Stepan Company (SCL) Q1 2026 earnings summary

Executive summary

• Adjusted EBITDA for Q1 2026 was $49.6M, down 14% year-over-year, mainly due to lower surfactant earnings, production timing in Asia, competitive pressures in Mexico, severe weather in North America, and higher oleochemical costs.

• Adjusted Net Income was $10.3M, a 47% decline year-over-year, primarily from lower surfactant earnings and higher interest expense related to the Pasadena, TX start-up.

• Reported a net loss of $41.4M versus $19.7M income in prior year, driven by a $65.4M pre-tax restructuring charge.

• Free cash flow improved 46% year-over-year to $14.0M, driven by working capital discipline, though one source notes negative free cash flow due to typical Q1 working capital needs.

• Project Catalyst, an operational efficiency initiative, is on track to deliver $100M in pre-tax savings over two years, with ~60% expected in 2026.

Financial highlights

• Net sales for Q1 2026 were $604.5M, up from $593.3M in Q1 2025, driven by higher selling prices and favorable currency translation.

• Adjusted EBITDA declined 14–15% year-over-year, with surfactants down due to lower absorption and cost pressures, while polymers saw an 8% increase from margin recovery and growth in spray foam and commodity phthalic anhydride.

• Adjusted Net Income excludes $51.2M after-tax restructuring charges, $0.5M deferred compensation expense, and $0.1M environmental remediation expense.

• Reported net income was a loss of $41.4M, compared to a profit of $19.7M in Q1 2025, due to significant restructuring charges.

• Adjusted earnings per diluted share was $0.45, down 46% from $0.84.

Outlook and guidance

• FY2026 capital expenditures are guided at $105–115M, down from $122.5M in 2025.

• Effective tax rate expected at 24–26% for 2026.

• Project Catalyst expected to deliver $100M in pre-tax savings over two years, with ~60% realized in 2026.

• Management expects full-year adjusted EBITDA growth, positive free cash flow, and continued balance sheet de-leveraging in 2026 despite market uncertainties.

• Focus remains on growth in Crop Productivity, Oilfield, Tier 2/3 Surfactants, and North American Polymers.