Stepan Co

Reported net sales were $684 million, up 15% year over year, driven by higher selling prices, higher volume, favorable product and customer mix, and favorable currency translation. Reported net income was $22.9 million, or $1.00 per diluted share, up 102% from $11.3 million, or $0.50 per diluted share, last year. Adjusted net income was $27.1 million, or $1.18 per diluted share, up 126% from $12 million, or $0.52 per diluted share; adjusted EBITDA was $74.4 million, up $23 million or 45%. Surfactants net sales were $484 million, up 18%, and adjusted EBITDA was $55 million, up 59%; polymers net sales were $178 million, up 9%, and adjusted EBITDA was $31 million, up 22%; specialty products net sales were $22 million, up 8%, and adjusted EBITDA was $6.5 million, slightly down. Cash flow from operations before working capital was $56 million, free cash flow was negative $15 million after $23 million of capex, and the quarter included a $58 million working capital build and about $6 million of restructuring cash impact. Net debt was $534 million and net leverage was 2.5x, down from 2.7x in Q1 and 2.9x a year ago. For full year 2026, management reiterated $75 million to $80 million of restructuring charges and said it expects full-year adjusted EBITDA growth, positive free cash flow, and continued deleveraging; no specific next-quarter guidance was given, but management cautioned Q3 could be slightly lower than Q2 after adjusting for one-time volume and margin effects and noted $4 million to $5 million of maintenance turnaround impact in the second half.

Luis Rojo described the quarter as strong execution, emphasizing broad-based organic volume growth, margin recovery, and the early benefits of Project Catalyst. He said the company is seeing growth across strategic end markets and Tier 2/Tier 3 customers, while Pasadena is ramping and Millsdale improved operationally. His tone was upbeat but measured, repeatedly noting that uncertainty remains high and that some Q2 demand may have been pre-buying tied to geopolitical and raw material concerns.

Ruben Velasquez walked through the quarter’s financial details, highlighting reported net income of $22.9 million, adjusted net income of $27.1 million, and adjusted EBITDA of $74.4 million. He said the quarter included a $5.1 million pre-tax restructuring charge, about $6 million of restructuring cash outflow, a $58 million working capital build, and $23 million of capital expenditures, which left free cash flow at negative $15 million. He also emphasized that net leverage improved to 2.5x and that the company remains focused on cash generation, disciplined capital allocation, and further deleveraging.

Analysts pressed management on how much of the quarter’s volume strength reflected pre-buying, and Luis Rojo estimated about $5 million to $10 million of EBITDA benefit from pre-buying tied to the Iran conflict. Questions also focused on spray foam growth, with management saying the business is still a relatively small base but remains an important white-space opportunity over the next 5 to 10 years. On margins and raw materials, management said pricing is being handled through normal contractual pass-through mechanisms, that the raw material environment is still volatile, and that Q3 could be slightly lower than Q2 after normalizing for the quarter’s volume and margin lift. Analysts also asked about Pasadena and capital allocation; management said Pasadena is about 75% to 80% ramped and that cash remains a priority alongside debt reduction and dividends.