Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stepan Co (SCL, Financial) reported a third quarter adjusted EBITDA of $53 million, marking an 11% increase compared to the previous year.
- The company achieved significant growth in its agricultural business, with a 22% increase in global agriculture volumes.
- Stepan Co (SCL) is on track to meet its $50 million cost reduction goal for 2024, demonstrating effective cost management.
- The company declared a quarterly cash dividend increase of 2.7%, continuing its 57-year streak of dividend growth.
- Construction of the new alkoxylation production facility in Pasadena, Texas is 99% complete, expected to contribute fully by the second half of 2025.
Negative Points
- Global sales volume decreased by 1% due to demand weakness and competitive pressures in the polymer business.
- The polymer segment experienced a 12% decrease in net sales, primarily due to sluggish demand and competitive pressures.
- Free cash flow for the first nine months was only $7 million, impacted by increased inventory levels and planned plant turnarounds.
- The company faced a $3.3 million expense related to a fraud event in Asia, affecting corporate expenses.
- The specialty products segment saw a 24% decrease in net sales, driven by lower selling prices and a 5% decline in sales volume.
Q & A Highlights
Q: Can you provide insights into the recent performance of the agricultural business within the Surfactants segment? Are the improvements sustainable?
A: Luis E. Rojo, CEO and President, stated that the agricultural business grew by 22% in the third quarter, marking the end of destocking. The growth aligns with expectations for the second half of 2024, and October's performance suggests continued positive trends. The fourth quarter is critical, and the company is optimistic about sustained improvement.
Q: What factors contributed to the significant improvement in surfactant earnings in Europe?
A: Luis E. Rojo highlighted that the positive trends in Europe are largely driven by the agricultural business. The team in Europe has performed well, contributing to the overall improvement in surfactant earnings.
Q: How is the consumer side of the surfactants business performing, and are there signs of stabilization?
A: Luis E. Rojo noted some weaknesses in the personal care segment due to customer losses. However, the laundry and cleaning business, which is a significant volume driver, grew by 4% in the quarter, indicating continued consumer spending in these areas.
Q: What is the outlook for the polymer business, considering current macroeconomic challenges?
A: Luis E. Rojo expressed confidence in the polymer business's future, citing potential growth in insulation demand as macroeconomic conditions improve. The company is focusing on diversification into high-margin areas like spray foam, which is expected to drive future growth.
Q: What are Stepan's plans for capital expenditures (CapEx) in the coming year?
A: Luis E. Rojo mentioned that Stepan plans to return to a normal CapEx level of $100 million to $200 million after completing major projects like the Pasadena facility. The company will continue to explore growth opportunities that offer good returns, particularly in the oilfield business, without significant new plant investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
