NewMarket Corporation (NYSE: NEU) has reported its earnings for the fourth quarter and full year of 2023, revealing nuanced financial results. The company announced a fourth-quarter net income of $80 million, or $8.38 per share, a decrease from the previous year's $91 million, or $9.26 per share. Full-year net income rose to $389 million, or $40.44 per share, up from $280 million, or $27.77 per share in 2022.
Petroleum additives sales declined in Q4 but increased operating profit for the full year. The company also completed a significant acquisition of American Pacific Corporation and improved its debt-to-EBITDA ratio.
Key Takeaways
- Q4 net income decreased to $80 million, or $8.38 per share, from $91 million, or $9.26 per share in Q4 2022.
- Full-year net income increased to $389 million, or $40.44 per share, from $280 million, or $27.77 per share in 2022.
- Q4 petroleum additives sales were $642 million, down from $680 million in the same period last year.
- Full-year petroleum additives operating profit rose to $514 million from $378 million in 2022.
- The company acquired AMPAC for approximately $700 million, expected to be accretive to 2024 net income.
- NewMarket secured a new five-year $900 million revolving credit facility and a two-year $250 million unsecured term loan.
Company Outlook
- Anticipates continued strength in the petroleum additives segment.
- Expects AMPAC integration to contribute positively to the company's performance.
- Focuses on long-term value for shareholders and customers.
- Emphasizes a safety-first culture, customer-focused solutions, technology-driven product offerings, and world-class supply chain capability.
Bearish Highlights
- Decreased Q4 net income year-over-year.
- Lower petroleum additives sales in Q4 2023 compared to Q4 2022.
- Operating profit decline in Q4 due to higher operating costs and lower shipments, despite lower raw material costs.
- Persisting global economic weakness and inventory rationalization impacting shipments.
- Ongoing inflationary pressures increasing operating costs.
Bullish Highlights
- Increased full-year net income and operating profit for the petroleum additives segment.
- Strong operating results for Q4 in comparison to historical performance.
- Improved working capital by $134 million.
- Reduced revolving credit facility debt by $361 million.
- Enhanced net debt-to-EBITDA ratio from 2.0 to 0.9 year-over-year.
Misses
- Q4 petroleum additives sales and operating profit fell short of the previous year's figures.
- Shipments decreased by 10.7% in 2023 compared to 2022.
Q&A Highlights
- The company is open to further questions via email or phone and encourages direct contact with the host, Mr. Bill Skrobacz, for additional inquiries.
This report reflects the latest financial developments for NewMarket Corporation, presenting a comprehensive view of its recent performance and strategic moves. The company's mixed results indicate both challenges and areas of growth, with strategic acquisitions and financial restructuring setting the stage for future progress.
InvestingPro Insights
NewMarket Corporation (NYSE: NEU) has shown a resilient financial performance in the face of a challenging economic environment. The company's strategic moves, including the acquisition of AMPAC and the improvement of its debt-to-EBITDA ratio, demonstrate a commitment to long-term value creation. Here are some key insights from InvestingPro that provide a deeper understanding of NewMarket's financial health and market position:
- InvestingPro Data shows that NewMarket's Market Cap stands at $5.69 billion, with a solid P/E Ratio of 14.66, slightly adjusting to 14.64 when looking at the last twelve months as of Q4 2023. This indicates a reasonable valuation in the market, especially when considering near-term earnings growth.
- The company's PEG Ratio for the last twelve months as of Q4 2023 is notably low at 0.14, suggesting potential for growth when compared to the P/E Ratio. Moreover, the Price / Book multiple as of the same period is 5.29, reflecting a premium market valuation that investors are willing to pay for the company's assets.
- NewMarket's strong financial discipline is also evident in its dividend practices, with a Dividend Yield as of early 2024 at 1.52% and a Dividend Growth rate of 7.14% for the last twelve months as of Q4 2023.
Investors looking for stability and growth may find NewMarket an attractive option, backed by InvestingPro Tips** such as the company's perfect Piotroski Score of 9, aggressive share buybacks by management, and a high shareholder yield. What's more, NewMarket has raised its dividend for 5 consecutive years and has maintained dividend payments for 18 consecutive years, signaling a strong commitment to returning value to shareholders.
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NewMarket Corporation's latest financial results and strategic initiatives, coupled with insights from InvestingPro, paint a picture of a company that is navigating market challenges while laying the groundwork for sustained growth and shareholder returns.
Full transcript - NewMarket Corp (NEU) Q4 2023:
Operator: Good day and welcome to the NewMarket Corporation Scheduled Conference Call and Webcast to review the Fourth Quarter and Full Year 2023. At this time, all participants are placed on a listen-only mode. And it now my pleasure to turn the floor over to your host, Mr. Bill Skrobacz. Sir, the floor is yours.
Bill Skrobacz: Thank you, Ali and thanks to everyone for joining me this afternoon. As a reminder, some of the statements made during this conference call maybe 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 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 intend to filed our 2023 10-K in the middle of February. It will contain significantly more details on the operations and performance of our company. Please review it. I will be referring to the data that was included in last night’s release. Net income for the fourth quarter of 2023 was $80 million or $8.38 per share, compared to net income of $91 million or $9.26 per share for the fourth quarter of 2022. Net income for 2023 was $389 million or $40.44 per share compared to net income of $280 million or $27.77 per share for 2022. Petroleum additives sales for the fourth quarter of 2023 were $642 million compared to $680 million for the same period in 2022. Petroleum additives operating profit for the fourth quarter of 2023 was $110 million compared to $117 million for the fourth quarter of 2022. The decrease in operating profit was mainly due to higher operating costs and lower shipments, partially offset by lower raw material costs. We also experienced lower selling prices offset by favorable product mix. It's also worth noting that the operating results for both fourth quarter periods were very strong when compared to our historical fourth quarter operating results. Sales for petroleum additives segment for 2023 were $2.7 billion compared to $2.8 billion in 2022. Petroleum additives operating profit for 2023 was $514 million compared to $378 million for 2022. The increase in operating profit was a result of selling prices, including favorable product mix, partially offset by lower shipments and higher raw material and operating costs. Shipments decreased 10.7% when comparing 2023 to 2022, with decreases in both lubricant additives and fuel additive shipments in all regions except Europe, which reported a small increase in fuel additive shipments. During 2023, our shipments were impacted by the overall global economic weakness and inventory rationalization, which persists in the chemical industry. We remain challenged by the ongoing inflationary environment and continue to experience increased operating costs. We are maintaining our focus on managing our operating costs, our inventory levels, and our portfolio profitability, while continuing our investment in technology. We are very pleased with the performance of our petroleum additives business in 2023 and the work done by our team to achieve four quarters of strong operating profit. We generated solid cash flows throughout the year, our working capital improved by $134 million, and we made payments of $361 million on our revolving credit facility. We returned $128 million to our shareholders through dividends of $85 million and share repurchases of $43 million. As of December 31st, 2023, our net debt-to-EBITDA ratio was 0.9, which was a significant improvement over the December ratio of 2.0 last year. On January 16th, 2024, we completed the acquisition of American Pacific Corporation for approximately $700 million. AMPAC is the leading North American manufacturer of critical performance additives used in solid rocket motors for space launch and military defense applications. The acquisition was funded by cash on hand and borrowings under our revolving credit facility. We expect that AMPAC will be accretive to our net income in 2024. The additional borrowing associated with the AMPAC acquisition, increased our net debt-to-EBITDA ratio, but we remain within our target operating range of 1.5 to 2.0. On January 22nd, we entered into a new five-year $900 million revolving credit facility that replaced our prior $900 million facility and also entered into a two-year $250 million unsecured term loan. This term loan gave us additional flexibility to repay borrowings under our revolving credit facility and support our business needs. As we look ahead to 2024 and beyond, we anticipate continued strength in our petroleum additives segment. We also look forward to the integration of AMPAC into the new market family of companies. 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. Ali, 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 will talk to you next quarter.
End of Q&A: Thank you, sir. This concludes today's call. You may disconnect your lines at this time and have a wonderful day. And we thank you for your participation.
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