NewMarket Corporation (NewMarket) has reported total net sales of $1.6 billion for the year-end 2008, compared with the total net sales of $1.37 billion in the previous year-end. It has also reported a net income of $73.2 million, or $4.75 per diluted share, for the year-end 2008, compared with the net income of $95.3 million, or $5.62 per diluted share, in the previous year-end.
Income from continuing operations for the year 2008 amounted to $73.2 million, an increase of 6% from earnings on the same basis for the year 2007 of $69 million before special items.
Income from continuing operations for the fourth quarter of 2008 was $19.4 million, an increase of 26% from earnings on the same basis for the fourth quarter 2007 of $15.4 million before special items. Earnings per share on this basis for the fourth quarter of 2008 were $1.27 per share, an increase of 32% from earnings per share for the fourth quarter of 2007 on this basis of $.96 per share before special items. Including fourth quarter 2007 special items, net income for the fourth quarter of last year was $27 million, or $1.68 per share.
Earnings per share for the 2008 periods reflect the benefit of share repurchases made in both 2007 and 2008. The year 2007 special items include the 2007 gain associated with the termination of the tetraethyl lead (TEL) marketing agreements, as well as the after-tax earnings from these agreements in the first quarter of 2007 (discontinued operations), which together total a benefit of $16.8 million. The year 2007 results also include a tax benefit of $9.5 million primarily associated with the reversal of taxes previously provided on the undistributed earnings of certain of our foreign subsidiaries.
The petroleum additive operations had another strong performance in 2008 with sales increasing to $1.6 billion, an improvement of 18% over sales in 2007 of $1.4 billion. This improvement in sales included the benefit of a 4% increase in volumes shipped for 2008 as a whole despite experiencing a significant drop in demand during the last two months of 2008. Operating profit for the year 2008 was $130 million, a slight improvement over the year 2007 operating profit of $129.4 million. For the fourth quarter of 2008, petroleum additives net sales were $365.6 million, an improvement of 1% from sales for the fourth quarter of last year of $360.6 million. Operating profit for the fourth quarter of this year increased to $32.5 million, an improvement of 13% over last year’s fourth quarter operating profit of $28.7 million.
While petroleum additives operating profit for the year 2008 showed a slight improvement over last year, during most of the year the business experienced unprecedented increases in the cost of many of the company’s raw materials compressing margins as raw material cost increases were outpacing the company’s pricing actions. As raw material increases slowed towards the latter part of 2008, the company experienced some margin recovery. As the world’s economic problems became more pronounced in the fourth quarter and the price of oil dropped precipitously causing the destocking of inventory by many of the company’s customers, the demand for company’s lubricant additives dropped about 20% from the average for the first nine months, as measured in tons shipped. Prior to this demand drop, the company had been running its plants at high rates to satisfy its customers’ requirements. During the last part of 2008 we lowered the company’s operating rates significantly in order to properly manage inventory levels and working capital. Some raw material costs have also begun to fall which should benefit us as well as the company’s customers.
While world economies continue to experience turbulent financial conditions, the company’s financial position remains strong. Currently, the company’s volumes continue to be negatively impacted by the worldwide economic slowdown and customer destocking actions which continues into 2009. The company believes the destocking process may continue throughout the first quarter, and that the underlying market demand will be within 5 to 8% of historical levels. The company has also instituted a number of cost controls including travel restrictions, reduced discretionary spend, reduced hiring and delays in certain capital projects.