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Mar 31, 2020
Stepan Q1 2020 Earnings Report
Stepan's first quarter earnings were reported, revealing a mix of challenges and opportunities amidst the COVID-19 pandemic.
Key Takeaways
Stepan Company reported a net income of $27.5 million, or $1.18 per diluted share, compared to $25.0 million, or $1.07 per diluted share, in the prior year. However, adjusted net income was $24.2 million, or $1.04 per diluted share, versus $30.6 million, or $1.31 per diluted share, in the prior year, impacted by a power outage at the Millsdale Plant. Surfactant operating income was $36.2 million, while Polymer operating income was $7.5 million, and Specialty Product operating income was $4.0 million.
Net income increased to $27.5 million, or $1.18 per diluted share, up from $25.0 million, or $1.07 per diluted share, in the prior year.
Adjusted net income was $24.2 million, or $1.04 per diluted share, down from $30.6 million, or $1.31 per diluted share, due to the Millsdale Plant power outage.
Surfactant operating income was $36.2 million, influenced by strong consumer product demand but offset by supply chain issues and lower demand in agriculture and oil field markets.
Polymer operating income decreased to $7.5 million, primarily due to the Millsdale facility incident, with a decline in phthalic anhydride volume.
Revenue by Segment
Forward Guidance
Stepan expects 2020 to be a difficult year but believes their business is well-positioned. They anticipate strong surfactant volume in consumer products, potential margin improvement from lower raw material prices, and stable results in the agriculture business. The Polymer business may face reduced demand, while the Specialty Product business should benefit from higher MCT demand.
Positive Outlook
- Strong surfactant volume in consumer product end markets due to demand for cleaning and disinfection products.
- Potential for margin improvement due to falling raw material prices.
- Agriculture business expected to approximate last year's performance.
- Specialty Product business to benefit from higher MCT demand in the infant nutrition market.
- Strong balance sheet with significant cash on hand and an untapped $350.0 million revolver.
Challenges Ahead
- Potential reduction in demand for the Polymer business due to deferred or canceled re-roofing and new construction projects.
- Anticipation of higher North American costs due to the Illinois River lock closure.
Revenue & Expenses
Visualization of income flow from segment revenue to net income
Historical Earnings Impact
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Avg. Return Before/After Earnings
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