Stepan Company posted strong second-quarter results characterized by significant EBITDA expansion and operational improvements across its business segments. Adjusted EBITDA increased 45%, supported by 6% organic volume growth, disciplined pricing actions, and productivity improvements. The company successfully applied contractual pass-through mechanisms to offset raw material cost fluctuations, enabling margin recovery during a period of commodity price volatility.
The Surfactants division demonstrated broad-based strength, with particular momentum in industrial cleaning, laundry, and oil field applications. Meanwhile, the North American Polymers segment achieved double-digit growth in rigid polyols and polyamides, substantially aided by strategic expansion into the spray foam market. Spray foam volumes grew threefold year-over-year from a modest base, with management positioning the segment as a long-term growth opportunity over the coming 5 to 10 years. The company also expanded its customer base significantly, adding 500 new customer-product combinations in the first half of the year.
Operational enhancements at key manufacturing facilities contributed to performance gains. The Millsdale site improved production volumes and stabilized key metrics, while the Pasadena, Texas facility reached 75% to 80% production utilization and achieved supply chain savings by reducing external tolling needs. Project Catalyst, the company’s efficiency initiative, remained on track to deliver over $60 million in pre-tax savings for 2026, targeting a run rate of $22 million quarterly by year-end.
Management acknowledged that a portion of Q2 volume strength reflected customer pre-buying activity driven by geopolitical uncertainty and raw material volatility, estimating that $5 million to $10 million in EBITDA was pulled forward from Q3. The company expects this normalization to create a corresponding EBITDA headwind in the second half. Additionally, scheduled maintenance turnarounds in the Polymers segment are projected to generate approximately $4 million to $5 million in costs during the second half.
Full-year restructuring charges are anticipated to range between $75 million and $80 million, with the company planning to eliminate approximately 100 salaried positions in Q3 as part of organizational optimization efforts. Corporate expenses increased 17% due to inflation and higher incentive compensation linked to improved operating performance. Strategic priorities remain focused on balance sheet deleveraging and generating positive free cash flow despite anticipated working capital builds from higher sales volumes.
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