Stepan(SCL) - 2025 Q2 - Quarterly Results

Stepan Q2 2025 Earnings Release Financial and Operational Highlights 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] - 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] - 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] Consolidated Financial Performance 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 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 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] - 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] - 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] 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] - Sales volume grew 7%, while selling prices decreased 7%. Volume growth was observed in North American Rigid, European Rigid, and Phthalic Anhydride businesses[10] - Adjusted EBITDA increased 17% to $25.6 million, mainly driven by the 7% sales volume growth[11] Specialty Products 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] - 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] Other Financial Information 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] - 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] - 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][46] 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] - 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] - 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] Appendix: Financial Statements and Reconciliations 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] - 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][27][29] - Includes Consolidated Balance Sheets as of June 30, 2025, and December 31, 2024, along with details on net debt and working capital components[42][43][44] - Presents detailed reconciliations of non-GAAP EBITDA and Adjusted EBITDA from Operating Income for each business segment and on a consolidated basis[47][48]