Stepan(US:SCL)2023-11-02 16:57Financial Performance - Consolidated net sales decreased by $157.0 million, or 22%, in Q3 2023 compared to Q3 2022, with a sales volume decline of 9% negatively impacting net sales by $61.3 million[93]. - Adjusted net income for Q3 2023 was $14.7 million, or $0.64 per diluted share, down from $46.3 million, or $2.01 per diluted share in Q3 2022[92]. - Total net sales for Q3 2023 were $562.2 million, a decrease of $156.9 million or 22% compared to Q3 2022[99]. - Operating income in Q3 2023 decreased by $35.1 million, or 64%, compared to Q3 2022, with declines in Surfactant, Polymer, and Specialty Products operating income of $23.6 million, $10.0 million, and $7.3 million, respectively[94]. - Total operating income for Q3 2023 was $19.5 million, a decrease of $35.1 million or 64% compared to Q3 2022[99]. - Operating income for the first nine months of 2023 decreased by $137.3 million, or 70%, with significant declines in all segments: Surfactants down $83.4 million, Polymers down $31.8 million, and Specialty Products down $14.5 million[122]. - Adjusted net income for the nine months ended September 30, 2023, was $43.2 million, or $1.88 per diluted share, compared to $140.0 million, or $6.06 per diluted share, for the same period in 2022[173]. Sales and Market Demand - The decline in sales volume was primarily due to lower market demand and continued customer and channel inventory destocking, with average selling prices negatively impacting net sales by $114.8 million[93]. - Surfactants segment net sales decreased by $101.0 million, or 21%, primarily due to lower average selling prices and a 7% decline in sales volume[100]. - Polymers segment net sales decreased by $45.2 million, or 21%, driven by a 12% decline in sales volume and lower average selling prices[109]. - Specialty Products segment net sales decreased by $10.7 million, or 36%[99]. - Net sales for Latin American operations decreased by $46.0 million, or 16%, primarily due to lower average selling prices, which negatively impacted net sales by $59.2 million[130]. - Net sales for Asian operations decreased by $7.4 million, or 14%, year-over-year, with a 14% decline in sales volume negatively impacting net sales by $7.1 million[131]. Operating Expenses and Income - Operating expenses decreased by $12.1 million, or 19%, compared to the prior year quarter, with net interest expense increasing by $0.8 million, or 34%[95]. - Corporate expenses, including business restructuring and deferred compensation expenses, decreased by $5.8 million year-over-year, largely due to a reduction in environmental remediation reserve expense[94]. - Business restructuring expenses were $5.6 million in Q3 2023, compared to $0.1 million in Q3 2022, including a $5.5 million restructuring reserve[99]. - Polymer operating income in Q3 2023 decreased by $10.1 million, or 32%, compared to Q3 2022, with gross profit down by $11.3 million, or 28%[113]. - Surfactant operating income for the first nine months of 2023 decreased by $83.4 million, or 59%, with gross profit down by $97.0 million, or 43%[132]. Cash Flow and Capital Expenditures - Cash flow from operating activities was a source of $105.9 million for the first nine months of 2023, compared to $74.9 million for the same period in 2022[148]. - Cash flow from financing activities was a source of $36.6 million in 2023, down from $154.6 million in 2022, primarily due to a lower level of borrowings[155]. - Total capital expenditures for 2023 are estimated to be in the range of $255.0 million to $260.0 million, including the new alkoxylation plant in Pasadena, Texas[154]. Debt and Equity - Consolidated balance sheet debt increased from $587.1 million on December 31, 2022, to $649.4 million on September 30, 2023, reflecting a net debt increase of $130.6 million[157]. - The ratio of net debt to net debt plus shareholders' equity was 31.1% as of September 30, 2023, compared to 26.2% at December 31, 2022[158]. - The Company had outstanding loans totaling $274.0 million as of September 30, 2023, including a $96.3 million delayed draw term loan[160]. - Current Maturities of Long-Term Debt increased to $227.0 million from $132.1 million year-over-year[175]. - Long-Term Debt decreased to $422.4 million from $455.0 million year-over-year[175]. - Total Debt rose to $649.4 million compared to $587.1 million year-over-year[175]. - Net Debt increased to $543.9 million from $413.3 million year-over-year[175]. - Equity increased to $1,202.8 million from $1,166.1 million year-over-year[175]. - Net Debt plus Equity increased to $1,746.7 million from $1,579.4 million year-over-year[175]. - Net Debt/Net Debt plus Equity ratio increased to 31% from 26% year-over-year[175]. Environmental and Corporate Governance - For the nine months ended September 30, 2023, the Company's environmental remediation expenses were $0.5 million, compared to $11.0 million for the same period in 2022[173]. - Cash expenditures related to environmental remediation and certain legal matters were $11.4 million for the nine months ended September 30, 2023, compared to $1.5 million for the same period in 2022[167]. - The Company anticipates delivering $50 million in pre-tax savings in 2024 through cost reduction activities to offset future inflation and increased expenses[169]. - The Company believes it was in compliance with all its debt covenants as of September 30, 2023[164]. - No material changes to market risks as described in the Company's 2022 Annual Report[176].