Valvoline Inc. has reported financial results for its first fiscal quarter ended Dec. 31, 2019.
“We are pleased with our start to fiscal 2020,” said Sam Mitchell, CEO. “Core North America had a strong quarter, driven by substantially higher branded volume in the retail channel and benefits from the operating expense reduction program announced last year. Quick Lubes continued its solid top line growth of over 15% for the quarter, while profitability was only up modestly to prior year due to increases in operating expenses which are expected to moderate. International returned to profitable volume growth in the quarter.”
First-Quarter Results
Reported first-quarter 2020 net income and EPS were $73 million and 39 cents, respectively. These results included after-tax income of $7 million (4 cents per diluted share), primarily related to pension and other post-employment benefit (OPEB) impacts. Reported first-quarter 2019 net income and EPS were $53 million and 28 cents, respectively. These results included after-tax income of $2 million (1 cent per diluted share) related to pension and OPEB impacts.
First-quarter 2020 adjusted net income and adjusted EPS were $66 million and 35 cents, respectively, compared to adjusted net income of $51 million and adjusted EPS of 27 cents in the prior-year period. The company said first-quarter results were driven by strong performance in Core North America, the ongoing strength of SSS and store additions in Quick Lubes and a return to growth in International. These factors led to adjusted EBITDA of $120 million, a 19 percent increase compared to the prior-year period.
Effective Oct. 1, 2019, the company adopted the new lease accounting standard. The adoption primarily resulted in incremental lease assets and liabilities recorded within the consolidated balance sheet of approximately $220 million. First-quarter results compared to the prior-year period included a $1 million unfavorable impact on EBITDA and cash flow from operations.
Outlook
Overall first-quarter performance exceeded the company’s expectations. Recently announced raw material cost increases are expected to modestly impact profitability in the second half of fiscal 2020.
“Overall results in Q1 were encouraging,” Mitchell said. “Looking beyond Q1, we expect profitability in Quick Lubes to improve and volume growth in International to continue. We’re making progress on our plans to strengthen and maintain the foundation of Core North America. While we anticipate volume softness in the segment for the next three quarters on a year-over-year basis, we now expect full-year Core North America EBITDA to grow modestly due to the strong Q1 results.
“With each segment on track to meet or exceed its profitability targets combined with the strong start to the year, we are raising our fiscal 2020 EBITDA guidance to $495 to $515 million, despite the recent increases in raw material costs.”
