Afton Chemical parent NewMarket Corp. on Feb. 4 said its petroleum additives segmented posted a $32.5 million operating profit for the quarter ending Dec. 31, 2008, up 13 percent from $28.7 million in the year-earlier period. Operating income for Cibas plastic additives segment (including lube additives) dropped 11 percent for the full year 2008, compared to 2007.
During 2008, Afton recorded a $130 million operating profit total, up from $129.4 million for 2007. NewMarket President and CEO Thomas Gottwald explained that while the petroleum additives operating profit for the year 2008 showed a slight improvement over last year, during most of 2008 the business experienced unprecedented increases in the cost of many of its raw materials. That compressed margins as raw material cost increases were outpacing the companys pricing actions.
As raw material increases slowed towards the latter part of 2008, we experienced some margin recovery, Gottwald noted. As the worlds economic problems became more pronounced in the fourth quarter, and the price of oil dropped precipitously causing the destocking of inventory by many of our customers, the demand for our lubricant additives dropped approximately 20 percent from the average for the first nine months, as measured in tons shipped. … We believe the destocking process may continue throughout the first quarter, and that the underlying market demand will be within 5 to 8 percent of historic levels.
Gottwald said Newmarket has instituted a number of cost controls, including travel restrictions, reduced discretionary spend, reduced hiring and delays in certain capital projects.
Prior to the fourth quarter demand drop, the company had been running its plants at high rates to satisfy customers requirements, Gottwald added. During the last part of 2008 we lowered our operating rates significantly in order to properly manage inventory levels and working capital, he continued. Some raw material costs have also begun to fall, which should benefit us as well as our customers.
The petroleum additives segment rang up $365.6 million in revenue for the quarter, up 1.4 percent from $360.6 million in 2007s fourth quarter. For the full year 2008, the petroleum additives segments revenue reached $1.6 billion, improving 18 percent from $1.4 billion for 2007.
Richmond, Va.-based NewMarket recorded $19.4 million in overall net income, or $1.27 per share in the fourth quarter, down 28.3 percent from $27 million in net income, or $1.69 per share, in the year-ago period. For the full year, NewMarkets net income reached $73.2 million, or $4.75 per share, down from $95.3 million, or $5.62 per share, for 2007.
Basel, Switzerland-based Cibas plastics additives segment, which includes lubricant additives, yesterday reported operating income of 154 million Swiss francs (U.S. $133.5 million) for the full year 2008, down 52 percent from 323 million francs ($280 million) in 2007. Net sales totaled 1.9 billion francs ($1.6 billion) for 2008, down 11 percent from 2.2 billion francs ($1.9 billion) in 2007.
Operating income was impacted by the drop in demand in the last quarter, the company said. However, it was mostly affected by unprecedented raw material and energy price increases in the first half, that could only partly be compensated by the higher selling prices that came through in the second half.
Process and lubricant additives experienced strong growth throughout the year, Ciba said, with increased sales to global additive-packaging houses and oil companies.
The company also updated the status of BASF’s offer last September to acquire Ciba. “There are still outstanding regulatory approvals from the competition authorities required before BASF can take full control of Ciba, but these are expected to come through in time to close the transaction in the first quarter of 2009,” Ciba said.