KWR

• Core Financial Performance • Achieved fourth consecutive quarter of year-over-year profitability growth, with 7% global sales volume growth from broad-based net share gains across all regions, resulting in the highest quarterly adjusted EBITDA in company history. • Aggregate end markets were flat to slightly above prior year levels, with positive trends in steel and aluminum end markets, while light vehicle automotive production remained challenged across most regions. • Total Q2 2026 net sales were $533 million, up 10% year-over-year; adjusted EBITDA hit $85 million with an adjusted EBITDA margin of 16%, up 40 basis points year-over-year and 90 basis points sequentially. • Gross margin came in at 35.5%, down 130 basis points sequentially, a smaller decline than anticipated due to higher volumes and strong pricing execution.

• Strategic & Operational Milestones • Successfully navigated raw material cost increases and supply chain volatility stemming from the Strait of Hormuz conflict, leveraging the company's flexible global manufacturing network to maintain consistent supply continuity. • Completed startup of the new manufacturing facility in Zhangjiang, China, enabling full local production of the company's entire product portfolio for the Asia Pacific region, reducing import reliance and improving efficiency, flexibility, and customer service responsiveness. • Progressed the business transformation and cost optimization program announced in Q1 2026; Q2 2026 actions are expected to deliver $10 million in annual run-rate savings, already reflected in Q2 results. The long-term target is to achieve sustained adjusted EBITDA margins above 18%. • Released the annual sustainability report, highlighting embedded sustainability across innovation, operations, and customer partnerships globally.

• Capital Allocation • Announced a new $250 million stock repurchase authorization in Q2, repurchased $24 million in shares during the quarter, and approved a 4.3% increase to the quarterly dividend, marking the 17th consecutive annual dividend increase. • Successfully completed refinancing of the corporate credit facility, reducing the cost of debt to 4.4% and improving overall financial flexibility. • Maintains a disciplined, balanced capital allocation approach, prioritizing organic and inorganic growth investments while returning capital to shareholders, with a strong balance sheet to pursue strategic acquisition opportunities that expand the product portfolio, accelerate innovation, and improve geographic diversification.

• Overall end market expectations are maintained: full year 2026 end markets are expected to be flat to modestly positive, with H1 2026 performance in line with prior expectations.
• Raw material costs are expected to remain stable at current elevated levels in the short term, then begin to moderate through the second half of 2026. Base oil prices remain volatile due to global refinery supply constraints.
• Q3 2026 gross margin is expected to be roughly flat relative to Q2 2026's 35.5% level, as the timing of raw material inflation, inventory revaluation, and price recovery actions work through the P&L. Gross margin is expected to return to the target range above 36% by the end of 2026, with a targeted range of 36% to 37% (no upward revision to this target is currently modeled).
• Full year 2026 capital expenditures are expected to be 2.5% to 3% of total annual sales, consistent with prior outlooks.
• Q3 2024 overall performance is expected to be broadly in line with Q2 2026 performance (barring unforeseen market disruptions); expected seasonal slowness from summer holidays in Europe will be offset by improving demand in the Americas.
• Full year 2026 is expected to deliver meaningful revenue growth and mid-to-high single digit adjusted EBITDA growth, consistent with prior guidance.
• Management reaffirmed the long-term target of achieving sustained adjusted EBITDA margins above 18%.

1. Asia Pacific: Q2 2026 net sales increased 12% year-over-year, with 10% organic volume growth (the largest contributor to company-wide volume gains), 1% contribution from favorable selling price, and 1% contribution from favorable foreign exchange. Segment earnings increased $8 million (27%) year-over-year, driven entirely by higher sales volumes from consistent new business wins. This segment contributed ~29% of total company Q2 net sales. 2. AMEA (EMEA + Middle East/Africa): Q2 2026 net sales increased 13% year-over-year, with 7% volume growth, plus contributions from higher selling prices (to offset raw material inflation) and favorable foreign exchange. Segment earnings increased $8 million (31%) year-over-year, driven by stronger top-line performance and lower manufacturing costs from the recently closed Dortmund, Germany facility. This segment contributed ~32% of total company Q2 net sales. 3. Americas: Q2 2026 net sales increased 7% year-over-year, with 4% volume growth from new business wins and the resumption of idled customer production, plus contributions from favorable foreign exchange and higher selling prices. Segment earnings decreased $2 million (3%) year-over-year, as stronger top-line results were offset by higher manufacturing and operational costs, including one-time quality-related inventory disposal costs. This segment contributed ~39% of total company Q2 net sales.

• The Strait of Hormuz/Middle East conflict has caused elevated and volatile raw material prices (particularly base oil and crude-derived products, which make up ~two-thirds of the company's raw material cost basket) and created supply chain uncertainty. While no major supply disruptions have occurred to date, the situation remains volatile with an uncertain trajectory.
• Raw material cost volatility and the lag between cost increases and customer price adjustments creates ongoing short-term gross margin pressure, driven by inventory revaluation timing effects.
• European demand faces seasonal headwinds in Q3 from extended summer holiday shutdowns and unseasonably high temperatures, which could temporarily reduce activity levels.
• Automotive internal combustion engine production is down double-digits across most regions, creating ongoing softness in that end market segment.
• While the company has ample current manufacturing and labor capacity to support ongoing volume growth, sustained high single-digit volume growth would eventually require incremental investments in commercial talent and production infrastructure.

Q: What raw material categories are volatile, what was the Q2 inflation impact, and when will these impacts hit the P&L? What is the sustainability of strong volume growth in EMEA and Asia Pacific? / A: Base oil and crude-derived raw materials (two-thirds of the cost basket) remain volatile at elevated levels, while oleochemicals have softened slightly. Cost impacts peaked in June 2026, with gross margins expected to hold steady in Q3 before improving in Q4. Most EMEA volume growth comes from sustainable share gains above the 2-4% target range, with a small portion from pre-buy activity that did not meaningfully change underlying demand. Asia Pacific double-digit growth is driven entirely by share gains (especially in electric vehicle manufacturing) and will likely normalize to mid-single digit growth, but remains a sustained long-term growth engine.

Q: Americas segment operating margins declined year-over-year; what drove this and how will margins trend in H2? / A: The Q2 decline stemmed from one-time quality-related inventory disposal costs, higher temporary costs from shifting one plant to 24/7 operation to clear backlog, and elevated manufacturing costs. Most of these impacts are one-time, so Americas operating margins are expected to return to their historical traditional levels in the second half of 2026.

Q: How does the company balance share repurchases and M&A for capital allocation, and what is the cadence of buybacks? / A: The company prioritizes organic growth investments (like the new China plant) and strategic bolt-on M&A first, then uses opportunistic share repurchases as a flexible tool for returning excess capital alongside the growing dividend. Buybacks are not programmatic; the new $250 million authorization simply gives the company flexibility to repurchase when market conditions and capital availability allow.

Q: What explains the attractive incremental margins on recent volume growth, and how much capacity exists to continue adding share without large incremental investments? / A: The company has reduced internal operational complexity over the last 18 months, freeing up skilled commercial and subject matter experts from internal work to focus on customer service and new business. Back-office efficiency improvements have created existing capacity to support additional growth without immediately needing to add more headcount. There is also ample unused production capacity across the global manufacturing network to support ongoing volume gains, supporting the long-term goal of reaching 18%+ adjusted EBITDA margins through operating leverage.