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NEWMARKET CORP (NEU)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered net sales of $0.701B, EPS $13.26, and net income of $125.9M; gross margin expanded to 33.7% and EBITDA margin to ~29.0% despite a 7.2% YoY shipment decline in petroleum additives, reflecting strong operational efficiency .
  • Specialty Materials (AMPAC) was a standout: sales $53.7M (vs. $17.0M YoY) and operating profit $23.2M (vs. a loss of $5.0M YoY), driven by volume and favorable mix; management reiterated quarterly variability inherent to AMPAC’s business .
  • Cash returns remained meaningful: $57.1M buybacks, $26.1M dividends, $13.0M capex; Net Debt/EBITDA improved to 1.1x, below the stated 1.5–2.0 target range, supporting balance sheet optionality .
  • The Board approved an AMPAC expansion program of up to $100M to lift ammonium perchlorate capacity >50% by 2026—an incremental growth catalyst tied to defense and space demand .
  • Wall Street EPS/revenue consensus for Q1 2025 was unavailable via S&P Global; results likely prompt estimate recalibration toward higher margins and stronger AMPAC contribution (Values retrieved from S&P Global).

What Went Well and What Went Wrong

What Went Well

  • Strong margin execution: gross profit rose to $236.0M (Q1 gross margin 33.7%) and EBITDA reached $203.2M, supporting EPS of $13.26, despite lower shipments .
  • Specialty Materials inflection: $53.7M sales and $23.2M operating profit vs. prior-year loss, with management crediting “increased volumes as well as favorable product mix” and cautioning variability by quarter .
  • Strategic capacity expansion: “We plan to make a capital investment of up to $100 million at our AMPAC facility…increasing capacity by more than 50%” with completion targeted in 2026, positioning for sustained defense/space demand .

What Went Wrong

  • Volume headwinds in petroleum additives: shipments down 7.2% YoY; lubricant additives fell in Asia Pacific and North America (Europe and LatAm slightly up), and fuel additives were lower in all regions except Asia Pacific .
  • Petroleum additives operating profit down from last year’s Q1 record ($142.1M vs. $150.9M), reflecting shipment declines, though margin discipline mitigated impact .
  • Macro/tariff uncertainty persists: management flagged monitoring “changes in international trade relations and tariffs,” a continued external risk to operations and demand .

Financial Results

Consolidated Performance (quarterly)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$724.9 $654.6 $700.9
Gross Profit ($USD Millions)$243.8 $207.7 $236.0
Gross Profit Margin %33.6% 31.7% 33.7%
Operating Profit (EBIT) ($USD Millions)$169.5 $132.8 $159.9
EBIT Margin %23.4% 20.3% 22.8%
EBITDA ($USD Millions)$212.7 $179.3 $203.2
EBITDA Margin %29.4% 27.4% 29.0%
Net Income ($USD Millions)$132.3 $110.7 $125.9
Diluted EPS ($USD)$13.79 $11.56 $13.26

Q1 2025 vs. Q1 2024

MetricQ1 2024Q1 2025YoY Change
Revenue ($USD Millions)$696.7 $700.9 +0.6%
Gross Profit ($USD Millions)$216.4 $236.0 +9.1%
Operating Profit (EBIT) ($USD Millions)$140.8 $159.9 +13.6%
EBITDA ($USD Millions)$178.6 $203.2 +13.8%
Net Income ($USD Millions)$107.7 $125.9 +16.9%
Diluted EPS ($USD)$11.23 $13.26 +18.1%

Segment Net Sales

SegmentQ3 2024Q4 2024Q1 2025
Petroleum Additives ($USD Millions)$663.0 $626.1 $645.6
Specialty Materials ($USD Millions)$59.1 $27.1 $53.7
All Other ($USD Millions)$2.8 $1.4 $1.7
Total ($USD Millions)$724.9 $654.6 $700.9

Segment Operating Profit

SegmentQ3 2024Q4 2024Q1 2025
Petroleum Additives ($USD Millions)$157.5 $135.7 $142.1
Specialty Materials ($USD Millions)$16.0 $1.5 $23.2
All Other ($USD Millions)-$0.093 -$0.735 -$0.481
Segment Operating Profit ($USD Millions)$173.3 $136.4 $164.8

KPIs and Cash Returns (Q1 2025)

KPIQ1 2025
Petroleum Additives Shipments YoY-7.2%
Share Repurchases$57.1M
Dividends Paid$26.1M
Capital Expenditures$13.0M
Net Debt/EBITDA (LTM)1.1x

Vs. Estimates

MetricQ1 2025 ConsensusActual Q1 2025
Revenue ($USD Millions)Unavailable*$700.9
EPS ($USD)Unavailable*$13.26

*Values retrieved from S&P Global

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly Dividend per ShareEffective Q2 2025 pay date (Apr 1, 2025)$2.50$2.75Raised 10%
AMPAC Capacity Expansion Capex2025–2026 projectN/AUp to $100M; >50% capacity increase; completion targeted 2026New program
Net Debt/EBITDA Target RangeOngoing1.5–2.0x1.5–2.0x (actual at 1.1x)Maintained
Formal Financial Guidance (Revenue, Margins, OpEx, Tax, Segment)2025Not providedNot providedMaintained (no formal guidance in PR/call)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Operational efficiency/margin managementFocus on cost/margin management driving OP; lower raw material costs aided margins Margins resilient despite shipment declines; strong OP and EBITDA Improving/Resilient
AMPAC performance/integrationQ3 2024: AMPAC results influenced by fair-value inventory sales, no margin; variability expected Q1 2025: strong sales/OP; variability reiterated Positive but variable
AMPAC capacity expansionNot present in Q3/Q4 releasesUp to $100M expansion; >50% capacity by 2026; Board-approved Accelerating investment
Regional shipment trends (Afton Chemical)Year-end inventory management impacted Q4 shipments Lubricant additives down in APAC/NA, slight up in Europe/LatAm; fuel additives down broadly except APAC Mixed/Soft volumes
Macro/tariffsGeneral macro noted Monitoring “changes in international trade relations and tariffs” Persistent external risk
Shareholder returns/leverageNet Debt/EBITDA 1.4x (Q3) and 1.2x (Q4); dividends and buybacks $83M returned in Q1; Net Debt/EBITDA 1.1x Strengthening balance sheet

Management Commentary

  • “Despite the lower shipments, our operating profit margin for the first quarter of 2025 remained strong as a result of our continued focus on operational efficiency.” — Thomas E. Gottwald, CEO .
  • “We view AMPAC as a strategic national asset…This investment assures capacity to meet our customers' growing needs while adding additional redundancy and security of supply in our production system.” — Tim Fitzgerald, CFO .
  • “We are monitoring the uncertain macroeconomic environment, particularly the changes in international trade relations and tariffs…” — Management statement in Q1 release .

Q&A Highlights

  • No live Q&A session was conducted; management invited follow-ups via email/phone. The call opened and closed with operator remarks and CFO prepared comments only .

Estimates Context

  • S&P Global’s Wall Street consensus for Q1 2025 EPS and revenue was unavailable; as such, we cannot formally classify a beat/miss this quarter (Values retrieved from S&P Global).
  • Given margin strength (gross margin 33.7%, EBITDA margin ~29.0%) and AMPAC’s step-up in profitability, estimates may need upward revisions on margins and Specialty Materials contribution even if volume pressure in petroleum additives persists .

Key Takeaways for Investors

  • Margin resilience is the story: Q1 gross margin 33.7% and EBITDA margin ~29.0% while shipments fell 7.2%; operational discipline continues to offset volume headwinds .
  • Specialty Materials (AMPAC) is becoming a meaningful earnings driver with $23.2M OP in Q1; expect quarterly variability but structural demand tailwinds from defense/space .
  • Capacity expansion of >50% at AMPAC (up to $100M, completion in 2026) is a multi-year growth catalyst and supply chain moat enhancer, potentially expanding segment earnings power .
  • Balance sheet flexibility: Net Debt/EBITDA at 1.1x, below 1.5–2.0x target, supports continued dividends/buybacks and strategic capex; Q1 returns totaled $83M .
  • Regional softness (APAC/NA lubricants, fuel additives broadly) is the key watch item; Europe/LatAm showed slight improvements—monitor tariff/trade policy impacts .
  • With formal guidance absent, narrative and execution drive the stock: dividend increase to $2.75/quarter and AMPAC expansion are near-term sentiment supports; margins and defense/space exposure are medium-term thesis pillars .
  • Tactical: look for updates on shipment trends and pricing/inputs into Q2; structural: track AMPAC project milestones and any regulatory/tariff developments that could affect regional demand .