Valvoline Inc. reported higher net income and operating income for the quarter ending June 30, in spite of a 28% increase in cost of sales. Saudi Aramco recently announced a $2.7 billion deal to acquire the company’s Global Products business, which reported 11% higher operating income for the quarter.
Meanwhile, income surged for HF Sinclair’s lubricants and specialty products segment, and operating profit improved for Afton Chemical’s petroleum additives business. Calumet reported an uptick in base oil and process sales revenue, Clean Harbors’ Safety-Kleen Sustainability Solutions segment reported higher revenues, and Quaker Chemical’s net income fell.
Valvoline’s net income rose 2% to $99 million, and operating income increased 5% to $138 million.
Valvoline reported sales revenue of $957 million for the third quarter of its fiscal year, up 21% from $792 million.
Cost of sales increased to $681 million in the quarter, up from $533 million. Gross profit rose 7% to $276 million. Selling general and administrative expenses edged up 1% to $138 million.
Valvoline – based in Lexington, Kentucky – has two segments: Retail Services and Global Products.
Operating income for the Retail Services segment decreased 1% to $97 million in the quarter, while segment sales increased 16% to $384 million. Retail Services sales are limited to sales at company-operated stores, sales of lubricants and other products to independent franchise and Express Care operators, in addition to royalties and other fees from franchised stores.
“The pricing actions we took in Q3 normalized our margins on a per-transaction basis, while product sales to our franchisees remain dilutive to overall margin percentage due to the price pass-through of higher raw material costs,” CEO Sam Mitchell said in Valvoline’s earnings news release.
Global Products operating income increased to $80 million in the quarter, improving from $72 million, while segment sales grew 24% to $573 million. Lubricant sales volume for the segment rose 9% to $45.4 million gallons. The sales increase was driven by record volume and successful price pass-through of raw material cost inflation, Mitchell said. The volume growth came, “as we continue to gain share and meet customer demand, despite ongoing challenges from COVID-19, particularly in China, and geopolitical disruption.”
In May 2021, Valvoline announced it would restructure its business model starting with last year’s third quarter, renaming its Quick Lubes segment to Retail Services and consolidating its Core North America and International segments into Global Products. Retail Services comprises Valvoline’s oil change stores in the United States and Canada, while Global Products focuses on sales of lubricants and other maintenance products through channels other than Quick Lubes.
Saudi Aramco announced on Aug. 1 a $2.7 billion deal to acquire Valvoline’s Global Products business. The acquisition marks not just a massive expansion for the state-owned oil company but a complete shift for Valvoline to a service-driven business model. The transaction is expected to close in late calendar year 2022 or early 2023 subject to customary closing conditions and receipt of regulatory approval.
HF Sinclair’s lubricants and specialty products segment reported that first-quarter income from operations jumped 125% to $134.9 million in the second quarter, improving from $59.9 million.
The segment’s revenue from external customers increased 28% to $845 million, up from $662.8 million.
The company said the segment’s improved earnings were driven by strong finished product demand in its Rack Forward businesses, which represent the portion of HF Sinclair’s lubricants and specialty products business operations that entails the processing of base oils into finished lubricants and the packaging, distribution and sale to customers.
The lubricants and specialty products segment includes Petro-Canada Lubricants and its refinery in Mississauga, Ontario, which makes such products as base oils, white oils, specialty products and finished lubricants, along with specialty lubricants from HollyFrontier’s refineries in Tulsa, Oklahoma.
NewMarket Corp., Afton Chemical’s parent company, reported a 23% increase in operating profit for its petroleum additives business, which it attributed mainly to increased selling prices and shipments, partly offset by higher raw material and operating costs.
NewMarket’s petroleum additives segment – which includes fuel additives, but mostly consists of Afton, which earns most of its money from lubricant additives – reported operating profit of $91.2 million for the second quarter, improving from $74.2 million in the same period in 2021.
Increases in lubricant additive shipments were partly offset by decreases in fuel additives shipments in the quarter, the company said. “All regions except Latin America contributed to the increase in lubricant additives shipments,” Newmarket, of Richmond, Virginia, stated in its earnings report.
Petroleum additives sales revenue also increased 23%, to $721 million, up from $587 million.
The company said its efforts to recover margins and control costs are beginning to take hold but are still challenged by the ongoing inflationary environment.
“Margin recovery and cost control will remain priorities throughout 2022 so that we can return to our historical profit margin range,” NewMarket said. “In addition, worldwide supply chain disruptions continue to negatively impact our business. We are working to resolve continuing supply chain issues to meet our customers’ growing needs, and we expect to see improvement in the supply chain and in our performance as the year unfolds.”
Afton Chemical declared force majeure effective July 26 because flooding at its additives plant in Sauget, Illinois – stemming from record rainfall in the St. Louis area – caused an unplanned, sitewide outage. According to a notice to customers, products impacted include engine oil additive packages.
Calumet reported base oil and process oil sales revenue of $245.3 million for the second quarter, 55% higher than $158.8 million in the same period of 2021. Production of those products rose 3% to 10,661 barrels per day, and wax production was down 20% at 1,204 b/d.
The company’s performance brands segment, which includes Royal Purple and Bel-Ray finished lubricants, along with packaged high-performance fuels, reported sales of $80.1 million, a 23% increase from $65.2 million. Production of those products rose 25% to 1,615 b/d.
Overall, Calumet trimmed its net loss to $15.3 million for the second quarter, compared with a $78.4 million net loss in the same period last year.
Clean Harbors, based in Norwell, Massachusetts, said its Safety-Kleen Sustainability Solutions segment – which includes oil rerefining, waste oil collection and finished lubricants – reported third-party revenues rose 34% to $271.7 million in the second quarter, compared with $203.2 million in the same period last year.
“Demand for our base oil was extremely high throughout the quarter, given industry dynamics and global supply disruptions,” Chairman, President and CEO Alan S. McKim said in the company’s earnings press release. “Two substantive base oil price increases occurred mid-quarter, helping drive greater revenue and profitability.”
Quaker Chemical – also known as Quaker Houghton – reported that net income fell 57% to $14.3 million in the second quarter, compared with $33.6 million in the same period last year.
Net sales increased 13% to $492.4 million, compared with $435.3 million. The company attributed the increase primarily to an increase in selling price and product mix, and additional net sales from acquisitions, partly offset by an unfavorable impact from foreign currency translation and a decrease in organic sales volumes.
“The increase in selling price and product mix was primarily attributable to double-digit increases in all segments in response to ongoing and unprecedented raw material and supply chain-related inflationary pressures,” the company said in its earnings news release. “The decline in organic sales volumes was primarily attributable to COVID-19 related disruptions in China, the wind-down of the tolling agreement for products previously divested related to the Quaker Houghton combination, the impact of the war in Ukraine and the company’s ongoing value based pricing initiatives, partially offset by net new business wins.”
Quaker Chemical, based in Conshohocken, Pennsylvania, completed its merger with Houghton in August 2019, forming the new Quaker Houghton.
The industrial process fluids company said that the increase in net sales was more than offset by lower gross margins primarily attributable to significant increases in raw material and other costs, compared to the same period in 2021.