David Jones; Senior Vice President, Chief Compliance Officer, General Counsel, Company Secretary; Innospec Inc
Patrick Williams; President, Chief Executive Officer, Director; Innospec Inc
Ian Cleminson; Chief Financial Officer, Executive Vice President; Innospec Inc
Jonathan Tanwanteng; Analyst; CJS Securities, Inc.
David Jones
Thank you. Welcome to Innospec's earnings call. This is David Jones, I'm Innospec's General Counsel and Chief Compliance Officer.
Earnings release for this presentation is posted on the company's website. During this call, we will make forward-looking statements, which are predictions about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from the anticipated results implied by such forward-looking statements. The risks and uncertainties are detailed in Innospec's 10-K, 10-Q, and other filings with the SEC. Please see the SEC site and Innospec's site for these and related documents.
In today's presentation, we have also included non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure is contained in the earnings release. The non-GAAP financial measures should not be considered as a substitute for or superior to those prepared in accordance with GAAP. They are included as additional items to aid investors understanding of the company's performance in addition to the impact of these items had on financial results.
With me today from Innospec are Patrick Williams, President and Chief Executive Officer; and Ian Cleminson, Executive Vice President and Chief Financial Officer.
And with that, I'll turn it over to you, Patrick.
Patrick Williams
Thank you, David, and welcome, everyone to Innospec's fourth quarter and full-year 2024 conference call.
This was another good quarter for Innospec as we exceeded earnings expectations despite the reduced Oilfield Services activity in Latin America.
In Performance Chemicals, we delivered double-digit operating income growth over the fourth quarter last year, driven by improved sales and margins. We have a balanced pipeline of growth opportunities across our global personal care, home care, agriculture, construction, and other industrial markets.
In addition, the integration and performance of our recent QGP acquisition in Brazil is proceeding to plan and is supporting not only Performance Chemicals but also Fuel Specialties growth opportunities in the region.
Moving to 2025, we continue to target operating income and margin improvement to levels consistent with full year 2022. In Fuel Specialties, operating income increased 7% over the same quarter last year, and operating margin improved to just below our target of 19% to 21%. We remain focused on further margin improvement in parallel with top line growth.
With our industry-leading innovation and customer service capabilities, we are well positioned to continue advancing our global customers' initiatives. Our technology will continue to focus on cleaner fuels, lowering emissions, and improving efficiency in traditional, renewable, and non-fuel applications.
In Oilfield Services as expected, results were similar to the third quarter, with no recovery in Latin America production chemical activity. We currently do not expect this activity to resume in the near term. In 2025, we remain focused on continuing to drive sequential quarterly improvements in our core businesses, including US completions and production, DRA, and the Middle East.
Now I will turn the call over to Ian Clemson, who will review our financial results in more detail, then I will return with some concluding comments. After that, Ian, I will take your questions. Ian?
Ian Cleminson
Thanks, Patrick. Turning to slide 7 in the presentation. The company's total revenues for the fourth quarter were $466.8 million, a 6% decrease from $494.7 million a year ago. Overall gross margin decreased by 2.3 percentage points from last year to 29.2%. Adjusted EBITDA for the quarter was $56.6 million compared to $61.6 million last year.
In the fourth quarter, the company concluded the buyouts of the UK pension scheme and incurred a non-cash settlement charge of $155.6 million and consequently, there was a net loss for the quarter of $70.4 million. Adjusting for this, the net income was $46.3 million compared to $37.8 million a year ago.
Our GAAP loss per share of $2.80, including special items, the net effect of which decreased our fourth quarter earnings by $4.21 per share. A year ago, we reported GAAP earnings per share of $1.51, which included a negative impact from special items of $0.33 per share. Excluding special items in both years, our adjusted EPS for the quarter was $1.41 compared to $1.84 a year ago.
For the full year, total revenues of $1.85 billion decreased 5% from $1.95 billion in 2023. Adjusted EBITDA for the year was $225.2 million compared to $216 million in 2023. And net income adjusted for the pension settlement was $152.3 million compared to $139.1 million a year ago. Our full-year GAAP earnings per share were $1.42, including special items, which decreased our full year earnings by $4.50 per share.
In 2023, we reported GAAP earnings per share of $5.56 per share, which included a negative impact from special items of $0.53 per share. Excluding special items in both years, our adjusted EPS for the year was $5.92 compared to $6.09 a year ago.
Turning to slide 8. Revenues in Performance Chemicals for the fourth quarter were $169.2 million, up 23% from last year's $137.2 million, a negative price mix of 2% was offset by acquisition growth of 7% and volume growth of 17% and a positive currency impact of 1%.
Gross margins of 22.7% were up 1.4 percentage points from last year, and operating income increased 14% to $20.6 million. For the full year, revenues of $653.7 million were up 16% from last year's $561.6 million and operating income increased by 52% to $82.9 million.
Moving on to slide 9. Revenues in Fuel Specialties for the fourth quarter were $191.8 million up 5% from $182.1 million reported a year ago. Volumes increased by 9% and a positive currency impact of 1% offset a negative price mix of 5%.
Fuel Specialties gross margins of 34.4% increased by 1.5 percentage points from 33.9% last year, and operating income increased 7% to $34.9 million. For the full year, revenues were up 1% to $ 701.1 million, and operating income increased 18% to $129.6 million. Adjusting to the impact of nonrecurring Brazil inventory charges in 2023, full year operating income grew by 4%.
Moving on to slide 10. Revenues in Oilfield Services for the quarter were $105.8 million, down 40% from $175.4 million in the fourth quarter last year. Gross margins of 30.1% were down 7.9 percentage points on last year's 38% and operating income of $7.5 million was down 59% from $18.3 million a year ago.
For the full year, revenues of $490.6 million were down 29% from last year's $691.3 million and operating income decreased to 51% to $38.8 million. Excluding the Latin American production activity, our core business has grown sales and operating income year over year. Our expectation for 2025 is that we will see further sequential improvements in the core oilfield business.
Turning to slide 11. Corporate costs of $20.6 million decreased by $3.8 million from last year, which included $1.3 million relating to acquisition costs. The full-year adjusted effective tax rate was 26.4% compared to 23% last year due to the geographical mix of taxable profits. For 2025, we expect the full year effective tax rate to be around 27%.
Moving on to slide 12. Cash generated from operations in the quarter was $25.7 million before capital expenditures of $20.6 million. In the quarter, we paid the previously announced semi-annual dividend of $0.79 per common share. This brought the total dividend for the full year to $1.55 per share, a 10% increase over 2023. For the full year, cash from operations after capital expenditures was $122.7 million compared to $130.2 million in 2023.
As of December 31, 2024, Innospec had $289.2 million in cash and cash equivalents and no debt.
And now I'll turn it back over to Patrick for some final comments.
Patrick Williams
Thanks Ian. Innospec achieved another good set of results over the quarter and full year. Strength in Performance Chemicals and Fuel Specialties continue to offset lower results in Oilfield Services. Our 2025 outlook remains for continued growth in Performance Chemicals and Fuel Specialties, along with the sequential quarterly recovery in Oilfield Services.
In all, our businesses remain focused to deliver best-in-class surface-active chemistry technologies and technical service to our global customers. Our opportunity pipeline continues to focus on technologies that lower emissions, enable cleaner formulations, and increase operating efficiencies. We view these as long-term customer priorities in all our markets.
Operating cash generation was positive in the quarter, and our net cash position closed with over $289 million. We continue to have significant flexibility and balance sheet strength for further M&A, dividend growth, share repurchases, and organic investment.
Now I will turn the call over to the operator, and Ian and I will take your questions.
Operator
(Operator Instructions) Jon Tanwanteng, CJS Securities.
Jonathan Tanwanteng
My first one is -- my first one is, could you just talk about the year-over-year volume increases in both the fuels and the Chemicals segment. Were those just easy comps? Or were there timing factors? Or was it just a significant improvement in the underlying run rate demand there?
Patrick Williams
I think there was a significant improvement. It was projects that we had, organic-based projects that came to fruition. Market conditions stabilized for us, and we continue to grow in our customer base. So I think it was overall just a general improvement.
Jonathan Tanwanteng
Got it. And the sustainability of that demand into Q1, have you seen those trends continue?
Patrick Williams
We have. So far, we have, Jon.
Jonathan Tanwanteng
Got it. And the margin, obviously, in Fuel Specialties was pretty outstanding. Do you think that is maintainable or sustainable for the future?
Patrick Williams
Yeah, I would probably hold the same margins that we held in the quarter.
Jonathan Tanwanteng
Got it. And then just on the oilfield segment, you mentioned that you don't expect that large customer to come back in the coming quarters. I'm wondering what your long-term expectation for that customer is if maybe six months down the line, a year down the line, you think they might come back.
Patrick Williams
Yeah. I think you probably answered. We're probably thinking a second part of the year -- second half of the year, I should say. We know what's going on internally. It's very political right now. There's been articles out about some of the crude coming out, I would say heavy crude with all the water in US refineries not taking or being able to handle that route. So we know at some point in time, Jon, they are going to have to come back. It's a function of when and to what volume.
I do know if they come back, it's probably going to be at a lower volume, but that's okay. I think that our technology is in my opinion, the best technology in the marketplace to treat those crudes. And we're there, we're ready, just a function of timing in my opinion.
Jonathan Tanwanteng
Got it. Is there a risk that the refineries retool to use different kinds of crudes in the market (multiple speakers) before it happens.
Patrick Williams
They could treat it at US refineries, but there's so much water in that crude right now that is very expensive to do. We could use our products that we probably use in Mexico at US refineries to help them and that's part of the plan is to have a dual attack there. Because we definitely help the US refineries that are taking that heavy crude. And so we are talking to them. Again, I think it's just a function of timing. It's just a lot of water in their crude and the US refineries aren't really prepared to take on that much water.
Jonathan Tanwanteng
Got it. Okay. Ian, just one housekeeping item. You had a pension settlement charge in the quarter. Can you just give a little color and details around that? Did you spend any cash? And what are the -- what's the pension liability going forward here?
Ian Cleminson
Yeah. Sure, Jon. So we flagged this probably about two years ago, that we were heading towards this point. We concluded the buyouts in the fourth quarter. Essentially, what that does then removes the company's obligation to provide the sort of the cost of the pension scheme and it removes all those legislation changes, risks of investment returns, assumptions on inflation and sort of things. They're all now removed from the company's balance sheet. So this is actually a very positive thing for us.
Part of the US GAAP accounting was to recycle all those historic gains and losses that were in the reserves back into the income statement. That gave us $155 million charge. We've adjusted that out in the quarter. So this is a non-cash charge. It was a one-off event. As we move into 2025, the one thing that is going to be slightly different for us is that in 2024, we have a service credit flowing through our other income line, below operating income, up about $7.2 million.
We won't have that credit flowing through in 2025. So there's a $0.22 headwind as we head into this year. That's the only impact that we've got ongoing. Everything else is pretty much wraps up now. There'll be no ongoing cost, no ongoing charges running through the income statement.
Operator
(Operator Instructions) As there are no further questions on the phone lines, I would now like to hand back to Patrick Williams for any closing remarks.
Patrick Williams
Thank you, all, for joining us today, and thanks to all our shareholders, customers and Innospec employees for your interest and support. If you have any further questions about Innospec or matters discussed today, please give us a call. We look forward to meeting up with you again to discuss our first quarter 2025 results in May. Have a great day.
