Afton parent navigates economic turbulence with rising profits
NewMarket Corporation, the parent company of petroleum additive producer Afton Chemical based in Richmond, Virginia, U.S.A., posted a net income of USD99.6 million for the second quarter of 2023, a nearly 50% increase from the USD66.5 million during the same period last year. Earnings per share also rose to USD10.36, up from USD6.54 in the same period last year.
In the first half of 2023, the company’s net income jumped by 56% to USD197.2 million, or USD20.45 per share, from USD125.8 million, or USD12.28 per share, during the same period last year.
The petroleum additives segment played a significant role in these results, with sales reaching USD684 million in the second quarter of 2023, albeit a 5% decrease from the USD721 million during the same period last year.
The decrease in sales was primarily due to lower shipments, partially offset by increased selling prices. Despite the decrease in sales, the petroleum additives operating profit for the second quarter of 2023 was USD132.1 million, up 44% from USD91.2 million in the same period last year.
Shipments were down 16.7% between quarterly periods, with decreases in both lubricant additives and fuel additives shipments. All regions contributed to the decrease in lubricant additives shipments, while North America was the primary contributor to the decrease in fuel additives shipments.
Petroleum additives sales for the first half of both 2023 and 2022 were USD1.4 billion. Petroleum additives operating profit for the first half of 2023 was USD264.2 million, up 48% from USD178.1 million in the first half of 2022. The increase in operating profit was a result of increased selling prices, partially offset by lower shipments and higher operating and raw material costs.
Shipments decreased 16.1% when comparing the first half of 2023 to the same period in 2022, with decreases in both lubricant additives and fuel additives shipments in all regions. Shipments have been lower than company expectations over the last few quarters, “as we continue to see the effects of customer destocking and global economic weakness.”
The company’s focus on cost control and margin recovery has resulted in a petroleum additives operating margin of 16.8% for the rolling four quarters ended June 30, 2023. Despite the ongoing inflationary environment leading to higher operating costs, NewMarket Corporation continues to generate solid cash flows and operate with low leverage.