Sign in

You're signed outSign in or to get full access.

SC

STEPAN CO (SCL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 results were mixed: revenue declined 1% YoY to $0.526B and adjusted EPS fell 64% YoY to $0.12 as higher Pasadena pre‑op expense (+$4.4M), a $2.9M Latin American tax reserve, and CEO transition costs weighed on earnings; adjusted EBITDA declined 7% YoY to $35.0M while reported EBITDA rose 39% to $35.8M on lower adjustments .
  • Surfactants and Specialty Products improved (Surfactants adj. EBITDA +10% YoY; Specialty adj. EBITDA +65%), but Polymers remained weak (adj. EBITDA −44% YoY) amid soft global rigid polyol demand and competitive pressure; global volume fell 1% YoY, with double‑digit growth in Ag and Oilfield offset by Polymers .
  • Management reiterated a constructive 2025 setup: Pasadena (TX) alkoxylation start‑up in Q1’25 with ramp through 2H’25, a plan to eliminate >$30M of 2024 one‑timers, and directional guidance for adjusted EBITDA improvement across all segments, positive FCF, and adjusted net income growth; FY25 D&A guided to $128–$132M .
  • Liquidity and cash execution improved: Q4 cash from operations was $68.3M and FCF $32.1M; net debt ratio held at 31%; Board declared a $0.385 quarterly dividend (57th consecutive annual increase) .

What Went Well and What Went Wrong

What Went Well

  • Mix and profitability in Surfactants: price/mix +5% and volume +1% drove Surfactants adj. EBITDA +10% YoY; management highlighted Tier 2/3 customer growth and Oilfield strength supporting price/mix .
  • Specialty Products recovery: segment sales +10% YoY with adj. EBITDA +65% on margin recovery and higher volume in medium‑chain triglycerides .
  • Cash execution and cost program: Q4 cash from ops $68.3M, FCF $32.1M; delivered $13.0M Q4 and $48.0M FY cost‑out despite flood and Asia fraud events; CEO noted these steps “position us well to deliver future growth” .

What Went Wrong

  • Polymers softness: sales −12% YoY, volume −9% on an 11% decline in rigid polyol demand; adj. EBITDA −44% YoY on lower volumes and competitive pricing pressure .
  • Non‑operational costs pressured earnings: Pasadena pre‑op expense (+$4.4M YoY), a $2.9M Latin America tax reserve, and CEO transition costs reduced adjusted earnings in Q4 .
  • Gross margin compression QoQ and YoY: gross profit fell to $56.7M (10.8% margin) from $75.7M (13.8%) in Q3 and $66.4M (12.5%) in Q2, reflecting mix and Polymers headwinds .

Financial Results

Consolidated P&L and Margins (quarterly)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$0.556 $0.547 $0.526
GAAP Diluted EPS ($)$0.42 $1.03 $0.15
Adjusted EPS ($)$0.41 $1.03 $0.12
Adjusted EBITDA ($USD Millions)$47.7 $53.1 $35.0
Gross Margin (%)12.5% 13.8% 10.8%
Net Income Margin (%)1.7% 4.3% 0.6%
Adjusted EBITDA Margin (%)8.6% 9.7% 6.7%

Notes: Margins are derived from cited revenue and profit figures.

Q4 2024 Segment Detail

SegmentNet Sales ($M) Q4’23Net Sales ($M) Q4’24YoY %Operating Income ($M) Q4’23Operating Income ($M) Q4’24YoY %Adjusted EBITDA ($M) Q4’23Adjusted EBITDA ($M) Q4’24YoY %
Surfactants369.5 378.8 3% 14.8 16.2 9% 31.6 34.7 10%
Polymers147.3 129.8 (12%) 12.6 3.4 (73%) 20.5 11.4 (44%)
Specialty Products15.4 17.0 10% 2.8 5.6 102% 4.3 7.1 65%
Total/Unalloc.———(30.0) (17.5) (42%) (18.9) (18.2) (4%)
Consolidated532.1 525.6 (1%) 0.2 7.7 NM 37.5 35.0 (7%)

Operating KPIs

KPIQ2 2024Q3 2024Q4 2024
Global Sales Volume YoY+4% −1% −1%
Cash from Operations ($M)$29.5 $22.7 $68.3
Free Cash Flow ($M)n/a−$4.0 $32.1
Cost‑out Savings Recognized ($M)$2.7 $13.3 $13.0
Net Debt Ratio31% 31% 31%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Depreciation & AmortizationFY 2025n/a$128–$132M midpoint ~$130M New
Pasadena (TX) Alkoxylation Start‑upQ1 2025 (ramp through 2H’25)n/aStart‑up Q1’25; full contribution run‑rate 2H’25 New/Timing set
Adjusted EBITDA (directional)FY 2025n/aExpected improvement in all segments; company targets growth in adjusted EBITDA and adjusted net income; positive FCF New directional outlook
Dividend per share (quarterly)Q4’24 onward$0.375 prior$0.385 declared; 57th consecutive annual increase Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
Agriculture end‑marketQ2: Ag soft on destocking ; Q3: double‑digit growth Q4: +37% in Q4; expecting double‑digit growth to continue into 1H’25 Improving
Polymers / Rigid PolyolsQ2: modest growth; Specialty Polyols strong ; Q3: rigid polyols −13% Q4: rigid polyols −11% on macro/interest rates; pockets of strength (China, Specialty) Mixed to weak, recovery targeted in 2025
Pasadena projectQ2: pre‑op costs impacting results ; Q3: continued investment Start‑up Q1’25; ramp to 2H’25; supply chain savings expected Nearing start‑up
Cost‑out & productivityQ2: $2.7M net; $50M 2024 goal ; Q3: $13.3M; on track Q4: $13.0M; FY $48.0M despite one‑timers Executing
Price/mix in SurfactantsQ3: +1% price/mix; Tier 2/3 growth Q4: +5% price/mix; Tier 2/3 and Oilfield strength Positive
FX/macro sensitivityQ3: FX modest headwind ; tax ETR benefit in Q3 Q&A: Euro is key FX risk; MXN/BRL manageable; Polymers exposed to macro/interest rates Manageable FX; macro headwind persists
Non‑recurring itemsQ2: Millsdale flood and Asia fraud costs ; Q3: Asia fraud elevated corporate costs Q4: tax reserve in LatAm; Pasadena pre‑op; CEO transition; plan to eliminate >$30M one‑timers in 2025 Set to abate

Management Commentary

  • “Full year Adjusted EBITDA grew 4% versus prior year despite several one-time events… Surfactants and Specialty Products delivered strong double-digit Adjusted EBITDA growth, partially offset by demand weakness in Polymers… We completed the majority of our new Pasadena, Texas site” — Luis Rojo, CEO .
  • “We believe Adjusted EBITDA will improve in all of our reporting segments… expect our Pasadena facility will start up in the first quarter of 2025… deliver full year Adjusted EBITDA and Adjusted Net Income growth and positive free cash flow in 2025” .
  • On normalization and one‑timers: “We’re talking about more than $30 million in one-time events… Pasadena pre‑op ~$4 million per quarter… without those one‑timers we were actually performing at the $60 million EBITDA per quarter. I’m not saying that’s guidance” .
  • On Surfactants mix/pricing: “Tier 2/3 delivered a positive mix… Oilfield continues growing very nicely, and that provides a positive price/mix” .

Q&A Highlights

  • Ag runway: Ag volumes up 22% in Q3 and 37% in Q4; double‑digit growth expected to continue into 1H’25 from a low base after H1’24 destocking .
  • Polymers outlook: Weakness centered in rigid polyols amid macro/interest rates and European challenges; pockets of strength include China and Specialty Polyols; new spray foam products targeted for 2025 .
  • 2025 starting point: >$30M one‑timers in 2024 targeted for avoidance in 2025; Pasadena pre‑op ~$4M per quarter should be offset by revenue/supply chain savings as the plant ramps; “not guidance,” but capability discussed around ~$60M EBITDA/quarter ex one‑timers .
  • Q1 dynamics: Pasadena still an early ramp headwind (~$4M); early quarter run‑rate seeing strength in Ag, Oilfield, and distribution channels; tariffs and other variables remain moving pieces .
  • 2025 D&A and FX: D&A guided to $128–$132M (midpoint ~$130M) with Pasadena timing; Euro is the main FX sensitivity; MXN/BRL largely naturally hedged via local cost structures .

Estimates Context

  • Wall Street consensus (S&P Global) was not available at time of analysis due to a temporary data access limit; as a result, we cannot assess beat/miss vs consensus for Q4’24 revenue or EPS and recommend updating once access is restored (S&P Global).
  • Internally, adjusted EPS declined to $0.12 from $0.33 YoY, while adjusted EBITDA declined 7% YoY; the drivers were identified as Pasadena pre‑op expense, a LatAm tax reserve, and CEO transition costs, partially offset by Surfactants/Specialty strength .

Key Takeaways for Investors

  • Mix improves but polymer cycle weighs: Surfactants/Specialty strength and positive price/mix are intact; polymer demand remains the swing factor for consolidated margins and EBITDA trajectory into 2025 .
  • 2025 catalysts: Pasadena start‑up (Q1) and 2H’25 ramp are central to volume growth and supply chain savings; elimination of >$30M 2024 one‑timers and cost actions should enable adjusted EBITDA/earnings growth with positive FCF .
  • Near‑term model watch‑items: Q1 Pasadena headwind (~$4M), pace of Ag/Oilfield momentum, rigid polyol demand stabilization, and D&A step‑up ($128–$132M FY25) .
  • Cash discipline: Q4 cash from ops $68.3M, FCF $32.1M, net debt ratio stable at 31%; dividend maintained at $0.385/qtr following a Q4’24 increase, underscoring capital return commitment .
  • FX/macro risks are manageable but non‑trivial: Euro sensitivity, construction exposure in Polymers, and tariff uncertainty are key external variables to monitor .
  • Narrative into next print: Evidence of polymer demand improvement, Pasadena qualification/ramp milestones, and continued Surfactants price/mix resilience are likely to drive stock reaction.

Appendices

Non‑GAAP Adjustments — Q4 2024

Item (after tax)Q4 2023 ($000)Q4 2024 ($000)
Deferred Compensation (Income)/Expense$2,243 $(762)
Business Restructuring & Asset Impairment$4,564 $0
Goodwill & Other Intangible Impairment$1,422 $0
Cash‑Settled SARs (Income)/Expense$71 $0
Environmental Remediation$378 $169
Adjusted Net Income$7,485 $2,757

Additional Q4 Highlights and Balance Sheet

  • Operating income $7.7M (vs $0.2M prior year); effective tax rate FY’24 16.7% (vs 16.9% FY’23) .
  • Net debt $525.7M; net debt ratio 31% (unchanged QoQ); total debt decreased by $63.1M QoQ .
  • Dividend: $0.385/shr declared (payable Mar 14, 2025; record Mar 3, 2025); dividend increased by $0.01 in Q4’24 (57th consecutive year) .

Sources:

  • Q4’24 press release and exhibits (Form 8‑K 2.02) .
  • Q4’24 press release (PR Newswire) .
  • Q4’24 earnings call transcript .
  • Q3’24 press release (PR Newswire) .
  • Q2’24 press release (PR Newswire) .