Stepan Company Q3: Earnings Miss, Lower Sales Volume, Dividend Hike & More

Stepan Company SCL reported a third-quarter FY23 sales decrease of 22% year-on-year, to $562.226 million, missing the analyst consensus of $603.72 million owing to lower selling prices.

Adjusted EPS of $0.64 missed the analyst consensus of $0.75.

Net Sales from Surfactants fell 21% Y/Y, Polymers down 21%, and Specialty Products plunged 36%.

The lower selling prices were mainly attributable to the pass-through of lower raw material costs, less favorable product/customer mix, and competitive pressures.   

Gross profit declined 39.9% Y/Y to $71.24 million. Total company sales volume decreased 9% versus the prior year.

Demand within the agricultural end market remained low due to continued customer and channel inventory destocking. 

Adjusted EBITDA was $48 million versus $85.5 million in the prior year.

"Specific to the third quarter, Surfactant unit margins were lower versus the prior year due to less favorable product mix, high-cost raw material inventory carryover, and pricing pressure in Latin America from imported products. Specialty Product unit margins were significantly lower due to high-cost inventory and pricing pressure related to increased MCT import activity," said Scott Behrens, President and Chief Executive Officer. 

Dividend Raised: Stepan Company approved an increase of $0.010 per share, or 2.7%, on its quarterly cash dividend on its common stock. The dividend of $0.375 per share is payable on December 15, 2023, to common stockholders of record on November 30, 2023. 

Outlook:  The company expects the fourth quarter of 2023 to face challenges, including continued destocking within the agricultural end market and the normal low seasonal demand for Rigid Polyols.  

Stepan Company expects to deliver $50 million in pre-tax savings in 2024, which will help offset future inflation and increased expenses associated with the planned commissioning of new Pasadena alkoxylation assets.

Price Action: SCL shares are trading higher by 0.36% at $68.25 on the last check Wednesday.