Stepan Q3 Adjusted EBITDA Rises 18% on Volume Growth and Catalyst Savings

Stepan Company (NYSE: SCL) reported an 18% year-over-year increase in third-quarter 2026 adjusted EBITDA as broad organic volume growth, pricing actions and Project Catalyst savings supported profitability despite raw-material inflation and operating pressures in Europe.

Adjusted EBITDA rose to $66.3 million from $56.2 million a year earlier. Adjusted net income increased 98% to $21.7 million, while adjusted earnings per diluted share climbed to $0.94 from $0.48. The results are non-GAAP measures that exclude certain restructuring, environmental remediation, deferred compensation and other items.

Organic volume grew 7%, with gains across all three global business segments. The company said targeted price increases and pass-through mechanisms helped offset volatile raw-material costs.

Surfactants lead earnings growth

Surfactants delivered the largest contribution to the quarterly improvement. Segment net sales increased 15% to $486.6 million from $422.4 million, while adjusted EBITDA rose 27% to $48.2 million.

Organic volume advanced 8%, driven by double-digit growth in Consumer Products, Construction & Industrial and Oilfield applications. Price and mix added 10% to sales, reflecting the pass-through of higher input costs and targeted pricing, while foreign exchange contributed 2%.

Earnings improved in North America and Asia on higher volumes and margin recovery. Latin America benefited from double-digit organic volume growth, pricing execution and margin recovery. European earnings were modestly lower because weaker Crop Productivity demand more than offset growth in consumer end markets.

Polymers net sales climbed 24% to $178.7 million, with price and mix contributing 22% as the company passed through higher raw-material costs. Volume increased 3%, while currency reduced sales by 1%.

Polymers adjusted EBITDA increased 4% to $23.3 million. Strong double-digit growth in North American Rigid Polyols and Phthalic Anhydride, including significant Spray Foam growth, supported the result. Those gains were partly offset by a five-year regulatory-mandated maintenance turnaround at Stepan’s German site, continued weak European construction demand and softer demand in Asia. Specialty Products adjusted EBITDA increased 5%, supported by 20% volume growth in medium-chain triglycerides, partly offset by a less favorable product mix.

Corporate expenses reduced the year-over-year adjusted EBITDA improvement by $1.6 million, reflecting inflation and higher incentive-based compensation associated with stronger results.

Project Catalyst savings advance

Stepan said Project Catalyst remains on track and is expected to exceed 60% of its two-year, $100 million pre-tax savings target in 2026. The program is intended to consolidate production at more efficient facilities, improve procurement and productivity, and simplify organizational accountabilities.

The initiative’s quarterly savings run rate was approximately $23 million in the third quarter, although inflationary pressure on operating expenses offset part of the benefit. Stepan eliminated about 100 salaried positions during the quarter, representing approximately 7% of its global salaried workforce. The company has also identified actions it believes will allow average quarterly savings to exceed $25 million during 2027.

Stepan continues to expect $77 million to $80 million of restructuring charges in 2026. Through the third quarter, Project Catalyst-related costs included $13 million of cash charges and $63 million of noncash charges. Additional estimated cash expenses of $18 million to $26 million associated with decommissioning, dismantling and environmental work are expected between 2027 and 2035.

Cash flow remains positive as working capital rises

Third-quarter free cash flow was $8.2 million, down from $40.2 million a year earlier, as strong demand and higher raw-material costs contributed to a working-capital build. Quarter-end working capital rose to $527 million from $471 million in the prior-year period. The 2026 figure also included $6 million of cash payments related to restructuring.

Net debt was $536 million at September 30, broadly unchanged from $537 million a year earlier. Trailing-12-month adjusted EBITDA increased to $224 million from $200 million, lowering the net leverage ratio to 2.4 times from 2.7 times.

For 2026, Stepan forecasts capital expenditures of approximately $105 million, scheduled debt repayments of $59 million, net interest expense of $24 million to $25 million, depreciation and amortization of $125 million to $130 million, and an effective tax rate of 23% to 25%.

The company said its regional manufacturing footprint, flexible petrochemical and oleochemical feedstock sources, and pricing mechanisms position it to manage disruption linked to the Middle East conflict. However, the outlook remains subject to raw-material and energy volatility, supply and transportation disruptions, tariffs and changes in trade policy, currency movements, economic weakness, and possible operational interruptions. Project Catalyst also carries execution risks related to facility closures, asset decommissioning, environmental compliance, workforce actions and the realization of planned savings.