Newmarket (NYSE: NEU) reported Q1 EPS of $5.57, versus $5.15 reported last year. Revenue for the quarter came in at $536.62 million versus the consensus estimate of $563.17 million.

• Petroleum Additives Operating Profit of $87.9 Million, Up 4.4% versus First Quarter 2018
• First Quarter Net Income of $62.2 Million, Up 2.7%
• First Quarter Earnings Per Share of $5.57, Up 8.4%

"Net income for the first quarter of 2019 was $62.2 million, an increase of 2.7% compared to net income of $60.6 million for the first quarter of 2018. Earnings per share increased 8.4% to $5.57 per share from $5.14 per share in the prior year period.

Sales for the petroleum additives segment for the first quarter of 2019 were $532.7 million, down 9.2% versus the same period last year. Petroleum additives operating profit for the first quarter of 2019 was $87.9 million, or 4.4% higher than first quarter operating profit last year of $84.1 million. The increase was due to changes in selling prices and raw material costs, partially offset by lower shipments, changes in foreign currency rates and higher conversion costs. Shipments were down 12.5% from the same period last year, with decreases in both lubricant additives and fuel additives shipments across all regions except for Asia Pacific, which reported an increase in fuel additives shipments. Shipments have been lower than our expectations over the last two quarters, primarily due to a softening of demand for petroleum additives products in the global marketplace, which we expect will be a short-term trend. We continue to believe that the fundamentals of our industry as a whole remain unchanged, with the petroleum additives market growing at 1% to 2% annually for the foreseeable future. We continue to believe that we will exceed that growth rate over the long term.

Petroleum additives operating margin was 14.1% for the rolling four quarters including the first quarter of 2019. While we saw some improvement in the first quarter, we are continuing to experience downward pressure on our margins caused by raw material price increases over the past two years, mainly because of the lag between when we raise our selling prices and when margins begin to improve and stabilize. Margin improvement will continue to be a priority in 2019 until we see margins consistently within our historical ranges.

During the quarter, we funded capital expenditures of $10.4 million and paid dividends of $19.6 million through a combination of borrowing under our revolving credit facility and cash from operations.

We have faced a challenging economic environment over the past two years, marked by sustained increases in raw material costs and changes in the global economy, and we have continued to manage our business to satisfy our customers’ needs while generating solid operating results. We will continue to make decisions we believe will promote the greatest long-term value for our shareholders, customers and employees, and will remain focused on our long-term objectives."

Sincerely,

Thomas E. Gottwald

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