All regions, except the Asia Pacific, posted a decline in both lubricant additives and fuel additives shipments during the third quarter, according to Afton Chemical parent NewMarket Corp. NewMarket Corp. is headquartered in Richmond, Virginia, U.S.A., and Afton Chemical is one of the top four petroleum additive manufacturers globally.
Shipments between quarterly periods were down 3.6% from the same period last year, with decreases in both lubricant additives and fuel additives shipments, the company said in its third-quarter report.
Increases in lubricant additives shipments were offset by decreases in fuel additives shipments. The Asia Pacific was the region contributing to the increase in lubricant additives shipments while Europe and North America were the primary drivers for the decrease in fuel additives shipments.
Sales for the petroleum additives segment for the third quarter of 2018 were up 2.6% at USD560.5 million versus the same period last year, due mainly to increased selling prices. NewMarket Corp. said operating profit for its petroleum additives segment posted a decline of nearly 10% at USD75.8 million, due mainly to higher raw material and conversion costs plus unfavorable changes in foreign currency rates, which were only partially offset by increased selling prices. Operating margin for the quarter was 13.5% compared to 15.4% in the prior-year quarter.
Net income for the third quarter of 2018 was USD58.5 million, compared to net income of USD59.8 million for the third quarter of 2017. Earnings per share increased by 1.6% to USD5.12 per share from USD5.04 per share in the prior year period. For the first nine months of 2018, net income was down by 7.7%, to USD171.9 million compared to USD186.4 million the previous year.
Petroleum additives sales for the first nine months of the year were USD1.7 billion compared to sales in the first nine months of last year of USD1.6 billion, or an increase of 6.9%.
Petroleum additives operating profit for the first nine months of the year was USD231.5 million compared to USD270.8 million for the first nine months of 2017, or a decrease of 14.5%.
Petroleum additives operating margin for the first nine months of 2018 was 13.3% compared to 16.6% in the prior year nine-month period.
The effective income tax rate for the third quarter of 2018 was 14.4%, down from the rate of 22.4% in the same period last year. The effective rate for the first nine months of 2018 was 21.6%, down from the rate in 2017 of 25.6%. The rates in both 2018 periods were lower due mainly to the U.S. Federal Tax Cuts and Jobs Act of 2017, including the reduction of deferred tax liabilities related to pension contributions.
NewMarket Corp. Chairman and CEO Thomas (Teddy) Gottwald said, “We have continued to see downward pressure on our operating margins, consistent with the last few quarters, which is directly related to the steady rise in raw material costs we have seen over the past two years. While we have made some progress in adjusting our selling prices to help compensate for the increase in costs, we have continued to experience the lag between when the price increases go into effect and when we start to see margins improve. We expect this lag to continue until raw material prices stabilize. Margin improvement will continue to be our number one priority for the remainder of this year and into 2019.”