NORTHBROOK, Ill. - Stepan Company (NYSE: SCL) today reported:
Second Quarter Highlights
Reported net income was a record $52.1 million, or $2.26 per diluted share, versus $43.3 million, or $1.85 per diluted share, in the prior year. Adjusted net income* was a record $53.0 million, or $2.30 per diluted share, versus $42.2 million, or $1.81 per diluted share, in the prior year. Total Company sales volume declined 1% versus the prior year.
Surfactant operating income was $48.2 million versus $45.9 million in the prior year. This increase was primarily driven by improved product and customer mix that was partially offset by a 3% decline in global sales volume. The lower sales volume was driven by global commodity laundry products due to raw material and logistics constraints in North American and lower demand in Latin America. Higher demand in the Functional Products, Personal Care and Institutional Cleaning end markets partially offset the above.
Polymer operating income was a record $33.9 million versus $23.0 million in the prior year. This increase was primarily attributable to margin recovery, improved mix and a 2% increase in global sales volume. Global Rigid Polyol volume was up 5% versus the prior year driven by North American volume growth of 8%, partially offset by lower demand within the Phthalic Anhydride and Specialty Polyols businesses.
Specialty Product operating income was a record $9.9 million versus $7.0 million in the prior year. This increase was primarily attributable to improved margins and customer mix within the medium chain triglycerides (MCTs) product line, partially offset by order timing differences within the food and flavor business.
The effect of foreign currency translation negatively impacted net income by $1.9 million, or $0.08 per diluted share, versus the prior year.
First Half Highlights
Reported net income was a record $96.9 million, or $4.19 per diluted share, versus $83.9 million, or $3.59 per diluted share, in the prior year. Adjusted net income* was a record $93.7 million, or $4.05 per diluted share, versus $84.6 million, or $3.62 per diluted share, in the prior year. Total Company sales volume was down 1% compared to the first six months of 2021. A 2% decrease in global Surfactant sales volume was partially offset by a 2% increase in global Polymer sales volume.
Adjusted net income is a non-GAAP measure which excludes deferred compensation income/expense, cash-settled stock appreciation rights (SARs) income/expense, legacy 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 earnings per diluted share
'The Company had a strong first half performance and delivered record results despite ongoing supply chain challenges. Reported net income was up 16% versus the first half of 2021 while adjusted net income was up 11%,' said Scott Behrens, President and Chief Executive Officer. 'For the quarter, Surfactant operating income was up 5% largely due to improved product and customer mix. This improvement was driven by growth in our Functional Products business as a result of elevated crop and energy prices and continued growth in the construction industry, which offset a 3% decline in sales volume. Our Polymer operating income was up 47% due to margin recovery, improved mix and 2% sales volume growth. Our Specialty Product results improved primarily due to to margin improvement and favorable customer mix.'
Corporate Profile
Stepan Company is a major manufacturer of specialty and intermediate chemicals used in a broad range of industries. Stepan is a leading merchant producer of surfactants, which are the key ingredients in consumer and industrial cleaning and disinfection compounds and in agricultural and oilfield solutions. The Company is also a leading supplier of polyurethane polyols used in the expanding thermal insulation market, and CASE (Coatings, Adhesives, Sealants, and Elastomers) industries.
Headquartered in Northbrook, Illinois, Stepan utilizes a network of modern production facilities located in North and South America, Europe and Asia.
The Company's common stock is traded on the New York Stock Exchange (NYSE) under the symbol SCL. For more information about Stepan Company please visit the Company online at www.stepan.com
More information about Stepan's sustainability program can be found on the Sustainability page at www.stepan.com
Contact: Luis E. Rojo 847-446-7500
Certain information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements about Stepan Company's plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, Stepan Company's actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as 'may,' 'could,' 'expect,' 'intend,' 'plan,' 'seek,' 'anticipate,' 'believe,' 'estimate,' 'guidance,' 'predict,' 'potential,' 'continue,' 'likely,' 'will,' 'would,' 'should,' 'illustrative' and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by Stepan Company and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements.
There are a number of risks, uncertainties and other important factors, many of which are beyond Stepan Company's control, that could cause actual results to differ materially from the forward-looking statements contained in this news release. Such risks, uncertainties and other important factors include, among other factors, the risks, uncertainties and factors described in Stepan Company's Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports, and include (but are not limited to) risks and uncertainties related to the impact of the COVID-19 pandemic; accidents, unplanned production shutdowns or disruptions in manufacturing facilities; reduced demand due to customer product reformulations or new technologies; our inability to successfully develop or introduce new products; compliance with laws; our ability to identify suitable acquisition candidates and successfully complete and integrate acquisitions; global competition; volatility of raw material and energy costs and supply; disruptions in transportation or significant changes in transportation costs; downturns in certain industries and general economic downturns; international business risks, including currency exchange rate fluctuations, legal restrictions and taxes; unfavorable resolution of litigation against us; maintaining and protecting intellectual property rights; our ability to access capital markets; global political, military, security or other instability; costs related to expansion or other capital projects; interruption or breaches of information technology systems; our ability to retain executive management and key personnel; and our debt covenants.
These forward-looking statements are made only as of the date hereof, and Stepan Company undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.
STEPAN COMPANY 
