Valvoline Inc. has reported financial results for its second fiscal quarter ended March 31, 2019.
“Our best-in-class Quick Lubes business delivered another strong quarter, with double-digit same-store sales growth and the addition of 26 net new stores,” said CEO Sam Mitchell. “In core North America, the actions we implemented in response to difficult DIY market dynamics drove notable improvement in our branded volume in the retail channel, leading to better overall sequential performance for the segment.
Challenges in the market remain and impacted year-over-year results, and we continue to work to stabilize performance in core North America. The recent increases in raw material costs have reduced our earnings expectations for the year.”
Reported second-quarter 2019 net income and EPS were $63 million and 33 cents, respectively, compared to reported second-quarter 2018 net income and EPS of $67 million and 33 cents, respectively. Second-quarter 2019 adjusted net income and adjusted EPS were $67 million and 35 cents, respectively, compared to adjusted net income of $68 million and adjusted EPS of 34 cents in the prior-year period.
Second-quarter 2019 adjusted results exclude, among other items, $7 million (4 cents per diluted share) of restructuring and related expenses, recorded in selling, general and administrative (SG&A) expenses. Second-quarter adjusted EBITDA of $122 million increased 21 percent sequentially and was flat to the prior-year period.
Fiscal 2019 Outlook
Valvoline’s second largest U.S. blending facility, in Deer Park, Texas, was temporarily shut down on March 18 because of a fire and resulting fuel and chemical releases at a nearby third-party petrochemical terminal. The plant, which sustained no damage, has reopened and restarted operations. During the shutdown, the company’s product supply team quickly and effectively shifted production to other locations, causing little to no impact to customers. Costs related to the shutdown are being treated as a key item, including approximately $1 million in fiscal Q2 and the remainder in fiscal Q3. The company expects to recover the majority of the loss through its insurance coverage.
“I am pleased with the work of our teams during the temporary plant shutdown in Texas. We reacted quickly, met our customers’ needs and managed through a difficult situation,” Mitchell said.
“We are modestly lowering our volume and sales growth, while increasing our same-store sales guidance,” he said. “The strong sequential improvement in results was encouraging, but recent raw material cost increases have led us to moderate our full-year outlook. We now expect adjusted EBITDA in the range of $460 million to $470 million.
“We continue to execute against the broad-based restructuring and cost-savings program announced during the quarter, and we expect to generate annualized operating expense savings of $40 million to $50 million by the end of fiscal 2020.”