Stepan Co. (SCL) Tops Q1 EPS by 39c, Revenues Beat

Stepan Co. (NYSE: SCL) reported Q1 EPS of $1.82, $0.39 better than the analyst estimate of $1.43. Revenue for the quarter came in at $537.74 million versus the consensus estimate of $508.07 million.

First Quarter Highlights

• Reported net income was a record $40.6 million, or $1.74 per diluted share versus $27.5 million, or $1.18 per diluted share, in the prior year. Adjusted net income* was a record $42.4 million, or $1.82 per diluted share versus $24.2 million, or $1.04 per diluted share, in the prior year. Total Company sales volume increased 6% versus the prior year.
• Surfactant operating income was $53.2 million versus $36.2 million in the prior year. This increase was primarily driven by improved product and customer mix and higher global demand in the agricultural and oil field end markets, partially offset by lower North American sales volume into the consumer product end markets due to supplier force majeures following the severe weather in Texas. The Company also experienced lower supply chain expenses in the current year quarter due to the non-recurrence of the Q1 2020 Millsdale plant power outage. Total global Surfactant sales volume was flat versus the prior year.
• Polymer operating income was $18.0 million versus $7.5 million in the prior year. This increase was primarily attributable to a 32% increase in global sales volume. Global rigid polyol volume was up 32% versus the prior year largely due to the INVISTA polyester polyol acquisition. Global rigid polyol volume, excluding the INVISTA acquisition, was up 8% versus the prior year. The Company also experienced lower supply chain expenses due to the non-recurrence of the Q1 2020 Millsdale plant power outage.
• Specialty Product operating income was $2.6 million versus $4.0 million in the prior year. This decrease was primarily attributable to lower margins, resulting from raw material shortages and manufacturing challenges, within our medium chain triglycerides (MCTs) product line.

* Adjusted net income is a non-GAAP measure which excludes deferred compensation income/expense, cash-settled stock appreciation rights (SARs) income/expense as well as other significant and infrequent/non-recurring items. See Table II for reconciliations of non-GAAP adjusted net income and adjusted earnings per share.

"The Company had a good start to the year and delivered record quarterly income. Both adjusted net income and adjusted EPS were up 75% versus the prior year first quarter which was negatively impacted by the Millsdale plant power outage," said F. Quinn Stepan Jr., Chairman and Chief Executive Officer. "Surfactant operating income was up 47% primarily due to improved customer and product mix. Our Polymer operating income was up 139% on the strength of 32% global sales volume growth. The Polymer volume growth was driven by both the INVISTA acquisition and organic market growth. Our Specialty Product business results were down due to lower margins within our MCTs product line. From a balance sheet perspective, the Company exceeded $1 billion of equity for the first time."

Outlook

"The Company delivered record quarterly earnings in the first quarter of 2021," said F. Quinn Stepan, Jr., Chairman and Chief Executive Officer. "Looking forward, we believe our Surfactant volumes in the North American consumer product end markets should recover following the supply chain disruptions caused by the severe weather in Texas. We believe that heightened consumer demand for disinfection, cleaning and personal wash products will continue. We anticipate that demand for surfactants within the agricultural and oilfield markets will improve versus 2020. Global demand for rigid polyols continues to recover from pandemic-related delays and cancellations of re-roofing and new construction projects. This gradual recovery, combined with our first quarter 2021 acquisition of INVISTA's aromatic polyester polyol business, should position our Polymer business to deliver growth versus prior year. We believe the long-term prospects for rigid polyols remain attractive as energy conservation efforts and more stringent building codes are expected to continue. We anticipate our Specialty Product business results will improve slightly year-over-year. Despite current raw material price increases and some supply constraints, we are cautiously optimistic about the remainder of the year."

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

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