QUAKER CHEMICAL CORP (KWR)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 revenue rose 4% year over year to $483.4M and 9% sequentially, driven by 2% organic volume growth and ~6% acquisition contribution; selling price/mix declined ~4% due to product/geography mix and indexed contracts .
• GAAP EPS was a loss of $3.78, reflecting a non-cash $88.8M goodwill impairment in EMEA; non-GAAP diluted EPS was $1.71, below prior year, and adjusted EBITDA was $75.5M with a 15.6% margin .
• Revenue beat S&P Global consensus by ~$22.3M*, while non-GAAP EPS missed by ~$0.12*; EBITDA slightly exceeded consensus*, indicating top-line outperformance but margin pressure from mix, raw materials, and tariffs .
• Management maintained full-year 2025 outlook of revenue and earnings “in the range of 2024,” initiated additional cost actions targeting ~$20M run-rate savings by end-2026, moderated 2025 CapEx to 2–3% of sales, and raised the dividend ~4.7% to $0.508 per share .
• Near-term trading catalyst: headline GAAP loss from impairment versus underlying revenue/EBITDA resilience and a revenue beat; H2 trajectory supported by new business wraps, acquisition contributions (Dipsol), targeted pricing, and cost savings .

What Went Well and What Went Wrong

What Went Well

• Strong top-line: Net sales +4% YoY to $483.4M; organic volumes +2% YoY, +4% QoQ; Asia/Pacific organic volumes +8% YoY with consolidated net sales +9% QoQ .
• Share gains/new business: Management emphasized “strong new business wins across all segments” (~5% growth from new business) and above-market growth; “We generated 2% year-over-year organic volume growth … led by Asia Pacific” (CEO) .
• Capital allocation: $32.7M share repurchases in Q2, dividend raised ~5%; net debt/TTM adj. EBITDA at ~2.6x with ample liquidity, no significant maturities until June 2027 .

What Went Wrong

• Margin compression: Adjusted EBITDA fell ~10% YoY to $75.5M and margin to 15.6% (vs 18.2% in Q2’24) due to higher raw materials/manufacturing costs and unfavorable product/geographic mix .
• GAAP loss from impairment: $88.8M non-cash goodwill impairment in EMEA drove GAAP EPS to -$3.78; non-GAAP EPS declined to $1.71 from $2.13 in Q2’24 .
• Americas softness and EMEA challenges: Americas net sales -1% YoY with segment earnings down; EMEA remains most challenged, with price/mix -7% YoY despite FX/acquisition tailwinds .

Financial Results

Segment Net Sales ($USD Thousands)

Segment Operating Earnings ($USD Thousands)

KPIs and Balance Sheet

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We generated 2% year-over-year organic volume growth… led by another strong performance in Asia Pacific… We delivered a 4% year over year increase in sales… benefitted from Dipsol… Gross margins were slightly lower at 36% but remain within our target range.” – CEO Joseph Berquist .
• “We are initiating cost actions which we expect will deliver approximately $20 million of additional run-rate savings by the end of 2026… $5 to $8 million of incremental in-year savings in the second half of 2025.” – CEO Joseph Berquist .
• “Our GAAP diluted EPS were a loss of $3.78… reflecting a non-cash goodwill impairment charge on our EMEA segment… Excluding these items, our second quarter non-GAAP diluted EPS were $1.71.” – CFO Tom Koler .
• “We forecast revenue and earnings will be in the range of 2024… we expect the business performance will improve in the second half of 2025.” – CEO Joseph Berquist .
• “We repurchased $33 million of shares… cost of debt ~5%… effective tax rate… between 28% and 29%.” – CFO Tom Koler .

Q&A Highlights

• Sustainability of share gains: Broad-based share gains across regions and advanced/specialty lines; confidence sustaining 2–4% above-market growth; wrap of H1 wins to support H2 .
• Asia Pacific margins: Headwinds from oleochemicals (palm oil), mix, first-fill incentives, Dipsol noise; targeted pricing underway; expected stability/modest improvement in H2 .
• Earnings cadence: H2 stronger than H1; Q3 typically strongest; H2 uplift from cost savings ($5–$8M), pricing lag catch-up, acquisitions (Dipsol) .
• Cost program specifics: ~$9M restructuring in Q2; incremental ~$20M run-rate by 2026; mix skewed to G&A with network optimization, especially in Europe .
• Tariffs impact: Mitigated on supply by local-for-local; main issue is demand uncertainty and inventory caution among customers .

Estimates Context

Comparison to S&P Global consensus and actuals

Values retrieved from S&P Global.*

Implications: Analysts likely adjust revenue upward (acquisition contribution, stronger APAC) but trim margin/EPS expectations to reflect mix/raw materials and tariff-induced costs; management’s H2 cost actions provide EPS support .

Key Takeaways for Investors

• Top-line resilience: Quaker Houghton delivered a revenue beat with strong APAC and acquisitions, despite price/mix headwinds; watch for continued above-market volumes in H2 .
• Margin bridge: H2 uplift should come from $5–$8M in-year cost savings, pricing lag catch-up, and acquisition synergies (Dipsol), but mix/raw material pressures remain; EBITDA margins targeted high teens over time .
• Impairment is non-operational: The $88.8M EMEA goodwill impairment does not affect cash; underlying non-GAAP earnings/EBITDA were stable sequentially .
• Capital deployment: Dividend increased and buybacks executed with leverage at ~2.6x TTM adj. EBITDA; liquidity is ample, no major maturities until 2027 .
• Guidance steady: FY 2025 revenue/earnings expected around 2024 levels; effective tax 28–29%; CapEx moderated to 2–3% to focus on key projects (China facility) .
• Trading setup: Headlines may focus on GAAP loss; the underlying revenue beat and H2 self-help could support sentiment if cost execution/pipeline conversion materialize as outlined .
• Monitor tariffs and APAC margins: Demand uncertainty from tariffs and oleochemical input costs are key variables; targeted pricing and local-for-local footprint mitigate but timing lags apply .