Quaker Houghton Navigates Challenges with Strategic Gains

Quaker Chemical ((KWR)) has held its Q1 earnings call. Read on for the main highlights of the call.

Quaker Houghton, despite facing challenges such as declining sales volumes and the impact of tariffs, expressed a cautiously optimistic sentiment during its recent earnings call. The company highlighted strategic acquisitions and market share gains as positive momentum drivers, while improvements in gross margins and adjusted EBITDA growth underscored effective cost management in the face of external pressures.

Market Share Gains

Quaker Houghton reported success in gaining additional market share across all segments, even amid a challenging global macroeconomic environment. This achievement reflects the company’s robust strategies and competitive positioning, which have allowed it to outperform in a tough market.

Strategic Acquisitions

The company completed three strategic acquisitions, including Dipsol, which have enhanced its portfolio and expanded its addressable market. These acquisitions are expected to bolster Quaker Houghton’s competitive edge and provide new growth opportunities.

Gross Margin Improvement

Quaker Houghton achieved a gross margin improvement of 120 basis points, reaching 36.4% compared to the fourth quarter of 2024. This improvement highlights the company’s effective cost management strategies and operational efficiencies.

Adjusted EBITDA Growth

The company generated $69 million in adjusted EBITDA in the first quarter, marking a $4 million sequential increase. This growth in adjusted EBITDA indicates strong financial performance and resilience despite market challenges.

Net New Business Wins

Net new business wins are trending at the high end of the targeted annual range of 2% to 4%, demonstrating Quaker Houghton’s ability to capture new opportunities and drive business growth.

Volume Decline

Sales volumes declined by approximately 1.5% compared to the prior year due to softer market conditions. This decline reflects the broader market challenges impacting the company’s sales performance.

Net Sales Decline

First quarter net sales were reported at $443 million, representing a 6% decrease from the prior year, or 3% lower on a constant currency basis. This decline is indicative of the challenging economic environment and its impact on the company’s revenue.

Impact of Tariffs

Uncertainty regarding tariffs has impacted customer decision-making and order patterns, contributing to softer market conditions. Quaker Houghton is actively working to mitigate these impacts through strategic initiatives.

Foreign Exchange Impact

Foreign exchange posed a $4 million headwind year-over-year and a $1 million headwind sequentially, affecting the company’s financial results.

EMEA and Americas Weakness

The company noted continued softness in the macroeconomic environment in the Americas and EMEA segments, which has affected overall performance.

Forward-Looking Guidance

Quaker Houghton provided forward-looking guidance that includes expectations for revenue and earnings to be in line with 2024 levels, despite a 1.5% volume decline. The company is advancing a $20 million cost program expected to deliver approximately $15 million of in-year benefits, primarily in SG&A. Strategic investments, including recent acquisitions, are aimed at enhancing the portfolio and expanding the addressable market. The company remains focused on leveraging its “local for local” strategy to mitigate the impacts of tariffs and trade uncertainties on its supply chain.

In conclusion, Quaker Houghton’s earnings call reflected a cautiously optimistic outlook, with strategic acquisitions and market share gains providing positive momentum. Despite challenges such as declining sales volumes and tariff impacts, the company’s effective cost management and strategic initiatives position it well for future growth.