Stepan Company (SCL) is a leading global manufacturer of specialty chemicals that are used in a wide range of consumer and industrial applications. With a diverse portfolio spanning surfactants, polymers, and specialty products, the company has established itself as a reliable partner for its customers worldwide.
In the fiscal year 2023, Stepan reported annual net income of $40,204,000 and annual revenue of $2,325,768,000. The company's annual operating cash flow stood at $174,876,000, while its annual free cash flow was -$85,458,999. These financial metrics demonstrate Stepan's ability to generate consistent profitability and cash flow, even in the face of challenging market conditions.
During the first quarter of 2024, Stepan reported net sales of $551,418,000, a 15% decrease compared to the same period in the prior year. This decline was primarily driven by lower average selling prices, which were mainly attributable to the pass-through of lower raw material costs and less favorable product mix. However, the company's sales volume increased by 1% year-over-year, with strong performance in the Surfactants and Specialty Products segments offsetting weakness in the Polymers segment.
Stepan's Surfactants segment, which accounted for 71% of consolidated net sales in the first quarter of 2024, reported a 16% decrease in net sales compared to the same period in 2023. This was largely due to the lower average selling prices, which were partially offset by a flat sales volume. The company's Surfactants business experienced double-digit volume growth in the personal care, oilfield, and construction and industrial solution end markets, as well as with its distribution partners. Additionally, Latin American surfactant volumes grew strongly, with record volumes in Mexico.
The Polymers segment, which contributed 26% of Stepan's consolidated net sales in the first quarter of 2024, reported a 10% decrease in net sales compared to the same period in the prior year. This decline was primarily driven by lower average selling prices, which were partially offset by a 1% increase in sales volume. The company's Rigid and Specialty Polyols businesses delivered mid-single-digit and high-single-digit volume growth, respectively, while the phthalic anhydride business experienced a decline due to operational issues at the Millsdale, Illinois plant.
Stepan's Specialty Products segment, which accounted for 3% of consolidated net sales in the first quarter of 2024, reported a 33% decrease in net sales compared to the same period in 2023. However, the segment's adjusted EBITDA increased by 49% due to higher unit margins and volume within the medium chain triglycerides (MCT) product line.
Despite the challenges faced in the first quarter, Stepan remains focused on executing its strategic priorities. The company's cost reduction program, which is expected to deliver $50 million in pre-tax savings in 2024, is on track. Additionally, Stepan is making progress on its major capital investments, including the construction of a new alkoxylation production facility in Pasadena, Texas, which is approximately 90% complete and is now expected to start up in the fourth quarter of 2024.
Looking ahead, Stepan expects sales volumes to continue gradually improving due to the ongoing recovery in Rigid Polyols demand and growth in Surfactant sales volumes, including the expected recovery of the agricultural business in the second half of 2024. The company remains confident in its ability to deliver full-year adjusted EBITDA growth and positive free cash flow, driven by continued gradual growth in market volumes, improved operational performance, and its focus on cost reductions.
Stepan's diversified business model, strong customer relationships, and commitment to innovation have positioned the company well to navigate the evolving market landscape. With a focus on sustainability and a track record of consistent financial performance, Stepan is poised to continue delivering value to its shareholders.