NORTHBROOK, Ill., April 29, 2025 /PRNewswire/ -- Stepan Company (NYSE: SCL) today reported: | | | Three Months Ended | | | | --- | --- | --- | --- | --- | | | March 31, | | | | | ($ in thousands, except per share data) | 2025 | 2024 | % | | | | | | Change | | | Net Sales | $593,255 | $551,418 | 8 | % | | Operating Income | $28,288 | $20,169 | 40 | % | | Net Income | $19,711 | $13,893 | 42 | % | | Earnings per Diluted Share | $0.86 | $0.61 | 41 | % | | Adjusted Net Income * | $19,310 | $14,656 | 32 | % | | A ...

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Environmental Compliance and Expenditures - The Company reported a capital expenditure of $12.0 million for environmental compliance in 2024, representing approximately 10% of total capital expenditures for the year[23]. - Recurring costs for waste treatment and environmental compliance were approximately $51.3 million in 2024[23]. - The Company made capital investments to reduce 1,4 dioxane content in ethoxylated surfactants to comply with recent regulations, positioning itself for new market opportunities[23]. - The Company has recorded a liability for environmental remediation costs, with potential changes based on ongoing discussions with regulatory agencies[108]. - The Company has paid $4.0 million for environmental response costs at the Wilmington site through December 31, 2024, with potential liabilities subject to change[110]. - Environmental expenditures for capital projects were $12.0 million in 2024, with recurring costs of $51.3 million for environmental compliance[187]. - Environmental remediation expenses for 2024 were reported at $2.6 million, compared to $1.0 million in 2023[203]. Competition and Market Position - The Company is one of the leading merchant producers of surfactants globally, competing with several large global and regional producers[18]. - The company is subject to significant competition, with some competitors having greater financial resources and internal manufacturing capabilities, leading to potential loss of business[56]. - The company lost sales volume from a customer in 2022 who invested in internal production capabilities for low-1,4 dioxane products[56]. - The company is focused on developing new products to replace declining sales, but success in achieving growth expectations is uncertain[51]. Financial Performance - The company's net income in 2024 increased by $10.2 million, or 25%, to $50.4 million, equating to $2.20 per diluted share, compared to $40.2 million, or $1.75 per diluted share in 2023[134]. - Adjusted EBITDA for 2024 was $187.0 million, up 4% from $180.0 million in 2023, while EBITDA increased by 13% to $186.8 million[135]. - Consolidated net sales decreased by $145.5 million, or 6%, primarily due to lower average selling prices, which negatively impacted sales by $160.3 million[136]. - Operating income in 2024 rose by $11.9 million, or 20%, with surfactant and specialty products operating income increasing by $13.2 million and $9.4 million, respectively[137]. - The company's effective tax rate slightly decreased to 16.7% in 2024 from 16.9% in 2023[141]. - The Company recognized $4.6 million in investment gains for deferred compensation assets in 2024, compared to $5.2 million in 2023, alongside a decrease in foreign exchange losses from $3.7 million in 2023 to $1.4 million in 2024[140]. - Cash generated from operating activities was $162.1 million in 2024, down from $174.9 million in 2023[164]. - Total net sales for 2024 were $2,180.3 million, a decrease of $145.5 million (6%) compared to 2023, with surfactants sales down by $70.7 million (4%) and polymers down by $57.6 million (9%) year-over-year[142]. Debt and Financial Obligations - As of December 31, 2024, the Company had $311.7 million of debt on its balance sheet, with additional borrowings of $313.7 million under a credit agreement[86]. - The Company had $125.1 million remaining for future share repurchases under its authorized program as of December 31, 2024[172]. - Consolidated balance sheet debt decreased by $28.7 million to $625.4 million as of December 31, 2024, primarily due to scheduled debt repayments[173]. - The Company's total debt obligations amounted to $625.8 million, with $292.8 million due within one year[180]. - The ratio of net debt to net debt plus shareholders' equity was 31.0% as of December 31, 2024, compared to 30.0% as of December 31, 2023[175]. - The Company amended two note purchase agreements to increase available facility amounts and extend the issuance period to August 27, 2027, with a total credit facility of $450.0 million[175]. Operational Challenges - The Company’s manufacturing plants primarily operate on electricity and interruptible natural gas, with temporary shutdowns occurring during peak heating demand periods[19]. - The company experienced unplanned production disruptions in 2022 due to weather-related issues, impacting operations at the Elwood, Illinois facility[40]. - In 2024, the Millsdale facility operations were negatively affected by a flood event, highlighting vulnerability to natural disasters[40]. - The company faced increased raw material prices in 2022 due to supply chain disruptions and inflationary pressures, which may not be passed on to customers[45]. - The company relies heavily on third-party transportation, and disruptions in this area could materially affect operations and costs[46]. - Conflicts and instability in energy-producing nations have led to increased energy prices, impacting the company's operations and supply chain[47]. Regulatory and Compliance Risks - Compliance with environmental, health, and safety laws may require the Company to incur additional costs or reformulate certain products, potentially affecting its financial results[61]. - The REACH regulations impose substantial compliance costs that are expected to increase as product sales rise, impacting the Company's ability to sell certain products[64]. - The Company may face increased regulatory scrutiny regarding the use of ethylene oxide, which could require material changes to its manufacturing operations[66]. - Environmental regulations may restrict the Company's ability to expand facilities or require costly modifications, impacting operational capabilities[67]. - The evolving nature of environmental laws may impose greater compliance costs and risks, potentially restricting the sale of existing or new products[73]. - The Company may incur significant legal expenses defending against environmental litigation, which could adversely affect its financial position[72]. Human Resources and Management - The Company employed 2,396 persons as of December 31, 2024, a slight increase from 2,389 employees in 2023[25]. - The Company’s executive team includes a new Chief Human Resources Officer appointed in September 2023 and an Interim Chief Financial Officer appointed in October 2024[36][37]. - The Company's future success significantly depends on the skills and experience of its executive management and key personnel, with potential adverse effects on financial position if unable to retain talent[97]. International Operations and Risks - The Company generated approximately 45% of its net sales from international operations in the year ended December 31, 2024[76]. - The Company is subject to various international business risks, including fluctuations in currency exchange rates, which may adversely affect profitability[76]. - The Company faces risks related to political, economic, and market conditions in foreign operations, which may be unstable[77]. - Fluctuations in foreign currency exchange rates could materially affect the Company's financial results, especially during a strengthening U.S. dollar[80]. - The company had forward contracts with an aggregated notional amount of $149.6 million to mitigate foreign currency exchange risk as of December 31, 2024[207].

Core Points - Stepan Company announced the retirement of Edward J. Wehmer from its Board of Directors effective April 29, 2025, during the next annual meeting of stockholders [1] - Mr. Wehmer has been a board member since 2003, serving as Lead Independent Director since 2016 and Chair of the Audit Committee from 2007 to 2023 [2] - The Board will reduce its size from eight to seven directors following Mr. Wehmer's retirement, with Randall S. Dearth succeeding him as Lead Independent Director [3] Company Profile - Stepan Company is a major manufacturer of specialty and intermediate chemicals used across various industries, including surfactants for cleaning and disinfection products, agricultural solutions, and polyurethane polyols for thermal insulation [4] - The company is headquartered in Northbrook, Illinois, and operates modern production facilities in North and South America, Europe, and Asia [5]

Financial Data and Key Metrics Changes - The company reported fourth quarter adjusted EBITDA of $35 million, down 7% year-over-year, and full year adjusted EBITDA of $187 million, a 4% increase compared to the prior year [7][23] - Full year adjusted net income was $50.5 million, flat versus the prior year, with strong earnings growth in Surfactant and Specialty Products fully offset by Polymers [9] - Free cash flow for the year was positive at $39 million, in line with expectations, and the company delivered $48 million in pretax cost savings during 2024 [10][25] Business Line Data and Key Metrics Changes - Surfactant net sales for the fourth quarter were $379 million, a 3% increase year-over-year, with adjusted EBITDA increasing by $3 million or 10% [17][19] - Polymer net sales were $130 million for the quarter, a 12% decrease year-over-year, with adjusted EBITDA decreasing by $9 million or 44% [20][22] - Specialty product net sales were $17 million for the quarter, a 10% increase year-over-year, with adjusted EBITDA increasing by 65% [22] Market Data and Key Metrics Changes - Global sales volume was down 1% versus the prior year, with double-digit growth in surfactant end markets offset by softer demand in rigid polymers [14] - The agricultural business grew volume by 30% in the second half of 2024, indicating a recovery after a difficult first half [43] - The company experienced sluggish demand in polymers due to high interest rates and slow construction activity, particularly in Europe [48] Company Strategy and Development Direction - The company focuses on customer acquisition, particularly in tier two and three markets, which remains a key priority [28] - Investments in the new Pasadena facility are expected to enhance production capabilities and supply chain resilience, with startup anticipated in Q1 2025 [32][35] - The company aims to improve adjusted EBITDA across all reporting segments and is optimistic about growth in the surfactant business in key strategic end markets [34][35] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with overall financial performance in 2024 but highlighted the company's strategic investments aimed at returning to profitable growth [7] - The company expects to see continued double-digit growth in the agricultural business and is optimistic about polymers as new products are introduced [43][49] - Management indicated that 2025 should see improved profitability and free cash flow generation, with a focus on avoiding one-time costs experienced in 2024 [64][65] Other Important Information - The company declared a quarterly cash dividend of $0.385 per share, marking 57 consecutive years of dividend payments [11] - Corporate expenses increased due to the CEO transition and other one-time events, but overall expenses were down year-over-year due to productivity efforts [24] Q&A Session Summary Question: Outlook for Agricultural Business - Management noted strong growth in the agricultural business, with expectations for continued double-digit growth in the first half of 2025 [43] Question: Challenges in Polymers - Management acknowledged challenges in the polymers segment but highlighted pockets of strength, particularly in specialty polymers and growth in China [48] Question: Surfactants Price Mix - Management explained that the positive price mix in surfactants was driven by growth in tier two and three customers and strong performance in agricultural and oilfield markets [56][57] Question: 2025 EBITDA Starting Point - Management discussed the impact of one-time events in 2024 and indicated a potential normalized EBITDA performance of around $60 million per quarter without those effects [64][65] Question: Pasadena Facility Impact - Management confirmed that the Pasadena facility would contribute to EBITDA but would also incur initial costs during its ramp-up phase [67] Question: Currency Sensitivity - Management identified the euro as the main currency risk, while the impact of the Mexican peso and Brazilian real was deemed manageable [80] Question: Polymers Business in China - Management highlighted the diversified nature of the polymers business in China, which is not solely reliant on the construction market [83]

2 AGENDA Fourth Quarter 2024 Earnings Results February 19, 2025 Safe Harbor Certain information in this presentation 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 (the Exchange Act). These statements include statements about Stepan Company's plans, objectives, strategies, financial performance and outlook, trends, the a ...

Group 1 - Stepan Co. reported quarterly earnings of $0.12 per share, missing the Zacks Consensus Estimate of $0.35 per share, representing a -65.71% earnings surprise compared to $0.33 per share a year ago [1] - The company posted revenues of $525.61 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 2.55%, but down from $532.13 million year-over-year [2] - Stepan Co. shares have lost about 4.6% since the beginning of the year, while the S&P 500 has gained 4% [3] Group 2 - The earnings outlook for Stepan Co. is uncertain, with current consensus EPS estimates at $0.92 for the coming quarter and $3.55 for the current fiscal year, with revenues expected to be $571.1 million and $2.29 billion respectively [7] - The Zacks Industry Rank for Chemical - Diversified is currently in the bottom 10% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8] - The estimate revisions trend for Stepan Co. is unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, suggesting expected underperformance in the near future [6]

Financial Performance - Reported net income for Q4 2024 was $3.4 million, compared to a net loss of $1.2 million in the prior year, while adjusted net income decreased by 63% to $2.8 million[4]. - Adjusted EBITDA for Q4 2024 was $35.0 million, down 7% year-over-year, while EBITDA increased by 39% to $35.8 million[4][10]. - Net sales for Q4 2024 were $525.6 million, a decrease of 1.0% from $532.1 million in Q4 2023[26]. - Gross profit for Q4 2024 was $56.7 million, down 14.6% from $66.4 million in Q4 2023[26]. - Operating income for Q4 2024 increased to $7.7 million compared to $0.2 million in Q4 2023[26]. - Basic net income per share for Q4 2024 was $0.15, compared to a loss of $0.05 per share in Q4 2023[27]. - Total operating expenses for Q4 2024 were $49.0 million, a decrease from $58.0 million in Q4 2023[26]. - The total pre-tax income for the quarter was $1.016 million, a significant improvement from a pre-tax loss of $2.991 million in the prior year[36]. - Total corporate expenses decreased by 42% to $17.468 million from $30.005 million in the prior year[41]. - The company's total assets decreased to $2.304 billion from $2.363 billion year-over-year[45]. - Total debt decreased by $63.1 million to $625.4 million compared to September 30, 2024[47]. - The net debt ratio remained constant at 31% for the quarter[47]. - Adjusted EBITDA for the twelve months ended December 31, 2024, was $187.0 million, compared to $186.9 million in the previous year[51]. Sales and Market Performance - Global sales volume decreased by 1% year-over-year, with a 2.5% growth in the Surfactant business offset by demand weakness in Polymers[5][11]. - Surfactant net sales increased by 3% to $378.8 million, driven by a 5% increase in selling prices and a 1% growth in sales volume[11]. - Polymer net sales decreased by 12% to $129.8 million, with a 9% decline in sales volume primarily due to reduced global demand[11]. - Specialty Product net sales rose by 10% to $17.0 million, with sales volume increasing by 32%[12]. - Net sales for the three months ended December 31, 2024, were $525.6 million, down 1.2% from $532.1 million in the same period of 2023[39]. Operational Efficiency and Future Outlook - The company expects to start operations at its new Pasadena facility in Q1 2025, which is anticipated to drive volume growth and supply chain savings[14]. - The company aims for improved Adjusted EBITDA and positive free cash flow in 2025, driven by strategic investments and cost reduction initiatives[14]. - The company plans to continue focusing on product development and market expansion despite current economic challenges[22]. - Future outlook includes continued focus on product innovation and market expansion to drive revenue growth[53]. - The company plans to enhance operational efficiency through ongoing restructuring efforts and strategic investments in technology[53]. - The overall financial performance reflects a solid foundation for future growth, supported by strong user data and market demand[53]. Cash Flow and Expenses - Free cash flow for Q4 2024 was $32.1 million, with cash from operations amounting to $68.3 million[4][16]. - Research, development, and technical services expenses for Q4 2024 were $13.8 million, down from $15.3 million in Q4 2023[26]. - The company reported a significant reduction in deferred compensation expense, from $5.227 million in the prior year to an income of $574,000 in the current quarter[41]. - Depreciation and amortization expenses totaled $105.3 million, with $64.4 million from surfactants and $32.4 million from polymers[53]. - The company incurred a business restructuring and asset impairment expense of $12.0 million, along with environmental remediation costs of $1.0 million[53]. - Cash settled SARs resulted in a minor expense of $0.1 million, reflecting limited impact on overall financial performance[53].

Core Viewpoint - The market anticipates Stepan Co. (SCL) to report a year-over-year earnings increase despite lower revenues for the quarter ended December 2024, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - Stepan Co. is expected to post quarterly earnings of $0.35 per share, reflecting a year-over-year increase of +6.1%, while revenues are projected to be $512.55 million, down 3.7% from the previous year [3]. - The consensus EPS estimate has been revised 20% lower in the last 30 days, indicating a reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that the Most Accurate Estimate aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0%, which complicates predictions of an earnings beat [10][11]. - The stock currently holds a Zacks Rank of 4 (Sell), making it challenging to predict a positive earnings surprise [11]. Historical Performance - In the last reported quarter, Stepan Co. exceeded expectations by delivering earnings of $1.03 per share against an expected $0.64, resulting in a surprise of +60.94% [12]. - Over the past four quarters, the company has beaten consensus EPS estimates two times [13]. Industry Context - Chemours (CC), another player in the Zacks Chemical - Diversified industry, is expected to report earnings of $0.10 per share, indicating a year-over-year decline of -67.7%, with revenues projected at $1.36 billion, down 0.1% [17]. - The consensus EPS estimate for Chemours has been revised 8.9% lower in the last 30 days, but a higher Most Accurate Estimate results in an Earnings ESP of 25.00%, despite also holding a Zacks Rank of 4 [18].

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