INNOSPEC INC.

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934. Accordingly, they do not include all the information and notes necessary for a comprehensive presentation of financial position, results of operations and cash flows.

During the year to date, the Company has reclassified prior period amounts to conform to the 2025 presentation. The reclassification had no impact on previously reported total net revenue, operating income or net income. For the six months ended June 30, 2025, this has resulted in $3.8 million (six months ended June 30, 2024 $4.0 million) of costs that were previously disclosed within selling, general and administrative expenses, being moved to research and development expenses.

It is our opinion, however, that all adjustments (consisting of normal, recurring adjustments, unless otherwise disclosed) have been made which are necessary for the condensed consolidated financial statements to be fairly stated. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 19, 2025 (the “2024 Form 10-K”).

The results for the interim period covered by this report are not necessarily indicative of the results to be expected for the full year.

When we use the terms “Innospec,” “the Corporation,” “the Company,” “Registrant,” “the Group,” “we,” “us” and “our,” we are referring to Innospec Inc. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

NOTE 2 – SEGMENT REPORTING

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

The Chief Operating Decision Maker (“CODM”) is the President and Chief Executive Officer (the Principal Executive Officer) and is a Director of Innospec Inc.. The CODM evaluates the performance of the Company’s segments and makes strategic decisions relating to the Company's allocation of resources, based on the segments' gross profit and operating income.

The following table analyzes sales and other financial information by the Company’s reportable segments:

The difference between net sales and gross profit is defined as cost of goods sold. The difference between segmental gross profit and operating income/(expense) is split between selling, general and administrative expenses and research and development expenses.

The following table analyzes cost of goods sold by the Company’s reportable segments:

The following table analyzes selling, general and administrative expenses and research and development expenses by the Company’s reportable segments:

NOTE 3 – EARNINGS PER SHARE

Basic earnings per share is based on the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the effect of options that are dilutive and outstanding during the period under the treasury stock method. Per share amounts are computed as follows:

In the three and six months ended June 30, 2025, the average number of anti-dilutive options excluded from the calculation of diluted earnings per share were 59,418 and 23,283 (three and six months ended June 30, 2024–10,436 and 10,483).

NOTE 4 – GOODWILL

The following table summarizes the goodwill movements in the year:

The exchange effect for the six months ended June 30, 2025 was $14.9 million relating to our Performance Chemicals segment and $0.2 million relating to our Fuel Specialties segment.

NOTE 5 – OTHER INTANGIBLE ASSETS

The following table analyzes other intangible assets movements in the year:

The amortization expense for the six months ended June 30, 2025 was $5.9 million (six months ended June 30, 2024 – $6.0 million).

In 2025, we have capitalized $10.8 million in relation to our internally developed software for a new Enterprise Resource Planning (“ERP”) system covering all our regions. The project is ongoing and is currently expected to complete in 2026. The expenses capitalized include the acquisition costs for the software as well as the external consultancy costs and the internal employee costs relating to the software development.

NOTE 6 – PENSION AND POST EMPLOYMENT BENEFITS

The Company previously maintained a defined benefit pension plan covering certain current and former employees in the United Kingdom (the “UK Plan”).

The UK Plan was bought out in the fourth quarter of 2024, therefore the company is no longer responsible for the future obligation for retirement benefits due to current and former employees. As at June 30, 2025, there isno remaining asset on the balance sheet (December 31, 2024 $2.4 million). Following the UK Plan buy-out, the Company is no longer required to make future cash contributions to the UK Plan. On July 29, 2025, the UK Plan was fully wound up.

The Company also maintains an unfunded defined benefit pension plan covering certain current and former employees in Germany (the “German plan”). The German plan is closed to new entrants and has no assets. As at June 30, 2025, we have recorded a liability of $10.1 million (December 31, 2024 $9.0 million).

The net periodic benefit of these plans is shown in the following table:

The service cost has been recognized in selling, general and administrative expenses. All other items have been recognized within other income and expense. The amortization of prior service cost and actuarial net gains are a reclassification out of accumulated other comprehensive loss into other income and expense.

In addition, we have obligations for post-employment benefits in some of our other European businesses. As at June 30, 2025, we have recorded a liability of $3.8 million (December 31, 2024 $4.1 million).

NOTE 7 – INCOME TAXES

As of January 1, 2025, the Company hadno unrecognized tax benefits, and there has beenno change in unrecognized tax benefits during the six months ended June 30, 2025. Accordingly, there wasno accrual for uncertain tax positions as of June 30, 2025, and the Company recordedno associated interest or penalties. The Company does not expect any significant changes to this position over the next twelve months.

As of June 30, 2025, the Company and its U.S. subsidiaries remain open to examination by the IRS for years 2021 onwards under the statute of limitations. The Company’s subsidiaries in foreign tax jurisdictions are open to examination including Brazil (2020 onwards), Germany (2020 onwards), and the U.K. (2023 onwards).

NOTE 8 – LONG-TERM DEBT

As at June 30, 2025, and December 31, 2024, the Company hadnot drawn down on its revolving credit facility. During the first six months of 2025 and 2024, the Company didnot draw down or repay any borrowing on its revolving credit facility.

The Company continues to have available a $250.0 million multicurrency revolving credit facility until May 30, 2028.

NOTE 9 – PLANT CLOSURE PROVISIONS

The Company has continuing plans to remediate manufacturing facilities at sites around the world as and when those operations are expected to cease, or we are required to decommission the sites according to local laws and regulations. The liability for estimated plant closure costs includes costs for environmental remediation liabilities and asset retirement obligations.

The principal site giving rise to asset retirement obligations is the manufacturing site at Ellesmere Port in the U.K.. There are also asset retirement obligations and environmental remediation liabilities in respect of other manufacturing sites.

Movements in the provisions are summarized as follows:

The charge for the six months ended June 30, 2025, was $4.1 million (six months ended June 30, 2024 $1.7 million). The current year charge represents the accounting accretion and a $2.3 million increase to the provisions for legacy operations in the United States. Amounts due within one year refer to provisions where expenditure is expected to arise within one year of the balance sheet date.

NOTE 10 – FAIR VALUE MEASUREMENTS

The following table presents the carrying amount and fair values of the Company’s financial assets and liabilities measured on a recurring basis:

The following methods and assumptions were used to estimate the fair values:

Emissions Trading Scheme credits: The fair value is determined by the open market pricing at the end of the reporting period.

Foreign currency forward exchange contracts: The fair value of derivatives relating to foreign currency forward exchange contracts are derived from current settlement prices and comparable contracts using current assumptions. Foreign currency forward exchange contracts primarily relate to contracts entered into to hedge future known transactions or hedge balance sheet net cash positions. The movements in the carrying amounts and fair values of these contracts are largely due to changes in exchange rates against the U.S. dollar.

Acquisition-related contingent consideration: Contingent consideration payable in cash is discounted to its fair value at each balance sheet date. Where contingent consideration is dependent upon pre-determined financial targets, an estimate of the fair value of the likely consideration payable is made at each balance sheet date. The contingent consideration payable has been calculated based on the latest forecast.

NOTE 11 – DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT

The Company enters into various foreign currency forward exchange contracts to minimize currency exchange rate exposure from expected future cash flows. As at June 30, 2025, the contracts have maturity dates of up to two years at the date of inception. These foreign currency forward exchange contracts have not been designated as hedging instruments, and their impact on the income statement for the first six months of 2025 was a loss of $6.4 million (first six months of 2024 a gain of $1.6 million). The gain or loss has been recorded in other income or expense.

NOTE 12 – CONTINGENCIES

Legal matters

We are involved from time to time in claims and legal proceedings that result from, and are incidental to, the conduct of our business including business and commercial litigation, and employee and product liability claims.

As reported in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K"), we have incurred financial losses and lodged a civil and criminal legal claim related to a misappropriation of inventory in Brazil. At the time of filing, there have been no significant developments to report in relation to the claims being made. Consistent with prior quarters, a corresponding asset for the potential legal or insurance recoveries has not been recorded for the resulting financial losses arising from this matter.

In addition, unrelated to the Brazil matter, in the unlikely event there are an unexpectedly large number of individual claims or proceedings with an adverse resolution, this could in the aggregate have a material adverse effect on the results of operations for a particular year or quarter.

Guarantees

The Company and certain of the Company’s consolidated subsidiaries are contingently liable for certain obligations of affiliated companies primarily in the form of guarantees of debt and performance under contracts entered into as a normal business practice. This includes guarantees of non-U.S. excise taxes and customs duties. As at June 30, 2025, such guarantees, which are not recognized as liabilities in the condensed consolidated financial statements, amounted to $8.3 million (December 31, 2024 $6.8 million). The remaining terms of the fixed maturity guarantees are up to 7 years, with some further guarantees having no fixed expiry date.

Under the terms of the guarantee arrangements, generally the Company would be required to perform the obligations should the affiliated company fail to fulfill its obligations under the arrangements. In some cases, the guarantee arrangements have recourse provisions that would enable the Company to recover any payments made under the terms of the guarantees from securities held of the guaranteed parties’ assets.

The Company and its affiliates have numerous long-term sales and purchase commitments in their various business activities, which are expected to be fulfilled with no adverse consequences material to the Company.

NOTE 13 – STOCK-BASED COMPENSATION PLANS

The following table summarizes the transactions of the Company’s share-based compensation for 2025 and 2024:

The following table summarizes the transactions of the Company’s share-based compensation plans for thesix months ended June 30, 2025.

For the awards granted with market conditions, a Monte Carlo model has been used to calculate the grant-date fair value. For all other awards granted, a fair market value methodology has been used to calculate the grant-date fair value.

The awards granted with market conditions include a performance measure for Innospec's total shareholder return as compared to a peer group of companies. This measure can result in a maximum 130% vesting for the number of stock options granted. The maximum potential vesting has been reflected in the grant-date fair value calculation, but not reflected for the number of awards granted, as shown in the table above. All other awards granted in the quarter have similar vesting conditions to those granted in the previous periods.

As of June 30, 2025, there was $25.3 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 2.1 years.

NOTE 14 – RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE LOSS

Reclassifications out of accumulated other comprehensive loss (“AOCL”) for the first six months of 2025 were:

(1)

These items are included in other income and expense. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information.

Changes in AOCL for the first six months of 2025, net of tax, were:

Reclassifications out of AOCL for the first six months of 2024 were:

(1)

These items are included in other income and expense. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information.

Changes in AOCL for the first six months of 2024, net of tax, were:

NOTE 15 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company has reviewed recently issued accounting pronouncements and concluded there were no matters relevant to the Company’s financial statements.

NOTE 16 – RELATED PARTY TRANSACTIONS

Mr. Patrick S. Williams has been an executive director of the Company since April 2009 and has been a non-executive director of AdvanSix Inc. ("AdvanSix"), a chemicals manufacturer, since February 2020. In the six months ended June 30, 2025, the Company didnot purchase any product from AdvanSix (six months ended June 30, 2024 –nil). As at June 30, 2025, the Company owednil to AdvanSix (December 31, 2024 nil).

Mr. Robert I. Paller was a non-executive director of the Company since November 1, 2009 until May 10, 2024, when he did not stand for re-election to the board. The Company has engaged the services of Smith, Gambrell & Russell, LLP (“SGR”), a law firm with which Mr. Paller held a position. In the six months ended June 30, 2024, the Company incurred fees from SGR of $0.2 million.

Mr. David F. Landless has been a non-executive director of the Company since January 1, 2016 and is a non-executive director of Ausurus Group Limited which owns European Metal Recycling Limited (“EMR”) which from time to time purchases scrap metal from the Company. The Company has sold less than $0.1 million of scrap metal to EMR in thesix months ended June 30, 2025 (six months ended June 30, 2024 less than $0.1 million). A tendering process is operated periodically to select the best buyer for the sale of scrap metal by the Company. As at June 30, 2025, EMR owednil for scrap metal purchased from the Company (December 31, 2024 nil).

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months Ended June 30, 2025

This discussion should be read in conjunction with our unaudited interim condensed consolidated financial statements and the notes thereto.