Stepan NYSE: SCL reported a first-quarter 2026 net loss as restructuring charges tied to its asset footprint changes overshadowed modest organic sales growth and mixed segment performance. Management also emphasized progress on its multi-year cost and asset optimization initiative, Project Catalyst, and discussed raw material inflation and supply constraints stemming from the Iran war.
Financial results include major restructuring charge
Vice President and Chief Financial Officer Ruben Velasquez said Stepan posted a reported net loss of $41.4 million, or $1.81 per diluted share, compared with net income of $19.7 million, or $0.86 per diluted share, in the prior-year quarter. Velasquez attributed the reported loss primarily to a $65.4 million pre-tax restructuring charge ($51.2 million after tax) related to the previously announced closure of the company’s Fieldsboro, New Jersey site and the decommissioning of select assets at its Millsdale, Illinois and Stalybridge, U.K. facilities.
Velasquez noted the cash impact associated with the restructuring charge was less than $1 million during the quarter.
On an adjusted basis, the company reported adjusted net income of $10.3 million, or $0.45 per diluted share, down 47% from adjusted net income of $19.3 million, or $0.84 per diluted share, in the first quarter of 2025. Consolidated EBITDA was $49.6 million versus $57.5 million a year earlier, a 14% decline.
Cash from operations was $17 million, and free cash flow was negative $14 million, which Velasquez said was driven by higher working capital requirements that are typical in the first quarter. The company ended the quarter with net debt of $511 million and a leverage ratio of 2.7, which Velasquez said was lower than in the year-ago quarter.
Segment results: Surfactants pressure offsets Polymers improvement
President and CEO Luis Rojo said organic net sales increased 4% year over year, while organic volume was flat, citing “double-digit growth in crop productivity, oil field, industrial cleaning, and in our Tier 2, Tier 3 customer base,” offset by “continued soft demand in European Polymers.”
Adjusted EBITDA declined in the quarter largely due to lower results in Surfactants. Rojo said Surfactants performance was affected by “lower absorption and production timing issues in Asia,” “competitive pressures in Mexico,” “the impact of the U.S. cold snap,” and “continued pressures from elevated oleochemical input costs.”
Velasquez provided additional detail:
- Surfactants: Net sales were $454 million, up 8% on an organic basis. Selling prices increased 2% largely from raw material pass-through and pricing actions, while organic volume rose 2%, led by double-digit growth in crop productivity, industrial cleaning, and oilfield end markets. Foreign currency translation added 5% to net sales. Segment adjusted EBITDA fell $7 million, or 15%, with the largest declines in North America and Asia. Velasquez said the “majority of this decrease was due to lower absorption and production timing differences in Asia,” which he described as having no free-cash-flow impact and representing “a one-time event that we expect to recover in future quarters.”
- Polymers: Net sales were $130 million, down 11%. Selling prices fell 8% due to lower raw material costs passed through and competitive pressures, and volume declined 6% overall. North America volume rose 5% driven by spray foam and commodity phthalic anhydride growth, while Europe experienced a double-digit decline amid macro uncertainty and a depressed construction market. Despite lower sales, polymer adjusted EBITDA increased 8%, driven by North America growth and “global margin improvement,” according to Velasquez.
- Specialty Products: Net sales were $21 million, up 24%, primarily from higher volume. Volume increased 30% on continued growth in Stepan’s MCT product line. Velasquez said adjusted EBITDA decreased slightly due to product mix and a lag in raw material prices, which management expects to recover in future quarters.
Project Catalyst: savings expected to accelerate in Q2
Rojo said Stepan continues to execute Project Catalyst “safely, on time, and on budget.” He described the program as a transformation effort intended to optimize the company’s asset base and improve organizational agility. The company expects Project Catalyst to deliver approximately $100 million in pre-tax savings over two years, with around 60% of those savings expected in 2026. Rojo said the company is “on track to deliver the committed savings this year.”
During the Q&A, Rojo told Stonegate’s Dave Storms that the “majority of the savings” are expected to begin showing up in the second quarter, noting that key footprint actions were executed at the end of March and beginning of April. He added that some of the 2026 savings will offset inflationary pressures.
Rojo also announced that Stepan entered into an agreement to sell “non-productive assets, especially land at our Millsdale site,” for $30 million, with an expected closing in the fall of 2026 after due diligence and regulatory items are completed.
Iran war: input inflation, some shortages, and continued pass-through pricing
In response to questions from Seaport Research Partners’ Mike Harrison, Rojo said the company is seeing “escalation in raw material inflation” tied to oil supply chain exposure following the Iran war. He said Stepan has been “very successful on passing through the price increases in line with the raw material inflation,” pointing to pass-through contracts and a disciplined pricing process.
Rojo also acknowledged availability constraints in certain supply chains. “There are some shortages in raw materials,” he said, adding that Stepan “could be growing faster” but does not currently have all the raw materials needed. Still, he said the company has contracts with suppliers and is getting a “fair share” of supply.
Management commentary: outlook themes, Pasadena ramp, and capital allocation
Rojo said Stepan’s strategy is anchored in four pillars: customer-centric innovation, diversification into higher-value end markets (including Tier 2 and Tier 3 customers), operational excellence and manufacturing network resiliency, and strengthening the financial position through free cash flow generation, deleveraging, and disciplined capital allocation.
He highlighted the continued ramp-up of the Pasadena, Texas facility, calling it “a critical enabler for strategic growth in specialty alkoxylates.” Rojo said the company expects Pasadena to reach approximately 80% utilization on average in 2026 and full utilization in 2027, which he said will drive supply chain savings and support future volume growth. Velasquez also noted that higher interest expense reflected lower capitalized interest income associated with the Pasadena startup.
On Surfactants profitability, Rojo said some first-quarter headwinds were temporary, including lower absorption in Asia and North America tied to the U.S. cold snap. Referencing the $7 million year-over-year decline in Surfactants adjusted EBITDA, Rojo said the company should be able to “recover at least 1/2 of that in the following quarters” due to timing and production factors, and that management views the quarter’s $50 million adjusted EBITDA as “not representative of what is the true performance of the company.”
Rojo also addressed oleochemical cost dynamics, discussing the spread between coconut oil (CNO) and palm kernel oil (PKO). He said the two are now at similar levels versus a previously significant gap, which he said improves the overall pricing environment. He added Stepan still has some high-cost CNO inventory moving through results, but expects pricing actions to support margin improvement in the second quarter and beyond.
Regarding shareholder returns, Rojo said the company paid $8.9 million in dividends during the quarter and that the board declared a quarterly cash dividend of $0.395 per share.
On capital spending, Velasquez said the company remains committed to investing in CapEx and highlighted safety and operational needs as key priorities. Rojo added that roughly 75% to 80% of total capital spending is for “base reliability and infrastructure,” with the remainder including growth, IT, and other investments.
About Stepan NYSE: SCL
Stepan Company is a global manufacturer of specialty and intermediate chemicals, primarily known for its development and production of surfactants and related specialty products. The company's portfolio includes a wide range of ingredients used to enhance the performance of consumer and industrial formulations, such as emulsifiers, foam control agents, odor control agents, antimicrobial products and performance additives. These products are integral components in cleaning solutions, personal care items, agrochemical formulations, coatings, oilfield treatments and polymer systems.
Serving a diverse set of end-markets, Stepan's offerings address both consumer-facing and industrial applications.
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