NEU - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, good day, and thank you all for joining this NewMarket Corporation Conference Call and Webcast to review Third Quarter 2019 Financial Results. [Operator Instructions]

And now for opening remarks and introductions, I'm pleased to turn the floor over to your host, Chief Financial Officer, Mr. Brian Paliotti. Please go ahead, sir.

Brian Paliotti

thanks us and afternoon. Jim, you, for this joining Thank

differ this statements may could As and forward-looking in to our earnings the filings, recent in during are cause from conference contained statements results our that a reminder, release factors Form made XX-K. call our those Relevant be actual including SEC materially most forward-looking.

our our reconciliation release, During our earnings in morning. the review was financial last night's company. measure XX-Q Please We to which be measure I significantly filed comparable our this can included operations to call, a we included in to GAAP may time also referring this website, that it. found more financial the details non-GAAP financial on data on take The of release. will of discuss contained earnings performance includes and non-GAAP be the release. measure. It the

a $XX of for in $XXX to quarter petroleum quarter for by due due $XX was $XXX conversion income costs, lower lower third compared Sales for same quarter quarter increase primarily for net million profit raw for compared period partially offset of or additives share to million compared the million increased offset the lower of a last and primarily XXXX by the shipments. were prices. share the was of $X.XX the materials segment of million. decrease $X.XX to $XX partially to third Petroleum the income shipments, the last year, XXXX or year. selling additives operating to was and third Net $XX million XXXX This of was sales third million

operate costs Shipments our our decreased and year-to-date and selling, undertaken we by Latin Pacific for mainly with periods and more X.X% conversion gain serve lubricant also evidenced operating lower due year. customers. America costs in in between newer pleased in cost-to-serve our as supply our Singapore Asia with to drivers broader network administrative team the is We the is this It This facilities. efficiently with lower decreases the experience being a are showing general the Mexico better shipments, additive decrease. the efforts to primary and

volume this the narrowed versus last each With gap quarter has year, year.

off the quarter the were in shipments first X% second. in Our XX% and

While some markets we see improving. overall are continue do to that be signs soft, trends the

so results our by operating that of results encouraged XXXX our are in We business profit year, petroleum the were we acknowledge XXXX strong compared to additives disappointing. must last

operations material marked by Our of were by softening environment rising two global quarters for a impacted the previous challenging adversely multiple economic raw years costs and demand.

market tax we that additives back The continue XX.X% for year. third is effective make the which for of recent for Petroleum XXXX of expect mid quarter is the quarter last -- in quarters which rate historical see is we income priority of the a improvement margin rolling XX.X%, from stability. until the third XXXX up period rate sorry same for -- was business. to operating the to from XX.X%, four upper-teen our most the We'll range

to In a Reform had quarter XXXX, third the Act. in for impact related the we onetime rate our Tax

the spend the to of bringing funding of our million. quarter, our dividends note $XX flow the million, normal spending million capital year-to-date capital of On the cash items our include for and of for $XX quarter $XX

low very leverage net X.X We with continue to times. debt-to-EBITDA at operate with

safety on the to and With expenditures see expect million in CapEx is our range. cost-to-serve and behind gains. $XX $XX focused capital do quality, we million major efficiency improvements environmental us, our XXXX, expansions For several to

X% petroleum long-term remain a additives remain objectives. annual and industry foreseeable with on a the shareholders unchanged, rate our as to decisions value whole We focused promote continue customers, to at the fundamental for future. long-term X% we make believe the to our We of market the for growing and

We very and profitable is our on growth rate that new team generating will the long-term continue exceed to focused over that business. believe we

Jim, questions. that concludes for our remarks, and we'd like the up to open line

Operator

first Buckingham the of We'll Research. to Dmitry line ahead. Absolutely, Silversteyn with go thank you. Please Instructions] [Operator go

is did Dmitry, Hello, your Your line open. you line question? for signal open, is a

Dmitry Silversteyn

Can me? Hi. you hear

Operator

sir. go Yes Please ahead.

Dmitry Silversteyn

Good for A afternoon. Thanks right. call. of taking questions. All my couple

First of you material the -- of if looking improvement the all conversion at on year-over-year, margin and raw kind costs. I'm mentioned

If guys in the I size of that two and in price buckets how raw would these and lower at material you conversion costs kind spit up talked least of you drivers? of in processing look relative about, terms at that

Brian Paliotti

perspective, the larger back relate call, Dmitry, driver I a larger was dollar conversion. the was the to margin after can if that's versus perspective you so raw you materials perspective a from But to I'll that exact what to of the the margin, would from the okay. give two of driver have In that get

Dmitry Silversteyn

Got you.

performance Okay. Yes it at high Then to lubes, flattish price difference fuels in like the I'm up little may it lubes mid- if fuels the like in XX-Q in like that kind I very be and to of in -- looks fuels. bit. the up sorry It was data looks was a be mix between your single-digits and look different.

within there of of in was shift So push? product price still that terms itself? trying was a mostly it you're the to portfolio kind Or mix

Brian Paliotti

product mix fuels lubes side, and price. shift was of versus the a On more it

Dmitry Silversteyn

Okay.

quarter look price, versus do okay. was a for and you quarter-on-quarter, fourth your materials year? than So did quarter material that how the bigger the raw fare you of If basket if how the of see I more third of up this year mentioned quarter -- at you raw shaping versus third year-over-year in And and quarter? driver, mix second that last

Brian Paliotti

material year quarter we stability don't than third that saw we on standpoint a the to go-forward in more from quarter. perspective, third and this raw we the what saw raw this from we raw guidance are the materials last of second we But materials third In quarter the year general are more did And -- in we do. in from basket stability two what saw terms, in to quarters we give see think and second XXXX year. going didn't a

Dmitry Silversteyn

Okay.

sequentially like it So a less meaningfully. or Is it year-over-year but on was down fair... pricing more that sounds stable

Brian Paliotti

Meaningfully perspective this the more we year year yes, in we stability correct. last saw raw saw that's from fluctuation material than a

Dmitry Silversteyn

kind Okay. you Have IMO in at the of view the looked to sure you the about would going overall, and guys have what low-sulfur thought industry what possible you're was I'm of XXXX just any wondering on the industry? impact business? do player but was of be? can you fuels lube a marine I the major do implementation your if impact a diesel diesel even in kind the on for that And impact marine fuel have for not if

Brian Paliotti

additives business. the not there'll understand that is participate We marine business to impact be that we a And the in heavily business an today.

impact. perspective, so we're And impact we much that don't from segment. that an of not as our from be see of heavily the there'll And the industry perspective an that into

Dmitry Silversteyn

impact were What kind the -- or about would an seeing industry seeing? thinking thinking about of was you you

Brian Paliotti

them. the what I mean, I in impact, impact so is market, an going on to or to Well, what we comment like industry see can't are the I that going other is going said, players be the on see I play don't to mean,

Dmitry Silversteyn

impact more in be is I to guess have mean, general, question negative. I my Brian doesn't

I'm or positive opportunity more So, to impact trying to the going fuel I overall sophisticated negative? in mean, vice market versa? to or is into be what to industry the is an additives just get there lubes be going the understand or

Brian Paliotti

do going impact our I to what the business. that I'm on the a trying see to don't direct to guess, IMO from material Dmitry, what was articulate market. We is impact

be will what to into those knowledge that or have but additives positive impact to they'd would there that an industry. that segment segment, would not we segment the players that be go and to play petroleum the that negative in think I of new from could have products whether that

Dmitry Silversteyn

Got you.

Okay. Thanks for clarifying that.

Brian Paliotti

Sure.

Dmitry Silversteyn

fuel sort different experiencing lube demand additives. regions of and in various about talked trends both You

Brian Paliotti

Sure.

Dmitry Silversteyn

look the at your you what your regions? what regions, it's sort different of can year? If for the between is and is And you outlook talk environment the to of how balance like current major

Brian Paliotti

this a Yes, perspective from a point seen what from what is seen region-to-region sorted I say you've macro perspective. along followed would to with we've

China, look that that's market economic and for know to you've an and you're little the Germany balance driven car from in going this of downs from like perspective in regional what mainly Europe, seen new and comments year seen but And by a resilient it's ups don't seeing in softness. then we the American perspective. to a softness be we've North made more the sales what from we've been a that's Asia, more perspective, reflected So bit specifically

Dmitry Silversteyn

you. Got

with is Argentina? And that is down did you so mention - about... happened is talk this it macro, America Latin specific in you not drive volumes your anything it or America, it just didn't quarter, Can Latin

Brian Paliotti

No. mean it's Nothing just specific I Dmitry, softness.

of auto just impacted softness see every regions some as industry where know to macro to and continue some due are -- than the others the demand. You more the in you

Dmitry Silversteyn

Got Last you. Got question. you.

Brian Paliotti

Sure.

Dmitry Silversteyn

is the big I of assuming so, terms mean, pretty pay generation I'm You your In how to use cash going cash think a already under-levered, cash. should we be not and deploying cash? debt use about down of

to done going it either, it you which share going repurchase? is to dividend is be So increases or haven't be mostly

Brian Paliotti

order use on giving a Well, about, perspective follow that to everything from the what that CapEx tell the steps the we is, CapEx like. the commented grow I to of to business you three going cash in one needs think we can look and that the continue is it

additives The another at. quarter can dividend are the acquisitions from that perspective petroleum of cash, increase potential that buybacks something is and reward going then to use is, we always opportunity. space so shareholders' cash And second be a we potentially a last dividend if an and is then we is look of find the did in use

Dmitry Silversteyn

Okay.

pay here? So buybacks sort excluding would terms of not debt increases be dividend and one, of it much acquisitions, needing and serendipity down two sounds to of the in like

Brian Paliotti

cash Well, be the we will one other evaluate in business CapEx is then going the all of for order and given priority. uses of the that to

Dmitry Silversteyn

Great.

it. got Thank you Okay, much. very

Brian Paliotti

Okay, you. thank

Operator

signals for Paliotti, our it to Mr. yourself remarks. [Operator back and any or additional team Instructions] no phones. from I'll closing the turn have we leadership

Brian Paliotti

you everyone and for we'll talk to thanks quarter. next Well, calling Okay. in

Operator

Ladies you conclude this for your and all gentlemen, thank and conference, we does today's participation.

You rest your may day. and of the we enjoy that your disconnect you now lines hope

NewMarket (NEU) 24 Oct 192019 Q3 Earnings call transcript