Innospec Inc. (NASDAQ: IOSP) today announced its financial results
for the second quarter ended June 30, 2024.
Total revenues for the second quarter were
$435.0 million, a decrease of 9 percent from $480.4 million in the
corresponding period last year. Net income for the quarter was
$31.2 million or $1.24 per diluted share compared to $28.9 million
or $1.16 per diluted share recorded last year. Adjusted EBITDA for
the quarter was $54.1 million compared to $47.4 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 second quarter was $1.39 per
diluted share, compared to $1.28 per diluted share a year ago.
Cash from operating activities was $4.7 million
before capital expenditures of $15.2 million. The quarter closed
with net cash of $240.2 million and in the second quarter, the
Company paid its semi-annual dividend of 76 cents per common
share.
Adjusted EBITDA, income before income taxes
excluding special items and net income excluding special items and
related per-share amounts together with net cash, are non-GAAP
financial measures that are defined and reconciled with GAAP
results herein and in the schedules below.
|
Quarter ended June 30, 2024 |
Quarter ended June 30, 2023 |
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(in millions, except share and per share
data) |
|
Income beforeincome taxes |
|
Netincome |
|
Diluted EPS |
|
Income beforeincome taxes |
|
Net income |
|
Diluted EPS |
|
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Reported GAAP
amounts |
$ |
43.7 |
|
$ |
31.2 |
|
$ |
1.24 |
|
$ |
36.6 |
|
$ |
28.9 |
|
$ |
1.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Amortization of acquired
intangible assets |
|
3.2 |
|
|
2.4 |
|
|
0.10 |
|
|
2.6 |
|
|
2.0 |
|
|
0.08 |
|
Legacy costs of closed
operations |
|
0.8 |
|
|
0.6 |
|
|
0.02 |
|
|
0.9 |
|
|
0.7 |
|
|
0.03 |
|
Adjustment to fair value of
contingent consideration |
|
0.6 |
|
|
0.4 |
|
|
0.02 |
|
|
- |
|
|
- |
|
|
- |
|
Adjustment of income tax
provisions |
|
- |
|
|
0.2 |
|
|
0.01 |
|
|
- |
|
|
0.3 |
|
|
0.01 |
|
Foreign currency exchange
losses/(gains) |
|
0.1 |
|
|
0.1 |
|
|
- |
|
|
(1.2 |
) |
|
(0.9 |
) |
|
(0.04 |
) |
Acquisition related costs |
|
- |
|
|
- |
|
|
- |
|
|
1.5 |
|
|
1.1 |
|
|
0.04 |
|
|
|
4.7 |
|
|
3.7 |
|
|
0.15 |
|
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|
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|
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Adjusted non-GAAP
amounts |
$ |
48.4 |
|
$ |
34.9 |
|
$ |
1.39 |
|
$ |
40.4 |
|
$ |
32.1 |
|
$ |
1.28 |
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Commenting on the second quarter results,
Patrick S. Williams, President and Chief Executive Officer,
said,
“This was a mixed quarter for Innospec as Fuel
Specialties and Performance Chemicals continued to deliver strong
results while Oilfield Services declined as expected on significant
production chemical headwinds. Nevertheless, overall operating
income grew 19 percent and operating margins improved.
Performance Chemicals operating income more than
doubled over the prior year on higher sales and improved gross
margins. Demand for our mild and natural personal care technologies
continued to drive growth in operating income. We are excited by
opportunities in all our end-markets and remain cautiously
optimistic that we can maintain these improved results in the
second half of 2024. Our recent acquisition of QGP Quimica is
performing in line with expectations and is well positioned for
growth.
In Fuel Specialties, gross margins were at the
upper end of our targeted 32 to 35 percent range and operating
income and margins improved over the prior year. We continue to
target further sales growth and margin improvement in the business
as we pursue a diverse set of end-market and geographic
opportunities in both fuel and non-fuel applications.
As anticipated, Oilfield Services results were
impacted by significantly lower production chemical activity in the
quarter. As of the end of July this activity has not recovered.
While potential remains for some near-term recovery in this
business, we currently expect to see lower sales levels continuing
through the second half of 2024. In parallel we plan to remain
focused on several exciting, technology-based sales growth and
margin improvement opportunities in our other oilfield
segments.”
Revenues in Performance Chemicals of $160.1
million were up 25 percent over the second quarter of last year
with acquisition growth of 7 percent, volume growth of 29 percent
and an adverse price/mix of 11 percent. Gross margins of 22.6
percent increased by 5.4 percentage points from the same quarter
last year. Operating income of $21.2 million more than doubled from
$9.2 million in the corresponding prior year period.
Revenues in Fuel Specialties of $166.6 million
were up 8 percent from $154.2 million in the second quarter of last
year. Volumes were up 20 percent offset by an adverse price/mix of
12 percent. Gross margins of 34.6 percent increased by 5.5
percentage points over last year. Operating income of $30.4 million
was up 78 percent from $17.1 million a year ago. Adjusting for the
$8.0 million loss in Brazil in the second quarter of 2023, prior
year gross margins were 32.3 percent and operating income was $25.1
million.
Revenues in Oilfield Services of $108.3 million
for the quarter were down 45 percent from $198.4 million in the
second quarter of last year. Gross margins of 30.6 percent
decreased by 11.5 percentage points from the same quarter last year
on a weaker sales mix. Operating income of $7.3 million decreased
74 percent from $28.0 million in the prior year period.
Corporate costs for the quarter were $17.6
million, compared with $20.1 million a year ago.
The effective tax rate for the quarter was 28.6
percent compared to 21.0 percent in the same period last year
reflecting the geographical location of taxable profits.
For the quarter, cash provided by operating
activities was $4.7 million compared to $55.0 million a year ago.
As of June 30, 2024, Innospec had $240.2 million in cash and cash
equivalents and no debt.
Mr. Williams concluded,
“I am very pleased with the strong results in
Fuel Specialties and Performance Chemicals in the quarter. We
continue to execute as expected against a broad set of
technology-led growth opportunities in these businesses. While the
results and short-term outlook in Oilfield Services are clearly
below our targeted range, our team remains intensely focused on
leveraging our leading customer service and technology to build a
stronger medium to long-term business.
With over $240 million in net-cash we expect to
continue to pursue organic investments and complementary M&A
while returning value to shareholders through dividend growth.”
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
adjusted EBITDA, income before income taxes excluding special
items, net income excluding special items and related per share
amounts together with net cash. Adjusted EBITDA is net income per
our consolidated financial statements adjusted for the exclusion of
interest (income)/expense, net, income taxes, depreciation and
amortization, foreign currency exchange losses/(gains), legacy
costs of closed operations, adjustment to fair value of contingent
consideration and acquisition related costs. Income before income
taxes, net income and diluted EPS, excluding special items, per our
consolidated financial statements are adjusted for the exclusion of
amortization of acquired intangible assets, legacy costs of closed
operations, adjustment to fair value of contingent consideration,
adjustment of income tax provisions, foreign currency exchange
losses/(gains) and acquisition related costs. 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. In addition, 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 net income excluding special items and adjusted
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 and has provided a
reconciliation of adjusted 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 2,400 employees in 22
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, 2023,
Innospec’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2024 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 Barnes Innospec Inc. +44-151-355-3611
corbin.barnes@innospecinc.com
|
INNOSPEC INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF INCOME |
Schedule 1 |
|
|
|
Three Months Ended June 30 |
|
Six Months Ended June 30 |
(in millions, except share and per share
data) |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
435.0 |
|
$ |
480.4 |
|
$ |
935.2 |
|
$ |
990.0 |
|
Cost of goods sold |
|
(308.1 |
) |
|
(330.0 |
) |
|
(652.6 |
) |
|
(691.8 |
) |
Gross profit |
|
126.9 |
|
|
150.4 |
|
|
282.6 |
|
|
298.2 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
(73.4 |
) |
|
(105.6 |
) |
|
(166.1 |
) |
|
(201.8 |
) |
Research and development |
|
(12.2 |
) |
|
(10.6 |
) |
|
(24.0 |
) |
|
(21.2 |
) |
Adjustment to fair value of contingent consideration |
|
(0.6 |
) |
|
- |
|
|
(1.4 |
) |
|
- |
|
Profit on disposal of property, plant and equipment |
|
- |
|
|
- |
|
|
0.1 |
|
|
- |
|
Total operating expenses |
|
(86.2 |
) |
|
(116.2 |
) |
|
(191.4 |
) |
|
(223.0 |
) |
Operating income |
|
40.7 |
|
|
34.2 |
|
|
91.2 |
|
|
75.2 |
|
Other income, net |
|
0.9 |
|
|
2.7 |
|
|
3.6 |
|
|
6.4 |
|
Interest income/(expense), net |
|
2.1 |
|
|
(0.3 |
) |
|
4.2 |
|
|
- |
|
Income before income taxes |
|
43.7 |
|
|
36.6 |
|
|
99.0 |
|
|
81.6 |
|
Income taxes |
|
(12.5 |
) |
|
(7.7 |
) |
|
(26.4 |
) |
|
(19.5 |
) |
Net income |
$ |
31.2 |
|
$ |
28.9 |
|
$ |
72.6 |
|
$ |
62.1 |
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
1.25 |
|
$ |
1.16 |
|
$ |
2.91 |
|
$ |
2.50 |
|
Diluted |
$ |
1.24 |
|
$ |
1.16 |
|
$ |
2.89 |
|
$ |
2.48 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (in thousands): |
|
|
|
|
|
|
|
|
Basic |
|
24,937 |
|
|
24,868 |
|
|
24,918 |
|
|
24,835 |
|
Diluted |
|
25,097 |
|
|
24,980 |
|
|
25,091 |
|
|
25,010 |
|
|
|
|
|
|
|
|
|
|
INNOSPEC INC. AND SUBSIDIARIES |
|
Schedule 2A |
|
SEGMENTAL ANALYSIS OF RESULTS |
|
Three Months Ended June 30 |
|
Six Months Ended June 30 |
(in millions) |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
Performance Chemicals |
$ |
160.1 |
|
$ |
127.8 |
|
$ |
320.9 |
|
$ |
279.2 |
|
Fuel Specialties |
|
166.6 |
|
|
154.2 |
|
|
343.5 |
|
|
344.5 |
|
Oilfield Services |
|
108.3 |
|
|
198.4 |
|
|
270.8 |
|
|
366.3 |
|
|
|
435.0 |
|
|
480.4 |
|
|
935.2 |
|
|
990.0 |
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
Performance Chemicals |
|
36.2 |
|
|
22.0 |
|
|
73.9 |
|
|
46.1 |
|
Fuel Specialties |
|
57.6 |
|
|
44.8 |
|
|
118.2 |
|
|
102.2 |
|
Oilfield Services |
|
33.1 |
|
|
83.6 |
|
|
90.5 |
|
|
149.9 |
|
|
|
126.9 |
|
|
150.4 |
|
|
282.6 |
|
|
298.2 |
|
|
|
|
|
|
|
|
|
|
Operating income: |
|
|
|
|
|
|
|
|
Performance Chemicals |
|
21.2 |
|
|
9.2 |
|
|
42.3 |
|
|
19.6 |
|
Fuel Specialties |
|
30.4 |
|
|
17.1 |
|
|
63.8 |
|
|
49.5 |
|
Oilfield Services |
|
7.3 |
|
|
28.0 |
|
|
24.2 |
|
|
43.9 |
|
Corporate costs |
|
(17.6 |
) |
|
(20.1 |
) |
|
(37.8 |
) |
|
(37.8 |
) |
|
|
41.3 |
|
|
34.2 |
|
|
92.5 |
|
|
75.2 |
|
Adjustment to fair value of contingent consideration |
|
(0.6 |
) |
|
- |
|
|
(1.4 |
) |
|
- |
|
Profit on disposal of property, plant and equipment |
|
- |
|
|
- |
|
|
0.1 |
|
|
- |
|
Total operating income |
$ |
40.7 |
|
$ |
34.2 |
|
$ |
91.2 |
|
$ |
75.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 2B |
|
NON-GAAP MEASURES |
|
Three Months Ended June 30 |
|
Six Months Ended June 30 |
(in millions) |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
31.2 |
|
$ |
28.9 |
|
$ |
72.6 |
|
$ |
62.1 |
|
Interest (income)/expense, net |
|
(2.1 |
) |
|
0.3 |
|
|
(4.2 |
) |
|
- |
|
Income taxes |
|
12.5 |
|
|
7.7 |
|
|
26.4 |
|
|
19.5 |
|
Depreciation and amortization |
|
11.0 |
|
|
9.3 |
|
|
21.3 |
|
|
18.5 |
|
Foreign currency exchange losses/(gains) |
|
0.1 |
|
|
(1.2 |
) |
|
(1.0 |
) |
|
(3.2 |
) |
Legacy costs of closed operations |
|
0.8 |
|
|
0.9 |
|
|
1.6 |
|
|
1.7 |
|
Adjustment to fair value of contingent consideration |
|
0.6 |
|
|
- |
|
|
1.4 |
|
|
- |
|
Acquisition related costs |
|
- |
|
|
1.5 |
|
|
- |
|
|
1.5 |
|
Adjusted EBITDA |
|
54.1 |
|
|
47.4 |
|
|
118.1 |
|
|
100.1 |
|
|
|
|
|
|
|
|
|
|
Schedule 3 |
INNOSPEC INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS |
|
(in millions) |
|
June 30, 2024 |
|
December 31, 2023 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
240.2 |
|
$ |
203.7 |
|
Trade and other accounts receivable |
|
300.3 |
|
|
359.8 |
|
Inventories |
|
313.5 |
|
|
300.1 |
|
Prepaid expenses |
|
9.7 |
|
|
18.7 |
|
Prepaid income taxes |
|
12.1 |
|
|
2.8 |
|
Other current assets |
|
1.0 |
|
|
0.6 |
|
Total current assets |
|
876.8 |
|
|
885.7 |
|
|
|
|
|
|
|
|
Net property, plant and equipment |
|
271.9 |
|
|
268.3 |
|
Operating lease right-of-use assets |
|
47.9 |
|
|
45.1 |
|
Goodwill |
|
388.2 |
|
|
399.3 |
|
Other intangible assets |
|
61.4 |
|
|
57.3 |
|
Deferred tax assets |
|
10.4 |
|
|
10.4 |
|
Pension asset |
|
37.0 |
|
|
35.1 |
|
Other non-current assets |
|
6.7 |
|
|
6.2 |
|
Total assets |
$ |
1,700.3 |
|
$ |
1,707.4 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
$ |
147.7 |
|
$ |
163.6 |
|
Accrued liabilities |
|
143.1 |
|
|
185.9 |
|
Current portion of operating lease liabilities |
|
14.9 |
|
|
13.6 |
|
Current portion of plant closure provisions |
|
4.6 |
|
|
4.6 |
|
Current portion of accrued income taxes |
|
21.3 |
|
|
2.6 |
|
Current portion of unrecognized tax benefits |
|
1.2 |
|
|
1.2 |
|
Total current liabilities |
|
332.8 |
|
|
371.5 |
|
|
|
|
|
|
|
|
Operating lease liabilities, net of current portion |
|
33.2 |
|
|
31.6 |
|
Plant closure provisions, net of current portion |
|
56.5 |
|
|
57.0 |
|
Accrued income taxes, net of current portion |
|
- |
|
|
11.6 |
|
Unrecognized tax benefits, net of current portion |
|
10.7 |
|
|
13.6 |
|
Deferred tax liabilities |
|
35.4 |
|
|
33.5 |
|
Pension liabilities and post-employment benefits |
|
12.7 |
|
|
13.3 |
|
Acquisition-related contingent consideration |
|
20.2 |
|
|
23.4 |
|
Other non-current liabilities |
|
2.9 |
|
|
2.3 |
|
Equity |
|
1,195.9 |
|
|
1,149.6 |
|
Total liabilities and equity |
$ |
1,700.3 |
|
$ |
1,707.4 |
|
|
|
|
|
|
|
|
Schedule 4 |
INNOSPEC INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
Six Months Ended June 30 |
(in millions) |
|
2024 |
|
2023 |
|
|
|
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
Net income |
$ |
72.6 |
|
$ |
62.1 |
|
Adjustments to reconcile net income to cash provided by operating
activities: |
|
|
|
|
Depreciation and amortization |
|
21.5 |
|
|
19.2 |
|
Adjustment to fair value of contingent consideration |
|
1.4 |
|
|
- |
|
Deferred taxes |
|
0.7 |
|
|
1.1 |
|
Profit on disposal of property, plant and equipment |
|
(0.1 |
) |
|
- |
|
Non-cash movements on defined benefit pension plans |
|
(1.6 |
) |
|
(1.7 |
) |
Stock option compensation |
|
4.2 |
|
|
3.9 |
|
Changes in working capital |
|
(10.0 |
) |
|
11.5 |
|
Movements in plant closure provisions |
|
(0.1 |
) |
|
(0.5 |
) |
Movements in income taxes |
|
(0.1 |
) |
|
(21.6 |
) |
Movements in unrecognized tax benefits |
|
(2.9 |
) |
|
0.6 |
|
Movements in other assets and liabilities |
|
(0.3 |
) |
|
2.2 |
|
Net cash provided by operating activities |
|
85.3 |
|
|
76.8 |
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
(21.6 |
) |
|
(32.6 |
) |
Proceeds on disposal of property, plant and equipment |
|
0.2 |
|
|
- |
|
Business combinations, net of cash acquired |
|
(0.2 |
) |
|
- |
|
Internally developed software |
|
(8.1 |
) |
|
(6.7 |
) |
Net cash used in investing activities |
|
(29.7 |
) |
|
(39.3 |
) |
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
Non-controlling interest |
|
0.8 |
|
|
0.2 |
|
Refinancing costs |
|
(0.3 |
) |
|
(1.5 |
) |
Dividend paid |
|
(19.0 |
) |
|
(17.2 |
) |
Issue of treasury stock |
|
0.8 |
|
|
0.7 |
|
Repurchase of common stock |
|
(0.7 |
) |
|
(1.0 |
) |
Net cash used in financing activities |
|
(18.4 |
) |
|
(18.8 |
) |
|
|
|
|
|
Effect of foreign currency exchange rate changes on cash |
|
(0.7 |
) |
|
0.1 |
|
Net change in cash and cash equivalents |
|
36.5 |
|
|
18.8 |
|
Cash and cash equivalents at beginning of period |
|
203.7 |
|
|
147.1 |
|
Cash and cash equivalents at end of period |
$ |
240.2 |
|
$ |
165.9 |
|
|
|
|
|
|
|
|
Amortization of deferred finance costs of $0.2
million (2023 - $0.7 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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