Stepan Q3 Results
NORTHFIELD, Ill., Oct. 25, 2017 /PRNewswire/ — Stepan Company (NYSE: SCL) today reported:
Third Quarter Highlights
- Reported net income was $21.9 million, or $0.94 per diluted share versus $21.4 million, or $0.92 per diluted share, in the prior year. Adjusted net income* was $21.4 million, or $0.92 per diluted share versus $25.4 million, or $1.10 per diluted share, in the prior year, primarily due to unfavorable Polymer results.
- Surfactant operating income was $22.5 million versus $20.7 million in the prior year. The increase was primarily attributable to higher demand in the Functional Products and Household, Industrial and Institutional end markets, higher Distribution sales and lower manufacturing costs, mainly related to prior plant closures in Canada and Brazil. Global Surfactant sales volume increased 1% versus the prior year despite lower commodity surfactant demand.
- Polymer operating income was $21.1 million versus $27.1 million in the prior year. This decrease was mostly attributable to higher raw material costs and lower North American sales volumes. Global Polymers volume declined 1% versus the prior year with Polyol volumes down 1%.
- Specialty Product operating income was $1.0 million versus $2.3 million in the prior year primarily due to order timing differences within our pharmaceutical and flavor businesses.
- The Company’s net-debt to total capitalization ratio declined 500 basis points to 5%. Year-to-date free cash flow was $53 million versus $37 million in the prior year.
- The Company increased its quarterly cash dividend in the fourth quarter of 2017 by $0.02 per share or 10%, marking the 50th consecutive year that the company has increased its cash dividend to stockholders.
“Although the third quarter reported net income increased versus prior year, adjusted net income was down due to increased competitive pressure within our North American Polymer business. Surfactant income increased due to an improved product mix and lower manufacturing costs. Global Polyol volumes were down slightly reflecting share loss at one customer despite a growing market for insulation materials. Both Surfactant and Polymers continue to benefit from our diversification strategy,” said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer.
* Adjusted net income is a non-GAAP measure which excludes Deferred Compensation income/ expense as well as other significant and infrequent/non-recurring items. See Table II for a reconciliation of non-GAAP adjusted net income and adjusted earnings per diluted share.
Polymer net sales were $147.8 million in the third quarter, a 10% increase versus the prior year. Selling prices increased 8% while sales volume declined 1% in the quarter. The lower sales volume was primarily due to lower Phthalic Anhydride (PA) and global Rigid Polyol volumes, partially offset by higher Specialty Polyol volume. Global Polyol volume declined 1% primarily due to lost share at one customer in North America. The translation impact of a weaker U.S. dollar positively impacted net sales by 3%. Operating income decreased $6.0 million or 22% versus the prior-year quarter, attributable to higher raw material costs and lower sales volumes during the quarter.
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