NewMarket Corporation Q2 2025 Earnings Call - AMPAC lifts specialty growth as additives face shipment erosion
Summary
NewMarket posted a flat quarter on the surface, with Q2 net income of $111 million, $11.84 per share, roughly unchanged from a year earlier, while first half net income hit a record $237 million, $25.11 per share. The petroleum additives business delivered strong margins but saw shipments slide, pushing segment operating profit lower year over year. Management attributes the profit squeeze to a 2.5% decline in Q2 shipments, higher R&D spend to support customers, inflationary pressure, and tariffs.
The real story is AMPAC in Specialty Materials. Sales and operating profit surged year over year, turning a small loss into meaningful contribution. NewMarket is committing to capacity and redundancy investments at AMPAC, funded by solid cash flow. The balance sheet is healthy, with net debt to EBITDA at 1.0 and $129 million returned to shareholders in the first half, but watch for ongoing volatility in specialty quarterly results and the persistent headwinds facing additives.
Key Takeaways
- Q2 2025 net income: $111 million, $11.84 per share, essentially flat versus Q2 2024 ($112 million, $11.63).
- First half 2025 delivered a record $237 million net income, $25.11 per share, up from $219 million and $22.87 in H1 2024.
- Petroleum additives sales fell to $654 million in Q2 2025 from $670 million a year ago; operating profit declined to $140 million from $148 million.
- Management cites a 2.5% decline in shipments in Q2 as the main driver of lower additives profitability, plus increased R&D spend.
- For H1 2025, petroleum additives sales were flat at $1.3 billion; operating profit declined to $282 million from $299 million, with shipments down 4.9% year over year.
- Inflationary pressures and tariffs continue to weigh on margins despite efficiency initiatives and cost management.
- Specialty Materials (AMPAC) is scaling up: Q2 sales $42 million versus $38 million prior, operating profit $11 million versus $5 million. H1 sales jumped to $96 million from $55 million and operating profit rose to $34 million from slightly above breakeven.
- Company views AMPAC as a strategic national asset and will invest in additional capacity and redundancy to meet customer demand and security requirements.
- Strong cash generation funded $129 million returned to shareholders in H1 2025, including $77 million in share repurchases (with $20 million in Q2) and $52 million in dividends.
- Balance sheet improved, with net debt to EBITDA at 1.0 as of June 30, 2025, down from 1.2x at year-end 2024.
- Management expects continued strength in both segments in H2, but warns that Specialty Materials will show substantial quarter-to-quarter variation due to the business mix.
- Operational priorities include continued R&D investment, inventory optimization, portfolio profitability, and technology-driven product development to support customers.
Full Transcript
Matt, Conference Moderator: day everyone and welcome to the NewMarket Corporation conference call and webcast to review second quarter 2025 financial results. At this time, all participants are on a listen-only mode. It is now my pleasure to turn the floor over to your host, Tim Fitzgerald. Sir, the floor is yours.
Tim Fitzgerald, CFO/Executive, NewMarket Corporation: Thank you, Matt, 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 non-GAAP financial measures to the comparable GAAP financial measures. We filed our 10-Q for the second 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 second quarter of 2025 was $111 million, or $11.84 per share, compared to net income of $112 million, or $11.63 per share, for the second quarter of 2024. Net income for the first half of 2025 was a record $237 million, or $25.11 per share, compared to net income of $219 million, or $22.87 per share, for the first half of 2024. Petroleum additives sales for the second quarter of 2025 were $654 million, compared to $670 million for the same period in 2024. Petroleum additives operating profit for the second quarter of 2025 was $140 million, compared to $148 million for the second quarter of 2024. The decrease in operating profitability compared to prior year was mainly due to a 2.5% decline in shipments along with an increase in research and development investments to support our customers’ needs.
For the first half of 2025, sales for the petroleum additives segment were $1.3 billion, essentially flat compared to the same period in 2024. Petroleum additives operating profit for the first half of 2025 was $282 million, compared to $299 million for 2024. The drivers for the decrease in operating profit were consistent with those affecting the second quarter. Shipments were down by 4.9% when comparing the first half of 2025 with the same period in 2024. We are very pleased with the performance of our petroleum additives business during the first half of 2025. Our team’s focus on enhancing efficiency has resulted in strong operating profit margins this year. However, we remain challenged by the ongoing inflationary environment and the impact of tariffs.
Despite our efforts to improve efficiency and manage our operating costs, 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 second quarter of 2025 were $42 million compared to $38 million for the same period in 2024. Specialty Materials operating profit for the second quarter of 2025 was $11 million compared to $5 million for the second quarter of 2024. The increase in operating profit was mainly due to an increase in 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 half of 2025, sales for the Specialty Materials segment were $96 million compared to $55 million for the same period in 2024. Specialty Materials operating profit for the first half of 2025 was $34 million compared to slightly above break even for the first half of 2024. We view AMPAC as a strategic national asset with a mission critical role in global safety, security, and space programs. As we announced in April of this year, we are committed to investing in additional capacity at AMPAC to meet our customers’ growing needs while adding additional redundancy and security of supply into our production system. Our company generated solid cash flows throughout the first half of 2025, which allowed us to return $129 million to our shareholders through share repurchases of $77 million and dividends of $52 million.
The share repurchases include $20 million that was completed in the second quarter of 2025. As of June 30, 2025, our net debt to EBITDA ratio is 1.0, which is an improvement over the 1.2x we reported at the end of 2024. As we look ahead to the second half of 2025 and beyond, we anticipate continued strength in our petroleum additives and Specialty Materials segments. We are committed to making decisions that 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. Matt, 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.
Matt, Conference Moderator: Thank you everyone. This concludes today’s event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
