October 19, 2022
Stepan Reports Record Third Quarter Results and Record Nine Month Earnings
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 55th consecutive year that the Company has increased its cash dividend to stockholders.
- 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.”
“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.”