Stepan Company

Good morning and welcome to the Stepman Company First Quarter 2025 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. As a reminder, this call is being recorded on Tuesday, April 29, 2025. It is now my pleasure to turn the call over to Mr. Sam Henrickson, Vice President and Interim Chief Financial Officer of Stepman Company. Mr. Henrickson, please go ahead.

Good morning and thank you for joining Stepman Company's First Quarter 2025 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 to prospects for our foreign operations, global and regional economic conditions, and factors detailed in our securities and exchange commission filings. In addition, this conference call would include discussions of adjusted net income, adjusted EBITDA and free cash flow, which are non-GAP measures. We provide reconciliations to the comparable GAP measures in the earnings presentation and press release, which we have made available at .stepman.com under the investors section of our website. Whether you are joining us online or over the phone, we encourage you to review the investors' slide presentation. We make these slides available at approximately the same time as when the earnings release is issued, and we hope that you find the information and prospectus helpful. With that, I would like to turn the call over to Mr. Luis Rojo, our President and Chief Executive Officer.

Thank you, Sam. Good morning. Thank you all for joining us today to discuss our first quarter 2025 results. I plan to share highlights of the quarterly performance, and we will also share updates on our key strategic priorities, while Sam will provide additional details on our financial results. We are pleased with the start of 2025, and I am proud of our team that is committed to further improving earnings going forward. The company reported first quarter adjusted EBITDA of $57.5 million, up 12% versus the prior year. Surfactant and specialty products delivered double-digit adjusted EBITDA growth, 12 polymers adjusted EBITDA decreased slightly -over-year. Volume grew 4%, and the growth was broad-based with surfactants up 3%, polymers up 7%, and our MCT product line up 4%. We continue to experience double-digit volume growth within the agricultural and oil field and markets, and with our distribution partners in surfactants. North America and the European rigid-polyur volume grew single digits, while the specialty polyurls and commodity PA businesses deliver strong growth -over-year. We believe that rigid-polyur growth continues to be restrained by global macroeconomic uncertainties and the high interest rate environment. We are encouraged by the broad-based volume growth across several of our key strategic end markets. We finished the first quarter of 2025 with $19.3 million of adjusted net income, up 32% versus the prior year, driven by earnings growth in surfactants and SRT products and a lower tax rate. We executed the safe start-up of our new Pasadena, Texas site, which is now operational. During the first quarter of 2025, the company paid $8.7 million in dividends to shareholders. Our board of directors declared a quarterly cash dividend on Stepan stock, common stock of .38.5 per share, payable on June 13, 2025. Stepan has paid an increase dividend for 57 consecutive years. Sam will now share some details about our first quarter results.

Thank you, Luis. My comments will generally follow the slide presentation. Let's start with slide four to recap the quarter. First quarter 2025 adjusted net income was $19.3 million or 84 cents per diluted share versus $14.7 million or 64 cents per diluted share for the first quarter of last year, a 32% increase. The increase was driven by broad-based volume growth, higher margins in surfactants, and a lower tax rate. Adjusted EBITDA for the quarter was $57.5 million, up 12% -over-year, driven by volume growth and improved surfactant product and customer mix, which was partially offset by higher pre-operating expenses at our Pasadena, Texas site. Cash from operations was $6.9 million for the quarter, and pre-cash flow was negative at $25.8 million. Slide five shows the total company net income bridge for the first quarter of 2025 compared to last year's first quarter and breaks down the increase in adjusted net income. Because this is net income, the figures noted on an after-tax basis. We will cover each second more detail, but to summarize, we delivered operating income growth in surfactants and specialty products, partially offset by lower operating results in polymers. The first quarter results benefited from a lower effective tax rate. The effective tax rate was 20% versus our normal range of 24 to 26%. This decrease was primarily attributable to favorable discrete items associated with the tax audit settlement in the U.S. Slide six shows the total company adjusted EBITDA bridge for the first quarter compared to last year's first quarter. Adjusted EBITDA was $57.5 million versus $51.2 million in the prior year, a 12% increase. We will cover each segment in more detail, but to summarize, we delivered adjusted EBITDA growth in surfactants and specialty products, partially offset by global polymers. Adjusted EBITDA results also benefited from lower corporate expenses compared to prior year. Slide seven focuses on the surfactant segment results. Surfactant net sales were $430.3 million for the quarter, a 10% increase versus the prior year. Selling prices were up 12%, primarily due to the improved product and customer mix and the pass-through of higher raw material costs. Sales volume grew 3% the over year, mainly due to double-digit growth within the agricultural and oilfield end markets along with our distribution partners. This growth was partially offset by lower demand within the commodity consumer product end markets. Foreign currency translation negatively impacted net sales by 5%. Surfactant adjusted EBITDA increased $4.5 million or 10% versus the prior year. This increase was primarily driven by the 3% growth in sales volume and improved product and customer mix, which was partially offset by pre-operating expenses at our Pasadena, Texas site. Now on slide eight, polymer net sales were $146.1 million for the quarter, that versus the prior year. Selling prices decreased 7%, primarily due to the pass-through of lower raw material costs and competitive pressures. Sales volume increased 7% in the quarter. North American and European rigid polyol volume grew low single digits despite the continued challenging overall environment. Especially polyols and commodity, metallic, and hydride volume delivered strong growth year over year. China polymer's volume was up low single digits. Foreign currency translation had a nominal impact on net sales during the quarter. Polymer adjusted EBITDA decreased $0.3 million or 2% versus the prior year, primarily due to less favorable product mix and a high cost inventory carryover, which was partially offset by the 7% volume growth. Finally, specialty product net sales were $16.8 million for the quarter, an 11% increase versus the prior year, primarily due to higher selling prices. Specialty product adjusted EBITDA increased $1.2 million or 21%. The increase in adjusted EBITDA was primarily due to margin recovery and volume growth within the medium-chain triglycerides product line. Next on slide nine, free cash flow was negative at $25.8 million for the first quarter, down $37.2 million year over year, reflecting typically higher working capital requirements during the first quarter, as well as increased purchases of raw materials in anticipation of tariffs and to support business growth. We are cautiously optimistic in our ability to deliver positive free cash flow for the full year 2025. During the first quarter, we deployed $32.7 million against capital investments and $8.7 million for dividends. Now on slide 10 and 11, Louise will update you on our strategic priorities.

Thanks, Dan. I will focus my comment on our strategic priorities. Our customer will always remain at the center of our strategy and innovation efforts. Our tier one customer base remains a solid foundation of our business. Continue our new customer acquisition with tier two and tier three customer remains a key priority. This is an important and profitable growth channel within our surfactant business. For the first quarter of 2025, our volume grew mid-single digits year over year, and we added over 400 new customers. Our end market diversification strategy remains a key focus area. For the first quarter, we grew double digits in our agricultural and oil field businesses. We are pleased to see our North America and European gridded polio business return to year over year growth after a challenging 2023 and 2024. Insulation remains a critical enabler of a more sustainable and energy efficient world, and we are confident in the long-term growth prospect of this business. Our focus continues to be on developing the next generation rigid polio technologies that can increase the energy efficiency and cost performance of our customer insulation products. Additionally, we are excited about the new products we are introducing in the growing spray from end market. Within polymers, we were able to achieve a strong growth in our specialty polio and our commodity P.A. business. This will enable us to deliver earnings growth in 2025. Our supply chain operation and resiliency continues to improve, and we deliver a solid quarter in all our key operational metrics. We are continuing to make the necessary investments in our meals outside to ensure reliable operations both today and in the future. Moving to slide 11, we safely start up our new Pasadena, Texas site. We have made six different products today. We expect to achieve the full contribution rate of the plan during the second half of 2025. Our commercial teams continue to develop and deliver new specialty accoutolation opportunities. Specialty accoutolation volume grew a strong double digits in the first quarter. To conclude, we remain focused on accelerating our business strategy through improved executions to grow volume, improved product and customer mix, and accelerate free cash flow generation. We believe that surfactants will experience continued growth in our key strategic markets, and that polymer demand will continue improving as we get more market certainty and we execute our innovation and growth plans. In addition, our Pasadena facility is now operational, and as Privilus communicated, we believe this will enable us to deliver volume growth and supply chain savings during the second half of the year. Despite all the current market uncertainties, including the impact of tariffs, we remain cautiously optimistic that we will deliver full year adjusted EBITDA and adjusted net income growth and positive free cash flow in 2025. This concludes our prepared remarks. At this point, we would like to turn the call over for questions. Stephen, please review the instruction for the today's call.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 101 on your telephone and wait for your name to be announced. To withdraw your question, please press star 101 again. Please stand by while we compile the Q&A roster. The first question comes from the line of Mike Harrison of Seaport Research Partners. Your line is now open.

Hi, good morning. Good morning, Mike. Morning. Congratulations on the Pasadena Alka Oscillation startup. I was hoping that maybe you could answer a few questions about that facility and kind of the timing of how we should think about the contribution there. First of all, you said it, I believe you said it was producing six products. Is that kind of the limit or are there still some products that you're bringing online? And can you talk at all about how we should think about the utilization and customer qualification ramp up process? Is that something that gets wrapped up in the next few months or is that something that's continuing kind of through the end of the

year? Great question, Mike. We are very excited with the news and with Pasadena starting up. Only six products. We have shared in the past that we're planning to produce more than 60 products in Pasadena. So we are in the process of qualifying one by one. And this is going to take a few months. So that's why we're saying the full contribution starting more in the second half of the year and of course, the full, full contribution from the plant in 2026. And as we have talked in the past, we expect to fill up the plant pretty quick in a few quarters, right? Because we have a lot of the volumes already. But of course, we want to continue growing. And if we can keep some of that volume in the site for growth that is coming and keeping the other supply chain options that we have available, that will be even better for us. But we will see how the next few quarters develop. But as I said in my prepared remarks, especially at Cox's, we are growing strong double digits. And to give you the exact number, it's 19% growth in Q1. So very, very strong growth. So it's early days. And we still spend $4 million in Q1 in pre-operating expenses in Pasadena. That's why if you exclude that, we are above the $60 million EBITDA. But that's something of course that we will mitigate with the supply chain savings going forward in future quarters.

I appreciate that color. That's helpful. So in terms of how we should think about the earnings contribution, at least directionally, it sounds like maybe in Q1, it was maybe $3 or $4 million to the negative in operating income or EBITDA. And then should we assume that Q2 is still negative but better than that? And then it's Q3 and Q4 when we start to see the positive earnings contribution ramp up?

Yeah, I think you are thinking that directionally the right way. I think Q2 is still, again, we are just starting out. So we are still investing. And you are not going to see the help in Q2. But for sure, you are not going to see such a negative like in Q1.

Perfect. So moving on to a couple other questions that I had, one of them, Mr. Factance, you mentioned the weakness in the commodity consumer products portions of the business. And I'm just curious, how much of that decline is intentional shifting of business into higher margin and non-commodity product lines and kind of higher value applications? Or can you just help us understand what else is contributing to the decline in volumes in that commodity consumer piece?

No, yeah. Luke, I mean, we are not intentionally moving a volume from consumer products to other applications. But of course, I mean, we will always optimize our assets in the future if we have to. We have really a sluggish demand from several of our consumer product customers. And if you see, if you read the report from others, volumes are not growing. So that's a challenging situation with inflation, with everything that the consumer is experiencing. We are not seeing material volume growth in this segment as we expect.

All right. And then the last one for me is on the polymers business. You mentioned that that high cost inventory that's still flowing through the P&L was a drag on margin. Are most of those higher cost goods out of inventory right now? Or is there still more that needs to flow through? And I guess my other question on polymers is, when might we expect to see pricing stabilize? I believe it was still a negative 7% year over year in the first quarter.

Great question, Mike. And that's the main issue in polymers in Q1 was a higher inventory cost that we were carrying on. And we're getting out of that. We're getting out of that already in Q2. So margin should improve.

And pricing stabilizing?

Yeah. I think, again, when you think about pricing and raw materials, we should see improvement.

All right. Thanks very much.

Thank you. Our next question comes from the line of Dave Storms of Stonegate. Your line is now open.

Good morning. Good morning, Dave. Maybe more on that. How can we start with the May we're seeing in down channel inventory levels? The volume increase they saw this quarter, was there any sense that this is from maybe a pull forward in inventory levels as customers are trying to get ahead of some of the macro uncertainties?

Great question, Dave. Look, we had a good quarter in Q1 in volumes. I mean, when you think of 3% in surfactants, 7% in polymers, 4% in MCT, we're very pleased. And we don't believe there is any overstocking in Q1 with the volumes that we shipped. And actually, we have talked a lot about our customers, especially on the polymer side, to see if there is any, you know, potential inventory build up. And we are not getting that perspective as of now. I will complement your question with we also are seeing the same dynamics in April, right? I mean, very, I mean, similar dynamics in the surfactant business, very strong, very good oilfield, good distribution. So same dynamics in surfactants. And actually, we're seeing an acceleration of growth in the polymers business. And we need to see how that plays out in May, June, and Q3. And if there is any pre-building inventory because of tariffs or price increase concerns or something like that. But yeah, April is coming stronger on the polymer side. And that's a piece that we need to evaluate in the next few months.

Understood. Very helpful. Thank you. And then you mentioned a couple times just the improved customer maximum. Suma is referring to, you know, serving more tier two and three customers. Are you able to give us a sense of, you know, maybe of those tier two and three customers, which are more spot buyers, and maybe which maybe are a little stickier, you know, using some of the additional services that you can provide for the tier two and three customers?

Sure. The mix is coming from both. It's coming from tier two, tier three, and it's also coming from the end market diversification. So ag is growing very, very strong. Oilfield is growing very nicely. So all of those are positive mix in our surfactant business. And actually, when you think about it, you can see the public data. All your chemicals went up significantly in Q1. So actually, that was a drag in our margins in surfactants because all your chemicals went up and you always have a gap between raw material price increases and then how much you can pass through and how fast you can pass through some of that increases. So there is always a lag. So we are very pleased with the results in surfactants driven by the customer and the product mix.

I'm just so thankful for taking more questions. I'll get back in Q.

Thank

you.

Our next question. One moment, please. Our next question comes from the line of David Silver, CL King & Associates. Your line is now open.

Yeah. Hi. Good morning. Thank you.

Good morning, David.

Yeah. Good morning. A couple of questions. Maybe a follow-up on kind of your double digit sales growth in agricultural and oilfield surfactants. And this would just go back to maybe the question about potential, I don't know, pipeline filling or overstocking. But you did note double digit growth. And firstly, I just was trying to confirm that the bulk of the demand growth was on the agricultural side as opposed to oilfield. And then secondly, I guess in the past couple of years, there was a big run-up in volumes on the agricultural surfactant side and then there was a period of time to, I guess, for inventories to normalize. So, you know, I'm just thinking in the current environment, it is the run-up to the spring planting season. There are some tariff issues. I mean, just on the agricultural side, what is your thoughts, your best thoughts about the level of any pre-buying or pipeline filling that may not be sustainable, I guess, as the balance of the year goes on? Thank you.

David, you are 100% right that the majority of the growth is driven by our ag business instead of oilfield. I mean, oilfield is a strong growth, but ag was significantly higher. And of course, we have a bigger business in ag than in oilfield. We keep talking with our customers and we don't believe there is plenty of ag inventory increases. And if you think about where people are with interest rates, nobody's willing to put a lot of inventory and tie a lot of cash like what happened in 2022, where it was totally a different environment where with supply chain issues across the board. So everybody wanted to have the material and interest rates were not where they are today. So all the data that we have from our customer is there is no significant inventory built up anywhere that we know. And we continue seeing good orders for April and actually already a good book order for May on the ag bill.

Okay, very good. Thank you for that. I did have a question, follow up maybe on your comments on the polymer side this quarter. So I think you did speak to some of the inventory issues that may have impacted your margins. But I was hoping not sure if you commented on this, but in the slide deck, you did cite a less favorable product mix. And I'm just wondering if you could comment on that. Is that, you know, particular end markets? Is that a particular region, just the less favorable product mix that may be impacted your margin performance this quarter? And what is the outlook you know, for that, for the balance of the year? Thank you.

Yeah, good point, David. The issues are following. We were very clear. We grew, you know, single digits. Our rigid folio business, right in North America and Europe combined, low single digits. We grew very strong double digits in our phallic and hydride, our PA business. And of course, phallic and hydride is a commodity. It has lower margins. And we are capturing a lot of new business and new shares in that end market because of other competitive dynamics. So that is what is driving the mix impact in the polymers business. That will continue because we continue growing in our PA business. But of course, I mean, we need the issue in Q1 was the high inventory cost that we had across the polymers business that really drag the margins. And that's why we have, you know, basically flattish EBITDA with volumes of 7%. That was the main drag.

Okay, great. Thanks for that. Next question would probably be a two-parter, but the topic would be, you know, tariff impacts as you see them currently. And, you know, I do think, you know, you're largely a local for local kind of structure right now, certainly in the US and Europe, maybe. But I am wondering about if you could comment on how the tariff situation as it currently stands, which I recognize is uncertain. But are there any kind of pressure points maybe from your, in your Mexican production base in particular? Is any, is all that product covered by the US MCA agreement? Or might some of it be sold into the US and be subject to some of the, you know, tariffs that have recently been announced? But, you know, and admittedly unsettled, but where would you kind of characterize your greatest sensitivity, you know, direct impact from, you know, potential tariff policies?

Sure. Of course, the question of the week and the month, right? And, Luke, as you said, David, things are changing every day. This is a very volatile and uncertain dynamic that we all have to navigate through right now. As you clearly said, the majority of our business is sourced, produced, and sold within the region, right? So the majority of our volumes are in each of the regions that we compete. And so, but of course, there are still impacts on the tariff because we import raw materials and there's going to be always some impacts that we are working right now to mitigate through changes on our sourcing strategy where possible and where it makes sense, and also pricing. We all know tariffs are inflationary. Many, I believe many customers and many competitors will price for tariffs, and we're working on that right now because our objective will be to recover any impact. When you think about Mexico and Canada, our products are included in the US NCA, so we're good. We're good with Mexico and Canada, but we still have other things that we need to recover via pricing and via supply chain changes.

Okay, and then last one from me, maybe a question about the indirect effects that you've seen thus far from the tariff announcements or potential import tariff implementation. But this would have to do maybe with your R&D or your product development efforts where you're collaborating with customers and their tariff exposures may be a little bit different than your companies. But have you noted or can you speak to any pausing or any changes in the collaborative relationships, let's say on new product developments that might be commercialized over the next year or two as a result of the tariffs? In other words, has anything changed with your R&D or technical collaborations with customers, let's say since the beginning of the year or since April 2nd with the tariff announcement? So kind of indirect effects on your customers from tariff issues that might be impacting your collaborative work with them. That would be my question. Thank you.

Well, Luke, we will continue our collaboratively work with our customers. We have a customer intimacy strategy and our innovation, I call it customer centric innovation because again, we are co-developing things with them. We want to make sure that we're working on projects that they need, they want, and they aspire to launch. It's working with their objectives and their plans. So I wouldn't say we have seen a significant change in the last few days with the tariff announcement, but we will stay diligent and we will continue working with our customers to make sure that we are providing the service and we're helping them in all their formulation challenges and where things need to be changed based on the tariff situation.

Okay, so no reduction in their willingness to work with Steppen, I guess, is what you're saying.

I'm saying we will continue working with our customers in all their innovation challenges and changes that they need to execute. I'm sure more requests are going to come in the future when this tariff situation also settles. I think people are also hesitant to make a lot of changes when the news are changing every day.

Right. Okay, great. Thanks very much. I appreciate all the color.

Thank you, David. Our next question comes from the line of Dimitri Silverstein of Water Tower Research. Your line is now open. Thank

you very much. Thank you, gentlemen, for taking my call and congratulations on the strong start to the year. A couple of questions there are related, I think. So let's start with your raw material situation here. You've seen an increase in pricing on raw material pass through in your surfactants business and a decline in your raw materials. What does the pricing environment look like in these businesses?

Look, as I mentioned before, in surfactants we saw important increases in all your chemicals and that was the driver of pricing actions at the end of the quarter and actually early into April to recover some of that. And in polymers, again, we made some decisions in Q1 and we still have the raw material that we had on our inventory. So we know we have to flow through that for a few months, for a couple of months. But I don't, I think we are in a good environment in terms of pricing and margins. I think it's a healthy situation and we will need to continue working with how tariffs or any other development on the raw material piece can impact us in the following months because again, tariffs are going to have direct and are going to have indirect impacts. So that's what we need to stay vigilant and we need to monitor the situation and take pricing where it's needed.

Okay, I understand that. I guess my question had more to do with the raw material cycle. Where are we or where you are in the raw material cycle? In other words, have raw materials stopped increasing, for example, in surfactants and you're just catching up with the pass-throughs? Have they stopped declining or continued to decline in polymers? So we can expect to see some more pricing pressure there?

Yeah, they have stabilized but again, tariffs are coming so things will keep changing in the next, in the next few months. So things have stabilized versus what we saw at the beginning of Q1 but now we will have a new development in the next few months that we need to monitor.

Understood and just to come back to the tariffs really briefly, you talked about direct and indirect impact, right? So the direct impact is would be if you have some raw material, cost increases and then indirect impact would be if your end products or your customers end products are being impacted in terms of demand by reciprocal tariffs going back and forth. So is there one area that you're more concerned or have a better visibility than another or are you monitoring both and you expect both of them to be somewhat impactful depending on how situation actually comes out?

Yeah, no, look, we need to monitor the indirect piece and we don't have enough data yet because things have not been executed to the full extent. But yeah, I mean, if there is a huge wave of inflation, you could argue that could have some you know, a demand impact in construction industry, the consumer, right? Also the fact that so that's what we need to monitor in the next few months. We haven't seen anything and as I said before, we have a strong April and so but this will take a few more months to go through the whole the whole chain all the way to the consumer, all the way to the construction industry for our polymers business and we will provide more updates in July.

Understood. Then final question, Justin, sort of base level demand. We've seen, you know, you've seen strong demand in oil field chemicals and in consumer. You also mentioned that your insulation products are growing well in North America and Europe and you're rolling out your spray foam products. Construction seems to be, I don't want to say starting to grow, but at least a little bit more uniform indications that the market is stabilizing certainly here in North America and maybe beginning to turn the corner. How do you feel about the construction side of your business and what do you expect to see in 2025?

Well, the comments that we made was we had, you know, single-digit growth in our region, polio business in North America and Europe and that we believe there is a staff that is still, you know, constrained demand because of the uncertainties in the market because of the high interest rate environment. So we believe that there is a lot of pent-up demand in this industry and this end market and we haven't seen the full potential of it and hopefully with more certainty and lower interest rates in the future, that's where we will see this business growing faster like it did in the last, you know, if you think of the last 10 to 20 years, this business grew high single-digit, the markets grew high single-digit and we are not seeing the markets growing high single-digit now. So that will take some time to go back to those levels.

Okay, but it is improving personally, excuse me. The demand level you're seeing in the first quarter, is it better than what you saw in 2024 and 2023?

Yeah, yeah, we grew 7% volumes in volumes and we grew single-digit and rigid volumes.

Okay, okay, but okay, so the business is growing but there's still more growth to come, assuming the interest rate environment and the economic environment improves. Understood, thank you.

Thank you, Dmitri. Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. We will welcome back Mike Harrison for our next question from Seaport Research Partners. Your line is now open.

Hi, just a couple more for me. I know you've addressed a lot of questions on tariffs. My question relates to imports of competitor products. I believe in the past, you guys, maybe particularly in the rigid polyol side, you've talked about some competition from imports in the US. And I believe this has also come up in the context of the medium chain of tariffs, the preglacoride business within your specialty business. So are you, based on what you're seeing with the tariffs right now, are you expecting that maybe some import competition could decline because of the impact of tariffs in any of your three segments?

Great question, Mike. And not in polymers. The polymers business is heavily sourced, also in competition within the region. But you are 100% right that our MCP business has imported competition and we are evaluating options. And to some degree, the surfactant business as well. I mean, we always see some levels of surfactant imports from China, especially in the West Coast. These are not significant volumes, but there is always some imported products in the surfactant business that for sure we will evaluate and try to grow our business and grow our shares.

All right, very helpful. And then last question for me is on the distribution piece of the surfactant business and the growth that you're seeing there. Is that just underlying market growth? Are you seeing some broader shifts away from a direct to customer and more volume just naturally moving through distributors? Or is this part of a more concerted effort on your part to expand distribution relationships or partnerships? And if that is the case, is that a North America thing? Is it a global thing? What color could you provide on that? Thank you.

Look, we are continuing working on our tier two, tier three strategy globally. I wouldn't say this is a North America only focus. I mean, it's a focus area for all our regions in our surfactant business. But of course, North America continues to be the biggest region. And what I would say is that you have both, you have market growth and you have our ongoing efforts to capture share, to capture more customers. I mentioned that we acquire more than 400 new customers in this space. So it's part of our core strategy as we continue developing this business and continues to pay out.

All right. Thanks very much. Thank you,

Mike. Thank you. I am showing no further questions at this time. I would now like to turn it back to Sam Hendrickson for closing remarks.

Thank you very much for joining us today's call. We appreciate your interest and ownership in Stepan Company. Have a great day.

Thank you for your participation in today's conference. This does conclude the program. You

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