Executive Summary / Key Takeaways

• NewMarket Corporation is strategically transforming into a diversified specialty chemicals leader, balancing its mature, cash-generative petroleum additives business with high-growth, mission-critical specialty materials.
• The recent acquisitions of AMPAC and Calca Solutions, coupled with a significant $100 million capital investment in AMPAC, are expanding capacity by over 50% by 2026, positioning NewMarket for substantial growth in the defense and space sectors.
• Despite market softness and increased R&D investments in petroleum additives, the segment continues to deliver solid operating profit margins, supported by a relentless focus on operational efficiency and cost control.
• NewMarket maintains a robust financial position, characterized by strong cash flow generation, significant debt reduction, and a healthy leverage ratio of 1.10x as of September 30, 2025, enabling consistent shareholder returns through dividends and share repurchases.
• The company's long-term outlook anticipates continued strength across both segments, with a strategic emphasis on technology-driven solutions and an ongoing evaluation of M&A opportunities, primarily within petroleum additives, to achieve a 10% compounded annual shareholder return.

A Legacy Reimagined: NewMarket's Strategic Evolution

NewMarket Corporation, with roots tracing back to 1887, has long been a foundational player in the specialty chemicals industry. Historically, its core strength has resided in the petroleum additives market, where its subsidiaries, Afton Chemical and Ethyl Corporation, have provided essential lubricant and fuel additives crucial for the efficient operation of vehicles and machinery globally. This segment has established NewMarket as a reliable partner across North America, Latin America, Asia Pacific, and the EMEAI regions.

In a pivotal strategic move, NewMarket has embarked on a significant diversification, expanding into the high-growth, mission-critical specialty materials sector. This transformation began with the acquisition of American Pacific Corporation (AMPAC) on January 16, 2024, for approximately $697 million, establishing a new reportable segment. Further solidifying this strategic direction, NewMarket completed the acquisition of Calca Solutions, LLC on October 1, 2025. This evolution positions NewMarket as a dual-engine enterprise, leveraging the stability and cash generation of its traditional business while tapping into the robust growth potential of advanced materials for defense and space applications.

Technological Edge: Fueling Performance and Critical Missions

NewMarket's competitive advantage is deeply rooted in its technology-driven product offerings and continuous innovation across both segments. In petroleum additives, the company consistently invests in research, development, and testing (R&D) to meet evolving customer needs and stringent industry standards. These "technology investments" ensure the development of solutions that enhance operational efficiency and support new product areas, reflecting a purposeful spending strategy to maintain its product base and future customer programs.

The Specialty Materials segment, however, showcases a distinct and highly differentiated technological moat. AMPAC manufactures critical specialty materials primarily used in solid rocket motors for space launch and military defense applications. Its long-standing qualification on numerous NASA and Department of Defense programs, spanning over 60 years, underscores the highly specialized and certified nature of its technology. Similarly, Calca Solutions is recognized as a leading producer of UltraPure and high-purity hydrazine, which are essential, mission-critical propellants for advanced aerospace and defense applications, particularly integral to in-space propulsion systems. Calca's 70-year history of supplying high-purity hydrazine to the U.S. Department of Defense's Defense Logistics Agency Energy further highlights its unique technological capabilities and trusted position.

To meet anticipated future demand, NewMarket is undertaking a significant capital investment of up to $100 million at AMPAC's facility, projected for completion in 2026. This investment aims to construct an additional production line, increasing capacity by more than 50%. This quantifiable expansion directly addresses the growing demand from U.S. military and space launch programs and their allies, ensuring redundancy and security of supply. For investors, these technological differentiators translate into high barriers to entry, stable demand from critical sectors, and a strong competitive moat, driving long-term growth and resilient revenue streams.

Competitive Dynamics: Niche Leadership in a Global Arena

NewMarket operates in highly competitive markets, facing both large, diversified chemical giants and more specialized players. In the petroleum additives space, direct competitors include segments of BASF SE (BASFY), Innospec Inc. (IOSP), Chevron Corporation (CVX), and ExxonMobil Corporation (XOM). NewMarket distinguishes itself through its focus on specialized, high-performance solutions and customer-specific innovations, fostering strong customer loyalty. Its integrated approach to additives across multiple applications provides superior versatility, while its technical specialization often leads to improved durability in challenging industrial conditions. While larger rivals like BASF and ExxonMobil may boast greater global reach and R&D breadth, NewMarket's targeted expertise allows it to capture significant market share in specialized segments. The high R&D costs and stringent regulatory approvals inherent in this industry act as substantial barriers to entry, protecting NewMarket's established position.

Financial Performance: Resilience Amidst Evolution

NewMarket's financial performance in 2025 reflects a period of strategic integration and operational focus, particularly against a backdrop of macroeconomic uncertainty. For the first nine months of 2025, consolidated net income was $337.5 million, or $35.78 per share, compared to $351.7 million, or $36.66 per share, in the prior year period. Notably, the first half of 2025 saw record net income of $237.2 million, or $25.11 per share.

The Petroleum Additives segment, while facing market softness and lower product shipments, demonstrated resilience. Net sales for the first nine months of 2025 were $1.95 billion, a 3.10% decrease from $2.01 billion in the same period of 2024, primarily due to lower product shipments partially offset by a favorable product mix. Operating profit for this segment decreased by 9.40% to $413.2 million for the first nine months of 2025, impacted by lower shipments, higher operating costs, and increased technology investments for R&D, along with one-time network optimization charges. However, these were partially mitigated by lower raw material costs and a favorable product mix. The segment's operating profit margin for the rolling four quarters ended September 30, 2025, stood at a solid 21.30%, well within its historical range. This performance underscores management's effective cost control and efficiency enhancement efforts, which have maintained strong operating profit levels despite external pressures.

The Specialty Materials segment, representing NewMarket's growth engine, reported higher net sales and operating profit for the first nine months of 2025, primarily driven by increased product volumes. Net sales reached $133.9 million, up from $114.2 million in the comparable 2024 period (which only included results from the January 16, 2024 acquisition date). Operating profit for the segment surged to $39.7 million for the first nine months of 2025, compared to $16.0 million in the prior year. While quarterly results for this segment can vary substantially due to shipment timing, the overall trend reflects robust growth following the strategic acquisitions.

Robust Capital Structure and Shareholder Returns

NewMarket maintains a strong financial position and robust liquidity, providing ample flexibility for strategic investments and shareholder returns. Cash and cash equivalents stood at $102.5 million as of September 30, 2025, an increase of $25 million since December 31, 2024.

Cash provided from operating activities for the first nine months of 2025 was $423.8 million, highlighting the company's significant cash-generating capabilities.

The company has also made substantial progress in managing its debt, with long-term debt decreasing from $971.3 million at December 31, 2024, to $783.1 million at September 30, 2025. This reduction was driven by principal payments of $150 million on the term loan and $50 million on senior notes. As a result, NewMarket's leverage ratio improved to 1.10x at September 30, 2025, well below its revolving credit facility covenant of 3.75 to 1.

This strong balance sheet supports the company's commitment to returning value to shareholders, evidenced by $77.2 million in share repurchases and $77.7 million in dividends paid during the first nine months of 2025. The quarterly dividend was further increased to $3.00 per share in October 2025, representing an approximate 9% increase.

Outlook and Strategic Imperatives

NewMarket's management is committed to a long-term goal of providing a 10% compounded return per year for shareholders, defined as earnings per share growth plus dividend yield. This objective is underpinned by a customer-focused strategy, a safety-first culture, technology-driven product offerings, and a world-class supply chain.

For the remainder of 2025, the petroleum additives segment is expected to deliver "continued solid results," despite ongoing market softness and the uncertain global economic environment. Management's focus remains on cost control, operating profit margin management, and optimizing its global manufacturing network for efficient product delivery. In the Specialty Materials segment, the company anticipates "solid results" from both AMPAC and Calca, though it cautions investors to expect substantial quarterly variations due to the nature of the business.

Capital expenditures for 2025 are projected to be in the $70 million to $100 million range, including investments in manufacturing and R&D infrastructure globally. The significant $100 million investment in AMPAC's ammonium perchlorate production capabilities, increasing capacity by over 50% by 2026, is a key strategic initiative to meet growing demand from U.S. military and space launch programs. While the recent acquisitions of AMPAC and Calca represent a successful diversification, NewMarket's primary focus for future acquisitions remains within the petroleum additives industry, which it views as offering the greatest opportunity for solid returns with minimized risk.

Risks and Challenges

Despite a strong strategic position, NewMarket faces several risks. The uncertain macroeconomic environment, including international trade relations and tariffs, could lead to supply chain disruptions, lower customer demand, and higher inflation, impacting both segments. The company's chemical operations are subject to hazards and potential disruptions at production facilities, some of which are single-sourced. Furthermore, the specialty materials segment, with its reliance on U.S. government contracts, is susceptible to variations in quarterly results, including potential impacts from government shutdowns. Environmental proceedings and potential liabilities also present ongoing risks, though the company believes it is adequately accrued for known issues.

Conclusion

NewMarket Corporation stands as a compelling investment thesis, skillfully balancing a mature, highly profitable core with a strategically acquired, high-growth segment. The company's long-standing leadership in petroleum additives, driven by continuous technological investment and operational efficiency, provides a stable foundation and robust cash flows. Simultaneously, its calculated expansion into mission-critical specialty materials, through the acquisitions of AMPAC and Calca, offers significant growth potential in resilient defense and space markets, underpinned by unique technological differentiators and high barriers to entry.

NewMarket's strong financial health, marked by substantial debt reduction and consistent shareholder returns, provides the flexibility to execute its dual-engine strategy. While macroeconomic headwinds and industry-specific challenges persist, the company's disciplined management, strategic capital allocation, and unwavering commitment to technological leadership position it for sustained long-term value creation. Investors looking for a specialty chemicals leader with a balanced portfolio and a clear growth trajectory in strategic markets will find NewMarket's story particularly insightful.