IOSP Innospec Inc. - 10-K

Item 1A Risk Factors

The factors described below represent the principal risks associated with our business.

Global Conditions

Competition and market conditions may adversely affect our operating results.

In certain markets, our competitors are larger than us and may have greater access to financial, technological and other resources. As a result, competitors may be better able to adapt to changes in conditions in our industries, fluctuations in the costs of raw materials or changes in global economic conditions. Competitors may also be able to introduce new products with enhanced features that may cause a decline in the demand and sales of our products. Consolidation of customers or competitors, or economic problems of customers in our markets could cause a loss of market share for our products, place downward pressure on prices, result in payment delays or non-payment, or declining plant utilization rates. These risks could adversely impact our results of operations, financial position and cash flows.

Continuing adverse global economic conditions could materially affect our current and future businesses.

Global economic factors affecting our business include, but are not limited to, geopolitical instability in some markets, consumer demand for premium personal care and cosmetic products, miles driven by passenger and commercial vehicles, legislation to control fuel quality, impact of alternative propulsion systems, and oil and gas drilling and production rates. The availability, cost and terms of credit have been, and may continue to be, adversely affected by the foregoing factors and these circumstances have produced, and may in the future result in, illiquid markets and wider credit spreads, which may make it difficult or more expensive for us to obtain credit.

The level of inflation and energy costs may result in an adverse impact on the group’s results from employee wages and other costs of operations of our manufacturing sites.

Continuing uncertainties in the U.S. and international markets and economies leading to a decline in business and consumer spending could adversely impact our results of operations, financial position and cash flows.

Domestic or international natural disasters or terrorist attacks may disrupt our operations, decrease the demand for our products or otherwise have an adverse impact on our business.

Chemical related assets, and U.S. corporations such as us, may be at greater risk of future terrorist attacks than other possible targets in the U.S., the U.K. and throughout the world. Extraordinary events such as natural disasters may negatively affect local economies, including those of our customers or suppliers. The occurrence and consequences of such events cannot be predicted, but they can adversely impact economic conditions in general and in our specific markets. The resulting damage from such events could include loss of life, severe injury and property damage or site closure. Any of these matters could adversely impact our results of operations, financial position and cash flows.

While Innospec maintains business continuity plans that are intended to allow it to continue operations or mitigate the effects of events that could disrupt its business, Innospec cannot provide assurances that its plans would fully protect it from all such events. In addition, insurance maintained by Innospec to protect against property damage, loss of business and other related consequences resulting from catastrophic

events is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of Innospec’s damages or damages to others in the event of a catastrophe. In addition, insurance related to these types of risks may not be available now or, if available, may not be available in the future at commercially reasonable rates.

Our business and operations have been, and may in the future be, adversely affected by epidemics, pandemics, outbreaks of disease and other adverse public health developments, including coronaviruses.

Epidemics, pandemics, outbreaks of novel diseases and other adverse public health developments in countries and states where we operate may arise at any time. Such developments, including coronaviruses, have had, and in the future may have, an adverse effect on our business, financial condition and results of operations. These effects include a potentially negative impact on the availability of our key personnel, labor shortages and increased turnover, temporary closures of our facilities or facilities of our business partners, customers, suppliers, third-party service providers or other vendors, and interruption of domestic and global supply chains, distribution channels and liquidity and capital or financial markets. In particular, restrictions on or disruptions of transportation, port closures or increased border controls or closures, or other impacts on domestic and global supply chains or distribution channels, could increase our costs for raw materials and commodity costs, increase demand for raw materials and commodities from competing purchasers, limit our ability to meet customer demand or otherwise have a material adverse effect on our business, financial condition and results of operations or cash flows.

Precautionary measures that we may take in the future intended to limit the impact of any epidemic, pandemic, disease outbreak or other public health development, may result in additional costs. In addition, such epidemics, pandemics, disease outbreaks or other public health developments may adversely affect economies and financial markets throughout the world, which may affect our ability to obtain additional financing for our businesses and demand for our products and services. The extent to which pandemics will impact our business and our financial results in the future will depend on future developments, which are highly uncertain and cannot be predicted. Such developments may include the ongoing spread of viruses, disease severity, outbreak duration, extent of any reoccurrence of coronaviruses or any evolutions or mutations of viruses, and the availability, administration and effectiveness of vaccines and the development of therapeutic treatments that can restore consumer and business economic confidence.

Business Operations

We face risks related to our foreign operations that may adversely affect our business.

We serve global markets and operate in certain countries with political and economic instability, including the Middle East, Northern Africa, Asia-Pacific, Eastern Europe and South American regions. Our international operations are subject to numerous international business risks including, but not limited to, geopolitical and economic conditions, military actions and war, risk of expropriation, import and export restrictions, trade wars, tariffs, exchange controls, national and regional labor strikes, high or unexpected taxes, government royalties and restrictions on repatriation of earnings or proceeds from liquidated assets of overseas subsidiaries. Any of these could have a material adverse impact on our results of operations, financial position and cash flows.

We may not be able to consummate, finance or successfully integrate future acquisitions, partnerships or other opportunities into our business, which could hinder our strategy or result in unanticipated expenses and losses.

Part of our strategy is to pursue strategic acquisitions, partnerships and other opportunities to complement and expand our existing business. The success of these transactions depends on our ability to efficiently complete transactions, integrate assets and personnel acquired in these transactions and apply our internal control processes to these acquired businesses. Consummating acquisitions, partnerships or other opportunities and integrating acquisitions involves considerable expense, resources and management time commitments, and our failure to manage these as intended could result in unanticipated expenses and losses. Post-acquisition integration may result in unforeseen difficulties and may deplete significant financial and management resources that could otherwise be available for the ongoing development or expansion of existing operations. Furthermore, we may not realize the benefits of an acquisition in the way we anticipated when we first entered the transaction. Any of these risks could adversely impact our results of operations, financial position and cash flows.

Our success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.

Our future success will depend in substantial part on the continued services of our senior management. The loss of the services of one or more of our key executive personnel could affect the implementation of our business plan and result in reduced profitability. Our future success also depends on the continued ability to attract, develop, retain and motivate highly-qualified technical and support staff. We cannot guarantee that we will be able to retain our key personnel or attract or retain qualified personnel in the future. If we are unsuccessful in our efforts in this regard, this could adversely impact our results of operations, financial position and cash flows.

An information technology system failure may adversely affect our business.

We rely on information technology systems to transact our business. Like other global companies, we and our third-party service providers have, from time to time, been and will likely in the future be, subject to or targets of unauthorized or fraudulent access, including, but not limited to, physical or electronic break-ins or unauthorized tampering, as well as attempted cyber and other security threats and other computer-related penetrations including by state actors, terrorists or organized crime. Also, like other global companies, we have an increasing challenge of attracting and retaining highly qualified security personnel to assist us in combating these security threats. The frequency and sophistication of such threats continue to increase, with malicious actors frequently changing tactics and techniques. These threats often become further heightened in connection with geopolitical tensions.

The rapid evolution and increased adoption of artificial intelligence technologies may intensify our cyber security risks. The proliferation of third-party financial data aggregators and emerging technologies, including our use of automation, artificial intelligence and robotics, increase our cyber security risks and exposure. Artificial intelligence capabilities may be used to identify vulnerabilities and craft increasingly sophisticated cyber security attacks. Vulnerabilities may be introduced from the use of artificial intelligence by us, our customers, suppliers and other business partners and third-party providers.

Although we have implemented administrative and technical controls and take protective actions to reduce the risk of cyber incidents and breaches of our information technology, and we endeavor to modify such procedures as circumstances warrant, such measures may be insufficient to prevent physical and electronic break-ins, cyber-attacks or other security breaches to our computer systems.

Our systems, processes, software and network and those of our third-party service providers may be vulnerable to internal or external security breaches, computer viruses, malware or other malicious code or cyber-attacks, catastrophic events, power interruptions, hardware failures, fire, natural disasters, human error, system failures and disruptions, and other events that could have security consequences. An information technology failure or disruption could prevent us from being able to process transactions with our customers, operate our manufacturing facilities, and properly report those transactions in a timely manner. Our information technology costs may increase to ensure the appropriate level of cyber security as we continuously adapt to the changing technological environment.

While we have limited insurance coverage in place that may, subject to policy terms and conditions, cover certain aspects of cyber risks, this insurance coverage is subject to certain limitations and may not be applicable to a particular incident or otherwise be sufficient to cover all of our losses beyond any coverage limitations. Furthermore, a significant or protracted information technology system failure may result in a material adverse effect on our results of operations, financial position and cash flows.

Our ability to monitor and manage our business performance is dependent upon the effectiveness of our information technology systems.

We use a variety of information technology systems to operate and manage our businesses, including a number of enterprise resource planning (“ERP”) systems.

We are currently in the process of developing and implementing a new, company-wide, information system platform. The new platform provider is well established in the market. The implementation is a phased, risk-managed, site deployment following a multistage user acceptance program with the existing platforms providing a fallback position. In 2025 and 2024 we have implemented the new platform for a number of our sites across EMEA, ASPAC and the Americas. In connection with this implementation, the Company has updated, and continues to update, its internal controls over financial reporting, as necessary, to accommodate modifications to its business processes and accounting procedures.

The successful implementation of the project plan, through to completion, involves significant cost to the business, involving external implementation partners and the dedication of internal employee resources. Any problems we encounter may lead to increased costs, delayed completion, business interruption and lower than expected benefits from the new system in the short to medium term.

Furthermore, the potential for problems with any of our integrated and stand-alone information technology systems, including communication technologies, could negatively impact our customers, suppliers and employees. As a result, there could be a consequential adverse impact on our results of operations, financial condition and cash flows.

Decline in our AvGas business.

The sales of our AvGas product line for use in aviation gasoline are recorded within our Fuel Specialties business. The piston aviation industry has been, and is currently, researching a safe replacement fuel to replace leaded fuel. The U.S. Federal Aviation Administration (“FAA”) program (Piston Aviation Fuels Initiative) has been established to identify a replacement fuel, and candidate fuels are undergoing testing. In 2022, various general aviation industry groups in conjunction with the US EPA and FAA created a new team named Eliminate Aviation Gasoline Lead Emissions (“EAGLE”). This is a government-industry partnership that also encompasses fuel producers and distributors, airport operators, communities that support general aviation airports, and environmental experts. The most significant announcement impacting the Company is the stated aim of EAGLE to eliminate lead emissions from general aviation in

the U.S. by the end of 2030 with Alaska having a derogation out to end 2032. Regulatory action in the EU on the prohibition of TEL use by EU based leaded avgas blenders under the EU REACH Regulations has resulted in three users successfully applying for EU REACH Authorization permitting continued TEL use until end of April 2032.

While we expect that at some point in the future a replacement fuel will be identified, trialed and supplied to the industry, there is no currently available alternative. If a suitable product is identified and the use of leaded fuel is prohibited in piston aviation, the Company’s future operating income and cash flows from operating activities would be adversely impacted.

Failure to protect our intellectual property rights could adversely affect our future performance and cash flows.

Failure to maintain or protect our intellectual property rights may result in the loss of valuable technologies, or us having to pay other companies for infringing on their intellectual property rights. Measures taken by us to protect our intellectual property may be challenged, invalidated, circumvented or rendered unenforceable. In addition, international intellectual property laws may be more restrictive or may offer lower levels of protection than under U.S. law. We may also face patent infringement claims from our competitors which may result in substantial litigation costs, claims for damages or a tarnishing of our reputation even if we are successful in defending against these claims, which may cause our customers to switch to our competitors. Any of these events could adversely impact our results of operations, financial position and cash flows.

Industry Matters

Trends in oil and gas prices affect the level of exploration, development and production activity of our customers, and the demand for our services and products, which could have a material adverse impact on our business.

Demand for our services and products in our Oilfield Services business is particularly sensitive to the level of exploration, development and production activity of, and the corresponding capital spending by, oil and gas companies. The level of exploration, development and production activity is directly affected by trends in demand for and prices of oil and gas, which historically have been volatile and are likely to continue to be volatile. Prices for oil and gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and gas, market uncertainty, and a variety of other economic and political factors that are beyond our control. Even the perception of longer-term lower oil and gas prices by oil and gas companies can similarly reduce or defer major expenditures given the long-term nature of many large-scale development projects. Factors affecting the prices of oil and gas include, but are not limited to, the level of supply and demand for oil and gas; governmental regulations, including the policies of governments regarding the exploration for and production and development of their oil and gas reserves; weather conditions and natural disasters; worldwide political, military and economic conditions; the level of oil and gas production by non-OPEC (“Organization of the Petroleum Exporting Countries”) countries and the available excess production capacity within OPEC; the cost of producing and delivering oil and gas; and potential acceleration of the development of alternative power generation, fuels and engine technologies. Any prolonged reduction in oil and gas prices will depress the immediate levels of exploration, development and production activity, which could have a material adverse impact on our results of operations, financial position and cash flows.

We could be adversely affected by technological changes in our industry.

Our ability to maintain or enhance our technological capabilities, develop and market products and applications that meet changing customer requirements, and successfully anticipate or respond to technological changes in a cost effective and timely manner will likely impact our future business success. We compete on a number of fronts including, but not limited to, product quality and performance. In the case of some of our products, our competitors are larger than us and may have greater access to financial, technological and other resources. Technological changes include, but are not limited to, the development of electric and hybrid vehicles, and the subsequent impact on the demand for gasoline and diesel. Our inability to maintain a technological edge, innovate and improve our products could cause a decline in the demand and sales of our products, and adversely impact our results of operations, financial position and cash flows.

Sharp and unexpected fluctuations in the cost of our raw materials and energy could adversely affect our profit margins.

We use a variety of raw materials, chemicals and energy in our manufacturing and blending processes. Many of these raw materials are derived from petrochemical-based and vegetable-based feedstocks which can be subject to periods of rapid and significant cost instability. These fluctuations in cost can be caused by political instability in oil producing nations and elsewhere, weather conditions or other factors influencing global supply and demand of these materials, over which we have little or no control. 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. From time to time, we have entered into hedging arrangements for certain utilities and raw materials, but do not typically enter into hedging arrangements for all raw materials, chemicals or energy costs. If the costs of raw materials, chemicals or energy increase, and we are not able to pass on these cost increases to our customers, then profit margins and cash flows from operating activities would be adversely impacted. If raw material costs increase significantly, then our need for working capital could increase. Any of these risks could adversely impact our results of operations, financial position and cash flows.

Our business is subject to the risk of manufacturing disruptions, the occurrence of which would adversely affect our results of operations.

We are subject to hazards which are common to chemical manufacturing, blending, storage, handling and transportation. These hazards include, but are not limited to, fires, explosions, chemical spills and the release or discharge of toxic or hazardous substances together with the more generic risks of labor strikes or slowdowns, mechanical failure in scheduled downtime, extreme weather or transportation interruptions. These hazards could result in loss of life, severe injury, property damage, environmental contamination and temporary or permanent manufacturing cessation. Any of these factors could adversely impact our results of operations, financial position and cash flows.

Legal, Regulatory and Tax Matters

We are subject to extensive regulation of our international operations that could adversely affect our business and results of operations.

Due to our global operations, we are subject to many laws governing international commercial activity, conduct and relations, including, but not limited to, those that prohibit improper payments to government officials, restrict where and with whom we can do business and limit the products, software and technology that we can supply to certain countries and customers. These laws include, but are not limited to, the U.S. Foreign Corrupt Practices Act and U.K. Bribery Act, sanctions and assets control programs administered by the U.S. Department of the Treasury and/or the E.U. from time to time, and the U.S. export control laws such as the regulations under the U.S. Export Administration Act, as well as similar laws and regulations in other countries relevant to our business operations. Violations of any of these laws or regulations, which are often complex in their application, may result in criminal or civil penalties that could have a material adverse effect on our results of operations, financial position and cash flows.

We may have additional tax liabilities.

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. Significant judgment is required in estimating our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, any final determination pursuant to tax audits and any related litigation could be materially different to the amounts reflected in our Consolidated Financial Statements. Should any tax authority disagree with our estimates and determine any additional tax liabilities, including interest and penalties for us, this could adversely impact our results of operations, financial position and cash flows.

Our products are subject to extensive government scrutiny and regulation.

We are subject to regulation by federal, state, local and foreign government authorities. In some cases, we need government approval of our products, manufacturing processes and facilities before we may sell certain products. Many products are required to be registered with the U.S. Environmental Protection Agency (EPA), with the European Chemicals Agency (ECHA) and with comparable government agencies elsewhere. We are also subject to ongoing reviews of our products, manufacturing processes and facilities by government authorities, and must also produce product data and comply with detailed regulatory requirements.

In order to obtain regulatory approval of certain new products we must, among other things, demonstrate that the product is appropriate and effective for its intended uses, that the product has been appropriately tested for safety and that we are capable of manufacturing the product in accordance with applicable regulations. This approval process can be costly, time consuming, and subject to unanticipated and significant delays. We cannot be sure that necessary approvals will be granted on a timely basis or at all. Any delay in obtaining, or any failure to obtain or maintain, these approvals would adversely affect our ability to introduce new products and to generate income from those products. New or stricter laws and regulations may be introduced that could result in additional compliance costs and prevent or inhibit the development, manufacture, distribution and sale of our products. Such outcomes could adversely impact our results of operations, financial position and cash flows.

Legal proceedings and other claims could impose substantial costs on us.

We are from time to time involved in legal proceedings that result from, and are incidental to, the conduct of our business, including employee and product liability claims. Although we maintain insurance to protect us against a variety of claims, if our insurance coverage is not adequate to cover such claims, then we may be required to pay directly for such liabilities. Such outcomes could adversely impact our results of operations, financial position and cash flows.

Environmental liabilities and compliance costs could have a substantial adverse impact on our results of operations.

We operate a number of manufacturing sites and are subject to extensive federal, state, local and foreign environmental, health and safety laws and regulations, including, but not limited to, those relating to emissions to the air, discharges to land and water, and the generation, handling, treatment and disposal of hazardous waste and other materials on these sites. We operate under numerous environmental permits and licenses, many of which require periodic notification and renewal, which is not automatic. New or stricter laws and regulations could increase our compliance burden or costs and adversely affect our ability to develop, manufacture, blend, market and supply products.

Our operations, and the operations of prior owners of our sites, pose the risk of environmental contamination which may result in fines or criminal sanctions being imposed or require significant amounts in environmental remediation payments.

We anticipate that certain manufacturing sites may cease production over time and on closure, will require safely decommissioning and some environmental remediation. The extent of our obligations will depend on the future use of the sites that are affected and the environmental laws in effect at the time. We currently hold a plant closure provision in our Consolidated Financial Statements based on current known obligations, anticipated plans for sites or existing environmental laws. If there were to be unexpected or unknown contamination at these sites, or future plans for the sites or environmental laws change, then current provisions may prove inadequate, which could adversely impact our results of operations, financial position and cash flows.

We may be exposed to certain regulatory and financial risks related to climate change.

The outcome of new or potential legislation or regulation in the U.S. and other jurisdictions in which we operate may result in new or additional requirements, additional charges to fund energy efficiency activities, fees or restrictions on certain activities. Compliance with these initiatives may also result in additional costs to us, including, among other things, increased production costs, additional taxes, reduced emission allowances or additional restrictions on production or operations. Any climate change regulations enacted in the future could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. Even without such regulation, increased public awareness and adverse publicity about potential impacts on climate change emanating from us or our industry could harm us. We may not be able to recover the cost of compliance with new or more stringent laws and regulations, which could adversely affect our business and negatively impact our growth. Furthermore, the potential impacts of climate change and related regulation on our customers are highly uncertain and may adversely affect our results of operations, financial position and cash flows.

Key Third-Party Relationships

Having a small number of significant customers may have a material adverse impact on our results of operations.

Our principal customers are personal and home care companies, oil refiners, oil and gas exploration and production companies, and other chemical and industrial companies. These industries are characterized by a concentration of a few large participants. The loss of a significant customer, a material reduction in demand by a significant customer or termination or non-renewal of a significant customer contract could adversely impact our results of operations, financial position and cash flows.

A disruption in the supply of raw materials or transportation services would have a material adverse impact on our results of operations.

Although we try to anticipate problems with supplies of raw materials or transportation services by building certain inventories of strategic importance, transport operations are exposed to various risks such as extreme weather conditions, natural disasters, technological problems, work stoppages, geopolitical tensions, pandemics, as well as transportation regulations. If the Company experiences transportation problems, or if there are significant changes in the cost of these services, the Company may not be able to arrange efficient alternatives and timely means to obtain raw materials or ship finished products, which could adversely impact our results of operations, financial position and cash flows.

The inability of counterparties to meet their contractual obligations could have a substantial adverse impact on our results of operations.

Credit limits, ongoing credit evaluation and account monitoring procedures are used to minimize bad debt risk. Collateral is not generally required. We have in place a credit facility with a syndicate of banks. From time to time, we use derivatives, including, but not limited to, interest rate swaps, commodity swaps and foreign currency forward exchange contracts, in the normal course of business to manage market risks. We enter into derivative instruments with a diversified group of major financial institutions in order to manage the exposure to non-performance of such instruments.

We remain subject to market and credit risks including the ability of counterparties to meet their contractual obligations and the potential non-performance of counterparties to deliver contracted commodities or services at the contracted price. The inability of counterparties to meet their contractual obligations could have an adverse impact on our results of operations, financial position and cash flows.

Finance and Investment

We are exposed to fluctuations in foreign currency exchange rates, which may adversely affect our results of operations.

We generate a portion of our revenues and incur some operating costs in currencies other than the U.S. dollar. In addition, the financial position and results of operations of some of our overseas subsidiaries are reported in the relevant local currency and then translated to U.S. dollars at the applicable currency exchange rates for inclusion in our Consolidated Financial Statements. Fluctuations in these currency exchange rates affect the recorded levels of our assets and liabilities, results of operations and cash flows.

The primary exchange rate fluctuation exposures we have are with the E.U. euro, British pound sterling and Brazilian real. Exchange rates between these currencies and the U.S. dollar have fluctuated in recent years and may continue to do so. We cannot accurately predict future exchange rate variability among

these currencies or relative to the U.S. dollar. While we take steps to manage currency exchange rate exposure, including entering into hedging transactions, we cannot eliminate all exposure to future exchange rate variability. These exchange risks could adversely impact our results of operations, financial position and cash flows.

A high concentration of significant stockholders may have a material adverse impact on our stock price.

Approximately 37% of our common stock is held by three stockholders. A decision by any of these, or other substantial, stockholders to sell all or a significant part of its holding, or a sudden or unexpected disposition of our stock, could result in a significant decline in our stock price. This could in turn adversely impact our ability to access equity markets, which could adversely impact our results of operations, financial position and cash flows.

Our amended and restated by-laws designate specific Delaware courts as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated by-laws (the “By-laws”) provide that, unless we consent in writing to the selection of an alternative forum, the appropriate court within the State of Delaware is the sole and exclusive forum, to the fullest extent provided by law, for the following types of actions or proceedings:

any derivative action or proceeding brought on behalf of the Corporation,

any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders,

any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (“DGCL”), our amended and restated certificate of incorporation, the By-laws, or as to which the DGCL confers jurisdiction upon the Court of Chancery of the State of Delaware,

any action asserting a claim governed by the internal affairs doctrine, or

any other internal corporate claim as defined in Section 115 of the DGCL.

This includes, to the extent permitted by the federal securities laws, lawsuits asserting both state law claims and claims under the federal securities laws.

This forum selection provision in the By-laws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding the forum selection clause included in the By-laws, a court could rule that such a provision is inapplicable or unenforceable.

Application of the choice of forum provision may be limited in some instances by law. Section 27 of the Securities Exchange Act of 1934 (“Exchange Act”) provides for exclusive federal court jurisdiction over Exchange Act claims. Accordingly, to the extent the exclusive forum provision is held to cover a shareholder derivative action asserting claims under the Exchange Act, such claims could not be brought in the Delaware Court of Chancery and would instead be within the jurisdiction of the federal district court for the District of Delaware. Section 22 of the Securities Act of 1933 (“Securities Act”) creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Our stockholders will not be deemed by operation of our choice of forum provision to have waived our compliance with the federal securities laws and the

regulations promulgated thereunder. The selection of legal jurisdiction for litigation claims may impact the outcome of legal proceedings which could in turn impact our results of operations, financial position and cash flows.

The provisions of our revolving credit facility may restrict our ability to incur additional indebtedness or to otherwise expand our business.

Our revolving credit facility contains restrictive clauses which may limit our activities as well as operational and financial flexibility. We may not be able to borrow under the revolving credit facility if an event of default under the terms of the facility occurs. An event of default under the credit facility includes a material adverse change to our assets, operations or financial condition, and certain other events. The revolving credit facility also 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, undergo a merger or consolidation, dispose of assets or materially change our line of business.

In addition, the revolving credit facility requires us to meet certain financial ratios, including ratios based on net debt to earnings before income tax, depreciation and amortization (“EBITDA”) and net interest expense to EBITDA. Net debt, net interest expense and EBITDA are non-GAAP measures of liquidity defined in the credit facility. Our ability to meet these financial covenants depends upon the future successful operating performance of the business. If we fail to comply with these financial covenants, we would be in default under the revolving credit facility and the maturity of our outstanding debt could be accelerated unless we were able to obtain waivers from our lenders. If we were found to be in default under the revolving credit facility, it could adversely impact our results of operations, financial position and cash flows.

Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with our Consolidated Financial Statements and the Notes thereto.

EXECUTIVE OVERVIEW

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, 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

Note 2 of the Notes to the Consolidated Financial Statements includes a summary of the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements.

Plant Closure Provisions

We are subject to environmental laws in the countries in which we conduct business. Ellesmere Port in the U.K. 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, 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 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.

Goodwill

The Company’s reporting units, the level at which goodwill is assessed for potential impairment, are consistent with the reportable segments. The components in each segment (including products, markets and competitors) have similar economic characteristics and the segments, therefore, reflect the lowest level at which operations and cash flows can be sufficiently distinguished, operationally and for financial reporting purposes, from the rest of the Company.

To test for impairment the Company performs a qualitative step zero assessment to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a segment is less than the carrying amount prior to performing the quantitative goodwill impairment test. 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, we assess the fair value based on projected 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. 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.

At December 31, 2025 we had $399.0 million of goodwill relating to our Performance Chemicals, Fuel Specialties and Oilfield Services segments. 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. 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.

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

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

(in millions)

Net sales:

Performance Chemicals

Fuel Specialties

Oilfield Services

Total net sales

Gross profit:

Performance Chemicals

Fuel Specialties

Oilfield Services

Total gross profit

Operating income:

Performance Chemicals

Fuel Specialties

Oilfield Services

Corporate costs

Adjustment to fair value of contingent consideration

Restructuring charge

Impairment of property, plant and equipment

Impairment of intangible assets

Profit on disposal

Total operating income

Other income/(expense), net

Pension scheme settlement charge

Interest income/(expense), net

Income before income taxes

Income taxes

Net income

Results of Operations – Fiscal 2025 compared to Fiscal 2024:

(in millions, except ratios)

Change

Net sales:

Performance Chemicals

Fuel Specialties

Oilfield Services

Total net sales

Gross profit:

Performance Chemicals

Fuel Specialties

Oilfield Services

Total gross profit

Gross margin (%):

Performance Chemicals

Fuel Specialties

Oilfield Services

Aggregate

Operating expenses:

Performance Chemicals

Fuel Specialties

Oilfield Services

Corporate costs

Adjustment to fair value of contingent consideration

Restructuring charge

Impairment of property, plant and equipment

Impairment of intangible assets

Profit on disposal of property, plant and equipment

Total operating expenses

Financial information with respect to our domestic and foreign operations is contained in Note 3 of the Notes to the Consolidated Financial Statements.

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:

Change (%)

Americas

EMEA

ASPAC

Total

Volume

Price and product mix

Exchange rates

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

Operating expenses: 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

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:

Change (%)

Americas

EMEA

ASPAC

AvGas

Total

Volume

Price and product mix

Exchange rates

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 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 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

Net sales: 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 in the current year were adversely impacted by the absence of production chemical activity in Mexico.

Gross margin: 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 $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 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 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): for 2025 and 2024, includes the following:

(in millions)

Change

Net pensions credit/(expense)

Profit attributable to non-controlling interests

Sundry expense

Foreign exchange gains/(losses) on translation

Foreign currency forward contracts gains/(losses)

Interest income/(expense), net: 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, 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. 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.

(in millions, except ratios)

Income before income taxes

Adjustment for stock compensation

Indemnification asset regarding tax audit

Legacy cost of closed operations

Adjustment to fair value of contingent consideration

Pension scheme settlement charge

Recovery of historical pension costs

Impairment of acquired intangible assets

Impairment of property, plant and equipment

Adjusted income before income taxes

Income taxes

Adjustment of income tax provisions

Tax on stock compensation

Tax loss / (gain) on distribution

Tax on legacy cost of closed operations

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

Adjusted income taxes

GAAP effective tax rate

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.

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.

Results of Operations – Fiscal 2024 compared to Fiscal 2023:

(in millions, except ratios)

Change

Net sales:

Performance Chemicals

Fuel Specialties

Oilfield Services

Total net sales

Gross profit:

Performance Chemicals

Fuel Specialties

Oilfield Services

Total gross profit

Gross margin (%):

Performance Chemicals

Fuel Specialties

Oilfield Services

Aggregate

Operating expenses:

Performance Chemicals

Fuel Specialties

Oilfield Services

Corporate costs

Adjustment to fair value of contingent consideration

Profit on disposal

Total operating expenses

Financial information with respect to our domestic and foreign operations is contained in Note 3 of the Notes to the Consolidated Financial Statements.

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:

Change (%)

Americas

EMEA

ASPAC

Total

Volume

Acquisition

Price and product mix

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 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 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: 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 .

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:

Change (%)

Americas

EMEA

ASPAC

AvGas

Total

Volume

Price and product mix

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.

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.

Operating expenses: 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

Net sales: 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. 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.

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.

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.

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.

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): for 2024 and 2023, includes the following:

(in millions)

Change

Net pensions credit

Profit attributable to non-controlling interests

Sundry expense

Foreign exchange gains/(losses) on translation

Foreign currency forward contracts gains/(losses)

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.

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

(in millions, except ratios)

Income before income taxes

Adjustment for stock compensation

Indemnification asset regarding tax audit

Legacy cost of closed operations

Adjustment to fair value of contingent consideration

Pension scheme settlement charge

Recovery of historical pension costs

Acquisition costs

Adjusted income before income taxes

Income taxes

Adjustment of income tax provisions

Tax on stock compensation

Tax loss / (gain) on distribution

Tax on legacy cost of closed operations

Tax on acquisition costs

Tax on pension scheme settlement charge

Tax on recovery of historical pension costs

Other discrete items

Adjusted income taxes

GAAP effective tax rate

Adjusted effective tax rate

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.

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. during 2023.

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 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. Management uses this non-GAAP financial measure internally to allocate resources and evaluate the performance of the Company’s operations. Items excluded from the adjusted working capital calculation are listed in the table below and represent factors which do not fluctuate in line with the day to day working capital needs of the business.

(in millions)

Total current assets

Total current liabilities

Working capital

Less cash and cash equivalents

Less prepaid income taxes

Less other current assets

Add back current portion of accrued income taxes

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

Adjusted working capital

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

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; 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 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 46 days to 50 days; increased in our Fuel Specialties segment from 44 days to 58 days; 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 related to lower earnings in our Performance Chemicals and Oilfield Services segments, together with increased working capital requirements and higher prepaid income taxes.

Cash

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 $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.

Debt

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. During 2025 and 2024, the Company did not draw down or repay any borrowing on its revolving credit facility.

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 $250.0 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. The agreement replaced the Company’s credit facility agreement dated September 26, 2019. See Note 12 to the Notes to the Consolidated Financial Statements for additional details.

Effective as of May 20, 2024, the termination date of the Facility was extended from May 30, 2027 to May 31, 2028 in accordance with the terms of the Company’s multicurrency revolving facility agreement (the “Facility Agreement”). No other terms of the Facility Agreement or the Facility were modified. The Company paid a customary extension fee in connection with the extension of the Facility as contemplated by the Facility Agreement. As a consequence, the Company has capitalized a further $0.3 million of costs relating to the new Agreement which are to be amortized over the period to May 31, 2028.

The revolving credit facility contains terms which, if breached, would result in it becoming repayable on demand. It requires, among other matters, compliance with the following financial covenant ratios measured on a quarterly basis: (1) our ratio of net debt to EBITDA must not be greater than 3.5:1.0 and (2) our ratio of EBITDA to net interest must not be less than 4.0:1.0. Management has determined that the Company has not breached these covenants and does not expect to breach these covenants for the next 12 months.

The revolving credit facility contains restrictions which may limit our activities as well as operational and financial flexibility. 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.

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

Contractual Commitments

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)

Total

Thereafter

Operating activities

Operating lease liabilities

Operating lease future commitments

Interest payments on debt facility

Investing activities

Capital commitments

Internally developed software

Total

Operating activities

Operating lease commitments relate primarily to right-of-use assets at third-party manufacturing facilities, office space, motor vehicles and various items of computer and office equipment which are expected to be renewed and replaced in the normal course of business.

The interest payments on debt are the commitment fees for our $250.0 million revolving credit facility. Any interest income has been excluded.

Investing activities

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 the Americas, including the acquisition costs for the software as well as the external and internal costs of the development.

Outlook

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

Under certain environmental laws the Company is responsible for the environmental remediation of hazardous substances or wastes at currently or formerly owned or operated properties.

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. law.

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. See Note 13 of the Notes to the Consolidated Financial Statements for further details. Expenditure utilizing these provisions was $5.8 million, $3.8 million and $4.9 million in the years 2025, 2024 and 2023, respectively.