Q2 2020 NewMarket Corp Earnings Call

Good day, ladies and gentlemen, and welcome to the Newmarket Corporation Conference call and webcast to review second quarter 2020 financial results all lines have been placed on in listen only mode for the duration of today's call.

At this time it it's my pleasure to turn the floor richer host Mr., Brian Paliotti, Sir the floor is yours.

Thank you Jess and thanks, everyone for joining me this afternoon.

As a reminder, some of the statements made during this conference call maybe forward looking.

Factors that could cause actual results to differ materially from those forward looking statements are contained in our earnings release and dinner I see see filings, including our most recent form 10-K.

During this call. We May also discuss non-GAAP financial measure included in our earnings release.

Earnings release, which you may find on their website includes a reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure.

We filed our 10-Q this morning.

It contains significantly more detail in the operations in performances performance of our company. Please take time to review it I'll be referring to the data that was included in last nights earnings release.

Net income was $22.3 million or $2.05, a share compared to net income of $74.2 million or 6.6 $3 per share for the second quarter of last year.

Petroleum additives net sales for the second quarter of 2024 $408.7 million compared to $560.8 million for the same period in 2019.

Petroleum additives operating profit for the quarter was $33.1 million lower than the second quarter operating profit of last year of $103 million.

Overall, the story for the second quarter simple our shipments were significantly impacted by the Kobin 19 pandemic.

When dramatically less Myles.

Driven and travel and with less industrial production specifically with the.

Automobile plant closures global demand for both.

Lubricants and fuel additives declined substantially.

Our sales volume was off an unprecedented 24% versus the same quarter last year and down 25%.

For the versus the first quarter of 2020.

Lower shipments drove lower sales revenue and lower profit.

Although the financial and operational.

Operational comparisons were muted by this impact.

During our report to you on a very strong first quarter. We said, we expect to see our operations to be impacted by the pandemic government restrictions to combat the spread of Cowen 19 will lead to reduce movement of people goods and services, which we reduced the demand for both fuel and lubricant additives. This is exactly what we saw in the second quarter.

The 24% reduction in demand was driven by decreases in all regions with North America accounting for over half of the drop in our European region accounting for about another 30% Latin American Asia regions, both saw small the reductions.

A few other financial items of note for the quarter. The effective income tax rate for the second quarter of 2020 was 18% down from the rate of 23.3% in the same period last year, because we generated more income from foreign sources in Q2. This year than we didn't in Q2 of 2019.

During the quarter, we funded capital expenditures of $20 million pay dividends of $20.8 million as we continued to operate with very low leverage with the net debt to EBITDA ending the quarter at 1.5 times.

Now onto some additional comments, we would like to first and foremost say and continued to say thank you to our 2000 and plus team members, who have adjusted to the life in the Coven 19 world for the past multiple months.

And who have made the necessary sustained changes that we're able to operate safely around the world.

This is not an easy whenever anyone in our team is no exception.

Our primary focus besides keeping everyone sees continues to be meeting or customer needs through this crisis as we have communicated last quarter operations continue to run without interruption.

We've worked with our customers to help them through this challenging business environment.

Our R&D projects are moving forward. So we don't lose time developing new products for their future needs, helping our customers through these uncertain times continues to be our focus our business continuity planning process has us well prepared to manage through these challenging times.

We began to see negative trends in mid April as the number of miles driven dropped and many auto companies to spend in production.

Also on April gasoline consumption in the United States reach the lowest point has been in over 50 years and then at one point in the month miles driven the United States reached a level that was about 50% lower than levels seen in the first quarter and miles driven in most areas.

Areas of Western Europe reached levels that were about 50 to 80, 80% to 90% lower.

Then level seen in the first quarter.

Well all three months, we saw decreased shipments our overall low point was in may.

In June we saw some improvement, particularly in North America and in Asia Pacific region shipments were on par with the June of 2019.

We're seeing the petroleum additives market to improve as government restrictions on People's movements are eased in the U.S. For example, gasoline demand has recovered to within 15% of pre virus levels up 50% from the reduction we saw in April.

In Western European countries personal miles traveled have returned to within 10% of pre viruses levels.

Further improvement will depend heavily on the rate and extent to which restrictions are lifted and stay lifted.

Most Oems have resumed manufacturing of vehicles, which is certainly a positive and further improvement will also be driven by a resumption of overall world industrial activity.

Modern transportation and machinery cannot function without our products and this unprecedented reduction of activity will not last.

Knowing this we're keen tendering to manage for the long term, we remain committed to our research and development investments to support our customers future needs with new products and services, we're continuing to invest in capital improvements to increase reliability quality and flexibility and most of all we remain committed to our people who will continue to possess.

Yes, well for long term success.

We are well positioned to manage through these uncertain times and an experienced management team and have a very sound financial position will continue to have an increasingly clear view on the impact next quarter and we will report what we're seeing in Q3 at our next Investor call. After the Q3 results are published.

We thank you for joining us the call today, we hope you're all healthy and staying safe.

Jeff that concludes our plan comments, we are available for questions via email or by phone. So please feel free to contact myself directly concerning questions.

Thank you all again and we look forward to talking to you all next quarter stay safe out there.

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