NewMarket Corporation (NEU)
Q4 2012 Earnings Call
January 29, 2013 11:00 am ET
David A. Fiorenza – Vice President, Chief Financial Officer and Treasurer
Thomas E. Gottwald – President and Chief Executive Officer
Ivan M. Marcuse – KeyBanc Capital Markets
Kevin W. Hocevar – Northcoast Research Partners LLC
Todd Vencil – Sterne, Agee & Leach, Inc.
Dmitry Silversteyn – Longbow Research LLC
Max Salk – PPM America, Inc.
Greetings and welcome to the NewMarket Corporation Fourth Quarter 2012 and Year-end Financial Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host David Fiorenza, Vice President, Treasurer and Principal Financial Officer for NewMarket Corporation. Thank you, Mr. Fiorenza, you may begin.
David A. Fiorenza
Good morning, Brenda, and thanks each of you for joining us to discuss our fourth quarter and year-end performance. With me today is our CEO, Teddy Gottwald. We need to have a few planned comments, and after that, we’ll be happy to take your questions.
As a reminder, some of the comments we will make today are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We believe we based our statements on reasonable expectations and assumptions within the bounds of what we know about our business and operations. However, we offer no assurance that actual results will not differ materially from our expectations due to uncertainties and factors that are difficult to predict and beyond our control.
A full discussion of these factors can be found in our 2011 10-K. We plan to file our 10-K for this year in the second half of February. I will be referring to the numbers that we included in last night’s release. NewMarket’s net income for 2012 increased to a record $239.6 million or $17.85 a share, compared to net income of $206.9 million or $15.09 a share for the previous year.
For the fourth quarter of this year, net income was $53.1 million or $3.94 a share, compared to net income of $33.7 million or $2.51 per share for the same period last year.
The earnings for 2012 and prior year periods include certain special items that are explained on the front page of the release. Excluding these special items from all periods, earnings for the year 2012 were a record $242.8 million or $18.08 per share, an increase of 25% compared to last year’s results of $193.7 million or $14.13 a share.
On this same basis, earnings for this year’s fourth quarter were $46.7 million or $3.47 a share, an improvement of 35% over last year’s fourth quarter results of $34.5 million or $2.57 a share. Earnings per share for the year and fourth quarter of this year increased 28% and 35% respectively. As we had mentioned a number of times, near-term demand variations in our business have become harder to predict. Having said that, the fourth quarter historically has been somewhat lighter quarter and this one is consistent with that pattern.
Petroleum additives net sales for the fourth quarter were $511 million, which is an increase of $12 million or approximately 2.5% higher than last year. The increase in sales was almost entirely due to increased volume, partially offset by unfavorable currency impacts, shipments were up about 4% in this quarterly comparison. Currency impacts for the quarter were in the $6 million adverse range.
Petroleum additives operating profit for the fourth quarter was $71.6 million, an improvement of 21% over the fourth quarter operating profit last year of $59.3 million. The profit improvement between these two fourth quarter periods was primarily driven by volume improvement, and the absence of some one-time costs we discussed last year, and those were offset to some degree by planned spending in S&A and R&D.
We are very pleased with this quarter’s results and the improvements over the last year’s fourth quarter. Petroleum additives net sales for the year of $2.2 billion were approximately 3.5% higher than last year. The increase between these two years reflect higher selling prices, offset partially by an unfavorable foreign exchange impact as well as 1.5% decrease in shipments for the year.
Petroleum additives operations had a record performance for the year in 2012, with operating profit of $372 million; an improvement of 20% over last year’s operating profit of $309.6 million excluding last year’s legal settlement gain. We posted an operating margin of 16.9% in this segment of the year.
This result was within our expectations of the performance of this business with the mix of business we sold last year. During the fourth quarter, we posted a 14% operating margin, which is also within our expectations of the normal business variations in the lighter quarter. Lower volumes do impact gross margins and because we do not adjust GS&A spend based on anticipated quarterly shipments, the volume impact is magnified in the operating margin.
We are pleased with both the quarterly and full-year results for the petroleum additives business. We did not repurchase any stock in the fourth quarter. We had approximately 13.4 million shares outstanding at the end of 2012. We have a current authorization $250 million for stock repurchases. This authorization expires at the end of 2014.
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