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Stepan Company Reports Fourth Quarter 2024 Results

Stepan Company, a prominent manufacturer of specialty chemicals, recently announced its financial results for the fourth quarter of 2024. The company, listed on the New York Stock Exchange under the ticker symbol SCL, reported a net income of $3.4 million, marking a significant turnaround from a net loss of $1.2 million in the same quarter the previous year.

Key Highlights

In the fourth quarter, Stepan's adjusted net income dropped to $2.8 million, a 63% decrease year-over-year, attributed mainly to increased commissioning expenses at its new alkoxylation facility in Pasadena, Texas, which rose by $4.4 million. Furthermore, a one-time tax reserve of $2.9 million was noted in their Latin American operations, and there were higher costs associated with the transition of the CEO.

The reported EBITDA stood at $35.8 million, reflecting a 39% year-over-year increase. However, the adjusted EBITDA saw a decline of 7% to $35.0 million. Global sales volume for Stepan decreased by 1%, with notable growth in surfactant markets overshadowed by weak demand in the polymers sector. Operational cash flows were robust at $68.3 million, and free cash flow for the quarter totaled $32.1 million.

In terms of operational efficiency, Stepan managed to achieve $13 million in pre-tax cost savings during the fourth quarter.

Year-to-Date Overview

For the full year of 2024, the company’s net income totaled $50.4 million, a 25% year-over-year increase. Adjusted net income remained flat at $50.5 million. The EBITDA for the year was reported at $186.9 million, up by 13%, while the adjusted EBITDA also increased by 4%, signaling stable performance overall despite the various challenges faced.

The company experienced a slight increase of 1% in global sales volume, which contributed to the overall positive financial trajectory, while free cash flow for the year improved significantly to $39.3 million from a negative $85.5 million in the previous year.

Luis E. Rojo, President and CEO of Stepan Company, remarked, "While we are disappointed with our overall financial performance in 2024, we advanced our strategic investments and took necessary steps to return the Company to profitable growth. Our Adjusted EBITDA grew by 4% against the previous year despite several one-time events that negatively impacted earnings and pre-operating expenses at our new Pasadena site."

Segment Performance

Breaking down revenue by segments, the surfactants division saw net sales of $378.8 million, a 3% increase year-over-year, while the polymers segment reported a decline of 12%, leading to net sales of $129.8 million. Specialty products, however, enjoyed a robust 10% increase due to higher sales volume and pricing, totaling $17 million for the quarter.

The company's overall strategy moving forward includes focusing on growth within surfactants and specialty products while addressing the decline in the polymers sector, which Rojo is optimistic about improving through innovation and market expansion.

Outlook

As 2025 approaches, Stepan Company expects its Pasadena facility to commence operation in the first quarter, which is vital for enhancing production capacity and achieving cost efficiencies. Rojo emphasized that this new facility, along with ongoing strategic investments, should pave the way for increased volume and improved profit margins. The company anticipates further growth in Adjusted EBITDA and net income as they continue to capitalize on market opportunities.

The company's enduring commitment to shareholder returns is evident as it has raised dividends for the 57th consecutive year, reflecting stable performance and confidence in future growth.

Conclusion

In summary, Stepan Company’s fourth-quarter results for 2024 signal resilience amidst challenges, thanks to strategic investments and a robust cash flow approach. As the company gears up for future growth, stakeholders remain optimistic about its potential to adapt and thrive in the competitive specialty chemicals market.