First Quarter 2025 Highlights
"I am encouraged by the earnings and volume growth we delivered in the first quarter. Volume growth was broad-based as Surfactants, Polymers and the Specialty Products MCT business were all up," said Luis E. Rojo, President and Chief Executive Officer. "First quarter adjusted EBITDA grew double digits driven by the Surfactant and Specialty Product businesses. In Surfactants, we continued to experience double-digit volume growth within the Agricultural and Oilfield end markets and with our Distribution partners. We are encouraged by this growth within several of our key strategic end markets. Polymer volume was up 7% during the quarter. North American and European Rigid Polyol, Specialty Polyols and Phthalic Anhydride all delivered volume growth during the quarter. Free cash flow was negative due to typically higher working capital requirements in the first quarter. Our new Pasadena, Texas site, which will support the growth of our specialty alkoxylation business, is now operational. We are pleased with the start of 2025 and remain focused on continued earnings improvement."
Financial Summary
Percentage Change in Net Sales
Net sales in the first quarter of 2025 increased 8% year-over-year. This increase reflects a 4% increase in sales volume and higher selling prices that were partially offset by the negative impact of foreign currency translation.
Segment Results
Consolidated operating income in the quarter increased $8.1 million, or 40%, year-over-year. Consolidated adjusted EBITDA(2) increased $6.3 million, or 12%, year-over-year driven by improved Surfactant product/customer mix, sales volume growth and the non-recurrence of prior year operational interruptions at the Millsdale plant site. Despite 7% volume growth, Polymer EBITDA was down slightly due to less favorable product mix and high cost inventory carryover.
• Surfactant net sales were $430.3 million for the quarter, a 10% increase versus the prior year. Selling prices were up 12% primarily due to improved product and customer mix and the pass through of higher raw material costs. Sales volume was up 3% year-over-year primarily due to double digit growth within the Agricultural and Oilfield end markets along with our distribution partners. This growth was partially offset by lower demand within the commodity Consumer Products end markets. Foreign currency translation negatively impacted net sales by 5%. Surfactant operating income for the quarter increased $2.9 million, or 11%, versus the prior year. Surfactant adjusted EBITDA(2) increased $4.5 million, or 10%, versus the prior year. This increase was primarily driven by the 3% growth in sales volume, improved product/customer mix and the non-recurrence of prior year operational interruptions at the Millsdale plant site.
• Polymer net sales were $146.1 million for the quarter, flat versus the prior year. Selling prices decreased 7%, primarily due to the pass-through of lower raw material costs and competitive pressures. Sales volume increased 7% in the quarter. North American and European Rigid Polyol, Specialty Polyols and commodity Phthalic Anhydride sales volume was up year-over-year. Foreign currency translation had a nominal impact on net sales during the quarter. Polymer operating income decreased $0.4 million, or 4%, versus the prior year. Polymer adjusted EBITDA(2) decreased $0.3 million, or 2%, versus the prior year primarily due to less favorable product mix and high cost inventory carryover.
• Specialty Product net sales were $16.8 million for the quarter, an 11% increase versus the prior year, primarily due to higher selling prices. Specialty Product operating income increased $1.2 million, or 29%, versus the prior year. Specialty Product adjusted EBITDA(2) increased $1.2 million, or 21%. The increase in adjusted EBITDA(2) was primarily due to margin recovery within the medium chain triglycerides product line.
Income Taxes
The Company's effective tax rate was 20.1% in the first quarter of 2025 versus 28.6% in the first quarter of 2024. This decrease was primarily attributable to favorable discrete items associated with a tax audit settlement.
Outlook
"Looking forward, we remain focused on accelerating our business strategies through improved execution to grow volume, improve product and customer mix and accelerate free cash flow generation. We believe our Surfactant business will experience continued growth in our key strategic end markets and that Polymer demand will continue improving as we get more market certainty and we execute our innovation and growth plans. Our Pasadena facility is now operational, and as we have previously communicated, this should enable us to deliver volume growth and Supply Chain savings during the second half of the year," said Luis E. Rojo, President and Chief Executive Officer. "Despite all the current market uncertainties, including the impact of tariffs, we remain cautiously optimistic that we will deliver full year Adjusted EBITDA and Adjusted Net Income growth and positive free cash flow in 2025."
Notes
(1) Adjusted net income and adjusted earnings per share are non-GAAP measures which exclude deferred compensation income/expense, certain environmental remediation-related costs as well as other significant and infrequent/non-recurring items. See Table II for reconciliations of non-GAAP adjusted net income and adjusted earnings per diluted share.
(2) EBITDA and adjusted EBITDA are non-GAAP measures. See Table VI for calculations and GAAP reconciliations of EBITDA and adjusted EBITDA.
(3) Free cash flow is a non-GAAP measure and reflects cash generated from operations minus capital expenditures. Cash generated from operations was $6.9 million during the first quarter of 2025 and capital expenditures were $32.7 million.
Source: Stepan
