Stepan Co. (SCL) Tops Q3 EPS by 11c, Revenues Beat

Stepan Co. (NYSE: SCL) reported Q3 EPS of $1.11, $0.11 better than the analyst estimate of $1.00. Revenue for the quarter came in at $508 million versus the consensus estimate of $504.2 million.

• Reported net income was $22.2 million, or $0.95 per diluted share versus $21.9 million, or $0.94 per diluted share, in the prior year. Adjusted net income* was $26.0 million, or $1.11 per diluted share, a 21% increase versus $21.4 million, or $0.92 per diluted share, in the prior year.
• Consolidated net sales were $508.0 million, an increase of 4% versus the prior year. This increase was primarily attributable to 6% global volume growth. The Company\'s first quarter acquisition of BASF\'s production facility in Mexico accounted for 2% and 4% of the quarterly increases in consolidated net sales and global volume growth, respectively. Foreign currency translation negatively impacted net sales by 2% in the quarter.
• Surfactant operating income was $31.2 million, reflecting record third quarter results, versus $22.6 million in the prior year. The increase was primarily attributable to higher North American demand within the consumer and functional product end markets. Global Surfactant sales volume increased 9% versus the prior year.
• Polymer operating income was $17.4 million versus $21.1 million in the prior year. This decrease was mostly attributable to margin pressures and lower European volume. Global Polymer sales volume was down 1% versus prior year. Global rigid polyol volume growth of 4% mostly offset lower volumes in other end markets.
• Specialty Product operating income was up $1.7 million versus the prior year primarily due to order timing differences within our pharmaceutical and flavor businesses.
• The Company\'s net-debt ratio declined to 2%.
• The Company increased its quarterly cash dividend in the fourth quarter of 2018 by $.025 per share, or 11%, marking the 51st consecutive year that the Company has increased its cash dividend to stockholders.

"The Company delivered record results through the first nine months. These results have been driven by record Surfactant earnings and a lower 2018 effective tax rate," said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer. "The quarterly and year-to-date Surfactant growth reflects higher sales volume, improved product mix and lower manufacturing costs. During the third quarter the Company approved a plan to cease Surfactant production at our German plant to further reduce our fixed cost base, refocus Surfactant resources on higher margin end markets and allow for select assets to be repurposed to support future polyol growth. The Polymer business remains down versus the prior year due to continued margin challenges and the lingering effects of the 2017 MDI shortage in Europe. Global rigid polyol volumes were up 4% versus the prior year quarter. Our Specialty Product business results were up for the quarter due to the partial catch up of order timing differences encountered in the first half of the year."

"Reported net income for the first nine months of 2018 is up 5% and adjusted net income is up 7%, both reflecting record earnings. We remain optimistic that the Company will deliver full year growth," said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer. "We believe our Surfactant business will continue to benefit from our diversification efforts into functional products, new technologies, improved internal efficiencies and expanded sales into our broad customer base globally. Although margins will continue to challenge us in our North American Polymer business we believe we will continue to benefit from the growing global market for insulation materials. We believe full year Specialty Product results should improve over 2017."

For earnings history and earnings-related data on Stepan Co. (SCL) click here.

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