What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-02-18 compared with 2025-02-19 · 161 added, 120 removed, 253 unchanged (53% of the section changed)

2 unchanged sentences

EXECUTIVE OVERVIEW

In 2024 Innospec achieved another good set of results.

Strength in Performance Chemicals and Fuel Specialties offset lower results in Oilfield Services.

In Performance Chemicals, full year revenues were up 16 percent and operating income increased by 52 percent.

We have a balanced pipeline of growth opportunities across our global personal care, home care, agriculture, construction and other industrial markets.

In addition, the integration and performance of our recent QGP acquisition in Brazil is proceeding to plan and is supporting not only Performance Chemicals but also Fuel Specialties growth opportunities in the region.

Moving into 2025, we continue to target operating income and margin improvement to levels consistent with the full year 2022.

In Fuel Specialties, revenues were up 1 percent and operating income increased 18 percent.

Operating margin improved to just below our target of 19 to 21 percent.

We remain focused on further margin improvement in parallel with topline growth.

In 2025, Innospec delivered a mixed set of results with continued strong operating income growth and margin expansion in Fuel Specialties offsetting lower results in Performance Chemicals and Oilfield Services.

In Performance Chemicals, full year revenues were up 4 percent on the prior year;

however, margins declined on higher costs, price management and weaker product mix.

While these results were below our expectations, margin actions began to take effect in the third quarter, and together with lower overheads drove sequential improvement in the fourth quarter.

Delivering sustainable margin improvement remains the primary focus of the business team.

We continue to execute on a range of price/cost management, productivity and new product commercialization actions over the short-to-medium term.

New products include the continued expansion of our industry-leading sulfate and 1,4-dioxane free personal and home care portfolio and growth in our technologies for agriculture, mining, construction and other diversified industrial markets.

We expect these combined efforts to drive further growth in 2026.

In Fuel Specialties, full year revenues were unchanged on the prior year and operating income increased 12 percent benefiting from a stronger sales mix and disciplined pricing.

The business has continued to deliver consistently strong results and has a diverse pipeline of fuel and non-fuel growth opportunities across all regions.

With our industry-leading innovation and customer service capabilities, we are well positioned to continue advancing our global customers’ initiatives.

Our technology will continue to focus on cleaner fuels, lowering emissions and improving efficiency in traditional, renewable and non-fuel applications.

In Oilfield Services, revenues were down 29 percent from last year and operating income decreased 51 percent on lower Latin America production activity.

Excluding this Latin America activity, our core business sales and operating income grew year over year.

Our expectation for 2025 is that we will see further sequential improvement in the core Oilfield business including U.S.

completions and production, DRA and the Middle East.

We currently do not expect the Latin America production activity to resume in the near term.

In Oilfield Services, full year revenues were down 19 percent on the prior year, and operating income decreased 40 percent driven by no recovery in our Latin American business and lower than expected Middle East and US completion activity in the second half of 2025.

We remain focused on delivering operating income growth in 2026 as Middle East activity returns, sales from our recent DRA expansion take effect, and our focus on margin improvement continues.

We currently do not expect Latin America production activity to resume in 2026.

For the full year, cash from operations after capital expenditures remained strong at $63.9 million.

As of December 31, 2025, Innospec had $292.5 million in cash and cash equivalents and no debt.

Full year dividend payments increased by 10 percent over the prior year to $1.71 per share and we bought back 264 thousand shares at a cost of $23.9 million.

We continue to have significant balance sheet flexibility for M&A, dividend growth, organic investment and buybacks.

CRITICAL ACCOUNTING ESTIMATES

3 unchanged sentences

Ellesmere Port in the U.K.

is our principal site giving rise to asset retirement obligations, associated with the production of TEL.

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

is our principal site giving rise to asset retirement obligations, primarily connected to the production of tetra ethyl lead.

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

At Ellesmere Port there is a continuing asset retirement program related to certain manufacturing units that have been closed.

Plant closure provisions at December 31, 2024 amounted to $60.3 million and relate principally to our Ellesmere Port site in the U.K..

Plant closure provisions at December 31, 2025 amounted to $65.1 million and relate principally to asset retirement obligations at our Ellesmere Port site in the U.K..

We recognize environmental remediation liabilities when they are probable and costs can be reasonably estimated, and asset retirement obligations when there is a legal requirement, including those arising from a Company promise, and the costs can be reasonably estimated.

The Company must anticipate the program of work required and the associated future expected costs, and comply with environmental legislation in the countries in which it operates or has operated in.

The Company must make significant judgments when anticipating the program of work required and the associated future expected costs, and comply with environmental legislation in the countries in which it operates or has operated in.

We develop these assumptions utilizing the latest information available together with recent costs.

While we believe our assumptions for plant closure provisions are reasonable, they are subjective good faith estimates and it is possible that variations in any of the assumptions will result in materially different calculations to the liabilities we have reported.

We are subject to income and other taxes in the U.S., the U.K., and a number of other jurisdictions.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied.

The calculation of our tax liabilities involves evaluating uncertainties in the application of accounting principles and complex tax regulations.

We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be required.

If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary.

We also recognize tax benefits to the extent that it is more likely than not that our positions will be sustained, based on technical merits of the position, when challenged by the taxing authorities.

To the extent that we prevail in matters for which liabilities have been established or are required to pay amounts in excess of the liabilities recorded in our financial statements, our effective tax rate in a given period may be materially affected.

An unfavorable tax settlement may require cash payments and result in an increase in our effective tax rate in the year of resolution.

We report interest and penalties related to uncertain tax positions as income taxes.

For additional information regarding uncertain income tax positions, see Note 11 of the Notes to the Consolidated Financial Statements.

The Company’s reporting units, the level at which goodwill is assessed for potential impairment, are consistent with the reportable segments.

8 unchanged sentences

These fair value techniques require management judgment and estimates including revenue growth rates, projected operating margins, changes in working capital and discount rates.

We would develop these assumptions by considering recent financial

performance and trends and industry growth estimates.

We would develop these assumptions by considering recent financial performance and trends and industry growth estimates.

While we believe our assumptions for impairment assessments are reasonable, they are subjective judgments, and it is possible that variations in any of the assumptions will result in materially different calculations of any potential impairment charges.

1 unchanged sentence

Our step zero impairment review at December 31, 2025 indicated the fair value of each segment is, more likely than not, higher than the carrying value, meaning no step one impairment review was required to be performed.

Other intangible assets and property, plant and equipment (net of amortization and depreciation, respectively)

Other intangible assets and property, plant and equipment are tested for impairment at the lowest possible level for which cash flows can be sufficiently distinguished, operationally and for financial reporting purposes.

To test for impairment the Company reviews whether there have been any changes or indicators of potential impairment.

Factors utilized in the qualitative assessment process include macroeconomic conditions;

industry and market considerations;

cost factors;

overall financial performance;

and Company specific events.

If a quantitative test is required, undiscounted future cash flows expected to result from the asset groups are compared with the carrying value of the assets and, if such cash flows are lower, an impairment loss may be recognized.

The amount of the impairment loss is the difference between the fair value and the carrying value of the assets.

Fair values are determined using post-tax cash flows discounted at the Company’s weighted average cost of capital.

These fair value techniques require management judgment and estimates including revenue growth rates, projected operating margins, changes in working capital and discount rates.

We would develop these assumptions by considering recent financial performance and trends and industry growth estimates.

For the quarter ended September 30, 2025, we recorded impairment charges relating to our Performance Chemicals and Oilfield Services segments.

See Note 6 and Note 9 of the Notes to the Consolidated Financial Statements for additional information.

At December 31, 2025 we had $67.7 million of intangible assets, included in Corporate costs and our Performance Chemicals segment, and we had $286.1 million of net property, plant and equipment for the Group in total.

Our review at December 31, 2025 highlighted no indicators of potential impairment and the amortization and depreciation periods remain appropriate.

RESULTS OF OPERATIONS

16 unchanged sentences

Adjustment to fair value of contingent consideration

Restructuring charge

Impairment of property, plant and equipment

Impairment of intangible assets

Profit on disposal

25 unchanged sentences

Adjustment to fair value of contingent consideration

Profit on disposal

Restructuring charge

Impairment of property, plant and equipment

Impairment of intangible assets

Profit on disposal of property, plant and equipment

Total operating expenses

4 unchanged sentences

Exchange rates

Higher sales volumes for all our regions were driven by increased demand for our personal care and home care products resulting from higher consumer demand, in particular for lower priced higher volume products.

The acquisition of the QGP business has also delivered increased volumes year over year.

All our regions recorded an adverse price and product mix due to lower selling prices, driven by lower raw material costs, together with the greater demand from consumers for lower priced products.

Higher sales volumes for the Americas were driven by increased demand for our personal care products, being offset by an adverse price and product mix due to pricing erosion and higher demand for our lower priced products.

The volume decline in EMEA was offset by a favorable price and product mix, primarily

driven by increased demand for our higher priced products.

ASPAC volumes were higher driven by increased demand for our personal care products, being partly offset by an adverse price and product mix due to higher demand for lower priced personal care products.

EMEA and ASPAC benefited from favorable foreign currency exchange rate movements.

Gross margin:

the year over year increase of 3.9 percentage points was due to margins returning to a more normalized level when compared to the depressed margins in the prior year.

Margins have benefited from raw materials pricing reductions in the current year, combining with the favorable impact arising from our manufacturing efficiency due to the higher production volumes.

the year over year decrease of 4.8 percentage points was primarily due to pricing erosion and higher demand for our lower margin products.

Operating expenses:

increased $14.4 million year over year due to higher selling expenses, increased amortization for the acquired intangible assets relating to our QGP acquisition, increased spending on research and development and higher performance-related remuneration accruals .

decreased by $4.5 million year over year, primarily due to lower provisions for performance-related remuneration accruals, together with lower charges for doubtful debts.

Fuel Specialties

2 unchanged sentences

Exchange rates

Sales volumes in all our regions have increased year over year due to increased demand from customers.

Price and product mix was adverse in all our regions, with a favorable sales mix being offset by lower pricing resulting from lower raw material costs.

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 higher proportion of sales being made to higher margin customers.

Sales volumes in the Americas have remained constant year over year, combined with an adverse price and product mix due to a weaker sales mix.

Sales volumes in EMEA have increased year over year due to increased demand from customers.

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 and disciplined pricing.

AvGas volumes were higher than the prior year due to variations in the demand from customers, being offset by an adverse price and product mix due to an adverse customer mix.

EMEA and ASPAC benefited from favorable foreign currency exchange rate movements.

Gross margin :

the year over year increase of 3.3 percentage points was driven by an improved sales mix from increased sales of higher margin products, together with the easing of raw material and other inflationary pressures, combined with the prior year adverse impact of the Brazil inventory misappropriation and the associated costs of exiting the related trading relationship.

Excluding this prior year item, gross margin has increased 1.0 percentage points.

the year over year increase of 1.8 percentage points was driven by increased sales of higher margin products, together with disciplined pricing and reduced inflationary pressures.

Operating expenses:

the year over year increase of $4.9 million is due to higher research and development expenditure and higher performance-related remuneration accruals, being partly offset by lower provisions for doubtful debts.

the year over year decrease of $2.9 million was due to lower provisions for performance-related remuneration accruals, lower research and development expenditure and favorable movements for doubtful debt provisions.

Oilfield Services

have decreased year over year by $95.5 million, or 19 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 2024 in Latin America.

Management expects to see lower sales volumes continuing for production chemicals in the coming quarters, while believing the growth opportunities for our other oilfield markets will drive sequential quarterly improvements.

Sales volumes in the current year were adversely impacted by the absence of production chemical activity in Mexico.

Gross margin:

the year over year decrease of 7.6 percentage points was due to an unfavorable sales mix as Latin America customer demand has weakened.

the year over year decrease of 1.6 percentage points was due to an unfavorable sales mix as our customer demand has weakened.

Operating expenses:

the year over year decrease of $76.0 million was driven by the lower customer service costs and commissions related to the reduced demand from certain customers, together with lower performance related remuneration accruals.

the year over year decrease of $20.9 million was due to lower customer service costs

and commissions related to the reduced demand from certain customers, together with lower provisions for performance-related remuneration accruals.

Other Income Statement Captions

Corporate costs:

the year over year decrease of $11.0 million was primarily driven by the $8.4 million recovery of historical costs which the Company incurred relating to our defined benefit pension scheme in the U.K., together with a reduction for acquisition related costs, being partly offset by higher information technology investment and the adverse impact of inflationary increases year over year.

the year over year increase of $2.6 million was due to the prior year including the recovery of $8.4 million of historical pension costs, increased provisions for asset retirement obligations in relation to our legacy operations, the additional investment in our IT infrastructure and the amortization of the group's new ERP system, being partly offset by lower provisions for performance-related remuneration accruals.

Adjustment to fair value of contingent consideration:

the charge in 2024 of $3.4 million (2023 - $0.0 million) relates to the accretion of the contingent consideration relating to the acquisition of QGP.

See Note 5 of the Notes to the Consolidated Financial Statements for further information.

Pension scheme settlement charge:

the charge in 2024 of $155.6 million (2023 - $0.0 million) relates to the buy-out of our U.K.

defined benefit pension scheme.

See Note 10 of the Notes to the Consolidated Financial Statements for further information.

the credit in the current year of $15.9 million compares to an expense of $3.4 million in the prior year.

The amounts in both years relate to the acquisition of QGP Química Geral (“QGP”) within our Performance Chemicals segment.

See Note 14 of the Notes to the Consolidated Financial Statements for additional information.

Restructuring charge:

the charge in the current year is $0.9 million compared to no charge in the prior year.

The charge relates to our operations in South America within our Performance Chemicals segment.

Impairment of property, plant and equipment:

the charge in the current year is $22.9 million compared to no charge in the prior year.

The charge relates to our Oilfield Services segment.

See Note 6 of the Notes to the Consolidated Financial Statements for additional information.

Impairment of intangible assets:

the charge in the current year is $19.1 million compared to no charge in the prior year.

The charge relates to our Performance Chemicals and Oilfield Services segments.

See Note 9 of the Notes to the Consolidated Financial Statements for additional information.

Other net income/(expense):

1 unchanged sentence

(in millions)

Net pensions credit

Net pensions credit/(expense)

Profit attributable to non-controlling interests

3 unchanged sentences

Interest income/(expense), net:

in 2024 was $9.3 million of income, compared to $2.3 million of income in 2023.

Interest income from our cash balances has increased due to higher central bank interest rates together with the benefit from our increasing cash balances.

was $9.2 million of income in 2025 compared to $9.3 million of income in 2024, driven by the interest income being earned from our cash balances.

Income taxes:

The effective tax rate was 15.6% and 13.6% in 2025 and 2024, respectively.

The adjusted effective tax rate, once adjusted for the items set out in the following table, was 26.4% in 2024 compared with 23.0% in 2023.

The adjusted effective tax rate, as calculated by adjusting income before taxes and by adjusting income taxes for the items set out in the following table, was 24.1% in 2025 compared with 26.4% in 2024.

The Company believes 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.

8 unchanged sentences

Recovery of historical pension costs

Acquisition costs

Impairment of acquired intangible assets

Impairment of property, plant and equipment

Adjusted income before income taxes

3 unchanged sentences

Tax on legacy cost of closed operations

Tax on acquisition costs

Tax on pension scheme settlement charge

Tax on recovery of historical pension costs

Tax on impairment of acquired intangible assets

Tax on impairment of property, plant and equipment

Impact of internal reorganizations

Other discrete items

2 unchanged sentences

Adjusted effective tax rate

The adjusted effective tax rate is higher in 2024 than the GAAP effective tax rate, primarily due to the current year recognition of previously unrecognized tax benefits being eliminated in determining the adjusted effective tax rate.

The adjusted effective tax rate is higher in 2025 than the GAAP effective tax rate, primarily due to the recognition of a deferred tax benefit in relation to internal reorganizations being eliminated in determining the adjusted effective tax rate.

The adjusted effective tax rate was higher in 2024 than the GAAP effective tax rate, primarily due to the recognition of previously unrecognized tax benefits being eliminated in determining the adjusted effective tax rate.

This item arose due to the lapse of the statute of limitations associated with the unrecognized tax benefit in the final quarter of 2024.

The adjusted effective tax rate was higher in 2023 than the GAAP effective tax rate, primarily due to the elimination of the impact of other discrete items in determining the adjusted effective tax rate.

This mainly represented the benefit arising from adjustments to the tax charge for previous years arising from return to provision adjustments in relation to the federal and state tax returns filed in the U.S.

For additional information on items which impact both the GAAP effective tax rate and the adjusted effective tax rate see Note 11 of the Notes to the Consolidated Financial Statements.

19 unchanged sentences

Corporate costs

Adjustment to fair value of contingent consideration

Profit on disposal

Total operating expenses

4 unchanged sentences

Exchange rates

Lower sales volumes for all of our regions were primarily driven by reduced demand for our personal care products resulting from cautious consumer sentiment, together with the impact of destocking by our customers.

The Americas and EMEA were impacted by an adverse price and product mix due to a higher proportion of lower priced products being sold.

ASPAC benefited from a favorable price and product mix due to a higher proportion of higher priced products being sold.

The acquisition of QGP in December 2023 has also delivered increased volumes year over year.

All our regions recorded an adverse price and product mix due to lower selling prices, driven by lower raw material costs, together with the greater demand from consumers for lower priced products.

Gross margin:

the year over year decrease of 4.6 percentage points was due to an adverse sales mix from reduced sales of higher margin products and the adverse impact of reduced manufacturing efficiency resulting from lower production volumes.

the year over year increase of 3.9 percentage points was due to margins returning to a more normalized level when compared to the depressed margins in the prior year.

Margins have benefited from raw materials pricing reductions in the current year, combining with the favorable impact arising from our manufacturing efficiency due to the higher production volumes.

Operating expenses:

decreased $3.6 million year over year, due to lower selling expenses including commissions, lower performance-related remuneration accruals and lower acquired intangibles amortization following the end of the expected life of the assets.

Fuel Specialties

2 unchanged sentences

Exchange rates

Sales volumes in all of our regions have decreased year over year, primarily due to a reduction in the sales of lower margin higher volume products.

Price and product mix was favorable in all our regions due to an increased proportion of higher margin products being sold.

AvGas volumes were lower than the prior year due to variations in the demand from customers, together with an adverse price and product mix due to a higher proportion of sales to lower margin customers.

Sales volumes in all our regions have increased year over year due to increased demand from customers.

Price and product mix was adverse in all our regions, with a favorable sales mix being offset by lower pricing resulting from lower raw material costs.

Gross margin:

the year over year increase of 0.5 percentage points was primarily due to a favorable sales mix from increased sales of higher margin products, being partly offset by the impact of the Brazil inventory misappropriation and the ending of that trading relationship.

Excluding this prior year item, gross margin has increased 1.0 percentage points.

Operating expenses:

the year over year increase of $5.2 million includes increased research and development expenditure and higher provisions for doubtful debts which are primarily related to the ending of the Brazilian trading relationship, being partly offset by lower performance-related remuneration accruals.

the year over year increase of $4.9 million was due to higher research and development expenditure and higher performance-related remuneration accruals, being partly offset by lower provisions for doubtful debts.

Oilfield Services

have increased year over year by $97.5 million, or 16%, with the majority of our customer activity concentrated in the Americas region.

We believe that customer demand remains strong despite operating income growth moderating, as expected, through the second half of the 2023.

have decreased year over year by $200.7 million, or 29 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 2024 in Latin America.

Gross margin:

the year over year increase of 2.9 percentage points was due to a favorable sales mix and the benefit of improved pricing.

the year over year decrease of 7.6 percentage points was due to an unfavorable sales mix as Latin America customer demand has weakened.

Operating expenses:

the year over year increase of $18.7 million was driven by higher customer service costs which are necessary to support the increase in demand with certain customers, together with higher provisions for doubtful debts, while being partly offset by lower performance-related remuneration accruals.

Other Income Statement Captions

Corporate costs:

the year over year increase of $9.8 million was primarily due to acquisition related costs, additional environmental remediation provisions, increased spending on our information technology infrastructure and some legal costs related to the Brazil inventory misappropriation, being partly offset by lower performance-related remuneration accruals.

Adjustment to fair value of contingent consideration:

the charge in 2024 of $3.4 million (2023 - $0.0 million) relates to the accretion of the contingent consideration relating to the acquisition of QGP.

See Note 5 of the Notes to the Consolidated Financial Statements for further information.

Pension scheme settlement charge:

the charge in 2024 of $155.6 million (2023 - $0.0 million) relates to the buy-out of our U.K.

defined benefit pension scheme.

See Note 10 of the Notes to the Consolidated Financial Statements for further information.

Other net income/(expense):

2 unchanged sentences

Net pensions credit

Profit attributable to non-controlling interests

Sundry expense

Foreign exchange gains/(losses) on translation

1 unchanged sentence

Interest income/(expense), net:

was income of $2.3 million in 2023 primarily due to the interest earned on the Company's cash balances, compared to a $1.1 million expense in 2022 primarily due to the commitment fee which the Company paid to retain its revolving credit facility for the term of the agreement.

in 2024 was $9.3 million of income, compared to $2.3 million of income in 2023.

Interest income from our cash balances has increased due to higher central bank interest rates together with the benefit from our increasing cash balances.

Income taxes:

The effective tax rate was 13.6% and 20.2% in 2024 and 2023, respectively.

The adjusted effective tax rate, once adjusted for the items set out in the following table, was 23.0% in 2023 compared with 27.0% in 2022.

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.

The adjusted effective tax rate, as calculated by adjusting income before taxes and by adjusting income taxes for the items set out in the following table, was 26.4% in 2024 compared with 23.0% in 2023.

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.

4 unchanged sentences

Legacy cost of closed operations

Adjustment to fair value of contingent consideration

Pension scheme settlement charge

Recovery of historical pension costs

Acquisition costs

5 unchanged sentences

Tax on acquisition costs

Tax on pension scheme settlement charge

Tax on recovery of historical pension costs

Other discrete items

2 unchanged sentences

Adjusted effective tax rate

The adjusted effective tax rate is higher in 2023 than the GAAP effective tax rate, primarily due to elimination of the impact of other discrete items.

This mainly represents the benefit arising from adjustments to the tax charge for previous years arising from return to provision adjustments in relation to the federal and state tax returns filed in the U.S.

Our adjusted effective tax rate was lower in 2022 than the GAAP effective tax rate primarily due to the elimination of stock compensation activity.

Foreign income inclusions arise each year from certain types of income earned overseas being taxable under U.S.

Foreign tax credits can fully or partially offset these incremental U.S.

foreign income inclusions.

The utilization of foreign tax credits varies year on year as this is dependent on a number of variable factors which are difficult to predict and may prevent offset.

The GAAP effective tax rate and the adjusted effective tax rate in both 2023 and 2022 have been negatively impacted by these items.

As a consequence of the Company having operations outside of the U.S., it is exposed to foreign currency fluctuations.

These have had a positive impact on the GAAP effective tax rate and adjusted effective tax rate in 2023, and a negative impact in 2022.

The level of foreign-derived intangible income benefit that the Company is entitled to has also had a positive impact on the GAAP effective tax rate and the adjusted effective tax rate in both 2023 and 2022.

The adjusted effective tax rate was higher in 2024 than the GAAP effective tax rate, primarily due to the current year recognition of previously unrecognized tax benefits being eliminated in determining the adjusted effective tax rate.

This item arose due to the lapse of the statute of limitations associated with the unrecognized tax benefit in the final quarter of 2024.

For additional information on items which impact both the GAAP effective tax rate and the adjusted effective tax rate see Note 11 of the Notes to the Consolidated Financial Statements.

LIQUIDITY AND FINANCIAL CONDITION

Working Capital

In 2024 our working capital increased by $71.0 million, while our adjusted working capital decreased by $1.7 million.

The difference between these measures is primarily due to the exclusion of the increase in our cash and cash equivalents, together with the movements for income taxes.

In 2025 our working capital increased by $59.3 million, while our adjusted working capital increased by $33.9 million.

The difference between the net movement for current assets and current liabilities and the adjusted working capital measure shown in the table below, is primarily due to the movements for income taxes.

The Company believes that adjusted working capital, a non-GAAP financial measure, provides useful information to investors in evaluating the Company’s underlying performance and identifying operating trends.

10 unchanged sentences

Add back current portion of plant closure provisions

Add back current portion of acquisition-related contingent consideration

Add back current portion of operating lease liabilities

Add back current portion of unrecognized tax benefits

Adjusted working capital

The movements in our adjusted working capital are explained as follows:

We had an $18.1 million decrease in trade and other accounts receivable primarily driven by the timing of sales across our reporting segments and the mix of customer payment terms.

Days’ sales outstanding in our Performance Chemicals segment decreased from 64 days to 61 days;

increased in our Fuel Specialties segment from 55 days to 57 days;

and increased from 55 days to 83 days in our Oilfield Services segment.

We had a $0.9 million increase in inventories, net of a $6.5 million increase in allowances, as we manage inventory levels necessary to support future demand, while mitigating the risk of potential supply chain disruption for certain key raw materials.

We had an $0.6 million increase in trade and other accounts receivable due to the timing of sales across our reporting segments and the mix of customer payment terms.

Days’ sales outstanding in our Performance Chemicals segment increased from 61 days to 72 days;

remained the same in our Fuel Specialties segment at 57 days;

and decreased from 83 days to 64 days in our Oilfield Services segment.

We had a $28.3 million increase in inventories, net of a $5.8 million increase in allowances, as we manage the inventory levels necessary to support future demand, while mitigating the risk of potential supply chain disruption for certain key raw materials.

Days’ sales in inventory in our Performance Chemicals segment increased from 63 days to 65 days;

decreased in our Fuel Specialties segment from 121 days to 113 days;

increased in our Fuel Specialties segment from 113 days to 133 days;

and increased from 76 days to 83 days in our Oilfield Services segment.

Prepaid expenses increased $2.3 million, from $18.7 million to $21.0 million due to the impact of inflationary increases and the timing of some prepayments.

Prepaid expenses decreased $0.9 million, from $21.0 million to $20.1 million, primarily due to a reduction in the group's insurance costs.

We had a $5.9 million decrease in accounts payable and accrued liabilities, primarily due to the timing of supplier payments.

Creditor days (including goods received not invoiced) increased in our Performance Chemicals segment from 45 days to 46 days;

Creditor days (including goods received not invoiced) increased in our Performance

Chemicals segment from 46 days to 50 days;

increased in our Fuel Specialties segment from 44 days to 58 days;

and increased from 48 days to 68 days in our Oilfield Services segment.

and decreased from 68 days to 46 days in our Oilfield Services segment.

Operating Cash Flows

We generated cash from operating activities of $138.3 million in 2025 compared to $184.5 million in 2024.

The decrease in cash is primarily related to our increased working capital, being partly offset by the improvements to our earnings before depreciation, amortization and excluding the one off non-cash impact relating to the U.K.

defined benefit pension scheme buy-out.

The decrease in cash is related to lower earnings in our Performance Chemicals and Oilfield Services segments, together with increased working capital requirements and higher prepaid income taxes.

As at December 31, 2025 and 2024, we had cash and cash equivalents of $292.5 million and $289.2 million, respectively, of which $145.4 million and $133.9 million, respectively, were held by non-U.S.

subsidiaries principally in the U.K..

The $85.5 million increase in cash and cash equivalents in 2024 was driven by the cash inflows from operating activities, partly offset by higher working capital needs, our continued investments in capital projects including the development of our new ERP platform, payments for income taxes and the payment of our semi-annual dividends.

The $3.3 million increase in cash and cash equivalents in 2025 was driven by the cash inflows from operating activities, being partly offset by higher working capital needs, our continued investments in capital projects including the development of our new ERP platform, payments for income taxes, payments of our semi-annual dividends and the repurchases of our common stock.

As at December 31, 2025 and 2024, the Company had no borrowings under the revolving credit facility and as a result, the related deferred finance costs of $0.7 million (December 31, 2024 – $1.1 million) are now included within other current and non-current assets at the balance sheet date.

1 unchanged sentence

On May 31, 2023, Innospec Inc.

and certain subsidiaries of the Company entered into a Multicurrency Revolving Facility Agreement with various lenders, providing for a $250,000,000 four-year multicurrency revolving loan facility.

The Agreement also contains an accordion feature whereby the Company may elect to increase the total available borrowings by an aggregate amount of up to $125,000,000.

and certain subsidiaries of the Company entered into a Multicurrency Revolving Facility Agreement with various lenders, providing for a $250.0 million four-year multicurrency revolving loan facility.

The Agreement also contains an accordion feature whereby the Company may elect to increase the total available borrowings by an aggregate amount of up to $125.0 million.

The termination date of the facility is May 30, 2027, but the Agreement includes an option for the Company to request an extension of the facility for a further year.

11 unchanged sentences

We may not be able to borrow if an event of default is outstanding, which includes a material adverse change to our assets, operations or financial condition.

The credit facility contains a

number of restrictions that limit our ability, among other things, and subject to certain limited exceptions, to incur additional indebtedness, pledge our assets as security, guarantee obligations of third parties, make investments, effect a merger or consolidation, dispose of assets, or materially change our line of business.

The credit facility contains a number of restrictions that limit our ability, among other things, and subject to certain limited exceptions, to incur additional indebtedness, pledge our assets as security, guarantee obligations of third parties, make investments, effect a merger or consolidation, dispose of assets, or materially change our line of business.

At December 31, 2025, the Company had no obligations under finance leases.

Contractual Commitments

The following represents contractual commitments at December 31, 2024 and the effect of those obligations on future cash flows:

The following represents contractual commitments and the estimated additional cost to complete work in progress at December 31, 2025 and their effect on future cash flows:

(in millions)

2 unchanged sentences

Operating lease future commitments

Interest payments on debt

Interest payments on debt facility

Investing activities

7 unchanged sentences

Capital commitments relate to certain capital projects that the Company has committed to undertake.

Internally developed software relates to the planned completion costs for the implementation of our new Enterprise Resource Planning system for EMEA and ASPAC, including the acquisition costs for the software as well as the external and internal costs of the development.

Our 2025 outlook remains for continued growth in Performance Chemicals and Fuel Specialties and sequential quarterly recovery in Oilfield Services.

In all our businesses we share a common focus to deliver best-in-class surface active chemistry technologies and service to our global customers.

Our opportunity pipeline continues to center on technologies that lower emissions, enable cleaner formulations and increase operating efficiency.

We view these as long-term customer priorities in all our markets.

Operating cash generation is expected to remain positive and we continue to have significant flexibility and balance sheet strength for further M&A, dividend growth, share repurchases and organic investment.

Internally developed software relates to the planned completion costs for the implementation of our new Enterprise Resource Planning system for the Americas, including the acquisition costs for the software as well as the external and internal costs of the development.

Entering 2026, our focus is unchanged.

We will continue to deliver exceptional innovation, value and service to our global customers across all our end-markets.

We will also continue to prioritize margin and operating income improvement in Performance Chemicals and Oilfield Services.

In both segments, we expect these actions to drive growth in 2026.

In addition, we expect Fuel Specialties to continue to deliver consistent results.

With a net cash position at over $292.5 million, we continue to have significant balance sheet flexibility for M&A, dividend growth, organic investment and buybacks in 2026.

Environmental Matters and Plant Closures

1 unchanged sentence

As most of our manufacturing operations have been conducted outside the U.S., we expect that liability pertaining to the investigation and environmental remediation of contaminated properties is likely to be determined under non-U.S.

We evaluate costs for environmental remediation, decontamination and demolition projects on a regular basis.

We evaluate costs for asset retirement obligations, decontamination and demolition projects on a regular basis.

Full provision is made for those costs amounting to $65.1 million at December 31, 2025.

2 unchanged sentences

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 7. Management’s Discussion and Analysis