Stepan Q4 2024 Earnings Report

Stepan EPS Results

• Actual EPS: $0.12
• Consensus EPS: $0.45
• Beat/Miss: Missed by -$0.33
• One Year Ago EPS: $0.33

Stepan Revenue Results

• Actual Revenue: $525.60 million
• Expected Revenue: $520.97 million
• Beat/Miss: Beat by +$4.63 million
• YoY Revenue Growth: -1.20%

Stepan Announcement Details

• Quarter: Q4 2024
• Date: 2/19/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, February 19, 2025
• Conference Call Time: 9:00AM ET

Stepan (NYSE:SCL) Company, together with its subsidiaries, produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products worldwide. It operates through three segments: Surfactants, Polymers, and Specialty Products. The Surfactants segment offers surfactants that are used in consumer and industrial cleaning and disinfection products, including detergents for washing clothes, dishes, carpets, and floors and walls, as well as shampoos and body washes; and other applications, such as fabric softeners, germicidal quaternary compounds, disinfectants, and lubricating ingredients. Its surfactants are also used in various applications, including emulsifiers for spreading agricultural products; and industrial applications comprising latex systems, plastics, and composites. The Polymers segment provides polyurethane polyols that are used in the manufacture of rigid foam for thermal insulation in the construction industry, as well as a base raw material for coatings, adhesives, sealants, and elastomers (CASE); polyester resins, including liquid and powdered products, which are used in CASE applications; and phthalic anhydride that is used in unsaturated polyester resins, alkyd resins, and plasticizers for applications in construction materials, as well as components of automotive, boating, and other consumer products. The Specialty Products segment offers flavors, emulsifiers, and solubilizers for use in food, flavoring, nutritional supplement, and pharmaceutical applications. Stepan Company was founded in 1932 and is headquartered in Northbrook, Illinois.

Stepan Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good morning, and welcome to the Stepan Company Fourth Quarter twenty twenty four Earnings Conference Call. As a reminder, this call is being recorded on Wednesday, 02/19/2025. It is now my pleasure to turn the call over to Mr. Sam Henriksen, Vice President and Interim Chief Financial Officer of STEPN Company. Mr.

[Operator]

Henriksen, please go ahead.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

Good morning, and thank you for joining Stepan Company's fourth quarter and full year twenty twenty four 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 will include discussions of adjusted net income, adjusted EBITDA and free cash flow, which are non GAAP measures. We provide reconciliations to the comparable GAAP measures in the earnings presentation and press release, which we have made available at www.stephen.com under the Investors section of our website.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

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 perspectives helpful. With that, I would like to turn the call over to Mr. Luis Rojo, our President and Chief Executive Officer.

[Luis Rojo, President & CEO at Stepan Company]

Thank you, Sam. Good morning and thank you all for joining us today to discuss our fourth quarter and full year 2024 results. I plan to share highlights of the full year performance and will also share updates on our key strategic priorities, while Sam will provide additional details on our financial results. The company reported fourth quarter adjusted EBITDA of $35,000,000 down 7% versus the prior year and full year adjusted EBITDA of $187,000,000 While we are disappointed with our overall financial performance in 2024, we advanced our strategic investments and took the necessary steps to return the company to profitable growth. I'm proud of the resiliency and work and dedication on the entire organization.

[Luis Rojo, President & CEO at Stepan Company]

Full year adjusted EBITDA grew 4% versus prior year despite several one time events that negatively impacted earnings and the pre operating expenses and our new Pasadena site. Surfactant and Specialty Products delivered a strong double digit adjusted EBITDA growth, partially offset by softer demand in polymers. Global volumes grew 1%, driven by 2.5% growth in Surfactant business. We are encouraged by the Surfactant growth across several of our key strategic end markets. We finished the year with $50,500,000 of adjusted net income, which was flat versus the prior year.

[Luis Rojo, President & CEO at Stepan Company]

A strong earnings growth in surfactant and specialty products was fully offset by polymers. Free cash flow for the year was positive at $39,000,000 and in line with our expectations and our operating plan. The company delivered $48,000,000 in pretax cost out during 2024, mainly through disciplined efforts in supply chain and workforce productivity actions taken in the last quarter of twenty twenty three. During the fourth quarter of twenty twenty four, the company paid $8,700,000 in dividends to shareholders. Our Board of Directors declared a quarterly cash dividend on Stepan common stock of $0.385 per share payable on 03/14/2025.

[Luis Rojo, President & CEO at Stepan Company]

Stepan has paid an increases dividend for fifty seven consecutive years. Sam will now share some details about our fourth quarter and twenty twenty four results.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

Thank you, Luis. My comments will generally follow the slide presentation. Let's start with Slide five to recap the quarter. Fourth quarter twenty twenty four adjusted net income was $2,800,000

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

0 point

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

1 2 dollars per diluted share versus $7,500,000 or $0.33 per diluted share for the fourth quarter of last year. The 63% decrease mainly due to $4,400,000 of higher pre operating expenses, our new reconciliation investment in Pasadena taxes and $2,900,000 related to a one time tax proceeding reserve in Latin America. The previously announced CEO transition also impacted quarterly results by $2,800,000 Adjusted EBITDA for the quarter was $35,000,000 down 7% year over year. Global sales volume was down 1% versus prior year as double digit growth in several surfactant end markets was fully offset by softer demand in rigid polymers. Cash from operations was $68,000,000 for the quarter and free cash flow was $32,000,000 In the fourth quarter, the company recognized $13,000,000 in pretax savings out of the $48,000,000 for the full year of 2024.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

Slide six shows the total company net income bridge for the fourth quarter compared to last year's fourth quarter and breaks down the decrease in adjusted net income. Because this is net income, the figures noted are on an after tax basis. We will cover each segment in more detail, but to summarize, we delivered operating income growth in Surfactants and Specialty Products, fully offset by lower operating results in Polymers. Corporate expenses increased primarily due to the higher expenses associated with the previously announced CO transition in the fourth quarter of twenty twenty four. Slide seven shows the total company adjusted EBITDA bridge for the fourth quarter compared to last year's fourth quarter.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

Adjusted EBITDA was $35,000,000 versus $38,000,000 in the previous year, a 7% decrease year over year. We will cover each segment in more detail, but to summarize, we delivered adjusted EBITDA growth in Surfactants and Specialty Products, fully offset by Global Polymers. Lower corporate expenses reflect savings related to productivity efforts implemented at the end of twenty twenty three. Slide eight focuses on the Surfactant segment results. Surfactant net sales were $379,000,000 for the quarter, a 3% increase versus the prior year.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

Selling prices were up five percent, primarily due to improved product and customer mix. Sales volume was up 1% year over year, driven by 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 consumer products end markets. Foreign currency translation negatively impacted net sales by 3%. Refactant adjusted EBITDA increased $3,000,000 or 10% versus the prior year.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

This increase was primarily driven by higher sales volume, favorable product and customer mix and margin recovery. Higher pre operating expenses at the company's new Acoxtilation facility being built in Pasadena, Texas and the tax proceeding reserve in Latin America partially offset these drivers. Now on Slide nine, Polymer net sales were $130,000,000 for the quarter, a 12% decrease versus the prior year. Selling prices decreased 4%, primarily due to the pass through of lower raw material costs and competitive pressures. Sales volume declined 9% in the quarter, primarily due to an 11% decrease in global rigid polyols volume due to sluggish demand and competitive pressure.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

We believe the sluggish demand is related to continued global macroeconomic uncertainties, overall lower construction activity and a higher interest rate environment. Specialty polyols volume was up year over year. Foreign currency translation positively impacted net sales by 1%. Polymer adjusted EBITDA decreased $9,000,000 or 44% versus the prior year, primarily due to the 9% decline in sales volume. Finally, specialty product net sales were $17,000,000 for the quarter, a 10% increase versus the prior year, primarily due to higher sales volume and higher selling prices.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

Sales volume was up 32% versus the prior year and adjusted EBITDA increased 65. The increase in adjusted EBITDA was primarily due to margin recovery and volume growth within the medium chain triglycerides product line. Turning to Slide 10, which shows the total company adjusted EBITDA bridge for full year 2024 compared to full year 2023. Adjusted EBITDA was $187,000,000 versus $180,000,000 in the prior year, a 4% increase year over year despite one time extra costs and higher pre operating expenses associated with our mills to Pasadena site. We delivered adjusted EBITDA growth in surfactants and specialty products, partially offset by lower polymers performance.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

Polymer results decreased primarily driven by lower global rigid polyol demand and competitive pressures. Corporate expenses were higher mainly due to the Asia fraud event and the CEO transition. Excluding these events, profit expenses were down year over year with the workforce productivity efforts implemented at the end of twenty twenty three. Overall, the company delivered $48,000,000 in cost savings despite the flood event that Mills sailed during the first half of twenty twenty four and the Asia fraud event. Next, on Slide 11, free cash flow was positive at $39,000,000 for the year, up $125,000,000 year over year as capital investments returned to normalized levels and working capital decreased.

[Samuel Hinrichsen, VP & Interim CFO at Stepan Company]

During the year, we deployed $123,000,000 against capital investments and $34,000,000 for dividends. Now on Slide twelve and thirteen, Luis will update you on our strategic priorities and capital investments.

[Luis Rojo, President & CEO at Stepan Company]

Thanks, Sam. I will focus my comment on our strategic priorities. Our customer will always remain at the center of our strategy and innovation efforts. Our longest standing Tier one customers value our technical capabilities and our ability to manufacture and deliver quality products at the scale they need. Our Tier one customer space remains a solid foundation of our business.

[Luis Rojo, President & CEO at Stepan Company]

Continue our new customer acquisition with Tier two and three tier customers remains a key priority. This is an important and profitable growth channel within our Surfactant business. For the full year of 2024, our volume grew high single digits and we added over 1,700 new customers. Our end market diversification strategy remains a key focus area. In 2024, we grew double digits in oilfield and in our Construction and Industrial Solutions businesses.

[Luis Rojo, President & CEO at Stepan Company]

After a difficult first half of the year, our agricultural business grew volume 30% versus prior year in the second half of twenty twenty four. Insulation remains a critical enabler of a more sustainable and energy efficient world. Our polymers business continues to focus on developing the next generation rigid polytechnologies that can increase the energy efficiency and cost performance of our customary insulation products. Additionally, we're excited about the new products we're introducing in the growing spray foam end market. Cost and operational excellence remains as a key priority area.

[Luis Rojo, President & CEO at Stepan Company]

During 2024, the company recognized $48,000,000 in pretax savings despite unfavorable one time events. These savings were partially offset by pre operating expenses on our new Pasadena site, the CEO transition and overall inflation. During 2024, the company made significant expenses and CapEx investments to improve the resiliency of our supply chain network. These investments will improve our customer service levels and reduce potential production disruptions in the future. Moving on to Slide 13, construction our new oxalation production facility in Pasadena, Texas is nearing completion and we expect the plant to start up in the first quarter of twenty twenty five.

[Luis Rojo, President & CEO at Stepan Company]

We expect the full contribution run rate of the plant to be achieved during the second half of twenty twenty five. To conclude, I'm excited and energized to continue our focus on accelerating our business strategies through improved execution to drive consistent volume growth, margin improvement and free cash flow generation. We believe adjusted EBITDA will improve in all our reporting segments. The second team is executing on opportunities to grow volume, deliver improved product and customer mix and further progress our cost out and cost avoidance initiatives. We are optimistic that Polymer's volumes will increase as we execute our innovation and growth plans.

[Luis Rojo, President & CEO at Stepan Company]

We believe our surfactant business will experience continued growth in our key strategic end markets. As previously announced, we expect our Pasadena facility will start up in the first quarter of twenty twenty five and enable us to deliver volume growth and supply chain savings during the year. We believe we are positioned well to deliver full year adjusted EBITDA and adjusted net income growth and positive free cash flow in 2025. This concludes our prepared remarks. At this time, we would like to turn the call over for questions.

[Luis Rojo, President & CEO at Stepan Company]

Gigi, please review the instructions for the questions portions of today's call.

[Operator]

Thank you. Our first question comes from the line of Dave Storms from Stonegate.

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

Good morning.

[Luis Rojo, President & CEO at Stepan Company]

Hi, Dave. Good morning.

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

Good morning, Louise and Harlan. Just kind

[Luis Rojo, President & CEO at Stepan Company]

of We cannot hear you well. Can you speak louder?

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

Is that better? Perfect.

[Luis Rojo, President & CEO at Stepan Company]

Yes, that was better.

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

Appreciate that. Okay. Just kind of wanted to start with Surfactants. Ag had a really strong quarter and you've mentioned in the past that that kind of goes the way of ag. How much more runway do you see in ag through the balance of 2025?

[Luis Rojo, President & CEO at Stepan Company]

Great question, Dave. So look, we had a very strong second half in our ag business. As I said in my prepared remarks, the ag business grew 30% in the second half, so 22% in Q3 and 37% in Q4. So we are actually seeing the acceleration of the growth in the ag business after a difficult Q first half with all the destocking that we still saw in that end market. We believe based on the low base that we have in the first half of twenty twenty four, we expect that double digit growth to continue and clearly the ag business is coming back.

[Luis Rojo, President & CEO at Stepan Company]

So we are positive that we should continue seeing the double digit growth in the first half of twenty twenty five.

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

Understood. Thank you. And then just turning to polymers, obviously a challenged quarter and year. Would you characterize the challenges in polymers as across the board? Or are there any pockets of strength or green shoots that we could look at there?

[Luis Rojo, President & CEO at Stepan Company]

So good point, Dave. If you think about our 2024 performance and while we are disappointed with the overall financial results of the company, we can do better and we're capable of doing better. You saw that in Surfactants, we still grew 15% adjusted EBITDA in the year despite all the investments that we did in Pasadena and despite all the one time events that we have. I just want to clarify that the reserve that we created in Latin America for the tax item is an above the line reserve, it's not in the tax line. So that's pre tax.

[Luis Rojo, President & CEO at Stepan Company]

So Surfactors did okay, specialty products had an outstanding year, almost you saw it almost doubling the operating income and really where we saw sluggish demand was in our polymers business with high interest rate, with a slow construction activity, with challenges in Europe. But we grew our specialty polymers business. We had a great year in China despite all the issues in China, our polymers business in China is growing nicely. So there are pockets of strength in our polymers business and we need to of course, grow the core, which is North America polymers. And we believe that we have a good plan for 2025.

[Luis Rojo, President & CEO at Stepan Company]

As I said in my prepared remarks, we're introducing in we're launching a spray foam market and we believe the market should grow overall the market should grow in 2025 with all the backlog that we have in re roofing and remodels and all of that.

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

Understood. Thanks for that color and I'll get back in queue.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Mike Harrison from Seaport Research Partners.

[Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners]

Hi, good morning. Can you hear me okay?

[Luis Rojo, President & CEO at Stepan Company]

I can hear you Mike. Perfect.

[Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners]

Great. Thank you very much. I was surprised to see the surfactant's price mix positive in the 5% level there. You mentioned that was mostly product mix and customer mix, but maybe help us understand a little bit more what you're seeing in that price mix number as we're starting to look into next year. Should price mix be kind of flattish or could it be positive for the full year 2025?

[Luis Rojo, President & CEO at Stepan Company]

Good point, Mike. And as we said, our strategy continues to be growing with Tier two, Tier three customers and of course, getting up as much business as possible with Tier one. So everything is a priority. But Tier two, Tier three delivered a positive mix and we're growing high single digits in the Tier two, Tier three space, while total surfactant you saw that the volume grew 2.5%. So when you think about it from a customer point of view, we continue having a positive mix by growing faster the Tier two, Tier three segments.

[Luis Rojo, President & CEO at Stepan Company]

And then on the product side, we had a great as I mentioned before, we had a great add second half and Q4 was a stellar growing 37%. Oilfield continues growing very nicely and that provides a positive price mix. So we are very pleased with how we are returning the surfactant business, which is at the end 70% of the company to growth and to growth levels that are pretty healthy. And those places where we're growing provide that positive pricemix that you saw.

[Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners]

All right. Very helpful. And then I was hoping, Luis, that you could help us level set the starting point for 2025 EBITDA. If we look at 2024 as you referenced, there were a lot of unusual items. There were some outages, the CEO and the tax issues this quarter and the Pasadena startup costs that presumably don't repeat.

[Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners]

I also assume though that there's maybe some incentive comp that was running below normal, maybe some discretionary costs that start to come back and maybe some FX headwinds. So a lot of different moving pieces. I was hoping that you could just help us bridge the call it $185,000,000 or $190,000,000 of EBITDA you did in 2024. How might we think of a more normalized starting point as we look at 2025?

[Luis Rojo, President & CEO at Stepan Company]

Great point, Mike. And thanks for pushing me for guidance, which I'm not going to provide. So but let me say something because we have been trying to be very, very clear and very transparent with the numbers and the one timers that we had. You saw that Mille Zelle was an $18,000,000 impact in 2024. And when you think about all the other items, Asia, the transition, the taxes in Latin America, so we're talking about more than $30,000,000 in one time events that we really we have a strong cost avoidance and cost out program in 2025 to ensure that we don't repeat those.

[Luis Rojo, President & CEO at Stepan Company]

So if you think about our performance on the 01/1987, of course, we are very disappointed about those $30 plus million. Pasadena, of course, we have to spend all this money. We have to hire the people. We have to train the people before the site is up and running. We started some of the depreciation already because there are a lot of areas of the plants that are functioning.

[Luis Rojo, President & CEO at Stepan Company]

So those costs will continue, but then you will see the revenue and the supply chain savings from the plant as the plant start up and we get to full run rate in the second half of twenty twenty five, you are going to see the savings that can compensate the extra cost that you saw in 2024. And we have been very clear, I mean, around $4,000,000 per quarter. So we have provided that data and that's the piece that we need to offset in the future with the revenue of the plant and the supply chain savings from the plant, right? And we need to avoid the $30,000,000 issues that we had. I think I was clear in a few calls previously that when you saw 2024 and excluded some of those items, we were actually performing on the $60,000,000 EBITDA per quarter.

[Luis Rojo, President & CEO at Stepan Company]

I'm not saying that's my guidance. I'm saying that's where this team should be capable of doing without those one timer effects. So the team is committed to turn around the profitability of the company in 2025 and we are working hard and the whole team is working hard to make that happen.

[Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners]

All right. Thank you for that. And then last question for me is just in thinking about the first quarter, and the impact of Pasadena, you've mentioned that it's nearing completion and going to be starting up, but presumably, we're still going to have another $4 ish million EBITDA headwind from Pasadena still being in its very early ramped stages. And I was curious, are there any other kind of one time or unusual factors we need to keep in mind as we're thinking about Q1?

[Luis Rojo, President & CEO at Stepan Company]

No, you are fully correct on the Pasadena comment. We're expecting to start up in Q1. What I would say is that Q1 I mean, we are what 60% into the quarter, where week number eight from the thirteen weeks of the quarter. And as I said before, ag continues to do well, oilfield continues to do well, our distribution partners continues to do well. So we we are seeing a good start of 2025, but of course, this is only seven, eight weeks and we still have to deliver the quarter and the year.

[Luis Rojo, President & CEO at Stepan Company]

There are a lot of moving pieces with tariff and many, many other moving pieces as you can imagine. But so far we have a good start for the year. And the only one timer Mike, the only one timer will be Pasadena.

[Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners]

Perfect. Thank you very much.

[Operator]

Thank you. Our next question comes from the line of Kevin Holder from CL King and Associates.

[Kevin Holder, Equity Research Analyst at C.L. King & Associates]

Hi, good morning. Thanks for taking our question.

[Luis Rojo, President & CEO at Stepan Company]

Good morning, David.

[Kevin Holder, Equity Research Analyst at C.L. King & Associates]

This is Kevin on for Dave clarifications with the Pasadena facility. Can you maybe give us a bit of guidance on how to look at interest expense and depreciation through 2025 as you kind of begin to ramp up production kind of in the Pasadena facility?

[Kevin Holder, Equity Research Analyst at C.L. King & Associates]

Thank you.

[Luis Rojo, President & CEO at Stepan Company]

Thank you, Kevin, for the question. We have provided guidance in the slides about our depreciation forecast for the year. We provided a $128,000,000 to January guidance, so call it $130,000,000 in the midpoint. So that's mainly the increase versus 2024 is mainly the Pasadena site. And again, I mean, all of that can vary a little bit based on timings and based on when each reactor is going online or not.

[Luis Rojo, President & CEO at Stepan Company]

So that can change a little bit. But what I'm planning to do is, one, the site is up and running and once we have more clarity on the qualification of the new SKUs, etcetera, in April, we can talk a little bit more about how we see the second half and what should be any savings or any modeling that you need to do in your models about the second half. I want to see the plant up and running and I want to have a little bit more details before we can talk about the implications for the second half. You see the depreciation already in our forecast and we will update you more in April.

[Kevin Holder, Equity Research Analyst at C.L. King & Associates]

Great. Thank you for that. That's very helpful. And then maybe kind of I wanted to switch gears kind of towards current currency rates and the strengthening dollar. What is your sensitivity to recurrences in the euro, the Mexican peso and the Brazilian rei?

[Luis Rojo, President & CEO at Stepan Company]

Yes. No, Good point. We have the majority of the impact could be the euro. I mean, euro sitting at 103 or 104 or 102, some people are already talking about parity. That's our main risk, right?

[Luis Rojo, President & CEO at Stepan Company]

I mean, it's very hard to do pricing in Europe just because of FX. That's not the dynamic in that environment. I'm not worried about Mexico and Brazil. Our cost structure is a lot based on local currency. So you see the help in the cost structure as well.

[Luis Rojo, President & CEO at Stepan Company]

So the net impact is really not material when you think about Brazil or Mexico. The only risk that we need to continue managing is the euro. And I believe this is still manageable in our total

[Luis Rojo, President & CEO at Stepan Company]

numbers.

[Kevin Holder, Equity Research Analyst at C.L. King & Associates]

Great. Thank you for that. And then maybe my last one kind of turning to China and maybe kind of your polymers business there. Can you maybe talk about your expectations in the construction market in China and maybe kind of your expectations in terms of growing spray foam into that market as well?

[Kevin Holder, Equity Research Analyst at C.L. King & Associates]

Thank you.

[Luis Rojo, President & CEO at Stepan Company]

No, great question. And what I will say is that the China team has done an outstanding job in diversifying the business. So when you think about our polymers business in China is not really focused 100% in roofing or construction. I mean, it's a very diversified polymers business going into many end markets, including LNG ships and including many other end markets. So that's what the team has been able to do and that's why we keep growing at a very nice rate or albeit it's a small business, but we're growing very nicely in China.

[Luis Rojo, President & CEO at Stepan Company]

So we are not exposed to the whole construction and residential issue that you see in China these days. We're not exposed to that.

[Kevin Holder, Equity Research Analyst at C.L. King & Associates]

Great. Thank you. That's very helpful. I'll hop back in the queue.

[Operator]

Thank you. At this time, I would now like to turn the conference back to Luis for closing remarks.

[Luis Rojo, President & CEO at Stepan Company]

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

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Samuel Hinrichsen, VP & Interim CFO
• Luis Rojo, President & CEO

Analysts

• Dave Storms, Director of Equity Research at Stonegate Capital Partners
• Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners
• Kevin Holder, Equity Research Analyst at C.L. King & Associates