Illinois, US – Q2 sales fell by 4.1% quarter-on-quarter at Stepan, declining from $580m last year to $556m this. The company attributed much of the decline to lower selling prices resulting from reduced raw material costs being passed on, partly offset by a 4% increase in global sales volume. Operating income was up by 5%, rising to $18.7m from the $17.8m reported in the second quarter, although net income was down by 25%.
Pre-tax earnings, the company said, were affected by a flood at its Millsdale, Illinois site, and pre-commissioning expenses at its new alkoxylation facility in Pasadena, Texas.
A further impact came from costs arising from a criminal fraud at a subsidiary in Asia. In mid-July, the company discovered that the subsidiary had been the victim of a criminal social engineering scheme, resulting in fraudulently induced outbound payments. An investigation led by external lawyers is under way, but the company believes it is an isolated event.
In its polymers business, net sales were $159.8m, down 2.9% on the $164.5m reported in last year’s quarter, with selling prices down by 6% in the light of lower raw material costs being passed on. Volumes were up by 2%, with a 2% increase in global rigid polyols demand and 28% increase for specialty polyols partially offset by lower volumes for commodity phthalic anhydride.
“From a top line perspective, we continue to be pleased with several of our core markets continuing to deliver volume growth,” said Scott Behrens, the company’s president and CEO. “Rigid and specialty polyols volumes grew during the quarter. Global margins were in line with expectations, despite an unfavourable product mix.” He added that the ongoing recovery in rigid polyols should contribute to improved earnings in the second half of the year.