Stepan Company (SCL, Financial) filed Quarterly Report for the period ended 2009-09-30.
Stepan Company produces specialty and intermediate chemicals which are sold to other manufacturers and then made into a variety of end products. They have three reportable segments: surfactants polymers and specialty products. Stepan Company has a market cap of $564 million; its shares were traded at around $58.21 with a P/E ratio of 11.3 and P/S ratio of 0.4. The dividend yield of Stepan Company stocks is 1.5%. Stepan Company had an annual average earning growth of 24.8% over the past 5 years.
Gross profit improved $26.1 million, or 61 percent. All segments reported quarter-over-quarter gross profit growth: surfactants gross profit was up $13.1 million, or 41 percent; polymers gross profit was up $10.7 million, or 120 percent; and specialty products was up $2.7 million, or 122 percent. Lower raw material costs contributed to each segments improvement. The effects of foreign currency translation reduced the quarter-to-quarter consolidated gross profit growth by approximately $1.8 million.
The loss from equity joint ventures, which includes results for the 50-percent owned Stepan Philippines Inc. (SPI) and TIORCO, LLC (TIORCO) joint ventures, increased $1.0 million between quarters. SPI reported an equity loss of $1.8 million, which was $0.4 million greater than the loss reported in last years third quarter. The current quarter included $1.2 million of expense for the reserve of value added tax receivable balances that are in dispute with Philippine tax authorities. TIORCO, which was formed in September 2008, reported $0.6 million of equity loss. Start-up expenses coupled with the economys negative effect on demand for the oil recovery services the venture provides drove the TIORCO result.
Other, net was income of $0.7 million for the third quarter of 2009 compared to $0.6 million of expense for the same period of 2008, a favorable swing of $1.3 million. A $2.5 million increase in investment related income and a $1.2 million unfavorable swing in foreign exchange gains and losses accounted for the other, net income change. Unrealized and realized gains related to the mutual
funds held for the Companys deferred compensation plans accounted for the quarter-to-quarter change in investment related income as $1.0 million of gains were posted in the third quarter of 2009 compared to losses of $1.6 million for the third quarter of 2008. Foreign exchange activity resulted in $0.3 million of losses for the third quarter of 2009 compared to $0.9 million of gains for the same period of 2008.
Operating expenses for the surfactants segment were down $1.3 million, or seven percent, between quarters due largely to declines of $1.0 million and $0.6 million in research and development and marketing expenses, respectively, for North American operations and to a $0.6 million favorable effect of foreign currency translation. The expense reductions were partially offset by a $1.0 million increase in operating expenses for European operations. Lower discretionary expenses for consulting, outside services and travel and entertainment accounted for the declines in both research and development and marketing expenses for North American operations. The increase in operating expenses for European operations was primarily attributable to an increased provision for potential bad debts and higher product registration expenses.
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Stepan Company produces specialty and intermediate chemicals which are sold to other manufacturers and then made into a variety of end products. They have three reportable segments: surfactants polymers and specialty products. Stepan Company has a market cap of $564 million; its shares were traded at around $58.21 with a P/E ratio of 11.3 and P/S ratio of 0.4. The dividend yield of Stepan Company stocks is 1.5%. Stepan Company had an annual average earning growth of 24.8% over the past 5 years.
Highlight of Business Operations:
Net income for the third quarter of 2009 improved 15 percent to $19.5 million, or $1.80 per diluted share, compared to $17.0 million, or $1.59 per diluted share, for the third quarter of 2008. Prior year net income benefited from $11.3 million (net of tax) of gains on the above-noted sales of the polyurethane systems product lines and Millsdale land. Below is a summary discussion of the major factors leading to the quarter-to-quarter changes in net sales, profits and expenses. A detailed discussion of segment operating performance for the third quarter of 2009 follows the summary.Gross profit improved $26.1 million, or 61 percent. All segments reported quarter-over-quarter gross profit growth: surfactants gross profit was up $13.1 million, or 41 percent; polymers gross profit was up $10.7 million, or 120 percent; and specialty products was up $2.7 million, or 122 percent. Lower raw material costs contributed to each segments improvement. The effects of foreign currency translation reduced the quarter-to-quarter consolidated gross profit growth by approximately $1.8 million.
The loss from equity joint ventures, which includes results for the 50-percent owned Stepan Philippines Inc. (SPI) and TIORCO, LLC (TIORCO) joint ventures, increased $1.0 million between quarters. SPI reported an equity loss of $1.8 million, which was $0.4 million greater than the loss reported in last years third quarter. The current quarter included $1.2 million of expense for the reserve of value added tax receivable balances that are in dispute with Philippine tax authorities. TIORCO, which was formed in September 2008, reported $0.6 million of equity loss. Start-up expenses coupled with the economys negative effect on demand for the oil recovery services the venture provides drove the TIORCO result.
Other, net was income of $0.7 million for the third quarter of 2009 compared to $0.6 million of expense for the same period of 2008, a favorable swing of $1.3 million. A $2.5 million increase in investment related income and a $1.2 million unfavorable swing in foreign exchange gains and losses accounted for the other, net income change. Unrealized and realized gains related to the mutual
funds held for the Companys deferred compensation plans accounted for the quarter-to-quarter change in investment related income as $1.0 million of gains were posted in the third quarter of 2009 compared to losses of $1.6 million for the third quarter of 2008. Foreign exchange activity resulted in $0.3 million of losses for the third quarter of 2009 compared to $0.9 million of gains for the same period of 2008.
Operating expenses for the surfactants segment were down $1.3 million, or seven percent, between quarters due largely to declines of $1.0 million and $0.6 million in research and development and marketing expenses, respectively, for North American operations and to a $0.6 million favorable effect of foreign currency translation. The expense reductions were partially offset by a $1.0 million increase in operating expenses for European operations. Lower discretionary expenses for consulting, outside services and travel and entertainment accounted for the declines in both research and development and marketing expenses for North American operations. The increase in operating expenses for European operations was primarily attributable to an increased provision for potential bad debts and higher product registration expenses.
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