Stepan Company (SCL) Earnings Call Transcript & Summary

Good morning, and welcome to the Stepan Company First Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 Hinrichsen, Vice President and Interim Chief Financial Officer of Stepan Company. Mr. Hinrichsen, please go ahead.

Good morning, and thank you for joining Stepan 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 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.stepan.com under the Investors section of our website. Whether you're joining us online or over the phone, we encourage you to review the investor 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, and 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'm 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. Surfactants and Specialty Products delivered double-digit adjusted EBITDA growth, while Polymers adjusted EBITDA decreased slightly year-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 continued to experience double-digit volume growth within the agricultural and oilfield end markets and with our distribution partners in Surfactants. North America and European Rigid Polyol volume grew single digits, while the Specialty Polyols and commodity PA businesses delivered strong growth year-over-year. We believe that Rigid Polyol growth in North America and Europe continues to be restrained by global macroeconomic uncertainties and the high interest rate environment. We're 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 Specialty Products and a lower tax rate. We executed the safe startup 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 common stock of $0.385 per share, payable on June 13, 2025. Stepan has paid and increased its 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 4 to recap the quarter. First quarter 2025 adjusted net income was $19.3 million, or $0.84 per diluted share, versus $14.7 million, or $0.64 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% year-over-year, driven by volume growth and improved surfactant product and customer mix, which was partially offset by higher preoperating expenses at our Pasadena, Texas site. Cash from operations was $6.9 million for the quarter, and free cash flow was negative at $25.8 million. Slide 5 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 are noted 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, 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 6 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 7 focuses on the Surfactants segment results. Surfactants 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 passthrough of higher raw material costs. Sales volume grew 3% year-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%. Surfactants 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 preoperating expenses at our Pasadena, Texas site. Now on Slide 8, Polymers net sales were $146.1 million for the quarter, flat versus the prior year. Selling prices decreased 7%, primarily due to the passthrough 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. Specialty Polyols and commodity Phthalic Anhydride volume delivered strong growth year-over-year. China Polymers volume was up low-single digits. Foreign currency translation had a nominal impact on net sales during the quarter. Polymers 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 Products net sales were $16.8 million for the quarter, an 11% increase versus the prior year, primarily due to higher selling prices. Specialty Products 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 9. 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, Luis will update you on our strategic priorities.

Thanks, Sam. I will focus my comments on our strategic priorities. Our customer will always remain at the center of our strategy and innovation efforts. Our tier 1 customer base remains a solid foundation of our business. Continuing our new customer acquisition with tier 2 and tier 3 customers remains a key priority. This is an important and profitable growth channel within our Surfactants 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 oilfield businesses. We are pleased to see our North America and European Rigid Polyol 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 of Rigid Polyol 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 foam end market. Within Polymers, we were able to achieve a strong growth in our Specialty Polyol and our commodity PA business. This will enable us to deliver earnings growth in 2025. Our supply chain operation and resiliency continues to improve, and we delivered a solid quarter in all our key operational metrics. We're continuing to make the necessary investments in our Millsdale site 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 6 different products to date. We expect to achieve the full contribution rate of the plant during the second half of 2025. Our commercial teams continues to develop and deliver new specialty alkoxylation opportunities. Specialty alkoxylation volume grew strong double digits in the first quarter. To conclude, we remain focused on accelerating our business strategy through improved executions to grow volume, improve product and customer mix, and accelerate free cash flow generation. We believe Surfactants will experience continued growth in our key strategic end 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 previously 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 instructions for the questions portion of today's call.

[Operator Instructions] First question comes from the line of Mike Harrison of Seaport Research Partners.

Congratulations on the Pasadena alkoxylation 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 6 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 6 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. This is going to take a few months, okay? So that's why we're saying the full contribution starting more in the second half of the year and, of course, a 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, specialty alkoxylates are growing strong double digit. 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 spent $4 million in Q1 in preoperating 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 the -- how we should think about the earnings contribution, at least directionally, it sounds like maybe in Q1, it was maybe $3 million 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?

Yes. I think you are thinking that directionally, the right way. I think Q2 is still -- again, we are just starting off, so we are still investing, and you're not going to see the help in Q2. But for sure, you're 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 in Surfactants. 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 noncommodity 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. Yes, look, we are not intentionally moving volume from consumer products to other applications. But of course, 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 reports 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 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 margins should improve.

And pricing stabilizing?

Yes. I think, again, when you think about pricing and raw materials, we should see improvements.

Our next question comes from the line of Dave Storms of Stonegate.

Just hoping we could start with maybe what you're seeing in down channel inventory levels. The volume increase that you 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, right? 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 ship. And actually, we have talked a lot about our customers, especially on the Polymers side to see if there is any potential inventory buildup, 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, dynamics in the Surfactants business, very strong ag, 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 prebuilt in inventory because of tariffs or price increase concerns or something like that. But yes, April is coming stronger on the Polymers side, and that's the piece that we need to evaluate in the next few months.

Understood. Very helpful. And then you mentioned a couple of times just the improved customer mix. I'm assuming that's referring to sort of more tier 2 and 3 customers. Are you able to give us a sense of maybe of those tier 2 and 3 customers, which are more spot buyers, and which maybe are a little stickier using some of the additional services that you can provide for the tier 2 and 3 customers?

Sure. The mix is coming from both. It's coming from tier 2, tier 3, 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 Surfactants business. And actually, when you think about it, you all can see the public data, oleochemicals went up significantly in Q1. So actually, that was a drag in our margins in surfactants because oleochemicals 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.

Our next question comes from the line of David Silver of CL King & Associates.

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 I'm just thinking in the current environment, it is the run-up to the spring planting season, there are some tariff issues. Just on the agricultural side, what is your thoughts -- your best thoughts about the level of any prebuying or pipeline filling that may not be sustainable, I guess, as the balance of the year goes on?

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 is 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 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 customers is there is not -- there is no significant inventory buildup anywhere that we know, and we continue seeing good orders for April and actually already a good book order for May on the ag business.

I did have a question, follow-up maybe on your comments on the Polymers 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 particular end markets? Is that a particular region? Just the less favorable product mix that maybe impacted your margin performance this quarter, and what is the outlook for that for the balance of the year?

Yes, good point, David. The issue is the following. We were very clear, we grew single digits, our Rigid Polyol business, North America and Europe combined low-single digits. We grew very strong double digits in our Phthalic Anhydride, our PA business. And, of course, Phthalic Anhydride is a commodity. It has lower margins, and we are capturing a lot of new business and new share 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, we need -- the issue in Q1 was the high inventory cost that we had across the Polymers business that really dragged the margins, and that's why we had basically flattish EBITDA with volumes up 7%. That was the main drag.

Next question would probably be a 2-parter, but the topic would be tariff impacts as you see them currently. And I do think you're largely a local-for-local kind of structure right now, certainly in the U.S. 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 -- in your Mexican production base in particular? Is any -- is all of that product covered by the USMCA agreement? Or might some of it be sold into the U.S. and be subject to some of the tariffs that have recently been announced, and admittedly unsettled. But where would you kind of characterize your greatest sensitivity direct impact from potential tariff policies?

Sure. Of course, the question of the week and the month, right? Look, as you said, David, things are changing every day. This is a very volatile, 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 regions, right? So the majority of our volumes are in each of the regions that we compete. But, of course, there are still impacts on the tariff because we import raw materials and there's going to be always some impact 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. I believe many customers and many competitors will price for tariff, 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 USMCA. 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 for 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 Stepan's than your company's. 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 2 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 2 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.

Well, look, we will continue our collaboratively work with our customer. 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 not a -- 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 Stepan, 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. And 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.

Our next question comes from the line of Dmitry Silversteyn of Water Tower Research.

Congratulations on a strong start to the year. A couple of questions. They 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 declining pricing on raw material passthrough in the Polymers business. So what specific or at least families of raw materials that are still inflating in the Surfactants and are deflating in your Polymers business? And excluding the passthroughs, what does the pricing environment look like in these businesses?

Look, as I mentioned before, in Surfactants, we saw important increases on oleochemicals, 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 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 tariff 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, right? So that's why we need to stay diligent, 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 passthroughs? Have they stopped declining or continue to decline in Polymers, so we can expect to see some more pricing pressure there?

Yes, they have stabilized. But again, tariffs are coming. So things will keep changing 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 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 [indiscernible] 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?

Yes. 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 yes, if there is a huge wave of inflation, you could argue that could have some demand impact in construction industry, [ the ag ] consumer, right, on Surfactants. 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. But this will take a few more months to go through 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, just on sort of base level demand. You've seen strong demand in oilfield 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 it's 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?

The comments that we made was we had single-digit growth in our Rigid Polyol business in North America and Europe, and that we believe there is still constrained demand because of the uncertainties in the market because of the high-interest-rate environment. So we believe 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 -- if you think of the last 10 to 20 years, this business grew high-single digits, the markets grew high-single digits. And we are not seeing the markets growing high-single digits now. So that will take some time to go back to those levels.

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

Yes. We grew 7% volumes in Polymers, and we grew single digits in Rigid Polyol.

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

[Operator Instructions] We will welcome back Mike Harrison for our next question from Seaport Research Partners.

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 U.S. And I believe this has also come up in the context of the medium chain triglycerides 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 3 segments?

Great question, Mike. And not in Polymers. The Polymers business is heavily sourced [indiscernible] competition within the region. But you are 100% right that our MCT business has imported competition, and we are evaluating options, and to some degree, the Surfactants business as well. We always see some levels of Surfactants import 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.

And then last question for me is on the distribution piece of the Surfactants 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 can you provide on that?

Look, we continue working on our tier 2, tier 3 strategy globally. I wouldn't say this is a North America-only focus. It's a focus area for all our regions in our Surfactants business. But, of course, North America continues to be the biggest region. And what I will 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 acquired more than 400 new customers in this space. So it's part of our core strategy as we continue developing this business and continue to [ scale up ].

Thank you. I am showing no further questions at this time. I would now like to turn it back to Sam Hinrichsen 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.

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