Stepan Company · NYSE:SCL
Stepan — Q4 2023 Earnings Presentation
26 slides from Stepan's earnings presentation, Feb 20, 2024
Slide 1: Earnings Call Presentation Fourth Quarter 2023
Earnings Call Presentation Fourth Quarter 2023 February 20, 2024
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, 2023 Fourth Quarter and Full Year Highlights President and Chief Executive Officer 2023 Fourth Quarter and Full Year Financial Luis E. Rojo, Results Vice President and Chief Financial Officer Scott R. Behrens, Strategic Outlook President and Chief Ex
Slide 4: CEO Remarks – 2023 Full Year Highlights
CEO Remarks – 2023 Full Year Highlights • Slow down in demand across most end use markets Volume down 11% • Significant customer and channel inventory destocking • Proactive headcount and discretionary expense controls offset inflation and Expense Control incremental expenses associated with Pasaden
Slide 5: Fourth Quarter 2023 Highlights
Fourth Quarter 2023 Highlights • Polymers up 10% driven by a 12% recovery in Global Rigid Polyols • Surfactants up 1% due to higher demand across Personal Care and Industrial Volume up 3% vs prior year Cleaning end markets, and to our Distribution partners • Significant customer and channel inventor
Slide 6: Net Income Bridge – Q4 2022 to Q4 2023
Net Income Bridge – Q4 2022 to Q4 2023 Note: All amounts are in millions of U.S. dollars and are reported after-tax. (1) The adjustments to Reported Net Income in Q4 2022 consisted of environmental remediation expense and restructuring costs of $0.4 million, deferred compensation expense and cash- s
Slide 7: Global Surfactants
Quarter-over-Quarter Volume Change Global Surfactants Surfactants Operating Income Surfactants Year-over-Year Volume Change Q1 2023 Q2 2023 Q3 2023 2 Q4 2023 1 Fourth quarter Operating Income Fourth quarter Volume increased was $14.8 million, a decrease of 1% year-over-year driven by double $0.6 mil
Slide 8: Global Polymers
Global Polymers Polymers Operating Income Polymers Year-over-Year Volume Change Q1 2023 Q2 2023 Q3 2023 2 Q4 2023 1 Fourth quarter Operating Income was $12.6MM, a decrease of Fourth quarter Volume increased $9.2MM compared to the third 10% year-over-year driven by quarter driven by lower seasonal co
Slide 9: Net Income Bridge – Full Year 2022 to 2023
Net Income Bridge – Full Year 2022 to 2023 Note: All amounts are in millions of U.S. dollars and are reported after-tax. (1) The adjustments to Reported Net Income in 2022 consisted of environmental remediation expense and restructuring costs of $9.0 million, deferred compensation income and cash-se
Slide 10: Cash Flow Improving with lower Capex and Inventories
Cash Flow Improving with lower Capex and Inventories Capital Expenditures Net Debt / TTM Adjusted EBITDA 92 2021 2022 2023 2024(1) 524 195 301 260 120-140 2.9 Net Debt / TTM Adjusted EBITDA $ Millions $ Millions Ratio(4) 68 54 180 47 Q1 Q2 Q3 Q4 Net Debt(2) TTM Adjusted 2023 Capital Expenditures EBI
Slide 11: Stepan Strategic Priorities
Stepan Strategic Priorities Shareholder Value Creation Innovation & Customer Intimacy Market & Extended Reach Diversification PEOPLE FIRST Cost & Efficient Capital Operational Allocation Excellence Sustainability 11
Slide 12: 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 invested in Low 1,4 dioxane capabilities at several Pasadena, Texas
Slide 13: CEO Remarks – 2024 Outlook
CEO Remarks – 2024 Outlook • Continued recovery in Rigid Polyols demand • North America Surfactant volume growth driven by new contracted low 1,4 Dioxane business Expected Volume and Margin • Latin America Surfactant volume growth due to new contracted business Growth • Recovery of Agricultural busi
Slide 14: Thank You
NYSE: SCL Thank You Luis E. Rojo VP and CFO 847-446-7500 WORKING TOGETHER FOR A SAFER, CLEANER WORLD
Slide 15: Appendix: Financials and GAAP Reconciliations
APPENDIX Financials and GAAP Reconciliations 15
Slide 16: Update on Certain Expectations
Appendix I Update on Certain Expectations (millions USD) 2021 Actual 2022 Actual 2023 Actual 2024 Forecast Capital Expenditures 195 301 260 120 - 140 Debt Repayments 38 38 38 54 Interest Net 6 10 12 21 - 23 Depreciation & Amortization 91 95 105 128 - 132 Effective Tax Rate (%) 20% 22% 17% 36 - 38%(*
Slide 17: 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 17
Slide 18: Foreign Exchange Impact – Q4 2023
Appendix III Foreign Exchange Impact – Q4 2023 (millions USD) Surfactants Polymers Specialty Consolidated Products Net Sales 10.5 5.5 0.1 16.0 Gross Profit 0.6 0.7 0.2 1.4 Operating 0.6 0.2 0.0 0.8 Expenses Operating Income (0.0) 0.4 0.2 0.6 18
Slide 19: Net Debt to Total Capitalization Ratio
Appendix IV Net Debt to Total Capitalization Ratio (millions USD) December December December December December December 31, 2023 31, 2022 31, 2021 31, 2020 31, 2019 31, 2018 Total Debt 654.1 587.1 363.6 198.7 222.1 276.1 Cash 129.8 173.8 159.2 349.9 315.4 300.2 Net Debt 524.3 413.3 204.4 (151.2) (93
Slide 20: Adjusted EBITDA and EBITDA Reconciliations Q4 2023
Appendix V Adjusted EBITDA and EBITDA Reconciliations Q4 2023 Q4 2023 – Quarterly Adjusted EBITDA by Segment (millions USD) Surfactants Polymers Specialty Products Corporate Total Stepan Net Sales 369.5 147.3 15.4 - 532.1 Reported Operating Income 14.8 12.6 2.8 (30.0) 0.2 Adjustments 0.1 0.0 0.0 10.
Slide 21: Adjusted EBITDA Bridge
Appendix VI Adjusted EBITDA Bridge(1) Latin America Impact (1) (1) (1) Adjusted EBITDA is a non-GAAP measure. See Appendix V and Appendix VII for GAAP reconciliations. 21
Slide 22: Adjusted EBITDA and EBITDA Reconciliations Q4 2022
Appendix VII Adjusted EBITDA and EBITDA Reconciliations Q4 2022 (millions USD) Q4 2022 – Quarterly Adjusted EBITDA by Segment Surfactants Polymers Specialty Products Corporate Total Stepan Net Sales 454.5 148.3 24.3 - 627.2 Reported Operating Income 21.8 3.0 6.6 (19.7) 11.7 Adjustments 0.2 0.0 0.0 3
Slide 23: Trailing Twelve Months Adjusted EBITDA Reconciliation
Appendix VIII Trailing Twelve Months Adjusted EBITDA Reconciliation 12/31/2023 TTM – Adjusted EBITDA Reported Operating Income 58.6 Depreciation & Amortization 105.3 Other Net Income (Expense) 1.9 EBITDA 165.8 Deferred Compensation (0.7) Cash Settled SARS (0.1) Goodwill and Other Intangibles Impairm
Slide 24: Free Cash Flow (FCF) Reconciliation
Appendix IX Free Cash Flow (FCF) Reconciliation $ Millions Q4 YTD 2023 2022 2023 2022 Cash Flow from Operations 69.0 85.8 174.9 160.8 Capital Expenditures (46.7) (96.2) (260.3) (301.6) Free Cash Flow 22.3 (10.4) (85.4) (140.8) 24
Slide 25: Surfactants Q4 2023 Business Results Highlights
Appendix X - Surfactants Operating Income impacted by unfavorable mix and competitive pressures in Latin America. This was partially offset by higher volumes. Agricultural Chemicals impacted by continued customer and channel destocking. Q4 2023 Business Results Highlights in millions $ Q4 2023 Q4 20
Slide 26: Polymers Q4 2023 Business Results Highlights
Appendix XI - Polymers Higher Operating Income due to volume recovery driven by increased construction-related activity Q4 2023 Business Results Highlights in millions $ Q4 2023 Q4 2022 Operating income was $12.6MM, an increase of $9.6MM compared to prior year. Selling prices decreased 15% mainly $