Will Stepan Company (SCL) be Able to Generate Steady Cash Flow?

Core Insights - SouthernSun Asset Management's "SouthernSun Small Cap Strategy" reported an 11.73% gross return in Q3 2025, underperforming the Russell 2000 Index and Russell 2000 Value Index which returned 12.39% and 12.60% respectively [1] - Over the trailing twelve months, the strategy returned -0.66% gross, significantly lower than the indexes which returned 10.76% and 7.88% [1] Company Performance - Stepan Company (NYSE:SCL) was highlighted as a detractor in the Small Cap strategy, with a one-month return of -11.30% and a 52-week loss of 47.82% [2][3] - As of November 4, 2025, Stepan Company's stock closed at $42.31, with a market capitalization of $956.902 million [2] - The company is focusing on growing its functional surfactants for agriculture and oilfield markets, but faced a 1% decline in overall surfactant segment volumes due to weakness in commodity consumer product markets [3] - The Polymer segment saw a 7% increase in volumes, driven by strong demand in North American and European rigid polyols markets [3] - Stepan Company generated $197 million in trailing 12-month EBITDA, with expectations to reach $60 million quarterly as market conditions improve [3] - The company ended the second quarter with a net debt to trailing 12-month EBITDA ratio of 2.9x, which is expected to decrease as heavy investments conclude [3] - Luis Rojo, promoted to CEO in October 2024, has been recognized for effectively executing the business strategy [3] - Stepan Company is acknowledged as an industry leader in developing new products and maintaining long-term customer relationships, which are anticipated to provide steady cash flow [3]