Stepan Company (NYSE:SCL) Q1 2018 Earnings Conference Call - Preliminary Transcript

Apr 24, 2018 • 08:00 am ET

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Stepan Company (NYSE:SCL) Q1 2018 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
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. Please go ahead.

Executive
Matthew Eaken

Good morning and thank you for joining Stepan Company's First Quarter 2018 Financial Review. Before we begin, please note that information in this conference call contains forward-looking statements, which are not historical facts. These statements involve risks and uncertainties that could cause actual results to differ materially, including but not limited to prospects for our foreign operations, global and regional economic conditions and factors detailed in our Securities and Exchange Commission filings. Whether you are joining us online or over the phone, we encourage you to review the investor slide presentation, which we have made available at www.stepan.com, under the Investor Relations section of our website. We make these slides available at approximately the same time as when the earnings release is issued, and we hope that you find the information and prospectus helpful.

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

Executive
F. Quinn Stepan Jr.

Thank you, Matt. Good morning and thank you all for joining our call today. Stepan Company had a good start to the year. First quarter adjusted net income was a record just barely at $32 million up 1% from the prior year quarter. The good start was driven by record surfactant results.

For the quarter, surfactant operating income increased over prior year due to an improved product mix, improved internal efficiencies, and the stabilization of commodity surfactant volumes. We closed on the acquisition of BASF surfactant production facility in Ecatepec, Mexico on March 26. The company believes the acquisition enhances our market position and supply capabilities for surfactants in Mexico and positions the company to grow in both the consumer and functional end markets in Mexico and adjacent geographies. The acquisition is expected to be slightly accretive to earnings in 2018.

Our North American polymer business continued to face headwinds related to lost share and lower margins previously communicated. In Europe, the polymer business was negatively impacted by the lingering effects of the 2017 MDI shortage and extended winter weather.

Despite a disappointing quarter for our polymer business, the market for insulation materials remains attractive due to continued energy conservation efforts. Our Specially Products business results were down due to changing order patterns for our pharmaceutical and flavor customers. However, specialty product results for the full year should improve over 2017. Our Board of Directors declared a quarterly cash dividend on Stepan's common stock of $0.225 per share payable on June 15, 2018.

At this point, I'd like Matt to walk through a few more details about our first