Quaker Houghton (NYSE:KWR) reported fourth-quarter and full-year 2025 results that management said reflected continued share gains and improving profitability despite soft industrial end markets and late-quarter operational disruptions in North America.
Fourth-quarter results show year-over-year profit improvement
President and CEO Joe Bergquist said the company delivered its “second consecutive quarter of year-over-year EBITDA improvement,” with adjusted EBITDA up 11% and adjusted earnings per share up 24% versus the prior-year quarter. CFO Tom Coler reported fourth-quarter net sales of $468 million, up 6% year-over-year, while organic volumes declined “less than 1%.”
Gross margin was essentially flat year-over-year, with Coler citing a 35.3% gross margin compared to 35.2% in the prior-year quarter. Bergquist noted regional differences, including a 280-basis-point improvement in EMEA gross margins due to favorable price mix and lower raw material costs, while North America faced headwinds from manufacturing absorption and higher maintenance, repairs, and raw material disposal costs. Sequentially, Bergquist said gross margins fell 150 basis points from the third quarter, though he characterized global product margins as steady.
Quaker Houghton posted $72 million of adjusted EBITDA in the quarter, representing a 15.3% adjusted EBITDA margin, up 75 basis points from the prior year but lower than recent quarters due to the North America gross margin issues in Q4, Coler said.
Regional performance led by Asia-Pacific momentum
Management repeatedly highlighted Asia-Pacific as a key growth driver. Bergquist said the region delivered 10 consecutive quarters of year-over-year organic volume growth, and Coler added that Asia-Pacific has posted organic net sales growth in nine of the last 10 quarters.
- Asia-Pacific: Fourth-quarter sales increased 15% year-over-year, with Dipsol and 4% organic volume growth partially offset by unfavorable price and mix. Segment earnings rose about $3 million, or 11%, though operating margin was pressured by product mix and service revenue.
- EMEA: Fourth-quarter sales increased 7% on acquisitions, favorable price/mix, and foreign exchange, partially offset by a 2% decline in organic volumes. Segment earnings rose about $3 million, or 17%, driven by improved operating margin tied to pricing/mix and lower raw material costs.
- Americas: Sales were flat year-over-year as acquisitions and foreign exchange offset lower organic volumes. Segment earnings were also flat, with slightly lower volumes offset by higher operating margin. Bergquist cited an extended outage at a major North American metal producer, tariff-related demand impacts, and operational disruptions that delayed shipments in Q4.
On a question about the quarter’s operational disruptions, Bergquist said issues such as frozen pipes and other plant-related disruptions in December set the business back “a couple days,” which he estimated as about a 1% impact on volume. He said the issues were resolved and are not expected to carry into the first quarter.
Cash flow declined amid restructuring and working capital changes
Quaker Houghton generated $47 million in fourth-quarter operating cash flow, down from $63 million in the prior-year period, which Bergquist attributed to higher restructuring costs and working-capital impacts. For the full year, operating cash flow was $136 million, down from $205 million in 2024.
Coler said the year-over-year decline was driven primarily by higher net cash outflows from restructuring activities and an increase in working capital. He added that working capital rose due to higher inventories tied to operational issues in North America and the planned closure of the Dortmund, Germany manufacturing facility, along with the timing of supplier payments and accrued liabilities.
The company recently announced it will close its Dortmund facility as part of broader European network optimization. Bergquist said production will be absorbed into existing excess capacity, and the company expects approximately $2 million of cost savings in 2026 and $5 million of annual ongoing savings beginning in 2027.
Management also discussed spending tied to potential acquisitions. Bergquist said the company booked approximately $7 million in costs related to assessing multiple acquisition opportunities in the second half of the year, but he did not expect those efforts to result in transactions “at this time.”
Earnings, balance sheet, and capital allocation
Coler reported GAAP diluted EPS of $1.18 in the fourth quarter and non-GAAP diluted EPS of $1.65. For the full year, Quaker Houghton posted a GAAP diluted loss per share of $0.14, which included an $89 million non-cash goodwill impairment charge and $35 million of restructuring charges. On an adjusted basis, full-year non-GAAP diluted EPS was $7.02.
On capital allocation, Coler said the company returned $76 million to shareholders during 2025, including $42 million of share repurchases and $34 million in dividends. He noted this marked the company’s 16th consecutive year of increasing its annual dividend payout. In the fourth quarter alone, Quaker Houghton paid about $9 million in dividends and repurchased about $5 million of shares.
The company ended the year with net debt of $691 million and a 2.3x net leverage ratio relative to trailing 12-month adjusted EBITDA, reflecting continued deleveraging following the Dipsol acquisition, according to Coler. Interest expense was $11 million in the quarter, and the cost of debt was approximately 5%.
2026 outlook: flat markets, continued share gains, and margin recovery expected
Looking ahead, Bergquist said the company does not expect external markets to improve in the near term and anticipates underlying markets will be flat in 2026, with potential incremental growth in the second half. Even so, he said Quaker Houghton expects to deliver net share gains within its 2% to 4% target range and said the company’s pipeline and recent track record support that view.
Management also expects gross margin to normalize after the North America disruptions. Bergquist said raw material costs are expected to remain steady early in the year and that the company anticipates full-year gross margin within its targeted 36% to 37% range. He added the company expects a “third consecutive quarter of year-over-year EBITDA improvement” in the first quarter of 2026, driven by share gains, gross margin improvement, and the run-rate benefit of acquisitions.
On cost trends, Bergquist said variable compensation and inflation are expected to raise SG&A year-over-year, but the company plans to partially offset those pressures through continued transformational initiatives. Management reiterated a long-term goal of sustaining EBITDA margins above 18%, pointing to manufacturing network actions, process streamlining, and further integration of prior acquisitions as areas of “self-help” to support margin expansion over the next few years.
About Quaker Houghton (NYSE:KWR)
Quaker Houghton is a global provider of process fluids, chemical specialties and sustainable solutions for industrial applications. The company develops and supplies metalworking fluids, coatings, and corrosion inhibitors, as well as heat transfer, lubrication and additive products designed to improve productivity and extend equipment life. Its portfolio addresses a range of end markets including automotive, aerospace, defense, energy, mining, agriculture and heavy industry.
The company traces its roots back to the founding of Quaker Chemical Corporation in 1918 and Houghton International in 1865.
