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Jun 30, 2023
Stepan Q2 2023 Earnings Report
Stepan's financial results decreased due to lower sales volume and unfavorable product mix.
Key Takeaways
Stepan Company reported a decrease in net income and earnings per share for Q2 2023 compared to the prior year, primarily due to a 19% reduction in sales volume. The decline was attributed to lower demand, customer destocking, and backward integration by a customer. The company is implementing cost control and cash management initiatives to address the challenging environment.
Net income was $12.7 million, or $0.55 per diluted share, versus $52.1 million, or $2.26 per diluted share, in the prior year.
Surfactant operating income was $15.1 million versus $48.2 million in the prior year, due to a 15% decline in global sales volume.
Polymer operating income was $16.3 million versus $33.9 million in the prior year, primarily due to a 29% decline in global sales volume.
Specialty Product operating income was $3.8 million versus $9.9 million in the prior year, attributable to lower unit margins and sales volume within the MCT product line.
Revenue by Segment
Forward Guidance
Stepan Company anticipates incremental improvements in volume and margins during the second half of the year, driven by a gradual recovery in Rigid Polyol demand, growth in Surfactant volumes from new contracts, and sequentially lower raw material costs. Additional cost control and cash management initiatives are being implemented, including a voluntary early retirement program and inventory reduction plans. Capital spending is projected to decrease in the second half of the year.
Positive Outlook
- Continued gradual recovery in Rigid Polyol demand expected.
- Growth in Surfactant volumes associated with new contracted business anticipated.
- Sequentially lower raw material costs projected.
- Capital spending expected to decrease in the second half of the year.
- Low 1,4 dioxane investments nearing completion.
Challenges Ahead
- Challenging business environment acknowledged.
- Unexpected destocking activity within Agricultural business impacted Surfactant volumes.
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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