Surfactant Gains Power Stepan

Stepan posted record net income for the first quarter of 2017. Reported net income rose more than 14% to a record $31.9 million. Surfactant operating income was a record $38.2 million due, primarily, to lower manufacturing costs, mostly resulting from previous actions taken to close plants in Canada and Brazil, according to the company. Surfactant sales volume was down 7% from the prior year.


“The company had a good start to the year and delivered record quarterly results,” said F. Quinn Stepan, Jr., chairman, president and chief executive officer. “The quarter benefited from structurally lower manufacturing costs, enhanced internal efficiencies and higher polymer volumes.”


Sales rose 4% in the quarter to $468.2 million. The 5% increase in quarterly net sales was primarily due to higher selling prices, which were attributable to the pass-through of higher raw material costs. These higher selling prices were partially offset by a 4% decline in sales volume and the negative impact of foreign currency translation.


Surfactant net sales were $322.6 million, a 4% increase versus prior year. Selling prices were up 12% primarily due to the pass-through of higher raw material costs. However, sales volume fell 7% mostly due to lower North American and European consumer product and agricultural volumes. The translation impact of a stronger US dollar decreased net sales by 1%. Surfactant operating income increased $1.0 million versus the prior year, primarily driven by lower manufacturing costs that were mostly attributable to the plant closures in Canada and Brazil.


Polymer net sales were $126.6 million in the first quarter, an 11% increase versus prior year. Sales volume increased 8% in the quarter primarily due to continued growth in polyols used in rigid foam insulation and insulated metal panels. Increased selling prices partially offset higher raw material costs. Polymer operating income decreased $800,000 versus the prior year. This decrease was attributable to higher costs associated with the company's new production facility in China and slightly lower unit margins, partially offset by higher global rigid polyol sales volume.


Specialty products net sales were $19.1 million, $3.0 million lower than a year ago. Operating income decreased $1.1 million. The quarterly decline reflects a combination of lower volume and lower margins. A significant portion of the lower volume was due to the timing of orders in the pharmaceutical and flavor businesses, according to Stepan.