Innospec Inc. (NASDAQ: IOSP) today announced its financial results
for the third quarter ended September 30, 2023. At the same time,
the Company announced that it has declared a semi-annual dividend
of 72 cents per common share for the second half of 2023 which will
be paid on November 27, 2023 to shareholders of record as of
November 20, 2023. This brings the annual dividend to $1.41 per
share, a 10 percent increase over 2022.
Total revenues for the third quarter were $464.1
million, a decrease of 10 percent from $513.0 million in the
corresponding period last year. Net income for the quarter was
$39.2 million or $1.57 per diluted share compared to $38.7 million
or $1.55 per diluted share recorded last year. EBITDA for the
quarter was $56.5 million compared to $59.2 million reported in the
same period a year ago.
Results for this quarter include some special
items, which are summarized in the table below. Excluding these
items, adjusted non-GAAP EPS in the third quarter was $1.59 per
diluted share, compared to $1.74 per diluted share a year ago.
Innospec generated cash from operating
activities of $58.1 million before capital expenditures of $16.7
million in the quarter. We closed the quarter with net cash of
$207.2 million.
EBITDA, income before income taxes and net
income excluding special items, and related per-share amounts, are
non-GAAP financial measures that are defined and reconciled with
GAAP results herein and in the schedules below.
|
|
|
Quarter ended September 30, 2023 |
|
Quarter ended September 30, 2022 |
|
|
|
|
|
|
(in
millions, except share and per share data) |
|
Incomebeforeincometaxes |
|
Netincome |
|
DilutedEPS |
|
Incomebeforeincometaxes |
|
Netincome |
|
DilutedEPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported GAAP amounts |
$ |
47.5 |
|
$ |
39.2 |
|
$ |
1.57 |
|
$ |
48.9 |
$ |
38.7 |
$ |
1.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
exchange (gains)/losses |
|
(3.2 |
) |
|
(2.4 |
) |
|
(0.10 |
) |
|
2.1 |
|
1.7 |
|
0.07 |
Amortization of
acquired intangible assets |
|
2.6 |
|
|
2.0 |
|
|
0.08 |
|
|
3.2 |
|
2.5 |
|
0.10 |
Legacy costs of
closed operations |
|
0.7 |
|
|
0.5 |
|
|
0.02 |
|
|
0.7 |
|
0.6 |
|
0.02 |
Acquisition
related costs |
|
0.3 |
|
|
0.2 |
|
|
0.01 |
|
|
- |
|
- |
|
- |
Adjustment of
income tax provisions |
|
- |
|
|
0.2 |
|
|
0.01 |
|
|
- |
|
- |
|
- |
|
|
0.4 |
|
|
0.5 |
|
|
0.02 |
|
|
6.0 |
|
4.8 |
|
0.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
non-GAAP amounts |
$ |
47.9 |
|
$ |
39.7 |
|
$ |
1.59 |
|
$ |
54.9 |
$ |
43.5 |
$ |
1.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commenting on the third quarter results, Patrick
S. Williams, President and Chief Executive Officer, said,
“This was another good quarter for Innospec. Our
balanced portfolio delivered strong sequential improvement in
Performance Chemicals, continued excellent results in Oilfield
Services and a steady performance in Fuel Specialties.
In Performance Chemicals, as expected, new
contracts drove sequential operating income growth and margin
improvement despite continued destocking and end-market headwinds.
We believe that destocking pressure has peaked. We are cautiously
optimistic that our new contracts together with on-going
improvement in our base business has the potential to deliver
further sequential growth and margin improvement in the fourth
quarter. We feel that our industry-leading 1,4-Dioxane-free and
sulfate-free technologies combined with our dedication to customer
partnerships and customer service leaves us well placed for
continued growth.
In Fuel Specialties, operating income was
broadly similar to last year as improved margins offset lower
sales. Gross margins were slightly below our target 32 to 35
percent range as we continue to manage inflationary pressure. We
expect sequential margin improvement and operating income growth as
demand for our chemistries increases into the winter
quarters.
In Oilfield Services, despite the expected
moderation in production chemicals activity versus the second
quarter, the business delivered strong operating income growth and
margin expansion compared to the prior year. In the fourth quarter,
we anticipate similar results to this quarter, and we expect 2023
to remain on track for significant full year growth and margin
improvement.”
Performance Chemicals revenues of $145.2 million
were down 9 percent from $159.7 million in the third quarter last
year driven by a negative price/mix of 19 percent being partially
offset by higher volumes of 7 percent and a positive currency
impact of 3 percent. Gross margins reduced by 3.6 percentage points
from the same quarter last year to 20.9 percent. Operating income
for the quarter of $16.9 million decreased 33 percent on the prior
year.
Revenues in Fuel Specialties of $169.3 million
for the quarter were down 5 percent from $178.7 million a year ago.
Volume reductions of 4 percent and a negative price/mix of 4
percent were partially offset by a positive currency impact of 3
percent. Gross margins of 31.3 percent were 1.4 percentage points
above last year. Operating income of $27.6 million was down
slightly from $27.9 million a year ago.
Revenues in Oilfield Services were $149.6
million for the quarter, down 14 percent from $174.6 million in the
third quarter last year. Gross margins were down by 0.4 percentage
points from the same quarter last year to 36.0 percent. Operating
income of $16.4 million increased 15 percent over the prior
year.
Corporate costs for the quarter were $19.0
million, compared with $17.4 million a year ago. The effective tax
rate for the quarter was 17.5 percent compared to 20.9 percent in
the same period last year.
For the quarter, cash provided by operating
activities was $58.1 million compared to $39.8 million a year ago.
As of September 30, 2023, Innospec had $207.2 million in cash and
cash equivalents and no debt.
Mr. Williams concluded,
“Our diversified business portfolio continued to
perform very well this quarter against a persistent backdrop of
economic uncertainty, continued destocking and end-market
headwinds.
Cash generation was again excellent this
quarter, and our net cash position strengthened to over $207
million. We have a strong, technology-driven growth pipeline in all
our businesses. In addition, we have significant balance-sheet
flexibility to execute further organic growth investments,
complimentary M&A, dividend growth and share repurchases.”
Use of Non-GAAP Financial
Measures
The information presented in this press release
includes financial measures that are not calculated or presented in
accordance with Generally Accepted Accounting Principles in the
United States (GAAP). These non-GAAP financial measures comprise
EBITDA, income before income taxes excluding special items, net
income excluding special items and related per share amounts
together with net cash. EBITDA is net income per our consolidated
financial statements adjusted for the exclusion of charges for
interest expense, net, income taxes, depreciation, and
amortization. Income before income taxes, net income and diluted
EPS, excluding special items, per our consolidated financial
statements are adjusted for the exclusion of foreign currency
exchange (gains)/losses, amortization of acquired intangible
assets, legacy costs of closed operations, acquisition related
costs and adjustment of income tax provisions. Net cash is cash and
cash equivalents less total debt. Reconciliations of these non-GAAP
financial measures to their most directly comparable GAAP financial
measures are provided herein and in the schedules below. The
Company believes that such non-GAAP financial measures provide
useful information to investors and may assist them in evaluating
the Company’s underlying performance and identifying operating
trends. In addition, these non-GAAP measures address questions the
Company routinely receives from analysts and investors and the
Company has determined that it is appropriate to make this data
available to all investors. While the Company believes that such
measures are useful in evaluating the Company’s performance,
investors should not consider them to be a substitute for financial
measures prepared in accordance with GAAP. Also, these non-GAAP
financial measures may differ from similarly titled non-GAAP
financial measures used by other companies and do not provide a
comparable view of the Company’s performance relative to other
companies in similar industries. Management uses adjusted EPS (the
most directly comparable GAAP financial measure for which is GAAP
EPS) and adjusted net income and EBITDA (the most directly
comparable GAAP financial measure for which is GAAP net income) to
allocate resources and evaluate the performance of the Company’s
operations. Management believes the most directly comparable GAAP
financial measure is GAAP net income and has provided a
reconciliation of EBITDA and net income excluding special items,
and related per share amounts, to GAAP net income herein and in the
schedules below.
About Innospec Inc.
Innospec Inc. is an international specialty
chemicals company with approximately 2,100 employees in 25
countries. Innospec manufactures and supplies a wide range of
specialty chemicals to markets in the Americas, Europe, the Middle
East, Africa and Asia-Pacific. The Performance Chemicals business
creates innovative technology-based solutions for our customers in
the Personal Care, Home Care, Agrochemical, Mining and Industrial
markets. The Fuel Specialties business specializes in manufacturing
and supplying fuel additives that improve fuel efficiency, boost
engine performance and reduce harmful emissions. Oilfield Services
provides specialty chemicals to all elements of the oil and gas
exploration and production industry.
Forward-Looking Statements
This press release contains certain
“forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than
statements of historical facts included or incorporated herein may
constitute forward-looking statements. Such forward-looking
statements include statements (covered by words like “expects,”
“estimates,” “anticipates,” “may,” “could,” “believes,” “feels,”
“plans,” “intends” or similar words or expressions, for example)
which relate to earnings, growth potential, operating performance,
events or developments that we expect or anticipate will or may
occur in the future. Although forward-looking statements are
believed by management to be reasonable when made, they are subject
to certain risks, uncertainties and assumptions, and our actual
performance or results may differ materially from these
forward-looking statements. Additional information regarding risks,
uncertainties and assumptions relating to Innospec and affecting
our business operations and prospects are described in Innospec’s
Annual Report on Form 10-K for the year ended December 31, 2022,
Innospec’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2023 and other reports filed with the U.S. Securities and
Exchange Commission. You are urged to review our discussion of
risks and uncertainties that could cause actual results to differ
from forward-looking statements under the heading “Risk Factors” in
such reports. Innospec undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
Contacts:
Corbin BarnesInnospec
Inc.+44-151-355-3611corbin.barnes@innospecinc.com
INNOSPEC INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
|
Schedule 1 |
|
(in
millions, except share and per share data) |
|
Three Months EndedSeptember
30 |
|
Nine Months EndedSeptember 30 |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
464.1 |
|
$ |
513.0 |
|
$ |
1,454.1 |
|
$ |
1,453.0 |
|
Cost of goods sold |
|
(326.9 |
) |
|
(357.0 |
) |
|
(1,018.7 |
) |
|
(1,017.9 |
) |
Gross profit |
|
137.2 |
|
|
156.0 |
|
|
435.4 |
|
|
435.1 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
(83.7 |
) |
|
(95.8 |
) |
|
(285.5 |
) |
|
(264.1 |
) |
Research and development |
|
(11.6 |
) |
|
(10.1 |
) |
|
(32.8 |
) |
|
(30.3 |
) |
Total operating expenses |
|
(95.3 |
) |
|
(105.9 |
) |
|
(318.3 |
) |
|
(294.4 |
) |
Operating income |
|
41.9 |
|
|
50.1 |
|
|
117.1 |
|
|
140.7 |
|
Other income/(expense),
net |
|
4.8 |
|
|
(0.9 |
) |
|
11.2 |
|
|
(0.2 |
) |
Interest income/(expense),
net |
|
0.8 |
|
|
(0.3 |
) |
|
0.8 |
|
|
(1.1 |
) |
Income before income
taxes |
|
47.5 |
|
|
48.9 |
|
|
129.1 |
|
|
139.4 |
|
Income taxes |
|
(8.3 |
) |
|
(10.2 |
) |
|
(27.8 |
) |
|
(31.9 |
) |
Net income |
$ |
39.2 |
|
$ |
38.7 |
|
$ |
101.3 |
|
$ |
107.5 |
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
1.58 |
|
$ |
1.56 |
|
$ |
4.08 |
|
$ |
4.34 |
|
Diluted |
$ |
1.57 |
|
$ |
1.55 |
|
$ |
4.05 |
|
$ |
4.30 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding (in thousands): |
|
|
|
|
|
|
|
|
Basic |
|
24,866 |
|
|
24,786 |
|
|
24,845 |
|
|
24,794 |
|
Diluted |
|
25,006 |
|
|
24,965 |
|
|
25,000 |
|
|
24,976 |
|
|
|
|
|
|
|
|
|
|
INNOSPEC INC. AND SUBSIDIARIES |
|
Schedule 2A |
|
SEGMENTAL ANALYSIS OF
RESULTS |
|
Three Months EndedSeptember 30 |
|
Nine Months EndedSeptember 30 |
(in millions) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
Performance Chemicals |
$ |
145.2 |
|
$ |
159.7 |
|
$ |
424.4 |
|
$ |
495.8 |
|
Fuel Specialties |
|
169.3 |
|
|
178.7 |
|
|
513.8 |
|
|
546.9 |
|
Oilfield Services |
|
149.6 |
|
|
174.6 |
|
|
515.9 |
|
|
410.3 |
|
|
|
464.1 |
|
|
513.0 |
|
|
1,454.1 |
|
|
1,453.0 |
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
Performance Chemicals |
|
30.3 |
|
|
39.1 |
|
|
76.4 |
|
|
123.5 |
|
Fuel Specialties |
|
53.0 |
|
|
53.4 |
|
|
155.2 |
|
|
171.0 |
|
Oilfield Services |
|
53.9 |
|
|
63.5 |
|
|
203.8 |
|
|
140.6 |
|
|
|
137.2 |
|
|
156.0 |
|
|
435.4 |
|
|
435.1 |
|
|
|
|
|
|
|
|
|
|
Operating income: |
|
|
|
|
|
|
|
|
Performance Chemicals |
|
16.9 |
|
|
25.4 |
|
|
36.5 |
|
|
79.5 |
|
Fuel Specialties |
|
27.6 |
|
|
27.9 |
|
|
77.1 |
|
|
94.9 |
|
Oilfield Services |
|
16.4 |
|
|
14.2 |
|
|
60.3 |
|
|
21.2 |
|
Corporate costs |
|
(19.0 |
) |
|
(17.4 |
) |
|
(56.8 |
) |
|
(54.9 |
) |
Total operating income |
$ |
41.9 |
|
$ |
50.1 |
|
$ |
117.1 |
|
$ |
140.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 2B |
|
NON-GAAP
MEASURES |
|
Three Months EndedSeptember 30 |
|
Nine Months EndedSeptember 30 |
(in
millions) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
39.2 |
|
$ |
38.7 |
|
$ |
101.3 |
|
$ |
107.5 |
|
Interest (income)/expense,
net |
|
(0.8 |
) |
|
0.3 |
|
|
(0.8 |
) |
|
1.1 |
|
Income taxes |
|
8.3 |
|
|
10.2 |
|
|
27.8 |
|
|
31.9 |
|
Depreciation and
amortization: |
|
|
|
|
|
|
|
|
Performance Chemicals |
|
4.4 |
|
|
4.9 |
|
|
12.7 |
|
|
15.6 |
|
Fuel Specialties |
|
1.6 |
|
|
1.5 |
|
|
4.5 |
|
|
4.6 |
|
Oilfield Services |
|
3.1 |
|
|
3.0 |
|
|
9.2 |
|
|
8.9 |
|
Corporate costs |
|
0.7 |
|
|
0.6 |
|
|
1.9 |
|
|
1.5 |
|
EBITDA |
|
56.5 |
|
|
59.2 |
|
|
156.6 |
|
|
171.1 |
|
|
|
|
|
|
|
|
|
|
EBITDA: |
|
|
|
|
|
|
|
|
Performance Chemicals |
|
21.3 |
|
|
30.3 |
|
|
49.2 |
|
|
95.1 |
|
Fuel Specialties |
|
29.2 |
|
|
29.4 |
|
|
81.6 |
|
|
99.5 |
|
Oilfield Services |
|
19.5 |
|
|
17.2 |
|
|
69.5 |
|
|
30.1 |
|
Corporate costs |
|
(18.3 |
) |
|
(16.8 |
) |
|
(54.9 |
) |
|
(53.4 |
) |
|
|
51.7 |
|
|
60.1 |
|
|
145.4 |
|
|
171.3 |
|
Other income/(expense),
net |
|
4.8 |
|
|
(0.9 |
) |
|
11.2 |
|
|
(0.2 |
) |
EBITDA |
$ |
56.5 |
|
$ |
59.2 |
|
$ |
156.6 |
|
$ |
171.1 |
|
|
EBITDA by segment includes operating income
relating to the segments, excluding depreciation and
amortization.
Schedule 3 |
INNOSPEC INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
(in millions) |
|
September 30,2023 |
|
December 31,2022 |
|
|
|
Assets |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
$ |
207.2 |
$ |
147.1 |
Trade and other accounts receivable |
|
305.2 |
|
334.6 |
Inventories |
|
331.5 |
|
373.1 |
Prepaid expenses |
|
7.7 |
|
14.1 |
Prepaid income taxes |
|
10.7 |
|
3.3 |
Other current assets |
|
1.4 |
|
0.4 |
Total
current assets |
|
863.7 |
|
872.6 |
|
|
|
|
|
Net
property, plant and equipment |
|
244.6 |
|
220.9 |
Operating lease right-of-use assets |
|
42.5 |
|
45.3 |
Goodwill |
|
357.9 |
|
358.8 |
Other
intangible assets |
|
47.8 |
|
45.0 |
Deferred
tax assets |
|
5.9 |
|
5.9 |
Pension
asset |
|
49.7 |
|
48.1 |
Other
non-current assets |
|
6.5 |
|
7.1 |
Total
assets |
$ |
1,618.6 |
$ |
1,603.7 |
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable |
$ |
146.1 |
$ |
165.3 |
Accrued liabilities |
|
165.1 |
|
202.9 |
Current portion of operating lease liabilities |
|
13.1 |
|
13.9 |
Current portion of plant closure provisions |
|
4.7 |
|
5.3 |
Current portion of accrued income taxes |
|
15.2 |
|
18.4 |
Total
current liabilities |
|
344.2 |
|
405.8 |
|
|
|
|
|
Operating lease liabilities, net of current portion |
|
29.4 |
|
31.4 |
Plant
closure provisions, net of current portion |
|
51.1 |
|
51.9 |
Accrued
income taxes, net of current portion |
|
11.6 |
|
21.0 |
Unrecognized tax benefits |
|
14.1 |
|
13.4 |
Deferred
tax liabilities |
|
26.4 |
|
26.2 |
Pension
liabilities and post-employment benefits |
|
12.2 |
|
12.2 |
Other
non-current liabilities |
|
1.5 |
|
1.4 |
Equity |
|
1,128.1 |
|
1,040.4 |
Total
liabilities and equity |
$ |
1,618.6 |
$ |
1,603.7 |
|
Schedule 4 |
INNOSPEC INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
|
|
Nine Months EndedSeptember
30 |
(in
millions) |
|
2023 |
|
2022 |
Cash Flows from Operating
Activities |
|
|
|
|
|
|
|
|
|
Net income |
$ |
101.3 |
|
$ |
107.5 |
|
Adjustments to reconcile net
income to cash provided by operating activities: |
|
|
|
|
Depreciation and amortization |
|
29.1 |
|
|
30.9 |
|
Deferred taxes |
|
0.5 |
|
|
0.6 |
|
Non-cash movements on defined benefit pension plans |
|
(2.5 |
) |
|
(1.9 |
) |
Stock option compensation |
|
5.9 |
|
|
4.7 |
|
Changes in working capital |
|
20.8 |
|
|
(132.6 |
) |
Movements in plant closure provisions |
|
(1.2 |
) |
|
0.3 |
|
Movements in accrued income taxes |
|
(20.2 |
) |
|
(4.0 |
) |
Movements in unrecognized tax benefits |
|
0.7 |
|
|
- |
|
Movements in other assets and liabilities |
|
0.5 |
|
|
(2.2 |
) |
Net cash provided by operating
activities |
|
134.9 |
|
|
3.3 |
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
(45.2 |
) |
|
(27.1 |
) |
Internally developed
software |
|
(10.8 |
) |
|
- |
|
Proceeds on disposal of
property, plant and equipment |
|
- |
|
|
0.1 |
|
Net cash used in investing
activities |
|
(56.0 |
) |
|
(27.0 |
) |
|
|
|
|
|
|
|
Cash Flows from Financing
Activities |
|
|
|
|
|
|
|
|
|
Non-controlling interest |
|
0.3 |
|
|
1.9 |
|
Repayment of finance
leases |
|
- |
|
|
(0.1 |
) |
Refinancing costs |
|
(1.4 |
) |
|
- |
|
Dividend paid |
|
(17.2 |
) |
|
(15.6 |
) |
Issue of treasury stock |
|
0.7 |
|
|
2.1 |
|
Repurchase of common
stock |
|
(1.0 |
) |
|
(5.0 |
) |
Net cash used in financing
activities |
|
(18.6 |
) |
|
(16.7 |
) |
|
|
|
|
|
Effect of foreign currency
exchange rate changes on cash |
|
(0.2 |
) |
|
(0.9 |
) |
Net change in cash and cash
equivalents |
|
60.1 |
|
|
(41.3 |
) |
Cash and cash equivalents at
beginning of period |
|
147.1 |
|
|
141.8 |
|
Cash and cash equivalents at
end of period |
$ |
207.2 |
|
$ |
100.5 |
|
|
Amortization of deferred finance costs of $0.8
million (2022 - $0.3 million) are included in depreciation and
amortization in the condensed consolidated statements of cash flows
and in interest expense, net in the condensed consolidated
statements of income.
Innospec (NASDAQ:IOSP)
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Innospec (NASDAQ:IOSP)
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De Mai 2023 à Mai 2024