Stepan Company · NYSE:SCL
Stepan — Q3 2023 Earnings Presentation
23 slides from Stepan's earnings presentation, Oct 18, 2023
Slide 1: Earnings Call Presentation Third Quarter 2023
Earnings Call Presentation Third Quarter 2023 October 18, 2023
Slide 2: Cautionary Statement
Cautionary Statement Certain information in this presentation consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Slide 3: Earnings Conference Call Agenda
Earnings Conference Call Agenda Scott R. Behrens, Third Quarter Highlights President and Chief Executive Officer Luis E. Rojo, Third Quarter Financial Results Vice President and Chief Financial Officer Scott R. Behrens, Strategic Outlook President and Chief Executive Officer Analyst / Shareholder Qu
Slide 4: Third Quarter 2023 Financial Recap
Third Quarter 2023 Financial Recap • Q3 reported net income was $12.6 million, or $0.55 per diluted share, versus a record $39.4 million, or $1.71 per diluted share, in the prior year. Q3 adjusted net income(1) was $14.7 million, or $0.64 per diluted share, versus a record $46.3 million, or $2.01 pe
Slide 5: Net Income Bridge – Q3 2022 to Q3 2023
Net Income Bridge – Q3 2022 to Q3 2023 Note: All amounts are in millions of U.S. dollars and are reported after-tax. (1) The adjustments to Reported Net Income in Q3 2022 consisted of environmental remediation expense and restructuring costs of $8.0 million and deferred compensation income and cash-
Slide 6: Global Surfactants
Quarter-over-Quarter Volume Change Global Surfactants 6% (6%) 2% 3 Surfactants Operating Income Surfactants Year-over-Year Volume Change 30.0 Q1 2023 Q2 2023 Q3 2023 27.1 0% 25.0 -2% -4% 20.0 1 -6% 2 $ Millions 15.1 15.4 15.0 -8% -7% -10% 10.0 -12% 5.0 -14% -13% -16% -15% 0.0 Volume Change (YoY) Q1
Slide 7: Global Polymers
Quarter-over-Quarter Volume Change Global Polymers 11% 5% 6% 3 Polymers Operating Income Polymers Year-over-Year Volume Change Q1 2023 Q2 2023 Q3 2023 25.0 0% 1 21.8 -5% 20.0 16.3 -10% 2 15.0 -15% -12% $ Millions 10.0 -20% 10.0 -18% -25% 5.0 -30% -29% 0.0 -35% Q1 2023 Q2 2023 Q3 2023 Volume Change (
Slide 8: Cash Flow Improving with lower Capex and Inventories
Cash Flow Improving with lower Capex and Inventories 2023 Capital Expenditure(1) Net Debt / TTM Adjusted EBITDA 92 544 3.0 Net Debt / TTM Adjusted EBITDA $ Millions $ Millions Ratio(4) 68 54 182 41-46 Q1 Q2 Q3 Q4 (1) Net Debt(2) TTM Adjusted EBITDA(3) 2023 Working Capital(5) Scheduled Debt Principal
Slide 9: Stepan Strategic Priorities
Stepan Strategic Priorities Shareholder Value Creation Innovation & Customer Intimacy Market & Extended Reach Diversification PEOPLE FIRST Cost & Efficient Capital Operational Allocation Excellence ESG 9
Slide 10: Strategic Capital Investments Update
Strategic Capital Investments Update Alkoxylation / Specialty Nonionics Low 1,4 Dioxane Capability Pasadena, Texas (United States) Millsdale, Illinois (United States) Stepan investing in new alkoxylation capacity at existing Stepan investing in Low 1,4 dioxane capabilities at several Pasadena, Texas
Slide 11: Thank You
NYSE: SCL Thank You Luis E. Rojo VP and CFO 847-446-7500 WORKING TOGETHER FOR A SAFER, CLEANER WORLD
Slide 12: Appendix: Financials and GAAP Reconciliations
APPENDIX Financials and GAAP Reconciliations 12
Slide 13: Update on Certain Expectations
Appendix I Update on Certain Expectations (millions USD) 2020 Actual 2021 Actual 2022 Actual 2023 Forecast Capital Expenditures 126 195 301 255 - 260 Debt Repayments 24 38 38 42 Interest Net 5 6 10 14 (1) Depreciation & Amortization 82 91 95 108 Effective Tax Rate (%) 25% 20% 22% 20-22% (1) Prelimin
Slide 14: Reconciliation of Non-GAAP Adjusted Net Income and EPS
Appendix II Reconciliation of Non-GAAP Adjusted Net Income and Earnings Per Diluted Share Reconciliation of Pre-Tax to After-Tax Adjustments 14
Slide 15: Foreign Exchange Impact – Q3 2023
Appendix III Foreign Exchange Impact – Q3 2023 (millions USD) Surfactants Polymers Specialty Consolidated Products Net Sales 12.7 6.2 0.2 19.1 Gross Profit 0.9 0.9 (0.0) 1.8 Operating 0.7 0.2 0.0 0.9 Expenses Operating Income 0.2 0.7 (0.0) 0.9 15
Slide 16: Net Debt to Total Capitalization Ratio
Appendix IV Net Debt to Total Capitalization Ratio (millions USD) September September September September September September 30, 2023 30, 2022 30, 2021 30, 2020 30, 2019 30, 2018 Total Debt 649.4 564.9 279.8 207.9 231.9 286.2 Cash 105.5 165.7 105.3 310.4 286.0 274.0 Net Debt 543.9 399.2 174.5 (102.
Slide 17: Adjusted EBITDA and EBITDA Reconciliations Q3 2023
Appendix V Adjusted EBITDA and EBITDA Reconciliations Q3 2023 Q3 2023 – Quarterly Adjusted EBITDA by Segment (millions USD) Surfactants Polymers Specialty Products Corporate Total Stepan Net Sales 374 170 18 - 562 Reported Operating Income 15 22 2 (20) 20 Adjustments 0 0 0 2 2 Adjusted Operating Inc
Slide 18: Adjusted EBITDA Bridge
Appendix VI Adjusted EBITDA Bridge(1) (1) (1) (1) Adjusted EBITDA is a non-GAAP measure. See Appendix V and Appendix VII for GAAP reconciliations. 18
Slide 19: Adjusted EBITDA and EBITDA Reconciliations Q3 2022
Appendix VII Adjusted EBITDA and EBITDA Reconciliations Q3 2022 (millions USD) Q3 2022 – Quarterly Adjusted EBITDA by Segment Surfactants Polymers Specialty Products Corporate Total Stepan Net Sales 475 215 30 - 719 Reported Operating Income 39 32 10 (26) 55 Adjustments* 0 0 0 8 8 Adjusted Operating
Slide 20: Trailing Twelve Months Adjusted EBITDA Reconciliation
Appendix VIII Trailing Twelve Months Adjusted EBITDA Reconciliation 9/30/2023 TTM – Adjusted EBITDA Reported Operating Income 70 Depreciation & Amortization 103 Other Net Income (Expense) 0 EBITDA 178 Deferred Compensation (1) Cash Settled SARS 0 Business Restructuring 6 Environmental Remediation 1
Slide 21: Free Cash Flow (FCF) Reconciliation
Appendix IX Free Cash Flow (FCF) Reconciliation $ Millions Q3 YTD 2023 2022 2023 2022 Cash Flow from Operations 70.1 36.8 105.9 74.9 Capital Expenditures (53.7) (75.9) (213.6) (205.3) Free Cash Flow 16.4 (39.1) (107.7) (130.4) 21
Slide 22: X - Surfactants
Appendix X - Surfactants Operating Income impacted by lower Volumes and mix. Agricultural Chemicals impacted by continued customer and channel destocking. Q3 2023 Business Results Highlights in millions $ Q3 2023 Q3 2022 Operating income was $15.4MM, a decrease of $23.6MM compared to prior year driv
Slide 23: XI - Polymers
Appendix XI - Polymers Lower Operating Income attributable to volume driven by reduced construction-related activity and continued customer and channel destocking. Q3 2023 Business Results Highlights in millions $ Q3 2023 Q3 2022 Operating income was $21.8MM, a decrease of $10.1MM compared to prior