Trends

Stepan Company (SCL) Q4 2022 Earnings Call Transcript

Trending 1 year ago
beritaja.com

Stepan Company (NYSE:SCL) Q4 2022 Earnings Conference Call February 16, 2023 10:00 AM ET

Company Participants

Luis Rojo - Vice President & Chief Financial Officer

Scott Behrens - President & Chief Executive Officer

Conference Call Participants

Mike Harrison - Seaport

Vincent Anderson - Stifel

David Storms - Stonegate

David Silver - C.L. King

Operator

Good day, and convey you for opinionated by. Welcome to nan Stepan’s Fourth Quarter and Full Year Earnings Conference Call. At this time, each participants are successful listen-only mode. After nan speaker's presentation, location will beryllium a question-and-answer session. [Operator Instructions] Please beryllium advised that today's convention telephone is being recorded.

I would now for illustration to move nan convention complete to your speaker today, Luis Rojo, Vice President and Chief Financial Officer. Please spell ahead.

Luis Rojo

Good morning, and convey you for joining Stepan Company's 4th fourth and afloat twelvemonth 2022 financial review. Before we begin, please statement that accusation successful this convention telephone contains forward-looking statements, which are not humanities facts. These statements impact risks and uncertainties that could origin existent results to disagree materially, including, but not constricted to prospects for our overseas operations, world and location economical conditions and factors elaborate successful our Securities and Exchange Commission filings.

Whether you're joining america online aliases complete nan phone, we promote you to reappraisal nan investor descent presentation, which we person made disposable astatine www.stepan.com nether nan Investors conception of our website. We made these slides disposable astatine astir nan aforesaid clip arsenic erstwhile nan net merchandise is issued. And we dream that you find nan accusation and position helpful.

With that, I would for illustration to move nan telephone complete to Mr. Scott Behrens, our President and Chief Executive Officer.

Scott Behrens

Good morning, and convey you each for joining america coming to talk our 4th fourth and afloat twelvemonth results. To begin, I will stock our 4th fourth and afloat twelvemonth highlights and strategy outlook, while Luis will supply further specifications connected our financial results.

Despite important outer proviso concatenation challenges successful a difficult macro environment, nan business was capable to present different record year, important ostentation and earthy materials, logistics and different expenses were afloat offset pinch pricing actions, operation improvements and productivity efforts. Improved merchandise and customer operation accrued gross by 30% successful 2022, aft delivering 22% maturation successful 2021

Surfactant's operating income was down slightly, chiefly owed to little world commodity laundry demands, earthy worldly constraints and customer inventory to stocking. Higher request for products sold nether nan functional merchandise and organization cleaning extremity markets partially offset nan above.

Polymer operating income accrued 13% versus anterior twelvemonth contempt little world income measurement owed to customer and transmission inventory destocking, reduced building manufacture activity and wide economical concerns. Specialty Products delivered grounds operating income of $30 million, compared to $14 cardinal successful nan anterior twelvemonth driven by improved separator and customer mix.

Our Board of Directors declared a quarterly rate dividend connected Stepan's communal banal of $0.0365 per stock payable connected March 15, 2023. Stepan has paid and accrued its dividend for 55 consecutive years.

During nan 4th fourth of 2022, nan institution paid $8.1 cardinal of dividends to shareholders and repurchase $2.7 cardinal of nan company's stock. For nan afloat year, nan institution paid $30.6 cardinal successful dividends and repurchase $25 cardinal of institution stock. The institution has $125 cardinal remaining nether nan stock repurchase programme authorized by Board of Directors.

We stay assured successful nan spot and diverseness of our business. And its expertise to make rate that will let america to put successful our existent business, prosecute strategical M&A opportunities and return rate to our shareholders.

Luis, will now stock immoderate specifications astir our 4th fourth and afloat twelvemonth results.

Luis Rojo

Thank you, Scott. My comments will mostly travel nan descent presentation. Let america commencement pinch a descent 5 to recap nan quarter. Adjusted nett income was $13.5 cardinal aliases $0.59 per diluted stock versus $22.5 cardinal aliases $0.97 per diluted stock for nan 4th fourth of 2021.

Because adjusted nett income is simply a non-GAAP measure, we supply afloat reconciliations to nan comparable GAAP measures, and these tin beryllium recovered successful Appendix II of nan position and array 2 of nan property release.

Specifically, nan adjusted nett income for nan 4th quarter, exclude deferred compensation disbursal of $2.2 million, compared to past twelvemonth disbursal of $2.4 million. It besides excludes nan insignificant changes successful our biology remediation we service and restructuring expenses.

The deferred compensation figures correspond nan nett income related to nan company's deferred compensation scheme arsenic good arsenic cash-settled banal appreciation for our employees. Because these liabilities alteration pinch nan activity successful nan banal price, we exclude this point from operational discussion.

The descent 6 shows nan full company's nett income span for nan 4th quarter, compared to past twelvemonth 4th fourth and breaks down nan summation successful adjusted nett income. Because this is nett income, nan fig is not present astatine connected an after-tax basis.

We will screen this conception successful much detail, but to summarize, we delivered fantabulous operating income maturation successful a specialty products and little operating consequence for Surfactants and immoderate Polymers.

Corporate and each different expenses, which are not allocated to nan business segment, went up $5.4 million, driven by higher liking expenses and wide inflation. The institution effective taxation complaint for nan 4th was somewhat negative, whitethorn lead you to one-time favorable taxation benefits.

The descent 7, attraction connected nan Surfactant conception results for nan quarter. Surfactant nett income were $455 million, for nan 4th and 8% summation versus nan anterior year. Selling prices went up 26%, chiefly owed to nan pass-through of higher earthy worldly and logistic costs arsenic good arsenic improved merchandise and customer mix.

Volume declined 15% year-over-year, chiefly owed to little request successful commodity laundry and individual attraction and market. Lower volumes owed to nan modulation of Low 1,4-Dioxane capabilities and Polymer inventory probability nan stocking efforts.

Higher world request for products sold successful nan cultivation volumes, organization cleaning and marketplace partially offset nan above. Foreign rate translator negatively impacted nett income by 3%.

Surfactant's operating income for nan 4th was $22 million, a alteration of $11 cardinal versus nan anterior year. But moreover by a measurement diminution of 15% for illustration mentioned it before, and higher expenses associated pinch a institution modulation of Low 1,4-Dioxane products. All Surfactant operating ratios are alteration operating income chiefly owed to nan little volumes mentioned before.

Now, turning to Polymer connected descent 8, nett income were $148 cardinal for nan quarter, a 15% summation versus anterior year. Selling prices accrued 14% chiefly owed to nan pass-through of higher earthy worldly cost.

Global measurement declined by 23%, chiefly owed to a 21% measurement declining volumes and little request crossed a Specialty Products and PA businesses.

The alteration was driven by customer inventory destocking, reduced construction, manufacture activity, and wide economical concerns. Foreign rate translator negatively impacted nett income by 6%. Polymer operating income was $3 cardinal versus $30 cardinal successful nan anterior year. The alteration is chiefly owed to nan 23% diminution successful world measurement and higher costs associated pinch nan planned attraction activities successful nan company's PA works located successful nan US.

North America and Europe results were impacted by little measurement crossed each polymer segments, partially offset by separator betterment efforts. Asia results amended connected summation request pursuing nan eased of COVID lockdowns and restrictions successful China.

Finally, Specialty Products operating income was $6.6 cardinal versus $2 cardinal successful nan anterior year. This summation was chiefly owed to amended margins and customer operation wrong nan -- merchandise line.

Turning to descent nine, contempt important outer proviso concatenation challenges and a difficult macro environment, nan business was capable to present different grounds afloat year. Adjusted nett income was a grounds $153.5 cardinal aliases $6.65 per diluted share, a 7% summation versus $143.5 million, aliases $6.16 per diluted stock successful 2021.

The institution measurement declined 7% versus nan anterior year, driven by little request arsenic customer inventory destocking efforts successful nan 2nd half of nan year. The Surfactant conception delivered operating income of $163 million, down somewhat versus nan anterior year. Surfactant world measurement was down 6%, chiefly owed to little world commodity laundry demand, nan effect of nan [indiscernible] and customer inventory destocking efforts. Higher request for products sold successful nan Functional Products and Institutional Cleaning extremity marketplace partially offset nan above.

The Polymer conception delivered $83 cardinal of operating income, up 13% versus nan anterior year. Global Polymer measurement declined 7% versus nan anterior twelvemonth owed to costumer and transmission inventory destocking and little construction-related activities successful nan 2nd half of nan year.

Specialty Product operating income was a grounds $30 cardinal versus $14 cardinal successful nan anterior year, driven by improved margins and customer needs successful our merchandise line.

Lastly, nan effect of overseas rate translator negatively impacted nett income by $5.6 cardinal aliases $0.24 per diluted stock versus nan anterior year. Earnings Per Share excluding FX grew 12% versus 2021.

Slide 10 shows nan full institution net divided for nan afloat twelvemonth of 2022 compared to 2021 and breakdown nan summation successful adjusted nett income. Surfactant was a somewhat down much than offset by Polymers and Specialty Products. The institution afloat twelvemonth effective taxation complaint was 22% successful 2022 versus 20% successful 2021. This year-over-year summation was chiefly owed to non-recurring favorable taxation benefits recognized successful 2021.

Moving onto descent 11, our equilibrium expanse remains strong, and we person ample liquidity to put successful nan business. Even pinch our accrued CapEx investments, our leverage and liking sum ratios continued a very patient levels.

During nan year, rate from operations was $161 cardinal and we deployed $466 cardinal against CapEx investments, dividends and indebtedness payments, stock repurchases, and higher moving superior requirements owed to earthy worldly inflation.

The institution afloat twelvemonth superior spending was $302 million, inclusive of our 1,4-dioxane task and Pasadena investments successful nan US.

Now opening connected Slide 12, Scott will update you connected our strategical priorities.

Scott Behrens

Thank you, Luis. In summation to delivering different grounds twelvemonth of earnings, we made bully advancement connected advancing our strategical priorities successful 2022. The pursuing slides seizure our strategical priorities and a imagination for a cleaner, healthier and much power businesslike world pinch our customers preferences successful mind.

Our diversification strategy and nan functional products, including cultivation and oilfield chemicals continues to beryllium a cardinal privilege for Stepan. Our world cultivation volumes accrued double digits successful 2022, supported by precocious commodity prices for corn, soybean and wheat, which incentivize growers to utilize nan afloat breadth of harvest protection options.

In addition, Brazil continues to beforehand successful agronomic practices, while favorable upwind patterns successful Australia accrued request for harvest protection. We proceed pinch nan build retired of nan Kymco KMCO Oilfield Demulsifier merchandise line, having commercialized complete half of nan acquired merchandise portfolio to date. We stay optimistic astir early opportunities successful this business arsenic elevated crude prices should promote accrued lipid accumulation and nan usage of accumulation and stimulation chemicals.

Our polymer business continues to attraction connected processing nan adjacent procreation precocious Rigid Polyols technologies, capturing nan integrated marketplace maturation driven by expanding world power conservation efforts and delivering diversified maturation successful nan spray foam market.

We completed respective important infrastructure projects astatine our Millsdale manufacturing site, which will amended productivity and wintertime reliability. Our efforts to amended operational ratio and nan bottleneck capacity proceed crossed galore of nan accumulation units astatine nan site. We besides look guardant to commissioning caller debased 1,4-dioxane investments astatine nan tract by midyear.

Tier 2 and Tier 3 customers proceed to beryllium a attraction of our Surfactant maturation strategy. We added 550 caller nett customers during 2022 and including functional products, we grew volumes mid-single digits. Despite nan destocking efforts we observed successful nan 4th fourth crossed astir markets and channels. We will proceed serving and investing successful nan strategical marketplace segment.

In nickname of our ESG efforts, Stepan was named number 1 wrong nan Specialty Chemical Sector of Investor's Business Daily’s 2022 champion ESG institution list. We besides erstwhile again achieved nan golden standing from EcoVadis which places Stepan astatine nan 96 percentile level wrong our industry.

Moving to Slide 13, activity continues astatine our caller alkoxylation accumulation installation successful Pasadena, Texas. This plus will beryllium a elastic state-of- the-art multi reactor installation pinch astir 75,000 metric tons of yearly alkoxylation capacity. It will supply strategically located capacity and capacity for agelong word specialty alkoxylate maturation crossed our strategical extremity markets, including agriculture, oilfield, building and family and organization cleaning. We expect nan works will beryllium up and moving mid 2024.

The underlining alkoxylation business that supports nan Pasadena finance continues its beardown double digit measurement maturation and astatine margins exceeding first expectations. The caller acquisition of PerformanX Specialty alkoxylate business delivers further baseload volumes for Pasadena and provides charismatic marketplace diversification opportunities for our alkoxylation merchandise line.

The integration of PerformanX business is complete and we are delighted pinch nan caller customers we are not serving progressive existing markets and caller markets to measurement in, specified arsenic pulp and insubstantial and lubricants.

As you know, we are expanding North American capacity and capacity to nutrient either sulfates that meet caller regulatory limits connected 1,4-dioxane pinch web completion expected successful nan first half of 2023. 1,4-dioxane is simply a insignificant byproduct generated successful nan manufacture of either sulfate Surfactants, which are cardinal cleaning and foaming ingredients utilized successful user merchandise formulations. Stepan is moving to proviso customers pinch either sulfates that meet nan caller regulatory requirements.

Customers person made semipermanent commitments to debased 1,4-dioxane either sulfates and we expect this modulation to spell done 2023 pinch our attraction connected generating worth growth. Stepan will person nan largest installed debased 1,4-dioxane accumulation capacity for income into nan North American market, enabling Stepan to support and turn our North American sulfonation business.

We are pleased pinch nan advancement successful our fermentation merchandise platform. Our privilege remains nan improvement and commercialization of Rondel lipids, our first anticipated biosurfactant offering. We judge this caller bio-based merchandise family has important opportunities successful respective important extremity markets for Stepan, including cultivation chemicals, user cleaning, individual attraction and lipid field. Customer sampling has begun arsenic improvement and engineering teams advancement towards last process design. Finally, fixed nan spot of our equilibrium sheet, acquisition opportunities that align pinch our maturation and diversification strategy stay a priority.

Summarizing 2022, we delivered grounds net and I americium proud of our team's effort and resiliency during what was a challenging marketplace environment. We person now successfully delivered 3 consecutive years of grounds earnings. We made important advancement successful respective strategical areas including superior task execution, our sustainability and invention programs, while besides delivering continued diversification and maturation of our customer guidelines wrong our targeted extremity usage markets.

We besides delivered double-digit operating income maturation wrong our surfactants functional products business, wrong our polymers business and wrong our specialty products business.

Looking forward, we judge 2023 will beryllium challenged by continued elevated ostentation and precocious liking rates. We judge nan macro situation could negatively effect user request and building related activity, which will impact some our surfactant and polymer businesses.

Additionally, we judge higher wide costs inflation, higher depreciation and pre-startup expenses associated pinch our caller Pasadena tract will situation our expertise to present net maturation successful 2023. We are seeking to offset these 2023 headwinds pinch productivity improvements, pricing increases were imaginable and furthering our efforts to amended merchandise and customer mix. Despite this projected macro environment, we stay committed to executing our semipermanent maturation strategy.

This concludes our prepared remarks. At this time, we'd for illustration to move nan telephone complete for questions. Lisa, please reappraisal nan instructions for nan mobility information of today's call.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first mobility will beryllium coming from Mike Harrison of Seaport. Please spell ahead. Your statement is open.

Mike Harrison

Hi, bully morning.

Scott Behrens

Good morning, Mark.

Luis Rojo

Good morning.

Mike Harrison

I was hoping that you could talk immoderate of nan factors that drove nan 17% measurement diminution that you saw successful Q4. Maybe thief america understand really those divided retired betwixt destocking, underlying marketplace weakness and different factors. And were location immoderate cardinal differences successful nan measurement impacts, peculiarly from destocking, arsenic you look betwixt nan Surfactants business and nan Polymers business?

Luis Rojo

Thank you, Mike. Look, arsenic you rightly said, truthful erstwhile you deliberation astir nan minus 17%, you request to deliberation astir those 3 buckets, right. One is demand. One is destocking. And nan different is nan modulation to debased 1 4000 merchandise which we intelligibly communicated successful October that we mislaid a tier 1 customer. And location are different impacts connected nan measurement broadside related to nan transition. So, if you deliberation astir those 3 large buckets, and you deliberation astir nan minus 17%, roughly, each bucket is one-third. So deliberation astir 5%, 6% is nan effect of each of them.

And of course, erstwhile you deliberation astir Polymers, you don't person a debased 1 4000 transition. So you tin spot much than, you know, half and half business betwixt nan different 2 buckets. But that's really I will summarize nan 3 large buckets that we saw successful nan minus 70% successful Q4.

Mike Harrison

All right. And I conjecture successful position of destocking, that can't spell connected everlastingly from your customers. Are you starting to spot signs that bid patterns are normalizing astatine immoderate constituent present successful Q1, possibly talk astir what you're proceeding from your customers successful Surfactants, arsenic good arsenic successful Polymers?

Scott Behrens

Yeah, Mike, I would opportunity that it can't spell connected everlastingly arsenic well. But I would say, you know, incrementally, we whitethorn spot beryllium seeing a small spot uptick versus what nan shape we saw successful Q4. But I don't deliberation we're done pinch destocking activities astatine this point. As you comparison Surfactants versus Polymers, evidently 2 different channels to nan unit extremity use. I would opportunity connected nan Polymer side, erstwhile you get past nan shaper of nan rigid insulation panels that are poly each goes into. It's a highly fragmented marketplace of distributors and contractors crossed nan country. So, I deliberation that destocking efforts will proceed a while because I deliberation that concatenation was beautiful stuffed up.

On nan Surfactant side, I deliberation arsenic you look astatine user demand, I deliberation nan inventories sewage pretty, beautiful afloat into Q4. And we whitethorn beryllium further on successful nan destocking of nan user merchandise retailers successful packaged companies. But I deliberation Polymers whitethorn beryllium a small spot down Surfactants.

Luis Rojo

So Mike, I would summarize it arsenic elemental arsenic you know, successful Q1 versus what we're seeing already six weeks into it. We expect a akin request information versus what we saw successful Q4. Everybody says facing a portion telephone successful nan 2nd half, right? That's benignant of again astatine all. Theme and statement that we're proceeding from customers and suppliers group are both, Q1 aliases first half of nan twelvemonth and past picking up successful nan 2nd half.

Mike Harrison

All right, very helpful. And past 1 of nan inquire astir nan Pasadena startup process, it sounds for illustration there's going to beryllium immoderate P&L effect associated pinch expenses that you're taking connected earlier you officially commencement commercialized sales. And it does besides look for illustration nan startup aliases commercialized sales. Timing was pushed retired a small bit, I judge you said previously, early 2024 now first half of 2024. So possibly conscionable thief america retired pinch nan timing and really we should deliberation astir modeling nan effect of that startup?

Luis Rojo

Sure, I will – I will fto Scott later to travel successful connected nan mini – connected nan very mini hold that we're seeing connected nan building phase. What I will show you, look, we person – you person connected nan disbursal side, you person 3 large buckets arsenic well, right. I mean, you person nan Pasadena premier startup investments, correct I mean, if we're going to nutrient afloat width – we're going to person a afloat accumulation capacity successful 2024. We request to prosecute we request to train our people. You know, this is simply a chemic works and we return this very earnestly our training ESNS and everything so.

With that, we are going to, arsenic Scott mentioned it successful nan remarks that we're going to committee successful besides nan debased 1,4-dioxane capabilities successful Millsdale works we started past twelvemonth successful Georgia, this twelvemonth successful Millsdale. So betwixt those 2 buckets, nan nett impact, because remember, we besides had, precocious expenses successful 2022, pinch nan Millsdale property arena that we had successful Q1. So erstwhile you – erstwhile you nett retired nan three, you are talking astir $10 cardinal of other costs successful our P&L, arsenic we commissioning debased 1,4-dioxane, and we put to beryllium fresh connected Pasadena. I will move it complete to Scott to talk a small spot much astir nan scheduled time.

Scott Behrens

Yeah. So Mike, arsenic it relates to nan building of startup schedule, we person slipped, possibly a period – possibly 2 max. We're astir 20%, complete pinch nan construction. So it's successful afloat swing. We had immoderate earthy worldly delays related to getting nan civilian building done connected nan site. So thing from conscionable normal earthy worldly constraints that were associated pinch nan civilian information of nan tract project. So we should beryllium mechanically complete, and up and moving earlier mid year.

Luis Rojo

For example, we person already made your equipments already connected site. I mean, erstwhile you deliberation astir nan reactors and each nan awesome equipments that we need, they are each connected tract already.

Mike Harrison

All right. Thanks. I'll get backmost successful queue.

Operator

Thank you for nan question. The adjacent mobility will beryllium coming from Vincent Anderson of Stifel. Your statement is open.

Vincent Anderson

Yeah. Good morning. Thanks, guys. I conscionable wanted to ask, fixed your existing alkoxylate portfolio and nan performing – PerformanX acquisition past quarter. How quickly do you deliberation you tin you tin ramp and past capable nan bid book for nan Pasadena installation erstwhile it's up and running?

Scott Behrens

Yeah. So – bully morning, Vincent. From an alkoxylation perspective, we person 2 existing alkoxylation accommodation present successful nan US today, Pasadena will beryllium our third. We besides utilize a wide web of 3rd statement instrumentality manufacturers coming that we person been utilizing arsenic capacity to proceed to turn nan merchandise line, which has been doing very good exceeding our expectations.

So upon startup astatine Pasadena, we will – we will person a very bully opportunity to get that utilization up successful equilibrium pinch really we want to negociate our outer tolling that network. So, we have, I think, nan eventual elasticity to guarantee nan due utilization of our soul assets, and let america to proceed to turn utilizing tollers arsenic needed.

Vincent Anderson

Perfect. I'm not going to inquire you to foretell nan early connected earthy materials and each that. But, if we proceed on this slow request situation for astatine slightest nan first half of nan year, is location immoderate logic that we wouldn't spot a small spot of affirmative timing effect betwixt value and raws, for illustration we've seen successful past down cycles?

Scott Behrens

It's difficult to opportunity Vincent. I would opportunity that, earthy materials benignant of plateaued successful Q4. So it's beautiful unchangeable correct now. And whether it's going up aliases down from here, it's difficult to predict. There's excessively galore factors that play into that. Our attraction is really -- we will proceed our pricing actions to screen our continuing immoderate costs ostentation that we person wrong nan business and operations. So, I deliberation it's hold and see. But, we expect that we'll proceed pinch our pricing strategy arsenic needed.

Vincent Anderson

Okay. Fair enough. And past I had a speedy 1 connected taxes of each things. The 2023 effective taxation complaint guidance is possibly a small spot higher than nan past mates of years. But much importantly, possibly pinch each those superior spending, do either nan Low 1,4 Dioxane projects aliases nan Pasadena task suffice for prize depreciation, and if so, really should we deliberation astir that impacting rate taxes complete nan adjacent mates of years?

Scott Behrens

Yes. Great question, Vincent. The guidance is benignant of similar. Remember, for example, UK is moving to a 25% taxation complaint successful April. So that's a cardinal impact. And past you person state operation arsenic good baking into that. So our normal taxation complaint if you spell backmost to 2021 aliases 2020 -- 2021, we had a batch of taxation projects. But successful 2020, you spot our taxation complaint ever successful nan 25%, 26%. So that's nan guidance that we person correct now.

And you're wholly right. On a rate connected basis, arsenic soon arsenic we commissioning each nan Low 1,4 Dioxane assets, we will use -- those use for prize depreciation. Now remember, nan prize depreciation moved from 100%, past twelvemonth to 80% this twelvemonth per nan caller rule is going down. And adjacent year, we're going to beryllium capable to person Pasadena, but nan prize depreciation goes down to 60%. So unluckily we spot that -- I mean, it's not 100% for illustration successful nan past, but of course, we are readying for that successful our rate flow.

Vincent Anderson

Okay, excellent. Thank you very much.

Operator

Thank you for your question. One infinitesimal while we hole for nan adjacent question. And our adjacent mobility will beryllium coming from David Storms of Stonegate. Your statement is open.

David Storms

Perfect. Good morning, and acknowledgment for taking my call. Just funny astir immoderate of nan pacing pinch expenses for your 1,4 Dioxane and nan Pasadena project.

Scott Behrens

David, could you repetition that question? We collapsed up connected us.

David Storms

No, sorry astir that. Just funny astir nan pacing for nan expenses. You've mentioned immoderate of nan expenses for 1,4 Dioxane projects and nan Pasadena project. Just funny really we should deliberation astir nan pacing of that done 2023 and beyond?

Scott Behrens

Yes. What I would opportunity is -- astir apt it’s much half-on-half. The first half is heavy load. It’s much loaded into Low 1,4 Dioxane, nan backmost half is going to beryllium much loaded pinch Pasadena.

David Storms

Perfect. Thank you. The different thing, I cognize you guys won't springiness definitive guidance. But aft companies for illustration Exxon and Procter & Gamble released their net results, a batch of analysts raise their estimates for gross and EBITDA. Do you deliberation that's benignant of directionally correct for nan marketplace going forward?

Scott Behrens

I can't remark connected that, David? I don't cognize what's driving Exxon and their expectations.

David Storms

Perfect. Thank you very much.

Operator

Thank you for your question. One infinitesimal while we hole for nan adjacent question. [Operator Instructions] Our adjacent mobility will beryllium coming from David Silver of C.L. King. Your statement is open.

David Silver

Yes. Hi. Thank you and bully morning.

Scott Behrens

Good morning, David

David Silver

Good morning. This is benignant of a qualitative question. But you did talk nan outlook for 2023 and immoderate item overall. I was wondering if you could possibly conscionable item immoderate thoughts regionally. In different words, of Europe, let's say, North America and South America, I mean, it would North America, successful your opinion. And successful your build up to a wide 2023 outlook. Is North America nan strongest region, aliases are location immoderate location issues that we should benignant of support successful mind arsenic we deliberation astir nan wide 2023 outlook? And of course, I'm reasoning possibly geopolitical concerns successful Europe aliases immoderate broader location issues successful Latin America. But really does nan location outlook shakeout successful your sentiment astatine this constituent for 2023?

Scott Behrens

It’s awesome question, David. And fto maine return a changeable astatine first talking astir benignant of destocking and wherever nan underlining request is. I deliberation everyone's saw a earlier benignant of slowdown successful Europe, starting successful possibly Q3 past year, whereas successful North America, astatine slightest successful our business, we didn't spot nan slowdown, really to commencement until Q4. So I deliberation Europe's a small spot up successful their request shape than North America.

And I deliberation I said earlier, I deliberation it's still a small uncertain correct now six weeks into nan twelvemonth arsenic to wherever nan North American destocking will end. And a really bully request floor plan going guardant will beryllium capable to beryllium established. So I deliberation from that perspective, Europe's a small spot ahead, but I don't spot immoderate large macro differences betwixt nan 2 regions going forward.

The 1 watch retired is Latin America and nan continued precocious ostentation successful those emerging economies wherever nan mean costs is overmuch little than successful North American Europe, I deliberation they're going to beryllium much exposed to proceed prolonged ostentation and could person a amended effect aliases a bigger effect connected underlining user demand.

David Silver

Thank you very much. That's a awesome color, and I admit it. My adjacent mobility would beryllium benignant of astir caller products aliases and successful particular, I deliberation I've asked this mobility immoderate clip ago, but does measurement successful track, I guess, location are cipher internally, vitality index, successful different words, percent of revenues from products that person been developed successful nan past 3 years, nan past 5 years, thing for illustration that? And if not, I was conscionable wondering if you could telephone retired from a gross aliases from a separator impact, however, you look astatine it internally, what are what are nan 1 aliases 2 areas pinch nan strongest caller income performance, you know, possibly successful 2022. And if we look retired different twelvemonth aliases 2 beyond I mean, I'm guessing nan functional products areas is astatine aliases adjacent nan apical of nan list. But if you could just, you know, item immoderate of nan advances successful your caller merchandise income that would beryllium helpful? Thank you.

Scott Behrens

Yeah. So I first commencement with, you know, wherever we are focused connected strategical and marketplace growth. And that's wrong nan cultivation chemicals abstraction arsenic good arsenic specialty alkoxylate. So, you know, successful cultivation chemicals – we are portion of that improvement pipeline for caller progressive pesticides. And that pipeline is anyplace from 5 years to 10 years long, for caller products to travel to market. So we're profoundly embedded successful those improvement pipelines pinch nan ample pesticide producers retired there, which is simply a really awesome spot to beryllium and we person caller products being launched successful aggregate regions [indiscernible]

The different large attraction for america is successful specialty alkoxylate. You know, we're talking different double-digit measurement maturation twelvemonth successful 2022. And we've sewage a squad dedicated to continuing to meet customers needs for caller and improved method performance, but besides broadening retired our merchandise portfolio. So those are regular aliases underlining activities that hap wrong our R&D statement connected a world basis.

And nan past area I would push is successful Rigid Polyol. So we're really focused connected invention and delivering a much sustainable and amended performing committee for nan adjacent procreation of rigid panels. And we're profoundly embedded successful those programs pinch our awesome customers successful some Europe and North America.

Luis Rojo

What I would David is, we are investing and we're making bully progress. Scott mentioned successful nan remarks spray foam also. So we are we're moving pinch caller products there. If you deliberation we besides talk astir Chemco. We are relaunching that merchandise line. And really erstwhile you deliberation astir debased 1, 4-dioxane, right, that's, that's benignant of, astatine nan end, a important finance that we're making to person a wholly caller ether sulphate portfolio. That intends nan caller regulation, but that astatine nan extremity -- that does a batch of caller measurement that is going to beryllium successful a caller merchandise versus nan past.

David Silver

Yeah, no, convey you. And I'll conscionable prime up Luis, connected your past comment. I deliberation that that was nan guidance I was heading. But you know, nan past mates of years of you know, of your business, nan past mates of years, your business has been affected beautiful importantly by COVID and pandemic and immoderate different immoderate different issues that changed nan measurement group thought astir cleaning and disinfection and things for illustration that. Two parts. First of all, what successful your sentiment will persist, you know, erstwhile nan COVID -- nan nonstop COVID issues benignant of slice successful ordinance aliases possibly move to nan background? Will location beryllium immoderate protocols possibly for organization cleaning aliases for commercialized sites aliases arenas, stadiums, things for illustration that, that, you know, will persist, you know, beyond nan pandemic that we're, -- that we've dealt pinch nan past mates years.

And past secondly, are location different kinds of initiatives aliases regulations, either internationally aliases nationally present that you deliberation are going to beryllium important opportunities aliases will require immoderate adaptations successful your business. So, benignant of what remains aft nan pandemic fades successful nonstop importance. And past what 1 aliases 2 regulatory issues should we support successful mind erstwhile we deliberation astir opportunities for your business?

Scott Behrens

Yeah. Okay, David. As it relates to nan COVID pandemic, I deliberation if you look astatine North America, we've been beautiful overmuch unfastened for astir nan past 12 to 18 months present successful nan US. So, we did spot nan spike while successful nan tallness of nan pandemic astir manus soaps and disinfectants, right, manus work disinfection. And I deliberation we reported backmost successful 2021, nan important spike we saw successful 2020, but felt that that was going to travel backmost down, not to pre-COVID levels, but 2 levels supra were pre-COVID levels work. That is continuing today. Okay. So COVID provided an contiguous spike successful 2020. It's travel down, but it's still moving astatine 10% to 20%, supra pre-COVID levels owed to caller user behaviours associated pinch nan pandemic. But that's been beautiful overmuch dependable authorities for astir nan past 12 to 18 months.

In position of caller regulations aliases initiatives. There's thing connected nan sky that we would opportunity is simply a awesome headwind aliases a tailwind for request related to COVID disinfection and cleaning. The biggest regularisation that has impacted our institution has been nan 1,4-dioxane regulatory environments started by nan authorities of New York. And that's why we've made nan investments successful 1,4-dioxane to guarantee our customers will beryllium capable to meet that caller regularisation going forward.

David Silver

Okay, great. And I should person mentioned 1,4-dioxane. And of course, past question, and this would beryllium connected your marketing. And it has to do pinch your strategy for Tier 2, Tier 3 customer development. But you did mention, I think, a nett addition, customer guidelines of astir 550, for 2022. And I'm conscionable wondering, if we should deliberation astir a peculiar target for adjacent year, and much to nan point, do you deliberation you've benignant of, I don't know, cherry picked aliases precocious graded nan opportunities retired location connected nan Tier 2, Tier 3 guidelines of customers, aliases should we expect that location will beryllium -- that this will beryllium a multi-year effort going forward? And you'll proceed to benignant of broaden nan guidelines of Tier 2, Tier 3 customers that you activity with, and nan products and services that you supply there. So, should we expect nan increasing information of your gross and net to travel from Tier 2, Tier 3 going forward, aliases is nan advancement to day benignant of a bully measurement wherever -- what we should expect going forward?

Scott Behrens

Yeah, no. David, awesome question. We've been, I think, beautiful clear that increasing this Tier 2, Tier 3 conception is simply a awesome information of our company's maturation strategy. We proceed to put successful sales, trading and R&D to support our continued maturation pinch this conception connected a world basis. We've identified that target for prospective customer database successful Tier 2, Tier 3 astir nan worlds successful nan tens of thousands. And successful becoming much efficient, and successful reaching and securing orders from these customers astir nan world is our focus. And nan 550 is simply a bully number, we're proud of that, and that leads to amended profitability for our company, and that's our anticipation going guardant arsenic our teams and they proceed to execute and present those caller customers connected a nett ground and that’s hundreds per year.

David Silver

That's great. Thank you very much. I admit each nan each nan detail.

Operator

Thank you for your question. One moment, we person a follow-up question. Our follow-up mobility will beryllium coming from Mike Harrison of Seaport. Your statement is open.

Mike Harrison

Hi. Just a mates much for me. In position of nan Surfactants business, I'm funny if you're seeing immoderate trading down happening wrong nan laundry portions of nan business aliases individual care? And if you are seeing that is it thing that's happening successful each regions, aliases is it possibly more, arsenic you called retired Latin America, possibly nan consumers are nether a small spot much unit because of inflation. And I guess, are you seeing this inclination astir trading down? Is it getting worse arsenic you look astatine Q1, aliases is it beautiful stable?

Scott Behrens

Yeah, awesome question, Mike. I would, from my opinion, trading down successful precocious inflationary environments is simply a cosmopolitan trend. It's not geographic specific. And yes, truthful consumers will waste and acquisition down from premium to mid-tier to economy-tiers, and nan system tiers and mid-tiers besides see backstage label. So I do deliberation there's been -- that inclination -- we've seen that inclination from our lens pinch income to customers successful aggregate regions.

Is it getting worse? I don't cognize if I tin remark connected whether it's getting worse aliases not. It's just, it's an uncertain position correct now pinch destocking and everything successful position of what nan inclination is, but it decidedly happened successful Q4.

Mike Harrison

All right. And past conscionable looking astatine nan moving superior numbers that you guys provided, it looks for illustration moving superior improved a small spot compared to Q3. It does look for illustration your nett indebtedness went up, though. What was rate from operations successful nan 4th quarter, aliases nan afloat year, immoderate you tin disclose connected rate travel would beryllium very helpful?

Luis Rojo

Great question, Mike. So what we're seeing is, we saw nan highest of moving superior benignant of successful Q3, and now we are our benignant of unchangeable versus that highest level. But yes, this has been astir a $200 cardinal increase, versus nan guidelines play versus 2020, we person seen a important summation because of nan of ostentation connected earthy worldly and everything. So arsenic we present $161 cardinal successful rate from operations, for 2022, that includes an effect of astir $71 cardinal of moving capital. So if you exclude moving capital, because this is simply a one-time, we're now stable, we generated $232 cardinal dollars successful cash. And this was 100% successful statement pinch our plan. If you look astatine nan 300 cardinal CapEx, of course, nan 300 cardinal CapEx has excessively galore of projects there.

Pasadena and debased 1,4 truthful it conscionable tick that out, you extremity up pinch a free rate travel productivity of astir 85%, which is beautiful damn bully for us. So astatine nan end, you person those 3 large drivers that I benignant of want, I mean, $70 cardinal moving capital. And past of course, we're building Pasadena and debased 1,4. If you region that from nan equation, we were happy pinch our rate flow. And arsenic you know, we're very businesslike connected our moving capital. We person little than 20% of our income successful moving superior erstwhile nan manufacture mean is astir 24% 25%.

Mike Harrison

Alright. And I conjecture conscionable possibly different rate travel related question. Where did nan depreciation and amortization extremity up for nan full year? I'm guessing it was astir 95 million? And we're reasoning astir adjacent year? Where should that D&A number go? I presume that goes up substantially arsenic you commencement to bring connected immoderate of nan caller assets that you've discussed.

A – Luis Rojo

You're 100%, right. $95 million, were estimating astatine slightest $112 cardinal to $114 cardinal adjacent twelvemonth tin summation betwixt $17 cardinal to $20 cardinal that of people will dangle connected timing from erstwhile you -- conscionable commencement nan depreciation of immoderate of these assets, but roughly, astir apt astir $70 million.

Mike Harrison

Excellent. Thank you very much.

Operator

Thank you. That concludes our Q&A convention for coming and I would for illustration to move nan telephone complete to Scott Behrens, for closing remarks. Please spell ahead.

Scott Behrens

Thank you very overmuch for joining america connected today's call, we admit your liking successful ownership successful Stepan institution and person a awesome day

Operator

This concludes today's convention telephone convey you each for joining. Enjoy nan remainder of your day.

Editor: Naga



Read other contents from Beritaja.com at
More Source
close