Quaker Chemical Corp. (NYSE:KWR) has spared the rod and spoiled the shareholders, showering them with profits as it pampers the metals industry with rolling lubricants, corrosion preventatives and finishing compounds. Flashy gains aside, this is a small-cap company rooted in simplicity, values as plain as a Quaker’s clothes closet.

Quakers — the company and the believers — are steeped in peace, friendship, individual ideas of God and appreciation of plainness. Headquartered unsurprisingly in Conshohocken, Pa., and founded in 1918, Quaker finally opened up to the world in 1999, deciding then to refashion its organizational structure to meet customer needs. It went global. Now, Quaker has regional headquarters in The Netherlands, Brazil and China.

Globalization has been worth the wait. Many CEOs rap passionately to shareholders about a company’s values, but Quaker CEO Ronald Naples takes it to another plane: he’s got the backbeat of Buddha and the concept of “character is destiny.” In the company’s 2007 annual report, Naples — who is stepping down as CEO in October — notes that by holding its course through tough times in 2004 and 2005, Quaker was able to boldly profit in 2006 and 2007.

“For me, the heart of this company character is captured in something I call the Quandary of the Wish. It’s been my unspoken guide for a long time, and what we’ve become as a company flows from it and the belief, hard work, and commitment of Quaker people all over the world,” Naples wrote to shareholders. He described the quandary as having to deal with the world as it is, not as wished for, but to also be unafraid to act “in a way that will create the tomorrow we want.”

Today is that tomorrow. Quaker reported record sales of $546 million in 2007, up 19% from 2006 and more than double sales in 1999, when the company went global. Increased sales in China and Europe helped, as did higher selling prices, which softened pressure from higher raw material costs. Margins in gross dollars improved but decreased as a percentage of sales as these costs were up from 2006 and climbed steadily through the year.

Profits are expanding as well. In 2007, Quaker’s earnings rose to $1.53 per diluted share, up 30% from $1.18 in 2006. The average of two analyst estimates put 2008 earnings at $1.89 per share, up 19%. Unusual for a small-cap growth company, Quaker in 2007 marked its 35th consecutive year paying a dividend; it raised its dividend in January to $0.23 per share, up from $0.215.

In the first quarter through March, earnings per share increased to $0.50 per diluted share from $0.35 in the first quarter of 2007, and net sales were $148 million, up 18% from the year-ago quarter. Quaker, with market capitalization of $308 million, is expected to release second-quarter results on July 30, 2008.

Plain though it may be, Quaker is upstaging its peers: through June 27, the S&P Specialty Chemicals Index had fallen 9.3% year to date, versus a 12% drop for the S&P Composite 1500 Index. Quaker settled Friday at $30.02, near the high end of a 52-week range of $15.27 to $33.45. Based on expectations for 2008 earnings at $1.89 per share, that puts Quaker’s price-earnings ratio at an unpretentious 16.

Demand for Quaker’s products is generally expected to remain stable, the company says, but volume in certain markets has been limited by end-market issues. For example, the automotive industry’s slowdown has tempered Quaker’s sales into that industry, and there has been a decline in steel demand, particularly in the United States.

Quaker’s three business segments are metalworking process chemicals, which made up 93% of 2007 sales; coatings (6%); and other chemical products (1%). The metalworking segment makes industrial process fluids for heavy industrial and manufacturing applications, and coatings go mainly to metal and concrete products.

Since a major part of Quaker’s revenues come from the sale of process fluids and services to manufacturers of steel, automobiles, appliances and durable goods, Quaker is subject to the same business cycles as these sectors. Quaker’s five largest customers account for approximately 29% of its net sales. Its main customer, Luxembourg-based steel maker Arcelor-Mittal (NYSE:MT), makes up about 10% of sales.

Despite its success, Quaker’s future is clouded by raw material prices. The company needs more than 1,000 raw materials — mineral oils, animal fats, vegetable oils, ethylene derivatives, solvents, you name it — for its products. Prices of many of these materials are influenced by crude oil prices, while biodiesel demand raises values for vegetable oil and animal fats. Consistent improvement in Quaker’s profit margins won’t come until prices for these necessities calm down.

But that’s just another welcome quandary for Quaker, who turns quandaries into wishes and makes those wishes come true.