INNOSPEC INC

RESULTS OF OPERATIONS

The Company reports its financial performance based on three reportable segments, which are Performance Chemicals, Fuel Specialties and Oilfield Services.

The following table provides sales, gross profit and operating income by reporting segment:

Three Months Ended March 31, 2025

The following table shows the changes in sales, gross profit and operating expenses by reporting segment for the three months ended March 31, 2025, and the three months ended March 31, 2024:

Performance Chemicals

Net sales: the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:

Higher sales volumes for the Americas were driven by increased demand for our personal care products, being partly offset by an adverse price and product mix due to higher demand for our lower priced products. The volumes decline in EMEA was offset by a favorable price and product mix, primarily driven by higher demand for higher priced personal care products. ASPAC volumes were higher driven by increased demand for our personal care products, together with a favorable price and product mix due to higher demand for higher priced personal care products. EMEA and ASPAC were adversely affected by foreign currency exchange rate movements.

Gross margin: the year over year decrease of 2.4 percentage points was primarily due to pricing pressure in a competitive market being partly driven by the recent global economic uncertainty and higher demand for our lower priced products.

Operating expenses: decreased by $1.1 million year over year due to lower provisions for doubtful debts, together with lower provisions for bonuses and performance-related remuneration accruals.

Fuel Specialties

Net sales: the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:

Sales volumes in the Americas and EMEA have increased year over year due to increased demand from customers, being offset by an adverse price and product mix from lower pricing resulting from lower raw material costs. Sales volumes in ASPAC have decreased year over year due to decreased demand from customers, being partly offset by a favorable price and product mix due to an improved sales mix. AvGas volumes were higher than the prior year due to variations in the demand from customers, together with a favorable price and product mix due to a favorable customer mix. EMEA and ASPAC were adversely affected by foreign currency exchange rate movements.

Gross margin: the year over year increase of 1.4 percentage points was driven by an improved sales mix from increased sales of higher margin products, together with reduced raw material and other inflationary pressures.

Operating expenses: the year over year decrease of $3.3 million was due to lower provisions for doubtful debts, together with lower provisions for bonuses and performance-related remuneration accruals.

Oilfield Services

Net sales: have decreased year over year by $60.4 million, or 37 percent, with the majority of our customer activity concentrated in the Americas region. Sales volumes were adversely impacted by significantly lower production chemical activity in Latin America. Management continues to see potential growth opportunities for our other oilfield markets.

Gross margin: the year over year decrease of 6.9 percentage points was due to an unfavorable sales mix as our customer demand has weakened.

Operating expenses: the year over year decrease of $15.6 million was due to lower customer service costs and commissions related to the reduced demand from certain customers, together with lower provisions for bonuses and performance-related remuneration accruals.

Other Income Statement Captions

Corporate costs: the year over year decrease of $2.5 million was primarily due to lower provisions for bonuses and performance-related remuneration accruals, being partly offset by the additional investment in our IT infrastructure and the amortization of our new group-wide ERP system.

Other net income/(expense): for the first quarter of 2025 and 2024, included the following:

Interest income/(expense), net: in the first quarter of 2025 was $2.4 million of income compared to $2.1 million of income in the first quarter of 2024, driven by the interest income being earned from our higher cash balances.

Income taxes: the effective tax rate was 26.1% and 25.1% in the first quarter of 2025 and 2024, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was 24.4% in 2025 compared with 24.5% in 2024. The 0.1% decrease in the adjusted effective rate was primarily due to the fact that a higher proportion of the Company’s profits are being generated in lower tax jurisdictions. The Company believes that this adjusted effective tax rate, a non-GAAP financial measure, provides useful information to investors and may assist them in evaluating the Company’s underlying performance and identifying operating trends. In addition, management uses this non-GAAP financial measure internally to evaluate the performance of the Company’s operations and for planning and forecasting in subsequent periods.

The following table shows a reconciliation of the GAAP effective tax charge to the adjusted effective tax charge: