On October 18, 2023, Stepan Co (SCL, Financial) released its Q3 2023 earnings report, revealing a decrease in net income and operating income across its segments. The company reported a net income of $12.6 million, or $0.55 per diluted share, compared to a record $39.4 million, or $1.71 per diluted share, in the prior year. This decrease was primarily due to a 9% decline in total company sales volume.
Performance Across Segments
The Surfactant segment reported an operating income of $15.4 million, down from $39.0 million in the prior year. This decrease was primarily due to a 7% decline in global sales volume and lower unit margins. The Polymer segment reported an operating income of $21.8 million, down from $31.9 million in the prior year, primarily due to a 12% decline in global sales volume. The Specialty Product segment reported an operating income of $2.4 million, down from $9.7 million in the prior year, mainly due to lower unit margins and sales volume.
Financial Highlights
Despite the challenges, Stepan Co (SCL, Financial) managed to increase its quarterly cash dividend in the fourth quarter of 2023 by $0.01 per share, or 3%, marking the 56th consecutive year that the company has increased its cash dividend to stockholders. The company also recorded a $4.1 million after-tax restructuring reserve, associated with the company's previously announced voluntary early retirement program, in the third quarter of 2023.
Looking Forward
Looking ahead, Stepan Co (SCL, Financial) expects to face similar challenges in the fourth quarter of 2023, including continued destocking within the agricultural end market, and the normal low seasonal demand for Rigid Polyols. However, the company is expanding its cost reduction activities and expects to deliver $50 million in pre-tax savings in 2024 to help offset future inflation and increased expenses associated with the planned commissioning of its new Pasadena alkoxylation assets.
