Stepan Company Reports Mixed Q3 Results with 3% Revenue Decline and 23% Operating Income Growth

Stepan Company reported its financial results for the third quarter and the nine months ended September 30, 2024, reflecting a mixed performance in terms of revenue and profitability compared to the previous fiscal period.

For Q3 2024, Stepan Company recorded net sales of $546.8 million, a decrease of 3% from $562.2 million in Q3 2023. The decline in sales was attributed to foreign currency translation effects and lower average selling prices, which negatively impacted revenue by $5.6 million and $5.5 million, respectively. Despite the decrease in sales, gross profit increased to $75.7 million from $71.2 million, driven by improved margins in the Surfactants segment. Operating income for the quarter rose to $23.9 million, up from $19.5 million in the prior year, reflecting a 23% increase. Net income for Q3 2024 was $23.6 million, significantly higher than $12.6 million in Q3 2023, resulting in a diluted earnings per share of $1.03 compared to $0.55.

For the nine months ended September 30, 2024, net sales totaled $1.65 billion, down from $1.79 billion in the same period of 2023. The decrease was primarily due to lower sales in the North American and European markets, which saw declines of 9% and 9%, respectively. However, net income for the nine-month period increased to $47.0 million from $41.4 million, with diluted earnings per share rising to $2.05 from $1.80. Adjusted EBITDA for the nine months was $151.9 million, an increase of 7% from the previous year.

Segment performance varied, with Surfactants, which accounted for 69% of consolidated net sales, experiencing a decline in sales but an increase in operating income. The Polymers segment saw a significant drop in sales, down 8% year-over-year, while Specialty Products reported a decrease in sales but an increase in gross profit and operating income.

Strategically, Stepan Company faced challenges, including a criminal social engineering scheme that resulted in pre-tax charges of $3.3 million in Q3 2024. The company is enhancing its security measures to mitigate such risks. Additionally, cash expenditures for environmental projects remained stable, and the company continues to manage its debt levels, with total debt increasing to $688.5 million as of September 30, 2024.

Overall, while Stepan Company faced revenue challenges, it demonstrated improved profitability and operational efficiency in the third quarter and year-to-date periods.