NewMarket Corporation Q4 2025 Earnings Call - Higher Taxes Trim EPS, Specialty Push Accelerates
Summary
NewMarket posted solid operating cash flow and strong pre-tax profits in 2025, but a higher effective tax rate materially compressed net income and EPS. Petroleum additives showed declining shipments, lower selling prices, and margin pressure from lower plant volumes and inflationary headwinds, while the specialty materials business, bolstered by Ampac and the Oct 1, 2025 Calca acquisition, delivered meaningful revenue and profit lift.
Management emphasized cash generation and capital allocation discipline: roughly $183 million returned to shareholders, $88 million of net debt reduction, and about $1 billion committed to building the specialty materials franchise. The near-term picture is mixed, with market softness and tariff/inflation pressure offset by strategic portfolio moves and continued investment in technology and capacity.
Key Takeaways
- Pre-tax income for Q4 2025 was $113 million, down from $134 million in Q4 2024; full-year pre-tax income was $561 million versus $584 million in 2024, a 4% decline.
- Net income for Q4 2025 was $81 million, or $8.65 per share, down from $111 million, or $11.56 per share in Q4 2024; full-year net income was $419 million, or $44.44 per share, versus $462 million, or $48.22 per share in 2024.
- Management singled out a higher effective tax rate in 2025 as a primary driver of the decline in net income and EPS, and directed listeners to the 10-K for the detailed tax factors.
- Petroleum additives sales in Q4 2025 were $585 million, down from $626 million a year earlier; full-year additives sales were $2.5 billion versus $2.6 billion in 2024.
- Petroleum additives operating profit fell to $107 million in Q4 2025 from a record $136 million in Q4 2024; full-year additives operating profit was $520 million versus $592 million in 2024.
- Shipments in petroleum additives declined about 6% in Q4 and 4.9% for the full year, reflecting market softness and deliberate pruning of low-margin business to protect portfolio profitability.
- Management cited lower selling prices, ongoing inflationary pressures, tariffs, and higher unit costs caused by reduced plant production and inventory management as headwinds to additives margins.
- Specialty materials sales rose to $49 million in Q4 2025 from $27 million in Q4 2024, driven by higher Ampac volumes and the inclusion of Calca after the Oct 1, 2025 acquisition; Q4 specialty operating profit was $7 million versus about $2 million a year ago.
- Full-year specialty materials sales were $182 million in 2025, up from $141 million in 2024; full-year specialty operating profit increased to $47 million from $17 million, reflecting Ampac volume growth and recent M&A.
- Company has committed approximately $1 billion to specialty materials through the acquisitions of Ampac and Calca and capacity expansion investments, signaling a strategic shift toward higher-technology, resilient end markets.
- Balance sheet and capital allocation: NewMarket returned $183 million to shareholders in 2025 via $77 million of share repurchases and $106 million of dividends, while reducing total debt by $88 million year over year.
- Net debt to EBITDA improved to 1.1 times at December 31, 2025, down from 1.2 times a year earlier, reflecting strong cash generation despite the Calca borrowing.
- Management expects continued strength in both petroleum additives and specialty materials, while continuing to prioritize technology investment, efficiency, inventory optimization, and portfolio profitability.
- Management warned that specialty materials will show substantial quarterly variability due to the nature of those businesses, and that detailed tax items are disclosed in the 10-K, suggesting scrutiny of one-off versus recurring tax impacts.
- The call closed with an emphasis on long-term value creation, safety-first culture, and a customer-focused, technology-driven strategy, but near-term earnings remain exposed to market softness, pricing pressure, and unit cost volatility.
Full Transcript
Conference Operator: Greetings. Welcome to the NewMarket Corporation conference call and webcast to review our fourth quarter and full year 2025 financial results. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Tim Fitzgerald, CFO at NewMarket. You may begin.
Tim Fitzgerald, CFO, NewMarket Corporation: Thank you, and thanks to everyone for joining me this afternoon. As a reminder, some of the statements made during this conference call may be forward-looking. Relevant factors that could cause actual results to differ materially from those forward-looking statements are contained in our earnings release and in our SEC filings, including our most recent Form 10-K. During this call, we will also discuss the non-GAAP financial measures included in our earnings release. The earnings release, which can be found on our website, includes a reconciliation of the non-GAAP financial measures to the closest comparable GAAP financial measures. Today, I will be referring to the data that was included in last night’s press release. However, our 2025 10-K contains significantly more details on the operations and performance of our company.
Pre-tax income for the fourth quarter of 2025 was $113 million, compared to $134 million for the fourth quarter of 2024. For the full year, pre-tax income was $561 million in 2025, compared to $584 million for 2024, a decline of only 4%. While we don’t normally call out pre-tax income, it’s notable now due to the significantly higher income taxes booked throughout the year, impacting our net income and EPS. Net income for the fourth quarter of 2025 was $81 million, or $8.65 per share, compared to net income of $111 million, or $11.56 per share for the fourth quarter of 2024.
Net income for the full year of 2025 was $419 million, or $44.44 per share, compared to our net income of $462 million, or $48.22 per share for 2024. One of the primary drivers of the decline in net income was a higher effective tax rate in 2025 compared to 2024. The factors driving the increase in our effective tax rate are outlined in the 10-K. Petroleum additive sales for the fourth quarter of 2025 were $585 million, compared to $626 million for the same period in 2024.
Petroleum Additives operating profit for the fourth quarter of 2025 was $107 million, compared to $136 million for the fourth quarter of 2024, which was a record fourth quarter for the segment. The decrease in operating profit compared to prior year was driven by a decline in shipments of 6%, mainly due to market softness, as well as a decline in selling prices. In addition, to manage inventory levels, operating profit in the fourth quarter was impacted by higher unit costs resulting from lower production volumes at our plants. For the full year of 2025, sales for the Petroleum Additives segment were $2.5 billion, compared to $2.6 billion for 2024.
Petroleum additives operating profit for 2025 was $520 million, compared to $592 million in 2024. The drivers for the decrease in operating profit were consistent with those affecting the fourth quarter comparison. Shipments were down by 4.9% compared to last year, as we saw market softness throughout 2025, combined with our strategic decision to manage the profitability of our portfolio by reducing low-margin business. We are very pleased with the performance of our petroleum additives business in 2025, compared to our record performance in 2024. However, we remain challenged by the ongoing inflationary environment and the impact of tariffs, as well as softness in the market impacting shipments.
We continue to focus on investing in technology to meet customer needs, becoming more efficient in our operating costs, optimizing our inventory levels, and improving our portfolio profitability. We report the financial results of our Ampac business and our newly acquired Calca Solutions business in our Specialty Materials segment. Specialty Materials sales for the fourth quarter of 2025 were $49 million, compared to $27 million for the same period in 2024. The increase in sales was mainly due to higher volume at Ampac and the inclusion of the Calca business, which was acquired on October 1, 2025. Specialty Materials operating profit for the fourth quarter of 2025 was $7 million, compared to about $2 million for the fourth quarter of 2024.
As previously stated, we will see substantial variation in quarterly results for the specialty materials segment on an ongoing basis due to the nature of the business. For the full year of 2025, sales for the specialty materials segment were $182 million, compared to $141 million for 2024. Specialty materials operating profit for 2025 was $47 million, compared to $17 million for 2024. The increase in operating profit was mainly driven by an increase in volume demand at Ampac. As previously announced, through our acquisitions of Ampac and Calca, and our investments to expand capacity at both operations, we have committed approximately $1 billion to this resilient, high-technology specialty materials segment.
Our company generated solid cash flows throughout the year in 2025, which allowed us to return $183 million to our shareholders through share repurchases of $77 million and dividends of $106 million. We also reduced our total debt by $88 million compared to 2024, which includes the borrowing for the Calca acquisition. As of December 31, 2025, our net debt to EBITDA ratio was 1.1 times, slightly down from 1.2 at the end of 2024. This strong cash flow performance enables us to continue to provide value to our shareholders through reinvestment of capital into our businesses for growth and efficiency, acquisitions, share repurchases, and dividends. We anticipate continued strength in our petroleum additives and specialty materials segments.
We are committed to making decisions that promote long-term value for our shareholders and customers while staying focused on our long-term objectives. We believe that the core principles guiding our business, a long-term perspective, a safety-first culture, customer-focused solutions, technology-driven products, and a world-class supply chain, will continue to benefit all of our stakeholders. That concludes our planned comments. We are available for questions via email or by phone, so please feel free to contact me directly. Thank you all again, and we will talk to you next quarter.
Conference Operator: Thank you. This does conclude today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
