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NewMarket Corporation Reports Second Quarter and First Half 2021 Results

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  • Petroleum Additives Second Quarter Shipments Strong, Margins Compressed

  • First Half Net Income of $121.7 Million and Earnings Per Share of $11.13

  • Petroleum Additives First Half Operating Profit of $168.3 Million

RICHMOND, Va., July 28, 2021--(BUSINESS WIRE)--NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the second quarter and first half of 2021.

Net income for the second quarter of 2021 was $52.0 million, or $4.75 per share, compared to net income of $22.3 million, or $2.05 per share, for the second quarter of 2020. Results for the second quarter of 2020 were severely impacted by the COVID-19 pandemic and the resulting government restrictions on the movement of people, goods and services to combat the spread of the virus in its early stages. For the first half of 2021, net income was $121.7 million, or $11.13 per share, compared to $107.9 million or $9.78 per share, for the first half of last year.

Sales for the petroleum additives segment for the second quarter of 2021 were $586.6 million, up from $408.7 million in the second quarter of 2020. Petroleum additives operating profit for the second quarter of 2021 was $74.2 million, compared to $33.1 million for the same period last year. The increase was due to higher shipments, lower conversion costs and favorable changes in selling prices, partially offset by higher raw material costs. Shipments increased 41.1% between periods, driven by increases in all world regions in both lubricant additives and fuel additives. Petroleum additives operating margin for the second quarter of 2021 was 12.7%, significantly lower than our historical average.

Petroleum additives sales for the first half of the year were $1.2 billion compared to sales in the first half of last year of $966.1 million. Petroleum additives operating profit for the first half of the year was $168.3 million compared to $146.7 million for the first half of 2020. The increase was due to higher shipments and lower conversion costs, partially offset by higher raw material costs. Shipments increased 19.1% between periods, due to increases in lubricant additives shipments. Fuel additives shipments were relatively flat between periods.

We are encouraged by our petroleum additives operating results and the strong shipments for the first half of 2021, but disappointed with our operating margins. Our product shipments for the first half of 2021 are the highest since the first half of 2018. However, we are seeing downward pressure on our operating margins due mainly to the steady increase in raw material costs throughout the year. While our efforts have been focused on recovering these cost increases, we have been experiencing the lag between when price increases go into effect and when margins start to improve. Margin improvement will continue to be a priority until we see margins consistently within our historical ranges.

During the first half of 2021, we funded capital expenditures of $44.4 million, and paid dividends of $41.5 million. In March 2021, we issued $400 million 2.70% senior notes that are due in 2031.

We remain focused on the long-term success of our company, including emphasis on satisfying customer needs, generating solid operating results, and promoting the greatest long-term value for our shareholders, customers and employees. We believe the fundamentals of how we run our business – a long-term view, safety and people first culture, customer-focused solutions, technology-driven product offerings, and a world-class supply chain capability – will continue to be beneficial for all our stakeholders.

Sincerely,

Thomas E. Gottwald

The petroleum additives segment consists of the North America (the United States and Canada), Latin America (Mexico, Central America, and South America), Asia Pacific, and Europe/Middle East/Africa/India (Europe or EMEAI) regions.

The Company has disclosed the non-GAAP financial measure EBITDA and the related calculation in the schedules included with this earnings release. EBITDA is defined as income from continuing operations before the deduction of interest and financing expenses, income taxes, depreciation (on property, plant and equipment) and amortization (on intangibles and lease right-of-use assets). The Company believes that even though this item is not required by or presented in accordance with United States generally accepted accounting principles (GAAP), this additional measure enhances understanding of the Company’s performance and period to period comparability. The Company believes that this item should not be considered an alternative to net income determined under GAAP.

As a reminder, a conference call and Internet webcast is scheduled for 3:00 p.m. EDT on Thursday, July 29, 2021 to review second quarter results. You can access the conference call live by dialing 1-844-602-0380 (domestic) or 1-862-298-0970 (international) and requesting the NewMarket conference call. To avoid delays, callers should dial in five minutes early. A teleconference replay of the call will be available until August 5, 2021 at 3:00 p.m. EDT by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay passcode number is 41908. The call will also be broadcast via the Internet and can be accessed through the Company’s website at www.NewMarket.com or www.webcaster4.com/Webcast/Page/2001/41908. A webcast replay will be available for 30 days.

NewMarket Corporation, through its subsidiaries Afton Chemical Corporation and Ethyl Corporation, develops, manufactures, blends, and delivers chemical additives that enhance the performance of petroleum products. From custom-formulated additive packages to market-general additives, the NewMarket family of companies provides the world with the technology to make engines run smoother, machines last longer, and fuels burn cleaner.

Some of the information contained in this press release constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although NewMarket’s management believes its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from expectations.

Factors that could cause actual results to differ materially from expectations include, but are not limited to, the availability of raw materials and distribution systems; disruptions at production facilities, including single-sourced facilities; hazards common to chemical businesses; the ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; sudden or sharp raw material price increases; competition from other manufacturers; current and future governmental regulations; the gain or loss of significant customers; failure to attract and retain a highly-qualified workforce; an information technology system failure or security breach; the occurrence or threat of extraordinary events, including natural disasters; terrorist attacks and health-related epidemics such as the COVID-19 pandemic; risks related to operating outside of the United States; political, economic, and regulatory factors concerning our products; the impact of substantial indebtedness on our operational and financial flexibility; the impact of fluctuations in foreign exchange rates; resolution of environmental liabilities or legal proceedings; limitation of our insurance coverage; our inability to realize expected benefits from investment in our infrastructure or from recent or future acquisitions, or our inability to successfully integrate recent or future acquisitions into our business; the underperformance of our pension assets resulting in additional cash contributions to our pension plans; and other factors detailed from time to time in the reports that NewMarket files with the Securities and Exchange Commission, including the risk factors in Item 1A. "Risk Factors" of our 2020 Annual Report on Form 10-K, which is available to shareholders upon request.

You should keep in mind that any forward-looking statement made by NewMarket in the foregoing discussion speaks only as of the date on which such forward-looking statement is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. We have no duty to, and do not intend to, update or revise the forward-looking statements in this discussion after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that the events described in any forward-looking statement made in this discussion, or elsewhere, might not occur.

NEWMARKET CORPORATION AND SUBSIDIARIES

SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION

(In thousands, except per-share amounts, unaudited)

Second Quarter Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

Revenue:

Petroleum additives

$

586,587

$

408,703

$

1,151,485

$

966,075

All other

4,134

2,161

5,851

4,206

Total

$

590,721

$

410,864

$

1,157,336

$

970,281

Segment operating profit:

Petroleum additives

$

74,200

$

33,061

$

168,271

$

146,732

All other

17

(399

)

(647

)

(64

)

Segment operating profit

74,217

32,662

167,624

146,668

Corporate unallocated expense

(3,548

)

(5,467

)

(7,860

)

(9,698

)

Interest and financing expenses

(8,869

)

(7,005

)

(15,212

)

(14,109

)

Other income (expense), net

5,258

7,078

11,876

14,485

Income before income tax expense

$

67,058

$

27,268

$

156,428

$

137,346

Net income

$

51,952

$

22,349

$

121,664

$

107,890

Earnings per share - basic and diluted

$

4.75

$

2.05

$

11.13

$

9.78

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per-share amounts, unaudited)

Second Quarter Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

Net sales

$

590,721

$

410,864

$

1,157,336

$

970,281

Cost of goods sold

449,722

314,126

854,584

692,636

Gross profit

140,999

96,738

302,752

277,645

Selling, general, and administrative expenses

34,735

35,432

71,650

71,147

Research, development, and testing expenses

35,517

33,549

71,854

69,055

Operating profit

70,747

27,757

159,248

137,443

Interest and financing expenses, net

8,869

7,005

15,212

14,109

Other income (expense), net

5,180

6,516

12,392

14,012

Income before income tax expense

67,058

27,268

156,428

137,346

Income tax expense

15,106

4,919

34,764

29,456

Net income

$

51,952

$

22,349

$

121,664

$

107,890

Earnings per share - basic and diluted

$

4.75

$

2.05

$

11.13

$

9.78

Cash dividends declared per share

$

1.90

$

1.90

$

3.80

$

3.80

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share amounts, unaudited)

June 30,
2021

December 31,
2020

ASSETS

Current assets:

Cash and cash equivalents

$

153,864

$

125,172

Marketable securities

376,295

0

Trade and other accounts receivable, less allowance for credit losses

399,373

336,395

Inventories

457,957

401,031

Prepaid expenses and other current assets

35,982

35,480

Total current assets

1,423,471

898,078

Property, plant, and equipment, net

680,315

665,147

Intangibles (net of amortization) and goodwill

128,531

129,944

Prepaid pension cost

141,151

137,069

Operating lease right-of-use assets

64,980

61,329

Deferred charges and other assets

40,264

42,308

Total assets

$

2,478,712

$

1,933,875

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

259,209

$

189,937

Accrued expenses

69,185

78,422

Dividends payable

18,613

15,184

Income taxes payable

5,242

3,760

Operating lease liabilities

14,460

13,410

Other current liabilities

5,416

11,742

Total current liabilities

372,125

312,455

Long-term debt

990,551

598,848

Operating lease liabilities - noncurrent

50,489

48,324

Other noncurrent liabilities

216,337

214,424

Total liabilities

1,629,502

1,174,051

Shareholders' equity:

Common stock and paid-in capital (with no par value; issued and outstanding shares - 10,928,129 at June 30, 2021 and 10,921,377 at December 31, 2020)

1,748

717

Accumulated other comprehensive loss

(164,947

)

(173,164

)

Retained earnings

1,012,409

932,271

Total shareholders' equity

849,210

759,824

Total liabilities and shareholders' equity

$

2,478,712

$

1,933,875

NEWMARKET CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED CASH FLOW DATA

(In thousands, unaudited)

Six Months Ended
June 30,

2021

2020

Net income

$

121,664

$

107,890

Depreciation and amortization

41,719

42,356

Unrealized (gain) loss on marketable securities

2,314

0

Cash pension and postretirement contributions

(5,184

)

(5,152

)

Working capital changes

(59,484

)

(60,072

)

Deferred income tax expense

6,654

3,322

Purchases of marketable securities

(387,653

)

0

Proceeds from sales and maturities of marketable securities

9,894

0

Capital expenditures

(44,394

)

(40,088

)

Issuance of 2.70% senior notes

395,052

0

Debt issuance costs

(3,897

)

(1,348

)

Net borrowings under revolving credit facility

0

47,059

Repurchases of common stock

0

(100,000

)

Dividends paid

(41,526

)

(41,916

)

All other

(6,467

)

5,616

Increase (decrease) in cash and cash equivalents

$

28,692

$

(42,333

)

NEWMARKET CORPORATION AND SUBSIDIARIES

NON-GAAP FINANCIAL INFORMATION

(In thousands, unaudited)

Second Quarter Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

Net Income

$

51,952

$

22,349

$

121,664

$

107,890

Add:

Interest and financing expenses, net

8,869

7,005

15,212

14,109

Income tax expense

15,106

4,919

34,764

29,456

Depreciation and amortization

20,594

20,709

40,918

41,568

EBITDA

$

96,521

$

54,982

$

212,558

$

193,023

View source version on businesswire.com: https://www.businesswire.com/news/home/20210728005811/en/

Contacts

FOR INVESTOR INFORMATION:
Brian D. Paliotti
Investor Relations
Phone: 804.788.5555
Fax: 804.788.5688
Email: investorrelations@newmarket.com

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