SCL - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2018 Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, April 24, 2018. It is now my pleasure to turn the conference over to Matthew Eaken, Vice President, Corporate Controller and Interim Chief Financial Officer. ahead. go Please

Matthew Eaken

thank XXXX and joining Company's Stepan Good review. you quarter financial first morning for

Commission online Before Securities note historical joining issued, and time encourage operations, make begin, at cause not We forward-looking factors involve section are we limited when please as and and we regional have presentation, actual the you statements, Relations and to or call release website. same this you risks in filings. that hope available us over for which these materially, detailed which economic information the contains results earnings phone, conference to to Whether conditions slides review find are www.stepan.com, made and slide Investor the including that prospects our you global we under not available the the uncertainties is facts. Exchange differ statements helpful. that and at These our could information investor of but the in foreign we our prospectus approximately

to I that, over the call Executive our Quinn and Stepan to Jr., turn with would Chairman, Officer. like President Now F. Chief

F. Quinn Stepan Jr.

a Good year. today. you our thank morning Stepan Matt. to start all joining Company for you, Thank and had good the call

driven quarter was X% by at was record from First adjusted results. The a up start income surfactant barely $XX the quarter. million net record just good prior year

The the XXXX. supply positions in company the to slightly in surfactants due Mexico geographies. stabilization end Ecatepec, product XX. BASF to of closed For the on Mexico acquisition of facility the We improved acquisition in both quarter volumes. our and functional company income production believes in surfactant for is surfactant on an operating expected surfactant the year be improved capabilities prior The accretive March earnings commodity internal over and mix, increased efficiencies, in to adjacent market to markets Mexico and the acquisition and grow enhances position consumer and

the was business Our North of to and face a attractive polymer insulation winter for impacted market business polymer by margins to to the American shortage XXXX the In the materials extended effects previously and lost headwinds continued energy polymer related quarter negatively disappointing business continued Despite weather. our efforts. for share Europe remains MDI lower communicated. conservation lingering due

Our customers. Specially Products results to and changing for pharmaceutical business flavor were patterns due down our order

product year should specialty improve XXXX. the However, for full over results

Our payable per walk few like I'd Directors Matt of XX, quarterly point, first [ph] more a declared quarter Board this about of cents At dividend stock through to a on on details share common cash ½ Stepan's June XX XXXX. results. our

Matthew Eaken

May Thank the slide generally you, Quinn. follow comments presentation. will

recap four start Slide Let's the number with to quarter.

Because the the adjusted be comparable to X full table GAAP net of income of in million $XX net the was a As in $X.XX $XX.X the Quinn measures diluted quarter for can presentation X the first stated, is income a or million reconciliations increase these in appendix first adjusted share versus press XXXX non-GAAP measure, or $X.XX found we release. share, X% XXXX. diluted and per provide of per quarter

income. reflected million last Specifically, per $X.XX reported $XXX,XXX per to share of normal regarding employee expense are compensation share the diluted diluted this our deferred income, in to in of Naturally or compensation $X or adjustments same net income deferred expenses included compensation all period quarter compared operating $X.XX year.

These of share increases, generated employee from expense we payouts defer some announced we future until is However, charges of also only related exclude $X.XX the date future The included allow stock restructuring decommissioning $XXX,XXX in company's quarter XXXX. this current Because the our with change or diluted from plant stock item price charges. Canadian the results When operational our compensation stock employees closure in on consistently of price, changes to this based the their to opportunity in per changes as price. the incentive item future we the after-tax mark costs to market discussion. payment the business value. liability

additional both expect of company after-tax related plants. bridge here for is to an adjusted million shows in $X the figures down number and quarter an are and to to the Because charges increase the million on Canadian quarter decommissioning last this cost first our restructuring compared XXXX five Slide $X year's We basis. noted income, earnings Fieldsboro in income. total after-tax the net breaks first net at

versus higher effective specialty XXXX. segment cover attributable first and primarily prior impact the favorably XXXX first benefited quarter versus detail, in tax rate the each current U.S. will of the first act company's were quarter stock year. benefits The decrease the by based XX.X% reform up down the The the excess first to tax of polymers the XXXX versus compensation awards was while derived XX% products The rate tax tax We in year in XX% $XXX,XXX. quarter quarter of and XXXX. from was more was the for quarter but statutory U.S. lower surfactants for of XX% net XXXX of

expect We the year be effective full rate tax range to of XX% XX%. in the continue to to

X this quarter. X% a positive Our increased on segment $XXX.X operating income, were million The dollar volumes. and and to Selling the to of the U.S. the show and number Mexico operating chemicals. in contributed in $XX.X were European to to results relatively of with the because results record American impact up and were from sales consumer inventory due at and The year North quarter high base. XX% business higher volume pass-through mostly and demand year-end Asia were X%, X of down in positively increase million of sales product, acquisition year associated weaker quarter. same were focuses surfactant consumer was agricultural raw North commodity the volumes sales X% Tier United surfactant partners. America the higher the in through the quarter delivered segment by ago. Surfactant higher first prices same bridge is North higher results due by and lower remaining Personal in and the expenses due a to the Brazil much in due production impacted year-over-year agricultural the business primarily over balances record down support or American product partners solely our X%. sales growth to category Higher oilfield is despite our the delivered volume sales In Latin a used Asia strong American Care States. we translation demand results prior to distribution products European X net also six material to America increase. sales in region distribution small costs, our surfactant material slightly of mainly customers for on Mexico. for certain higher consumer up Tier due Tier customer North first slide the were in growth income

year. settlement. sales also a on North reflects Operating $X.X in as used income American partially remaining slide were dollar Polyol polymers X%. X% year loss to down to and quarter net U.S. the volume panels. by was The foam in Operating North seven, higher conservation shortfall of million costs. from lower sales starts, customer a lost and due in decreased insulated remained costs material same Polyol turning America raw volumes Global offset recapture in insulation The due million project energy Europe. down $XX.X weather share negatively raw metal of $XXX.X the to European sales from was lower strong effects insulation impacted lost global Europe in impact demand quarter was the class partially were and due ago. America income by lingering quarter, the adverse materials translation to favorable to decline in rigid previously. North last the increased European for XX% of offset number margins in during of X% weaker and from Fundamentally, same North discussed late the material volume higher in Now volumes America, continued demand a volume compared million This the MDI primarily million proceeds Sales $XX.X to soft share winter the by due the market at efforts. shortfall XXXX by action positive

company slide capital number Mexico consumed company balance The on our capital sheet and in the million requirements typical to free X%. the $XX as at low of Higher Turning will to nine, slide remains remains Beginning flow update eight, to debt during you strong the Quinn for acquisition quarter. number value. first first shareholder increase cash our our on primarily of working due net quarter quarter the higher plan now are requirements. working

F. Quinn Stepan Jr.

you, Matt. Thank

into expanded our to and momentum we'll technologies, and Looking surfactant upon products, functional believe forward strong from base to has sales broad efforts a benefit customer start our internal improved business we efficiencies product globally. and continue consumer build new our diversification

However, and we insulation of improve optimistic XXXX. headwinds balance continue contribute our results. to North is demand for us European polymer are the in in will Better to challenge to business expected American the restore polymer Overall, weather about year.

several to grow. slide our strong our can businesses we leadership which to continue position a in is XX, foundation market of believe from Turning that we

Mexico. of in and in the the the the anionic strengthened Our acquisition hemisphere market Western position for as largest plant was the surfactants merchant of Ecatepec, producer amphoteric with BASF

quarter, the be acquisition to a volume contribute full for should sustain the Although quarter, not the the slightly it remainder we the during year. for grew earnings anionic the look growth to Overall, in the for Americas year. the of did surfactants sales company accretive performance

currently polyol headwinds As experiencing are previously in rigid mentioned, we our business.

is continued the conservation optimistic construction. producer increased remain polyester the growth standards, in growth and polyols rigid expected the However, energy insulation a to continued we market it of leading efforts due globally, of about

that For the should year share believe XXXX North we despite in polyol of America. global the rigid loss approximate remainder volumes

a efforts of our continue strategy. Our diversification long-term to key be component

continue Stepan many very We in the use chemistries companies the oilfield is large portfolio that Stepan's include product closely of continue believe surfactant oil. work of chemistries In we of agricultural launches. well their production to market our with in for to suited to

Our X priority segment X the Tier and the top strategy for to acquire surfactant Tier reach customers and new remains to team. more our expand

North business For although to the for our We soft sales case contributions in key Columbus, and demand chemistry of strategy. efforts for should volume a of diversification the Georgia. supported reactor polyol European new the do growth polyol by the so long-term of significantly our increased X% foundation continue specialty our is about was in Collaborative optimistic remain quarter balance increased America XXXX. from quarter

rigid polyol in our advances market, in research and technologies value-added the to leader are of customer on our a we continue pipeline. for a few generation base As developing next about the work excited

new a continue for chemistries for patent solvent launched to and We agricultural also and for market fracking create Care We solvent bio-based technology market. developed wells. biodegradable pending use more the Personal in the oil recently end

strategy. expected create operational focus the Ecatepec New drive from a Fieldsboro, our of and opportunities, excellence plant network application also acquisition. savings believe deliver will Our on practices, to this and of remains year. The that best sulfonation aspect our We of Jersey restructure synergies our is key value

Finally, review and another over adjusted please opportunities. of the delivered to you, question would The we We Tina, feel call This net capture shareholders. challenges of quarter turn provides we call. record our questions. today's to instructions we the At this our well for market portion prepared income. remarks. for time, opportunities positioned concludes the for like are

Operator

ahead. Seaport Harrison, go Thank question Mike [Operator from Our you. Global Securities. Please Instructions] first comes

Mike Harrison

Hi, good morning.

F. Quinn Stepan Jr.

Good morning, Mike.

Matthew Eaken

morning, Mike. Good

Mike Harrison

I wanted surfactants. you're commodity, hoping surfactant's seeing on color little in I consumer business, what more your to on a of the just for side was start the

some if a I that just seeing if you were you I there you and some or think America consumer sure issue specifically into that North a stabilization the lingering second saw could the that's in heard issues wondering and inventory can see of the that issues wasn't you if we some temporary was I America just the broadly quarter? address Latin and comment say surfactants, there

F. Quinn Stepan Jr.

is that our primarily of American volume commodity driven business. correct the by You North stabilization and the are

one with was down Our bit. X.X% quarter in a fact business being for customer actually anionic large up the little

XXXX America in and down so further that. So we fabric that market the carry large and January the and American of encouraged into associated specifically continue inventories with will growth customers that balance North of Latin softeners some was growth year. some in the for the With had business our February to by we're and optimistic respect

up pick will of So we balance that year. anticipated the business for the

Mike Harrison

treat Okay impact acquisition America was as and that costs Latin in quarter, how time? the one in first did the not of during terms of you much first quarter the results in expense

Matthew Eaken

range the results then North in results. that America split and I million was and partially America Latin Mike, Yes and $X of thereabouts mean probably all-inclusive, between say that's

Mike Harrison

it the impact? All performance right, been go think would though forward if so unusual have margin better I that excluding about

Matthew Eaken

That's correct.

Mike Harrison

polymers you negative that they Okay, are heard expect full a believe just seems through…? year to business, But switching optimistic and end though I XXXX the with X% walk then demand. relatively can like where to it polymers the you over are you number. starting you on volumes I still even say up for were you above for

Matthew Eaken

That's said will I said approximate not for we balance of the what What exactly believe was Mike. I volumes XXXX. year that the

Mike Harrison

business and over but region just region fundamentals several whether growth still underlying you're thinking driven can of been the maybe past kind the Okay, the business, by regulatory through that's an has years? about you the important that of that seeing secular clarification, helping walk

Matthew Eaken

yes, market we're is balance we grow year and offset XX% the that is year of America. to seeing we And market had North the at we've the continuing the in at least share short answer that Yes, loss is are. do what will in growth that the for believe per the the

growing market So comfortable is we strong and about very that we still feel and good good feel that. so and the

Mike Harrison

result, about as the that that terms has right, think you've you way are the on pricing some to environment right pricing of of kind it walk from meant volume are treading decided line? in competitive away where some and how line facing to and of had now All situations and now, and the you've hold a you kind volume I

Matthew Eaken

America that, couple the of are say an in that basis. one would North businesses generally I a on awarded annual comments,

our contracts of We business for XXXX. balance place in have the for

is growth the come additional anticipating in our So to necessarily for going not pick certain business share. look market what the growth we in we're of like amount the to that have and in a of knowledge of the going balance terms up from is and year

so is marketplace and provide today the would value And competitive intention I in customers. our say for to that continue our we're to

Mike Harrison

effects are last was then or products lingering we've you that not me wondering using shortage some And of substitution is competitive you're question situation a that from seen other the products? insulation this rigid of not commented where I lingering Europe. MDI is, just your still polymer seeing in foam

Matthew Eaken

Yes, Customers or it's filled year had One, bought been I December kind of became of short November availability would inventories. of last MDI year. the and say their twofold. available that in throughout MDI

experienced came many not the did into with and they our the year of the large first difficult So much. in inventories Europe buy with fairly customers then in weather that as quarter, Europe

PIR projects a So you're that during share. MDI PIR right not have available the insulation we there was people have, lost for year exactly were inventory last was as shortage the that going into because may may specifying installation high the installation year, but some

there of now loss And that was. so in itself feel share see kind and how better that much is the right playing have out June we'll timeframe to May, market a

Mike Harrison

thanks for right, All answering my questions.

Matthew Eaken

thanks. Yes,

Matthew Eaken

you. Thank

Operator

Please next ahead. Our question Stratton comes from Review. of Great Lakes David go Instructions] [Operator

David Stratton

and question. the taking thanks for Good morning

F. Quinn Stepan Jr.

Good morning, David.

David Stratton

you drive best just synergies then and expect realize practice which acquired opportunities there expect mentioned quantify also are the to to you at those? you and and for improvements, facility going pace and you able BASF what some The some forward you too

F. Quinn Stepan Jr.

ask quarter. could owned end half if only and I a the ask this for What of would this that you is that point the We've at weeks. site at two next question

idea our savings on. significant Matamoros synergy with the that a cash a a some we'll do of arms weeks significant to more next preliminary time plan over the network that to Ecatepec. That to little we've some production the so. price the to fully. more We the There have like working this consolidate is facility. that better Matamoros relative of the for get opportunities but We our that terms have is I'd paid have And around develop a ideas. that site, bit into are plan to purchase relative priority think we're We in have timing couple a

David Stratton

some you polyol call. weather the Yes, that impacts? what question of at regarding give no weather, little around on can look I'll after more effectively volumes, the said the a you And impacted all. detail the problem of kind then next

F. Quinn Stepan Jr.

in of in significant a in So with number was had weather little the we polyol number. of get were we looking I'm we I American We hit and what the then that in I some primarily United again kind the also and surprised looking America potentially North at a again North and down say range impact PIR had expected, our XX%, and negative number bit to Northeast we here we poor insulation perspective, States trying pretty attribute would weather to of it being closely. well. of yes northeast, would we a down and still European and Europe. share impact and XX% European us got which the Europe the a a of loss would guess would weather poor XX% but was that again our we're guess was about but probably in dialed business in at I by From

David Stratton

Got the or…? people you and I where that's the because on weather install assume of cannot side demand

F. Quinn Stepan Jr.

of Yes, and off Generally really weather. Europe because is May, season not the just June North the America now. getting into the the of we're Generally, in season of install insulations the so… intensity start

Matthew Eaken

delayed. then not David, is lost I comment And business it's would typically just that

they're projects just when So away pushed like to further. construction back delay it's not have they they go

F. Quinn Stepan Jr.

roof going leaking have fix to it. Yes if you're you a

David Stratton

Yep. you. Got

Matthew Eaken

And be not again roofs. tends roofs our it’s new replacement and business typically XX% to of

David Stratton

Right, you. thank

Operator

Thank Markets. And Curt go next of Siegmeyer comes Instructions] our from question you. ahead. Please [Operator Capital KeyBanc

Curt Siegmeyer

guys. morning good Hey,

Matthew Eaken

Curt. morningm Good

F. Quinn Stepan Jr.

Curt. morning, Good

Curt Siegmeyer

growth comment for comment more a the offsetting of market the for polymers remainder share of for clarification, the that a an earnings losses, and ask that offsetting just or business? year, was demand volume could I If the about comment

Matthew Eaken

Volume.

Curt Siegmeyer

volume, it's anticipate That third last should an was share market that quarter year, that is And impact we if which recall I lap a until situation situation? should we headwinds okay. that was the we remain that that lap on this until is

Matthew Eaken

correct, generally that's Curt. Yes,

Curt Siegmeyer

are kind would you of growth just a just still, you're been of thought some you about was just drivers oil more business and have growth here, sluggish, there of of maybe Can some talked you some maybe recovery so has what it oil as surfactants that saw there? on the what Obviously a seeing And talk are? field Ag about little the, what Okay. Ag. as some I the on color you more kind well seeing in

F. Quinn Stepan Jr.

in say are would sold I and/or of fracking to their into that the oil are the field going sales generally production oil today. our being buyer support side

And were then at Tier have of oilfield in the XX% contributions those Tier if field, profit growth businesses so from oil you approximately look Profit were up but again our contributions X, up mentioned of we relatively business significantly. small those Ag the X today, businesses. the and a business combination that I

the we be So hopefully that in the feel that's expand of believe today. growth we will pretty those and sustained year performance it. And good about occurring the balance for markets

Curt Siegmeyer

you. Thank helpful. that's Great,

Operator

you, gentlemen. Thank

have over further remarks. I’ll no the you any We back questions at closing call this for time. turn to

F. Quinn Stepan Jr.

look on very your in you our XXXX quarter We reporting on day. the Have Thank thank call. Okay, Stepan forward to to joining interest and much call you today. Company. great you. a ownership us second We for appreciate

Operator

and lines. you Thank you good We conference the please ask for day. a and disconnect for you that have your conclude thank today. participation does that gentlemen, and Ladies your call to

Stepan (SCL) 24 Apr 182018 Q1 Earnings call transcript