Stepan (NYSE:SCL) executives used the company’s fourth-quarter and full-year 2025 earnings call to outline a year of portfolio actions, cost discipline, and improving cash generation, while also unveiling a new multi-year efficiency program dubbed Project Catalyst.
Management frames 2025 as a “transformational year”
President and CEO Luis Rojo said 2025 included major operational and strategic milestones, including the divestiture of two manufacturing plants and the commissioning of Stepan’s Pasadena sulfonation facility. Rojo also highlighted what he called the best safety performance in company history.
Rojo also emphasized capital allocation discipline, noting Stepan generated positive free cash flow in 2025, reduced net debt, and improved its leverage ratio from 2.8x to 2.5x by year-end.
Q4: adjusted loss, but reported profit aided by asset sale gain
CFO Ruben Velazquez said Stepan posted a Q4 2025 adjusted net loss of $0.5 million, or ($0.02) per diluted share. Reported net income was $5 million, up 49% versus the prior year, which he attributed primarily to a gain on sale of assets and certain non-recurring items.
Velazquez said the year-over-year decline in adjusted earnings was mainly due to lower Surfactants operating income, lower capitalized interest expense, and a less favorable effective tax rate, partially offset by improved Polymers performance and lower corporate expenses. He added that higher depreciation and declining capitalized interest related to the Pasadena startup had no cash impact compared with the prior-year quarter.
Consolidated adjusted EBITDA was $33.8 million in Q4, down 3% from $35.0 million a year earlier. The company generated $60 million of cash from operations in the quarter and free cash flow of $25 million, compared with roughly break-even free cash flow in the prior-year period, driven by working capital reductions and disciplined capital spending.
Segment results: Surfactants pressured; Polymers volumes jump
In Surfactants, Q4 net sales rose to $402 million from $379 million a year earlier. However, organic volume declined 3%, which Velazquez attributed to weaker demand across commodity consumer and construction and industrial solution end markets. Price and mix benefited from pass-through of higher raw material costs, improved product and customer mix, and pricing actions, while foreign currency translation provided a 3% lift to sales. Surfactants adjusted EBITDA declined slightly, reflecting lower volume and elevated oleochemical input costs.
Polymers net sales were $132 million, up from $113 million in the prior-year quarter. Volume increased 11%, driven by North America and Asia rigid polyols as well as global commodity phthalic anhydride growth. Price was negatively impacted by pass-through of lower raw material costs and competitive pressure, while foreign currency translation increased sales by 2%. Polymers adjusted EBITDA rose 9%, driven by volume growth and operating leverage, partially offset by lower unit margins and unfavorable mix.
Specialty Products net sales and EBITDA were described as modestly lower year over year due to order timing within the pharmaceutical business. Management noted that medium-chain triglycerides continued to post double-digit volume growth.
Full-year 2025: higher EBITDA, positive free cash flow, lower net debt
Velazquez reported full-year 2025 net income of $46.9 million, down 7% year over year, and adjusted net income of $41.7 million. Full-year EBITDA increased 11% to $208 million, while adjusted EBITDA increased 6% to $199 million.
Cash from operations totaled $148 million in 2025, and free cash flow was $25.4 million, which Velazquez said was enabled by working capital management and disciplined capital spending even as Stepan funded strategic investments.
The company ended Q4 with net debt of $494 million, a $32 million reduction versus the prior year, and a net leverage ratio of about 2.5x trailing twelve-month adjusted EBITDA.
On shareholder returns, Rojo said Stepan increased its dividend for the 58th consecutive year. The board declared a quarterly dividend of $0.395 per share, payable March 13, 2026, representing a 2.6% increase versus the prior year. The company paid $8.9 million in dividends during Q4 2025.
Project Catalyst: targeting $100 million in pre-tax savings and footprint actions
Rojo introduced Project Catalyst, describing it as a “comprehensive plan” to optimize the asset base and create a more agile, accountable organization. Management expects approximately $100 million in pre-tax savings over the next two years, with around 60% expected in 2026.
Rojo said the initiative is designed to enhance competitiveness while preserving customer service and growth flexibility, and is intended to partially offset inflationary pressures and other headwinds while creating capacity to reinvest in growth, innovation, and supply chain resiliency.
Management outlined three primary levers:
- Footprint optimization, including consolidating volume into more modern and cost-competitive sites and ramping Pasadena to an expected 70%-80% utilization in 2026 and full utilization in 2027.
- Operational efficiency and cost optimization, including procurement savings, productivity improvements, and an enterprise-wide management operating system.
- Organizational effectiveness, including streamlining decision-making and aligning resources to growth priorities.
As part of the plan, Rojo announced the closure of Stepan’s Fieldsboro, New Jersey, site, citing continued lower demand in commodity surfactants used in laundry detergents. He also said the company is decommissioning select assets at its Millsdale and Stalybridge sites, with actions planned over the next few months, and that Stepan will continue evaluating additional footprint optimization opportunities.
In the Q&A, Rojo said the sites being addressed were not necessarily losing money, but the consolidation is intended to move volume to more cost-efficient sites and improve utilization rates. Responding to another question, he said the Millsdale actions relate to ethoxylation assets, and the Stalybridge action involves exiting a “commodity, low margin, high CapEx, organics business” that management said does not generate acceptable returns.
Rojo also noted that Stepan’s cost structure includes about $750 million of fixed costs and said inflation—citing areas like healthcare, insurance, and incentive compensation—could absorb some of the expected 2026 savings.
Looking to 2026, management reiterated expectations for adjusted EBITDA growth and positive free cash flow, while cautioning that performance is likely to be weighted more heavily toward the second half of the year. Rojo also quantified a Q1 2026 weather-related impact of about $6 million on an EBITDA basis, stating the company expects to recover at least half of that between Q2 and Q4.
About Stepan (NYSE:SCL)
Stepan Company is a global manufacturer of specialty and intermediate chemicals, primarily known for its development and production of surfactants and related specialty products. The company’s portfolio includes a wide range of ingredients used to enhance the performance of consumer and industrial formulations, such as emulsifiers, foam control agents, odor control agents, antimicrobial products and performance additives. These products are integral components in cleaning solutions, personal care items, agrochemical formulations, coatings, oilfield treatments and polymer systems.
Serving a diverse set of end-markets, Stepan’s offerings address both consumer-facing and industrial applications.
