Afton Chemical parent cites significant impact of Covid-19 in 2020
Petroleum additives operating results for NewMarket Corporation, parent of Afton Chemical, in 2020 have been marked by economic uncertainty resulting from the ongoing effects of the Covid-19 pandemic and the related restrictions on the movement of people, goods and services.
“While we have continued to operate throughout the year in each of our regions, we have at various times seen significant changes in some of the key drivers that affect the performance of our business. During the second quarter of 2020, government and business shutdowns in North America and Europe led to a precipitous drop in vehicle miles driven and auto production, with gasoline consumption in the United States dropping to its lowest point in over 50 years. With less travel and fewer miles driven, combined with automobile plant closures, global demand for our products declined substantially, except in our Asia Pacific region where demand remained relatively stable throughout the year,” said Thomas E. Gottwald, NewMarket Corporation chairman and chief executive officer.
“As restrictions eased and economies reopened in the second half of 2020, global production of automobiles began to rebound and gasoline consumption and miles driven showed steady improvement in most countries, including the United States. Late in the fourth quarter, renewed restrictions on travel and work in certain countries had a negative effect on our business. The pace and stability of improvement in demand for our products will continue to depend heavily on economic recovery and the rate at which government restrictions are lifted and remain lifted.”
For the year ending 2020, NewMarket Corporation reported a decline in petroleum additives sales by 9% to USD2.0 billion, compared to sales in 2019 of USD2.2 billion. NewMarket said the decrease was due mainly to lower shipments and decreased selling prices. Petroleum additives operating profit for 2020 was USD333.2 million, a 7.2% decrease compared to 2019 operating profit of USD359.2 million. The decrease was mainly due to changes in selling prices, lower shipments and higher conversion costs, partially offset by lower raw material costs and selling, general, and administrative costs. Shipments decreased by 5.2%, with decreases in both lubricant additives and fuel additives shipments.
“As we look forward to 2021, we will continue to monitor government restrictions on the movement of people, goods and services as well as the status of vaccination programs that are being implemented globally. We are hopeful the vaccinations will help provide more stability in the global economy in 2021,” Gottwald said.
“Our business decisions will continue to be focused on the long-term success of our company, including emphasis on satisfying customer needs, generating solid operating results, and promoting the greatest long-term value for our shareholders, customers and employees. We believe the fundamentals of how we run our business – a long-term view, safety and people first culture, customer-focused solutions, technology-driven product offerings, and a world-class supply chain capability – will continue to be beneficial for all our stakeholders.”
NewMarket said that despite Covid-19, its business continues to generate strong cash flow. During the year, NewMarket funded capital expenditures of USD93.3 million, paid dividends of USD83.4 million, and repaid USD44.7 million of borrowings on its revolving credit facility. NewMarket also repurchased 270,963 shares of its common stock for a cost of USD101.4 million.
NewMarket reported research, development expenses at USD140 million in 2020, down 3%, from USD144 million in 2019. As a percent of net sales, R&D costs in 2020 represented 7%, similar to the previous year.