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]

Financial Data and Key Metrics Changes - Adjusted EBITDA for the first nine months of 2025 grew by 9%, reaching $165 million, despite challenges from rising oil chemical raw material prices and higher startup costs at the Pasadena facility [4][6] - Third quarter adjusted net income was $10.9 million, a 54% decrease from $23.7 million in the prior year, primarily due to a higher effective tax rate and increased depreciation [6][8] - Free cash flow was positive at $40 million for the quarter, driven by reduced working capital and disciplined capital spending [7][15] Business Line Data and Key Metrics Changes - Specialty Products adjusted EBITDA increased significantly by 113%, driven by favorable order timing in the pharmaceutical business [5][14] - Polymers net sales decreased by 4% to $143.9 million, with selling prices down 14% but volume increased by 8% [12][14] - Surfactants adjusted EBITDA decreased by 14% to $37.5 million, impacted by higher startup costs and raw material price inflation [11][12] Market Data and Key Metrics Changes - North America rigid polyol and commodity PA volumes grew by double digits, while European volumes were affected by macroeconomic uncertainties [6][12] - Surfactants experienced a 10% increase in net sales, but volume declined by 2% due to lower demand in global commodity consumer products [11][12] Company Strategy and Development Direction - The company remains focused on balancing volume and margins, with a commitment to not lose market share while managing costs [16][24] - The Pasadena facility is fully operational and expected to contribute fully by 2026, enhancing production capabilities [17][18] - The company is analyzing opportunities to optimize its global footprint and asset base, including the sale of its site in the Philippines [19][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovering margins in the surfactants business, with a target to achieve margin recovery by 2026 [23][26] - The company anticipates continued growth in key strategic end markets, particularly in crop productivity and oil field businesses [16][18] - Despite current market uncertainties, management remains optimistic about achieving full-year adjusted EBITDA growth and positive free cash flow in 2025 [19] Other Important Information - The company declared a quarterly cash dividend of $0.395 per share, marking a 2.6% increase, continuing a 58-year trend of increasing dividends [7] Q&A Session Summary Question: Recovery of oil chemicals cost in surfactants - Management noted that coconut oil prices have increased significantly but are now coming down, with a goal to recover margins by 2026 [23] Question: Pricing challenges with lower raw material costs - Management emphasized the importance of balancing volumes and margins, stating they will remain competitive in the market [24] Question: Long-term margin goals for surfactants - Management believes that double-digit EBITDA margins are achievable as they grow in functional markets [26] Question: Pent-up demand in commercial roofing and insulation - Management confirmed there is pent-up demand for renovation in the construction sector, which could improve with lower interest rates [28] Question: Margin recovery in polymers - Management indicated that while margins are currently under pressure, they expect improvements as demand recovers [30] Question: Optimization of global footprint - Management committed to a balanced approach between productivity, asset rationalization, and top-line growth, with future announcements expected [32]

Financial Data and Key Metrics Changes - Adjusted EBITDA for the first nine months of 2025 grew by 9%, reaching $165 million, despite challenges from rising oil chemical raw material prices and higher startup costs related to the new Pasadena facility [3][4] - Third quarter adjusted EBITDA was $56 million, a 6% increase year-on-year [4][8] - Adjusted net income for the third quarter was $10.9 million, down 54% from $23.7 million in the prior year, primarily due to a higher effective tax rate and increased depreciation [5][7] Business Line Data and Key Metrics Changes - Specialty Products adjusted EBITDA increased significantly, driven by favorable order timing within the pharmaceutical business, with net sales rising 68% year-on-year [4][12] - Polymers net sales decreased by 4% to $143.9 million, although sales volume increased by 8% [11][12] - Surfactants net sales were $422.4 million, a 10% increase, but adjusted EBITDA decreased by 14% due to higher startup costs and raw material price inflation [10][11] Market Data and Key Metrics Changes - North America rigid polyol and commodity PA volumes both grew by double digits, while European rigid polyol volumes were impacted by macroeconomic uncertainties [5][11] - The company experienced double-digit volume growth in the crop productivity business and mid-single-digit growth in the oil field end market, but faced lower demand in global commodity consumer products [4][5] Company Strategy and Development Direction - The company remains focused on gradually recovering margins while balancing volumes and margins [4][16] - The new Pasadena facility is fully operational and expected to contribute fully by 2026, enhancing production capabilities [15][16] - The company is analyzing opportunities to optimize its global footprint and asset base, including the planned sale of its site in the Philippines [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about delivering full-year adjusted EBITDA growth and positive free cash flow in 2025 despite ongoing market uncertainties [16] - The company aims to maintain a competitive balance between volumes and margins, particularly in the surfactants business [22][24] Other Important Information - Free cash flow was positive at $40 million during the quarter, driven by reduced working capital and disciplined capital spending [5][12] - The Board declared a quarterly cash dividend of $0.395 per share, marking a 2.6% increase [6] Q&A Session Summary Question: Recovery of oil chemicals cost in surfactants - Management noted that coconut oil prices have increased by 70% compared to 2024, but prices are now coming down, and they aim to recover margins by 2026 [21] Question: Pricing challenges with lower raw material costs - Management emphasized the importance of balancing volumes and margins and stated they will remain competitive in the market [22] Question: Long-term margin goals for surfactants - Management believes that surfactants can achieve healthy double-digit EBITDA margins as they grow in functional markets [24] Question: Pent-up demand in commercial roofing and insulation - Management acknowledged pent-up demand for renovations in the construction sector and noted that lower interest rates could stimulate activity [25][26] Question: Margin recovery expectations in polymers - Management indicated that while margins are currently down, they expect improvements as demand recovers [28] Question: Future asset optimization actions - Management committed to a balanced approach between top-line growth and asset rationalization, with potential future announcements regarding asset sales [30]

Core Points - Stepan Company has approved a quarterly cash dividend increase of $0.01 per share, representing a 2.6% rise, bringing the total dividend to $0.395 per share, payable on December 15, 2025 [1] - This increase marks the 58th consecutive year of dividend growth for the company [1] Company Overview - Stepan Company is a major manufacturer of specialty and intermediate chemicals, primarily producing surfactants used in cleaning, disinfection, and agricultural solutions [2] - The company is also a leading supplier of polyurethane polyols for the thermal insulation market and CASE (Coatings, Adhesives, Sealants, and Elastomers) industries [2] Operational Footprint - Headquartered in Northbrook, Illinois, Stepan operates modern production facilities across North and South America, Europe, and Asia [3] - The company's common stock is traded on the New York Stock Exchange under the symbol SCL [3]

Core Viewpoint - Stepan Company is set to release its third quarter 2025 earnings results on October 29, 2025, followed by a conference call to discuss financial and operational performance [1][2]. Company Overview - Stepan Company is a major manufacturer of specialty and intermediate chemicals, particularly known for its surfactants used in cleaning and disinfection products, as well as in agricultural and oilfield solutions [4]. - The company is also a leading supplier of polyurethane polyols for the thermal insulation market and CASE (Coatings, Adhesives, Sealants, and Elastomers) industries [4]. - Headquartered in Northbrook, Illinois, Stepan operates modern production facilities across North and South America, Europe, and Asia [5]. Conference Call Details - The conference call will be hosted by Luis E. Rojo, President and CEO, and Ruben D. Velasquez, Vice President and CFO [2]. - Participants can access the call via phone or webcast, with a recommendation to join ten minutes early to avoid delays [3].

Core Insights - The article discusses the best dividend stocks for a dividend champions list, focusing on companies that have consistently increased their dividends for 25 years or more [2][5]. Dividend Champions Overview - Dividend champions are distinguished from dividend aristocrats by not needing to be part of the S&P Index, but they share a commitment to increasing dividend payouts [2]. - The ability to grow dividends through challenging times, such as the pandemic, highlights the resilience of these companies [3]. Market Trends - There is a growing interest in dividend stocks among younger investors, particularly Gen Z, who are seeking financial independence and early retirement [4]. - Income-focused ETFs have gained significant traction, capturing about one in every six dollars flowing into equity ETFs, with the sector reaching approximately $750 billion by 2025 [5]. Methodology for Stock Selection - The selection process involved analyzing over 150 dividend champions and identifying those with the highest dividend yields as of October 2 [7]. Company Highlights - **The York Water Company (NASDAQ:YORW)**: - Offers a dividend yield of 2.91% and has paid dividends since 1816, increasing payouts for 28 consecutive years [9][12]. - Operates in a monopoly-like environment, providing stable cash flow due to the high costs of establishing utility services [11]. - **The Southern Company (NYSE:SO)**: - Provides a dividend yield of 3.15% and has a strong reputation in nuclear energy, overseeing eight reactors [13][15]. - Has a record of 24 years of consecutive dividend increases and has paid dividends without interruption for 78 years [15]. - **Stepan Company (NYSE:SCL)**: - Offers a dividend yield of 3.16% and has increased its dividend for 57 straight years [16][19]. - Reported an 8% increase in adjusted EBITDA to $51.4 million in the second quarter, with strong growth in its Polymers and NCT product lines [17][18].

Summary of Stepping Company Conference Call Company Overview - Stepping Company is listed on the New York Stock Exchange under the symbol SCL [2] - The company focuses on priority growth markets with strategic tailwinds for growth and emphasizes customer-centric operations [3] Key Business Segments - The company operates in three reporting segments: Surfactants, Polymers, and Specialty Products [6] - Surfactants serve six key end markets: agricultural chemicals, oil field chemicals, construction and industrial applications, personal care products, household cleaning, and laundry [6] - The Polymers segment primarily focuses on rigid polyols for insulation products [7] - Specialty Products cater to niche markets such as beverages and baby formula [7] Growth Drivers - Demand for food is projected to grow significantly, driving agricultural chemicals [8] - Oilfield chemicals are expected to see growth due to increased productivity and energy efficiency [9] - Long-term government investments in infrastructure are anticipated to boost the construction and industrial solutions segment [9] - The shift towards natural ingredients in personal care products is a key market driver [10] Financial Performance and Investments - The company has made significant investments, including the largest capital investment in its history with a new coxylation facility in Pasadena, Texas [4][12] - Recent growth in agricultural and oilfield surfactants has been noted, with double-digit growth in the first half of the year [19] - The company aims to focus on high-margin, high-growth end markets to drive EBITDA and free cash flow [10] Customer Base Expansion - Stepping Company added approximately 1,800 new customers in the last year, indicating a strong trend in customer acquisition [15][29] - The company has a potential market of 22,000 new and existing customers for further sales opportunities [15] - The focus is on expanding into Tier two and Tier three customer bases, which are smaller accounts that can grow over time [31] Management and Strategy - The management team has undergone changes, with a new CEO appointed in October and a new CFO recently [27][43] - Executive compensation is aligned with strategic targets such as net income, EBITDA, and free cash flow growth [26] - The company is committed to returning cash to shareholders, having increased dividends for 57 consecutive years [23][39] Challenges and Market Conditions - Sales have been trending downwards over the past five years, influenced by raw material cost fluctuations and weakness in agricultural sales [17][18] - The company is focused on managing its balance sheet, currently at a net leverage of 2.9, with plans to deleverage further [25] Innovation and R&D - Stepping Company employs over 230 chemists and has 14 application centers globally, introducing 33 new products in 2024, which accounts for about 10% of revenue [12][42] - The company emphasizes customer-centric innovation, providing tailored solutions and technical support to clients [13] Conclusion - Stepping Company is positioned for growth through strategic investments, a focus on high-margin markets, and an expanding customer base, while navigating challenges in sales trends and market conditions [10][19]

Summary of Ascent Industries Conference Call Company Overview - **Company Name**: Ascent Industries - **Ticker Symbol**: ACNT (NASDAQ) - **Industry**: Specialty Chemicals - **Historical Context**: The company has undergone significant transformation since early 2024, with leadership experienced in turnaround situations from previous roles at ClearOn, a specialty chemical manufacturer that improved from a loss of $8 million in adjusted EBITDA to $36 million over four years [3][4]. Key Points and Arguments Financial Performance - **Turnaround Achievements**: In the past year, Ascent Industries achieved a turnaround of approximately $19.9 million in adjusted EBITDA and $20 million in gross margin improvements, alongside generating $70 million in cash [6]. - **Divestitures**: The company divested its stainless steel assets, including Bristol Metals for $45 million and ASTI for $17 million, transitioning to a pure play specialty chemical company [7]. - **Current Financials**: The company reported a cash drag of $2.1 million from an idle facility, which is expected to be resolved by year-end [8]. Business Strategy - **Chemicals as a Service**: Ascent focuses on providing customized chemical solutions rather than traditional manufacturing, with a shift from 90% custom manufacturing to 75% product sales [10][11]. - **Market Segments**: The company targets four key segments: hygiene and industrial cleaning, oil and gas, water treatment, and coatings, adhesives, sealants, and elastomers [10][15]. - **Growth Potential**: The U.S. specialty chemical market is valued at $200 billion, with Ascent's addressable market at $300 million, indicating significant growth potential [16][17]. Operational Efficiency - **Utilization Rates**: Current asset utilization is around 50%, presenting opportunities for growth with minimal capital investment [12][18]. - **Cost Management**: The company has focused on reducing costs and improving margins, with a target of achieving a 35% gross margin and 15% adjusted EBITDA by 2030 [26][27]. Future Growth Plans - **Revenue Goals**: Ascent aims to reach $120 million to $130 million in revenue from existing assets by 2030, with a long-term goal of $500 million [61][62]. - **M&A Strategy**: The company is exploring small acquisitions to enhance its capabilities and address organic growth challenges, focusing on orphan products and complementary capabilities [30][31]. Market Position and Brand Recognition - **Rebranding Efforts**: Ascent has undergone a rebranding to improve market perception, moving away from a reputation of custom manufacturing to being recognized for innovative solutions [42][45]. - **Sales Strategy**: The company has revamped its sales organization and marketing efforts, resulting in a 45% improvement in the selling project pipeline [24][60]. Additional Important Insights - **R&D Focus**: Ascent is enhancing its R&D capabilities to develop custom solutions and improve product offerings [55]. - **Share Buyback**: The company has been active in share buybacks, utilizing proceeds from asset sales to strengthen its balance sheet [34]. - **Investor Confidence**: Leadership expresses confidence in the company's undervalued status and future growth potential, emphasizing disciplined capital management [39][40]. This summary encapsulates the key points discussed during the conference call, highlighting Ascent Industries' strategic direction, financial performance, and growth opportunities within the specialty chemicals sector.

Core Viewpoint - Stepan Company (SCL) is currently rated as a Zacks Rank 5 (Strong Sell) due to a recent earnings miss and subsequent stock sell-off [1]. Company Overview - Stepan Company is a significant manufacturer of specialty and intermediate chemicals utilized across various industries, particularly known for producing surfactants, which are essential in consumer and industrial cleaning products [2]. Earnings History - The company has beaten the Zacks Consensus Estimate in two of the last four quarters but has also missed in two quarters, indicating mixed performance [4]. - In the most recent quarter, Stepan reported an EPS of $0.52, falling short of the consensus estimate of $0.92, resulting in a negative earnings surprise of 43.5% [5]. Earnings Estimates - Recent trends show a decline in earnings estimates for Stepan, with the current fiscal year consensus remaining at $3.33, while the next year's estimate has decreased from $4.43 to $4.01 over the past 60 days [6]. - The negative movement in earnings estimates is a key factor contributing to the stock's Zacks Rank of 5 (Strong Sell) [6]. Market Context - Many stocks within the Zacks universe are experiencing negative earnings estimate revisions, leading to a broader trend of stocks falling to a Zacks Rank 5 (Strong Sell) [7].

Financial Data and Key Metrics Changes - The company reported second quarter adjusted net income of $12 million, up 27% from $9.4 million in the prior year, driven by earnings growth in polymers and crop productivity, as well as a lower tax rate [9][11] - Adjusted EBITDA for the second quarter was $51.4 million, an 8% increase from $47.7 million in the prior year [14] - Cash from operations was $11.2 million for the quarter, while free cash flow was negative at $14.4 million due to inventory builds [12][19] Business Line Data and Key Metrics Changes - Polymers delivered double-digit adjusted EBITDA growth, while surfactant adjusted EBITDA remained similar to last year, impacted by raw material inflation [6][7] - Surfactant net sales were $411.5 million, an 8% increase year-over-year, with selling prices up 11% [15] - Specialty product net sales increased by 22% to $20.5 million, but adjusted EBITDA decreased by 24% due to order timing fluctuations [18] Market Data and Key Metrics Changes - Volume grew 1%, with polymers up 7% and NCT product line up 49%, while surfactants volume was down 1% [8] - North America and European rigid polyols volume grew low single digits, while the commodity PA business showed strong year-over-year growth [8] - The company experienced double-digit volume growth in crop productivity and oilfield end markets, offset by lower demand in global commodity consumer products [8] Company Strategy and Development Direction - The company aims to recover margins gradually and continues to focus on customer acquisition within Tier two and Tier three segments [6][20] - Investments are being made in new product development, particularly in the spray foam end market and next-generation polytechnologies [22] - The company is on track to close the sale of its site in the Philippines in 2025 and is looking for opportunities to optimize its asset base [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about delivering full-year adjusted EBITDA and net income growth despite market uncertainties [24] - The company is focused on enhancing operational excellence to grow volume and improve product mix [23] - Management noted that the first half of the year was decent, with growth in adjusted EBITDA across surfactants, polymers, and specialty products [32] Other Important Information - The effective tax rate was 19.2% during the first half of the year, lower than the normal range of 24% to 26% due to favorable discrete items [13] - The company paid $8.7 million in dividends during the quarter and has increased dividends for 57 consecutive years [10] Q&A Session Summary Question: Clarification on one-time impacts in the Surfactants business - Management confirmed that the $6 million includes startup costs from Pasadena, the EPA fine, and environmental remediation reserve adjustments [29][31] Question: Details on raw material impacts and pricing - Management indicated that coconut oil prices have significantly increased, and they are still catching up on price execution [34][35] Question: Effects of the new collective bargaining agreement in Millsdale - Management expressed satisfaction with the workforce and noted that the agreement is a routine event occurring every four years [37] Question: Insights on the AOS expansion and its beneficiaries - Management highlighted that AOS is crucial for sulfate-free business growth, targeting both Tier one and lower-tier clients [43] Question: Future asset optimization opportunities - Management stated they are continuously evaluating their asset base for productivity and return on investment, with no concrete plans yet [46] Question: Clarification on the tax benefit seen in the quarter - Management confirmed that the tax benefit was a one-time occurrence and the normal tax rate will return to the range of 24% to 26% [47]