Le Lézard
Classified in: Business
Subjects: ERN, ERP

Stepan Reports First Quarter 2024 Results


NORTHBROOK, Ill., April 30, 2024 /PRNewswire/ -- Stepan Company (NYSE: SCL) today reported:

First Quarter 2024 Highlights

"We are encouraged by the first quarter volume growth in several of our core end markets.  Surfactants experienced double-digit volume growth within the Personal Care and Oil Field end markets and with our Distribution partners.  As expected, Latin America Surfactant volumes grew double digits as we recovered Consumer volumes in Mexico.  Rigid and Specialty Polyols volume grew 4% and 7%, respectively, while Specialty Products volume was up double digits.  Soft demand in the Agricultural market due to continued inventory destocking delivered a poor comparison to the prior year first quarter record Agricultural volumes.  This weakness in the Agricultural market, coupled with lower Phthalic Anhydride volumes due to operational issues at our Millsdale site, mostly offset volume recovery across our core markets in Surfactants, Polymers and Specialty Products. Margins were in line with expectations despite unfavorable product mix," said Scott Behrens, President and Chief Executive Officer.  "I am pleased with our first quarter progress towards our full year $50 million cost reduction program.  We delivered adjusted EBITDA growth of 5% and generated positive free cash flow despite higher operating costs related to operational interruptions at our Millsdale site, pre-commissioning expenses at our new Alkoxylation investment in Pasadena, Texas and the continuing impact of Agricultural destocking."

Financial Summary



Three Months Ended
March 31,


($ in thousands, except per share data)


2024



2023



%
Change


Net Sales


$

551,418



$

651,436




(15)

%

Operating Income


$

20,169



$

21,057




(4)

%

Net Income


$

13,893



$

16,142




(14)

%

Earnings per Diluted Share


$

0.61



$

0.70




(13)

%











Adjusted Net Income *


$

14,656



$

16,419




(11)

%

Adjusted Earnings per
   Diluted Share *


$

0.64



$

0.71




(10)

%



* See Table II for reconciliations of non-GAAP adjusted net income and adjusted earnings per diluted share.


Percentage Change in Net Sales

Net sales in the first quarter of 2024 decreased 15% year-over-year primarily due to lower selling prices that were mainly attributable to the pass-through of lower raw material costs and less favorable product mix.  These lower selling prices were partially offset by a 1% increase in global sales volume and the favorable impact of foreign currency translation.



Three Months Ended
March 31, 2024


Volume



1

%

Selling Price & Mix



(18)

%

Foreign Translation



2

%

Total



(15)

%

Segment Results



Three Months Ended
March 31,


($ in thousands)


2024



2023



%
Change


Net Sales










Surfactants


$

390,820



$

467,828




(16)

%

Polymers


$

145,508



$

161,127




(10)

%

Specialty Products


$

15,090



$

22,481




(33)

%

Total Net Sales


$

551,418



$

651,436




(15)

%

 



Three Months Ended
March 31,


($ in thousands, all amounts pre-tax)


2024



2023



%
Change


Operating Income










Surfactants


$

26,079



$

27,056




(4)

%

Polymers


$

8,382



$

10,004




(16)

%

Specialty Products


$

4,268



$

2,530




69

%

Total Segment
   Operating Income


$

38,729



$

39,590




(2)

%

Corporate Expenses


$

(18,560)



$

(18,533)




0

%

Consolidated
   Operating Income


$

20,169



$

21,057




(4)

%

 



Three Months Ended
March 31,


($ in millions)


2024



2023



%
Change


EBITDA










   Surfactants


$

43.8



$

42.4




3

%

   Polymers


$

16.4



$

18.3




(10)

%

   Specialty Products


$

5.8



$

3.9




49

%

   Unallocated Corporate


$

(15.8)



$

(16.3)




(3)

%

Consolidated EBITDA


$

50.2



$

48.3




4

%











Adjusted EBITDA










   Surfactants


$

43.8



$

42.3




4

%

   Polymers


$

16.4



$

18.3




(10)

%

   Specialty Products


$

5.8



$

3.9




49

%

   Unallocated Corporate


$

(14.8)



$

(15.8)




(6)

%

Consolidated Adjusted EBITDA


$

51.2



$

48.7




5

%

Consolidated adjusted EBITDA increased $2.5 million, or 5%, year-over-year as slightly higher sales volume and margin improvement more than offset $5.8 million of negative impact associated with the operational interruptions at the Millsdale plant site.  

Outlook

"Looking forward, we believe sales volumes will continue to gradually improve due to ongoing recovery in Rigid Polyols and growth in Surfactant volumes including the expected recovery of the Agricultural business in the second half of the year," said Scott Behrens, President and Chief Executive Officer.  "We remain focused on delivering $50 million in pre-tax savings from our previously shared cost reduction program to help offset inflationary pressures, increased expenses associated with the commissioning of our new Pasadena alkoxylation assets, higher incentive-based compensation expenses and expenses associated with the operational issues at our Millsdale site.  Free cash flow should continue to improve versus prior year as we finish construction on our Pasadena investment and benefit from higher Agriculture volumes in the second half of the year.  Continued gradual growth in market volumes, improved operational performance and our continued focus on cost reduction should position us to deliver full year adjusted EBITDA growth and positive free cash flow.  We remain confident in our long-term growth and innovation initiatives." 

Notes

(1)

Adjusted net income and adjusted earnings per share are non-GAAP measures which exclude deferred compensation income/expense, cash-settled stock appreciation rights (SARs) income/expense, certain environmental remediation-related costs as well as other significant and infrequent/non-recurring items. See Table II for reconciliations of non-GAAP adjusted net income and adjusted earnings per diluted share.



(2)

EBITDA and adjusted EBITDA are non-GAAP measures.  See Table VI for calculations and GAAP reconciliations of EBITDA and adjusted EBITDA.



(3)

Free Cash Flow is a non-GAAP measure and reflects cash generated from operations minus capital expenditures.

Conference Call

Stepan Company will host a conference call to discuss its fourth quarter and full year results at 8:00 a.m. ET (7:00 a.m. CT) on April 30, 2024. The call can be accessed by phone and webcast. To access the call by phone, please click on this Registration Link, complete the form and you will be provided with dial in details and a PIN.  To avoid delays, we encourage participants to dial into the conference call ten minutes ahead of the scheduled start time.  The webcast can be accessed through the Investors/Conference Calls page at www.stepan.com. A webcast replay of the conference call will be available at the same location shortly after the call.

Supporting Slides

Slides supporting this press release will be made available at www.stepan.com through the Investors/Presentations page at approximately the same time as this press release is issued.

Corporate Profile

Stepan Company is a major manufacturer of specialty and intermediate chemicals used in a broad range of industries. Stepan is a leading merchant producer of surfactants, which are the key ingredients in consumer and industrial cleaning and disinfection compounds and in agricultural and oilfield solutions. The Company is also a leading supplier of polyurethane polyols used in the expanding thermal insulation market, and CASE (Coatings, Adhesives, Sealants, and Elastomers) industries.

Headquartered in Northbrook, Illinois, Stepan utilizes a network of modern production facilities located in North and South America, Europe and Asia. 

The Company's common stock is traded on the New York Stock Exchange (NYSE) under the symbol SCL. For more information about Stepan Company please visit the Company online at www.stepan.com

More information about Stepan's sustainability program can be found on the Sustainability page at www.stepan.com

Certain information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements about Stepan Company's plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, Stepan Company's actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "guidance," "predict," "potential," "continue," "likely," "will," "would," "should," "illustrative" and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by Stepan Company and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond Stepan Company's control, that could cause actual results to differ materially from the forward-looking statements contained in this news release. Such risks, uncertainties and other important factors include, among other factors, the risks, uncertainties and factors described in Stepan Company's Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports, and include (but are not limited to) risks and uncertainties related to  accidents, unplanned production shutdowns or disruptions in manufacturing facilities; reduced demand due to customer product reformulations or new technologies; our inability to successfully develop or introduce new products; compliance with laws; our ability to identify suitable acquisition candidates and successfully complete and integrate acquisitions; global competition; volatility of raw material and energy costs and supply; disruptions in transportation or significant changes in transportation costs; downturns in certain industries and general economic downturns; international business risks, including currency exchange rate fluctuations, legal restrictions and taxes; unfavorable resolution of litigation against us; maintaining and protecting intellectual property rights; our ability to access capital markets; global political, military, security or other instability; costs related to expansion or other capital projects; interruption or breaches of information technology systems; our ability to retain executive management and key personnel; and our debt covenants.

These forward-looking statements are made only as of the date hereof, and Stepan Company undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

* * * * *

Tables follow

 

Table I


STEPAN COMPANY

For the Three Months Ended March 31, 2024 and 2023

(Unaudited ? in 000's, except per share data)




Three Months Ended
March 31,




2024



2023


Net Sales


$

551,418



$

651,436


Cost of Sales



481,137




577,876


Gross Profit



70,281




73,560


Operating Expenses:







Selling



11,388




13,067


Administrative



22,690




22,639


Research, Development and Technical Services



14,256




15,138


Deferred Compensation Expense



1,778




1,502





50,112




52,346









Business Restructuring Expense



-




157









Operating Income



20,169




21,057









Other Income (Expense):







Interest, Net



(3,071)




(2,822)


Other, Net



2,362




1,668





(709)




(1,154)









Income Before Provision for Income Taxes



19,460




19,903


Provision for Income Taxes



5,567




3,761


Net Income



13,893




16,142


Net Income Per Common Share







Basic


$

0.61



$

0.71


Diluted


$

0.61



$

0.70


Shares Used to Compute Net Income Per
   Common Share







Basic



22,824




22,757


Diluted



22,948




22,994


 

Table II


Reconciliation of Non-GAAP Net Income and Earnings per Diluted Share*




Three Months Ended
March 31,


($ in thousands, except per share amounts)


2024



EPS



2023



EPS


Net Income Reported


$

13,893



$

0.61



$

16,142



$

0.70















Deferred Compensation
   (Income) Expense


$

(388)



$

(0.02)



$

(104)



$

-


Business Restructuring Expense


$

-



$

-



$

115



$

-


Cash-Settled SARs (Income) Expense


$

-



$

-



$

(40)



$

-


Environmental Remediation
    Expense


$

1,151



$

0.05



$

306



$

0.01


Adjusted Net Income


$

14,656



$

0.64



$

16,419



$

0.71



* All amounts in this table are presented after-tax

The Company believes that certain non-GAAP measures, in conjunction with comparable GAAP measures, are useful for evaluating the Company's operating performance and financial condition.  The Company uses this non-GAAP information as an indicator of business performance and evaluates management's effectiveness with specific reference to these indicators.  Management believes that these non-GAAP financial measures provide useful supplemental information because they exclude non-operational items that affect comparability between years.  These measures should be considered in addition to, not as substitutes for or superior to, measures of financial performance prepared in accordance with GAAP and may differ from similarly titled measures presented by other companies.  The Company's Annual Report on Form 10-K for the year ended December 31, 2023 contains additional information regarding the use of non-GAAP financial measures.

Summary of First Quarter 2024 Adjusted Net Income Items

Adjusted net income excludes non-operational deferred compensation income/expense, cash-settled SARs income/expense, certain environmental remediation costs and other significant and infrequent or non-recurring items.

 

Table III

Reconciliation of Pre-Tax to After-Tax Adjustments


Management uses the non-GAAP adjusted net income metric to evaluate the Company's operating performance. 
Management excludes the items listed in the table below because they are non-operational items.  The cumulative
tax effect was calculated using the statutory tax rates for the jurisdictions in which the transactions occurred.




Three Months Ended
March 31,


($ in thousands, except per share amounts)


2024



EPS



2023



EPS


Pre-Tax Adjustments













Deferred Compensation
    (Income) Expense


$

(517)






$

(137)





Business Restructuring Expense


$

-






$

157





Cash-Settled SARs Income


$

-






$

(53)





Environmental Remediation
    Expense


$

1,534






$

409





   Total Pre-Tax Adjustments


$

1,017






$

376


















Cumulative Tax Effect
    on Adjustments


$

(254)






$

(99)


















After-Tax Adjustments


$

763



$

0.03



$

277



$

0.01



















 

Table IV

Deferred Compensation Plans


The full effect of the deferred compensation plans on quarterly pre-tax income was $0.5 million of income versus
$0.1 million of income in the prior year.  The quarter-end market prices of Company stock and the impact of
deferred compensation on specific income statement line items is summarized below:




2024



2023




3/31



12/31



9/30



6/30



3/31


Stepan Company


$

90.04



$

94.55



$

74.97



$

95.56



$

103.03























 



Three Months Ended
March 31,


($ in thousands)


2024



2023


Deferred Compensation







Operating Expense


$

(1,778)



$

(1,502)


Other, net ? Mutual Fund Gain



2,295




1,639


Total Pre-Tax


$

517



$

137


Total After-Tax


$

388



$

104


 

Effects of Foreign Currency Translation


The Company's foreign subsidiaries transact business and report financial results in their
respective local currencies. These results are translated into U.S. dollars at average foreign exchange rates appropriate for the reporting period.  The table below presents the impact that foreign currency translation had on select income statement line items. 


($ in millions)


Three Months Ended
March 31,



Decrease



Change
Due to
Foreign
Currency
Translation




2024



2023








Net Sales


$

551.4



$

651.4



$

(100.0)



$

11.8


Gross Profit



70.3




73.6



$

(3.3)




1.3


Operating Income



20.2




21.1



$

(0.9)




0.7


Pretax Income



19.5




19.9



$

(0.4)




0.6


 

Corporate Expenses




Three Months Ended
March 31,


($ in thousands)


2024



2023



%
Change


Total Corporate Expenses


$

18,560



$

18,533




0

%

Less:










   Deferred Compensation Expense


$

1,778



$

1,502




18

%

   Business Restructuring Expense


$

-



$

157




(100)

%

   Environmental Remediation
      Expense


$

1,534



$

409



NM


Adjusted Corporate Expenses


$

15,248



$

16,465




(7)

%

Adjusted Corporate expenses decreased $1.2 million, or 7% for the quarter. This decrease was primarily due to productivity measures implemented in late 2023 that were partially offset by higher incentive-based compensation accruals.

Table V


Stepan Company

Consolidated Balance Sheets

March 31, 2024 and December 31, 2023




March 31, 2024



December 31, 2023


ASSETS







Current Assets


$

869,806



$

851,883


Property, Plant & Equipment, Net



1,205,634




1,206,665


Other Assets



297,707




304,806


Total Assets


$

2,373,147



$

2,363,354


LIABILITIES AND STOCKHOLDERS' EQUITY







Current Liabilities


$

628,853



$

607,870


Deferred Income Taxes



10,257




10,373


Long-term Debt



400,121




401,248


Other Non-current Liabilities



119,394




127,373


Total Stepan Company Stockholders' Equity



1,214,522




1,216,490


Total Liabilities and Stockholders' Equity


$

2,373,147



$

2,363,354


 

Selected Balance Sheet Information 


The Company's total debt decreased by $8.1 million and cash decreased by $4.0 million versus December 31, 2023. 
The decrease in debt primarily reflects lower borrowings against the Company's revolving credit facility and lower
foreign credit line borrowings.  The Company's net debt level decreased $4.1 million versus December 31, 2023 and
the net debt ratio remained at 30% (Net Debt and Net Debt Ratios are non-GAAP measures, reconciliations of which
are shown in the table below).  Management uses the non-GAAP net debt metric to show a more complete picture
of the Company's overall liquidity, financial flexibility and leverage level


($ in millions)

March 31, 2024



December 31, 2023


Net Debt






Total Debt

$

646.0



$

654.1


Cash


125.8




129.8


Net Debt

$

520.2



$

524.3


Equity


1,214.5




1,216.5


Net Debt + Equity

$

1,734.7



$

1,740.8


Net Debt / (Net Debt + Equity)


30

%



30

%

The major working capital components were:

($ in millions)

March 31, 2024



December 31, 2023


Net Receivables

$

446.6



$

422.1


Inventories


257.1




265.6


Accounts Payable


(256.9)




(233.0)



$

446.8



$

454.7


 

Table VI


Reconciliations of Non-GAAP EBITDA and Adjusted EBITDA to Operating Income


Management uses the non-GAAP EBITDA and adjusted EBITDA metrics to evaluate the Company's operating performance. 
Management excludes the items listed in the table below because they are non-operational items.




Three Months Ended
March 31, 2024


















($ in millions)


Surfactants



Polymers



Specialty
Products



Unallocated
Corporate



Consolidated


Operating Income


$

26.1



$

8.4



$

4.3



$

(18.6)



$

20.2


   Depreciation and Amortization


$

17.7



$

8.0



$

1.5



$

0.4



$

27.6


   Other, Net Income











$

2.4



$

2.4


EBITDA


$

43.8



$

16.4



$

5.8



$

(15.8)



$

50.2


   Deferred Compensation


$

-



$

-



$

-



$

(0.5)



$

(0.5)


   Environmental Remediation


$

-



$

-



$

-



$

1.5



$

1.5


Adjusted EBITDA


$

43.8



$

16.4



$

5.8



$

(14.8)



$

51.2




















Three Months Ended
March 31, 2023


















($ in millions)


Surfactants



Polymers



Specialty
Products



Unallocated
Corporate



Consolidated


Operating Income


$

27.1



$

10.0



$

2.5



$

(18.5)



$

21.1


   Depreciation and Amortization


$

15.3



$

8.3



$

1.4



$

0.5



$

25.5


   Other, Net Income


$

-



$

-



$

-



$

1.7



$

1.7


EBITDA


$

42.4



$

18.3



$

3.9



$

(16.3)



$

48.3


   Deferred Compensation


$

-



$

-



$

-



$

(0.1)



$

(0.1)


   Cash Settled SARs


$

(0.1)



$

-



$

-



$

-



$

(0.1)


   Business Restructuring


$

-



$

-



$

-



$

0.2



$

0.2


   Environmental Remediation


$

-



$

-



$

-



$

0.4



$

0.4


Adjusted EBITDA


$

42.3



$

18.3



$

3.9



$

(15.8)



$

48.7


















 

SOURCE Stepan Company


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