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- **Adjusted EBITDA growth**: +9% YTD to $165M, driven by Specialty Products (+113%) and Polymers (+8% volumes)
- **Free cash flow turnaround**: $40.2M Q3 vs -$4.2M prior year, dividend +2.6%
- **Strategic momentum**: 350 new customers Q3, Pasadena facility ramping to full contribution in 2026
- **Challenges**: 70% oleochemical cost increase, European construction weakness
- **Outlook**: Full year EBITDA growth, double-digit Surfactant margins achievable in 2-3 years

**【CEO Opening Remarks】**
- Year-to-date 2025: Adjusted EBITDA up 9% to $165 million, despite challenges from 70% oleochemical raw material cost increase and $10 million Pasadena start-up costs.
- Q3 2025 highlights:
  - Specialty Products EBITDA +113% on 68% sales growth (pharma order timing)
  - Polymers volumes +8% (North America Rigid Polyol +20%, Europe -15%)
  - Surfactants volumes -2% (crop productivity +20%, oilfield +mid-single, offset by consumer products -)
- Free cash flow $40M (vs -$4M prior year), dividend +2.6% to $0.395/share
- Strategic priorities: End market diversification (crop productivity, oilfield), Tier 2/3 customer growth (+350 new Q3), Pasadena ramp-up (41 SKUs produced)

**【CFO Financial Commentary】**
- Q3 2025: Adjusted net income $10.9M (-54% vs prior year) due to:
  - Higher tax rate (23.8% vs 18.9%) from U.S. tax law
  - $1.5M lower capitalized interest
  - $1.3M higher depreciation (Pasadena)
- EBITDA breakdown:
  - Specialty Products +$5.9M (113%)
  - Surfactants -$6.2M (14%)
  - Polymers -$1M (4%)
- Free cash flow $40.2M (vs -$4.2M prior year) from working capital reduction
- 2025 outlook: Full year adjusted EBITDA growth, positive free cash flow

**【Q&A Highlights】**
- **Oleochemical recovery**: Coconut oil prices down from $3,000/ton peak to $2,500, but 70% higher than 2024. Full margin recovery expected by 2026
- **Surfactant margins**: Target double-digit EBITDA margin in 2-3 years (currently ~10%)
- **Polymers demand**: Spray foam growth (0% share → +), Europe construction lagging due to macro uncertainty
- **Asset optimization**: Philippines site sale Q4 2025, evaluating further footprint rationalization
- **Dividend policy**: 58-year streak, 2.6% increase to $0.395/share

Stepan Company (SCL) Q3 2025 Earnings Call Transcript

- **Adjusted EBITDA growth**: 8% YoY to $51.4M, driven by Polymers and crop productivity. Surfactant margins strained by 110%+ raw material price increases.
- **New facility impact**: Pasadena site to deliver full benefits in 2026, with H2 2025 incremental contributions.
- **Key risks**: Global macroeconomic uncertainty restraining Rigid Polyol growth, $6M one-time costs in Q2.
- **Tax benefit**: 19.2% effective rate in H1 vs. 24-26% norm, but one-time audit settlements unlikely to recur.

**【CEO Summary Section】**
- Q2 2025 adjusted EBITDA of $51.4 million, up 8% YoY, driven by double-digit growth in Polymers and crop productivity. Surfactant EBITDA remained flat due to raw material inflation and volume declines in global commodity markets.
- Volume growth of 1% overall, with Polymers up 7% and NCT product line up 49%, offset by 1% decline in Surfactants. Crop productivity and oilfield end markets saw double-digit growth.
- New Pasadena, Texas facility ramping up, contributing incremental benefits in H2 2025. EPA penalty ($1M) expected to be recovered from third parties.
- Dividend of $0.385 per share declared, maintaining 57-year dividend streak.
- Strategic focus on end market diversification (crop productivity, oilfield), new customer acquisition (400+ new customers in Q2), and operational excellence.

**【CFO Financial Commentary】**
- Adjusted net income $12M ($0.52 EPS), up 27% YoY, driven by Polymers and crop productivity growth, lower tax rate (19.2% vs. 24-26% norm). Free cash flow negative at -$14.4M due to inventory builds and start-up costs.
- Surfactant segment: Net sales $411.5M (+8% YoY), EBITDA down $0.5M due to raw material costs, EPA penalty, and start-up expenses. Polymer EBITDA up $3.8M (17%) on volume growth. Specialty Products EBITDA down 24% due to order timing.
- Key one-time costs: $6M total (Pasadena start-up, EPA penalty, environmental reserve adjustment).

Stepan Company (SCL) Q2 2025 Earnings Call Transcript

- **Q1 EBITDA Growth**: 12% YoY to $57.5M, driven by Surfactants (+10% sales) and Specialty Products. Polymers lagged due to inventory costs.
- **Volume Expansion**: 4% total volume growth, with standout gains in agricultural (+19% alkoxylation), oilfield, and MCT (+4%).
- **New Site Progress**: Pasadena, TX site operational, producing 6 products. Full contribution expected H2 2025; Q1 pre-op costs $4M.
- **Free Cash Flow Outlook**: Negative Q1 ($25.8M) but cautiously optimistic for full-year positive flow.
- **Tariff Strategy**: Passing through raw material costs; local production (USMCA-compliant) mitigates U.S. import risks.
- **Polymers Recovery**: Margins to improve Q2+ as high-cost inventory clears; specialty polyol growth offsets rigid polyol macro challenges.


**【CEO Performance Overview】**
- Q1 2025 adjusted EBITDA reached $57.5 million, up 12% YoY, driven by double-digit growth in Surfactants and Specialty Products. Polymers saw slight EBITDA decline due to unfavorable product mix and inventory costs.
- Volume growth of 4% was broad-based: Surfactants +3%, Polymers +7%, MCT +4%. Agricultural and oilfield end markets contributed double-digit growth, while Rigid Polyol growth in North America and Europe was constrained by macroeconomic factors.
- New Pasadena, Texas site operational, producing 6 products with full contribution expected in H2 2025. Q1 pre-operating expenses at the site were $4 million.
- Q1 adjusted net income of $19.3 million (+32% YoY) supported by tax rate reduction and margin improvements.

**【CFO Financial Breakdown】**
- Q1 GAAP net income: $19.3 million ($0.84 EPS) vs. $14.7 million ($0.64 EPS) YoY, driven by volume growth, improved margins in Surfactants, and lower tax rate (20% vs. 24-26% range).
- Cash from operations: $6.9 million; free cash flow: -$25.8 million (due to working capital build and raw material purchases). Full-year positive free cash flow cautiously expected.
- Segment performance:
  - **Surfactants**: +10% net sales ($430.3M) with 12% price increase (raw material pass-through), 3% volume growth. Adjusted EBITDA +$4.5M (10% YoY).
  - **Polymers**: Flat net sales ($146.1M) with 7% volume growth offset by -7% price decline. Adjusted EBITDA -$0.3M (2% YoY) due to inventory carryover and mix issues.
  - **Specialty Products**: +11% net sales ($16.8M), +21% EBITDA driven by MCT margin recovery.

**【Q&A Key Takeaways】**
- **Pasadena Site Ramp-Up**: Full contribution expected in H2 2025; Q1 pre-operating expenses ($4M) will decline as production scales. Q2 EBITDA impact expected to improve from Q1.
- **Tariff Impact**: Direct costs on raw materials being passed through to customers. Indirect risks include potential demand slowdown in construction and consumer sectors.
- **Polymers Recovery**: Margins to improve in Q2 as high-cost inventory is depleted. PA business growth (commodity, lower margin) driving volume but weighing on margins.
- **Customer Mix Shift**: Strategic focus on Tier 2/3 customers in Surfactants, with 400+ new customers added in Q1. Agricultural and oilfield end markets showing resilience despite macro challenges.
- **Tariff Mitigation**: Local-for-local production strategy limits exposure; USMCA-covered Mexico production insulated from U.S. tariffs.


Stepan Company (SCL) Q1 2025 Earnings Call Transcript

- **Surfactant Strength**: 15% EBITDA growth in 2024, driven by +32% Specialty Products and 30% H2 ag recovery. 
- **Polymers Turnaround**: 2025 spray foam launch targets North America construction; China polymers + despite macro. 
- **2025 Outlook**: $4M/Q Pasadena savings to offset costs; +EBITDA in all segments. 
- **Risk Management**: $48M cost savings vs. $30M+ one-time 2024 charges; Euro FX hedging. 
- **Free Cash Flow**: $39M 2024, targeting positive 2025 with Pasadena ramp. 
- **Dividend Resilience**: 57-year streak continues with $0.385/Q dividend.

**【CEO Summary Section】**
- **2024 Full Year Performance**: Adjusted EBITDA of $187 million (+4% YoY), driven by double-digit growth in Surfactants and Specialty Products, offset by softer Polymers demand. Free cash flow of $39 million (+$125M YoY). 
- **Strategic Highlights**: 
  - Surfactants grew 15% in adjusted EBITDA, with 32% volume growth in Specialty Products. 
  - $48M in pre-tax cost savings vs. $4.4M in Pasadena pre-operating expenses. 
  - New Pasadena alkoxylation plant to start Q1 2025, targeting full run-rate by H2 2025. 
- **2025 Outlook**: Optimistic on Surfactant growth in agriculture/oilfield, Polymer innovation in spray foam, and $4M/Q Pasadena savings offsetting costs. 

**【CFO Financial Commentary】**
- **Q4 2024 Results**: 
  - Adjusted EBITDA: $35M (-7% YoY) due to $4.4M Pasadena expenses and $2.9M tax reserve. 
  - Surfactants: +10% EBITDA from volume/mix; Polymers: -9% volume but +44% EBITDA margin. 
  - Free cash flow: $32M (Q4) vs. $68M in 2023. 
- **Full Year 2024**: 
  - Adjusted EBITDA: $187M (+4% YoY). 
  - $48M cost savings offset $30M+ one-time costs (Millsdale flood, Asia fraud, CEO transition). 
  - Net income: $50.5M flat YoY. 

**【Q&A Key Points】**
1. **Surfactant Growth**: 
   - Ag business +30% H2 2024, expects double-digit 2025 growth. 
   - Oilfield and industrial solutions driving 2.5% global volume growth. 
2. **Polymers Recovery**: 
   - Specialty Polyols up YoY; China polymers growing despite macro challenges. 
   - Spray foam launch in 2025 targets North America construction recovery. 
3. **2025 EBITDA Outlook**: 
   - Excluding one-time costs, 2024 EBITDA would have been ~$185M. 
   - 2025 target: +EBITDA in all segments via Pasadena savings and cost control. 
4. **FX & China Risks**: 
   - Euro sensitivity remains key; China polymers diversified into LNG/industrial uses. 
   - No direct exposure to Chinese residential construction slowdown. 
5. **Pasadena Impact**: 
   - Q1 2025: $4M EBITDA headwind; H2 2025: full run-rate with supply chain savings. 
   - 2025 capex ~$128M-$132M, mostly for Pasadena depreciation.

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