Innospec Stock

Good day, and thank you for standing by. Welcome to the Innospec's Second Quarter 2026 Earnings Release Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded.

I would now like to turn the conference over to your speaker, David Jones, General Counsel and Chief Compliance Officer. Please go ahead.

Thank you. Welcome to Innospec's second quarter earnings call. This is David Jones, and I'm Innospec's General Counsel and Chief Compliance Officer. The earnings release for the quarter and this presentation are posted on the company's website.

During this call, we will make forward-looking statements, which are predictions and projections 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 filings with the SEC. Please see the SEC site and Innospec's site for these and related documents.

In today's presentation, we've 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 investor understanding of the company's performance and to show the impact these items and events 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.

Thank you, David, and welcome, everyone, to Innospec's second quarter 2026 conference call. This was a strong quarter for Innospec with all businesses contributing to double-digit sales and operating income growth. Performance Chemicals operating leverage drove a 15% operating income increase over last year. In North Carolina, we continue to prioritize plant repairs and process improvements, which will drive long-term benefits. In parallel, we are commercializing new technologies in all end markets and targeting further margin improvement opportunities across the business. We expect these combined efforts to drive further improvement in the second half of 2026.

Fuel Specialties had another strong quarter, delivering revenue and operating income growth with margins in our target range. Volume and price/mix improved as the business continued to achieve consistently strong results through a range of economic cycles. While there may be some margin headwind in the sequential quarter because of the lag between pricing and cost inflation, we expect a continued strong performance.

Oilfield Services operating income and margins improved sequentially and on the prior year, driven by recent DRA plant expansion and growing opportunities for this technology in the markets we serve. However, performance is below our expectations in our completions and production business where opportunities remain for growth and margin improvement. Furthermore, our Middle East business is positioned for growth as onshore completions activity levels recover. We are confident that these combined efforts will drive further sequential improvements in the second half of 2026.

Now I will turn the call over to Ian Cleminson, who will review our financial results in more detail. Then I will return with some concluding comments. After that, Ian and I will take your questions. Ian?

Thanks, Patrick. Turning to Slide 7 in the presentation. The company's total revenues for the second quarter were $491.4 million, a 12% increase from $439.7 million a year ago. Overall gross margin increased by 0.1 percentage points from last year to 28.1%. Adjusted EBITDA for the quarter was $50.1 million compared to $49.1 million last year, and net income attributable to Innospec for the quarter was $30.8 million compared to $23.5 million a year ago. Our GAAP earnings per share were $1.25, including special items, the net effects of which decreased our second quarter earnings by $0.02 per share. A year ago, we reported GAAP earnings per share of $0.94, which included a negative impact from special items of $0.32 per share. Excluding special items in both years, our adjusted EPS for the quarter was $1.27 compared to $1.26 a year ago.

Turning to Slide 8. Revenues in Performance Chemicals for the second quarter were $190.3 million, up 9% from last year's $173.8 million. Volume reductions of 2% were offset by a positive price/mix of 8% and a favorable currency impact of 3%. Gross margins of 17.3% decreased 0.2 percentage points compared to 17.5% in the same quarter in 2025. Operating income of $16.4 million increased 15% from $14.3 million last year.

Moving on to Slide 9. Revenues in Fuel Specialties for the second quarter were $185.7 million, up 12% from the $165.1 million reported a year ago. Volumes were up 7% with price/mix up 3% and a positive currency impact of 2%. Fuel Specialties gross margins of 36.6% decreased 1.5 percentage points compared to 38.1% in the same quarter last year on a weaker sales mix. Operating income of $36.3 million was up 3% from $35.4 million a year ago.

Moving on to Slide 10. Revenues in Oilfield Services for the quarter were $115.4 million, up 14% from the $100.8 million reported a year ago. Gross margins of 32.3% increased 2.7 percentage points from last year's 29.6% on an improved sales mix. Operating income of $8.7 million increased 40% from $6.2 million 1 year ago.

Turning to Slide 11. Corporate costs for the quarter were $21.6 million compared to $20.9 million a year ago. The effective tax rate for the quarter was 25% compared to last year's 26%.

Moving on to Slide 12. Cash from operating activities was $7.2 million before capital expenditures of $16.5 million. In the second quarter, we bought back just over 87,000 shares at a cost of $6.4 million. As of June 30, Innospec had $250.2 million in cash and cash equivalents and no debt.

I'll now turn it back over to Patrick for some final comments. Patrick?

Thanks, Ian. With our diversified global supply chain and manufacturing footprint, our teams continue to manage through the direct impacts of geopolitical disruption delivering sales, margin and operating income improvements. We remain focused on security of supply and innovative solutions for our customers. We will continue to implement improvements across all our businesses that will position us for further growth and margin improvement. Our short-term expectations are for further operating income growth in Performance Chemicals and Oilfield Services in the second half of 2026 and steady performance in Fuel Specialties.

Our strong debt-free balance sheet continues to allow for significant flexibility in the current environment to pursue further organic investment, M&A, dividend growth and buybacks. Operating cash generation was again positive in the quarter, and our net cash position closed at over $250 million. Our teams are focused on opportunities to improve working capital efficiency, and we expect these actions will support increased operating cash flow in the second half of 2026. This quarter, we continued our record of returning value to shareholders with our semiannual dividend of $0.92 per share and $6.4 million in share repurchases.

Now I'll turn the call over to the operator, and Ian and I will take your questions.

[Operator Instructions] We are now going to proceed with our first question, and the questions come from the line of Mike Harrison from Seaport Research Partners.

First question is on the Performance Chemicals business. I was hoping you could give us an update on the repair and upgrading process at your facilities. Would you say that that's mostly complete at this point or where do we stand on that?

Mike, I would say -- it's Patrick. I would say we're probably about 60% of the way through it. We've still got some minor repairs, and now it's doing a little more pipe work for more expansion, but we're getting close. I think by the end of Q4, we should be fully repaired and fully optimized at that point.

All right. And then in terms of just what you're seeing in the pricing versus raw material realm on Performance Chemicals, the price/mix there was up 8%. Did that keep pace with raw material cost inflation that you saw in the quarter? And I guess, it looks like some of the oleochemicals are coming a little bit lower. Is that something that's helping to maybe provide a little bit of margin benefit?

Yes, Mike, it's Ian. The team has done a really good job actually with -- keeping up with the price increases. They've been pretty creative around the edges as well about putting new formulations into customers' hands. Where we needed to take price action, we have. And you can see year-over-year that the margins are pretty comparable, and they've obviously improved sequentially over Q1 as well. So we are seeing price inflation. We're handling it pretty well at the moment, and we continue to expect to be able to handle it and we'll pass through where we need to. So the markets are pretty choppy at the moment. Prices are moving up and down pretty rapidly, but we've got a good handle on it, and the team are doing well.

All right. And then a similar question on Fuel Specialties. I think that gross margin number for Q2 came in maybe a little bit better than you had anticipated, but it sounds like maybe you're anticipating some margin pressure sequentially into Q3. Can you just give us a little bit of sense of how you're seeing the raw material flow through and that contractual pricing pass-through mechanism?

Yes. Sure, Mike, it's Ian again. As you know, in fuels, we have the pricing lag up and down. Fuels is mostly crude derivatives based. So the team, again, are chasing prices up at the moment. You've seen a little bit of margin compression in Q2. Some of that is pricing, but some of that is also sales mix in the quarter. We're actually quite pleased with what the team have done there. They're on top of it. As we move into Q3, I would expect a little bit more pressure on the gross margins because of the lag. But again, there's nothing here that is really concerning us. It's a well-trodden path. The team are well-versed in what they need to do, and the market is responding correctly to our actions. So we're in good shape. So I think as we move through Q3 and into Q4, we're hopeful that if we get stability in prices, we'll start to see some stability in margins.

All right. And then last question for me is just on the Oilfield business. I was hoping you could give some additional detail on what you're seeing in the drag-reducing agent portion of that business. It sounds like you guys have added capacity and you've started to see some good uptake of that additional capacity. But how much growth are you seeing in that business overall? And how much of that is coming in the Middle East as a result of some of the, I guess, crude logistics issues they're facing in the wake of the Iran war?

Yes. So we added capacity and the majority of that capacity is almost sold out. We added new customers in North America. But again, as you just alluded to, we have shipped a lot to the Middle East, more importantly for the East-West pipeline and other pipelines that go along that corridor. I've always said and we said in the last quarter that where there's chaos, there's opportunity. And we see this as not just a short-term fix. We think that they're going to move more products to that pipeline over time, even if Strait of Hormuz are open in the near term. And so our product is extremely good product. And I think that it's been taken very well in the Middle East, and we'll continue to ship products as we go. There is another opportunity for us to do another expansion of DRA down the road, and that's being discussed as we speak.

[Operator Instructions] We are now going to proceed with our next question, and the questions come from the line of David Silver from Freedom Capital Markets.

I apologize. I think my feed was cutting in and out just a little bit. So apologies if I make you repeat yourself here. I'd like to go back to Mike's question about the work done in your -- with your Performance Chemicals facilities in the wake of the unplanned outages and the disruptions earlier this year. So Patrick, you did mention that the work, the discretionary upgrading work should be done by the end of the year. In a qualitative basis, I mean, have you guys kind of thought about what -- or what kind of benefit could we expect to result from the project once it's complete? Is it capacity related? Is it efficiency related? Just what kind of benefits? And if you could ballpark them, that would be great.

Yes, David. Sure, David. The #1 priority was to get the plant repairs up and moving so we could provide products to our customers. That was the #1 priority on our list, and we've accomplished that. We still have a ways to go. We're still tight. But I think as these efficiencies come on, it will give us more capacity. It will give us better yield rates and it also improve safety, everything along that plant that we needed to improve. It's hard to put a number on yet on what it's going to -- how much volume is going to help increase, but it is a pretty good number that we're looking at, probably north of 10% at least moving forward for next year.

10% on capacity, that is. Is that correct?

On capacity, yes.

Okay, great. And I did want to kind of go back to oilfield and maybe just pick your brain, Patrick, for your approach to investing and taking advantage of some opportunities. So you certainly touched on the DRA opportunity emerging in the Middle East. What do you sense the opportunities are or how you want to be positioned in the shale basins here? In other words, will production be structurally higher for some period of time because of the geopolitics, as you mentioned? Or are we still in kind of a phase where the industry is a little more careful with their CapEx than maybe they have been in the past. But what are the broader opportunities in the global oil market beyond DRAs in the Middle East?

Yes. I mean you could follow the rig count and see it hasn't spiked like you thought it would. And we've always said that E&P companies are taking a more disciplined approach now. But you got to remember, you have longer laterals, more stages, so you're getting more volume of oil through wells than you have in the past. So there's really not a need to have a large uptick on drilling. But what we're seeing is still a very disciplined approach by E&P companies. And we just have to be prepared with new technologies, which we should be launching here within the next 6 months that will help us propel in that area as well as other areas like South America and Mexico. And we're watching things over in Mexico. We're seeing some things start to turn. And hopefully, we'll have some opportunities there over the next 6 months.

Wow, Mexico. I wasn't expecting that. Okay, interesting. Maybe just to go back to Fuel Specialties. I mean, the revenues were up double digits, operating income was up 3%. So there was some margin effect there. Was that all due to raw material costs or was there kind of a notable mix effect? And then more broadly, it seems like that segment is on track for another record year. Just wondering if you had any thoughts about that record revenue and operating income.

Yes. Let me take that one, David. It's Ian. So as we said previously to Mike, the gross margin compression that we saw year-over-year, most of that was from sales mix. There's a little bit of pricing in there, but most of it was the mix of the top line. And the business is progressing really nicely, as you said. So at the half year point, it's pretty much where we expected it to be. We expect the business in Q3 to be very similar set of results to what we did in Q2. And then we're into the winter season. So the business is very well set for a very strong second half of the year. And that is built on great technology, great service to the customers, a really dedicated team that's out there executing day in, day out, and we're really pleased with where we got to. So yes, they're all well set. It's not easy, but they will drive really hard for a record year.

Okay. And then last question for me, and this is kind of a big picture question. But your results were very strong here in absolute terms. But I think even in relative terms, you surprised me, and I guess the consensus a little bit in terms of your ability to produce and ship in the wake of the disruptions that you suffered in the first quarter. Maybe just a comment on how you were able to kind of reposition or react so effectively and seemingly not miss a beat in terms of shipments and driving revenue growth, I think, across your businesses, several of which did suffer some mechanical disruptions. So just broadly speaking, is there a lot of flexibility inherent in your system? And is there still a lot of flexibility assuming you're producing at the 2Q level or is that something that incremental growth might have to be addressed through additional CapEx or other types of resourcing?

No. I think we first have to give credit to the management team and the individuals at the plant. I mean this has been a very, very difficult process for us to go through. You had the winter storm hit. We found out a lot of weaknesses within the system. We worked night and day, 7 days a week to get it fixed to make sure we're not missing load to customers, and that's been very difficult without claiming a force majeure. So we fought our way through that.

I think as I said earlier, the efficiencies that are coming about and coming through now and that will hit in the fourth quarter is going to give us additional capacity without more CapEx once we spend this original CapEx. So we're in a really good position. I think that you'll see -- over the coming quarters, you'll see improvements. We could have had some nice volume improvement in the quarter, but we just couldn't make it. We are at capacity. So I think we will start seeing volume improvements as the quarters come. But it's been a lot of work, David. And I got to give credit to credit due is we put ourselves in this position, but we fought like hell to get out of it, and we're not going to ever go there again. But we're sitting in a good spot. We can see the light at the end of the tunnel, and we're very confident moving forward.

[Operator Instructions] We are now going to proceed with our next question, and the questions come from the line of Jon Tanwanteng from CJS Securities.

I was wondering if you could quantify the impact in Q2 from the repair and upgrade activity. And it sounds like it's taking a little bit longer to get back where you want to be. What do you think you might be leaving on the table heading into Q3 and maybe Q4? And do you make it up on the back end when things are up and running or are those sales gone?

Yes. Let me take that first, Jon, and then Patrick will come over the top a little bit. As Patrick alluded to on previous questions, we were really supply constrained in Q2. We got as much volume out of North Carolina as we could. There could have been more in there. Our expectation is that broadly, Q3 will be very similar to Q2 across Performance Chemicals. That volume -- the additional volume, additional capacity won't really come on until Q4 at the earliest, probably more likely into Q1 next year. So I think you're going to see us -- I don't mean plateaued is probably the wrong word, but I think we're probably operating towards the top end of what we're capable of now. So I think Q3 will be very similar. Q4 might see a little bit more of an uptick sequentially, but that's sort of how we see it right now.

Yes. I think as we said, Jon, the #1 priority was to get that plant up and running to meet the volumes and contractual volumes that we had in place, and we've done that. And now it's more putting better efficiencies in place so that we can increase yield and increase volume moving forward. And as Ian said, I think you'll see that towards the latter part of Q4 and then for sure in Q1. So we have missed some volume. Will we pick some of that back up in Q4 or Q1 next year? Yes, but you won't pick it up in Q3.

Okay, great. And then I was wondering if you could go into a little bit more detail on just the improved price and mix in the segment. I think you called out that you're doing a good job in getting new formulations to customers. But could you go into a little more detail on where exactly you're winning? What's driving that? And kind of how sustainable that is as you get more capacity online?

Are you asking, Jon, about in the future or are you asking about Q2?

Both.

Both, okay. So yes, we did a good job on pricing in Q2 in Performance Chemicals. The mix was pretty flat year-over-year. And I think sequentially, obviously, the winter storm impacted Q1. So it's not a really good comparison because of the volume interruptions that we had. As we move into Q3, our expectation is that the business will continue to manage pricing, potentially swap out some formulations with customers where we can. But where we can't, we'll take pricing action. I don't think we'll really see the benefit of the improvements that we're making until back part of Q4, early 2027 because we just won't have the capacity, Jon, to change the sales mix and the profile there.

Additionally to that, we're also expecting new products to come online as well, which will help the margin profile. But I think overall, the way we're managing raw materials, you'll see us do the same again in Q3 to what we've done in Q2. That's responsibly managing through our customers and through our supply chains.

Yes. Just to add a little color to Ian's comments. In all of our businesses, we've had to manage extremely tight time lines on raw materials. There's been force majeure on some raw materials, we've had to reformulate away. There has been a tightness in the market in general and timing of shipments has been extremely difficult. So our supply chain, our management team and all the businesses have done a really good job dealing with not only the inflationary pricing, but obviously, the tightness of the market. So we're -- we feel confident that we have a handle on it. And I think that we'll just continue to see those general improvements as we move forward.

Great. And then I think you mentioned earlier that you have some confidence that Mexico might come back later this year. I was wondering if you could just talk about the -- what's going on there and if you can size or time the ramp-up of potential return of business there?

Yes. It's interesting. There's -- they've had some public announcements about spending capital in certain areas. Some was on polyethylene, some was on crude, some was on nat gas plants, petrochemical plants. That's filtering through now to saying that they realize they actually need, now is the time that the country needs to get more crude out of the system. It's never going to be what it was. I think technology is changing a little bit, but it's going to be a slow process.

As we always told you, we're not going to sell products that we're not going to get paid on for 6 months to a year. And so until that environment changes, we're just going to slow play it. But in saying that there's opportunities, we have had some people come to us and said, we've got opportunities, here's our payment. It's not large volumes. I don't think you'll see any effect this year. We're not counting on it even for next year. If it comes, it comes. So it's more putting ourselves in a position that when they have to return back to using chemicals, that we're their first choice, and that's what we're doing. But we are just -- we're seeing more activity and having more conversations.

Got it. No, that's helpful. And just to be clear, they're now reaching out to you as opposed to just waiting for something to happen.

Correct.

We have no further questions at this time. So I'll now hand back to you to Patrick Williams for closing remarks. Thank you.

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 third quarter 2026 results in November. Have a great day.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

Good day, and thank you for standing by. Welcome to the Innospec's First Quarter 2026 Earnings Release and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, David Jones, General Counsel and Chief Compliance Officer. Please go ahead, sir.

Thank you. Welcome to Innospec's first quarter earnings call. It's David Jones, I'm Innospec's General Counsel and Chief Compliance Officer. The earnings release for the quarter and this presentation are 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 from the anticipated results implied by such forward-looking statements. These risks and uncertainties are detailed in Innospec's 10-K, 10-Qs 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've also included non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure is contained in the earnings release. Non-GAAP financial measures should not be considered as a substitute for or superior to those prepared in accordance with GAAP. They're included to aid investor understanding of the company's performance in addition to the impact that these items and events 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.

Thank you, David, and welcome, everyone, to Innospec's First Quarter 2026 Conference Call. Before discussing the results, I want to recognize the focus and determination being demonstrated by our employees around the world and especially those in the Middle East. Volatile environments like this bring a unique set of challenges and opportunities. We are seeing increased chances to deliver innovative solutions and security of supply to all our customers, and we will continue to execute on these initiatives. This was a mixed quarter for Innospec with continued strong results in Fuel Specialties, partially offsetting the impacts of the January 2026 U.S. winter storm, which affected Performance Chemicals and Oilfield Services.

Performance Chemicals sales were broadly flat with last year, but margins and operating income were significantly impacted by the shutdown of our North Carolina plants due to the U.S. winter storm. We are continuing to prioritize plant repairs in order to meet customer requirements. Additionally, and without slowing the pace of these critical plant repairs, we have elected to pull forward multiple plant optimization projects, which will drive long-term benefits. In parallel, we continue to execute on a range of top line and margin opportunities identified in the business, which we expect to drive sequential growth in the second quarter. Fuel Specialties had another strong quarter with sales growth and margins that remained at the upper end of our target range. The business has continued to deliver consistent strong results through a range of economic cycles.

With a diverse pipeline of nonfuel opportunities across all regions, we expect a continued strong performance in this business. Oilfield Services operating income and margins improved on the prior year, but sequential results were impacted by the U.S. winter storm. While the Middle East conflict may delay some activity in the region, it is also creating new opportunities, which we are aggressively pursuing. In parallel, we remain focused on driving incremental growth from our recent DRA expansion and other opportunities in our Completions and Production segments.

We are cautiously optimistic that this combination will deliver sequential operating improvement in the second quarter and leave us well positioned for further improvement in the second half of 2026. Now I will turn the call over to Ian Cleminson, who will review our financial results in more detail, then I will return with some concluding comments. After that, Ian and I will take your questions. Ian?

Thanks, Patrick. Turning to Slide 7 in the presentation. The company's total revenues for the first quarter were $453.2 million, a 3% increase from $440.8 million a year ago. Overall gross margin decreased by 1.1 percentage points from last year to 27.3%. Adjusted EBITDA for the quarter was $43.7 million compared to $54 million last year, and net income attributable to Innospec for the quarter was $30.4 million compared to $32.8 million a year ago.

Our GAAP earnings per share were $1.22, including special items, the net effect of which increased our first quarter earnings by $0.17 per share. A year ago, we reported GAAP earnings per share of $1.31, which included a negative impact from special items of $0.11 per share. Excluding special items in both years, our adjusted EPS for the quarter was $1.05 compared to $1.42 a year ago. Turning to Slide 8. Revenues in Performance Chemicals for the first quarter were $169.4 million, up 1% from last year's $168.4 million.

Volume reductions of 9% were offset by a positive price/mix of 1% and a favorable currency impact of 9%. Gross margins of 16.8% decreased 4.2 percentage points compared to the 21% in the same quarter in 2025 due to the impact of the U.S. winter storm at the start of the quarter. Operating income of $10.7 million decreased 46% from $19.8 million last year. Moving on to Slide 9. Revenues in Fuel Specialties for the first quarter were $181.6 million, up 7% from the $170.3 million reported a year ago. A 10% increase in volumes and a favorable currency impact of 6% were offset by negative price/mix of 9%. Fuel Specialties gross margins of 35.4% were broadly flat with the same quarter last year. Operating income of $37.8 million was up 2% from $36.9 million a year ago.

Moving on to Slide 10. Revenues in Oilfield Services for the quarter were $102.2 million, flat with the first quarter last year. Gross margins of 30.1% increased 1.7 percentage points from last year's 28.4% on an improved sales mix. Operating income of $5.6 million increased 37% from $4.1 million a year ago. Turning to Slide 11. Corporate costs for the quarter were $22.3 million compared with $17.7 million a year ago, driven by higher legacy costs of closed operations, higher legal and compliance expenses and additional amortization for our ERP system. The effective tax rate for the quarter was 22.8% compared to 25.7% a year ago.

Moving on to Slide 12. Cash generated from operating activities was $17.6 million before capital expenditures of $8.6 million. In the first quarter, we bought back 90,000 shares at a cost of $6.2 million. As of March 31, Innospec had $289.1 million in cash and cash equivalents and no debt.

And now I'll turn it back over to Patrick for some final comments.

Patrick?

Thanks, Ian. With our diversified global supply chain and manufacturing footprint, we believe that we are well positioned to manage the direct impacts of near-term geopolitical disruptions. We are monitoring closely the potential for further raw material inflation and supply disruption as the Middle East conflict extends. During this period, we remain focused on our continued commitment to security of supply and innovative solutions for our customers. We will continue to implement improvements across all our businesses that will position us for growth and margin expansion as market conditions recover.

Our short-term expectations is for sequential operating income growth in Performance Chemicals and Oilfield Services and steady performance in Fuel Specialties. Our strong debt-free balance sheet continues to allow for significant flexibility in the current environment to pursue further dividend growth, buybacks, organic investment and M&A. Cash generation was again positive this quarter, and our net cash position held at over $289 million after repurchasing 90,000 shares at a cost of $6.2 million.

In addition, this quarter, our Board approved a further 10% increase in our semiannual dividend to $0.92 per share, which together with the newly announced $75 million buyback further enhances shareholder returns.

Now I will turn the call over to the operator, and Ian and I will take your questions.

[Operator Instructions] And now we're going to take our first question, and it comes from the line of Michael Harrison from Seaport Research Partners.

I wanted to just start with the Performance Chemicals business. Maybe help us understand how much of that volume decline was related to the weather or outage impact? And I guess, what you're seeing in terms of underlying market dynamics there, given the consumer sentiment remains a little bit weak. And really just trying to get a sense of should we see volumes start to recover in the second quarter? Or is that more of a second half type of dynamic?

Yes, Mike, I'll kind of go in reverse of the question. I think you'll start seeing it in the second half of the year. It's not necessarily orders that we're seeing a negative impact. Our order pattern is very strong right now. The issue we're still having is the plant and that effect from the winter storm that we had early on or late in the season. So it's an issue of getting product out and manufactured and out the door. It's not an issue of orders. I think what you'll see probably is a similar, maybe a little better quarter in Q2 with a significant better increase in Q3. That's where we sit right now. And we can give you, obviously, more color as we go along.

Yes. Just to kind of follow up on that. Can you maybe walk us through the repairs and upgrades or optimizations that you're making at the High Point and Salisbury plants in North Carolina. What's happening at each plant? What's the time line for each plant, I guess, to get fully back up and running? And can you help us understand what the potential benefits are of the optimizations that you're working on?

Yes. Number one was to get the plant up and running so we could at least meet most of the orders that we have in place today. So the #1 priority was to get the plant up and running, and we've gotten the majority of that right now. Along the way, we've decided that let's start to optimize to where we get better yields, better efficiencies, automation, et cetera, along the way. But the #1 critical part was to get product to customers. So that's been the primary focus. As we move through the stage of that, then we're moving back into the stage of automation, et cetera, that we just talked about.

So, it's a process. It takes time. You had frozen pipes. We've had to replace a lot of pipes, boilers, et cetera. There is a time line on everything that we've done. We have a plan in place. And Mike, as you know, when plants go down, it just takes time to get some of these things fixed as you fix one thing and another thing pops up. And so it's just taking some time. It's a little frustrating by us, but we are starting to see a light at the end of the tunnel.

And the good thing is, again, the order pattern is extremely strong. And I think when we come out of this, priority #1 is to get product to customers. Priority #2 is let's make sure we don't have the problems again and of course, better efficiency, better yield, better quality, et cetera, which should come along with it in the latter part of the year.

All right. Very helpful. And then I wanted to move on to just understanding some of the impacts of the Iran war on your business. I think, first of all, just from a raw material perspective, I'm a little concerned about the Fuel Specialties business. That business tends to pass through raw material cost on an index and sometimes there's a lag. I guess what are you anticipating in terms of some potential margin pressure impacting the Fuel Specialties business? And I guess with pricing negative in the quarter, should we assume that, that price/mix number turns positive again in the second quarter? Or is that maybe we see that remain negative and not turn positive until the second half?

Yes. Let me take the first part of that, Mike. So Fuel Specialties is a business that operates through or has operated through many different economic cycles. And this, in many ways, is similar to what we've been through before. We've seen some really serious spikes in raw material costs and crude derivatives. And you're absolutely spot on that we have a pass-through mechanism for most of our business, and that does have a time lag.

So our expectation is that we'll see some gross margin compression in the second quarter. And that's not to be unexpected. Now depending on how long some of this continues for, we may well be chasing some of those price increases for a quarter or two. If prices stabilize or drop, we'll obviously see the benefits of that in the fullness of time. So again, a little bit like Performance Chemicals, demand is really good.

The business is operating at the real top end of where we expect it to be with the seasonal impact of Fuel Specialties in Q2 dropping off a little bit and some timing of gross margins. We expect operating income to be in that sort of low $32 million, $33 million in the second quarter. So a little bit lighter than Q1, but margins potentially a little bit tighter as well.

Yes, Mike, it's interesting. As Ian said, we've been through these cycles before in this business, and we've managed it extremely well. And what you always look for is, is there demand destruction, right? Do you see high crude prices, high jet prices, high diesel gasoline moving up in the marketplace. Will that have demand destruction. We're not seeing it quite yet.

It could happen. But typically, what you see is a slight demand destruction, but yet the margin profile still stays pretty steady, and this business just kind of marches along. And I think as Ian and I looked at this and ascertain the situation and all the market information that we're getting, we feel -- still feel very confident that Fuel Specialties will continue on this path.

No, we're -- I mean, the market is surprisingly resilient here. I was surprised to see the unemployment numbers that came out today. So we'll see what happens with demand. I guess the last question that I had is just maybe tying it all together, you mentioned the sequential decline in Fuel Specialties and sequential growth expectations for Performance Chems and for Oilfield. So net-net, is Q2 earnings pretty similar to Q1, a little bit lower than Q1? Maybe just any additional color you can provide there would be helpful.

Yes, I'll let Ian take the first part, and I'll add some clarity to it as well.

Yes. You called it pretty right there, Mike. We're expecting a small drop-off in fuels compared to Q1, seasonally driven. We expect a small increase sequentially in Performance Chemicals and the same in Oilfield. So net-net, you're going to come out with a very similar quarter in terms of EPS, maybe $0.01 or $0.02 higher. We do need to see the impacts of the war coming through. But right now, that's how we see it, very much like it's modeled in your numbers as well, Mike.

Yes. I think, Mike, we looked at your model and your numbers on -- let's talk about oilfields. We haven't touched much on oilfield. Where there's chaos, there's opportunities, right? And I think if you look at the expansion that we did in DRA, this chaos has created a lot of opportunities in DRA. And as Ian said, that will help boost oilfield in Q2 and Q3 moving forward.

And so we're seeing more opportunities with higher crude prices. Even if crude prices come down, we still feel like we're in a better position than we have been in the past. And so -- and I think as Ian said, you'll see a similar type -- a little bit of improvement in Q2, and then you'll see the bigger improvements in Q3, Q4.

And the question comes from the line of Jon Tanwanteng from CJS Securities,.

Patrick, I just want to drill down on the oilfield business, pun intended there. You mentioned you're obviously seeing more opportunities there even with the delays in the expansion in the Middle East. Are those net positive opportunities as you look at the full year? Or is it a net negative just with the disruptions that you're seeing compared to what you thought maybe two or three months ago?

Yes. It's definitely, Jon, net positive. And I think that what we're seeing in the position that we put our product lines in with specific customers, either a, in the Middle East and even a little bit now potentially in Argentina or Venezuela and Mexico as well, where there's heavy crude. We think these are potentially long-term opportunities. So it's -- as I said earlier, there's opportunity in chaos. And because of our technologies, it's provided us a lot of opportunity.

And now it's up for us to capture that. So even as the Strait of Hormuz open up, you have the East-West pipeline that we're looking at helping out right now with DRA. Once the strait open up, you'll see fracking pick up again, which will obviously help our business again. And then you're seeing Venezuela coming in with heavy crude that we're looking to trade on their heavy crude. So a lot of this chaos has created a lot of opportunities. And I think if we positioned ourselves properly, we have great technology. Now it's a matter for our group to go ahead and execute. And we're starting to see that happening. That's why we're telling you we'll see a sequential improvement over Q1 in the oilfield, and we should see that throughout the rest of the year.

Got it. And if I could just ask two more on the same topic. Are you seeing any DRA opportunities pushed out of this year as a result of the delays in the conflict, number one? And number two, is there any update on your prior large Latin American client and if -- the higher prices today might spur them to do something sooner rather than later?

Yes. So on DRA, we've seen all opportunities. As a matter of fact, that the plant expansion that we put together is pretty much going to be maxed out in Q2 and Q4. So pure opportunities there. If you look at the Latin America opportunities, and we mentioned a couple, we mentioned Venezuela. I know your specific question is to Mexico. There is activity going in Mexico right now. And obviously, with their heavy crude and where the crude prices are right now and the need for the Gulf Coast refineries to have access to heavy crude there is a lot of activity.

Now until Pemex decides how they're going to fix paying vendors, there's going to be that lag still. But we are starting to see increased activity. And the hope is that we'll start seeing something out of there. It will never be the magnitude that we had. The hope is we'll see something coming out of there. But again, there are some opportunities in Venezuela, too, that we're going to start pursuing that hopefully will benefit as well.

Got it. And then one last question just on capital allocation priorities. I see that you bought back a lot of shares. You authorized a new $75 million buyback, which is great. I think in the prior quarter, you had talked about increasing M&A opportunities this year. And I'm wondering if that's changed in your outlook, just given the higher degree of share buybacks. So can you do both with the cash flow and the cash pile that you have?

Yes. I think we can do both. And we tap the brakes a little bit, Jon, until we get Performance Chemicals, right? And we're starting to see a light at the end of that tunnel. And the hope is that after we get through Q2, where we'll see a similar quarter as we saw in Q1 that we start seeing those big improvements that we've anticipated in Q3 and Q4. Once we see that turnaround, and it's in actual numbers, not in just talk, but in actual numbers, I think you'll see us aggressively going after M&A. But we haven't stopped. We just haven't found the right thing, but we are continuously looking. But the hope is the right deal doesn't come around until Q3 when we see those numbers improve.

Is it fair to say that a deal will be dependent on that factory getting -- that facility getting fixed? Or is that just something you're hoping to have as a bogey in terms of...

Yes, it's hoping I have as a bogey.

And the question comes from the line of David Silver from Freedom Capital Markets.

I would like to maybe kind of drill down just a little bit on Fuel Specialties. So according to my records, both the revenues and especially operating income were kind of at all-time highs. And more to the point rather than just isolating one period, I mean, maybe three out of the last four quarters have really been exceptionally strong from a historical perspective.

And I know you kind of talk about this as being a very steady business, but 10% volume growth this quarter and just the overall trend kind of points to maybe, I don't know, some share gains or some new products making an impact. But maybe if you could just comment not just on good results, but on record results and kind of consecutive periods of kind of above normal or above trend, I would say, growth and margin performance. So underneath, I mean, underlying this, what might be moving more positively than the historical trends that might indicate?

Yes. Good question, David. I'll take that. Some of it has been market changes, market improvements, volume gains, price mix. There's been a little bit of variable in your question. The other that we've seen is that we've started to grow a lot of business in adjacent markets that are outside of fuels. And so when you're looking at polyethylene plants, polypropylene, et cetera. So we've moved into other market segments that are an offshoot of fuel specialties. So that's been a beneficial gain and nice margins in that area.

So they've done a really good job of putting together a strategy and a plan in place and sticking to it. And as you know, that business is always extremely steady. I've been involved in that business from day 1. It was my business prior to being CEO of this company. So I know this business extremely well. They've done a really good job running this business. They've created themselves opportunities. We've got a good product pipeline. And that's why we feel confident that we can continue to either, a, grow or sustain moving forward this year and beyond.

So it's a little bit of everything, which you'd like to see. You don't want to see one thing create all the positive. It's a little bit of everything that's created the positive. Now you are going into a second quarter, you always see a drop-off because of seasonality. And so you just have to remember that. But again, I think the sequential improvement has been very impressive, as you said.

And if you don't mind, I'm just going to follow up. But again, from the perspective of very strong results, I mean, near term, I guess, the diesel markets have been rattled a bit on the cost and maybe availability side and various airlines are balking, I guess, or having trouble operating in the current environment. So I mean, just from your perspective, I know diesel and jet are important to your fuel specialties. But how would you say -- what has been the strategy or the plan to kind of continue to operate or perform so well despite kind of objectively some meaningful near-term disruptions?

Yes. Dave, I think it's diversification of portfolio within Fuel Specialties. Again, we treat marine, bunker, jet, gasoline, diesel. We've gone to adjacent markets outside of core fuels and heavy fuels. So it's the creativity within the organization and the diversification of the portfolio, which will help us sustain kind of where we are today.

Now we are watching heavily what's going on with fuels. And as you said, you see Spirit Airlines go down and others blaming it on fuel costs. Why they weren't hedging fuel costs is beyond me. But my only point there is we are watching demand destruction and see if it hits us. It has not as of yet. The consumer is extremely strong still. Usage is still strong, but we are watching it closely. But again, the diversification within the portfolio has always helped us overcome these chaotic markets.

Okay. And then just one more kind of maybe bigger picture question. But when I think of the disruptions from the Persian Gulf and one or two other areas, I mean, I do think -- and you touched on this earlier, but I do think oilfield in particular, but probably multiple areas do have objectively, they're going to have greater opportunities regardless of when and how the Persian Gulf situation plays out. I mean people are just going to want to source differently.

And from your perspective, I mean, I think you have multiple areas that could benefit, which you did discuss, but I'd like to maybe ask you about the resourcing. In other words, what would you have to do in oilfield, for example, to take advantage of what we're seeing on a daily basis, which is a much greater interest in U.S. petroleum and petroleum products exports. And there probably are some other businesses I'm just wondering, do you have spare capacity now? Or do you need to really increase maybe either investments in capacity or investments in talent to kind of take full advantage?

I think we're properly positioned. And I think security of supply is big on everybody's mind, and we're well positioned for security supply. I think during chaotic times like this, innovation is going to be on the forefront of everybody. If you're looking at similar technologies that come out of the Gulf based off of raw material, can you do something different in other markets that are sustainable long term with technology. Those are things that we're looking at and consistently and constantly bringing to the market.

So I think if you really look at when these market dynamics change like they are today, innovation, security of supply is on everybody's mind. And that's going to be our focus during these times, but as well as sustainability when things come back to normal if and when they do. And that's the key for our group is to make sure that what we do today brings us sustainability in the following years moving forward.

Dear speakers, there are no further questions for today. I would now like to hand the conference over to Patrick Williams for any closing remarks.

Thank you all for joining us today, and thanks to all our shareholders, customers and Innospec employees for your interest and support. In the first -- sorry, if you have any further questions about Innospec on matters discussed today, please give us a call. We look forward to meeting up with you again to discuss the second quarter 2026 results in August. Have a great day.

Good day, and thank you for standing by. Welcome to the Innospec's Fourth Quarter 2025 Earnings Release Conference Call and Webcast. Speakers on the call today are David Jones, General Counsel and Chief Compliance Officer; Patrick Williams, President and CEO; and Ian Cleminson, Executive Vice President and Chief Financial Officer.

[Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker, Mr. David Jones, General Counsel and Chief Compliance Officer. Please go ahead.

Thank you. Welcome to Innospec's Fourth Quarter and Full Year Earnings Call. This is David Jones, I'm Innospec's General Counsel and Chief Compliance Officer. The earnings release and this presentation are posted on the company's website.

During this call, we will make forward-looking statements, which are predictions and projections at our future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that can cause actual results to differ materially from the anticipated results implied by such forward-looking statements. The risks and uncertainties are detailed in the sect 10-K, 10-Q and other filings with the SEC. Please see the SEC site and in spite for these unrelated 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 investor understanding of the company's performance and adjust to the impact of these items and events 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.

Thank you, David, and welcome, everyone, to Innospec's Fourth Quarter 2025 Conference Call. This was a good quarter for Innospec, with continued strong operating income growth and margin expansion in Fuel Specialties combined with improving results in Performance Chemicals and Oilfield Services. In Performance Chemicals, margin improvement actions and lower overheads drove strong sequential operating income growth. We continue to execute on price cost management, manufacturing efficiencies and new product commercialization actions over the short to medium term.

New products include the continued expansion of our industry-leading sulfate and [indiscernible] free personal and home care portfolio. Additionally, we are accelerating our growth in new technologies for agriculture, mining, construction and other diversified industrial markets. We expect these combined efforts to drive further growth in 2026. iN Fuel Specialties, sales growth and margin expansion drove a 7% increase in operating income over the prior year.

As expected, the business has continued to deliver consistently strong results and has a diverse pipeline of fuel and nonfuel growth opportunities across all regions. Oilfield Services operating income and margins improved on a richer sales mix and lower overheads. Sales were down on reduced activity in U.S. completions and the Middle East. We remain focused on delivering operating income growth in 2026 as Middle East activity returns and our recent DRA expansion takes effect.

In parallel, we will continue to focus on margin improvement. Our outlook does not assume any resumption of Mexico sales in 2026. Regarding our outlook for the first quarter of 2026. Results in Performance Chemicals and Oilfield Services will be negatively impacted by the historic winter storm, which occurred in late January. Despite this, we are optimistic that we will drive full year improvements in both businesses in 2026.

Now I will turn the call over to Ian Cleminson, who will review our financial results in more detail. Then I will return with some concluding comments. After that, Ian and I will take your questions. Ian?

Thanks, Patrick. Turning to Slide 7 in the presentation. The company's total revenues for the fourth quarter were $455.6 million, a decrease of 2% from the $466.8 million reported a year ago. Overall gross margin decreased by 1.2 percentage points from last year to 28%. Adjusted EBITDA for the quarter was $55.7 million compared to $56.6 million last year. And net income for the quarter was $47.4 million compared to a net loss of $70.4 million recorded last year, which was driven by the buyout of the U.K. pension scheme.

Our GAAP earnings per share were $1.91, including special items, the net effect of which increased our fourth quarter earnings by $0.41 per share. A year ago, we reported a GAAP loss per share of $2.80, which included a negative impact from special items of $4.20. Excluding special items in both years, our adjusted EPS for the quarter was $1.50 compared to $1.41 a year ago.

For the full year, total revenues of $1.8 billion decreased 4% from 2024. Adjusted EBITDA for the year was $203 million compared to $225.2 million in 2024 and net income for 2025 and was $116.6 million compared to the prior year net income of $35.6 million. Our full year GAAP earnings per share were $4.67 including special items, which decreased our full year alive by $0.60 per share.

In 2024, we reported GAAP earnings of $1.42 per share, which included a negative impact from special items of $4.50. Excluding special items in both years, our adjusted EPS for 2025 and was $5.27 compared to $5.92 a year ago. Turning to Slide 8. Revenues in Performance Chemicals of $168.4 million were flat with the fourth quarter of last year.

Volumes reduced by 7%, offset by a positive price/mix of 3% and a favorable currency impact of 4%. Gross margins of 18.1% decreased 4.6 percentage points compared to 22.7% in the same quarter in 2024 due to higher costs and a weaker product mix. Operating income of $17.7 million decreased 14% from $20.6 million last year.

As expected, our fourth quarter results improved sequentially over the third quarter as improvement actions took effect. Fourth quarter gross margins of 18.1% improved 3 percentage points compared to the third quarter and operating income of $17.7 million almost doubled from the $9.2 million recorded in the third quarter last year. For the full year, revenues of GBP 68.4 million were up 4% from last year's $653.7 million, and operating income decreased by 26% to $61 million.

Moving on to Slide 9. Revenues in Fuel Specialties for the fourth quarter were $194.1 million, up 1% from the $191.8 million reported a year ago. Volumes were up 8% with an adverse price mix of 10% and a positive currency impact of 3%. Fuel Specialties gross margins of 34.7% were 0.3 percentage points above the same quarter last year, benefiting from a stronger sales mix and disciplined pricing. Operating income of $37.2 million was up 7% from $34.9 million a year ago.

For the full year, revenues were unchanged at $701.5 million and operating income increased 12% to $144.8 million. Moving on to Slide 10. Revenues in Oilfield Services for the quarter were $93.1 million down 12% from $105.8 million in the fourth quarter last year. Gross margins of 31.9% increased 1.8 percentage points from last year's 3.1% and operating income of $8.2 million increased 9% from $7.5 million 1 year ago.

For the full year, revenues of $395.1 million were down 19% from last year's GBP 49.6 million and operating income decreased 40% to GBP 23.3 million. Turning to Slide 11. I corporate costs for the quarter of $16 million decreased by $4.6 million from a year ago, driven by lower personnel-related costs. The full year adjusted effective tax rate for the quarter was 24.1% compared to 26.4% in the same period last year due to the geographical mix of taxable profits. For 2026, we expect the full year effective tax rate to be around 26%.

Moving on to Slide 12. Cash flow from operating activities was GBP 61.4 million before capital expenditures of $20.5 million. In the quarter, we paid the previously announced semi-annual dividend of $0.87 per share. This brought the total dividend for the full year to $1.71 per share a 10% increase over 2024. There were no share repurchases in the quarter, and for the full year, we have repurchased a total of 247,000 shares at a cost of $22.2 million.

For the full year, cash from operations after capital expenditures was GBP 63.9 million compared to GBP 122.7 million in 2024. As of December 31, in respect of $292.5 million in cash and cash equivalents and no debt. I'll now turn it back over to Patrick for some final comments. Patrick?

Thanks, Ian. Entering 2026, our focus is unchanged. We will continue to deliver exceptional innovation, value and service to our global customers across all our end markets. We will also continue to prioritize margin and operating income improvements in Performance Chemicals and Oil build services. In addition, we expect Fuel Specialties to continue to deliver consistent results.

Operating cash generation was excellent in the quarter. our new cash position closed at over $292 million after making our semiannual dividend payment of $21.6 million. We continue to have significant balance sheet flexibility for dividend growth, buybacks, organic investment and M&A.

Now I will turn the call over to the operator. Ian, and I will take your questions.

[Operator Instructions] And the questions come from the line of Jon Tanwanteng from CJS Securities.

Really nice job on the mix and margin there. I was wondering if you could go a little bit into the oilfield business and how you see the mix evolving there, especially in the coming quarters as you continue to diversify that business?

Yes, John, let me start with that one. We're really pleased with the progress that we've seen in the oilfield business in Q4. We were with the team yesterday, and I've got to say we're really encouraged by the activity levels that are going on with the creativity the focus on technology.

As we head into 2026, we're going to take a little tough on the brakes because of the weather impacts in Q1. But beyond that, our expansion is coming online, and we're starting to ramp volumes there, spreading the customer base and improving the profitability and the gross margins in that business is critical for us Also, the Middle East remains a real hotspot for us.

We can see lots of opportunities there, advancement technologies and a real nice opportunity for us to grow the business above average rates in the region. Outside of that, we've had a tough time in the U.S., but we've got lots of opportunities with new technologies and new ways of going to market, starting to happen. So when we wrap all that together, we do feel confident that we'll be able to outpace what we did in 2025.

The mix will be a little bit more towards the Middle East and and we feel that we can improve the profitability of those are the core businesses in production and Stim as well.

Okay. Great. You mentioned the impact of weather a couple of times. I would -- I guess that less people driving maybe there are some styles with production but I would also expect probably maybe an offsetting impact from cold slow. Could you just quantify what you think the impact is going to be this quarter from cold weather and winter storms?

Yes. I'll let Ian take the financial portion negative effects. But in oilfield, it was production activity, people couldn't get to the well sites, couldn't deliver product. There's a multitude of issues. If you look at North Carolina, I mean, it was an extreme snow and icy event where our plants are located, probably the biggest ice in a century in that area. .

So we did have a lot of plant downtime, couldn't get raw materials in. And then obviously, John, when you start the plant back up and then have a lot of issues, and that's what we've done. In conjunction with that, though, being that we've had these issues with cold weather hit us. We've also decided at the same time to really work on the plant inefficiencies to make the plant more efficient, get better yields, better product quality, work on some of the manufacturing processes that we probably would have had done at some point in time.

So we're going to go ahead and do it all since we had the plant issue and had the cold weather issue, just knock it all out at once. So I think it's -- I wouldn't say it's blessed to discussed by any means because I think we would have a really strong first quarter. So we would have backed up the fourth quarter with another strong quarter, but it is something that has to be done. It's an event that was unexpected. We'll get a fix. It won't happen again because we will prepare for it. But we'll also make that plant in a much better condition to move forward for growth.

Yes. Just to add to that, John, when you roll that into our expectations for Q1, within the oilfield business, we're probably going to be posting operating income around about GBP 5 million, GBP 6 million. that's probably a couple of million below where we would like to have been. And that's for the reasons Patrick explained. In Performance Chemicals, it's a bigger impact because we've obviously got quite a large manufacturing footprint down there. which was closer to an extended period, and there's been some damage to the site as well.

So it's going to take a little time for us to build that back off. So we're expecting the Performance Chemicals Q1 operating income to be close 10 million to 11 million. Again, that's probably GBP 5 million to GBP 6 million below where we would have liked to have been. So it's quite a significant impact from the weather in Q1 in both of those businesses.

Got it. And just a follow-up on that. Do you expect to make that up in the following quarters for the whole year? Or is that something that gets lost as you look at...

It's slightly different in both businesses. The oil field business potentially could make up some of that, John, but it's going to be a tough as for them because their customers have closed down -- and if they come back and will come back strong, we may make up some of it. Performance Chemicals because it's production based. We've lost that production time. We will not be able to make that back off, and it's going to take us a quarter or for the reasons Patrick was explaining some of the additional efficiencies that we're going to be looking for on that side.

We won't be able to make up that volume of production. So with those sales and those costs will be less to us -- what we do expect is as we exit Q2 is that the Q3 numbers will be showing much stronger benefits of the changes that we're making and a much stronger benefit from the direction and the discipline the business is driving into customer contracts, pricing and general efficiencies.

Yes, it was just unfortunate timing, John. It's -- we -- our expectations were rolling into a nice Q4 to roll into a really strong 2026, and we're just going to take advantage of it now that it did happen. We're going to make it even better coming out of Q2.

The next question comes from the line of Mark Harrison from Seaport Research Partners.

On Mac. I have just a couple of questions on the Performance Chemicals business. Can you talk a little bit about what drove the volume decline that you saw in Q4. I assume that was not weather-related. Was that customers taking inventory down or what else is going on there?

And then I guess just in terms of the price -- specific to the pricing actions you need to take in order to cover the higher cost of Oleochemicals and maybe other raw material inputs -- are those prices in place and where you need them to be? Or are there going to be some additional actions that may contribute to better price versus raw material cost margin contribution as we get into '26.

Yes, we'll hit your questions by both of us. I think -- to start with Q4 volumes, Mike, a lot of it was just uncertainty in the marketplace. I think tariffs in general just have put a down tone on any kind of inventory build I think that was part of it.

Typically, Q4 is a little slower in the business by nature. But I think overall, if you look at the quality of business that we have moving into the year, we felt very strong. I think for us, there is -- we've done a lot of price action around margins and around raw materials.

A lot of our national contracts, international contracts with multinationals has price mechanisms built into the contract. So we had to go back and just make sure we're following those guidelines that have set forth in the contracts. In other areas where we saw price spikes around [indiscernible], et cetera, we have finally gotten out in front of those. And therefore, you saw the margin increase I do think over time, probably more towards the middle of this year, you'll start to see us even get ahead of that. But because of the weather event that we had, I think first quarter is going to affect us a little bit a little bit into Q2.

But overall, I think we're heading in the right direction with margins. The volume is there. The sales are there, the revenue is there. The business is there. We're increasing our output on new products in the portfolio, which is going to build upon throughout the year as well, and those are higher-margin products, too.

So if you look at the overall business, I would say it's not a negative, it's a positive. I think it's the weather event that's going to affect us upfront. But we're starting to really manage these processes the way they should have been. But additionally, that the pipeline is full of new products, which will benefit us moving forward. I think that probably covered all of it.

All right. And then a couple on oilfield. I'm just curious, this was a year -- 2025 was a year when you guys, again, saw some further declines in revenue obviously, you didn't see any recovery from the Latin American customer. But I'm just curious, as you're starting to think about what top line growth could look like next year?

It sounds like you're really encouraged by what you're seeing in the Middle East, some contribution from DRAs -- is it your view that as we think about the entire year, we could see some maybe mid- to high single-digit type of top line growth? And then the second piece of that question is as we're talking about Latin America, is it possible that we see any business opportunities start to show up in Venezuela?

Yes. So good question. I do think you're going to start seeing that probably between 5% to 7% revenue growth in that in oilfield oilfield needs consolidation in the marketplace, at least in North America. And there's also a need for technology. And as Ian alluded to earlier in the conversation, there's been a big emphasis and a big push to bring new technologies to the marketplace that really this market hasn't seen in quite some time.

And I do think that we're on the edge of that happening. As you said, I think Middle East will start to really pull its way in Q2, Q3, Q4. And it's not just with Saudi Aramco. It's in the general market area, the regional area of the Middle East. In regards to Latin America, I do think we're going to start seeing sales in Mexico again. I think it's a function of how we're going to get paid.

We're not going to sell products for free. But I do think that they -- while we do know they need the technology, we know our technology works. It's proven. So I do think Mexico at some point in time, we will see something not to the magnitude we've had in the past. And in regards to Vensaele, it's a very heavy crude. We know that crude up there very well. Chevron's operated in that region for quite some time.

So as soon as you start getting some stability, political stability in that area and you start seeing international investment primarily from the U.S. That is definitely an open market for oilfield where I think we can make a big difference. So there's a lot of positives there. We've got to extract those and the market's got to come our way. And I think it's up for our guys to really push the envelope and make it happen. All right.

One of the special items that you guys called out in the quarter referred to the tax impact from an internal reorganization I was wondering if you could explain what that reorganization entails and what impact that could have on the P&L going forward? .

Yes, I'll take that one, Mike. It was a reorganization we did over a year ago at the top end of the organization just to simplify the structure and allow us to move cash overseas into the U.S. in a much more tax-efficient way. There was a deferred tax impact to that reorganization. That has a -- I think it's a 15-year benefit to tax. It would be about a year for the next 15 years in cash taxes, Mike.

So it's all below operating income. There's no business benefit, but it does simplify our operations at the way we are able to move cash around the way we are able to file tax returns in the U.S. and it gives us a little bit of benefit to the tax line as well.

All right. Last one for me is just on corporate costs. They were quite a bit lower in Q4 I was just curious, was that some incentive comp that was lower or what drove that? And if you can give any kind of an outlook or guidance for corporate costs in the first quarter and for 2026, that would be very helpful.

Yes, you're spot on, Mark. It was personnel-related costs. As we look forward into 26, that sort of GBP 20 million per quarter, '18 for the full year, that's the level that we're expecting for 2026. .

We are now going to proceed with our next question. And the question comes from the line of [ David Silver from Freedom Capital Markets ].

Yes. Thank you. David. So I would like to start with maybe just a question or 2 on fuel specialties. And firstly, on the quarter, if I'm not mistaken, my model goes back about, I don't know, 10 years or so. I believe the revenues in the quarter were your highest ever. And your operating profit, $37 million was, I think, your second highest ever.

So obviously, the business is functioning pretty well. And I know that your view is that it's a very stable business, low single-digit grower from year-to-year. But -- it does seem like you're shaking things up a little bit or operating the business a little bit differently. So what maybe led to the record revenue near record operating profit this quarter?

In other words, did you have some incremental success with new products or just a richer mix overall, but just maybe some thoughts about that and then why that strength on an annual basis, let's say, couldn't continue on into 2026.

Yes, David. They've really done a really good job in that business. I think you're spot on it was a record revenue. It was very close to a record op A lot of it was product mix, but a lot of it is outside of even fields. I think they've done a really good job of expanding their portfolio, getting out there with new technologies, making sure that we've got the right costing in place, making sure that we're staying up on innovation.

And it was a good overall effort globally by all parts -- it is a business that's typically a 2% to 3% growth business. And occasionally, we see those spikes like when you went to ULSD, we had the big spike you're starting to see some regulatory movement. You're starting to see GDI take effect in some aftermarkets and Europe our marine business, all the businesses that we've been talking about for quite some time are starting to come along as expected.

And the group who manages that division have really stepped it up and you got to give them credit. I think that -- it's always been our stable business. It's a light on CapEx. It's got great free cash flow, and we'll continue to push it there. I think it's also an area just to expand a little bit of your question, it's an area we'd love to acquire into if we found something that was worth purchasing. The team deserves it. They've built it. They're ready for it. We've just got to find the right thing to buy. But overall, great job. I do expect them to have another strong consistent year.

You poached with that M&A comment you poached 1 of my questions for the follow-up discussion. Next question, I wanted to maybe switch over to Performance Chemicals and maybe, I don't know, come at it just a little bit different. But revenue-wise, I mean, I think it was record or near record year. And there's a number of issues involving kind of the lower operating profit year-over-year. But in general, there's a lot of chatter about the strained kind of middle income or consumer and things like that.

And I did note, I believe it's like 2 or 3 quarters in a row where you cited kind of a weaker mix within Performance Chemicals. And I'm just wondering, is trading down kind of an issue that you're seeing? Are your customers kind of indicating that, that part -- a bigger part of their business with you?

And then more to the point, I mean, I guess, this business has been a mid- to high single-digit grower over a longer term. Is that still kind of your thinking for next year or whether it's due to mix or other factors that maybe the growth potential might be a little slower over the medium term.

Yes. I mean if you consumer trends right now, they are trading down to a lower-priced commoditized type products. So we have definitely seen that. Now that moves in that ebb and flows. Once you take up market uncertainty out and people see more spending capabilities in their pockets, they'll go out and start spending more on high-end products.

So we have seen that push down to more commoditized products. But again, David, you'll see that, that's very typical in markets like this where there's uncertainty or coming out of inflationary markets. For us, it's the continuance on innovation, right, and to get better manufacturing processes and efficiencies so that we can better prepare for that commoditized market. where we're making better margins than we have to date is something we're doing at some of our plants right now, which will benefit us towards the latter part of the year.

But yes, consumer trends have sent us that way. We -- the way I look at growth in that area is, I think you're probably looking at it a little bit flat this year. And then I think you'll start seeing it spike back up probably towards the latter part of this year. but I would probably hold it flat.

Okay. Last one for me. I did want to go to your concluding remarks. -- in your earnings release. And in particular, you cited in Performance Chemicals and oilfield, you said new technology commercializations and other opportunities for 2026, in particular, on the new technology commercialization, I mean, you focused on kind of some of your functional surfactant products for mining and agro chemical and whatnot.

But I was just wondering, is that -- are those the recent commercializations, -- are those the products you're talking about, maybe expanding the rollout there? Or you haven't been shy about rolling out new products over a longer period of time. Is there another new crop of product introductions we should be thinking about? And qualitatively, maybe could you point us to where those might be?

Yes. These are a series of products and let's talk Performance Chemicals specifically. There are a series of products that go in multiple applications. They're not mass markets where you're going into a multibillion-dollar industry and capturing $200 million to $300 million of this, they're more specialized. So we will typically launch 2, 3 or 4 of these throughout the year, which is just a nice build on upon our business in which over time will start increasing that margin. .

And as I said earlier, I think that you'll start seeing the impact of those probably more in the Q3, Q4 range. So there is a nice pipeline of portfolio of products that will be hitting the market throughout the year, but I think it's a buildup over time where you start seeing the big changes in margin profile and in revenue. And it's the same in oilfield. We've got a lot of creativity in the group. They're finally starting to come together and bring new ideas and creativity market.

And sometimes, it's not necessarily just products. It could be market approach. And so there's a lot of differentiality going. We have to be different than other people, whether it's technology or whether it's service or whether it's any kind of innovation that's attached to both. And that's really where we're pushing our group.

And that's why we feel pretty confident that we'll overcome the barriers that we have in Q1 and Q2 manufacturing barriers, we'll overcome those in Q3, Q4 by all the things that we have going on internally with the organization.

Okay. Great. Thank you very much. Thank you. We have no further questions at this time. So I'll hand back to the President and CEO, Patrick Williams for closing remarks. .

Thank you 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 2026 results in May. Have a great day.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a great day.

Good day, and thank you for standing by. Welcome to the Innospec Third Quarter 2025 Earnings Release and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, David Jones, General Counsel and Chief Compliance Officer. Please go ahead.

Thank you. Welcome to Innospec's Third Quarter Earnings Call. This is David Jones, and I'm Innospec's General Counsel and Chief Compliance Officer.

The earnings release for the quarter and this presentation are 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 from the anticipated results implied by such forward-looking statements.

These risks and uncertainties are detailed in Innospec's 10-K, 10-Qs 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 to aid investor understanding of the company's performance in addition to the impact these items and events 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 turn it over to you, Patrick.

Thank you, David, and welcome, everyone, to Innospec's Third Quarter 2025 Conference Call. This was a mixed quarter for Innospec with continued strong operating income growth and margin expansion in Fuel Specialties, offsetting lower results in Performance Chemicals and Oilfield Services.

Performance Chemicals continued to deliver sales growth over the prior year, where gross margins declined as expected on higher cost, price management and weaker product mix. These combined factors drove results below our expectations, but we are executing on multiple top line cost and other margin improvement opportunities identified in the business.

Late in the third quarter, we began to see a positive impact from our initial actions, and we are optimistic that we will deliver sequential operating income and margin improvement in the fourth quarter. Over the medium term, we have a strong pipeline of margin-accretive opportunities across all our end markets, and we are working to accelerate these actions.

Fuel Specialties had another strong quarter with double-digit operating income growth and improved margins. Margins continue to track at the upper end of our expected range, and our outlook is for steady performance in the fourth quarter. Oilfield Services operating income declined sequentially and versus the prior year on lower-than-anticipated Middle East activity due to customer timing and phasing.

We are optimistic that we will deliver sequential operating income and margin improvement in the fourth quarter as Middle East activity returns and our new DRA expansion comes online. We remain focused on margin improvement in all segments. Our outlook does not assume any resumption of Mexico sales.

Now I will turn the call over to Ian Cleminson, who will review our financial results in more detail. Then I will return with some concluding comments. After that, Ian and I will take your questions. Ian?

Thanks, Patrick. Turning to Slide 7 in the presentation. The company's total revenues for the third quarter were $441.9 million, similar to the $443.4 million reported a year ago. Overall gross margin decreased by 1.6 percentage points from last year to 26.4%. Adjusted EBITDA for the quarter was $44.2 million compared to $50.5 million last year, and net income for the quarter was $12.9 million compared to $33.4 million a year ago.

Our GAAP earnings per share were $0.52 compared to $1.33 recorded last year. Our headline results for the quarter include $24.4 million in charges, which had a negative EPS impact of $0.57. These charges are composed of $42.9 million of assets and intangible impairments and restructuring charges related to the expected lack of near-term recovery in our QGP business in Brazil, our Mexican oilfield production business and our U.S. oilfield stimulation business. These charges were offset by an $18.5 million reduction to the fair value of contingent consideration associated with the 2023 acquisition of QGP.

Excluding these and other special items in both years, our adjusted EPS for the quarter was $1.12 compared to $1.35 a year ago. Turning to Slide 8. Revenues in Performance Chemicals for the third quarter were $170.8 million, up 4% from last year's $163.6 million. Volumes fell by 2%, offset by a positive price/mix of 3% and favorable currency impact of 3%.

Gross margin of 15.1% decreased 7 percentage points compared to 22.1% in the same quarter in 2024 due to higher costs, price management and weaker product mix. Operating income of $9.2 million decreased 54% from $20 million last year. Moving on to Slide 9. Revenues in Fuel Specialties for the third quarter were $172 million, up 4% from the $165.8 million reported a year ago.

Volumes were down 7% with price/mix up 7% and a positive currency impact of 4%. Fuel Specialties gross margins of 35.6% were up 2 percentage points above the same quarter last year, benefiting from a stronger sales mix and disciplined pricing.

Operating income of $35.3 million was up 14% from $30.9 million a year ago. Moving on to Slide 10. Revenues in Oilfield Services for the quarter were $99.1 million, down 13% from $114 million in the third quarter last year. Gross margins of 30% increased 1.7 percentage points from last year's 28.3% due to a better sales mix.

Operating income of $4.8 million decreased 32% from $7.1 million a year ago. Turning to Slide 11. Corporate costs for the quarter were $18.2 million compared with $11.8 million a year ago, which included an $8.4 million recovery of historic pension costs. The adjusted effective tax rate for the quarter was 22.5% compared to 24.6% in the same period last year due to the geographical mix of taxable profits.

We expect the full year adjusted tax rate to be around 25%, moving on to Slide 12. Cash flow from operating activities was $39.3 million before capital expenditures of $22.2 million. In the third quarter, we bought back almost 123,000 shares at a cost of $10.7 million. As of September 30, Innospec had $270.8 million in cash and cash equivalents and no debt. And now I'll turn it back over to Patrick for some final comments.

Thanks, Ian. We continue to prioritize gross margin and operating income actions in Performance Chemicals and Oilfield Services, and we expect to deliver sequential growth in the fourth quarter. We remain focused on a combination of sales, price cost actions, new technology, commercialization and other opportunities to drive sustainable improvement.

In addition, we expect Fuel Specialties to continue to deliver strong results. Operating cash generation was again positive in the fourth quarter, and our net cash position closed at over $270 million. We have significant balance sheet flexibility for M&A, dividend growth, organic investment and buybacks. This quarter, our Board approved a further 10% increase in our semiannual dividend to $0.87 per share, and we continued our record of returning value to shareholders with $10.7 million in share repurchases. Now I'll turn the call over to the operator, and Ian and I will take your questions.

[Operator Instructions]

And your first question comes from the line of Mike Harrison from Seaport Research Partners.

I wanted to start with a couple of questions on the Performance Chemicals business. I was hoping to start that you could give us a little more color on what's going on with the gross margin there, a couple of hundred basis points of sequential decline there. Did the oleo chemicals raw material headwind get incrementally worse this quarter? Did mix get worse sequentially? Were there other factors? And I was hoping you could also address what you mean by price management as one of the issues impacting margin in Performance Chemicals.

Yes. Let me take that first, Mike, and Patrick will come over the top with some comments. What we saw in July and August was the continuing headwinds from the oleo chemicals. That's put pressure on our pricing and our pass-through ability. I think what's important is that as we've moved through September and into October, the actions that we talked about on the last call have started to take effect.

We've seen the business improve from the gross margin perspective, and we're expecting the Q4 gross margin to be much closer to 18%. So that's up a full 3 percentage points sequentially Q3 to Q4. Also, I think it's worth remembering that in Q3, we do have a slower period in July and August, particularly in Europe with the shutdowns and the holiday season. So it's always a little bit weaker.

I think the important thing is that our demand remains really strong. Volumes remain good. We've got a lot of work that we need to do internally. We've done some of that. We've got more to do. The team are on it, and we're starting to see the positive impacts of that coming through.

Yes, Mike, we talked about it in the previous quarter, actually previous 2 quarter calls that we had a lot of actions that we had to take to manage margins better than we have in the past. And as Ian alluded to, all these actions have really come to forth right.

We've really done a good job in the last month of this quarter, and we're starting to see it even better going into Q4. So the actions the guys have put in place, whether it's pricing, manufacturing efficiencies, new product, product mix, raw materials, it's just being managed better than it has. And I think we've learned a few lessons along the way, and we should see those improving as we go forward.

All right. And then can you specifically talk about what are some of the commercial actions you're looking at in Performance Chemicals? I think you referenced some top line opportunities maybe across multiple different end markets. Can we just get a little more detail there?

Yes. I mean we continuously have a lot of products run through our disruptive technology group that we introduced to the market. There was a little lull over probably the last year, hence, why our product mix was off a little bit. But we are introducing new products to the market probably this quarter and throughout next year, which will help with the balance. So it's more -- and it's technology, Mike, across all the sectors, whether it's agriculture, mining, personal care, it's really all sectors that we have new product technologies coming through.

There was a general lull in the market because instead of looking at the big trends were 1,4-Dioxine-free, sulfate-free, nitrosamine free, that market has now stabilized out and other competitors have jumped in. We're now looking at what's the new move on the horizon. And these are products that we should be introducing over the next 3 to 6 months.

All right. Very helpful. And then in the Fuel Specialties business, seasonally, you would typically see better margin performance as you start to get some cold flow improvers and the mix just kind of shifts seasonally. It sounded to me like you're saying you expect that business to be more steady in terms of earnings from Q3 into Q4. So I was just hoping that you could address whether we should see that normal seasonal pickup or if something else is going on.

Yes, Mike, we've had a really good year in Fuel Specialties. The business has executed extremely well on pricing, on top line initiatives, and we've seen the benefit of that coming through in a very strong gross margin performance. As you remember, in Q2, the gross margins were 38%. In Q3, they're at 35%. We expect that 35% to be about the same in Q4, maybe a little bit up, maybe a little bit down, but certainly around that mark, and that's really a function of where the pricing and the timing of that pricing works.

As you know, there's a lag up and down. We're seeing a pretty stable environment in terms of raw materials there right now, and as you're right, we'll start to see a pickup in those winter businesses, and we're going to hit around about that $35 million of operating income in Q4, and we feel pretty good about that. That will top off an extremely strong year for Fuel Specialties.

And maybe just to ask a little bit more broadly on the outlook. It sounds like you expect sequential improvement in Performance Chemicals as well as Oilfield Services and then maybe flattish in Fuel Specialties. So is the expectation that EPS gets into the, I don't know, $1.20, $1.30 range. It doesn't seem like maybe you have enough tailwind to get up to that 140-ish level that you were at last year.

No, we won't be up at $1.40, mark. Will be above $1. You said sort of that $1.20 to $1.25 range. I think as we sit here right now, we'd be disappointed not to get there. We feel comfortable about October. November is looking good. December, as you can imagine, with year-end customer actions, weather, it can be a little bit variable for us, but that's certainly the range that we're aiming for.

We will now take the next question, and the question comes from the line of John Tanwanteng from CJS.

I was wondering if you could touch more on the timing in the oilfield business as it pertains to your Middle East clients and how that runs through in Q4. Is your expectation for the second half the same as it was previously and it just catches up in Q4? Or does everything just push out to the right maybe because there's not enough time to catch up to what was happening?

Yes. There's not enough time to catch up. We saw activity starting to pick back up in Q4. It's just timing. There's no loss of customers. It's just timing with customers. It's all Middle East. And...

To the right as opposed to a catch-up occurring in Q4.

Correct. Correct.

Okay. Understood. And then in Q3, could you just give a little bit more detail as to what drove the underperformance in Performance Chemicals? And then as you go into the Q4, we expect on the pricing to catch up, which is what I think you've been saying all along. Will it catch up to the degree you had previously expected? Or is there more of a headwind there now incrementally in Q4 compared to what you expected before?

Yes. There were a lot of issues, and we talked about the last quarter, and those issues remained. I mean it was pricing issues to the customer. It was raw material actions, spike in raw materials. It was a lag in contracts up or down. At this point, we got caught on the downside. It was flexibility of assets. It was product mix.

It was the introduction of new technologies, which we'll start seeing in Q4. It was manufacturing efficiencies. There were a lot of things. We had a big spike in growth and sometimes you forget about the internal issues you have to manage. And so all the actions have been in place. And as Ian alluded to, the last month of this quarter showed a very strong quarter or a very strong month, I should say, and we should have some nice momentum going into Q4.

Okay. Great. Can you speak to the momentum you expect heading into Q1 of next year in that business as you fix all these things and maybe speak a little bit to the underlying customer demand you expect?

Yes. Customer demand is strong. We've had no issue with customer demand at all. It's quite frankly, it's just all the things that we just talked about that we had to get internally fixed and obviously, the contracts had to catch up too on pricing. So you've had pricing catch up and then all of a sudden, raw materials spike again and you're now another 3-month delay. And so you get the benefit on the downside, but the upside it hurts you a little bit. But I think for all of us, we're seeing a lot more stability going into Q4, and it should really carry over into Q1 next year.

Understood. And then lastly, could you just speak to capital allocation? It looks like you bought back some shares. It looks like your stock price might be giving you opportunities here. I'm just wondering if you're more biased there or you're saving your firepower for M&A or other activities.

It's still a nice balance. I think you're right at the share price, we're still buying back. You saw that we also increased our dividend. I think that we are seeing some stressed assets out there. So we want to have some dry powder. Obviously, we have to have our internal house managed appropriately as we are going into Q4. But I think for next year, we do want to have dry powder. We are going to continue to buy back at this price, and we are going to continue to increase our dividend. And we've done, I think, a very good job on all ends. But having the dry powder will be key moving into next year.

That concludes the Q&A session. I will now hand the call back to Patrick Williams for closing remarks.

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 being up with you again to discuss our fourth quarter 2025 results in February. Have a great day.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.