Innospec Inc.
11/05/2025 | Press release | Distributed by Public on 11/05/2025 09:24
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three and Nine Months Ended September 30, 2025
This discussion should be read in conjunction with our unaudited interim condensed consolidated financial statements and the notes thereto.
CRITICAL ACCOUNTING ESTIMATES
The policies and estimates that the Company considers the most critical in terms of complexity and subjectivity of assessment are those related to plant closure provisions, income taxes and goodwill. These policies have been discussed in the Company's 2024 Form 10-K.
RESULTSOF OPERATIONS
The Company reports its financial performance based on three reportable segments, which are Performance Chemicals, Fuel Specialties and Oilfield Services.
The following table provides sales, gross profit and operating income by reporting segment:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
(in millions) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
|
Net sales: |
||||||||||||||||
|
Performance Chemicals |
$ |
170.8 |
$ |
163.6 |
$ |
513.0 |
$ |
484.5 |
||||||||
|
Fuel Specialties |
172.0 |
165.8 |
507.4 |
509.3 |
||||||||||||
|
Oilfield Services |
99.1 |
114.0 |
302.0 |
384.8 |
||||||||||||
|
$ |
441.9 |
$ |
443.4 |
$ |
1,322.4 |
$ |
1,378.6 |
|||||||||
|
Gross profit: |
||||||||||||||||
|
Performance Chemicals |
$ |
25.8 |
$ |
36.1 |
$ |
91.6 |
$ |
110.0 |
||||||||
|
Fuel Specialties |
61.2 |
55.7 |
184.9 |
173.9 |
||||||||||||
|
Oilfield Services |
29.7 |
32.3 |
88.5 |
122.8 |
||||||||||||
|
$ |
116.7 |
$ |
124.1 |
$ |
365.0 |
$ |
406.7 |
|||||||||
|
Operating income/(loss): |
||||||||||||||||
|
Performance Chemicals |
$ |
9.2 |
$ |
20.0 |
$ |
43.3 |
$ |
62.3 |
||||||||
|
Fuel Specialties |
35.3 |
30.9 |
107.6 |
94.7 |
||||||||||||
|
Oilfield Services |
4.8 |
7.1 |
15.1 |
31.3 |
||||||||||||
|
Corporate costs |
(18.2 |
) |
(11.8 |
) |
(56.8 |
) |
(49.6 |
) |
||||||||
|
Adjustment to fair value of contingent consideration |
17.7 |
(0.7 |
) |
16.2 |
(2.1 |
) |
||||||||||
|
Restructuring charge |
(0.9 |
) |
- |
(0.9 |
) |
- |
||||||||||
|
Impairment of property, plant and equipment |
(22.9 |
) |
- |
(22.9 |
) |
- |
||||||||||
|
Impairment of intangible assets |
(19.1 |
) |
- |
(19.1 |
) |
- |
||||||||||
|
Profit on disposal of property, plant and equipment |
- |
0.1 |
0.2 |
0.2 |
||||||||||||
|
Total operating income |
$ |
5.9 |
$ |
45.6 |
$ |
82.7 |
$ |
136.8 |
||||||||
Three Months Ended September 30, 2025
The following table shows the changes in sales, gross profit and operating expenses by reporting segment for the three months ended September 30, 2025, and the three months ended September 30, 2024:
|
Three Months Ended |
||||||||||||||
|
(in millions, except ratios) |
2025 |
2024 |
Change |
|||||||||||
|
Net sales: |
||||||||||||||
|
Performance Chemicals |
$ |
170.8 |
$ |
163.6 |
$ |
7.2 |
+4% |
|||||||
|
Fuel Specialties |
172.0 |
165.8 |
6.2 |
+4% |
||||||||||
|
Oilfield Services |
99.1 |
114.0 |
(14.9 |
) |
-13% |
|||||||||
|
$ |
441.9 |
$ |
443.4 |
$ |
(1.5 |
) |
-0% |
|||||||
|
Gross profit: |
||||||||||||||
|
Performance Chemicals |
$ |
25.8 |
$ |
36.1 |
$ |
(10.3 |
) |
-29% |
||||||
|
Fuel Specialties |
61.2 |
55.7 |
5.5 |
+10% |
||||||||||
|
Oilfield Services |
29.7 |
32.3 |
(2.6 |
) |
-8% |
|||||||||
|
$ |
116.7 |
$ |
124.1 |
$ |
(7.4 |
) |
-6% |
|||||||
|
Gross margin (%): |
||||||||||||||
|
Performance Chemicals |
15.1 |
22.1 |
-7.0 |
|||||||||||
|
Fuel Specialties |
35.6 |
33.6 |
+2.0 |
|||||||||||
|
Oilfield Services |
30.0 |
28.3 |
+1.7 |
|||||||||||
|
Aggregate |
26.4 |
28.0 |
-1.6 |
|||||||||||
|
Operating expenses: |
||||||||||||||
|
Performance Chemicals |
$ |
(16.6 |
) |
$ |
(16.1 |
) |
$ |
(0.5 |
) |
+3% |
||||
|
Fuel Specialties |
(25.9 |
) |
(24.8 |
) |
(1.1 |
) |
+4% |
|||||||
|
Oilfield Services |
(24.9 |
) |
(25.2 |
) |
0.3 |
-1% |
||||||||
|
Corporate costs |
(18.2 |
) |
(11.8 |
) |
(6.4 |
) |
+54% |
|||||||
|
Adjustment to fair value of contingent consideration |
17.7 |
(0.7 |
) |
18.4 |
n/a |
|||||||||
|
Restructuring charge |
(0.9 |
) |
- |
(0.9 |
) |
n/a |
||||||||
|
Impairment of property, plant and equipment |
(22.9 |
) |
- |
(22.9 |
) |
n/a |
||||||||
|
Impairment of intangible assets |
(19.1 |
) |
- |
(19.1 |
) |
n/a |
||||||||
|
Profit on disposal of property, plant and equipment |
- |
0.1 |
(0.1 |
) |
n/a |
|||||||||
|
$ |
(110.8 |
) |
$ |
(78.5 |
) |
$ |
(32.3 |
) |
+41% |
|||||
Performance Chemicals
Net sales: the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:
|
Three Months Ended September 30, 2025 |
||||||||||||||||
|
Change (%) |
Americas |
EMEA |
ASPAC |
Total |
||||||||||||
|
Volume |
-1 |
-3 |
+2 |
-2 |
||||||||||||
|
Price and product mix |
-1 |
+7 |
-8 |
+3 |
||||||||||||
|
Exchange rates |
- |
+7 |
+2 |
+3 |
||||||||||||
|
-2 |
+11 |
-4 |
+4 |
|||||||||||||
Volumes for the Americas were down slightly as demand for our personal care products stabilized following a period of growth, combined with an adverse price and product mix due mostly to pricing erosion. The volume decline in EMEA was offset by a favorable price and product mix, primarily driven by higher demand for higher priced personal care products. ASPAC volumes were higher driven by increased demand for our personal care products, partly offset by an adverse price and product mix due to higher demand for lower priced products. EMEA and ASPAC benefited from favorable foreign currency exchange rate movements.
Gross margin: the year over year decrease of 7.0 percentage points was primarily due to pricing erosion, higher demand for our lower priced products that contribute lower gross margins and the impact of some tariffs not passed on to customers.
Operating expenses:increase by $0.5 million year over year due to higher provisions for doubtful debts together with higher research and development expenses, being partly offset by lower provisions for performance-related remuneration accruals.
Fuel Specialties
Net sales: the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:
|
Three Months Ended September 30, 2025 |
||||||||||||||||||||
|
Change (%) |
Americas |
EMEA |
ASPAC |
AvGas |
Total |
|||||||||||||||
|
Volume |
-8 |
-3 |
-39 |
+48 |
-7 |
|||||||||||||||
|
Price and product mix |
- |
+14 |
+21 |
-18 |
+7 |
|||||||||||||||
|
Exchange rates |
- |
+8 |
+1 |
- |
+4 |
|||||||||||||||
|
-8 |
+19 |
-17 |
+30 |
+4 |
||||||||||||||||
Sales volumes in all our regions decreased year over year due to decreased demand from customers. EMEA and ASPAC benefited from a favorable price and product mix due to an improved sales mix and disciplined pricing. AvGas volumes were higher than the prior year due to variations in the demand from customers, being partly offset by an adverse price and product mix due to an adverse customer mix. EMEA and ASPAC benefited from favorable foreign currency exchange rate movements.
Gross margin: the year over year increase of 2.0 percentage points was driven by an improved sales mix from increased sales of higher margin products, together with disciplined pricing and reduced raw material and other inflationary pressures.
Operating expenses: the year over year increase of $1.1 million was due to higher research and development expenses and higher provisions for performance-related remuneration accruals.
Oilfield Services
Net sales: have decreased year over year by $14.9 million, or 13 percent. Sales in the Americas were higher year over year, being outweighed by lower sales in EMEA. The majority of our customer activity is concentrated in the Americas region.
Gross margin: the year over year increase of 1.7 percentage points was due to a favorable sales mix.
Operating expenses: the year over year decrease of $0.3 million was primarily due to lower provisions for performance-related remuneration accruals and lower amortization of acquired intangible assets, being partly offset by adverse changes to our doubtful debt provisions year over year.
Other Income Statement Captions
Corporate costs: the year over year increase of $6.4 million was primarily due to the prior year including a recovery of $8.4 million of historic pension costs, combined with increased costs in the current year for the additional investment in our IT infrastructure and the amortization of the group's new ERP system, being partly offset by lower provisions for performance-related remuneration accruals.
Adjustment to fair value of contingent consideration: the credit in the current year is $17.7 million (prior year an expense of $0.7 million) relating to the acquisition of QGP within our Performance Chemicals segment. See Note 11 of the Notes to the Condensed Consolidated Financial Statements for additional information.
Restructuring charge: the charge in the current year is $0.9 million relating to our operations in South America within our Performance Chemicals segment.
Impairment of property, plant and equipment: the charge in the current year is $22.9 million relating to our Oilfield Services segment. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information.
Impairment of intangible assets: the charge in the current year is $19.1 million relating to our Performance Chemicals and Oilfield Services segments. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information.
Other net income/(expense): for the three months ended September 30, 2025 and 2024, included the following:
|
(in millions) |
2025 |
2024 |
Change |
|||||||||
|
Net pension credit/(cost) |
$ |
(0.1 |
) |
$ |
1.7 |
$ |
(1.8 |
) |
||||
|
Loss/(profit) attributable to non-controlling interests |
0.2 |
(0.9 |
) |
1.1 |
||||||||
|
Foreign exchange gains/(losses) on translation |
0.5 |
(7.1 |
) |
7.6 |
||||||||
|
Foreign currency forward contracts gains/(losses) |
2.8 |
2.8 |
- |
|||||||||
|
$ |
3.4 |
$ |
(3.5 |
) |
$ |
6.9 |
||||||
Interest income/(expense), net: in the three months ended September 30, 2025 was $2.2 million of income compared to $2.7 million of income in the three months ended September 30, 2024, driven by lower interest rates and lower cash balances in the current year.
Income taxes:the effective tax rate was (12.2)% and 25.4% in the third quarter of 2025 and 2024, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was 22.5% in 2025 compared with 24.6% in 2024. The 2.1% decrease in the adjusted effective rate was primarily due to the fact that a higher proportion of the Company's profits are being generated in lower tax jurisdictions. The Company believes that this adjusted effective tax rate, a non-GAAP financial measure, provides useful information to investors and may assist them in evaluating the Company's underlying performance and identifying operating trends. In addition, management uses this non-GAAP financial measure internally to evaluate the performance of the Company's operations and for planning and forecasting in subsequent periods.
The following table shows a reconciliation of the GAAP effective tax charge to the adjusted effective tax charge:
|
Three Months Ended |
||||||||
|
(in millions) |
2025 |
2024 |
||||||
|
Income before income taxes |
$ |
11.5 |
$ |
44.8 |
||||
|
Adjustment for stock compensation |
0.9 |
2.2 |
||||||
|
Adjustment to fair value of contingent consideration |
(17.7 |
) |
0.7 |
|||||
|
Impairment of acquired intangible assets |
19.1 |
- |
||||||
|
Impairment of property, plant and equipment |
22.9 |
- |
||||||
|
Legacy costs of closed operations |
1.0 |
1.0 |
||||||
|
Adjusted income before income taxes |
$ |
37.7 |
$ |
48.7 |
||||
|
Income taxes |
$ |
(1.4 |
) |
$ |
11.4 |
|||
|
Tax on stock compensation |
(0.2 |
) |
(0.2 |
) |
||||
|
Adjustment of income tax provision |
- |
(0.9 |
) |
|||||
|
Tax on adjustment to fair value of contingent consideration |
- |
0.2 |
||||||
|
Tax on impairment of acquired intangible assets |
5.1 |
- |
||||||
|
Tax on impairment of property, plant and equipment |
4.8 |
- |
||||||
|
Tax on legacy cost of closed operations |
0.2 |
0.2 |
||||||
|
Adjustments to tax charge of prior periods |
- |
1.3 |
||||||
|
Adjusted income taxes |
$ |
8.5 |
$ |
12.0 |
||||
|
GAAP effective tax rate |
(12.2 |
)% |
25.4 |
% |
||||
|
Adjusted effective tax rate |
22.5 |
% |
24.6 |
% |
||||
Nine Months Ended September 30, 2025
The following table shows the changes in sales, gross profit and operating expenses by reporting segment for the nine months ended September 30, 2025, and the nine months ended September 30, 2024:
|
Nine Months Ended |
||||||||||||||
|
(in millions, except ratios) |
2025 |
2024 |
Change |
|||||||||||
|
Net sales: |
||||||||||||||
|
Performance Chemicals |
$ |
513.0 |
$ |
484.5 |
$ |
28.5 |
+6% |
|||||||
|
Fuel Specialties |
507.4 |
509.3 |
(1.9 |
) |
-0% |
|||||||||
|
Oilfield Services |
302.0 |
384.8 |
(82.8 |
) |
-22% |
|||||||||
|
$ |
1,322.4 |
$ |
1,378.6 |
$ |
(56.2 |
) |
-4% |
|||||||
|
Gross profit: |
||||||||||||||
|
Performance Chemicals |
$ |
91.6 |
$ |
110.0 |
$ |
(18.4 |
) |
-17% |
||||||
|
Fuel Specialties |
184.9 |
173.9 |
11.0 |
+6% |
||||||||||
|
Oilfield Services |
88.5 |
122.8 |
(34.3 |
) |
-28% |
|||||||||
|
$ |
365.0 |
$ |
406.7 |
$ |
(41.7 |
) |
-10% |
|||||||
|
Gross margin (%): |
||||||||||||||
|
Performance Chemicals |
17.9 |
22.7 |
-4.8 |
|||||||||||
|
Fuel Specialties |
36.4 |
34.1 |
+2.3 |
|||||||||||
|
Oilfield Services |
29.3 |
31.9 |
-2.6 |
|||||||||||
|
Aggregate |
27.6 |
29.5 |
-1.9 |
|||||||||||
|
Operating expenses: |
||||||||||||||
|
Performance Chemicals |
$ |
(48.3 |
) |
$ |
(47.7 |
) |
$ |
(0.6 |
) |
+1% |
||||
|
Fuel Specialties |
(77.3 |
) |
(79.2 |
) |
1.9 |
-2% |
||||||||
|
Oilfield Services |
(73.4 |
) |
(91.5 |
) |
18.1 |
-20% |
||||||||
|
Corporate costs |
(56.8 |
) |
(49.6 |
) |
(7.2 |
) |
+15% |
|||||||
|
Adjustment to fair value of contingent consideration |
16.2 |
(2.1 |
) |
18.3 |
n/a |
|||||||||
|
Restructuring charge |
(0.9 |
) |
- |
(0.9 |
) |
n/a |
||||||||
|
Impairment of property, plant and equipment |
(22.9 |
) |
- |
(22.9 |
) |
n/a |
||||||||
|
Impairment of intangible assets |
(19.1 |
) |
- |
(19.1 |
) |
n/a |
||||||||
|
Profit on disposal of property, plant and equipment |
0.2 |
0.2 |
0.0 |
n/a |
||||||||||
|
$ |
(282.3 |
) |
$ |
(269.9 |
) |
$ |
(12.4 |
) |
+5% |
|||||
Performance Chemicals
Net sales: the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:
|
Nine Months Ended September 30, 2025 |
||||||||||||||||
|
Change (%) |
Americas |
EMEA |
ASPAC |
Total |
||||||||||||
|
Volume |
+7 |
-3 |
+14 |
+2 |
||||||||||||
|
Price and product mix |
-4 |
+9 |
-1 |
+3 |
||||||||||||
|
Exchange rates |
- |
+2 |
+1 |
+1 |
||||||||||||
|
+3 |
+8 |
+14 |
+6 |
|||||||||||||
Higher sales volumes for the Americas were driven by increased demand for our personal care products, being partly offset by an adverse price and product mix due to pricing erosion and higher demand for our lower priced products. The volume decline in EMEA was offset by a favorable price and product mix, primarily driven by increased demand for our higher priced products. ASPAC volumes were higher driven by increased demand for our personal care products, being partly offset by an adverse price and product mix due to higher demand for lower priced personal care products. EMEA and ASPAC benefited from favorable foreign currency exchange
rate movements.
Gross margin: the year over year decrease of 4.8 percentage points was primarily due to pricing erosion, higher demand for our lower priced products and the impact of some tariffs not passed on to customers.
Operating expenses:increased by $0.6 million year over year due to higher selling expenses and higher research and development expenses, being partly offset by lower provisions for performance-related remuneration accruals.
Fuel Specialties
Net sales: the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:
|
Nine Months Ended September 30, 2025 |
||||||||||||||||||||
|
Change (%) |
Americas |
EMEA |
ASPAC |
AvGas |
Total |
|||||||||||||||
|
Volume |
-4 |
- |
-26 |
+9 |
-4 |
|||||||||||||||
|
Price and product mix |
+1 |
+4 |
+10 |
-1 |
+3 |
|||||||||||||||
|
Exchange rates |
- |
+2 |
- |
- |
+1 |
|||||||||||||||
|
-3 |
+6 |
-16 |
+8 |
- |
||||||||||||||||
Sales volumes in the Americas and ASPAC have decreased year over year due to decreased demand from customers, being partly offset by a favorable price and product mix due to an improved sales mix and disciplined pricing. Sales volumes in EMEA have remained constant year over year, combined with a favorable price and product mix due to an improved sales mix and disciplined pricing. AvGas volumes were higher than the prior year due to variations in the demand from customers, being partly offset by an adverse price and product mix due to an adverse customer mix. EMEA benefited from favorable foreign currency exchange rate movements.
Gross margin: the year over year increase of 2.3 percentage points was driven by an improved sales mix from increased sales of higher margin products, together with disciplined pricing and reduced raw material and other inflationary pressures.
Operating expenses: the year over year decrease of $1.9 million was primarily due to favorable movements for the provisions for doubtful debts.
Oilfield Services
Net sales: have decreased year over year by $82.8 million, or 22 percent, with the majority of our customer activity concentrated in the Americas region. Sales volumes in the current year were adversely impacted by the absence of production chemical activity in Mexico.
Gross margin: the year over year decrease of 2.6 percentage points was due to an unfavorable sales mix as our customer demand has weakened.
Operating expenses: the year over year decrease of $18.1 million was due to lower customer service costs and commissions related to the reduced demand from certain customers, together with lower provisions for performance-related remuneration accruals.
Other Income Statement Captions
Corporate costs: the year over year increase of $7.2 million was primarily due to the prior year including the recovery of $8.4 million of historic pension costs, together with increased provisions for environmental
remediation in relation to legacy operations, the additional investment in our IT infrastructure and the amortization of the group's new ERP system, being partly offset by lower provisions for performance-related remuneration accruals.
Adjustment to fair value of contingent consideration: the credit in the current year is $16.2 million (prior year an expense of $2.1 million) relating to the acquisition of QGP within our Performance Chemicals segment. See Note 11 of the Notes to the Condensed Consolidated Financial Statements for additional information.
Restructuring charge: the charge in the current year is $0.9 million relating to our operations in South America within our Performance Chemicals segment.
Impairment of property, plant and equipment: the charge in the current year is $22.9 million relating to our Oilfield Services segment. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information.
Impairment of intangible assets: the charge in the current year is $19.1 million relating to our Performance Chemicals and Oilfield Services segments. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information.
Other net income/(expense): for the nine months ended September 30, 2025 and 2024, included the following:
|
(in millions) |
2025 |
2024 |
Change |
|||||||||
|
Net pension credit/(cost) |
$ |
(0.2 |
) |
$ |
5.0 |
$ |
(5.2 |
) |
||||
|
Profit attributable to non-controlling interests |
(1.0 |
) |
$ |
(1.7 |
) |
0.7 |
||||||
|
Foreign exchange gains/(losses) on translation |
2.6 |
(2.1 |
) |
4.7 |
||||||||
|
Foreign currency forward contracts gains/(losses) |
(3.6 |
) |
(1.1 |
) |
(2.5 |
) |
||||||
|
$ |
(2.2 |
) |
$ |
0.1 |
$ |
(2.3 |
) |
|||||
Interest income/(expense), net: in the nine months ended September 30, 2025 was $7.3 million of income compared to $6.9 million of income in the nine months ended September 30, 2024, driven by the interest income being earned from our cash balances.
Income taxes:the effective tax rate was 21.2% and 26.3% in the first nine months of 2025 and 2024, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was 23.6% in 2025 compared with 25.7% in 2024. The 2.1% decrease in the adjusted effective rate was primarily due to the fact that a higher proportion of the Company's profits are being generated in lower tax jurisdictions. The Company believes that this adjusted effective tax rate, a non-GAAP financial measure, provides useful information to investors and may assist them in evaluating the Company's underlying performance and identifying operating trends. In addition, management uses this non-GAAP financial measure internally to evaluate the performance of the Company's operations and for planning and forecasting in subsequent periods.
The following table shows a reconciliation of the GAAP effective tax charge to the adjusted effective tax charge:
|
Nine Months Ended |
||||||||
|
(in millions) |
2025 |
2024 |
||||||
|
Income before income taxes |
$ |
87.8 |
$ |
143.8 |
||||
|
Indemnification asset regarding tax audit |
- |
0.1 |
||||||
|
Adjustment for stock compensation |
5.0 |
6.4 |
||||||
|
Adjustment to fair value of contingent consideration |
(16.2 |
) |
2.1 |
|||||
|
Impairment of acquired intangible assets |
19.1 |
- |
||||||
|
Impairment of property, plant and equipment |
22.9 |
- |
||||||
|
Legacy cost of closed operations |
4.8 |
2.6 |
||||||
|
Adjusted income before income taxes |
$ |
123.4 |
$ |
155.0 |
||||
|
Income taxes |
$ |
18.6 |
$ |
37.8 |
||||
|
Tax on stock compensation |
(0.5 |
) |
(0.1 |
) |
||||
|
Adjustment of income tax provision |
- |
(3.8 |
) |
|||||
|
Tax on adjustment to fair value of contingent consideration |
- |
0.7 |
||||||
|
Tax on impairment of acquired intangible assets |
5.1 |
- |
||||||
|
Tax on impairment of property, plant and equipment |
4.8 |
- |
||||||
|
Tax on legacy cost of closed operations |
1.1 |
0.6 |
||||||
|
Adjustments to tax charge of prior periods |
- |
4.7 |
||||||
|
Adjusted income taxes |
$ |
29.1 |
$ |
39.9 |
||||
|
GAAP effective tax rate |
21.2 |
% |
26.3 |
% |
||||
|
Adjusted effective tax rate |
23.6 |
% |
25.7 |
% |
||||
LIQUIDITY AND FINANCIAL CONDITION
Working Capital
In the nine months ended September 30, 2025 our working capital increased by $47.5 million, while our adjusted working capital increased by $43.1 million. The difference is primarily due to the exclusion of the movements for cash and cash equivalents, together with the changes for taxes.
The Company believes that adjusted working capital, a non-GAAP financial measure (defined by the Company as trade and other accounts receivable, inventories, prepaid expenses, accounts payable and accrued liabilities rather than total current assets less total current liabilities) provides useful information to investors in evaluating the Company's underlying performance and identifying operating trends. Management uses this non-GAAP financial measure internally to allocate resources and evaluate the performance of the Company's operations. Items excluded from working capital in the adjusted working capital calculation are listed in the table below and represent factors which do not fluctuate in line with the day to day working capital needs of the business.
|
(in millions) |
September 30, |
December 31, |
||||||
|
Total current assets |
$ |
988.8 |
$ |
956.6 |
||||
|
Total current liabilities |
(356.1 |
) |
(371.4 |
) |
||||
|
Working capital |
632.7 |
585.2 |
||||||
|
Less cash and cash equivalents |
(270.8 |
) |
(289.2 |
) |
||||
|
Less prepaid income taxes |
(10.5 |
) |
(3.1 |
) |
||||
|
Less other current assets |
(4.1 |
) |
(0.6 |
) |
||||
|
Add back accrued income taxes |
5.6 |
19.6 |
||||||
|
Add back current portion of plant closure provisions |
5.0 |
5.0 |
||||||
|
Add back current portion of operating lease liabilities |
16.0 |
13.9 |
||||||
|
Adjusted working capital |
$ |
373.9 |
$ |
330.8 |
||||
We had a $7.8 million increase in trade and other accounts receivable, which was primarily due to increases in our Performance Chemicals segment due to the timing of customer collections, being partly offset by lower sales in our Oilfield Services segment. Days' sales outstanding increased in our Performance Chemicals segment from 61 days to 75 days; remained unchanged at 57 days in our Fuel Specialties segment; and decreased from 83 days to 67 days in our Oilfield Services segment.
We had a $44.2 million increase in inventories, including a $4.8 million increase in allowances, which was driven by higher levels of finished goods in our Fuel Specialties segment, due to higher production relating to expected sales volumes. The Company continues to maintain inventory levels necessary to manage the risk of potential supply chain disruption for certain key raw materials, especially in our Fuel Specialties segment. Days' sales in inventory in our Performance Chemicals segment increased from 63 days to 66 days; increased from 113 days to 160 days in our Fuel Specialties segment; and remained unchanged at 76 days in our Oilfield Services segment.
Prepaid expenses decreased $12.3 million, from $21.0 million to $8.7 million, primarily due to the cyclical expensing of prepaid invoices.
We had a $3.4 million decrease in accounts payable and accrued liabilities, which was dependent on the timing of payments for each of our reporting segments and includes the effect of the lower activity in our Oilfield Services segment. Creditor days (including goods received not invoiced) have increased in our Performance Chemicals segment from 46 days to 48 days; increased from 44 days to 56 days in our Fuel Specialties segment; and decreased from 68 days to 57 days in our Oilfield Services segment. The changes for creditor days are impacted by the timing of sales and cost of sales in the quarter, when using a countback methodology.
Operating Cash Flows
We generated cash from operating activities of $76.9 million in the nine months ended September 30, 2025 compared to $158.8 million in the nine months ended September 30, 2024. The decrease in cash generated from operating activities was primarily related to decreased operating income, less favorable working capital cash flows and increased income tax payments.
Cash
At September 30, 2025 and December 31, 2024, we had cash and cash equivalents of $270.8 million and $289.2 million, respectively, of which $160.8 million and $133.9 million, respectively, were held by non-U.S. subsidiaries principally in the United Kingdom.
The decrease in cash and cash equivalents of $18.4 million for the nine months ended September 30, 2025 was primarily driven by our continued investments in capital projects, the payment of our semi-annual dividend and the repurchases of our common stock, being partly offset by the cash generated from operating activities.
Debt
We continue to have available a $250.0 million multicurrency revolving credit facility.
At September 30, 2025, and December 31, 2024, we had no debt outstanding under the revolving credit facility and no obligations were outstanding under finance leases. See Note 9 of the Notes to the Condensed Consolidated Financial Statements for additional information.
Innospec Inc. published this content on November 05, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 05, 2025 at 15:24 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]