uncertainty, and so on. So from a margin perspective, would you still be on track at some point to get back to 18% EBITDA margins? I think you were down year on year in 2026 versus 2025, but you expect margin growth in 2027? And what would drive that?

And do you need volume to, I guess, organic market based volumes to improve in order to see that margin growth, or are there other things that you can do to drive that? Thanks.

Thomas Coler: Yeah. Thanks, Arun. So what I would say specifically with respect to gross margin in Q4, I think what you mentioned is correct. There were some specific items that we had mentioned in our prepared remarks with respect to weather and some operational challenges that we had in North America relative to production. I would say underlying that our product margin remains healthy in all three regions. And so, I would characterize some of the margin impact in Q4 of this year as operational in nature. As we have transitioned, even now through January here in 2027, we see that margin profile has recovered. Some of those operational issues have been resolved.

And then with respect to our long-term goals around 18% EBITDA margin growth, I will let Joseph A. Berquist answer that.

Joseph A. Berquist: Yeah. I mean, that is definitely still the target, Arun. We referenced the plant closure of Dortmund earlier. So that is something, as an example, we are looking at our network around the world. This is particularly in Europe. We have excess capacity, and we have too many nodes. And that is an example of where on the manufacturing cost side, there is opportunity for improvement. It is not just in North America. We think that will come into play in other regions as well. There is a line of sight to specific cost initiatives, mostly in these functional support areas.

We are working on things like fixing our master data, streamlining our business processes, and integrating these businesses that we have acquired over the past few years. So there are still opportunities there, I think, to look at combining R&D operations, combining sales offices, looking at combining even the sales organization, and getting some benefits there. So, really, yeah, volume will help us get to 18%, but there is still some self help, I think, in there that we think tangible actions that we could take that will make meaningful movement in the next year or two.

Thomas Coler: Thanks.

Operator: There are no further questions at this time. I would like to turn the call back over to Joseph A. Berquist for closing remarks.

Joseph A. Berquist: Okay. Thank you. Thanks everyone for joining our call today. We appreciate your continued interest in Quaker Chemical Corporation. I want to sincerely thank all of our colleagues around the world for their hard work in 2026 and their commitment to success in 2027. Please reach out to Kevin Estok if you have any additional follow-up questions. Thank you.

Operator: Thank you. This will conclude today’s call. You may disconnect at this time and thank you for your participation.

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