Stepan's Adjusted Profit Nearly Doubles, But A $76.1 Million Restructuring Charge Keeps Nine Months In The Red
The chemical maker's cleaning-ingredient business drove a 98% jump in third-quarter adjusted earnings, and it expects full-year adjusted EBITDA growth.
Stepan, which makes specialty and intermediate chemicals for other manufacturers, said Wednesday its third-quarter adjusted net income rose 98% to $21.7 million, led by a rebound in its surfactants unit. Reported net income climbed 64% to $17.8 million, or $0.78 per diluted share, on sales of $692.2 million, up 17%.
Surfactants lead the quarter
Adjusted EBITDA, an operating-earnings measure, rose 18% to $66.3 million. CEO Luis E. Rojo credited global volume growth, margin recovery and savings from Project Catalyst, the company's restructuring plan.
Surfactants, the cleaning and foaming agents used in detergents, shampoos and other products, delivered most of the gain: adjusted EBITDA rose 27% to $48.2 million on organic volume up 8%. Rojo said the volume growth was "broad-based and across most end markets." Polymers adjusted EBITDA rose 4% to $23.3 million, despite maintenance costs at its Germany site that the company said occur every five years. Specialty Products rose 5% to $11.7 million on volume growth of 20%.
Sales growth of 17% came from a 13% lift in selling prices and mix, a 3% rise in volume and a 1% currency benefit. The company said the price increase mainly reflects passing through higher raw material costs, along with pricing actions.
Restructuring still weighs on the year
Over nine months, Stepan reported a net loss of $0.7 million, against income of $41.9 million a year earlier. The company said the loss is entirely due to a $76.1 million pre-tax restructuring charge, with about $12.8 million of cash impact so far this year. Adjusted net income for the nine months was $59.1 million, up 40%.
The third quarter carried $5.6 million of that charge, tied to roughly 100 salaried job cuts, or 7% of global salaried headcount. Rojo said the organizational redesign phase of Project Catalyst was executed in line with expectations.
Stepan is a chemicals supplier whose customers use its products in end goods, and it does not sell to consumers directly.
Cash, debt and the dividend
Cash from operations was $29.3 million, but free cash flow was only $8.2 million after $21.1 million of capital spending and higher working capital needs. Total debt fell $13.3 million from June 30, and the net debt ratio held at 31%.
In October, Stepan closed the sale of a parcel of land near its Millsdale site for $28.5 million, and it will use the full proceeds to pay down debt.
The company said it expects full-year adjusted EBITDA growth, positive free cash flow and continued deleveraging in 2026. Its board declared a $0.405 quarterly dividend, a $0.010 increase and the 59th consecutive annual increase, payable December 15 to holders of record December 1.
Stepan shares closed the third quarter at $62.38, up from $47.70 a year earlier, according to the company's results tables.
Sources
- 8-K Filing — STEPAN CO (SCL) — SEC EDGAR
- Exhibit scl-ex99_1.htm — STEPAN CO 8-K exhibit — SEC EDGAR
- Exhibit scl-ex99_2.htm — STEPAN CO 8-K exhibit — SEC EDGAR
