NewMarket Q1 2026 Earnings Call - Strategic Shift Toward High-Margin Business Amidst Softening Shipments
Summary
NewMarket Corporation faced a headwind in the first quarter of 2026, reporting a dip in net income to $118 million from $126 million a year prior. The petroleum additives division, the company's engine, saw a 7% decline in shipments. Management is framing this not as a pure market failure, but as a deliberate pivot. They are actively shedding low-margin business to protect profitability, even as geopolitical instability in the Middle East forces a constant recalibration of logistics and raw material costs.
The specialty materials segment remains a volatile variable. While sales grew slightly due to the recent acquisition of Calca Solutions, operating profits took a significant hit compared to last year, largely due to shifting shipment mixes at AMPAC. Despite these fluctuations, NewMarket is maintaining its discipline on capital allocation, returning $154 million to shareholders through buybacks and dividends, supported by a healthy net debt to EBITDA ratio of 1.2x.
Key Takeaways
- Net income for Q1 2026 fell to $118 million, down from $126 million in Q1 2025.
- Petroleum additives sales declined to $610 million from $646 million year-over-year.
- Shipments in the petroleum additives segment dropped by 7% during the quarter.
- Management attributed declining shipments to both market softening and a strategic decision to cut low-margin business.
- Operating profit margins for petroleum additives remained resilient despite lower shipment volumes.
- Geopolitical conflict in the Middle East is driving increased costs for raw materials, utilities, and logistics.
- The company implemented price adjustments to offset rising operational and supply chain costs.
- Specialty materials sales rose to $58 million, bolstered by the acquisition of Calca Solutions in October 2025.
- Specialty materials operating profit dropped significantly to $12 million from $23 million due to AMPAC shipment mix shifts.
- NewMarket returned $154 million to shareholders via $126 million in share repurchases and $28 million in dividends.
- The company maintains a conservative leverage position with a net debt to EBITDA ratio of 1.2x.
Full Transcript
Conference Operator: Greetings. Welcome to the NewMarket Corporation conference call and webcast to review first quarter 2026 financial results. At this time, all participants are in a listen only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Tim Fitzgerald, CFO at NewMarket. You may begin.
Tim Fitzgerald, Chief Financial Officer (CFO), NewMarket Corporation: 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 first 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 last night’s press release.
Net income for the first quarter of 2026 was $118 million, or $12.62 per share, compared to net income of $126 million, or $13.26 per share for the first quarter of 2025. Petroleum additives sales for the first quarter of 2026 were $610 million, compared to $646 million for the same period in 2025. Petroleum additives operating profit for the first quarter of 2026 was $135 million, compared to operating profit of $142 million in 2025. The decrease in operating profit was mainly due to the decline in shipments of 7%, due to softening in the market and our strategic decision to reduce low-margin business. However, we are encouraged by the increase in shipments we observed in the latter part of the first quarter of 2026. Despite the decline in shipments in the first quarter, our operating profit margin remained strong.
We are very pleased with the performance of our petroleum additives business during the first quarter of 2026 and the work done by our team to operate within a rapidly changing environment due to the conflict in the Middle East. We have implemented price adjustments to account for the escalating cost of raw materials, utilities, and logistics, and we have rebalanced our global production to make sure we are meeting customer demands in a dynamically evolving market. Despite these challenges, we remain committed to improving efficiency and managing operating costs. Our focus continues to be on investing in technology and our supply network to meet customer demands, enhancing our operational efficiency and improving our portfolio profitability. We report the financial results of our AMPAC business and our newly acquired Calca Solutions business in our specialty materials segment.
Specialty materials sales for the first quarter of 2026 were $58 million, compared to $54 million for the same period in 2025. The increase in sales was mainly due to the inclusion of the Calca business, which was acquired on October 1st, 2025, offset by a shift in shipment mix at AMPAC versus the first quarter of last year. Specialty materials operating profit for the first quarter of 2026 was $12 million, compared to $23 million for the first quarter of 2025. The decline in operating profit was mainly due to the change in quarterly shipment mix at AMPAC compared to last year. 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.
Our company generated solid cash flows throughout the first quarter, which allowed us to return $154 million to our shareholders through share repurchases of $126 million and dividends of $28 million. As of March 31st, 2026, our net debt to EBITDA ratio was 1.2 times. As we look ahead to 2026, 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. 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.
Conference Operator: Thank you. This does conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation.
