October 20, 2022

Urethane Highlights from Stepan Earnings Call

Stepan Company (SCL) Q3 2022 Earnings Call Transcript

Oct. 19, 2022 4:17 PM ETStepan Company (SCL)

Q3: 2022-10-19 Earnings Summary

EPS of $2.01 beats by $0.40 | Revenue of $719.19M (19.33% Y/Y) beats by $54.71M

Stepan Company (NYSE:SCL) Q3 2022 Earnings Conference Call October 19, 2022 10:00 AM ET

Company Participants

Luis Rojo – Vice President & Chief Financial Officer

Scott Behrens – Chief Executive Officer, Chief Operating Officer, President & Director

Scott Behrens

Good morning and thank you for joining us today to discuss our third quarter results. To begin, I will share our third quarter highlights and strategy outlook and Luis will provide additional details on our financial results for the quarter.

The third quarter continued to be a challenging operating environment given continued raw material constraints, the energy crisis in Europe, cost inflation, foreign currency exchange impacts from a stronger U.S. dollar and overall global macroeconomic uncertainties. Nonetheless, I am proud of how our team has continued to overcome these challenges by delivering record results for the third quarter. Reported net income reached a record $39.4 million or $1.71 per diluted share, while adjusted net income was a record of $46.3 million or $2.01 per diluted share. Surfactant operating income was $39.0 million compared to $34.5 million in the prior year quarter. Growth was mainly driven by a better product and customer mix, partially offset by an 8% decline in global volume.

Our Polymer segment reached a record operating income of $31.9 million compared to $19.8 million in the prior year which represents a 61% increase driven by margin recovery and improved mix. Our Specialty Products segment also had a record quarter, growing operating income to $9.7 million, representing a $7.3 million increase over prior year. Our Board of Directors declared a quarterly cash dividend on Stepan’s common stock of $0.365 per share, payable on December 15, 2022. And — this represents a 9% increase in our dividend and Stepan has paid and increased its dividend for 55 consecutive years. During the third quarter of 2022, the company paid $7.5 million of dividends to shareholders and repurchased $5.3 million of company stock. During the first 9 months of 2022, the company paid $22.5 million in dividends and repurchased $22.3 million of company stock. The company still has $127.7 million remaining under our share repurchase program.

Looking forward, we believe the operational environment will remain challenging. However, we are confident that we can deliver another record year. At this point, I would like Luis to walk through a few more details about our third quarter results.

Luis Rojo

Now, turning to Polymers on Slide 7. Net sales were $215 million, up 8% from the same quarter last year. Selling prices increased 26% due to the pass-through of higher raw material and logistics costs and recovering margins. Volume decreased 10%, driven an 8% decline in global [indiscernible] volume, primarily due to softening demand in Europe. Foreign currency translation negatively impacted net sales by 8%. Polymers delivered a record operating income for the quarter of $31.9 million which represents a 61% increase versus prior year. This is primarily due to margin recovery and improved mix which was partially offset by the 10% decrease in global volumes. North America Polyol and PA income increased driven by margin recovery and mix improvement. The decrease in Europe was driven by FX and volume reductions. China operating income was down slightly due to suppressed demand from the COVID lockdowns and restrictions.

Scott Behrens

Our Millsdale plant continues to be one of our key priorities. We are accelerating investments to improve productivity and reliability and to increase capacity through operational excellence initiatives. These investments will continue throughout the year and we expect to see benefits from our efforts and investments starting next year. One of the key priorities at Millsdale is the execution of our low 1,4-dioxane project.

Moving to Slide 11. Work continues on our new alkoxylation production facility in Pasadena, Texas. This asset will be a flexible state-of-the-art multi-reactor facility with approximately 75,000 tons per annum of annual alkoxylation capacity. It will provide strategically located capacity and capability for long-term specialty alkoxylate growth across our strategic growth end markets, including agriculture, oilfield, construction and household and institutional cleaning. We expect the plant to be up and running in early 2024. The underlining alkoxylation business that supports the Pasadena investment continues its strong growth and at margins above our original projections.

We remain confident and excited about our investment in Pasadena. The recent acquisition of performanX alkoxylates business should deliver additional baseload volumes for Pasadena in the future and the chemistries are well known by Stepan. This acquisition is a strong fit within Stepan Surfactant business and provides attractive market diversification opportunities for our alkoxylation product line. The acquired surfactants are supplied to key customers and end markets covering personal care, pulp and paper, lubricants, household institutional cleaning, oil and gas, agricultural and other industrial markets. We are excited to expand our customer base in some of these new end use markets for Stepan.

As you know, we are increasing North American capability and capacity to produce either sulfates that meet new regulatory limits on 1,4-dioxane by the end of January 2023. The 1,4-dioxane is a minor byproduct generated in the manufacture of ether sulfate surfactants which are key cleaning and foaming ingredients used in consumer product formulations. Stepan is working to supply customers with either sulfates that meet the new regulatory requirements. As part of this transition, one key customer chose to invest in internal production capabilities so that lost volume was recognized starting in the third quarter. However, we have gained volume with other customers and we’ll continue focusing on strategic priority of growing within our Tier 2, Tier 3 customer segment. We expect this transition to go through 2023 and our focus is on generating value growth. The good news is that the overall market continues to believe that either sulfates which meet the new regulation levels for 1,4-dioxane are the best alternative for performance and costs.

David Silver

Okay, great. And then just last question. I mean, this is something I just have noticed in the headlines over the last week or 2. But water levels, this is in the U.S. logistics but the water levels on the Mississippi are such that barge and vehicle vessel traffic is being disrupted. So thinking about Millsdale and maybe some of your other — or maybe your flow of raw materials — is that creating unusual issues for you? Are you kind of diverting to different modes of transport as a result? Or is that just — is that something you’re able to manage without too much difficulty, thank you.

Scott Behrens

Yes. We — yes, great question. And yes, we’ve been operating our plants on the Illinois River, the Des Plaines River for 50 years and we have very robust contingency plans in our sourcing and planning groups work with very closely with our raw material suppliers to ensure alternate modes are available into the Chicago area. So not an impactful…

Luis Rojo

Yes. No major impact.

Mike Harrison

Okay. And then the last one I had is on polymers. I was just hoping you could give a little bit more detail on what you’re seeing in terms of demand trends as we’re getting into Q4. Obviously, the 10% volume decline in Q3 suggests that you’re definitely seeing some things getting worse. Curious if some of that is customer inventory destocking that might be a little bit more temporary but anything you can share on near-term demand in the construction-related portions of polymers would be appreciated.

Scott Behrens

Yes. I think as we all read what’s happening in Europe, specifically in the construction markets, there is a slowdown happening. Projects are being put on hold or canceled which is really what’s driven our volume decline in polymers in Q3. And then the continued kind of lockdowns in China have also significantly impacted demand. Where is it look sequentially quarter-over-quarter into Q4, we’re kind of expecting a lot of the same for Q4. And I think the overall hope is that there’s maybe a two or three quarter, call it, a hiatus and expecting growth and recovery in the construction markets in Europe in the second half of next year. I think that’s kind of a general consensus right now across what we’re hearing in the market.

Luis Rojo

And as you know, Mike, I mean, at the end, insulation played a critical role in what needs to be achieved in the world which is to reduce energy consumption. So of course, people preserve cash in this environment and people put on hold some of the projects. But if you need to replace your roof, you need to replace it, right? And you can hold out for one, two, three quarters but you cannot hold forever. So we believe this is a transitory theme. And if you look at North America, despite all the challenges, a region in North America year-to-date is growing volume, single low single digits but it’s still growing. So the impact that we saw in Q3 is mainly Europe and Asia.

David Storms

Good morning, gentlemen. Thanks for taking my call. You actually just touched on it with the demand weakening in Europe and the Chinese markets. I know the North American markets seem to still have pretty strong demand. Are there any indicators that you’re keeping an eye on to forecast if or when any of this demand weakness does spread to the North American markets?

Scott Behrens

Yes. We’re obviously staying very close to our customers and watching and hearing what they’re saying about the installation contractors [indiscernible]. I think everyone’s been talking about the backlog of orders and projects. And in the first sign of weakness that we will see is when we hear that those back orders are starting to decline. So at this point in time, as Luis mentioned, our growth — our rigid North American volumes continue to grow in the small single digits. And I think we can anticipate that Q4 should be very similar. But too early to tell.

https://seekingalpha.com/article/4547593-stepan-company-scl-q3-2022-earnings-call-transcript

October 20, 2022

Dow Quarterly Results

Dow reports third quarter 2022 results

Oct. 20, 2022 6:00 AM ETDow Inc. (DOW)

MIDLAND, Mich., Oct. 20, 2022 /PRNewswire/ — Dow (NYSE: DOW):

FINANCIAL HIGHLIGHTS

• GAAP earnings per share (EPS) was $1.02; Operating EPS¹ was $1.11, compared to $2.75 in the year-ago period and $2.31 in the prior quarter, reflecting margin compression due to higher energy costs, primarily in Europe, the Middle East, Africa and India (EMEAI).
• Net sales were $14.1 billion, down 5% versus the year-ago period, as gains in Performance Materials & Coatings were more than offset by declines in Industrial Intermediates & Infrastructure and Packaging & Specialty Plastics. Sequentially, sales were down 10% with declines in all operating segments and regions.
• Local price increased 3% versus the year-ago period, driven by Performance Materials & Coatings and Industrial Intermediates & Infrastructure. Sequentially, local price decreased 6% with declines in all operating segments and regions.
• Currency decreased net sales by 4% year-over-year and 1% versus the prior quarter due to broad-based strength of the U.S. dollar.
• Volume was down 4% versus the year-ago period, as a 12% decline in EMEAI more than offset 2% volume growth each in the U.S. & Canada and Asia Pacific. Sequentially, volume was down 3%, led by an 8% decline in EMEAI.
• Equity losses were $58 million, compared to equity earnings of $249 million in the year-ago period and $195 million in the prior quarter, led by margin compression in polyurethanes at Sadara and MEG at the Kuwait joint ventures.
• GAAP Net Income was $760 million. Operating EBIT¹ was $1.2 billion, down from $2.9 billion in the year-ago period, as gains in Performance Materials & Coatings were more than offset by higher raw material and energy costs as well as lower equity earnings. Operating EBIT decreased from $2.4 billion in the prior quarter due to margin compression across all operating segments.
• Cash provided by operating activities – continuing operations was $1.9 billion, down $779 million year-over-year and up $84 million compared to the prior quarter. Free cash flow¹ was $1.5 billion.
• Returns to shareholders totaled $1.3 billion, comprised of $800 million in share repurchases and $493 million in dividends in the quarter.

CEO QUOTE

Jim Fitterling, chairman and chief executive officer, commented on the quarter:

“In the third quarter, Team Dow managed significant macroeconomic headwinds as we swiftly initiated actions and aligned production with supply chain and logistics constraints, prioritized resources toward higher-value products, and reduced operational costs across the enterprise. As a result, we maintained our focus on cash flow generation and continued to execute on our capital allocation strategy, returning $1.3 billion to shareholders.

“Underlying demand remains resilient in the U.S., while high energy and feedstock costs are driving record inflation and impacting demand in the Eurozone, and ongoing lockdowns in China continue to pressure both consumer spending and infrastructure investments. Moving forward, our global scale, geographic diversity, and advantaged feedstock and derivative flexibility will continue to be the source of our distinct advantages. Our track record of employing a disciplined and balanced approach to capital allocation, focus on cash flow generation, and our strengthened balance sheet provide a solid foundation as we continue managing through these dynamic global conditions.”

Industrial Intermediates & Infrastructure

Industrial Intermediates & Infrastructure segment net sales were $4.1 billion, down 9% versus the year-ago period. Local price improved 5% year-over-year with gains in both businesses. Currency decreased net sales by 5%. Volume was down 9% year-over-year, as declines in Polyurethanes & Construction Chemicals were partly offset by gains in Industrial Solutions due to demand strength in pharmaceutical, agricultural, and energy applications. On a sequential basis, the segment recorded a net sales decline of 7% on lower local price and currency with stable volume.  

Equity losses for the segment were $114 million, a decrease of $236 million compared to the year-ago period. Competitive pricing pressures in propylene oxide derivatives and MEG due to supply additions in China, as well as lower demand in EMEAI were the main impacts. On a sequential basis, equity earnings decreased by $171 million primarily due to lower price at Sadara and the Kuwait joint ventures.

Operating EBIT was $167 million, compared to $713 million in the year-ago period and $426 million in the prior quarter, as lower EMEAI demand and increased energy and raw material costs were partly offset by higher prices. On a sequential basis, operating EBIT margins declined 560 basis points on lower price and higher energy costs.

Polyurethanes & Construction Chemicals business reported a net sales decrease compared to the year-ago period, as local price gains were more than offset by lower volumes due to inflationary pressures on demand in EMEAI and currency impacts. Sequentially, net sales declined as improved demand in mobility end-markets was more than offset by lower price and inflationary impacts on demand for consumer durables, industrial, and building & construction applications.

Industrial Solutions business reported a net sales increase compared to the year-ago period, driven by local price gains and strong demand for pharmaceutical, agricultural, and energy applications. Sequentially, net sales decreased as strong demand in energy, pharmaceutical, and mobility end-markets and increased catalyst sales were more than offset by price declines and currency impacts.

OUTLOOK

“In the near-term, we expect the macro environment to remain dynamic. As a result, we have outlined a playbook of actions that have the potential to deliver more than $1 billion in cost savings in 2023 while we continue to leverage our scale, geographic diversity and feedstock and derivative flexibility,” said Fitterling. “At the same time, we remain focused on advancing our Decarbonize and Grow strategy with higher-return investments that will extend our competitive advantages and industry leadership positions. Our strong financial position and balance sheet as well as our continued focus on cash flow generation give us ample flexibility to execute on our capital allocation priorities, including attractive shareholder remuneration, as we maximize value creation over the longer-term.”

https://seekingalpha.com/pr/18983750-dow-reports-third-quarter-2022-results?mailingid=29433026&messageid=2900&serial=29433026.12005

October 20, 2022

Dow Quarterly Results

Dow reports third quarter 2022 results

Oct. 20, 2022 6:00 AM ETDow Inc. (DOW)

MIDLAND, Mich., Oct. 20, 2022 /PRNewswire/ — Dow (NYSE: DOW):

FINANCIAL HIGHLIGHTS

• GAAP earnings per share (EPS) was $1.02; Operating EPS¹ was $1.11, compared to $2.75 in the year-ago period and $2.31 in the prior quarter, reflecting margin compression due to higher energy costs, primarily in Europe, the Middle East, Africa and India (EMEAI).
• Net sales were $14.1 billion, down 5% versus the year-ago period, as gains in Performance Materials & Coatings were more than offset by declines in Industrial Intermediates & Infrastructure and Packaging & Specialty Plastics. Sequentially, sales were down 10% with declines in all operating segments and regions.
• Local price increased 3% versus the year-ago period, driven by Performance Materials & Coatings and Industrial Intermediates & Infrastructure. Sequentially, local price decreased 6% with declines in all operating segments and regions.
• Currency decreased net sales by 4% year-over-year and 1% versus the prior quarter due to broad-based strength of the U.S. dollar.
• Volume was down 4% versus the year-ago period, as a 12% decline in EMEAI more than offset 2% volume growth each in the U.S. & Canada and Asia Pacific. Sequentially, volume was down 3%, led by an 8% decline in EMEAI.
• Equity losses were $58 million, compared to equity earnings of $249 million in the year-ago period and $195 million in the prior quarter, led by margin compression in polyurethanes at Sadara and MEG at the Kuwait joint ventures.
• GAAP Net Income was $760 million. Operating EBIT¹ was $1.2 billion, down from $2.9 billion in the year-ago period, as gains in Performance Materials & Coatings were more than offset by higher raw material and energy costs as well as lower equity earnings. Operating EBIT decreased from $2.4 billion in the prior quarter due to margin compression across all operating segments.
• Cash provided by operating activities – continuing operations was $1.9 billion, down $779 million year-over-year and up $84 million compared to the prior quarter. Free cash flow¹ was $1.5 billion.
• Returns to shareholders totaled $1.3 billion, comprised of $800 million in share repurchases and $493 million in dividends in the quarter.

CEO QUOTE

Jim Fitterling, chairman and chief executive officer, commented on the quarter:

“In the third quarter, Team Dow managed significant macroeconomic headwinds as we swiftly initiated actions and aligned production with supply chain and logistics constraints, prioritized resources toward higher-value products, and reduced operational costs across the enterprise. As a result, we maintained our focus on cash flow generation and continued to execute on our capital allocation strategy, returning $1.3 billion to shareholders.

“Underlying demand remains resilient in the U.S., while high energy and feedstock costs are driving record inflation and impacting demand in the Eurozone, and ongoing lockdowns in China continue to pressure both consumer spending and infrastructure investments. Moving forward, our global scale, geographic diversity, and advantaged feedstock and derivative flexibility will continue to be the source of our distinct advantages. Our track record of employing a disciplined and balanced approach to capital allocation, focus on cash flow generation, and our strengthened balance sheet provide a solid foundation as we continue managing through these dynamic global conditions.”

Industrial Intermediates & Infrastructure

Industrial Intermediates & Infrastructure segment net sales were $4.1 billion, down 9% versus the year-ago period. Local price improved 5% year-over-year with gains in both businesses. Currency decreased net sales by 5%. Volume was down 9% year-over-year, as declines in Polyurethanes & Construction Chemicals were partly offset by gains in Industrial Solutions due to demand strength in pharmaceutical, agricultural, and energy applications. On a sequential basis, the segment recorded a net sales decline of 7% on lower local price and currency with stable volume.  

Equity losses for the segment were $114 million, a decrease of $236 million compared to the year-ago period. Competitive pricing pressures in propylene oxide derivatives and MEG due to supply additions in China, as well as lower demand in EMEAI were the main impacts. On a sequential basis, equity earnings decreased by $171 million primarily due to lower price at Sadara and the Kuwait joint ventures.

Operating EBIT was $167 million, compared to $713 million in the year-ago period and $426 million in the prior quarter, as lower EMEAI demand and increased energy and raw material costs were partly offset by higher prices. On a sequential basis, operating EBIT margins declined 560 basis points on lower price and higher energy costs.

Polyurethanes & Construction Chemicals business reported a net sales decrease compared to the year-ago period, as local price gains were more than offset by lower volumes due to inflationary pressures on demand in EMEAI and currency impacts. Sequentially, net sales declined as improved demand in mobility end-markets was more than offset by lower price and inflationary impacts on demand for consumer durables, industrial, and building & construction applications.

Industrial Solutions business reported a net sales increase compared to the year-ago period, driven by local price gains and strong demand for pharmaceutical, agricultural, and energy applications. Sequentially, net sales decreased as strong demand in energy, pharmaceutical, and mobility end-markets and increased catalyst sales were more than offset by price declines and currency impacts.

OUTLOOK

“In the near-term, we expect the macro environment to remain dynamic. As a result, we have outlined a playbook of actions that have the potential to deliver more than $1 billion in cost savings in 2023 while we continue to leverage our scale, geographic diversity and feedstock and derivative flexibility,” said Fitterling. “At the same time, we remain focused on advancing our Decarbonize and Grow strategy with higher-return investments that will extend our competitive advantages and industry leadership positions. Our strong financial position and balance sheet as well as our continued focus on cash flow generation give us ample flexibility to execute on our capital allocation priorities, including attractive shareholder remuneration, as we maximize value creation over the longer-term.”

https://seekingalpha.com/pr/18983750-dow-reports-third-quarter-2022-results?mailingid=29433026&messageid=2900&serial=29433026.12005

October 19, 2022

Stepan Results

Stepan Reports Record Third Quarter Results and Record Nine Month Earnings

PR Newswire

NORTHBROOK, Ill., Oct. 19, 2022 /PRNewswire/ — Stepan Company (NYSE: SCL) today reported:

Third Quarter Highlights

• Reported net income was a record $39.4 million, or $1.71 per diluted share versus $36.9 million, or $1.59 per diluted share, in the prior year. Adjusted net income* was a record $46.3 million, or $2.01 per diluted share, versus $36.4 million, or $1.57 per diluted share, in the prior year. Total Company sales volume decreased 8% versus the prior year.
• Surfactant operating income was $39.0 million versus $34.5 million in the prior year. This increase was primarily driven by improved product and customer mix that was partially offset by an 8% decline in global sales volume. The sales volume decline was primarily due to lower global commodity laundry demand and raw material constraints in North America. Higher demand in the Functional Products and Institutional Cleaning end markets partially offset the above.
• Polymer operating income was $31.9 million versus $19.8 million in the prior year. This increase was primarily attributable to margin recovery and improved mix that was partially offset by a 10% decrease in global sales volume. The volume decrease was primarily due to an 8% decline in global Rigid Polyol demand driven by double digit declines in Europe and Asia.
• Specialty Product operating income was $9.7 million versus $2.4 million in the prior year. This increase was primarily attributable to improved margins and customer mix within the medium chain triglycerides (MCTs) product line.
• The Company increased its pre-tax environmental reserve from $23.2 million to $33.5 million in the current year quarter. This increase was primarily due to revised environmental remediation cost estimates for the Company’s Maywood, New Jersey site.
• The effect of foreign currency translation negatively impacted net income by $2.4 million, or $0.11 per diluted share, versus the prior year.
• The Company increased its quarterly cash dividend in the fourth quarter of 2022 by $0.03 per share, or 9.0%, marking the 55^th consecutive year that the Company has increased its cash dividend to stockholders.

YTD Highlights

• Reported net income for the first nine months of 2022 was a record $136.3 million, or $5.90 per diluted share, versus $120.8 million, or $5.19 per diluted share, in the prior year. Adjusted net income* was a record $140.0 million, or $6.06 per diluted share, versus $121.0 million, or $5.20 per diluted share, in the prior year. Total Company sales volume was down 3% compared to the first nine months of 2021.

*  Adjusted net income is a non-GAAP measure which excludes deferred compensation income/expense, cash-settled stock appreciation rights (SARs) income/expense, certain environmental remediation-related costs as well as other significant and infrequent/non-recurring items. See Table II for reconciliations of non-GAAP adjusted net income and earnings per diluted share.

“The Company had strong performance for the first nine months of 2022 and delivered record results, despite ongoing supply chain challenges.  Reported net income was up 13% versus the first nine months of 2021 while adjusted net income was up 16%,” said Scott Behrens, President and Chief Executive Officer. “For the quarter, Surfactant operating income was up 13%  largely due to improved product and customer mix.  This improvement was driven by growth in our Functional Products business as a result of elevated crop and energy prices, which offset an 8% decline in sales volume primarily within our Consumer Products business.  Our Polymer income was up 61% due to margin recovery and improved mix that was partially offset by a 10% decline in sales volume.  Our Specialty Product results improved significantly due to margin improvement and favorable customer mix.” 

Outlook

“The Company delivered record third quarter and nine-month results and we expect to deliver record full year earnings again in 2022.  For the fourth quarter we anticipate approximately $8 million of incremental expense related to planned maintenance activity in our North American Phthalic Anhydride plant and low 1,4 dioxane transition costs,” said Scott Behrens, President and Chief Executive Officer.  “From a segment perspective, we believe that Surfactants, Polymers and Specialty Products should all deliver full year earnings growth versus prior year.  Surfactant volumes within the Functional Products and Industrial Cleaning end markets are expected to show full year growth over 2021.  Despite short-term volatility and challenges, we believe that the long-term outlook for Rigid Polyols will remain attractive as energy conservation efforts and more stringent building codes are expected to continue.  Looking forward to the next few quarters, we believe the Company will be challenged by slowing global economic growth, weakening consumer and construction demand, continued inflationary pressures and a stronger U.S. dollar.  Despite this projected macro environment, we remain committed to executing our long-term growth strategy.”     

https://smb.middlesboronews.com/article/Stepan-Reports-Record-Third-Quarter-Results-and-Record-Nine-Month-Earnings?storyId=634fd850b4ed3a46c52845e2

October 19, 2022

Stepan Results

Stepan Reports Record Third Quarter Results and Record Nine Month Earnings

PR Newswire

NORTHBROOK, Ill., Oct. 19, 2022 /PRNewswire/ — Stepan Company (NYSE: SCL) today reported:

Third Quarter Highlights

• Reported net income was a record $39.4 million, or $1.71 per diluted share versus $36.9 million, or $1.59 per diluted share, in the prior year. Adjusted net income* was a record $46.3 million, or $2.01 per diluted share, versus $36.4 million, or $1.57 per diluted share, in the prior year. Total Company sales volume decreased 8% versus the prior year.
• Surfactant operating income was $39.0 million versus $34.5 million in the prior year. This increase was primarily driven by improved product and customer mix that was partially offset by an 8% decline in global sales volume. The sales volume decline was primarily due to lower global commodity laundry demand and raw material constraints in North America. Higher demand in the Functional Products and Institutional Cleaning end markets partially offset the above.
• Polymer operating income was $31.9 million versus $19.8 million in the prior year. This increase was primarily attributable to margin recovery and improved mix that was partially offset by a 10% decrease in global sales volume. The volume decrease was primarily due to an 8% decline in global Rigid Polyol demand driven by double digit declines in Europe and Asia.
• Specialty Product operating income was $9.7 million versus $2.4 million in the prior year. This increase was primarily attributable to improved margins and customer mix within the medium chain triglycerides (MCTs) product line.
• The Company increased its pre-tax environmental reserve from $23.2 million to $33.5 million in the current year quarter. This increase was primarily due to revised environmental remediation cost estimates for the Company’s Maywood, New Jersey site.
• The effect of foreign currency translation negatively impacted net income by $2.4 million, or $0.11 per diluted share, versus the prior year.
• The Company increased its quarterly cash dividend in the fourth quarter of 2022 by $0.03 per share, or 9.0%, marking the 55^th consecutive year that the Company has increased its cash dividend to stockholders.

YTD Highlights

• Reported net income for the first nine months of 2022 was a record $136.3 million, or $5.90 per diluted share, versus $120.8 million, or $5.19 per diluted share, in the prior year. Adjusted net income* was a record $140.0 million, or $6.06 per diluted share, versus $121.0 million, or $5.20 per diluted share, in the prior year. Total Company sales volume was down 3% compared to the first nine months of 2021.

*  Adjusted net income is a non-GAAP measure which excludes deferred compensation income/expense, cash-settled stock appreciation rights (SARs) income/expense, certain environmental remediation-related costs as well as other significant and infrequent/non-recurring items. See Table II for reconciliations of non-GAAP adjusted net income and earnings per diluted share.

“The Company had strong performance for the first nine months of 2022 and delivered record results, despite ongoing supply chain challenges.  Reported net income was up 13% versus the first nine months of 2021 while adjusted net income was up 16%,” said Scott Behrens, President and Chief Executive Officer. “For the quarter, Surfactant operating income was up 13%  largely due to improved product and customer mix.  This improvement was driven by growth in our Functional Products business as a result of elevated crop and energy prices, which offset an 8% decline in sales volume primarily within our Consumer Products business.  Our Polymer income was up 61% due to margin recovery and improved mix that was partially offset by a 10% decline in sales volume.  Our Specialty Product results improved significantly due to margin improvement and favorable customer mix.” 

Outlook

“The Company delivered record third quarter and nine-month results and we expect to deliver record full year earnings again in 2022.  For the fourth quarter we anticipate approximately $8 million of incremental expense related to planned maintenance activity in our North American Phthalic Anhydride plant and low 1,4 dioxane transition costs,” said Scott Behrens, President and Chief Executive Officer.  “From a segment perspective, we believe that Surfactants, Polymers and Specialty Products should all deliver full year earnings growth versus prior year.  Surfactant volumes within the Functional Products and Industrial Cleaning end markets are expected to show full year growth over 2021.  Despite short-term volatility and challenges, we believe that the long-term outlook for Rigid Polyols will remain attractive as energy conservation efforts and more stringent building codes are expected to continue.  Looking forward to the next few quarters, we believe the Company will be challenged by slowing global economic growth, weakening consumer and construction demand, continued inflationary pressures and a stronger U.S. dollar.  Despite this projected macro environment, we remain committed to executing our long-term growth strategy.”     

https://smb.middlesboronews.com/article/Stepan-Reports-Record-Third-Quarter-Results-and-Record-Nine-Month-Earnings?storyId=634fd850b4ed3a46c52845e2