Q4 2019 Earnings Call

Ladies and gentlemen, Hello, and thank you all for joining todays Newmarket Corporation fourth quarter 2019, and year end financial results conference call well jump right and I'm pleased to turn the floor over to your host Mr., Brian Paliotti. Please go ahead Sir.

Thank you Jim and thanks, everyone for joining us this afternoon.

As a reminder, some of the statements made during this conference call maybe forward looking relevant factors could cause results to materially differ materially from those forward looking statements are contained in our earnings release, and an or FCC filings, including our most recent form 10-K.

During the call. We May also discuss non-GAAP financial measures included in the earnings release their news release, which can be found out on our website includes a reconciliation of the non-GAAP financial measure to the comparable finance GAAP financial measure.

We intend to file our 2019 10-K towards the middle of February it will contain significantly more details on the operations and performance of our company. Please take the time to review it and I will be referring to the data that was included in last nights release.

Now onto the fourth quarter results, our profit before tax was $66.6 million, a 6.3% decrease compared to the profit before tax for the fourth quarter of 2018 of $71.1 million.

For the tax Reform Act affecting the quarterly earnings per share numbers. This profit before tax number as a good way to compare periods.

The next set of numbers are mentioned does include the impact of the tax Reform Act.

Net income for the fourth quarter, 2019 was $50.1 million or $4.40, a share compared to net income of 20 or $62.8 million or $5. A 58 cents per share for the fourth quarter of 2018.

Income tax expense was $16.5 million for the fourth quarter 2019, compared to $8.3 million for the fourth quarter of 2018 the rate for 2018 was lower due to the onetime benefits recorded in 2018 associated with the tax Reform Act.

Now onto petroleum additives performance sales for the fourth quarter were $582 million down 1% compared to sales for the same period last year petroleum additives operating profit for the quarter was $73.6 million down 7.4% versus the fourth quarter of 2018.

The decrease was primarily due to changes in selling prices in foreign currency rates, partially offset by lower raw material costs.

Shipments increased 1.4% between periods with increases in lubricant additive shipments, partially offset by decreases in fuel additive shipments North America in Europe, where their primary drivers for lubricant additives increases partially offset by decreases in Asia Pacific.

The decrease in fuel additive shipments was primarily driven by Latin America.

The increase in shipments between the fourth quarter periods represents the first time since the second quarter 2018 that we've seen an increase.

During this past quarter. In addition to funding of $21 million of dividends, we spent $22 million on capital expenditures in support of our long term capital plan.

Turning to the full year, our petroleum additives operating profit was $359 million up 15.5% versus the prior year with our profit before tax of $332 million up.

14.2% versus 2018, and net income of $254.3 million up 8.3%.

The income tax rate for 2019 is.

More consistent one management's expectations in the post tax reform environment.

Full year petroleum additives shipments decreased 5.5% versus 2018 with decreases in both lubricant additives and fuel additive shipments across all regions, except North America, which reported an increase in lubricant additive shipments and Asia Pacific, which reported an increase in fuel additive shipments.

We saw market weakness throughout 2019 with an easing as the year progressed with steady improvement reflected in each of the quarters in 2019, as we narrowed the shipments gap versus 2018, ending in Q4 with a year on year increase in shipments.

In 2019, we began to see a turnaround in the operating performance of the petroleum additives segment as compared to the prior year.

In the two years prior to 2019, our operations were impacted by a challenging economic environment marked by a sustained increase in raw materials.

While we have seen evidence that this trend improved in 2019, we will continue to make operating margin stability a priority.

Petroleum additives operating profit for the Rolling four quarters ended December.

30, Onest 2019 was 16.5% which is more in line with historical ranges our shareholders have come to expect.

Along with our substantial investments in petroleum additives.

From both a capital and R&D perspective, we returned value to our shareholders through dividends of $82 million.

We ended the year with a very healthy balance sheet and will net debt to EBITDA at 1.1 times.

As we have stated before we are comfortable maintaining net debt to EBITDA and the 1.5 to two times range and at times will go outside that range.

In 2020, we expect to see capital investments in the $75 million to $85 million range.

Petroleum additives continued its steady performance as we continued to extend the reach of our products and services across the globe.

Our global supply network is suited to continue our growth in all geographic regions to our passion for solutions model.

We have maintained measured cost control and continuing to make interim progress on our cost to serve efficiencies across the enterprise.

We continue to see the goal global economic challenges and were fully will remain committed to making decisions for the long term for our consistent strategy of excellence in the petroleum additives business.

Our business continues to generate significant amounts of cash in our priorities for using cash remain the same.

As we reinvest in the business for growth.

Nine acquisitions that can strengthen our competitive position in petroleum additives and reward our shareholders through dividends and stock buybacks.

As we look forward to 2020, we expect to bill on the successes over the last year and we'll continue emphasis on margins it should be a solid year for our petroleum additives segment and the company as we are well positioned for the long term, we will continue to focus our research and development.

Efforts to bring higher value products to our customers and we'll continue to improve quality and cost to be more effective lease serving the market. We appreciate your support.

I need to make one clarification for the petroleum additives fourth quarter sales were $532 million I'm has spoken said $582 million apologize for that.

Jim that concludes our plan comments, if there any questions. Please contact us directly via email or via phone and we will expeditiously expeditiously get back to where the response in an answer.

That concludes our conference call for the quarter and we'll talk to you all next quarter.

Thank you for your remarks today, ladies and gentlemen, does conclude today's meeting and we do thank you all for taking a moment of your day.

You may now disconnect your lines and we hope that you enjoy the rest of your day.

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