Innospec Reports Third Quarter 2023 Financial Results

Strong sequential improvement in Performance Chemicals; Continued excellent results in Oilfield Services; Consistent performance in Fuel Specialties

$58.1 million cash generated from operations in the quarter; Net cash improves to $207.2 million

Maintaining a strong, debt-free, flexible balance sheet

Dividend for full year increased by 10 percent

GAAP EPS $1.57 and adjusted non-GAAP EPS $1.59

ENGLEWOOD, Colo., Nov. 07, 2023 (GLOBE NEWSWIRE) -- Innospec Inc. (NASDAQ: IOSP) today announced its financial results for the third quarter ended September 30, 2023. At the same time, the Company announced that it has declared a semi-annual dividend of 72 cents per common share for the second half of 2023 which will be paid on November 27, 2023 to shareholders of record as of November 20, 2023. This brings the annual dividend to $1.41 per share, a 10 percent increase over 2022.

Total revenues for the third quarter were $464.1 million, a decrease of 10 percent from $513.0 million in the corresponding period last year. Net income for the quarter was $39.2 million or $1.57 per diluted share compared to $38.7 million or $1.55 per diluted share recorded last year. EBITDA for the quarter was $56.5 million compared to $59.2 million reported in the same period a year ago.

Results for this quarter include some special items, which are summarized in the table below. Excluding these items, adjusted non-GAAP EPS in the third quarter was $1.59 per diluted share, compared to $1.74 per diluted share a year ago.

Innospec generated cash from operating activities of $58.1 million before capital expenditures of $16.7 million in the quarter. We closed the quarter with net cash of $207.2 million.

EBITDA, income before income taxes and net income excluding special items, and related per-share amounts, are non-GAAP financial measures that are defined and reconciled with GAAP results herein and in the schedules below.

   Quarter ended September 30, 2023
 Quarter ended September 30, 2022
(in millions, except share and per share data) Income


Reported GAAP amounts$47.5 $39.2 $1.57 $48.9$38.7$1.55
Foreign currency exchange (gains)/losses (3.2) (2.4) (0.10) 2.1 1.7 0.07
Amortization of acquired intangible assets 2.6  2.0  0.08  3.2 2.5 0.10
Legacy costs of closed operations 0.7  0.5  0.02  0.7 0.6 0.02
Acquisition related costs 0.3  0.2  0.01  - - -
Adjustment of income tax provisions -  0.2  0.01  - - -
  0.4  0.5  0.02  6.0 4.8 0.19
Adjusted non-GAAP amounts$47.9 $39.7 $1.59 $54.9$43.5$1.74

Commenting on the third quarter results, Patrick S. Williams, President and Chief Executive Officer, said,

“This was another good quarter for Innospec. Our balanced portfolio delivered strong sequential improvement in Performance Chemicals, continued excellent results in Oilfield Services and a steady performance in Fuel Specialties.

In Performance Chemicals, as expected, new contracts drove sequential operating income growth and margin improvement despite continued destocking and end-market headwinds. We believe that destocking pressure has peaked. We are cautiously optimistic that our new contracts together with on-going improvement in our base business has the potential to deliver further sequential growth and margin improvement in the fourth quarter. We feel that our industry-leading 1,4-Dioxane-free and sulfate-free technologies combined with our dedication to customer partnerships and customer service leaves us well placed for continued growth.

In Fuel Specialties, operating income was broadly similar to last year as improved margins offset lower sales. Gross margins were slightly below our target 32 to 35 percent range as we continue to manage inflationary pressure. We expect sequential margin improvement and operating income growth as demand for our chemistries increases into the winter quarters.  

In Oilfield Services, despite the expected moderation in production chemicals activity versus the second quarter, the business delivered strong operating income growth and margin expansion compared to the prior year. In the fourth quarter, we anticipate similar results to this quarter, and we expect 2023 to remain on track for significant full year growth and margin improvement.”

Performance Chemicals revenues of $145.2 million were down 9 percent from $159.7 million in the third quarter last year driven by a negative price/mix of 19 percent being partially offset by higher volumes of 7 percent and a positive currency impact of 3 percent. Gross margins reduced by 3.6 percentage points from the same quarter last year to 20.9 percent. Operating income for the quarter of $16.9 million decreased 33 percent on the prior year.

Revenues in Fuel Specialties of $169.3 million for the quarter were down 5 percent from $178.7 million a year ago. Volume reductions of 4 percent and a negative price/mix of 4 percent were partially offset by a positive currency impact of 3 percent. Gross margins of 31.3 percent were 1.4 percentage points above last year. Operating income of $27.6 million was down slightly from $27.9 million a year ago.

Revenues in Oilfield Services were $149.6 million for the quarter, down 14 percent from $174.6 million in the third quarter last year. Gross margins were down by 0.4 percentage points from the same quarter last year to 36.0 percent. Operating income of $16.4 million increased 15 percent over the prior year.

Corporate costs for the quarter were $19.0 million, compared with $17.4 million a year ago. The effective tax rate for the quarter was 17.5 percent compared to 20.9 percent in the same period last year.

For the quarter, cash provided by operating activities was $58.1 million compared to $39.8 million a year ago. As of September 30, 2023, Innospec had $207.2 million in cash and cash equivalents and no debt.

Mr. Williams concluded,

“Our diversified business portfolio continued to perform very well this quarter against a persistent backdrop of economic uncertainty, continued destocking and end-market headwinds.

Cash generation was again excellent this quarter, and our net cash position strengthened to over $207 million. We have a strong, technology-driven growth pipeline in all our businesses. In addition, we have significant balance-sheet flexibility to execute further organic growth investments, complimentary M&A, dividend growth and share repurchases.”

Use of Non-GAAP Financial Measures

The information presented in this press release includes financial measures that are not calculated or presented in accordance with Generally Accepted Accounting Principles in the United States (GAAP). These non-GAAP financial measures comprise EBITDA, income before income taxes excluding special items, net income excluding special items and related per share amounts together with net cash. EBITDA is net income per our consolidated financial statements adjusted for the exclusion of charges for interest expense, net, income taxes, depreciation, and amortization. Income before income taxes, net income and diluted EPS, excluding special items, per our consolidated financial statements are adjusted for the exclusion of foreign currency exchange (gains)/losses, amortization of acquired intangible assets, legacy costs of closed operations, acquisition related costs and adjustment of income tax provisions. Net cash is cash and cash equivalents less total debt. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are provided herein and in the schedules below. The Company believes that such non-GAAP financial measures provide useful information to investors and may assist them in evaluating the Company’s underlying performance and identifying operating trends. In addition, these non-GAAP measures address questions the Company routinely receives from analysts and investors and the Company has determined that it is appropriate to make this data available to all investors. While the Company believes that such measures are useful in evaluating the Company’s performance, investors should not consider them to be a substitute for financial measures prepared in accordance with GAAP. Also, these non-GAAP financial measures may differ from similarly titled non-GAAP financial measures used by other companies and do not provide a comparable view of the Company’s performance relative to other companies in similar industries. Management uses adjusted EPS (the most directly comparable GAAP financial measure for which is GAAP EPS) and adjusted net income and EBITDA (the most directly comparable GAAP financial measure for which is GAAP net income) to allocate resources and evaluate the performance of the Company’s operations. Management believes the most directly comparable GAAP financial measure is GAAP net income and has provided a reconciliation of EBITDA and net income excluding special items, and related per share amounts, to GAAP net income herein and in the schedules below.

About Innospec Inc.

Innospec Inc. is an international specialty chemicals company with approximately 2,100 employees in 25 countries. Innospec manufactures and supplies a wide range of specialty chemicals to markets in the Americas, Europe, the Middle East, Africa and Asia-Pacific. The Performance Chemicals business creates innovative technology-based solutions for our customers in the Personal Care, Home Care, Agrochemical, Mining and Industrial markets. The Fuel Specialties business specializes in manufacturing and supplying fuel additives that improve fuel efficiency, boost engine performance and reduce harmful emissions. Oilfield Services provides specialty chemicals to all elements of the oil and gas exploration and production industry. 

Forward-Looking Statements

This press release contains certain “forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Such forward-looking statements include statements (covered by words like “expects,” “estimates,” “anticipates,” “may,” “could,” “believes,” “feels,” “plans,” “intends” or similar words or expressions, for example) which relate to earnings, growth potential, operating performance, events or developments that we expect or anticipate will or may occur in the future. Although forward-looking statements are believed by management to be reasonable when made, they are subject to certain risks, uncertainties and assumptions, and our actual performance or results may differ materially from these forward-looking statements. Additional information regarding risks, uncertainties and assumptions relating to Innospec and affecting our business operations and prospects are described in Innospec’s Annual Report on Form 10-K for the year ended December 31, 2022, Innospec’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 and other reports filed with the U.S. Securities and Exchange Commission. You are urged to review our discussion of risks and uncertainties that could cause actual results to differ from forward-looking statements under the heading “Risk Factors” in such reports. Innospec undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


Corbin Barnes
Innospec Inc.

Schedule 1
(in millions, except share and per share data)
 Three Months Ended
September 30
 Nine Months Ended
September 30
2023 2022 2023 2022
Net sales$464.1 $513.0 $1,454.1 $1,453.0 
Cost of goods sold (326.9) (357.0) (1,018.7) (1,017.9)
Gross profit 137.2  156.0  435.4  435.1 
Operating expenses:        
Selling, general and administrative (83.7) (95.8) (285.5) (264.1)
Research and development (11.6) (10.1) (32.8) (30.3)
Total operating expenses (95.3) (105.9) (318.3) (294.4)
Operating income 41.9  50.1  117.1  140.7 
Other income/(expense), net 4.8  (0.9) 11.2  (0.2)
Interest income/(expense), net 0.8  (0.3) 0.8  (1.1)
Income before income taxes 47.5  48.9  129.1  139.4 
Income taxes (8.3) (10.2) (27.8) (31.9)
Net income$39.2 $38.7 $101.3 $107.5 
Earnings per share:        
Basic$1.58 $1.56 $4.08 $4.34 
Diluted$1.57 $1.55 $4.05 $4.30 
Weighted average shares outstanding (in thousands):        
Basic 24,866  24,786  24,845  24,794 
Diluted 25,006  24,965  25,000  24,976 

Schedule 2A
September 30
 Nine Months Ended
September 30
(in millions) 2023 2022 2023 2022
Net sales:        
Performance Chemicals$145.2 $159.7 $424.4 $495.8 
Fuel Specialties 169.3  178.7  513.8  546.9 
Oilfield Services 149.6  174.6  515.9  410.3 
  464.1  513.0  1,454.1  1,453.0 
Gross profit:        
Performance Chemicals 30.3  39.1  76.4  123.5 
Fuel Specialties 53.0  53.4  155.2  171.0 
Oilfield Services 53.9  63.5  203.8  140.6 
  137.2  156.0  435.4  435.1 
Operating income:        
Performance Chemicals 16.9  25.4  36.5  79.5 
Fuel Specialties 27.6  27.9  77.1  94.9 
Oilfield Services 16.4  14.2  60.3  21.2 
Corporate costs (19.0) (17.4) (56.8) (54.9)
Total operating income$41.9 $50.1 $117.1 $140.7 

Schedule 2B
NON-GAAP MEASURES Three Months Ended
September 30
 Nine Months Ended
September 30
(in millions) 2023  2022  2023  2022 
Net income$39.2 $38.7 $101.3 $107.5

Interest (income)/expense, net (0.8) 0.3  (0.8) 1.1 
Income taxes 8.3  10.2  27.8  31.9 
Depreciation and amortization:        
Performance Chemicals 4.4  4.9  12.7  15.6 
Fuel Specialties 1.6  1.5  4.5  4.6 
Oilfield Services 3.1  3.0  9.2  8.9 
Corporate costs 0.7  0.6  1.9  1.5 
EBITDA 56.5  59.2  156.6  171.1 
Performance Chemicals 21.3  30.3  49.2  95.1 
Fuel Specialties 29.2  29.4  81.6  99.5 
Oilfield Services 19.5  17.2  69.5  30.1 
Corporate costs (18.3) (16.8) (54.9) (53.4)
  51.7  60.1  145.4  171.3 
Other income/(expense), net 4.8  (0.9) 11.2  (0.2)
EBITDA$56.5 $59.2 $156.6 $171.1 

EBITDA by segment includes operating income relating to the segments, excluding depreciation and amortization.

Schedule 3
(in millions) September 30,
 December 31,
Current assets:    
Cash and cash equivalents$207.2$147.1
Trade and other accounts receivable 305.2 334.6
Inventories 331.5 373.1
Prepaid expenses 7.7 14.1
Prepaid income taxes 10.7 3.3
Other current assets 1.4 0.4
Total current assets 863.7 872.6
Net property, plant and equipment 244.6 220.9
Operating lease right-of-use assets 42.5 45.3
Goodwill 357.9 358.8
Other intangible assets 47.8 45.0
Deferred tax assets 5.9 5.9
Pension asset 49.7 48.1
Other non-current assets 6.5 7.1
Total assets$1,618.6$1,603.7
Liabilities and Stockholders’ Equity    
Current liabilities:    
Accounts payable$146.1$165.3
Accrued liabilities 165.1 202.9
Current portion of operating lease liabilities 13.1 13.9
Current portion of plant closure provisions 4.7 5.3
Current portion of accrued income taxes 15.2 18.4
Total current liabilities 344.2 405.8
Operating lease liabilities, net of current portion 29.4 31.4
Plant closure provisions, net of current portion 51.1 51.9
Accrued income taxes, net of current portion 11.6 21.0
Unrecognized tax benefits 14.1 13.4
Deferred tax liabilities 26.4 26.2
Pension liabilities and post-employment benefits 12.2 12.2
Other non-current liabilities 1.5 1.4
Equity 1,128.1 1,040.4
Total liabilities and equity$1,618.6$1,603.7

Schedule 4
  Nine Months Ended
September 30
(in millions) 2023 2022
Cash Flows from Operating Activities    
Net income$101.3 $107.5 
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization 29.1  30.9 
Deferred taxes 0.5  0.6 
Non-cash movements on defined benefit pension plans (2.5) (1.9)
Stock option compensation 5.9  4.7 
Changes in working capital 20.8  (132.6)
Movements in plant closure provisions (1.2) 0.3 
Movements in accrued income taxes (20.2) (4.0)
Movements in unrecognized tax benefits 0.7  - 
Movements in other assets and liabilities 0.5  (2.2)
Net cash provided by operating activities 134.9  3.3 
Cash Flows from Investing Activities    
Capital expenditures (45.2) (27.1)
Internally developed software (10.8) - 
Proceeds on disposal of property, plant and equipment -  0.1 
Net cash used in investing activities (56.0) (27.0)
Cash Flows from Financing Activities    
Non-controlling interest 0.3  1.9 
Repayment of finance leases -  (0.1)
Refinancing costs (1.4) - 
Dividend paid (17.2) (15.6)
Issue of treasury stock 0.7  2.1 
Repurchase of common stock (1.0) (5.0)
Net cash used in financing activities (18.6) (16.7)
Effect of foreign currency exchange rate changes on cash (0.2) (0.9)
Net change in cash and cash equivalents 60.1  (41.3)
Cash and cash equivalents at beginning of period 147.1  141.8 
Cash and cash equivalents at end of period$207.2 $100.5 

Amortization of deferred finance costs of $0.8 million (2022 - $0.3 million) are included in depreciation and amortization in the condensed consolidated statements of cash flows and in interest expense, net in the condensed consolidated statements of income.