| Revenue of $684.11M (15.04% Y/Y) beats by $48.26M
Stepan Company (SCL) Q2 2026 Earnings Call July 29, 2026 9:00 AM EDT
Company Participants
Ruben Velasquez – VP & Chief Financial Officer
Luis Rojo – President, CEO & Director
Luis Rojo President, CEO & Director
Thank you, Ruben. Good morning, and thank you all for joining us today to discuss our second quarter 2026 results. I will share the highlights of the quarter and an update on our key strategic priorities and Ruben will take you through the financial details.
Before reviewing the quarter, I want to recognize our teams around the world for their commitment to safety. Safety remains our top priority and the foundation on everything we do at Stepan. That focus was evident again this quarter, as we now have delivered the strongest safety performance on record in the last 12 months. Congratulations, team.
The second quarter was a strong quarter of execution for Stepan. Broad-based volume growth and margin recovery together with the initial benefits from Project Catalyst actions drove significant improvement in earnings.
I want to highlight a few elements of our second quarter performance. Adjusted EBITDA was $74 million, up 45% versus the prior year, with all 3 levers contributing to the results. First, volume growth. Organic volume grew 6%, with growth across all our end markets. We’re growing share in many of our strategic end markets.
Second, margin recovery. The pricing actions we are implementing, together with the discipline and execution of our contractual pass-through mechanisms, contributed to margin recovery during the quarter and helped offset higher raw material costs. Third, productivity and cost out. Project Catalyst remains on track, with savings ramping up in line with our plan. We are on track to deliver our savings commitments for the year.
Looking at the consolidated results, net sales were $684 million, up 15% versus the prior year, reflecting higher selling prices, higher volume, favorable product and customer mix, and favorable currency translation. Adjusted earnings per diluted share were $1.18, more than double the prior year.
Finally, we remain focused on cash generation and balance sheet deleveraging. We finished Q2 with a net leverage ratio of 2.5x. We continue to advance the previously announced agreement to sell a parcel of nonproductive land adjacent to our plant in Joliet, Illinois, subject to customary closing conditions.
We were pleased with the breadth of the growth during the quarter. We also believe a portion of the incremental demand we experienced in the quarter reflects some customer pre-buying in response to the geopolitical and raw material uncertainty. We are considering that potential timing effect as we plan for the second half of 2026.
Ruben Velasquez VP & Chief Financial Officer
Thank you, Luis. As shared in our second quarter 2026 earnings release, reported net income was $22.9 million or $1 per diluted share, up 102% versus $11.3 million or $0.50 per diluted share in the prior year. Reported results include a $5.1 million pretax restructuring charge or $4 million aftertax, largely related to the previously announced closure of our Fieldsboro, New Jersey site and the decommissioning of select assets at our Millsdale, Illinois and Stalybridge, United Kingdom facilities. The cash impact associated with restructuring was approximately $6 million during the quarter.
The plan to reduce our global salaried workforce, announced today, is part of the previously announced Project Catalyst efficiency initiative. The majority of the expenses associated with these workforce actions is expected to be recognized during the second half of 2026. The company anticipates full-year restructuring charges in the range of $75 million to $80 million, which is in line with prior communications.
Moving to Polymers on Slide 8. Net sales were $178 million, a 9% increase versus the prior year. Selling prices were up 3%, primarily due to pricing actions and the pass-through of higher raw material costs. Sales volume increased 5% in the quarter.
North American volume was up strong double digits, driven by rigid polyols and phthalic anhydride, including significant growth in our spray foam product line. This was partially offset by lower volumes in Europe and Asia. Foreign currency translation positively impacted net sales by 1%.
Polymer adjusted EBITDA was $31 million, up 22% versus the prior year, primarily due to sales volume growth and margin recovery. North America EBITDA was up $5 million on strong volume growth and margin recovery. Europe improved modestly as margin recovery helped offset construction demand that remained soft. Asia was slightly lower on softer demand in China.
Michael Harrison Seaport Research Partners
Then I was hoping maybe you could give a little bit more color on the opportunity in the Polymers business for spray foam. I see in the slide deck here that the volumes were up 3x year-on-year. I understand you started from a relatively small number. But where do you think that business can go in the next year or 2 as you presumably pick up some market share and kind of build out your position in that relatively new space?
Luis Rojo President, CEO & Director
Mike, great question. And we are pleased with our initiative on spray foam. We are committed to this market. This is a white space for us because, I mean, as you know, we were focused on the lamination piece. And this market, historically, has been very strong and has been growing high single digits. So that’s why we really want to participate in it. I’m not going to give you an exact forecast.
I will say that I’m pleased with the 3x. Of course, it’s a very low base, as you mentioned. But the important piece here is to have a good portion of the market and grow with the market in the future. We all believe in the next 5 to 10 years, spray foam will continue growing as a market as it did in the last decade, and we want to participate out of that market growth.
