Northfield, Illinois - Stepan Co, a manufacturer of speciality chemicals including polyester polyols for the urethanes sector, reports that its third quarter net sales rose 12 percent to $366.8 million, after a 4-percent increase in sales volume coupled with a 9-percent increase in selling prices attributable to higher raw material costs.
Net income for the quarter, however, was marginally lower, at $19.2 million versus $19.5 million in the same period last year, the firm said in a 20 Oct announcement. But year-to-date net income, ending 30 Sept 2010, rose 5 percent to $56.9 million versus $54.3 million in the prior year, it added.
Its polymer division, which includes its polyols business, saw gross profit down 24 percent to $15.0 million, although it reported that sales volume grew by 8 percent to reach $91.8 million.The lower gross profit margins was attributed to higher raw material costs in both North America and Europe, the firm said.
Stepan's surfactant business also reported lower gross profit, down 15 percent to $38.6 million on a 3-percent improvement in volume to $264 million in the third quarter of this year. This was due to competitive pricing in Europe leading to lower margins and higher manufacturing costs in North America, Stepan said. The higher manufacturing costs included those incurred during a labour dispute during which the company's Illinois plant was operated by salaried personnel. A new three year labour agreement was approved on 19 Aug 2010, Stepan added.
Its speciality products business accounts for the rest of its sales, $10.9 million, just 1 percent higher than in the same quarter for 2009.
Research expenses rose 9 percent due to consulting expense for the European REACH registration initiative, as well as increased headcount to support growth in innovation projects, Stepan commented.
"We have the opportunity to achieve another record full-year earnings despite downward pressure on margins in Europe, higher spending on acquisition-related activities and higher research costs focused on innovation for organic growth," said F. Quinn Stepan, Jr., president and chief executive officer, in the 20 Oct statement.
"The fourth quarter will benefit from lower manufacturing costs attributable to the non-recurring third quarter labour dispute and lower acquisition-related spending. In addition, we announced price increases for the fourth quarter attempting to recover lost third quarter margin," his statement added.
Also, "despite continued slow economic recovery, we look forward to volume growth in 2011 due to our surfactant expansion in Brazil, our polyol expansion in Germany and acquisition in Poland," Quinn Stepan commented.
The board of directors approved an 8.3-percent increase in the annual dividend per common share to $1.04, which is the 43rd consecutive annual dividend increase, the firm reported.
Cash flow from operations remained strong with cash on hand of $111 million and debt, net of cash, of $66.5 million, or 16.3 percent, net debt to capitalisation ratio, the Stepan statement concluded.
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