NewMarket Corporation (NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the third quarter and first nine months of 2018.
Net income for the third quarter of 2018 was $58.5 million, compared to net income of $59.8 million for the third quarter of 2017. Earnings per share increased 1.6% to $5.12 per share from $5.04 per share in the prior year period. For the first nine months of 2018, net income was $171.9 million, or $14.78 per share, compared to net income of $186.4 million, or $15.73 per share, for the first nine months of last year.
Sales for the petroleum additives segment for the third quarter of 2018 were $560.5 million, up 2.6% versus the same period last year, due mainly to increased selling prices. Petroleum additives operating profit for the third quarter of 2018 was $75.8 million, a 9.9% decrease over third quarter operating profit last year of $84.2 million. The decrease was due mainly to higher raw material and conversion costs plus unfavorable changes in foreign currency rates, which were only partially offset by increased selling prices. Petroleum additives operating margin for the quarter was 13.5% compared to 15.4% in the prior-year quarter. Shipments between quarterly periods were down 3.6% from the same period last year with decreases in both lubricant additives and fuel additives shipments. All regions except Asia Pacific showed decreases in both lubricant additives and fuel additives shipments.
Petroleum additives sales for the first nine months of the year were $1.7 billion compared to sales in the first nine months of last year of $1.6 billion, or an increase of 6.9%. This increase was due mainly to selling prices, changes in foreign currency rates and product mix. Petroleum additives operating profit for the first nine months of the year was $231.5 million compared to $270.8 million for the first nine months of 2017, or a decrease of 14.5%. The decrease was due mainly to higher raw material and conversion costs, as well as unfavorable changes in foreign currency rates, partially offset by increased selling prices. Petroleum additives operating margin for the first nine months of 2018 was 13.3% compared to 16.6% in the prior-year nine month period. Shipments decreased slightly between periods, with increases in lubricant additives shipments offset by decreases in fuel additives shipments. Asia Pacific was the region contributing to the increase in lubricant additives shipments. Europe and North America were the primary drivers for the decrease in fuel additives shipments.
The effective income tax rate for the third quarter of 2018 was 14.4%, down from the rate of 22.4% in the same period last year. The effective rate for the first nine months of 2018 was 21.6%, down from the rate in 2017 of 25.6%. The rates in both 2018 periods were lower due mainly to the Tax Cuts and Jobs Act of 2017, including the reduction of deferred tax liabilities related to pension contributions.
We have continued to see downward pressure on our operating margins, consistent with the last few quarters, which is directly related to the steady rise in raw material costs we have seen over the past two years. While we have made some progress in adjusting our selling prices to help compensate for the increase in costs, we have continued to experience the lag between when the price increases go into effect and when we start to see margins improve. We expect this lag to continue until raw material prices stabilize. Margin improvement will continue to be our number one priority for the remainder of this year and into 2019.
During the first nine months of 2018, we funded capital expenditures of $55.1 million, paid dividends of $60.8 million and repurchased 385,181 shares of our common stock for a total of $148.6 million, through a combination of borrowing under our revolving credit facility and cash from operations.
We make decisions that we believe will promote the greatest long-term value for our shareholders, customers and employees. We will remain focused on our long-term objectives, including margin improvement in the coming months. We believe the fundamentals of how we run our business - a long-term view, safety-first culture, customer-focused solutions, technology-driven product offerings, and world-class supply chain capability - will continue to be beneficial for all of our stakeholders.
As a reminder, a conference call and Internet webcast is scheduled for 3:00 p.m. EDT on Thursday, October 25, 2018, to review third quarter 2018 financial results. You can access the conference call live by dialing 1-877-407-9210 (domestic) or 1-201-689-8049 (international) and requesting the NewMarket conference call. To avoid delays, callers should dial in five minutes early. A teleconference replay of the call will be available until November 1, 2018 at 11:59 p.m. EDT by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay ID number is 37828. The call will also be broadcast via the Internet and can be accessed through the Company’s website at www.NewMarket.com or www.investorcalendar.com. A webcast replay will be available for 3 months.
(a) "All other" includes the results of our TEL business, as well as certain contracted manufacturing and services.