Stepan Company

Greetings and welcome to the Stepan Company Q3 2021 earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded on Wednesday, October 20, 2021. I would now like to turn the conference over to Luis Rojo, Vice President and Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining Stepan Company's third quarter 2021 financial review. Before we begin, please note that information in this conference call contains forward-looking statements, which are not historical facts. These statements involve risks and uncertainties that could cause actual results to differ materially. including but not limited prospects for our foreign operations, global and regional economic conditions, and factors detailing our security and exchange commission filings. Whether you are joining us online or over the phone, we encourage you to review the investor slide presentation, which we have made available at www.stepan.com under the investor section of our website. We make these slides available at approximately the same time as the earnings release is issued. and we hope that you find the information and perspective helpful. Now with that, I would like to turn the call over to Mr. Quinn Stepan, our Chairman and Chief Executive Officer.

Good morning, and thank you all for joining us today to discuss our third quarter and year-to-date earnings. Although many parts of the world are slowly improving, the Delta variant continues to spread, and vaccine rates in much of the developed world have stalled. Global supply chain disruptions are impacting commerce, and many of the products we all use every day have been impacted. At Steppen, our team continues to navigate through the turbulent environment to help our customers serve the market. Adjusted third quarter net income was $36,400,000, flat with prior year. The negative impact of the global supply chain disruptions and inflationary pressures was offset by one-time tax benefits. Year to date, adjusted net income was $121 million, or $5.20 per diluted share. Both adjusted net income and adjusted earnings per share were up 22% versus the first nine months of 2020. Surfactants was also negatively impacted by lower consumer demand for cleaning, disinfection, and personal wash products, which have dropped since the pandemic peak in 2020. In the third quarter, each of our company's three global business segments was negatively affected by raw material price inflation and significant supply chain disruptions, including raw material shortages and logistics constraints. Surfactant operating income was down 16%, largely due to higher North American supply chain costs driven by inflation, higher planned maintenance costs, and the $2.2 million insurance recovery related to the Millsdale plant in 2020. Our polymer operating income was down 12%, mostly due to the non-reoccurrence of the insurance recovery and the compensation received from the Chinese government in the third quarter of 2020. Global polymer sales volume rose 27% and was largely driven by the Invista acquisition. Our specialty product business rose by 53% and was mainly due to order timing differences within our food and flavor business. Our board of directors declared a quarterly cash dividend on Steppen's common stock of 33 and a half cents per share payable on December 15th, 2021. With this 9.8% increase, Steppen has now increased and paid its dividend for 54 consecutive years. The board authorized the company to repurchase up to $150 million of its common stock further demonstrating our commitment to deliver stockholder value through disciplined capital allocation. Our strong balance sheet and cash generation will allow us to invest in our current business and pursue strategic opportunities while we return capital to our stockholders. Luis will now share some details about our third quarter and year-to-date results.