Stepan Company — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales for the third quarter of 2026 were $692.2 million, a 17% increase year-over-year (YoY) from $590.3 million; year-to-date (YTD) sales were $1,980.8 million, up 11% YoY from $1,778.2 million.
• Reported net income for Q3 2026 was $17.8 million, up 64% YoY from $10.8 million; YTD net income was a loss of $0.7 million compared to $41.9 million in the prior year.
• Adjusted net income for Q3 2026 was $21.7 million, up 98% YoY from $10.9 million; YTD adjusted net income was $59.1 million, up 40% YoY from $42.2 million.
• Earnings per diluted share (EPS) for Q3 2026 were $0.78, up 66% YoY from $0.47; YTD EPS was a loss of $0.03 compared to $1.83 in the prior year.
• Adjusted EPS for Q3 2026 was $0.94, up 96% YoY from $0.48; YTD adjusted EPS was $2.58, up 40% YoY from $1.84.
• EBITDA for Q3 2026 was $57.5 million, up 2% YoY from $56.1 million; YTD EBITDA was $110.1 million, down 33% YoY from $164.7 million.
• Adjusted EBITDA for Q3 2026 was $66.3 million, up 18% YoY from $56.2 million; YTD adjusted EBITDA was $190.3 million, up 15% YoY from $165.1 million.
• Cash from operations for Q3 2026 was $29.3 million; free cash flow was $8.2 million, negatively impacted by higher working capital requirements.
• Pre-tax earnings included a $5.6 million restructuring charge in Q3 2026; YTD pre-tax restructuring charges totaled $76.1 million.
• Total debt decreased by $13.3 million to $634.1 million as of September 30, 2026, compared to $647.4 million on June 30, 2026.
• Net debt was $536.0 million as of September 30, 2026, with a net debt ratio of 31%, constant with the prior quarter.

Guidance and Future Outlook:

• Management expects to deliver full-year adjusted EBITDA growth in 2026.
• Management projects positive free cash flow for the full year 2026.
• Management intends to continue de-leveraging the balance sheet in 2026.
• The company remains focused on executing growth opportunities, productivity plans, and cash interventions despite ongoing market uncertainties.

Business Segments and Product Lines:

• Surfactants: Net sales were $486.6 million, up 15% YoY; adjusted EBITDA was $48.2 million, up 27% YoY. Global sales volume increased 3% and organic sales volume increased 8%. Double-digit growth occurred in Consumer Products, Construction & Industrial, and Oilfield end markets, partially offset by lower Crop Productivity demand.
• Polymers: Net sales were $178.7 million, up 24% YoY; adjusted EBITDA was $23.3 million, up 4% YoY. Sales volume increased 3%, with double-digit growth in North American Rigid, Spray Foam, and Phthalic Anhydride businesses, partially offset by lower volumes in Europe and Asia. Regulatory-mandated maintenance turnaround costs at the Germany site were offset by volume growth.
• Specialty Products: Net sales were $26.9 million, up 12% YoY; adjusted EBITDA was $11.7 million, up 5% YoY. Sales volume increased 20%, driven by the medium chain triglycerides product line, partially offset by less favorable product mix.
• Project Catalyst: The company executed the organizational redesign phase of Project Catalyst during the quarter, including approximately 100 salaried position reductions (7% of global salaried headcount).

Market and Competitive Landscape:

• Net sales growth was driven by higher selling prices (13% impact in Q3), primarily due to the pass-through of higher raw material costs and pricing actions, alongside volume growth and foreign currency translation.
• Surfactant selling prices increased 10% YoY; Polymer selling prices increased 22% YoY.
• The company achieved broad-based volume growth across most end markets despite global economic uncertainties and supply chain disruptions.
• Foreign currency translation positively impacted Q3 net sales by 1% and negatively impacted Q3 Polymer net sales by 1%.

Risks and Challenges:

• The YTD net loss of $0.7 million was entirely due to a $76.1 million pre-tax restructuring charge.
• Free cash flow was negatively impacted by higher working capital requirements in the quarter.
• The company faces ongoing global economic uncertainties and supply chain disruptions.
• Polymer adjusted EBITDA growth was partially offset by regulatory-mandated maintenance turnaround costs at the Germany site.
• Specialty Products adjusted EBITDA growth was partially offset by less favorable product mix.

Management Commentary and Tone:

• Luis E. Rojo, President and CEO, stated that quarterly earnings were up significantly driven by improved results in all three segments, global volume growth, margin recovery, and Project Catalyst savings.
• Management expressed pleasure with growth achieved in key strategic end markets despite market uncertainties.
• Management noted that Project Catalyst is contributing to growth by optimizing the asset base and creating a more productive and agile organization.

Other Key Points:

• In October 2026, the company closed on the sale of a parcel of land near its Millsdale site for $28.5 million; full cash proceeds will be used to pay down debt.
• The cash impact associated with the YTD restructuring charge was approximately $12.8 million.
• Corporate expenses increased 49% YoY in Q3 to $26.2 million, primarily due to the inclusion of restructuring charges, environmental remediation, and deferred compensation; adjusted corporate expenses increased 6% YoY.
• Environmental remediation expense in Q3 2026 was $2.4 million (after-tax), reflecting a reserve adjustment related to the Maywood, NJ site.
• Deferred compensation expense in Q3 2026 was $0.1 million (after-tax) compared to $0.1 million income in the prior year.