Summary of Stepping Company Conference Call Company Overview - Stepping Company is listed on the New York Stock Exchange under the symbol SCL [2] - The company focuses on priority growth markets with strategic tailwinds for growth and emphasizes customer-centric operations [3] Key Business Segments - The company operates in three reporting segments: Surfactants, Polymers, and Specialty Products [6] - Surfactants serve six key end markets: agricultural chemicals, oil field chemicals, construction and industrial applications, personal care products, household cleaning, and laundry [6] - The Polymers segment primarily focuses on rigid polyols for insulation products [7] - Specialty Products cater to niche markets such as beverages and baby formula [7] Growth Drivers - Demand for food is projected to grow significantly, driving agricultural chemicals [8] - Oilfield chemicals are expected to see growth due to increased productivity and energy efficiency [9] - Long-term government investments in infrastructure are anticipated to boost the construction and industrial solutions segment [9] - The shift towards natural ingredients in personal care products is a key market driver [10] Financial Performance and Investments - The company has made significant investments, including the largest capital investment in its history with a new coxylation facility in Pasadena, Texas [4][12] - Recent growth in agricultural and oilfield surfactants has been noted, with double-digit growth in the first half of the year [19] - The company aims to focus on high-margin, high-growth end markets to drive EBITDA and free cash flow [10] Customer Base Expansion - Stepping Company added approximately 1,800 new customers in the last year, indicating a strong trend in customer acquisition [15][29] - The company has a potential market of 22,000 new and existing customers for further sales opportunities [15] - The focus is on expanding into Tier two and Tier three customer bases, which are smaller accounts that can grow over time [31] Management and Strategy - The management team has undergone changes, with a new CEO appointed in October and a new CFO recently [27][43] - Executive compensation is aligned with strategic targets such as net income, EBITDA, and free cash flow growth [26] - The company is committed to returning cash to shareholders, having increased dividends for 57 consecutive years [23][39] Challenges and Market Conditions - Sales have been trending downwards over the past five years, influenced by raw material cost fluctuations and weakness in agricultural sales [17][18] - The company is focused on managing its balance sheet, currently at a net leverage of 2.9, with plans to deleverage further [25] Innovation and R&D - Stepping Company employs over 230 chemists and has 14 application centers globally, introducing 33 new products in 2024, which accounts for about 10% of revenue [12][42] - The company emphasizes customer-centric innovation, providing tailored solutions and technical support to clients [13] Conclusion - Stepping Company is positioned for growth through strategic investments, a focus on high-margin markets, and an expanding customer base, while navigating challenges in sales trends and market conditions [10][19]

Financial Data and Key Metrics Changes - The company reported a strong first half performance with underlying EBITDA of NZD 86.7 million, up 43% year-over-year [3] - Underlying NPAT increased by 48% to NZD 56.9 million, while NPAT attributable to shareholders rose by 72% to NZD 48.9 million [3][4] - Net debt decreased by NZD 14.4 million to NZD 67.5 million as of June 30, 2025, reflecting income from earnings and proceeds from the sale of orchards [7][8] Performance by Business Lines - The Global Proteins division maintained steady performance with underlying EBITDA of NZD 29.7 million, consistent with the previous year [6] - The Horticulture division achieved exceptional results with underlying EBITDA of NZD 53.2 million, up 77% due to increased apple volumes and favorable pricing [7][11] - Logistics reported underlying EBITDA of NZD 6.1 million, a 60% increase attributed to higher freight volumes [12] Market Data and Key Metrics Changes - The horticulture division's total own growing export volumes are forecasted to be 3.7 million TCEs, a projected increase of around 21% compared to 2024 [11] - The Asia and Middle East markets are expected to account for approximately 85% of total fruit sold, with strong demand anticipated due to supply shortages [11] Company Strategy and Industry Competition - The company is focused on strategic growth initiatives, particularly in horticulture and logistics, leveraging investments in premium apple varieties targeted at key markets [5][16] - The logistics division is actively seeking opportunities to expand its freight forwarding model, enhancing connections with global operations [25] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the global proteins division due to geopolitical uncertainties and tariff impacts, but remains confident in medium-term growth initiatives [15][22] - The company anticipates continued diversification of earnings and growth in global protein and logistics sectors [16] Other Important Information - The company is developing new sustainability targets following the successful delivery of 2024 milestones, focusing on emissions reduction and employee support policies [13][14] Q&A Session Summary Question: Can you discuss the performance of global proteins projects? - Management noted strong performance from the new plant in Melbourne and the second toll processing plant in North America, with ongoing projects expected to contribute positively by the end of the year [20][21] Question: What factors are included in the updated guidance range? - The guidance reflects caution around macroeconomic conditions and tariff uncertainties, with a steady demand for pet food expected to return to historical growth rates [22][23] Question: What does the growth outlook for logistics look like? - The company is optimistic about the logistics sector, actively seeking to ramp up operations and connect with global supply chains [25] Question: Can you provide specifics on horticulture's EBITDA and impact for the year? - The company expects a flat second half for horticulture, with more fixed and variable costs compared to the previous year [30] Question: What are the drivers of global proteins growth in FY 2028 and beyond? - Management indicated that both organic growth and potential acquisitions will drive future growth, with opportunities in fish and poultry markets being explored [46][48]

Financial Performance - Scales Corporation's Underlying EBITDA for 1H25 increased by 43% to $86.7 million, compared to $60.5 million in 1H24[14] - Underlying NPAT for 1H25 rose by 48% to $56.9 million, up from $38.4 million in 1H24[14] - Underlying NPATAS increased significantly by 72% to $48.9 million, compared to $28.5 million in 1H24[14] - The company anticipates Underlying NPATAS to be between $45.0 million and $50.0 million for FY25[14, 67] Divisional Results - Horticulture division experienced exceptional growth, with Underlying EBITDA increasing by 77.4% to $53.2 million in 1H25, compared to $30.0 million in 1H24[14, 23] - Logistics division also showed excellent results, with Underlying EBITDA up by 59.9% to $6.1 million in 1H25, compared to $3.8 million in 1H24[14, 23, 56] - Global Proteins division maintained a steady performance, with Underlying EBITDA at $29.7 million in 1H25, a slight increase of 0.5% from $29.6 million in 1H24[14, 23, 37] Balance Sheet - Net debt decreased to $67.5 million as of June 30, 2025, compared to $81.9 million as of June 30, 2024[25] - Approximately 55% of the Horticulture crop had been sold as of June 30, 2025, compared to 54% as of June 30, 2024[30] - Premium volumes accounted for approximately 75% of total export sale volumes, compared to 72% in 2024[52]

Core Viewpoint - Stepan Company (SCL) is currently rated as a Zacks Rank 5 (Strong Sell) due to a recent earnings miss and subsequent stock sell-off [1]. Company Overview - Stepan Company is a significant manufacturer of specialty and intermediate chemicals utilized across various industries, particularly known for producing surfactants, which are essential in consumer and industrial cleaning products [2]. Earnings History - The company has beaten the Zacks Consensus Estimate in two of the last four quarters but has also missed in two quarters, indicating mixed performance [4]. - In the most recent quarter, Stepan reported an EPS of $0.52, falling short of the consensus estimate of $0.92, resulting in a negative earnings surprise of 43.5% [5]. Earnings Estimates - Recent trends show a decline in earnings estimates for Stepan, with the current fiscal year consensus remaining at $3.33, while the next year's estimate has decreased from $4.43 to $4.01 over the past 60 days [6]. - The negative movement in earnings estimates is a key factor contributing to the stock's Zacks Rank of 5 (Strong Sell) [6]. Market Context - Many stocks within the Zacks universe are experiencing negative earnings estimate revisions, leading to a broader trend of stocks falling to a Zacks Rank 5 (Strong Sell) [7].

Core Viewpoint - The focus is on identifying high-quality companies with strong free cash flow, efficient capital allocation, and superior management teams for investment opportunities [1]. Group 1: Investment Philosophy - The company emphasizes the importance of investing in quality companies rather than chasing small, fast-growing firms with compelling stories, which may not lead to successful outcomes [1]. - The founder has extensive experience in investment analysis, having been involved since 1985 and holding qualifications such as CPA and CFA [1]. Group 2: Background and Expertise - The founder has a diverse background, including experience in retail, military service, and various management roles, providing a broad perspective on macroeconomics and detailed operational insights [1]. - The founder's investment philosophy is influenced by renowned investors like Benjamin Graham and Warren Buffett, indicating a value-oriented approach [1].

Part I FINANCIAL INFORMATION [Item 1. Financial Statements](index=2&type=section&id=Item%201%20-%20Financial%20Statements) Stepan Company's H1 2025: Net sales up 7.2% to $1.19B, net income up 32.6% to $31.1M, operating cash flow at $18.1M Condensed Consolidated Statements of Income Highlights | (In thousands, except per share amounts) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $1,187,944 | $1,107,823 | +7.2% | | **Gross Profit** | $147,348 | $139,833 | +5.4% | | **Operating Income** | $46,253 | $38,836 | +19.1% | | **Net Income** | $31,052 | $23,414 | +32.6% | | **Diluted EPS** | $1.36 | $1.02 | +33.3% | Condensed Consolidated Balance Sheet Highlights | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $906,106 | $810,429 | | **Total assets** | $2,416,130 | $2,304,648 | | **Total current liabilities** | $673,021 | $669,034 | | **Total liabilities** | $728,378 | $732,688 | | **Total equity** | $1,241,713 | $1,169,934 | Condensed Consolidated Statements of Cash Flows Highlights | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net Cash Provided By Operating Activities** | $18,135 | $71,056 | | **Net Cash Used In Investing Activities** | ($51,468) | ($54,036) | | **Net Cash Provided By (Used In) Financing Activities** | $13,258 | ($16,005) | | **Net Decrease in Cash and Cash Equivalents** | ($10,761) | ($5,115) | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail segment performance, $19.5M environmental accrual, $75M senior note issuance, and Philippine asset sale - The company has three reportable segments: Surfactants, Polymers, and Specialty Products. For the six months ended June 30, 2025, Surfactants accounted for **71%** of net sales, Polymers for **26%**, and Specialty Products for **3%**[59](index=59&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) Segment Operating Income (Six Months Ended June 30) | (In thousands) | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | **Surfactants** | $42,297 | $43,142 | -2.0% | | **Polymers** | $25,177 | $21,979 | +14.5% | | **Specialty Products** | $10,766 | $11,587 | -7.1% | | **Total Segment Operating Income** | $78,240 | $76,708 | +2.0% | - The company is managing various environmental and legal proceedings, with an estimated range of possible losses between **$19.5 million** and **$44.9 million** as of June 30, 2025. The company has accrued for the lower end of this range, totaling **$19.5 million**[37](index=37&type=chunk) - On May 21, 2025, the company issued and sold **$75 million** in aggregate principal amount of its **6.17%** Senior Notes due May 21, 2033[68](index=68&type=chunk) - On May 27, 2025, the company's subsidiary in the Philippines entered into an agreement to sell its manufacturing assets. The asset disposal group includes **$8.7 million** of assets and **$4.8 million** of liabilities[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=28&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A reports 7% net sales growth for Q2/H1 2025, Q2 operating income down, H1 up, Polymers driving growth, cash flow decreased [Results of Operations - Three Months Ended June 30, 2025 and 2024](index=32&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) Q2 2025 net income rose 19%, net sales grew 7%, operating income fell 4%, driven by mixed segment performance and a lower tax rate Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $594.7M | $556.4M | +7% | | **Operating Income** | $18.0M | $18.7M | -4% | | **Net Income** | $11.3M | $9.5M | +19% | | **Diluted EPS** | $0.50 | $0.42 | +19% | | **Adjusted Net Income** | $12.0M | $9.4M | +28% | - Surfactant operating income decreased **22%** to **$13.4 million**, mainly due to higher operating expenses, including a **$1.1 million** USEPA penalty, and margin pressure in North America from new facility start-up costs[103](index=103&type=chunk)[107](index=107&type=chunk) - Polymers operating income increased **26%** to **$17.2 million**, driven by an **18%** sales volume increase in North America and improved margins[108](index=108&type=chunk)[111](index=111&type=chunk) - The effective tax rate decreased to **17.7%** from **44.7%** in Q2 2024, primarily due to the non-recurrence of an unfavorable GILTI-related event and a favorable tax audit settlement in 2025[96](index=96&type=chunk) [Results of Operations - Six Months Ended June 30, 2025 and 2024](index=40&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) H1 2025 net income increased 32.6%, net sales grew 7%, operating income rose 19%, driven by Polymers and lower corporate expenses H1 2025 vs H1 2024 Performance | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $1,187.9M | $1,107.8M | +7% | | **Operating Income** | $46.3M | $38.8M | +19% | | **Net Income** | $31.1M | $23.4M | +33% | | **Diluted EPS** | $1.36 | $1.02 | +33% | | **Adjusted Net Income** | $31.3M | $24.1M | +30% | - Consolidated sales volume increased **2%**, with Surfactants up **1%**, Polymers up **7%**, and Specialty Products up **8%**[120](index=120&type=chunk) - Corporate expenses decreased by **$5.9 million** (**16%**) year-over-year, primarily due to the non-recurrence of a **$3.5 million** charge from 2024 and lower deferred compensation expenses[145](index=145&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) H1 2025 operating cash flow decreased to $18.1M due to working capital, cash fell to $88.9M, $75M in new senior notes issued - Cash from operating activities decreased to **$18.1 million** in H1 2025 from **$71.1 million** in H1 2024, primarily due to higher working capital requirements[147](index=147&type=chunk)[149](index=149&type=chunk) - Capital expenditures for H1 2025 were **$58.3 million**, and the full-year estimate is projected to be between **$120.0 million** and **$125.0 million**[152](index=152&type=chunk) - The company issued **$75.0 million** of **6.17%** Senior Notes due 2033 in May 2025[153](index=153&type=chunk)[155](index=155&type=chunk) - As of June 30, 2025, the company had **$139.6 million** available under its primary credit agreement[69](index=69&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes to market risks were reported compared to the 2024 Annual Report on Form 10-K - There have been no material changes to the market risks as disclosed in the Company's 2024 Annual Report on Form 10-K[177](index=177&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were effective as of June 30, 2025, with no material changes to internal financial reporting controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[178](index=178&type=chunk) - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[178](index=178&type=chunk) Part II OTHER INFORMATION [Item 1. Legal Proceedings](index=58&type=section&id=Item%201.%20Legal%20Proceedings) The company received a USEPA notice for FIFRA violations, paid a $1.1M civil penalty, and is seeking indemnification - On March 19, 2025, the company received a notice from the USEPA for violations of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)[180](index=180&type=chunk) - The USEPA assessed a civil penalty of **$1.1 million**, which the company paid on July 2, 2025. The company is pursuing indemnification claims to recover this cost[180](index=180&type=chunk) [Item 1A. Risk Factors](index=58&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported compared to the 2024 Annual Report on Form 10-K - There have been no material changes to the risk factors as disclosed in the Company's 2024 Annual Report on Form 10-K[182](index=182&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No open market share repurchases occurred in Q2 2025, with $125.1M remaining under the repurchase program - The company did not purchase any shares of its common stock on the open market during the second quarter of 2025[154](index=154&type=chunk)[183](index=183&type=chunk) - As of June 30, 2025, the company had **$125.1 million** remaining under its share repurchase program authorized by the Board of Directors[154](index=154&type=chunk)[183](index=183&type=chunk)

Financial Data and Key Metrics Changes - The company reported second quarter adjusted net income of $12 million, up 27% from $9.4 million in the prior year, driven by earnings growth in polymers and crop productivity, as well as a lower tax rate [9][11] - Adjusted EBITDA for the second quarter was $51.4 million, an 8% increase from $47.7 million in the prior year [14] - Cash from operations was $11.2 million for the quarter, while free cash flow was negative at $14.4 million due to inventory builds [12][19] Business Line Data and Key Metrics Changes - Polymers delivered double-digit adjusted EBITDA growth, while surfactant adjusted EBITDA remained similar to last year, impacted by raw material inflation [6][7] - Surfactant net sales were $411.5 million, an 8% increase year-over-year, with selling prices up 11% [15] - Specialty product net sales increased by 22% to $20.5 million, but adjusted EBITDA decreased by 24% due to order timing fluctuations [18] Market Data and Key Metrics Changes - Volume grew 1%, with polymers up 7% and NCT product line up 49%, while surfactants volume was down 1% [8] - North America and European rigid polyols volume grew low single digits, while the commodity PA business showed strong year-over-year growth [8] - The company experienced double-digit volume growth in crop productivity and oilfield end markets, offset by lower demand in global commodity consumer products [8] Company Strategy and Development Direction - The company aims to recover margins gradually and continues to focus on customer acquisition within Tier two and Tier three segments [6][20] - Investments are being made in new product development, particularly in the spray foam end market and next-generation polytechnologies [22] - The company is on track to close the sale of its site in the Philippines in 2025 and is looking for opportunities to optimize its asset base [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about delivering full-year adjusted EBITDA and net income growth despite market uncertainties [24] - The company is focused on enhancing operational excellence to grow volume and improve product mix [23] - Management noted that the first half of the year was decent, with growth in adjusted EBITDA across surfactants, polymers, and specialty products [32] Other Important Information - The effective tax rate was 19.2% during the first half of the year, lower than the normal range of 24% to 26% due to favorable discrete items [13] - The company paid $8.7 million in dividends during the quarter and has increased dividends for 57 consecutive years [10] Q&A Session Summary Question: Clarification on one-time impacts in the Surfactants business - Management confirmed that the $6 million includes startup costs from Pasadena, the EPA fine, and environmental remediation reserve adjustments [29][31] Question: Details on raw material impacts and pricing - Management indicated that coconut oil prices have significantly increased, and they are still catching up on price execution [34][35] Question: Effects of the new collective bargaining agreement in Millsdale - Management expressed satisfaction with the workforce and noted that the agreement is a routine event occurring every four years [37] Question: Insights on the AOS expansion and its beneficiaries - Management highlighted that AOS is crucial for sulfate-free business growth, targeting both Tier one and lower-tier clients [43] Question: Future asset optimization opportunities - Management stated they are continuously evaluating their asset base for productivity and return on investment, with no concrete plans yet [46] Question: Clarification on the tax benefit seen in the quarter - Management confirmed that the tax benefit was a one-time occurrence and the normal tax rate will return to the range of 24% to 26% [47]

While Stepan Co. has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? Stepan Co. (SCL) came out with quarterly earnings of $0.52 per share, missing the Zacks Consensus Estimate of $0.92 per share. This compares to earnings of $0.41 per share a year ago. These figures are adjusted for non- recurring items. This quarterly report represents an earnings surprise of -43.48%. A quarter ago, it was expected that this specialty chemicals company ...

Financial Performance - Reported Net Income increased by 19% year-over-year to $11.3 million[12] - Adjusted Net Income increased by 27% year-over-year to $12.0 million[12] - EBITDA increased by 6% year-over-year to $50.6 million[12] - Adjusted EBITDA increased by 8% year-over-year to $51.4 million[12] - Free Cash Flow decreased by 62% year-over-year to $11.2 million, impacted by higher working capital[10, 12] Volume and Sales - Global sales volume grew 1% year-over-year, driven by Polymers, Crop Productivity, and MCT business, offset by decline in commodity consumer surfactants[9] - Surfactants Adjusted EBITDA decreased by 1% to $34.5 million due to lower demand in commodity consumer end markets, offset by growth in agricultural and oilfield end markets[20, 25] - Polymers Adjusted EBITDA increased by 17% to $25.6 million, driven by sales volume growth in North America and Europe[20, 30] - Specialty Products Adjusted EBITDA decreased by $2.1 million primarily due to order timing fluctuations within the pharmaceutical business[20] Strategic Initiatives - The Pasadena, Texas site is now operational and expected to provide benefits in the specialty alkoxylation business[11, 41] - The company is on track to close the sale of Philippines assets during the fourth quarter[11]

[Stepan Q2 2025 Earnings Release](index=1&type=section&id=Stepan%20Reports%20Second%20Quarter%202025%20Results) [Financial and Operational Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights) Stepan achieved double-digit net income growth in Q2 and H1 2025, driven by Polymers and Crop Productivity, despite start-up costs and negative free cash flow Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Change vs. Q2 2024 | | :--- | :--- | :--- | | Reported Net Income | $11.3 million | +19% | | Adjusted Net Income | $12.0 million | +27% | | EBITDA | $50.6 million | +6% | | Adjusted EBITDA | $51.4 million | +8% | | Global Sales Volume | - | +1% | H1 2025 Key Financial Metrics | Metric | H1 2025 | Change vs. H1 2024 | | :--- | :--- | :--- | | Reported Net Income | $31.1 million | +33% | | Adjusted Net Income | $31.3 million | +30% | | EBITDA | $108.6 million | +11% | | Adjusted EBITDA | $108.9 million | +10% | | Global Sales Volume | - | +2% | - Earnings growth was driven by improved results in the Polymer and Crop Productivity businesses, as well as a lower effective tax rate. Polymer volume increased by **7%**[4](index=4&type=chunk) - Pre-tax earnings were negatively impacted by **$6.1 million** due to start-up costs for the new Pasadena, Texas alkoxylation site and an environmental remediation reserve adjustment at the Millsdale site[5](index=5&type=chunk) - Free cash flow was negative **$14.4 million** for the quarter, mainly due to increased working capital for business growth, inventory builds ahead of tariffs, and hurricane season preparations[5](index=5&type=chunk) [Consolidated Financial Performance](index=2&type=section&id=Consolidated%20Financial%20Performance) Q2 2025 net sales grew 7% to $594.7 million with net income up 19%, while H1 saw 7% sales growth and 33% net income increase Consolidated Financial Results ($ in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $594,689 | $556,405 | 7% | $1,187,944 | $1,107,823 | 7% | | Operating Income | $17,965 | $18,667 | (4)% | $46,253 | $38,836 | 19% | | Net Income | $11,341 | $9,521 | 19% | $31,052 | $23,414 | 33% | | Diluted EPS | $0.50 | $0.42 | 19% | $1.36 | $1.02 | 33% | | Adjusted Net Income | $11,952 | $9,396 | 27% | $31,262 | $24,052 | 30% | | Adjusted Diluted EPS | $0.52 | $0.41 | 27% | $1.37 | $1.05 | 30% | Net Sales Change Breakdown | Driver | Q2 2025 | H1 2025 | | :--- | :--- | :--- | | Volume | 1% | 2% | | Selling Price & Mix | 6% | 7% | | Foreign Translation | (—)% | (2)% | | **Total** | **7%** | **7%** | [Segment Results](index=2&type=section&id=Segment%20Results) Consolidated adjusted EBITDA rose 8% in Q2, led by Polymers' 17% growth, while Surfactants and Specialty Products faced headwinds Net Sales by Segment (Q2 2025 vs Q2 2024, $ in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Surfactants | $411,456 | $379,795 | 8% | | Polymers | $162,751 | $159,757 | 2% | | Specialty Products | $20,482 | $16,853 | 22% | | **Total** | **$594,689** | **$556,405** | **7%** | Adjusted EBITDA by Segment (Q2 2025 vs Q2 2024, $ in millions) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Surfactants | $34.5 | $35.0 | (1)% | | Polymers | $25.6 | $21.8 | 17% | | Specialty Products | $6.7 | $8.8 | (24)% | | Unallocated Corporate | $(15.4) | $(17.9) | (14)% | | **Consolidated** | **$51.4** | **$47.7** | **8%** | [Surfactants](index=3&type=section&id=Surfactants) Q2 Surfactant net sales increased 8% to $411.5 million, driven by price, but adjusted EBITDA declined 1% due to costs and volume decrease - Net sales increased **8%** to **$411.5 million**, primarily due to a **11%** rise in selling prices[10](index=10&type=chunk) - Sales volume decreased by **1%**, as lower demand in commodity consumer products was largely offset by double-digit growth in Agricultural and Oilfield end markets[10](index=10&type=chunk) - Adjusted EBITDA decreased **1%** to **$34.5 million**, negatively impacted by Pasadena start-up costs, a remediation reserve adjustment, an EPA penalty, and higher Oleochemical raw material costs[10](index=10&type=chunk) [Polymers](index=3&type=section&id=Polymers) Polymers net sales rose 2% to $162.8 million, driven by 7% volume growth, leading to a 17% increase in adjusted EBITDA to $25.6 million - Net sales increased **2%** to **$162.8 million**[10](index=10&type=chunk) - Sales volume grew **7%**, while selling prices decreased **7%**. Volume growth was observed in North American Rigid, European Rigid, and Phthalic Anhydride businesses[10](index=10&type=chunk) - Adjusted EBITDA increased **17%** to **$25.6 million**, mainly driven by the **7%** sales volume growth[11](index=11&type=chunk) [Specialty Products](index=4&type=section&id=Specialty%20Products) Specialty Products net sales grew 22% to $20.5 million, but adjusted EBITDA fell 24% to $2.1 million due to pharmaceutical order timing shifts - Net sales grew **22%** to **$20.5 million**, primarily due to higher sales volume[11](index=11&type=chunk) - Adjusted EBITDA decreased **24%** to **$2.1 million**. The decline was mainly due to pharmaceutical business order timing, with orders moved to the second half of the year[11](index=11&type=chunk) [Other Financial Information](index=4&type=section&id=Other%20Financial%20Information) H1 2025 effective tax rate decreased to 19.2% due to a favorable audit, while Q2 adjusted corporate expenses fell 18% and net debt ratio remained stable at 31% - The effective tax rate for H1 2025 was **19.2%**, down from **36.1%** in H1 2024. This decrease was primarily due to a favorable tax audit settlement in 2025 and the non-recurrence of an unfavorable GILTI-related event from 2024[12](index=12&type=chunk) - Adjusted corporate expenses for Q2 2025 decreased by **18%** year-over-year, mainly because expenses from a 2024 criminal social engineering scheme did not recur[41](index=41&type=chunk) - The net debt ratio remained constant at **31%** at the end of Q2 2025, the same as the previous quarter and year-end 2024[45](index=45&type=chunk)[46](index=46&type=chunk) [Outlook](index=4&type=section&id=Outlook) Management anticipates full-year growth in Adjusted EBITDA and Net Income, positive free cash flow, driven by operational excellence and the new Pasadena facility - The company is focused on accelerating business strategies through operational excellence, improved product/customer mix, and accelerated free cash flow generation[13](index=13&type=chunk) - The new Pasadena facility is now operational and is expected to deliver volume growth in the alkoxylation product line and supply chain savings in H2 2025[13](index=13&type=chunk) - Management expects to deliver full-year growth in Adjusted EBITDA and Adjusted Net Income, and achieve positive free cash flow in 2025, despite market uncertainties[13](index=13&type=chunk) [Appendix: Financial Statements and Reconciliations](index=7&type=section&id=Appendix%3A%20Financial%20Statements%20and%20Reconciliations) This appendix provides unaudited financial statements and reconciliations of non-GAAP measures, including income statements, balance sheets, and adjusted EBITDA - The appendix includes detailed Consolidated Statements of Income for the three and six months ended June 30, 2025 and 2024[25](index=25&type=chunk) - Provides a reconciliation of reported GAAP Net Income to non-GAAP Adjusted Net Income, detailing after-tax adjustments for Deferred Compensation and Environmental Remediation expenses[26](index=26&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) - Includes Consolidated Balance Sheets as of June 30, 2025, and December 31, 2024, along with details on net debt and working capital components[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - Presents detailed reconciliations of non-GAAP EBITDA and Adjusted EBITDA from Operating Income for each business segment and on a consolidated basis[47](index=47&type=chunk)[48](index=48&type=chunk)