Quaker Chemical's 2025 Q1 Earnings Call: Unpacking Contradictions in Margins, Regulation, and Market Dynamics

Gross margin expectations, regulatory impact on business, tariff impact and customer behavior, market growth opportunities, impact of tariffs on market demand are the key contradictions discussed in Quaker Chemical's latest 2025Q1 earnings call.



Volumes and Market Conditions:
- Quaker Houghton reported a 1.5% decline in total volumes in Q1 2025 compared to the prior year.
- Despite this, the company outperformed its end-markets, which were estimated to be down by a low to mid-single-digit percentage.
- The decline in volumes was primarily due to soft industrial activity and uncertainty regarding tariffs, impacting customer decision-making and order patterns.

Financial Performance and Gross Margins:
- First quarter net sales were $443 million, 6% below the prior year or 3% lower on a constant currency basis.
- Gross margins improved by 120 basis points to 36.4%, although they were below the prior year due to timing of raw material cost increases and product and geographic mix.
- The improvement in gross margins was mainly due to positive mix and disciplined cost management.

Strategic Acquisitions and Market Expansion:
- Quaker Houghton acquired three companies in 2025, including Dipsol, which brought $80 million in sales and $15 million in EBITDA in 2024.
- These acquisitions are expected to add a few percentage points of growth in 2025 and expand the company's addressable market.
- The acquisitions were strategically aligned with the company's goal of increasing its footprint in Japan and enhancing its position in the automotive and industrial segments.

Outlook and Tariff Impact:
- Quaker Houghton expects underlying market growth rates to decline a low-single-digit percentage in 2025, impacted by tariffs and trade dynamics.
- The company anticipates revenue and earnings will be in line with 2024 levels, expecting tariff impacts to be managed through localized sourcing and production.
- While tariffs are a concern, Quaker Houghton's "local for local" strategy and criticality of its products to customers' operations are expected to mitigate most direct impacts.