Thank you, David and welcome, everyone, to Innospec’s first-quarter 2020 conference call.
We are very pleased with our first-quarter performance. But I’d like to start by reviewing the current situation. I’m saddened to report the passing of Joachim Roeser, who was a non-executive director of Innospec for 12 years.
Joachim succumbed to COVID-19 on April 26. He was a valued colleague, a great friend and he will be greatly missed. When we consider the twin issues of the COVID-19 pandemic and the collapse of crude oil facing in our industries, I’m acutely conscious that you need to hear how we are responding to these challenges and how we see the near-term prospects.
Our first priority will always be the safety and health of our employees, their families and our customers.
My thoughts are with those employees who are sick and with the families who are helping them get through these difficult times.
As well as aligning ourselves with our national and local government advice, we have enhanced our hygiene precautions and ensure that our teams are able to operate remotely and safely.
We are conscious of our role in supporting our neighboring communities and we have already donated a large quantity of respiratory protection equipment and offered our laboratory facilities as a resource to the health authorities.
In terms of manufacturing, we are covered by the definition of an essential industry, so we have continued to manufacture at all our sites.
In doing so, we have employed social distancing while ensuring that our employees are protected by appropriate personal protective equipment. I’d like to take this chance to publicly acknowledge my appreciation to the great people of our company who are keeping us going through these difficult times.
As a result of these actions, we are continuing to meet our customers’ requirements in all our business units globally. In the near term, our three strategic businesses face different challenges and opportunities.
Products for the personal care and home care industries are seeing sustained and even increased demand. This has been moderated a little with some temporary limitations to customer facilities. Fuel specialties is driven by fuel demand. This will take a short-term hit but should bounce back as miles on the road, especially for freight and trucks return to normal.
The outlook for oilfield services is very dependent on crude oil and natural gas prices.
We have already responded to the downturn in customer activity. And unfortunately, we’ve had to make redundancies to right-size the current cost base. The survival of many companies through this unprecedented period will depend on their financial strength.
Therefore, it’s important to spend a little time reviewing our first-quarter performance and the financial outlook for the rest of the year.
We are very pleased with our performance in the first quarter of 2020. Had it not been for the COVID-19 pandemic and the pressures on crude and natural gas, there is no question that Innospec was on pace for an outstanding year. We delivered a 13% increase in operating income and a 14% increase in adjusted EPS in the first quarter.
Just as important, we ended the quarter with a very strong balance sheet. We entered these unknown times with a net cash position and with significant headroom on our existing credit facilities.
We have held discussions with our banking group and they remain very supportive of our strategy and of the management team. The financial strength of our balance sheet gives us the confidence to continue with our dividend and I am pleased that the board has approved holding our semiannual payment at $0.52 per share, which is the same level as the second half of 2019.
Performance chemicals had a very good quarter overall. Volumes were up significantly, even after allowing for a headwind of 5 points from customers in-sourcing in Q2 last year. Revenues were down as we passed through lower raw material costs. But with volume growth, the focus on gross margins and cost control, we delivered a 16% increase in operating income.
Fuel specialties performed well against a strong comparative quarter, especially with the headwinds of a mild winter. Business has recovered from the supplier disruption of last summer and has a more sustainable foundation for the future. Against a deteriorating market, oilfield services performed very well with both revenues and operating income down only marginally on the same period in 2019.
We also had modest, but encouraging, results by developing new business in drag-reducing agents and completion in production business in the Middle East.
Overall, we have continued to demonstrate the value of a balanced portfolio and the benefit of prudent deployment of capital.
Now I will turn the call over the Ian Cleminson, who will review our financial results in more detail. Then I will return with some concluding comments. After that, we will take your questions.