Stepan Eyes Margin Recovery as Catalyst Targets $100M in Savings

Stepan is showing early margin recovery: Second-quarter EBITDA rose 45% year over year, while organic volume increased 6% across geographies and priority segments. Project Catalyst targets $100 million in savings over 2026–2027 through plant closures, footprint optimization, operational efficiencies and workforce reductions; $18 million–$20 million of the expected $25 million quarterly run-rate benefit was realized in the second quarter. The company is prioritizing higher-margin growth areas such as crop productivity, oilfield chemicals and insulation, while also reducing leverage from roughly 3 times to about 2.5 times and targeting positive cash generation for the year.

Stepan NYSE: SCL is in the early stages of a margin recovery, supported by growth in higher-margin product areas, cost reductions and broader-based volume gains, Chief Financial Officer Ruben Velasquez said during a company presentation. Velasquez said second-quarter EBITDA increased 45% year over year, while organic volume rose 6%. He described the volume performance as broad-based across geographies and most of the company’s priority growth segments rather than the result of activity from a single customer.

Velasquez said Stepan’s strategy centers on customer-focused innovation, diversification into faster-growing and higher-margin applications, operational excellence and disciplined capital allocation. The company is seeking to expand in what it calls priority segments, including crop productivity, oilfield solutions, rigid polyols used in insulation panels, and smaller tier 2 and tier 3 customers that require more tailored technical support. Velasquez said roughly 75% of Stepan’s EBITDA now comes from these priority segments. While legacy consumer customers remain important to plant utilization and sales volumes, the company is aiming for a more balanced customer mix. Velasquez said the company does not plan to divest lower-margin legacy consumer business, citing longstanding relationships with large consumer-product companies and continued innovation opportunities with those customers. Stepan employs about 230 scientists globally and operates 14 application centers, Velasquez said. The company launched 41 products last year, and new products account for roughly 10% of annual sales.

Priority segments, including oil and gas, posted high-single-digit growth in the second quarter, Velasquez said. He attributed demand in oilfield chemicals partly to producers’ interest in extracting more oil from existing reservoirs, particularly when oil prices are elevated. Stepan’s surfactants can be used in secondary recovery applications, where chemicals are used with water or gas to help oil flow from reservoirs. Velasquez said the company is also working with smaller oil companies to develop surfactant formulations suited to specific fields. That development work can take several months, but he said resulting business tends to be more durable once a formulation is adopted. In Polymers, Stepan is a market leader in polyiso insulation products for industrial buildings, while its rigid and spray-foam activities are growing from a smaller base. Velasquez said the rigid and spray-foam business, which serves residential applications, grew ...