Stepan NYSE: SCL reported higher second-quarter earnings as broad-based volume growth, margin recovery and early savings from its Project Catalyst program lifted results, while management cautioned that some demand may have been pulled forward amid geopolitical and raw-material uncertainty.
Reported net income for the second quarter of 2026 was $22.9 million, or $1.00 per diluted share, compared with $11.3 million, or $0.50 per share, a year earlier. Adjusted net income increased to $27.1 million, or $1.18 per diluted share, from $12 million, or $0.52 per share, in the prior-year period.
Net sales rose 15% year over year to $684 million. President and Chief Executive Officer Luis Rojo said higher selling prices, increased volumes, favorable product and customer mix, and favorable currency translation contributed to the sales increase. Adjusted EBITDA rose 45% to $74.4 million, while organic volume increased 6% across the company.
Volume Growth and Margin Recovery Drive Results
Rojo said the company’s second-quarter performance reflected contributions from volume growth, margin recovery and productivity initiatives. Pricing actions and contractual pass-through mechanisms helped offset higher raw-material costs, he said, while Project Catalyst savings were ramping in line with the company’s plan.
However, management said some of the quarter’s sales strength may have reflected customer inventory building. Rojo estimated that pre-buying tied to uncertainty surrounding the Iran conflict and raw-material availability represented roughly $5 million to $10 million of EBITDA in the second quarter.
“We are considering that potential timing effect as we plan for the second half of 2026,” Rojo said in prepared remarks. During the question-and-answer session, he added that the company expects third-quarter results to be somewhat lower than the second quarter after accounting for the elevated volume and margin contribution.
Chief Financial Officer Ruben Velasquez said the company also expects special maintenance turnarounds, particularly in Polymers, to reduce second-half results by approximately $4 million to $5 million.
Surfactants and Polymers Lead Segment Improvement
The Surfactants segment reported net sales of $484 million, up 18% from a year earlier. Selling prices increased 12%, largely reflecting raw-material pass-throughs, product and customer mix, and pricing actions. Reported volume rose 3%, while organic volume increased 7%; currency translation added 4% to sales.
Surfactants adjusted EBITDA increased 59% to $55 million. The company cited broad-based volume growth, Project Catalyst savings and recovery from production-timing and absorption impacts discussed in the first quarter. Industrial cleaning, laundry, construction and industrial applications, and oil field were among the leading growth areas.
Rojo highlighted growth in the company’s Tier 2 and Tier 3 customer base, saying the business generated 500 new customer-product combinations during the first half. He also said Stepan recorded double-digit growth in oil field and continued growth in agriculture despite market challenges related to fertilizers and the Iran conflict.
Polymers sales increased 9% to $178 million, with selling prices up 3% and volume up 5%. North American volume grew by strong double digits, driven by Rigid Polyols and Phthalic Anhydride, including significant growth in spray foam products. Those gains were partly offset by lower volumes in Europe and Asia.
Polymers adjusted EBITDA rose 22% to $31 million, primarily on volume growth and margin recovery. North American EBITDA increased by $5 million, while Europe improved modestly as better margins offset continued soft construction demand. Asia was slightly lower because of softer demand in China.
Specialty Products sales rose 8% to $22 million, while volume increased 4%. Adjusted EBITDA was slightly lower at $6.5 million due to a less favorable product mix in medium-chain triglycerides.
Project Catalyst Actions Continue
Stepan said Project Catalyst is expected to produce approximately $100 million in pre-tax savings over two years, with about 60% of the savings anticipated in 2026. Rojo said the company remains on track to exceed its commitment of $60 million in pre-tax savings this year and is currently realizing approximately $18 million to $20 million in savings per quarter.
The company expects to exit 2026 at a quarterly savings run rate of about $22 million, according to Rojo. He said most of the program’s savings actions have already been executed or announced, though Stepan continues to identify additional initiatives needed to reach the full $100 million run-rate target next year.
During the first half, Stepan completed the closure of its Fieldsboro, New Jersey, site and decommissioned select assets at Millsdale, Illinois, and Stalybridge, United Kingdom. The company is transferring volumes to other facilities in its network.
Velasquez said reported second-quarter results included a $5.1 million pre-tax restructuring charge, primarily tied to those actions. Stepan expects full-year restructuring charges of $75 million to $80 million. The company also announced plans to reduce approximately 100 salaried positions in the third quarter, with most associated expenses expected to be recognized in the second half.
Cash Flow and Balance Sheet
Free cash flow was negative $15 million in the quarter after $23 million of capital expenditures and a $58 million working-capital build tied to stronger sales and higher raw-material costs. Cash from operations before working-capital changes was $56 million, including approximately $6 million of cash restructuring costs.
Net debt ended the quarter at $534 million, and net leverage improved to 2.5 times from 2.7 times in the first quarter and 2.9 times a year earlier. The company paid $9 million in dividends during the quarter and said it remains focused on cash generation, deleveraging and disciplined capital allocation.
Rojo said Stepan expects to deliver full-year adjusted EBITDA growth, positive free cash flow and continued balance-sheet deleveraging in 2026, while navigating ongoing uncertainty in raw materials and global markets.
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.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider Stepan, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Stepan wasn't on the list.
While Stepan currently has a Reduce rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Tesla, Nvidia, and Google helped shape the last era of market growth, but the next wave could come from a new group of companies. Inside this report, you’ll find 7 stocks that could play a major role in the next tech-driven market boom.
Get This Free Report
