| --- | --- | --- | --- | |--------------------|-------|-------|-------| | | | | | | | | | | | | | | | | Earnings Call | | | | | Presentation | | | | | | | | | | Third Quarter 2020 | | | | | October 21, 2020 | | | | Cautionary Statement 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 amend ...

Financial Data and Key Metrics Changes - Adjusted net income for Q2 2020 was a record $38.3 million or $1.65 per diluted share, a 9% increase from $35.1 million or $1.50 per diluted share in Q2 2019 [5][11][12] - The effective tax rate increased to 23.9% in the first half of 2020 from 21.8% in the first half of 2019, primarily due to lower tax benefits and a different country mix of income [14] Business Line Data and Key Metrics Changes - Surfactant net sales were $332 million, a 6% increase year-over-year, with a 10% increase in sales volume driven by higher demand for cleaning and disinfection products due to COVID-19 [15][17] - Polymer net sales decreased by 20% to $112.4 million, with a 13% decrease in sales volume primarily due to lower Rigid Polyol volumes in North America and Europe [19][20] - Specialty Product net sales were $15.8 million, a 17% decrease year-over-year, with operating income down due to order timing differences and lower margins [21] Market Data and Key Metrics Changes - Surfactant operating income increased by $16.4 million or 51% year-over-year, driven by strong sales volume growth and a record quarter in Latin America [17] - Mexican operations delivered year-over-year earnings growth, with a $5 million operating income improvement driven by 33% volume growth [17][26] - Europe saw higher results due to strong demand for consumer products and double-digit growth in agricultural chemicals [18] Company Strategy and Development Direction - The company continues to prioritize safety and health while delivering products that contribute to the fight against COVID-19, with a focus on Surfactant volume growth in consumer product end markets [25][26] - The diversification strategy into Functional Products remains a key priority, with agricultural business growing 6% despite a decrease in North America [26] - M&A is viewed as an important tool for delivering meaningful EPS and EBITDA growth, with a recent agreement to acquire Clariant's Mexican business to accelerate growth in that market [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term prospects for the Polymer business despite current challenges, citing energy conservation efforts and stricter building codes as future demand drivers [28] - The company is committed to improving supply chain efficiency, targeting an additional $10 million of operating income in 2021 through external consulting [77][79] - Management highlighted the importance of maintaining employee health and safety during the pandemic, with minimal operational disruptions reported [65][66] Other Important Information - The company declared a quarterly cash dividend of $0.275 per share payable on September 15, 2020 [9] - Capital expenditures for the full year are expected to be in the range of $100 million to $120 million [22] Q&A Session Summary Question: Are customers looking for larger or longer-dated volume commitments for cleaning and disinfection products? - Management noted that the global market for disinfectant products is tight, with some inventory building but not enough material available to significantly impact commitments [33] Question: Can you provide more details on the Clariant acquisition? - The intent is to absorb the business and equipment into the Ecatepec facility, increasing capacity utilization [34] Question: How much of the Rigid Polyol growth in China is driven by cold storage and livestock activity? - Virtually all growth is driven by cold storage and livestock, with a 50-50 split between those end markets [35][36] Question: What drove the margin strength in Surfactants? - Volume growth and improved product mix contributed significantly to margin strength, with a focus on tier 2 and tier 3 customers [39][40] Question: How is the company managing raw material dynamics? - The majority of high-cost raw material inventory has been moved through the system, with minimal remaining vulnerability [43][44] Question: What is the status of the Illinois River lock maintenance project? - The project has started, with an anticipated closure of 3.5 to 4 months, potentially increasing costs by $3 million [46][48] Question: How is the company managing FX exposure? - The majority of FX impact was in Latin America, particularly Brazil, with a good hedging program in place to manage exposure [60][61] Question: What is the current status of the workforce in Mexico and Brazil amid the pandemic? - The company has been able to maintain operations with minimal disruptions, prioritizing employee health and safety [64][66] Question: How did the company manage to meet customer commitments while adding new customers? - The company was able to meet full contract requirements for existing customers while adding new tier 2 and tier 3 customers, with some allocation needed in specific product lines [82]

Stepan S | --- | --- | --- | --- | |-----------------------------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | Earnings Call Presentation | | | | | | | | | | Second Quarter 2020 | | | | | July 22, 2020 | | | | Cautionary Statement 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 o ...