Q2 2021 Stepan Co Earnings Call
[music] zone.
Yes.
Greetings and.
Turning to the Q2 Stepan company 2021 earnings conference call. During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct the question and answer session at that time. If you have the question. Please press the 1 followed by the 4 on the telephone if at any time during the.
Welcome to the need to reach an operator, Please press star Zero as a reminder of this conference is being recorded Wednesday July 28, 2021, I would now like to turn the conference over to Luis Rojo, Vice President and Chief Financial Officer. Please go ahead.
Good morning, and thank.
Current joining Stepan company's second quarter 2021 financial review.
Before we begin please note that information in this conference call contains forward looking statements.
Our non historical facts the statements involve risks and uncertainties that could cause actual results to differ materially.
Including but not limited.
Thank you for checks for our coating operations.
Oil and regional economic conditions and factors detailed in our security at the on Exchange Commission filings.
Joining us online or over the phone we encourage you to review of the Investor Slide presentation, which we have made available at www dot of Stefan Dot com under the investors.
The problem of our website.
We made these the slides available at approximately the same time as 1 of the earnings release is issued.
And we hope that you find information and perspective helpful.
Now with that I would like to turn the call over to Mr. Quinn Stepan, our chairman and Chief Executive Officer.
Thank you Luis.
Thanks, Good morning, and thank you all for joining US we hope you and your families of had an opportunity to be vaccinated and that you have done so the <unk>.
Best way to protect yourself and your family is to be vaccinated.
Although the demand for cleaning disinfection and personal wash products has slowed from the pandemic.
Pandemic peak.
We had step and remain committed to doing our part by supporting customers that supply of these essential products to the market.
The.
The had a good first half and delivered record results adjusted net income was $84.6 million or $3.60.
The <unk> <unk> per diluted share both.
Both adjusted net income and adjusted earnings per share were up 35% versus the first half of 2020.
Which was negatively impacted by the mills sale plant outage.
We delivered our best second quarter and had 40.
$42.2 million adjusted net income.
<unk> operating income was down 5% largely due to higher north American supply chain costs, driven by inflationary pressures pressures and planned higher maintenance cost.
Our polymer operating income was up 48% on.
44% sales volume growth the.
Of the polymer growth was driven by both the Investor polyester polyol acquisition and organic market growth overall.
Overall, the integration of investors business into our company has gone well and is on track with our business plans.
Our specialty product business results were up due to order timing and improve margins within our MCT product line.
Our board of directors declared a quarterly cash dividend on <unk> common stock of $30.05 per share payable on September 15th 2021.
Stefan has increased its dividend for 53 consecutive years.
Luis will walk you through a few more details about our second quarter results.
My comments will generally follow the slide presentation.
As I started with the slide 4 to recap the quarter.
Adjusted net income for the.
The second quarter of 2021 was $42.2 million or $1.81 per diluted share.
At the 10% increase versus $38.3 million for $1.65 per diluted share in the second quarter for us and Im Duane.
Because the adjusted net income.
<unk> the only got measures, we put of life for reconciliations to the comparable GAAP measures and these can be found in the appendix 2 of the presentation on table 2 of the price relief.
The specifically adjustment to reported net income this quarter consist of adjustment for deferred compensation of minor restructuring expenses.
Is that the net income for the quarter the <unk>.
The FERC compensation income of $1.1 million or for the share compared to the FERC compensation expense of $1.9 million or 8 cents per diluted share in the same period last year.
The deferred compensation numbers represent the net expense.
Adjusted it to the company sort of deferred compensation plan as well as gas cellular stock appreciation rights for our employees.
The these liabilities change with the morphing of the stock price with Claude this item from the operational discussion.
Slide 5 shows the total company earnings bridge for the second quarter.
Relative to last year's second quarter breakdown being could easing of that youll spend net of income.
Ecosystem is net income the figure is not of here that on an after tax basis, we will cover each segment in more detail, but to summarize all the marathon of specialty products, where all of what sort of factor was down versus the prior year.
Corporate expenses.
Comfort all orders were higher during the quarter due to higher acquisition related expenses and the overall inflation the comp.
<unk> effective tax rate was 24, 4% in the first half of 2021 compared to 23, 9% in the prior year period. This year over year increase was primarily attributable to a less favorable.
<unk> Africa the mix of income.
We expect the full year 2021 effective tax rate of in the range of 23% to 26%.
The slide 6 focus on sort of fact on segment results for the quarter sort of <unk>.
<unk> net sales were $384 million.
A 16% increase versus the prior year.
Selling prices were up 17%, primarily due to improved product and customer mix as well as the pass through of higher raw material costs.
Fact of foreign currency translation positively impacted net sales by 5%.
Volume decreased 6% year over year.
Most of these.
The increase reflects lower volume into the North America consumer product and market.
This reduction was driven by lower demand for consumer cleaning disinfection and personal wash brokers of the pandemic peak in 2020.
Additionally, we continue to experience feedstock supply issues and customer inventories.
30 of rebalancing efforts.
Was partially offset by higher demand for products sold in total institutional cleaning and functional product and market.
So the fact that operating income for the quarter decreased $2.6 million or 5% versus the prior year, primarily due to higher North American supply.
<unk> cost as a result of inflationary pressures and planning higher finance costs.
Latin America operating results benefit from of $2.1 million dollar via the.
Tax recovery project in the current year quarter.
Europe results decreased slightly due to lower demand in consumer products.
Partially offset by increase in mining functional products.
Now turning to polymers on slide 7.
Net sales were $191 million in the quarter of 70% from prior year sales volume increased 44% primarily of U 241% growth.
<unk> changed the polyol volumes.
Global rigid polyol volumes, excluding the <unk> acquisition was up 7% versus the prior year.
Higher demand within the PPA and the specialty polyol businesses also contributed to the volume growth.
Selling prices increased 21%.
And the translation impact of a weaker U S dollar positively increased net sales by 5%.
Volume and operating income increased 7.5 million or 48%, primarily due to double digit volume growth in the legacy polymers business closing the acquisition.
In brief the America polyol results decreased due to rising raw materials and manufacturing costs, partially offset by higher volumes.
Europe results increased due to double digit volume growth from the base business planting based acquisition.
China results decreased due to the non recurrence of a onetime.
The fifth in the base period in 2020, and lower volumes, China volumes in the first half of 2021 grew 5%.
Specialty products net sales were $21 million for the quarter of 33% from the prior year quarter.
Volume was up 17%.
Between quarters, and operating income increased $3.8 million for 116%.
The operating income increase was primarily attributable to order timing the for instance, within our food and flavor business and improve margins within our MCT product line.
Moving on to slide.
Slide 8 our balance sheet remains strong and we have ample liquidity to invest in the business our leverage and interest coverage ratios continues at very healthy levels. We.
We had a strong cash from operations in the first half of 2021, which was used for Capex investments.
Share buybacks and investments in working capital given the strong sell through growth on raw material inflation.
We executed agreements for $100 million of new private placement debt at a very attractive on the fixed interest rates of around 2%.
We will use the new cash.
Cash to fund, our organic and inorganic growth opportunities and for other general corporate purposes.
For the full year capital expenditures are expected to be in the range of $150 million to $170 million.
Beginning on slide 10 of Scott will now update you on our 2000.
21 of strategic priorities.
Thank you Louise we are pleased to have delivered record first half earnings to our shareholders and look forward to carrying that momentum into the second half of the year.
We continue to prioritize the safety and health of our employees as we deliver products that contribute to the fight again.
Against COVID-19.
Our EPA approved biocide formulations kill the specific novel virus that causes COVID-19, and allow our customers to provide the public with additional tools to protect their families and the fight the pandemic.
Based on cash.
Customer feedback consumer.
Of our habits have changed.
And these new behaviours require higher use of disinfection cleaning and personal wash products.
Therefore, we believe our surfactant volumes in the consumer product end market will remain higher versus pre pandemic levels, however, lower than peak pandemic demand.
In Q2 of 2020.
We believe institutional cleaning volume will continue to grow as the economies around the world reopen and people demand higher standards for cleaning and disinfection in public settings.
We also anticipate that demand for surfactants within the agricultural.
<unk> oilfield markets will continue to benefit from higher agricultural and commodity prices and improved versus 2020.
We will continue working on improving productivity as well as product and customer mix to improve surfactant operating income.
Globally, we are increase.
Increasing capacity in certain product lines, including bio sides, and the and for Terex to ensure we can meet higher requirements from our customers.
As discussed previously we are increasing north American capability and capacity to produce low 1 for dioxane Sulfates a minor byproduct.
<unk> and generated in the manufacture of ether sulfate surfactants, which are key cleaning and foaming ingredients used in consumer product formulations.
Through a combination of process optimization and additional manufacturing equipment step and we'll be prepared to supply customers either sulfates that meet the.
Product of Torrey requirements.
This project is the primary driver of our 2021 capital expenditure forecast of $150 million to $170 million and will carry over to 2022 as well we.
We are working with our customers to ensure these product projects deliver our financial.
New regulatory targets.
Tier 2 and tier 3 customers continued to be of focus of our strategy.
Tier 2 and tier 3 volume grew in the second quarter driven by increased customer penetration, we added 150, new customers during the quarter and more than 500 customers in the first half of this.
Here, our diversification strategy in the functional markets continues to be a key priority for Stepan during.
During the first half global agricultural volume increased high single digits with strong growth of obtained in the post patent pesticide segment and new products launched throughout the world.
Oilfield volume was up mid single digits due to higher oil prices, we remain optimistic about future opportunities in this business as oil prices have recovered to the $70 per barrel level.
We continued our consulting work in our <unk> plant and accelerated interventions and investments.
And both expense and capex to increase capacity and improve productivity.
We expect to continue this project and investment level through throughout the rest of the this year.
We are projecting a strong return on investment in this project through a combination of productivity improvements more.
Our capacity and sell for several high margin product lines through Debottlenecking key processes and improve service to our customers.
We anticipate starting to see the benefits of this project in 2022 and beyond.
<unk> had a good quarter and.
To have of the year as the business is coming back from a challenging year due to COVID-19 restrictions.
The long term prospects for our polyol business remain attractive as energy conservation efforts and more stringent building codes should increase demand.
As Quinn stated the integration of the businesses.
And for acquired from the Vista is going well and we expect to deliver $16 million to $18 million of EBITDA in 2021.
Given the strength of our balance sheet. We also plan to continue to identify and pursue acquisition opportunities to fill gaps in our portfolio and to add new platform Chemistries.
I will now turn the call back to <unk> for closing comments. Thank.
Thank you Scott the <unk>.
Company delivered record first half earnings in 2021.
Looking forward, we believe surfactant volumes in North America.
Consumer product end market will be challenged versus peak pandemic levels.
In 2020.
While we believe institutional cleaning volume will continue to grow versus prior year, we do not believe it will compensate for lower consumer consumption of cleaning disinfection and personal wash products.
We anticipate that demand for surfactants within the agricultural.
<unk> and oilfield markets will improve versus 2020.
Global demand for rigid polyol continues to recover from pandemic related delays and cancellations of re roofing and new construction projects.
This recovery combined with our first quarter 2021 Act.
Acquisition.
Should position.
<unk>, our polymer business to deliver growth versus prior year.
We believe the long term prospects for rigid polyol remains attractive as energy conservation efforts and more stringent building codes are expected to continue.
We anticipate our specialty product business results will improve slightly year over year.
Despite continued raw material price increases and planned higher maintenance costs, we remain cautiously optimistic about the remainder of the year.
This concludes our prepared remarks at this.
This time, we would like to turn the call over for questions. Daisy. Please review of the instructions for the question portion of today's call.
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Our first question comes from the line of Mike Harrison with Seaport.
The Port Research partners. Please proceed with your questions.
Hi, good morning.
Good morning, Mike.
Was hoping that you could walk through some of the.
Pricing and raw material cost dynamics that you were seeing in your 2 key segment.
So the surfactants and polymers.
But overall pricing was up 20% in the second quarter.
How much more pricing do you feel like you need before you can offset the impact the margin impact of higher raws and maybe what does the timing look like.
In terms of I guess the margin trajectory in both of those segments.
Okay.
Start with that Mike.
Let me just say that the company has implemented price increases.
July 1 as well the <unk>.
Price increase in surfactants I would say.
Hey.
<unk> is going well and we're pretty good shape from our surfactants business I think in polymers, most likely we have a little more work to do in Q4.
The catch up and maintain.
And move our margins of restore our margins in that segment, particularly in North America.
Erica we're pretty good shape in polymers in Europe at this point in time.
Alright.
In terms of the surfactants business you mentioned the decline in consumer surfactant demand of.
Obviously.
Coming off the peak from the pandemic as well as some inventory Destocking destocking.
Where do you see that consumer volume.
Compared to pre pandemic levels once everything's stabilizes.
Actually given your view that we're going to see sustained higher cleaning demand as well as.
The addition of a lot of tier 2 and tier 3 customers.
That you've brought on over the past several quarters.
Yes, Mike This is Scott.
It's a little bit difficult to project.
What's going to happen in the second half of the year. We've got economies that were open in our question.
Questioning about the restricting going forward, we have economies that still have yet to be opened so it's really hard to predict what it's going to look like going forward. We're in unchartered times I would say based.
Based on the comments we've made.
Our business is up versus pre pandemic levels.
Below of where we saw the peak last year and if you think about the peak in 2020 that basically emptied of lot of inventories throughout the production supply chain and what inventory is left in the in the trade at this point and in the consumers' pantries is yet to be seen.
So I'd say, it's really hard.
But the predict where we are in that continuum at this point, but I would say that our customers have told us that they believe that.
There is of higher demand for cleaning within homes and also within institutional facilities restaurants hotels.
The cetera. So we do believe versus 2019, we have seen of sustained.
Increase in cleaning.
Virtually all end markets that we're participating in.
Alright.
The polyol business.
It sounds like if we excluded the.
Of the Investor deal the volumes were maybe up.
Mid to high single digits year over year.
Maybe not as robust of a recovery as we might expect.
In some of those construction in rigid polyol applications are.
Are there either supply chain issues or pandemic issues that are still kind of dragging on construction activity and dragging on volumes within that business.
So if.
If we look at our legacy business, our legacy business was up.
7%.
For the REIT for radio budget for rigid polyol.
So good market growth.
And your number that you calculated it was kind of kind of right on but we have seen some shortage of.
Reaction products that our polyol reacted with in the marketplace specifically.
The MDI has been.
Short for periods of time and the pricing in China has been an issue that has negatively impacted our demand so.
We do see.
We are optimistic that we're going to see higher demand throughout the year.
Typically for our polymer business.
But there have been some supply issues on.
On MDI and I guess, what I would also say some of them some fire retardant ingredients as well.
Mike what I will complement any fast this the <unk>.
Rigid polyol business.
We had of various thrown quarter also on case.
And the.
That takes the whole legacy business, excluding the Vista.
Strong double digit growth because case grew very strong and PAA as well on top of the 7% of intermediate volumes.
Alright, and then last question for now.
I know you don't provide.
The guidance, but I feel like you have a lot of moving pieces going on in terms of the earnings.
Comparison, so you posted a couple of record quarters here in Q1 and Q2, obviously the prior year.
Included the mills deal outage impact and then 2021 is including the impact of the Texas Freeze, which was also unusual.
So can you give us a sense of what your underlying earnings growth would have looked like in the first half without those effects and maybe.
Give us a little bit more direction on what that should tell us about the pace of earnings growth as we get into the second half. Thank you.
No Great question, Mike This is the way.
So yeah. If you remember last year, we had in the first half the impact of the meal Zelle freeze.
And then we had all of the insurance proceed for that event basically in the second half. So if we if we move the income to the first half to make sure that we have a clear base.
The 35% growth that we are reporting today, the not just the net income.
On an apples to apples basis will be around plus 12%.
<unk> is a good double digit growth in our in our business.
And on on we're happy we thought with the throne double digit net income growth and as you know we don't provide guidance.
Items.
For the future of but we are providing a lot of perspective about higher maintenance cost this quarter for the next couple of quarters, we continue seeing.
That piece going as well.
Versus what we did in Q2.
No.
Income of is called provide a little bit more perspective on the volume situations, so, but but if we look at the first half.
On the lagging apples to Apple is plus 12%.
Alright, thanks very much.
Our next.
It comes from the line of Vincent Anderson with Stifel. Please proceed with your question.
Yes, good morning. Thanks.
So good morning Vincent.
Morning.
I think Mike covered the raw material question pretty extensively there already but I did just want to.
To make sure in case I missed it.
Is there any way to quantify some of the impact on revenues rather than margins that came.
Basically hit this quarter from you the raw material shortage of logistics shortage, so specifically not being able to deliver as much as you wanted to.
Kind of regardless of the price of that raw material.
Yeah.
I think it would be difficult to do.
To break that out but for the.
Sure.
I would.
I would say from an income perspective.
Shortages in Q2, primarily impacted our ethylene.
Oxide and propylene oxide derivative business.
And so I would say those those 2 areas.
<unk>.
From an income perspective operating income perspective, we're probably maybe a couple of million dollars below.
And the.
Of that dollar value of would be associated with our business in North America, and with our business in Mexico.
Okay, that's fair.
And I just I'm looking at what's going on in.
Germany, right now and you mentioned some.
Some of MDI in the flame retardant issues I think of Asia is.
Is that something of that we should be keeping an eye on or do you feel like that's mostly dealt with and we're not going to see another kind of like.
The 2018.
19, where we had the justice.
The shortage of the kind of co materials for your rigid polyol demanded for installation.
This is Scott Vincent I would say, it's being managed the plants are operating they are unplanned.
The answer on.
Unscheduled turnarounds so the industry is managing it I would say it's.
It's very tight supply demand balance at this point, we do expect improvement in the second half, but I would not characterize this as of 2018 type of event.
Okay. That's good for now.
Alright, 1 more from me it might be a very short answer from you but.
We're linked to a fairly sizable acquisition target I figured I'd be remiss, if I didn't try to ask if 1 there had been any validity to that if there is no longer any participation by stephane.
And that target.
If so would you be willing to speak maybe in general terms, what drew you to a business of that size of portfolio mix.
Maybe just as the case study in your M&A strategy.
Yes, so we remain interested in making acquisitions.
On a global.
And that is F.
And specifically enhancing our product portfolio.
So we were it was reported in the price that we were interested.
In.
In the acquisition.
In Brazil or based on the company in Brazil, I would tell you that.
<unk> interest.
For that product line is primarily in North America and.
So our our activities were not as ambitious.
And a little bit more focus on a geographic perspective than than what's reported in the price.
Understood. So that was really just the <unk>.
Paucity of Texas, if I remember.
Our constellation on the Gulf Coast of the United States remains the priority for our company.
Wonderful I appreciate the color good luck on the rest of the year gentlemen.
Okay. Thank you very much for instance.
Our next question comes from the line of Marco Rodriguez with Stonegate capital markets.
Please proceed with your question.
Good morning, everybody. Thank you for taking my questions.
Good morning Marco.
I was wondering if maybe you.
And you can expand on the comment if I heard it correctly.
When talking about the Capex expansion here in fiscal 'twenty, 1 you're obviously guiding to $1.50 to 170, but I believe I heard some comments from saying that should carry into 2022.
Ill provide some additional color surrounding that that curve.
Okay.
Medical the comment.
Coming from God was basically related to the low 1 for dioxin project, which is 1 of the key drivers of the higher Capex this year.
That project will continue the execution in 2022.
Sure.
Got it and is there or is it too early to quantify maybe what the additional.
I'll spend might be related to that.
Yes, I think we will provide very clear capex guidance for next year. Once we once we go through the book yet once we have all of the projects in and outs, we will provide a clear clear perspective for next year later on.
Got it okay, and just kind of circling.
Around with the price increases in the raw material price increases for you guys spent some time already addressing that very much appreciated just wondering if you could maybe provide any sort of feedback from our customer standpoint, all of those increases in terms of them just being.
Obviously resigned to the fact that obviously, if it's in the contracts but.
Backward, but its something Thats an expectation then if you could maybe.
Perhaps comment on what sort of levels of competition you might be seeing that may be trying to kind of hold that your ability to push that through.
In the second half.
Yes, Mark of this is Scott I would I would start off by saying.
But also inflation that our industry has seen in the first 6 months of this year probably has been unprecedented in the last 15 years.
And it's every material and every service that debt.
That touches a customer or any part of their value chain. So.
The.
The market is tight as well youre coming out of Covid restricted environment.
Inventories were low you've seen what's happening in the automotive market and the lack of inventory so.
It's a wave that all of us are trying to deal with in real time.
<unk> to the best of our ability so.
That's the best way I could describe the environment at this point.
Yes, what I would further say is that.
I think transportation has been an issue not only for the whole chemical industry, but I think for the whole supply chain across many.
Different <unk>.
Products.
So I think as transportation has been limited in the marketplace.
It also has created less flexibility for ourselves and other people to respond to changes in demand.
So.
I would say.
The environment.
From a competitive perspective.
Recognizes that.
The costs are up and <unk>.
Pricing.
We've generally been able to pass through.
The most of the price increases are most of the price.
Raw material price increases that we've seen in the market, particularly in surfactants and I mentioned earlier, we have more work to do on our polymer business in North America.
Very helpful and last quick question from me.
If you could maybe just talk a little bit more about your M&A pipeline.
Just kind of where that.
That looks of what that looks like versus last quarter in terms of size and then maybe if you can just address what valuations might look like.
Generally we have.
A small number of active projects within our M&A pipeline.
We have seen multiple.
The polls.
The go up significantly over the last couple of years, we're seeing a little bit of maybe plateauing and maybe a little bit of a decrease of.
For for certain more commodity assets think specialty chemicals remain at relatively peak multiples.
<unk> today so.
But so we continue to look and we'll keep you informed as the projects and opportunities are announced in the marketplace and the good news Mark <unk>. The whole industry is very active on M&A on the R plane deal.
Our projects coming out.
Every quarter. So of course, we will we will continue being very diligent of all of our process and we will engage in those that debt.
It makes sense for us.
I will say, though don't look for anything short term from us.
Got it very helpful. Appreciate the time guys. Thank you.
As a reminder to register for a question press the 1 for.
Our next question comes from the line of Mike Harrison with Seaport Research Partners. Please proceed with your question.
Hi, just a few more for me 1 of the things.
Things I wanted to understand you've talked about the 1 for Diana <unk>.
The changes in the capital associated with that.
You've been adding some other capacity can you quantify how much additional capacity has been brought on in some of these key cleaning and disinfection.
Product lines, and I guess with the pandemic.
You know elevated demand maybe running its course is theres still going to be of demand.
Alright enough demand out there in order to justify the additional capacity.
So what I would tell you is that we have added a relatively small amounts of incremental capacity and our buyer side area and in our amphoteric at.
The product lines, primarily driven by customer request.
Around the world with specific enhancements in Mexico, and North America.
Thats, mostly where our.
The capital expansions have been we've also added some new reactor of capability in the Brazil too.
The support our agricultural business in that country.
Mike specific to 1 for the oxide. It is not of capacity expansion of our Sulfonation network. It is putting a new capability on our existing assets to be able to meet the new regulation. So it's not incremental capacity.
And then the last thing relative to our polymer business.
The primary driver for the acquisition of and this is polyester polyol business was to provide low cost capacity opportunities for us today, but also over the.
The next decade.
There is significant excess capacity within the asset that we acquired within Wilmington, and there are opportunities to debottleneck and expand the lesage in the Netherlands plant to support our European business.
It's the perfect and then on the agricultural business, it's great to see the volume higher there, but just trying to understand is from.
This is just strong AG market fundamentals, that's driving that or if its application wins or geographic expansion or maybe the product.
Our strategic efforts.
But we're seeing drive the growth there.
Yes, Mike, it's a little bit of all of the above.
Commodity prices have risen significantly since last year of corn soybean.
Prices are 2 acts of where they were.
Driven.
Of all of the increased farmer confidence.
And really of focus on improving yields per acre, which really comes from their chemical applications.
Underlying market growth rate and then there are certain differentiated wins that were we're achieving through our targeted initiatives.
And post patent pesticide application formulations as well as new emerging.
Smaller customers throughout our.
International regions. So we've seen the agricultural volumes grow in all 4 of our regions in the first half.
Yes.
Alright, and then last question I have is on the oilfield business.
Slide deck mentions that you are planning a relaunch of the camco business sometime in 2021 can you give a little more detail in terms of the timing and the.
The potential revenue associated with that relaunch.
Yes, I would say a couple of things 1 we're trying to replicate a.
<unk> line.
That was manufactured in a different facility chemicals old facility. So we've had a lot of R&D and process development work to do.
In 2021.
With the impact of Covid in operations and the supply chain disruptions, we've had with <unk>.
Potentially raw materials and manufacturing partners were a little bit behind our target. However.
It is not going to be incremental to 2021.
It was more of a rebuilding the the supply chain model within the step in network, which.
Quite honestly was.
More than a 12 to 24 months the timeline.
Alright, thanks very much.
<unk>.
Our next question comes from the line of Vincent Anderson with Stifel. Please proceed with your question.
Yes. Thanks.
I had this the stock.
And I know you addressed a couple of quarters ago, but it wasn't it might note. So on the 1 for dioxane that is a new York State I want to say regularly regular.
The regulation that is driving this.
If I'm wrong correct me otherwise. The question is are you already in conversations with either major customers or with regulatory bodies elsewhere in the U S where maybe you can actually get ahead of similar regulations in other states and gain.
Gain market share from this or is this really going to be a just.
Just kind of coordinate with the buyers to make sure you're getting paid for the capital that you are having the spend.
So so most.
The large consumer product companies.
The supply chains are such that they don't want to have multiple.
The skus in the marketplace, so you'd think about.
The vast vast majority of our customers are going to meet the standard even though it's just approved in the state of New York today. So we'll have 1 product and their product line that meets the standard for the entire United States.
So.
So that that's really what the vast majority of our customers are doing.
If you take a look at how we've approached this market.
And this this opportunity of this challenge and the.
From the marketplace, we've worked very closely with our customers and we have.
Yes.
To ensure that we get a fair return on the new capital that we are spending to meet the standard.
Understood I appreciate the clarification. Thank you.
There are no.
Have questions at this time, please continue with your presentation or closing remarks.
Hi, Thank you very much for joining us on today's call. We appreciate your interest and ownership in Stepan company.
Please stay safe and healthy.
Josh your hands frequently used.
Disinfectants to clean surfaces and get backs unaided.
Have a great day. Thank you.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
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