Stepan Company ((SCL)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Stepan Company recently conducted its earnings call, revealing a mixed sentiment marked by notable achievements and significant challenges. The company celebrated strong growth in its surfactant specialty products and successful cost reduction efforts. However, these positive developments were tempered by difficulties in the polymers segment and a marked decrease in earnings, influenced by one-time events and external market pressures.
Strong Performance in Surfactant Specialty Products
Surfactant Specialty Products stood out with impressive performance, achieving strong double-digit adjusted EBITDA growth. Global volumes increased by 1%, propelled by a 2.5% growth in the surfactant business, and the segment reported a 10% rise in adjusted EBITDA for the quarter.
Positive Free Cash Flow
The company reported a positive free cash flow of $39 million for the year, aligning with both expectations and its operating plan, underscoring financial stability amidst broader market challenges.
Successful Cost Reduction Efforts
Stepan Company successfully achieved $48 million in pretax cost reductions during 2024, thanks to enhancements in supply chain efficiencies and improvements in workforce productivity.
Strong Specialty Products Performance
The specialty products division experienced robust growth, with net sales up by 10% in the quarter and adjusted EBITDA soaring by 65%, driven by margin recovery and volume growth.
Strategic Investments and Growth
Despite facing challenges, the company continued to invest strategically, notably in the new Pasadena site, and launched new products in the expanding spray foam market.
Earnings Decrease
The fourth quarter saw an adjusted EBITDA of $35 million, a 7% decrease year-over-year, while the full-year adjusted EBITDA was $187 million. Adjusted net income for the fourth quarter was $2.8 million, marking a 63% decrease compared to the previous year.
Challenges in Polymers Segment
The polymers segment struggled with a 12% decline in net sales for the quarter, affected by a 4% drop in selling prices and a 9% decrease in sales volume due to sluggish demand in global rigid polyurethanes.
Impact of One-Time Events
Earnings were negatively impacted by several one-time events, including a $2.9 million tax reserve in Latin America and a $2.8 million expense related to the CEO transition.
Forward-Looking Guidance
Looking ahead, Stepan Company anticipates improvements in adjusted EBITDA across all segments in 2025, supported by strategic investments such as the new Pasadena facility, expected to be operational in early 2025. The company also plans to maintain its tradition of dividend payments, with a declared quarterly dividend of $0.385 per share.
In conclusion, while Stepan Company faces challenges, particularly in its polymers segment, it continues to demonstrate resilience through strategic growth in surfactant specialty products and effective cost management. The company’s forward-looking guidance suggests optimism for 2025, with expectations of improved financial performance driven by ongoing investments.
