The lubricant additive businesses of Lubrizol Corp. and the former Ethyl Corp. both posted healthy financial gains for the second quarter, thanks to robust sales and success in passing through higher costs. Quaker Chemical also recorded a sales jump but watched its profit fall because its own price hikes did not keep pace with raw materials costs.
Lubrizol, of Wickliffe, Ohio, reported July 28 that it had operating income of $72.8 million from its lubricant additive segment for the three-month period ending June 30. Those same activities – the companys former Fluid Technologies for Transportation segment plus additives supplied for metalworking fluids, greases and hydraulic fluids – had operating income of $58.6 million during the second quarter of 2003.
Sales revenue for the segment, which was created after the June acquisition of Noveon International Inc., jumped 15 percent to $522.1 million due to sales volume growth in all product lines.
Volume trends were stronger than we expected, Senior Vice President and Chief Financial Officer Charles P. Cooley said during a conference call with investment analysts. You will recall that last year we talked about finished lubricant industry inventory levels at 20-year lows, and we believe this quarter we benefited from some amount of rebuild.
Cooley said sales volumes grew 9 percent in North America, 12 percent in Europe and 23 percent in Asia/Pacific and the Middle East. He singled out China, where the company is successfully commercializing a competitive [engine oil] additive package with fewer performance features at a lower pricing than our top-tier products.
NewMarket Corp., which changed its name from Ethyl as part of a July 1 restructuring, said Thursday that its petroleum additive business yielded a second quarter operating profit of $14.9 million, 20 percent higher than the same period of 2003. The petroleum additive business, now named Afton Chemical Corp., posted $214.6 million in sales, an increase of 26 percent.
Afton also claimed increased shipment volumes for all major product lines. Although raw materials costs have risen, Lubrizol and Afton both said they have been able to pass those costs on to customers by raising their own prices. Richmond, Virginia-based NewMarket said Aftons price hikes are still lagging behind raw materials costs. Lubrizol raised prices in March and again in June and said it expects to catch up with raw materials costs in the fourth quarter.
Quaker Chemical, of Conshohocken, Pa., announced Thursday that its second quarter sales jumped 18 percent to $98.7 million, due to double-digit growth in Asia/Pacific and Latin America, and gains from exchange rate fluctuations, acquisitions and new chemical management services contracts. Its net income, however, fell 20 percent to $2.8 million because of higher-than-expected raw materials costs.
Officials said the company has announced and implemented a number of price increases and expects them to improve the bottom line during the second half of the year.
NewMarket and Lubrizol said they expect sales during the second half to be increased from the same period of 2003 but to ease off the pace set during the first six months of this year. Lubrizol said it has begun shipping additive packages for the new GF-4 passenger car motor oil upgrade but that quantities have been small so far.