10/08/2010

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Stepan reports second quarter and first half earnings

  • Overall, YTD net income rose 9 % to USD 37.7 million.

  • Q2 net income declined 13 % to USD 17.0 million from the record year ago quarter of USD 19.6 million.

  • Net income, excluding deferred compensation plan expense, declined 14 % from USD 22.4 million to USD 19.1 million for the quarter but increased 12 % from USD 34.3 million to USD 38.5 million for the year-to-date.

  • Sales volume rose 6 % during Q2 and 7 % for the year-to-date, with strong polymer volume growth of 16 % and 19 % for the respective periods.


During this financial year, the company has continued to invest in growth opportunities resulting in higher research and acquisition expenses. Administrative expenses were higher due to recent acquisitions in Poland, Singapore, and the Philippines. Research expense rose by 12 % due to increased headcount required to support the company's innovation portfolio and higher regulatory compliance for the European REACH product registration initiative.


Surfactants: Sales volume rose 4 % during the second quarter and sales volumes improved in both North America and Europe. In addition to growth in consumer laundry and cleaning volume, sales of functional surfactants used in housing, oilfield and agricultural products improved. Gross profit from this business declined by USD 1.7 million, or 4 % during Q2 due to lower margins in Europe and higher operating expenses in North America as well as higher raw material costs.
Polymers: Higher sales volumes were led by the significantly stronger demand for aromatic polyester polyols used in flat roof rigid PU foam insulation used in commercial construction. The lower operating results were attributable to lower margins in Europe and higher global production, administrative and research expenses. During the second quarter polymer segment gross profit declined by USD 0.4 million, or 3 %, while sales volume grew by 16 %. Unit profit margins on polyol products have declined, primarily in Europe, due to higher raw material costs, competitive pressure, and foreign currency translation. Phthalic anhydride (PA) profitability improved on a 10 % increase in sales volume. Demand for PA-based unsaturated polyester resins in the automotive and housing industries has improved from last year's recessionary conditions

"Year-to-date net income is up 9 % over a strong 2009 first half", said F. Quinn Stepan, Jr., President and Chief Executive Officer. "The decline in second quarter results is due to pressure on margins in Europe combined with higher expenses to support growth initiatives through acquisitions and increased research within our innovation portfolio."


"We have made recent investments in Singapore, Poland and the Philippines to deliver long term growth for the company. Our strong first half volume gains were generated by improved market demand, market share gains and greater penetration of new end use markets. We expect these opportunities for growth will continue for the balance of this year and into 2011", he said.



Six months ended 30 June 2010 (in USD million)



2010

2009

Increase

Increase due to foreign translation

Net sales

703.5

639.3

64.2

12.4

Gross profit

127.0

114.4

12.6

2.2

Operating income

63.4

57.4

6.0

1.7

Pretax income

58.0

53.9

4.1

1.4




Three months ended 30 June 2010 (Q2) (in ‘000 USD)



2010

2009

% change

Net sales

366,504

321,199

+14

Cost of sales

303,026

255,541

+19

Gross profit

63,478

65,658

-3

Operating income

29,772

31,188

-5

Pre-tax income

26,387

30,627

-14



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