Newmarket's Q3 2025 Earnings Call: Contradictions Emerge on Tariff Impact, Strategic Shifts, Segment Performance, and Competitive Outlook

Date of Call: None provided

Financials Results

• EPS: $10.67 per share for Q3 2025, compared to $13.79 per share in Q3 2024; $35.78 per share for first nine months of 2025 vs $36.66 for first nine months of 2024

Guidance:

• Quarterly dividend increased 9% to $3.00 per share payable January 2, 2026
• Anticipate continued strength in petroleum additives and specialty materials
• Focus on investing in technology, optimizing inventory, and improving portfolio profitability
• Continue capital allocation via acquisitions, share repurchases, and dividends supported by strong cash flow and deleveraging

Business Commentary:

* Petroleum Additives Revenue and Profit Decline: - Petroleum additive sales were $649 million in Q3 2025, down from $663 million in Q3 2024. - Operating profit decreased to $131 million in Q3 2025 from $157 million in Q3 2024, marking a record for the segment. - The decline was primarily due to one-time charges related to global manufacturing network optimization, a 4.1% decline in shipments, and increased R&D investments.

• Specialty Materials Segment Decline:
• Specialty materials sales were $38 million in Q3 2025, a decrease from $59 million in Q3 2024.
• Operating profit fell to $6 million in Q3 2025 from $16 million in Q3 2024.

• The decrease in operating profit was due to lower volume within the quarter, with significant variation expected in future quarterly results.

• Inflation and Market Softness Impact:

• The company faced challenges from the ongoing inflationary environment, impact of tariffs, and softness in the market, which impacted shipments and profitability.

• These factors were particularly evident in the petroleum additives segment, where shipments were down by 4.6% in the first nine months of 2025 compared to the same period in 2024.

• Cash Flow and Shareholder Returns:

• NewMarket generated solid cash flows in the first nine months of 2025, returning $155 million to shareholders through share repurchases and dividends.
• The company reduced net debt by $213 million, lowering the net debt-to-EBITDA ratio to 0.9x as of September 30, 2025.
• This strong cash flow performance supports the company's ability to reinvest in growth, acquisitions, share repurchases, and dividends.

Sentiment Analysis:

Overall Tone: Neutral

• "Net income for Q3 2025 was $100 million, compared to $132 million in Q3 2024"; company cited one-time charges, shipment declines and higher R&D. "We generated solid cash flows... returned $155 million to shareholders" and reduced net debt-to-EBITDA to 0.9x; board raised dividend 9%.

Contradiction Point 1

Impact of Tariffs and Inflation

It highlights differing perspectives on how tariffs and inflation have affected the company's business, which could impact strategic planning and financial forecasts.

How are tariffs and inflation affecting your business, particularly in the petroleum additives segment, and how do you expect the competitive landscape to evolve in the near term? - Stephen Volkmann (Jefferies)

2025Q3: Inflation and tariffs have impacted our business significantly. We've seen higher costs and reduced profit margins. - Tim Fitzgerald(CFO)

Any update on cost inflation and the U.S. tax situation? - Howard Penney (Hedgeye Risk Management)

2024Q4: We're seeing some inflationary price pressures as we approach year-end. Additionally, we have seen cost escalation of our raw materials. - Tim Fitzgerald(CFO)

Contradiction Point 2

Strategic Focus on Profitability vs. Volume

It reflects a shift in strategic focus, which could influence financial performance and long-term growth expectations.

How will reducing low-margin business affect shipments? Does this align with your long-term goals? - Gina Martin (BofA Securities)

2025Q3: We've strategically prioritized profitability over volume by reducing low-margin business. This approach has resulted in a slight reduction in shipments but aligns with our long-term focus on portfolio optimization and efficiency. - Tim Fitzgerald(CFO)

What results would we expect in a normal quarter? How should we assess secular growth trends in your business? - Richard Safran (Seaport Global Securities)

2024Q4: While we experienced some margin compression, we were able to offset these with strong pricing and shipment growth. - Tim Fitzgerald(CFO)

Contradiction Point 3

Specialty Materials Growth Strategy

It involves differing perspectives on the growth strategy for specialty materials, which impacts long-term investment and market positioning.

What synergies and strategic implications did the Calca Solutions, LLC acquisition generate? How does this acquisition align with your specialty materials growth strategy? - Matthew Blair (PJM Capital)

2025Q3: We've invested approximately $1 billion in specialty materials since 2024, reflecting our commitment to high-technology growth areas. - Tim Fitzgerald(CFO)

The provided transcript does not include any specific questions. - Unknown

2025Q1: Specialty Materials sales were $54 million for the first quarter of 2025 compared to $17 million for the first quarter of 2024. - Timothy Fitzgerald(CFO)

Contradiction Point 4

Petroleum Additives Segment Performance

It involves differing perspectives on the performance of the petroleum additives segment, which is a key component of the company's business.

What is the impact of tariffs and inflation on your business, particularly in the petroleum additives segment? How do you expect the competitive landscape to evolve in the near term? - Stephen Volkmann (Jefferies)

2025Q3: Petroleum additives sales for the third quarter of 2025 were $650 million compared to $654 million for the same period in 2024. - Timothy Fitzgerald(CEO)

Can you confirm if the company plans to continue its current dividend payout ratio? - Operator

2025Q2: Petroleum additives sales for the second quarter of 2025 were $654 million compared to $670 million for the same period in 2024. - Timothy Fitzgerald(CEO)

Contradiction Point 5

Competitive Landscape

It reflects differing perspectives on the competitive landscape, which impacts strategic planning and market positioning.

How are tariffs and inflation affecting your business, particularly the petroleum additives segment? Also, how will the competitive landscape evolve in the near future? - Stephen Volkmann (Jefferies)

2025Q3: We expect market conditions to remain competitive in the near-term. - Tim Fitzgerald(CFO)

Welcome to the NewMarket Corporation conference call and webcast? - Operator

2025Q2: We believe our industry is highly competitive. - Timothy Fitzgerald(CEO)