What changed in this filing

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Item 1. Business

2023-02-22 compared with 2022-02-16 · 46 added, 59 removed, 132 unchanged (44% of the section changed)

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and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

Innospec develops, manufactures, blends, markets and supplies specialty chemicals for use as fuel additives, ingredients for personal care, home care, agrochemical, metal extraction and other applications and oilfield chemicals.

Our products are sold primarily to oil and gas exploration and production companies, oil refiners, fuel manufacturers and users, formulators of personal care, home care, agrochemical and metal extraction formulations, and other chemical and industrial companies throughout the world.

Our Fuel Specialties business offers fuel additives to help improve fuel efficiency, boost engine performance and reduce harmful emissions.

Our Performance Chemicals business provides effective technology-based solutions for our customers’ processes or products focused in the personal care, home care, agrochemical and metal extraction markets.

Innospec develops, manufactures, blends, markets and supplies a wide range of specialty chemicals to markets in the Americas, Europe, the Middle East, Africa and Asia-Pacific.

Our Performance Chemicals business creates innovative technology-based solutions for our customers in the personal care, home care, agrochemical, mining and industrial markets.

Our Fuel Specialties business specializes in manufacturing and supplying fuel additives that improve fuel efficiency, boost engine performance and reduce harmful emissions.

Our Oilfield Services business supplies drilling, completion and production chemicals which make exploration and production more effective, cost-efficient and environmentally friendly.

Segment Information

The Company reports its financial performance based on the four reportable segments described as follows:

Fuel Specialties

Performance Chemicals

Oilfield Services

Octane Additives (ceased trading June 30, 2020)

The Fuel Specialties, Performance Chemicals and Oilfield Services segments operate in markets where we actively seek growth opportunities although their ultimate customers are different.

The Octane Additives segment has ceased trading and is no longer a reporting segment from July 1, 2020, as reported in our Quarterly Report on Form 10-Q

for the quarter ended June 30, 2020.

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

Our Octane Additives segment has previously ceased trading and is no longer a reporting segment from July 1, 2020, as reported in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.

For financial information about each of our segments, see Note 3 of the Notes to the Consolidated Financial Statements.

Performance Chemicals

Our Performance Chemicals segment provides innovative technology-based solutions for our customers’ processes or products focused in the personal care, home care, agrochemical, mining and other industrial markets.

This segment has grown through acquisitions, together with the organic development and marketing of innovative products in these end-markets.

Our customers in this segment include large multinational companies, manufacturers of personal care and home care products and global mining, agriculture and building products and other industrial companies.

Fuel Specialties

Our Fuel Specialties segment develops, manufactures, blends, markets and supplies a range of specialty chemical products used as additives to a wide range of fuels.

Our Fuel Specialties segment develops, manufactures, blends, markets and supplies a range of specialty chemical products used as additives in diesel, jet, marine, fuel oil and other fuels.

These fuel additive products help improve fuel efficiency, boost engine performance and reduce harmful emissions;

and are used in the efficient operation of automotive, marine and aviation engines, power station generators, and heating oil.

The segment has grown organically through our development of new products to address what we believe are the key drivers in demand for fuel additives.

These drivers include increased demand for fuel, focus on fuel economy, changing engine technology and legislative developments.

We have also devoted substantial resources towards the development of new and improved products that may be used to improve combustion efficiency.

Our customers in this segment include national and multinational oil companies and fuel retailers.

Performance Chemicals

Our Performance Chemicals segment provides effective technology-based solutions for our customers’ processes or products focused in the personal care, home care, agrochemical and metal extraction markets.

This segment has grown through acquisitions, together with the development and marketing of innovative products.

The focus for our Performance Chemicals segment is to develop high performance products from its technology base in a number of targeted markets.

Our customers in this segment include large multinational companies, manufacturers of personal care and household products and specialty chemical manufacturers operating in agrochemical, metal extraction and other industrial applications.

and are most commonly used in the efficient operation of commercial trucking, marine and aviation engines, power station generators, heating oil and other industrial machinery applications.

The segment has grown organically through our development of new products to address increased demand for fuel, focus on fuel economy, higher efficiency engine technologies and legislative developments, including tightening global emissions regulations.

We are also applying these fuels technologies to an increasing number of non-fuel applications in a variety of industries.

Our customers in this segment include national and multinational oil companies, fuel marketers and retailers, fuel terminals, marine lines, coating & plastics producers and other heavy industrial end-users.

Oilfield Services

Our Oilfield Services segment develops and markets chemical solutions for fracturing, stimulation and completion operations, products for oil and gas production which aid flow assurance and maintain asset integrity and products to prevent loss of mud in drilling operations.

This segment had been growing strongly in recent years until the COVID-19

pandemic adversely impacted customer demand in 2020.

We expect increased customer activity to return as the global demand for fuel increases.

Our customers in this segment include multinational public and independent companies currently operating principally in the Americas.

Our strategy is to develop new and improved products and technologies to continue to strengthen and increase our market positions within our Fuel Specialties, Performance Chemicals and Oilfield Services segments.

Our Oilfield Services segment develops and markets chemical solutions for fracturing, drilling, stimulation and completion operations, products for oil and gas production and transport which aid flow assurance and maintain asset integrity.

Our customers in this segment include multinational public and independent exploration & production and oilfield services companies currently operating principally in the Americas.

Our strategy is to develop new and improved products and technologies to continue to strengthen and increase our market positions within our Performance Chemicals, Fuel Specialties and Oilfield Services segments.

We also actively continue to assess potential strategic acquisitions, partnerships and other opportunities that would enhance and expand our customer offering.

We focus on opportunities that would extend our technology base, geographical coverage or product portfolio.

We believe that focusing on the Fuel Specialties, Performance Chemicals and Oilfield Services segments, in which the Company has existing experience, expertise and knowledge, provides opportunities for positive returns on investment with reduced operating risk.

We also continue to develop our geographical footprint, consistent with the development of global markets.

We believe that focusing on the Performance Chemicals, Fuel Specialties and Oilfield Services segments, in which the Company has existing experience, expertise and knowledge, provides opportunities for positive returns on investment with reduced operating risk.

We also continue to expand our geographical footprint, consistent with the development of global markets.

Geographical Area Information

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We therefore require corresponding amounts of working capital for normal operations.

We do not believe that this is materially different to our competitors, with the exception of cetane number improvers, in which case we maintain high enough levels of inventory, as required, to retain our position as market leader in sales of these products.

We do not believe that this is materially different to our competitors.

The purchase of large amounts of certain raw materials across all our segments can create some variations in working capital requirements, but these are planned and managed by the business.

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These purchases account for a substantial portion of the Company’s variable manufacturing costs.

These materials are, with the exception of ethylene for our operations in Germany, readily available from more than one source.

These materials are, with the exception of ethylene for our operations in Germany, available from more than one source.

Although ethylene is, in theory, available from several sources, it is not permissible to transport ethylene by road in Germany.

As a result, we source ethylene for our German operations via a direct pipeline from a neighboring site, making it effectively a single source.

Ethylene is used as a primary raw material for our German operations in products representing approximately 6% of Innospec’s sales.

As a result, we source ethylene for our German operations via a direct pipeline, making it effectively a single source.

Ethylene is used as a primary raw material for one of our German operations in products representing approximately 5% of Innospec’s sales.

We use long-term contracts (generally with fixed or formula-based costs) and advance bulk purchases to help ensure availability and continuity of supply, and to manage the risk of cost increases.

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The majority of these patents were developed by the Company and, subject to maintenance obligations including the payment of renewal fees, have at least 10 years life remaining.

The trademark “Innospec and the Innospec device” in Classes 1, 2 and 4 of the “International Classification of Goods and Services for the Purposes of the Registration of Marks” are registered in all jurisdictions in which the Company has a significant market presence.

The Company also has trademark registrations for certain product names in all jurisdictions in which it has a significant

market presence.

The trademark “Innospec and the Innospec device” in Classes 1, 2 and 4 of the “International Classification of Goods and Services for the Purposes of the Registration of Marks” are

registered in all jurisdictions in which the Company has a significant market presence.

The Company also has trademark registrations for certain product names in all jurisdictions in which it has a significant market presence.

We actively protect our inventions, new technologies, and product developments by filing patent applications and maintaining trade secrets.

In addition, we vigorously participate in patent opposition proceedings around the world where necessary to secure a technology base free from infringement of intellectual property.

In 2022, the Company had a significant customer in the Oilfield Services segment which accounted for $222.2 million (11.3%) of our net group sales.

Certain markets in which the Company operates are subject to significant competition.

The Company competes on the basis of a number of factors including, but not limited to, product quality and performance, specialized product lines, customer relationships and service, and regulatory expertize.

Fuel Specialties:

Fuel Specialties is generally characterized by a small number of competitors, none of which hold a dominant position.

We consider our competitive edge to be our proven technical development capacity, independence from major oil companies and strong long-term customer relationships.

We believe we remain the world’s only producer of tetra ethyl lead (“TEL”) for use in aviation gasoline, which we market as our AvGas product line.

Performance Chemicals:

Within the Performance Chemicals segment we operate in the personal care, home care, agrochemical and metal extraction markets, which are highly fragmented, and the Company experiences substantial competition from a large number of multinational and specialty chemical suppliers in each geographical market.

Within the Performance Chemicals segment we operate in the personal care, home care, agrochemical, mining markets and other industrial markets, which are highly fragmented, and the Company experiences substantial competition from a large number of multinational and specialty chemical suppliers in each geographical market.

Our competitive position in these markets is based on us supplying a superior, diverse product portfolio which solves particular customer problems or enhances the performance of new or existing products.

In a number of specialty chemicals markets, we also supply niche product lines, where we enjoy market-leading positions.

Fuel Specialties:

The Fuel Specialties segment is generally characterized by a small number of competitors, none of which hold a dominant position.

We consider our competitive edge to be our proven technical development capacity, independence from major oil companies and strong long-term customer relationships.

We believe we remain the world’s only producer of tetra ethyl lead (“TEL”) for use in aviation gasoline, which we market as our AvGas product line.

Oilfield Services:

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Research, Development, Testing and Technical Support

Research, product/application development and technical support (“R&D”) provide the basis for the growth of our Fuel Specialties, Performance Chemicals and Oilfield Services segments.

Research, product/application development and technical support (“R&D”) provide the basis for the growth of our Performance Chemicals, Fuel Specialties and Oilfield Services

Accordingly, the Company’s R&D activity has been, and will continue to be, focused on the development of new products and formulations.

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We believe that our proven technical capabilities provide us with a significant competitive advantage.

Our Performance Chemicals business has launched significant new mild surfactants based on isethionate and taurate chemistry, which are well aligned with developing customer needs.

In addition, the business has developed further formulations in emollients, silicones and surfactants for the personal care, homecare, agrochemical and metal extraction markets.

Our Performance Chemicals business has launched significant new mild surfactants, which are well aligned with developing customer needs.

In addition, the business has developed further formulations in emollients, silicones and surfactants for the personal care, home care, agrochemical, mining markets and other industrial markets.

Fuel Specialties has continued to innovate, focused on bringing new technologies to market which reduce pollution and improve fuel economy, including detergents and cold flow improvers.

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There are also asset retirement obligations and environmental remediation liabilities on a much smaller scale in respect of other manufacturing sites.

We regularly review the future expected costs of remediation and

the current estimate is reflected in Note 13 of the Notes to the Consolidated Financial Statements.

We regularly review the future expected costs of remediation and the current estimate is reflected in the Consolidated Balance Sheets and Note 13 of the Notes to the Consolidated Financial Statements.

The European Union (“E.U.”) legislation known as the Registration, Evaluation and Authorization of Chemical Substances Regulations (“REACH”) requires most of the substances in the Company’s products to be registered with the European Chemicals Agency.

Under this legislation the Company has to demonstrate that the substances it uses in its products are safe for use and appropriate for their intended purposes in the E.U..

During this registration and continual evaluation process, the Company incurs expense to test and register substances it manufactures or imports in the E.U..

During this registration and continual evaluation process, the Company incurs expenses to test and register substances it manufactures or imports in the E.U..

Following the end of the Brexit transition process, on January 11, 2021 the United Kingdom (“U.K.”) government introduced U.K.

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We aim to create an environment where our employees are encouraged to make positive contributions and fulfill their potential.

The Board is also actively involved in reviewing and approving executive compensation, selections and succession plans so that we have leadership in place with the requisite skills

and experience to deliver results the right way.

The CEO periodically provides the Board with an assessment of senior executives that have potential as successor for the CEO position, as well as perspectives on potential candidates for other senior management positions.

The Company’s Board of Directors (the “Board”) is also actively involved in reviewing and approving executive compensation, selections and succession plans so that we have leadership in place with the requisite skills and experience to deliver results the right way.

The Company’s Chief Executive Officer (“CEO”) periodically provides the Board with an assessment of senior executives that have potential as successor for the CEO position, as well as perspectives on potential candidates for other senior management positions.

Core Values & Culture

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Our continued success depends on keeping people safe, promoting a healthy lifestyle, protecting human rights, improving education, training and maintaining good relations with our neighbors.

& Protecting the Environment:

Conserving & Protecting the Environment:

We aim to use resources as efficiently as practicable and minimize the impact of our operations on the environment.

We look to supply safe, sustainable products, designed to meet the needs of society now and in the future while minimizing their environmental impact.

We look to supply

safe, sustainable products, designed to meet the needs of society now and in the future while minimizing their environmental impact.

Leading by Example:

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We set high standards for process and occupational safety, which is managed by our network of Safety, Health and Environment (“SHE”) professionals throughout the business.

SHE is a top priority for Innospec with our three core objectives being that:

Our three core objectives being that:

No-one gets hurt

We don’t annoy our neighbors

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Through this structure, we have established a strong culture of safety within our organization.

The RESPECT committee reports to the Board and conducts a major review of objectives and performance annually alongside quarterly interim reviews.

Training is an essential part of our health and safety strategy.

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The Company routinely posts important information for investors on its website (under Investors).

The Company uses this website as a means of disclosing material, non-public

information and for complying with its disclosure obligations under SEC Regulation FD (“Fair Disclosure”).

The Company uses this website as a means of disclosing material, non-public information and for complying with its disclosure obligations under SEC Regulation FD (“Fair Disclosure”).

Accordingly, investors should monitor the Investors portion of the Company’s website, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and webcasts.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business