Quaker Chemical (KWR) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales were $463.6M, down 6% year-over-year, mainly due to lower selling prices, product mix, and soft end market conditions in Americas and EMEA, partially offset by growth in Asia/Pacific and new business wins.

• Gross margin improved to 37.9%, up 200 basis points year-over-year, supporting profitability and marking the 8th consecutive quarter of margin improvement.

• Adjusted EBITDA reached $84.3M, up 5% year-over-year, with non-GAAP diluted EPS at $2.13, a 10% increase.

• Operating cash flow year-to-date was $73.5M, with a net leverage ratio of 1.7x trailing 12-month Adjusted EBITDA.

• Board approved a 6.6% increase in the cash dividend, reflecting confidence in cash flow generation and future performance.

Financial highlights

• Q2 2024 net sales: $463.6M (down 6% year-over-year); gross profit: $175.7M; gross margin: 37.9% (up from 35.9%).

• Adjusted EBITDA margin improved to 18.2% from 16.2% year-over-year.

• Q2 2024 net income: $34.9M; GAAP diluted EPS: $1.94; non-GAAP diluted EPS: $2.13, up 10% year-over-year.

• Operating cash flow was $46M in Q2; capital expenditures were $7M.

• Net debt as of June 30, 2024: $548.9M.

Outlook and guidance

• Management expects continued margin improvement and earnings growth in 2024 despite ongoing macroeconomic and geopolitical challenges.

• Adjusted EBITDA for Q3 expected to be in the range of Q2.

• Gross margins expected to remain within or at the higher end of the target range for the full year.

• Sufficient liquidity is expected to support operations, dividends, share repurchases, and growth initiatives for at least the next twelve months.

• The company anticipates full run-rate cost savings of ~$20M from its global cost and optimization program by end of 2024.