Afton Chemical recorded lower operating profit and sales for its second quarter, and Valvoline reported decreases in operating income and sales for its fiscal quarter ending June 30, as both companies weathered the impacts of COVID-19.
Afton Chemical, the petroleum additives segment of NewMarket Corp., posted operating profit of $33.1 million for its second quarter, down 68% from $103 million in 2019’s second quarter.
Sales for the segment dropped to $408.7 million, down 27% from $560.8 million.
“Shipments were down 24.4% from the same period last year, with decreases in both lubricant and fuel additives shipments,” NewMarket Chairman and CEO Thomas Gottwald said in an earnings release. “Lower shipments were the primary driver of the lower operating profit. During the quarter, we saw no significant impact on profits from changes in raw material costs.”
Thomas Gottwald noted that, as the company had anticipated in its first-quarter earnings release, the second quarter of the year was significantly impacted by the COVID-19 pandemic and the resulting government restrictions on the movement of people, goods and services to combat the spread of the virus.
“With dramatically less travel and miles driven, and with less industrial production, specifically with automobile plant closures, global demand for both lubricant and fuel additives declined substantially,” he said. “Shipments to customers in the second quarter were down 25.1% from the first quarter of the year.”
While all three months saw decreased shipments for the company, he said, its overall low point was in May. “In June, we saw some improvement, particularly in North America, and in the Asia-Pacific region where shipments were on par with June 2019,” he added.
In addition to the increased shipments in June, Gottwald said the company saw substantial improvements in miles driven in both North America and Western Europe, and noted that vehicle production is resuming around the world. “The pace of improvement will depend heavily on the rate at which government restrictions are lifted and remain lifted,” the company noted. “Our regions will see varying effects on demand, based on our product portfolio, our geographic coverage and the differing government responses to the pandemic.”
NewMarket reported net income of $22.3 million, or $2.05 per diluted share, down 70% from $74.2 million or $6.63 per diluted share in the second quarter of last year.
Valvoline’s three operating segments – Core North America, quick lubes and international – posted a combined operating income of $88 million for the quarter, down 14% from $102 million in the year-earlier quarter. The quarter ending June 30 is the third quarter of Valvoline’s fiscal year.
The Lexington, Kentucky-based company’s three segments combined for $516 million in sales for the quarter, down 16% from $613 million. The Core North America segment accounted for $207 million, or 40% of sales, followed by quick lubes with $199 million, or 39%, and international at $110 million or 21%.
North American lubricant sales reached 19 million gallons for the quarter, down 21% from 24.1 million gallons. “The majority of the volume decline for the quarter was in the installer channel, driven primarily by impacts from COVID-19,” the company said. “Retail channel volume was less impacted by COVID-19 due to a rapid recovery in the [do-it-yourself] category during the quarter.”
Quick-lube lubricant sales declined to 6.2 million gallons, down 14% from 7.2 million gallons.
International lubricant sales declined 20% to 11.5 million gallons. The majority of this volume decline occurred in Latin America and an unconsolidated joint venture in India, the company noted, “where, in both regions, recovery is lagging due to extended COVID-19 impacts.”
Valvoline CEO Sam Mitchell said the durable nature of its business was on display during the quarter. “Lockdowns in response to COVID-19 caused meaningful impacts on our results in April and May,” he said in the company’s earnings news release. “As the restrictions eased and miles driven trends improved, we finished the quarter with June overall sales growing by 10% year-over-year. Quick Lubes and Core North America sales were each up 16% in June. International saw significant sequential improvement in June while still below prior year.”