QUAKER CHEMICAL CORP Q1 FY2025 earnings call

• First quarter results were directionally in line with expectations despite soft end-market demand. Volumes declined 1.5%, but the team gained market share across all segments.
• Advancing a $20 million cost program, substantially complete in the first half of 2025.
• Made strategic acquisitions like Dipsol, which is a leading provider of surface treatment solutions with strong cultural fit and financials.
• Focus on improving customer intimacy model, cross-selling capabilities, and product simplification program to reduce complexity.
• Invested in a new facility in China and multi-channel approach to make it easier to do business with Quaker Houghton.
• Net new business wins trending at the high end of the targeted annual range of 2% to 4%.

Asia-Pacific: Net sales declined 2% year-over-year, but were in line with the prior year on a constant currency basis. Organic volumes increased approximately 1% and the Sutai acquisition added another 2%. Selling price and product mix was 3% lower. Segment earnings and margins declined due to lower sales, higher raw material costs, and product and geographic mix. EMEA: Net sales were 7% lower year-over-year or 4% on a constant currency basis. Total sales volumes declined 3% and selling price and product mix decreased 1%. Segment earnings decreased by approximately $6 million compared to the prior year. Americas: Net sales declined 7% year-over-year or 3% on a constant currency basis. Volumes declined 3% due to soft industrial activity. Segment earnings declined by $8 million compared to the prior year.

• Expect underlying market growth rates to decline a low-single-digit percentage in 2025 compared to 2024 levels.
• Recent acquisitions like Dipsol should add a few percentage points of growth in 2025.
• Expect revenue and earnings to be in line with 2024 levels, considering current uncertainty and reduced sentiment.
• Modest seasonal improvement in demand across segments in Q2, with benefit from recent acquisitions, but uncertainty related to tariffs remains.

• Uncertainty regarding tariffs impacting customer decision-making and order patterns, which is harder to assess the impact on demand.
• Volatility in raw material costs and market conditions affecting segment performances.

Q: How does Quaker Houghton handle tariff impacts on raw materials and finished goods?

A: They can largely mitigate raw material impacts due to local purchasing and dual sourcing. Finished goods are manufactured locally, and they have flexibility in their footprint. The bigger issue is assessing impact on demand.

Q: Can you elaborate on the initiatives to simplify the portfolio and improve brand awareness?

A: Restructured strategy organization and product management alignment with business segments. Working on creating clarity around brands for a Quaker Houghton brand family. Using technology to create an inside sales channel and e-commerce for better customer service.

Q: What's the outlook for Q2 EBITDA?

A: Expect EBITDA to be modestly higher versus Q1, with normal seasonality, share gains, and contribution from Dipsol starting in Q2.

Q: How has order volatility been and where is it most impacted?

A: Volatility has been present, with Europe and Americas most impacted in Q1. Asia had Lunar Holiday impact. It's about lumpiness in order patterns.

Q: Thoughts on deregulation impact on business?

A: Supportive of deregulation, but no material impact expected on their business as regulations often require innovation from them.

Q: Contribution from acquisitions and outlook for Dipsol?

A: Dipsol had ~$80M sales and ~$15M EBITDA in 2024. Acquired in April 2025, so contribution in 2025. Excited about fit, expands addressable market, but automotive is a question mark with tariffs.

Q: Tariff assumption for full year?

A: Base assumption is current status, with markets observed to be soft and weakened in Q1.

Q: Capital allocation and leverage?

A: Focus on investing for growth via M&A or organic growth. Healthy balance sheet and cash flow, will be opportunistic with capital allocation.

Q: Volumes and customer feedback on end-market weakness?

A: Seasonal help in Q2, pipeline and business acquisitions support. No material differential change from customers currently, but dynamic situation.

Q: EBITDA margin outlook?

A: Multiple factors, including selective price increases, cost actions, optimizing manufacturing footprint, and global procurement changes to push margins higher towards high-teens and above.