Q4 2021 Stepan Co Earnings Call

Yeah.

Speaker 1: Greetings. Thank you for standing by. Welcome to the Stepan company Q4 full year 2021 earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Thursday, February 17, 2022.

Greetings. Thank you for standing by welcome to the Stefan Company Q4 full year 2021 earnings call. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone if at any time during the conference you need to reach an operator, Please press star zero.

Reminder, this conference is being recorded Thursday February 17th 2022.

Speaker 1: And now I'd like to turn the conference over to Luis Rojo, Vice President and Chief Financial Officer. Please go ahead.

And now I'd like to turn the conference over to Luis Rojo, Vice President and Chief Financial Officer. Please go ahead.

Speaker 2: Good morning, and thank you for joining Stepan Company's fourth quarter and full year 2021 financial review.

Good morning, and thank you for joining Stepan company's fourth quarter and full year 2021 financial review.

Speaker 2: Before we begin, please note an information in this conference called Contained Forward-Looking Statements, which are not historical facts.

Before we begin please note that information in this conference call contains forward looking statements, which are not historical facts.

Speaker 2: These statements involve risks and uncertainties that could cause actual results to be fair material, including but not limited to projects for our foreign operations, global and regional economic conditions, and factors detailing our security and exchange commission filings. Whether you are joining us online or over the phone, we encourage you to review the investor slide presentation.

These statements involve risks and uncertainties.

Actual results may differ materially.

Including but not limited to prospects for our floating operations global and regional economic conditions and factors detailed in our Securities and Exchange Commission filings.

Joining us online or over the phone when gold is reviewed investor slide presentation.

Speaker 2: which we have made available at www.stepan.com under the investors section of our website. We make these slides available at approximately the same time as when the earnings release is issued. And we hope that you find the perspective helpful.

We have made available at www dot to step on the com under the investors section of our website. We make these slides available at approximately the same time as when the earnings release is issued and we hope that you find the perspective helpful.

Speaker 2: Now with that, I would like to turn the call over to Mr. Queen Stepan, our Chairman and Chief Executive Officer.

Now with that I would like to turn the call over to Mr. Stefan <unk>, our chairman and Chief Executive Officer.

Speaker 3: Good morning, and thank you all for joining us today.

Good morning, and thank you all for joining us today.

Speaker 3: 2021 was another difficult year for our world, our country, and our industry as COVID-19 and weather events created employee, raw material, and transportation challenges that impacted global supply chain.

2021 was another difficult year for our world, our country and our industry as COVID-19, and weather events created employee.

Material and transportation challenges that impacted global supply chains.

Speaker 3: At Stepan, our employees' commitment and our team's agility allowed us to mostly meet customer requirements and grow income, while taking significant steps to build a better, stronger, more sustainable future.

At stepping our employees commitment and our team's agility allowed us to mostly meet customer requirements and grow income, while taking significant steps to build a better stronger more sustainable future.

Speaker 3: Our reported net income reached a record $138 million, or $5.92 per diluted share, while our adjusted net income was also a record at $143.5 million, or $6.16 per diluted share.

Our reported net income reached a record $138 million or $5 92 per diluted share while our adjusted net income was also a record at $143 5 million or $6 16 per diluted share.

Speaker 3: These record results were achieved despite the challenges affecting our operation.

These record results were achieved despite the challenges affecting our operations.

Speaker 3: The net, the estimated negative impact of the supply chain disruptions in our operating income for the three business segments totaled $21 million during 2021.

The estimated negative impact of the supply chain disruptions in our operating income for the three business segments totaled $21 million during 2021.

Speaker 3: In addition, global demand decreased for cleaning, disinfection, and personal wash products versus a pandemic peak in 2020.

In addition, global demand decreased for cleaning disinfection and personal wash products versus that pandemic peak in 2020.

Speaker 3: This impact was partially offset by higher demand within the institutional cleaning and functional product and market.

This impact was partially offset by higher demand within the institutional cleaning and functional product end markets.

Speaker 3: Although our base polymer business was affected by supply chain disruptions, higher polymer results were driven by the mourning condition.

Although our base polymer business was affected by supply chain disruptions higher polymer results were driven by the inverse to acquisition.

Speaker 3: Specialty product results were slightly ahead of those reported in 2020, but results were negatively impacted by raw material availability.

Specialty product results were slightly ahead of those reported in 2020.

But results were negatively impacted by raw material availability.

Speaker 3: Our board of directors declared a quarterly cash dividend on Steppen's common stock of 33.5 cents per share, payable on March 15, 2022.

Our board of directors declared a quarterly cash dividend on <unk> common stock of $33.05 per share payable on March 15th 2022.

Speaker 3: Stepan has increased its dividend for 54 consecutive years.

<unk> has increased its dividend for 54 consecutive years.

Speaker 3: During 2021, we returned $45 million to our shareholders via dividends and share buybacks.

During 2021, we returned $45 million to our shareholders via dividends and share buybacks. This represents an increase of 11% versus 2020.

Speaker 3: This represents an increase of 11% versus 2020.

Speaker 3: As previously communicated, our board of directors authorized another $150 million of share repurchase.

As previously communicated our board of directors authorized another $150 million of share repurchases.

Speaker 3: We remain confident in the strength and diversity of our business and its ability to generate cash that will allow us to invest in our current business, pursue strategic M&A opportunities, and return cash to our shareholders.

We remain confident in the strength and diversity of our business and its ability to generate cash that will allow us to invest in our current business.

<unk> strategic M&A opportunities and return cash to our shareholders.

Speaker 3: At this point, I would like Louise to walk through a few more details about our fourth quarter and full year results.

At this point I would like Luis to walk through a few more details about our fourth quarter and full year results.

Speaker 2: Thank you, Queen. My comments will generally follow the slide presentation. Let's start with slide five to recap the quarter. Adjust the net income for the fourth quarter of 2021 was $22.5 million, or 97 cents per diluted share. A 32% decrease versus $33.1 million, or $1.42 per diluted share in the fourth quarter of 2020.

Thank you Quinn my comments will generally follow the slide presentation, let's just start with slide five to recap the quarter.

Adjusted net income for the fourth quarter of 2021 was $22 5 million or.

97 per diluted share.

32% decrease versus $33 1 million or $1 42 per diluted share in the fourth quarter of 2020.

Speaker 2: Because adjusting income is a non-gap measure, we provide full reconciliations to the comparable GAAP measures . And this can be found in appendix two of the presentation and table two of the press relief.

Because adjusted net income is a non-GAAP measure we provide full reconciliations to the comparable GAAP measures and these can be found in appendix two of the presentation and table two of the press release.

Speaker 2: Specifically, adjustments to reported net income this quarter excludes deferred compensation expense of 2.4 million dollars.

Specifically adjustment to reported net income this quarter excludes the political compensation expense of $2 4 million.

Speaker 2: Additionally, it also excludes $3.1 million for business restructuring, the non-cash loss on the sale of a corporate building, and environmental remediation reserves.

Additionally, it also excludes $3 $1 million for business restructuring the noncash loss on the sale of our corporate building and environmental remediation reserves.

Speaker 2: The deferred compensation numbers would present the net expense related to the company's deferred compensation plan, as well as cash settled stock appreciation rights for our employees. Because these liabilities change with the movement in the stock price, we exclude this item from our operational discussion.

Yet your FERC compensation numbers represent the net expense related to the company's deferred compensation plan as well as cash settled stock appreciation rights for our employees because these liabilities change with the movement in the stock.

Price, we exclude this item from our operational discussion.

Speaker 2: Slide six shows the total company earnings breach for the fourth quarter compared to last year's fourth quarter and breaks down the decrease in adjusted net income.

Slide six shows the total company earnings bridge for the fourth quarter compared to last year's fourth quarter breaks down to decrease in adjusted net income because this is net income the figure. It is not a here are on an after tax basis, we will cover each segment in more detail summarize surfactants and polymers had a down.

Speaker 2: because this is net income, the figures are not here, they are on an after tax base.

Speaker 2: We will cover each segment in more detail, not to summarize to the fact that some polymers are down, made driven by the one-time benefits free-coded in Q4 2020. Specifically, the Meele-Zell insurance payment and the Chinese government reimbursement.

Mainly driven by the one time benefits recorded in Q4, 2020, specifically, Niels Zale insurance payment and the Chinese government reimbursement.

Speaker 2: excluding those two items, our results are basically flat versus last year.

Excluding those two items our results are basically flat versus last year.

Speaker 2: Corporate expenses and all others were lower during the quarter due to lower the position related expense.

Expenses on all orders were lower in the quarter due to lower acquisition related expenses.

Speaker 2: and incentive-based compensation expenses. The company effective tax rate was 20% in 2021, compared to 25% in 2020. This year-over-year decrease was primarily attributable to favorable one-time tax benefits.

And incentive based compensation expenses.

Company effective tax rate was two 8% in 2021 compared to 25% in 2020. This year over year decrease was primarily attributable to favorable one time tax benefits.

Speaker 2: It's like seven, focus on surfactant segment results for the quarter. Surfactant net sales were $420 million, a 17% increase versus a prior year. Any prices increase 27%. For my literature to the past through of high-erome material costs, a well-ass improved product and cost of remakes. Boarding was down 9%.

<unk> seven so the fact that segment, we sold for the quarter. So in fact, our net sales were $420 million, a 17% increase versus the prior year.

<unk> increased 27%, primarily due to the pass through of higher raw material costs.

Improved product and customer mix.

Volume was down 9% versus last year.

Speaker 2: Most of this decrease reflects lower volume sold into the North America consumer product market as demand for cleaning, disinfection, and personal wash products grown from the peak of the pandemic. This was partially offset by very strong growth in our functional product market and solid growth in the industrial and institutional cleaning market.

Most of this decrease reflects lower volumes sold either in North America consumer product end market as demand for cleaning disinfection of personal wash products that all from the peak of the pandemic.

This was partially offset by very strong growth in our functional product end markets and solid growth in the industrial and institutional cleaning market.

Speaker 2: the effect of foreign currency translation positively impacted sales by 1%. Subfact and operating income per quarter decreased $10.9 million from a minimum to inflation, supply chain disruptions, higher planning, maintenance expenses, as well as the one-time meal sale insurance payment of $3 million recognized in the fourth quarter of 2020.

Effect of foreign currency translation positively impacted sales by 1%.

So in fact on the operating income for the quarter decreased $10 9 million.

And I'll leave you to inflation supply chain disruptions, how youre planning maintenance expenses as well as the one time, Neil Zale insurance payment of $3 million recognized in the fourth quarter of 2020.

Speaker 2: We estimated that supply chain disruption had a negative impact of an operating income of approximately $3 million during the quarter. We implemented additional price increases to continue recovering our market.

We actually made a supply chain disruption had a negative impact on operating income of approximately $3 million during the quarter.

We implemented additional price increases to continue recovering our margins.

Speaker 2: Europe results were mainly flat from prior year due to decreased consumer product demand which was partially offset by increased demand in functional products.

Europe results were mainly flat from prior year due to decreased consumer product demand, which was partially offset by increased demand in functional products.

Speaker 2: Latin America's operating results were slightly up from last year due to strong volume growth in the functional product and market.

<unk> operating results were slightly up from last year due to strong volume growth in the functional product end markets now.

Speaker 2: Now, turning to polymers on slide 8. Net sales were $174 million, up 49% from the prior year, telling prices increased 39% from my review to the pass-through of higher raw material costs.

Now turning to polymers on slide eight.

Net sales were $174 million.

Up 49% from the prior year.

Selling prices increased 39%, primarily due to the pass through of higher raw material costs.

Speaker 2: Volume grew 12% in the quarter driven by 13% growth in global rigid volume. This volume growth is mostly related to the invista position.

Volume grew 12% in the quarter driven by 13% growth in global rigid polyol volume growth is mostly related to increased acquisition.

Speaker 2: Highly man, within the special depole of business, also contributed to volume growth.

Higher demand within our specialty polyol business also contributed to volume growth.

Speaker 2: Polymer operating income decreased $10 million. This decrease primarily reflects supply chain disruptions and the non-recorder of two fourth quarter 2020 events.

Polymer operating income decreased $10 million. This decrease primarily reflects supply chain disruptions and the nonrecourse.

<unk> fourth quarter 2020 event.

Speaker 2: First, a 10 million insurance recovery related to the 2020 Mule cell event. And second, a $1.4 million settlement received from the Chinese government.

10 million insurance recovery related to the 2020 meal zelle event.

Second a $1 $4 million settlement received from the Chinese government.

Speaker 2: we estimate the supply chain disruption had a negative impact on our banking income of approximately $3 million during the quarter. Your results increased by...

We actually made a supply chain disruption had a negative impact on operating income of approximately $3 million during the quarter.

Europe results increased driven by the <unk> acquisition.

Speaker 2: Turning to slide nine, despite significant challenges during the year, including the global pandemic, unprecedented supply chain disruptions, they completed the record for the result.

Turning to slide nine despite significant challenge during the year, including the global pandemic unprecedented supply chain disruptions they completely record full year results.

Speaker 2: Just the net income was a record $143.5 million, or $6.16 per diluted share. An increase of 9% versus $132 million, or $5.68 per diluted share in the prior year.

Adjusted net income was a record $143 5 million.

$6 16 per diluted share, an increase of 9% versus $132 million or $5 68 per diluted share in the prior year.

Speaker 2: The surfactant segment operated income was $166 million, down slightly from 2020. Global volume was down by 5% as a result of lower demand for cleaning, disinfection, and personal wash products versus the pandemic peak in 2020. This was partially offset by higher demand for products sold into institutional cleaning and functional product and marketing.

So in fact on <unk>.

Operating income was $166 million.

Down slightly from 2020 global volume was down by 5% as a result of lower demand for cleaning disinfection of personal wash products versus the pandemic peak in 2020. This was partially offset by higher demand for products sold into institutional cleaning and functional product end markets.

Speaker 2: The polymer segment delivers $74 million of operating income, of 8% versus last year. Global polymer volume grew 29% from another result in VISTA IT crap.

The polymer segment delivered $74 million of operating income.

8% versus last year lower volume our volume grew 29% primarily as a result of MB stopped polyol acquisition.

Speaker 2: Specialty product operator Inco was $14.2 million, basically flat versus prior year.

Specialty broader operating income was $14 $2 million basically flat versus prior year.

Speaker 2: Lastly, the estimated negative impact of the supply chain disruption in our operating income was $21 million during 2021. The second impact was $12 million, polymer $8 million and specialty products $1 million.

Lastly, the estimated negative negative impact of the supply chain disruption in our operating income was $281 million during 2021.

Any impact was $12 million, <unk> 8 million and our specialty products $1 million.

Speaker 2: Slide 10 shows the total company earnings for the full year of 2021 compared to 2020 and breaks down the increase in adjusted net income. Because this is net income, the figures noted here are on an after-tax basis. Turfactan was slightly down, fully upset by polymers, and one-time tax benefits. We expect the effective tax rate for 2022 to be in the range of 24-26 percent.

Slide 10 shows the total company earnings bridge for the full year of 2021 compared to 2020.

Breaks down the increase in adjusted net income because this is net income. The figures noted here are on an after tax basis to the fact that we will slightly down fully offset by polymers and one time tax benefit we expect the effective tax rate for 2022 to be in the range of 24% to 26%.

Speaker 2: Moving on to slide 11, our balance sheet remains strong, and we have ample liquidity to invest in the business.

Moving on to slide 11, our balance sheet remains strong and we have ample liquidity to invest in the business.

Speaker 2: Our leverage and interest coverage ratios continues at very healthy levels. The company has full year capital expenditures of $195 million as we ramp up our investment in Pasadena and low one for dioxin projects.

Our leverage and interest coverage ratios continues at very healthy levels.

The company had full year capital expenditures of $195 million as we ramp up our investment in <unk>.

In a low one four dioxin projects.

Speaker 2: Beginning on a flight 12, the SCOB will now update you on our 2022 Shakyig priority.

Beginning on Slide 12, Scott will now update you on our 2022 key priorities.

Speaker 1: Thank you, Luis. As we wrap up 2021 and despite the supply chain challenges that we experienced together with our customers, we managed to deliver record net income. Our team delivered once again.

Thank you Louise as we wrap up 2021, despite the supply chain challenges that we experienced together with our customers. We managed to deliver record net income our team delivered once again.

Speaker 1: Although cleaning, disinfection, and personal wash volumes declined last year versus the 2020 pandemic peak, consumer habits have changed which has led to a sustained higher level of demand versus pre-pandemic levels.

Although a cleaning disinfection and personal wash volumes declined last year versus the 2020 pandemic peak consumer habits have changed which has led to a sustained higher level of demand versus pre pandemic levels.

Speaker 1: Published data shows consumers are spending up to 20% more time in their homes.

Published data shows consumers are spending up to 20% more time in their homes.

Speaker 1: Our diversification strategy and the functional products continues to be a key priority for step.

Our diversification strategy and our functional products continues to be a key priority for Stepan.

Speaker 1: Our global agricultural volumes increased strong double digits in 2021. High commodity prices for corn and soybeans, coupled with more planted acreage in the year, drove a strong season for crop protection products in North America.

Our global agricultural volumes increased strong double digits in 2021.

High commodity prices for corn, and soybeans, coupled with more planted acreage in the year drove a strong season for crop protection products in North America.

Speaker 1: In Latin America, crop prices and a favorable exchange rate had a positive impact on exports, driving higher planted acreage in Brazil.

In Latin America crop prices and a favorable exchange rate had a positive impact on exports driving higher planted acreage in Brazil oil.

Speaker 1: Oil field chemicals experienced record sequential volume growth as the price of oil increased 68% last year. We remain optimistic about future opportunities in this business as oil prices remain high. And we continue to promote our new cost effective product solutions that will improve oil field operator return on investment and protect their wealth.

Oilfield chemicals experienced record sequential volume growth as the price of oil increased 68% last year, we remain optimistic about future opportunities in this business as oil prices remain high and we continue to promote our new cost effective product solutions that will improve oilfield operator returned on.

<unk> and protect their wells.

Speaker 1: We increased our biocide capacity last year and are investing to increase capacity and capability in certain product lines including sulfates, amphoteric and alkoxylates to ensure we can meet higher requirements from our customers.

We increased our biocide capacity last year and are investing to increase capacity and capability in certain product lines, including Sulfates and for Terex.

<unk> to ensure we can meet higher requirements from our customers.

Speaker 1: As discussed previously, we are increasing North American capability and capacity to produce sulfates that meet new limits on 1-4-to-AXA by the January 2023 regulatory deadline. 1-4-to-AXA is a minor byproduct generated in the manufacture of either sulfates or factants, which are key cleaning and foaming ingredients used to consume or product formulation.

As discussed previously we are increasing north American capability and capacity to produce sulfates that meet new limits on one for dioxin by the January 2023 regulatory deadline.

<unk> seen as a minor byproduct generated in the manufacture of either Sulfates surfactants, which are key cleaning and folding ingredients used to consumer product formulations.

Speaker 1: through a combination of process optimization and additional manufacturing equipment, Steppen will be prepared to supply customers via the full fades that meet the new regulatory requirements.

Through a combination of process optimization and additional manufacturing equipment step and we'll be prepared to supply customers either sulfates that meet the new regulatory requirements.

Speaker 1: This project, along with our previous announcement of an Alcoxilation production facility at our Pasadena, Texas site are the primary drivers of the forecasted 350 to 375M dollars in 2022 capital spending.

This project along with our previous announcement of in our constellation production facility at our Pasadena, Texas site are the primary drivers of our forecasted $350 million to $375 million in 2022 capital spending.

Speaker 1: We expect to break ground and pass it in the next month and estimate plant start off by the end of 2023.

We expect to break ground in capacity in the next months and estimate plant startup by the end of 2023.

Speaker 1: We are excited about the capability and the future growth that these investment projects will deliver to step in company.

We are excited about the capability and the future growth that these investment projects will deliver to step in company.

Speaker 1: Tier 2 and Tier 3 customers continue to be a focus of our surfactant growth strategy.

Tier two and tier three customers continued to be a focus of our surfactant growth strategy we.

Speaker 1: We added 1,400 new customers during 2021, and we will continue serving the strategic market for us.

We added 1400, new customers during 2021, and we will continue serving the strategic market for us.

Speaker 1: We continue to invest in enhancing our digital customer interface and capabilities to reach these customers around the world.

We continue to invest invest in enhancing our digital customer interfacing capabilities to reach these customers around the world.

Speaker 1: We made good progress last year in our fermentation program, which is focused on the development and commercialization of Romnolip.

We made good progress last year in our fermentation program, which is focused on the development and commercialization of around the Olympics.

Speaker 1: We are excited about the level of market interest in bio-based materials, including surfactants.

We are excited about the level of market interest in bio based materials, including surfactants.

Speaker 1: We expect a complete process development work this year and begin engineering design on modifications required to produce round the lipids at our commercial scale fermentation plant located in Louisiana, which we acquired last year.

We expect to complete process development work this year and begin engineering design modifications required to produce round of lipids that are commercial scale fermentation plant located in Louisiana, which we acquired last year.

Speaker 1: This program is in line with our commitment to a more sustainable future. As we continue to advance sustainability initiatives, we were pleased that in 2020, the Wall Street Journal recognized Step & Company within the top 100 most sustainably managed companies in the world. And in 2021, we were successful in improving our EcoVadis rating from silver to gold.

This program is in line with our commitment to a more sustainable future.

We continue to advance our sustainability initiatives. We were pleased that in 2020, the Wall Street Journal recognize Stefan company within the top 100, most sustainably managed companies in the world and in 2021, we were successful in improving our <unk> rating from silver to gold.

Speaker 1: Our consulting work at Millsdale is complete and we are now focused on implementing the recommended changes.

Our consulting work at <unk> is complete and we are now focused on implementing the recommended changes.

Speaker 1: We accelerated investments in both expense and CapEx in 2021 to improve productivity and to increase capacity. We expect to see these benefits of our efforts in the following years.

We accelerated investments in both expense and Capex during 2021 to improve productivity and to increase capacity, we expect to see these benefits of our efforts in the following years.

Speaker 1: Polymers had a good performance during the year, despite significant supply chain disruption and challenges.

Polymers had a good performance during the year, despite significant supply chain disruptions and challenges.

Speaker 1: The integration of the business acquired from Envisto was all done by our team, and we delivered more than $20 million of EBITDA in 2021.

The integration of the business acquired from Vista was all done by our team we delivered more than $20 million of EBITDA in 2021.

Speaker 1: The acquisition was accretive to both EPS and even a margin.

The acquisition was accretive to both EPS and EBITDA margins.

Speaker 1: We are investing at both of the legacy and this production site to debattle that capacity and to ag capabilities to produce a broader range of Steppen's product portfolio.

We are investing at both of the legacy Investor production sites to Debottleneck capacity and to add capabilities to produce a broader range of Stephens product portfolio.

Speaker 1: Given the strength of our balance sheet, we plan to continue to identify and pursue acquisition opportunities that align with our growth and diversification strategy, including the addition of new platform chemistries that can broaden our portfolio of sustainable offerings for our customers. I will now turn the call back to Quinn for close.

Given the strength of our balance sheet, we plan to continue to identify and pursue acquisition opportunities that align with our growth and diversification strategy, including the addition of new platform Chemistries that can broaden our portfolio of sustainable offerings for our customers.

I will now turn the call back to Quinn for closing comments.

Thank you Scott.

Speaker 3: The company delivered record earnings in 2021.

The company delivered record earnings in 2021.

Speaker 3: Looking ahead to 2022, we believe demand for our products will remain strong. But the company will continue to face many of the same challenges that impacted our operations in 2021.

Looking ahead to 2022, we believe demand for our products will remain strong, but the company will continue to face many of the same challenges that impacted our operations in 2021.

In terms of segments, we are cautiously optimistic about the consumption of cleaning disinfection and personal wash product within surfactants.

Speaker 3: We are cautiously optimistic about the consumption of cleaning, disinfection, and personal wash products within Surfact.

Speaker 3: We believe I will not return to the pandemic peak levels of 2020, but will grow versus 2021.

We believe volumes will not return to the pandemic peak level of 2020, but will grow versus 2021.

Speaker 3: We expect industrial and institutional cleaning volumes to increase as the economy is open.

We expect industrial and institutional cleaning volumes to increase as the economies open.

Speaker 3: Surrected demand within the agricultural and oil field markets should continue to grow due to higher commodity prices and new step in technology.

Sure accurate demand within the agricultural and oilfield markets should continue to grow due to higher commodity prices and new step in technologies.

Speaker 3: The long-term prospects for our polymer business remain attractive. We expect stronger demand linked to energy conservation efforts and more stringent building code.

The long term prospects for our polymer business remain attractive.

Expect stronger demand linked to energy conservation efforts and more stringent building codes.

Speaker 3: Additionally, we believe that the new US infrastructure bill should provide tailwinds for the insulation industry.

Additionally, we believe that the new U S infrastructure Bill should provide tailwind for the installation industry.

Speaker 3: However, in January , we experienced production challenges in our polymer unit at Millsdale.

However in January we experienced production challenges in our polymer unit at mill sale.

Speaker 3: And unfortunately we had to declare a forced measure. At Mill Sale we are producing polymers at reduced rates and we are using our global network including the inquired Envista Wilmington North Carolina site to deliver products to our customers and albeit at higher cost. We expect to resume full production in early March.

And Unfortunately, we had to declare a horse mature.

At <unk>, we are producing polymers have reduced race and we are using our global network, including the inquired Investor Wilmington, North Carolina site to deliver products to our customers, albeit at higher cost.

We expect to resume full production in early March.

Speaker 3: We anticipate our specialty product business results will improve slightly year over year.

We anticipate our specialty product business results will improve slightly year over year.

Speaker 3: Despite continued raw materials sourcing issues and higher prices, as well as our higher first quarter polymer supply chain costs, we believe underlying market demand across most segments remains strong and we are optimistic about delivering another good year.

Despite continued raw material sourcing issues and higher prices as well as our higher first quarter polymer supply chain costs, we believe underlying market demand across most segments remains strong and we are optimistic about delivering another good year.

Speaker 3: Finally, today we are announcing my retirement from Steff & Co. effective April 25, 2022. I am extremely pleased that Scott will be our next CEO .

Finally.

Today, we are announcing my retirement from staffing company effective April 25th.

'twenty two.

I am extremely pleased that Scott will be our next CEO .

Speaker 3: No one is better suited to lead us into the future. Under his leadership, the business has diversified its market presence, delivered innovative, sustainable technologies, and completed multiple acquisitions, which have contributed to record results.

No one is better suited to lead us into the future under his leadership the business has diversified its market presence delivered innovative sustainable technologies and completed multiple acquisitions, which have contributed to record results.

Speaker 3: It has been an honor and privilege to serve as a third founding family, the EO of Stepping Company.

It has been an honor and privilege to serve as a third founding family CEO of Stepan company.

Speaker 3: I am proud not only of the value that we have created for employees, customers, and you, our shareholders, but how we have delivered those results.

I am proud not only of the value that we've created for employees customers and you our shareholders, but how we have delivered those results.

Speaker 3: I am grateful to the Steppen employees around the world whose unwavering commitment to our mission has allowed us to grow and will ensure our future success. This concludes our prepared remarks. At this time, please remember to give and prayers for an

I am grateful to the step and employees around the world, whose unwavering commitment to our mission as it allowed us to grow and will ensure our future success.

This concludes our prepared remarks.

At this time, we would like to turn the call over for questions. Scott can you. Please review the question the instructions for the question portion of today's call.

Speaker 3: Scott, can you please review the instructions for the question portion of today's call?

Speaker 1: Thank you. If you'd like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a 3 tone prompt to acknowledge your request.

Thank you if you'd like to register a question. Please press the one followed by the foreign your telephone Youll hear a three pronged to acknowledge your request.

Speaker 1: If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. And if you are using a speaker phone, please lift your handset before entering your request. Once again, that's one four to register for a question, one brief moment, fourth first question. We do have a question from Mike Harrison with C-Port Research Partners. Please go ahead and open.

If your question has been answered and you would like to withdraw your registration. Please press. The one followed by the <unk> and if you are using a speaker phone. Please lift your handset before entering your request once again Thats one four to register for a question on performance for the first question.

Do have a question from Mike Harrison with Seaport Research Partners. Please go ahead. Your line is open.

Speaker 4: Hi, good morning and congratulations to Scott on the promotion and to Quinn on the retirement.

Hi, good morning, and congratulations Scott on the promotion and Quinn.

Retirement announcements.

Speaker 3: Thank you, Mike. We're both looking forward to that.

Thank you Mike. Thank you, Mike we're both looking forward to that.

Yeah.

Speaker 4: Understood. Was wondering if you can give a little bit more color on the inflationary and supply chain disruption impact.

Understood.

I was wondering if you can give a little bit more color on the inflationary and supply chain disruption impacts across the different segments, I think a little bit what we're trying to understand.

Speaker 4: across the different segments. I think a little bit what we're trying to understand.

Speaker 4: You gave the $7 million total impact from disruption in the fourth quarter. I'm trying to understand how much of that is price-cost lag. How much of it is maybe related to limited raw material availability or some other production and efficiencies. And are those issues getting better as we get into Q1 and Q2 or could they actually worsen in the first half of the year?

<unk> the $7 million total impact from disruption in the fourth quarter I'm trying to understand how much of that is price cost lag.

How much of it is maybe related to limited raw material availability or some other production inefficiencies and are those issues getting better as we get into Q1, and Q2 or could they actually worse than in the first half of the year.

Speaker 2: Thanks, Mike, for the question. This is please, look, I'm not getting to all the specific details as you can imagine. This is a broader number on the impact of Q4, and more importantly, on the impact for total 2021. So as I mentioned in my remarks, all the supply tends to be disruption that we saw in the marketplace because of raw material availability, because...

Thanks, Thanks, Mike for the question this is the space.

Look I'm not going to get into all the specific details as you can imagine this is a broad.

Order number on the impact of Q4 and more importantly on the impact for total 2021, so as I mentioned in my remarks.

All of this supply chain disruption that we saw in the marketplace because of raw material availability because logistics.

Speaker 2: lack of availability was inject in total around $21 million in operating income. So on a pre-tax basis and I gave the numbers by business units. So it's accessible, it's a sizeable impact that.

Lack of availability was in total around $21 million in operating income on a pretax basis and I gave the numbers by business unit. So is it possible is a sizeable impact that prevented us to grow even further would it be if you look at let me give you a little bit more perspective.

Speaker 2: prevented us to grow even further our business. If you look at, let me give you a little bit more perspective on the inflation and pricing. But...

Inflation in pricing, but if you look at our numbers cost of goods sold.

Speaker 2: If you look at our numbers, cost of good souls are up 31%. I don't know, volume is up 2%.

31% <unk> volume is up 2%. So we are seeing significant inflation in raw materials are north of 30% in logistics north of 25%.

Speaker 2: So we are seeing significant inflation in raw material, north of 30%, in logistics, north of 25%. And as you have seen in our numbers, we have done a very good job managing our pricing and our needs.

And as you have seen in our numbers we have done.

Very good job managing our pricing on our mix. So we've closed the year with 22% price mix, but we get our improvements quarter after quarter right, 13% in Q1, 20% in Q2, 28% in Q3, 29% in Q4 so.

Speaker 2: So we close the year with 22% price mix, but we've got all improvements quarter after quarter, right? 13% into one, 20% into two, 28% into three, 29% into four. So.

Speaker 2: You always have a lack between cost and pricing, but the team has done a very good job of trying to recover all the inflation that we're seeing with pricing and mix. The 22% as you can do the math is $400 million.

You always have a lag between cost and pricing, but the team has done a very good job of.

Trying to recover all the inflation that we're seeing with pricing of 22% as you can do the math is $400 million.

Speaker 2: in pricing and mix. So we're pleased with the performance from the team, and we will continue working on productivity and working on pricing and working on mix.

In pricing so we.

We're pleased with the performance.

From the team and we will continue we will continue working on productivity on working on pricing on working to.

Speaker 2: to gradually improve our margins. And if I could just talk to Sean.

So get out really improve improve our margins.

If I could kind of just cut.

On the raw material.

Speaker 3: availability. Raw materials within our surfactant business are generally significantly improved.

Availability raw materials within our surfactant business are generally.

Significantly improved there are still some issues with regard to propylene oxide and fatty acid availability.

Speaker 3: still some issues with regard to propylene oxide and fatty acid availability that we're still dealing with, that this whole supply chain is dealing with, but the other raw materials are present.

That.

Bad debt, we're still dealing with it this whole supply chain is dealing with but the other raw materials are are.

Our present.

Speaker 3: The issue that we're still facing that is problematic.

The issue that we're still facing that is problematic is transportation availability and that is a kind of a universal.

Speaker 3: is transportation availability. And that is kind of a universal issue in the United States today. And I would say there's some gradual improvement in there, but it's still a big issue. And talking with our suppliers and our customers, we anticipate that that'll be with us through the first half of the year.

Issue.

In the United States today, and I would say.

There is some gradual improvement in there, but it is still.

It's still a big issue in <unk>.

Talking with our suppliers and our customers.

Anticipating that that will be with us through the first half of the year.

Speaker 4: I appreciate all the color there, Luis. I guess I would just ask as a follow up, the you guys run on FIFO inventory. So I guess I'm asking, have we already seen peak raw materials run through to the PNL in Q4, or is Q1 going to be the peak for raw material costs?

Alright, I appreciate all the color there I guess I would just ask as.

As a follow up.

The you guys run.

FIFO inventory, so I guess im asking have we already seen peak raw materials run through to the P&L in Q4 or is Q1 going to be the peak for raw material costs.

Speaker 2: Look, the situation, I mean, we have a broad background, of course, of raw materials and some are going up, so much are starting to stabilize. But look, oil is already a 93 dollars.

Look the situation.

We have a broad basket of course of raw materials on some amount of going not saw modest either starting to stabilize tullow oil is already at $93. So I don't think we are in the peak.

Speaker 2: So I don't think we are in the peak yet. Now, the slope of increase has significantly changed, right? I mean, the slope of increases that we saw in Q2, Q3, and Q4, and for the average of the 30% plus in 2021, that slope is significantly lower now, but with oil above $90, I don't think we are in the peak.

Now the slope of increase has significantly changed right I mean.

The slope of the increases that we saw in Q2 Q3 and Q4.

For the average of the 30% plus in 2021 that is will be significantly lower now, but with oil above $90. I don't think we are adding to begin.

Speaker 4: All right, I appreciate that. And then in terms of the Nosedale facility mentioned,

Alright, I appreciate that and then in terms of the mills deal facility you mentioned.

Speaker 4: some disruption there and declaring force major. How much lower is production now or operating rate now versus 100% or where you would expect to be? And can you also talk about the changes that are being recommended and implemented at that facility based on your work with consultants?

Some disruption there and declaring force majeure, how much lower is production now we're operating right now versus 100% or where you would expect to be and can you also talk about the changes that are being recommended and implemented at that facility.

<unk> based on your work with consultants.

Yes. Thanks.

Speaker 1: So we experienced the power disruption in early January that subsequently caused damage to our polymer plant, which we're in the process of getting back online and as Quinn mentioned earlier, getting back to full production rates by March 1st. Today, we're running it about half capacity at the site, but our supplementing supply from our global network is Quinn mentioned earlier.

So we experienced a power disruption in early January that.

Subsequently caused.

Damage to our polymer plant, which we're in the process of getting back online.

Quinn mentioned earlier getting back to full production rates.

First today, we're running at about half capacity at the site, but are supplementing supply from our global networks.

Quintin mentioned earlier.

Speaker 1: So once we get the units back to full production rates in early March, we have a long list of items that we will be working on to get that reliability up so we can handle the power blips in the future. And that work will commence in starting in Q2.

So once once we get the units back to full production rates and early March.

We have a long list of items that we will be working on to too.

Get that reliability up so we can handle the power blips in the future.

And that work will commence in starting in Q2.

Speaker 1: So $57 million impact is what we think will be seeing in Q1. In Q1-22, the $5.27 million that's gorgeous measure is going to predax base.

There was a $5 $7 million impact is what we think.

We will be.

Being in the.

In Q1, and Q1 'twenty towards the $5 million to $7 million as Scott just mentioned is on a pre tax basis.

Speaker 4: Perfect, that's very helpful. And then a couple of quick questions. First of all, Luis, on the tax rates, your guidance is quite a bit higher than the 20% you saw in 2021. What causes the variability in the tax rate? It seems like it's jumped around the past few years.

Perfect.

That's very helpful.

And then a couple of quick questions first of all Luis on the tax rates Youre guidance is quite a bit higher than the 20% you saw in 2021.

This is the variability in the tax rate it seems like it's jumped around the past few years.

Speaker 2: Yeah, great question. Like we have had the opportunity to deliver some one of tax projects in the last few years, and especially in 2021. If you look at the tax rate in the US, the 21 plus state is an average tax rate for many companies of around 24, 25%. And if you look at our country mix outside of

Yeah, Great question Mike.

We have had this opportunity to deliver some.

<unk> projects in the last few years and especially in 'twenty 2021, if you look at the tax rate in the U S. The 21, plus the state is an average tax rate for.

Many companies look around 2425% and if you look at our country mix outside of the U S.

Speaker 2: you get to an average tax rate of 26%. So roughly between 25, 26. That's our normal...

Get to our average tax rate of 26% so.

Roughly between 25% 26, that's our normal.

Speaker 2: tax rate. We have the opportunity last year as we worked on tax projects.

Right, we had the opportunity last year rewards tax projects, we did emerge in Brazil of our diverse acquisition that would be it a few years ago, you know the low in Brazil.

That would will for tax purposes, so that provided.

Speaker 2: time help in 2021. So we are not expecting we don't have any any of those type of projects in 2022. We will continue looking for opportunities but but at this point we don't envision any critical projects that is going to reduce our normal tax rate which is between 24 and 26 percent. And then I was also curious on the fourth quarter revenue contribution from Investor. I know you as you said, about 120 million in revenue for the sale.

A nice one time help us in 2021, so we're not expecting we don't have any.

Any of those type of projects in 2022, we will continue looking for opportunities, but but at this point, we don't envision any critical projects that it's we're not gonna have used our normal tax rate, which is between 24% 26%.

Speaker 2: between 24 and 26%.

Speaker 4: Right. And then, was also curious on the fourth quarter revenue contribution from Invista. I know you said about 120 million in revenue for the full year. But what did it do in Q4? And maybe give you a chance to comment on how that business is performing relative to your expectations roughly a year since you acquired it. Thank you.

Alright, and then was also curious on the fourth quarter revenue contribution from this I know you said about $120 million in revenue for the full year, but what did it do in Q4.

Maybe give you a chance to comment on how that business is performing relative to your expectations roughly a year since you acquired it. Thank you.

Speaker 2: Yeah, we provided a 120 and as you know, we had the business for 11 months in 2021. So you can easily see that it's around 10 million dollars per month. But you know that this business has its own attitude, right? I mean Q4 is typical in the lower...

Yes, yes, we provided a one too many.

And as you know we had the business for 11 months in 2021, So you can easily see that.

Around $10 million per month, but you know that this business has seasonality right. I mean Q4 is typically the lowest.

Speaker 2: quarter of the year of the seasonality. So I'm not gonna give you the exact number. You can imagine that it's below $30 million and below the normal.

Quarter of the year business. So not only these so im not wanted to give you. The exact number you can imagine that is below $30 million below the normal average and I would say, we're very pleased with the integration.

Speaker 3: And I would say we were very pleased with the integration effort by our employees around the world.

By our.

By our employees around the world.

Speaker 3: The volumes increase as a result of our

The volumes.

Increase is a result of our.

Speaker 3: the underline market growth and the efficiency of which we integrated that into our supply chain work.

The underlying market growth and the efficiency at which we integrated that into our supply chain work.

Speaker 3: We were able to improve the margins on a European basis, and we're very pleased with the overall contribution of the business, and it's right at early start. It's ahead of our plan. The business generated in excess of $20 million of EBITDA in 2021.

We were able to <unk>.

Prove the margins.

The European <unk>.

<unk> basis.

We're very pleased with the overall.

Contribution of the business in it.

As early start it's ahead of our plan the business generated an excess of $20 million of EBITDA in 2000.

'twenty one.

Speaker 2: Yeah, that put us basically ahead of our target like two years, right? We promise you guys six and a half to seven and a half multiple after two years. We are basically delivering that in the first year.

Yes.

Put us basically ahead of our targets like two years right. We promised you guys six five to seven five multiple after two years.

We are basically delivering that in the first year.

Okay.

Alright, thanks very much.

Thanks, Mike.

Speaker 5: Our next question is from Vincent Anderson with the Steeple. Please go ahead, Dr. Linde open.

Our next question is from Vincent Anderson with Stifel. Please go ahead. Your line is open.

Yes. Thanks can you hear me okay.

Yes.

Speaker 6: Good morning, Dan. Good morning. And I'll echo Mike's, you know, sincere congratulations to Quinnon. Good morning.

Good morning.

Good morning, and I'll Echo my sincere congratulations to Quintin Scott Paul.

I'm not sure when we can expect your artisanal line of skin and hair care products as you enter the next phase of your career, but I can imagine, they're just going to walk away completely.

Speaker 6: So sorry, maybe a bit more granularity on where de-stocking was most concentrated between your tier 1 and tier 2, tier 3 customers, and then how that

So sorry, maybe a bit more granularity on where destocking was most concentrated between your tier one and tier two tier three customers and then how that might be impacting your broader expectations for mix impact on margins in surfactants next year or this year I should say, yes.

Speaker 1: Yeah, thanks, this is Scott. You know, the de-stocking that we experienced in 2021 was really centered around biopytes used in disinfection products both for home and in industrial applications.

Yeah. Thanks, Vincent this is Scott.

The destocking that we experienced in 2021 was really centered around bio sites used in.

Disinfection products, both for home and industrial applications.

Speaker 1: I'd say the other area was in liquid hand soaps. I think as we've all witnessed in 2020 and 2021, the myriad of products that were available in the market on the store shelves did cause, I think, a fat spot in the supply chain, which had to be worked through in 2021. And I would say that impacted both Tier 1 and Tier 2, Tier 3 customers equally.

I'd say the other area was in liquid hand, soaps I think.

In 2020 in 2021, the myriad of products that were available in the market on the store shelves did cause.

That spot in the supply chain, which had to be worked through in 2021.

Let's say that impacted both tier one and tier two tier three customers equally.

Speaker 1: where we see ourselves in 2022, we're hopeful that most of that inventory has been flushed through the system and that we will see more normal as demand going forward into Quinn's earlier point. We believe that will be above pre-pandemic levels, but not as high as the volumes we saw in 2020. Okay, that's helpful.

Where we see ourselves in 2022 were hope that hopeful that most of that.

Inventory has been flushed through the system and that we will see more normalized demand going forward into Quinn's earlier point, we believe that will be above pre pandemic levels, but not as high as the volumes we saw in 2020.

Okay. That's helpful. Thanks, and then.

Maybe switching over to functional surfactants.

Speaker 6: Yeah, just given the inherent volatility of those end markets, I was curious how you measure your own performance in areas like ag and oil.

Just given the inherent volatility of those end markets I was curious how you measure your own performance in areas like AG in oilfield and if there are any kind of broad targets that you'd be willing to share with us heading into 2022.

Speaker 6: and if there are any kind of broad targets that you'd be willing to share with us.

Speaker 1: no uh... you you hit it on the head then to these markets are volatile i'd say oilfield obviously more volatile than ag uh... you know you do have a a good underlining trend tailwind in in the crop

No.

You hit it on the headwinds that these markets are volatile I'd say oilfield, obviously more volatile than AG.

You do have a a good underlining trend tailwind in the crop.

Speaker 1: crop production market with the need to feed the planet and with renewable fuels taking a larger stage going forward. There's really bullish undertones for continued demand for crop protection products.

Crop production market with the need to plan it in.

And with renewable fuels, taking a larger stage going forward.

Really bullish undertones for continued.

Demand for crop protection products oilfield, obviously is more volatile.

Speaker 1: Oil field obviously is more volatile. I think that's, you know, in terms of how we look at it and forecast going forward, it's not a science by any means.

I think thats it.

In terms of how we look at it and forecast going forward.

It's not a science by any means.

Speaker 3: What I would say is one of the key metrics for us in terms of our R&D efforts within the ag space. We're tracking fairly closely our wins at the customer interface in terms of

What I would say is one of the key metrics for us in terms of our R&D efforts within the AG space.

We're tracking fairly closely our wins at the customer interface in terms of.

Speaker 3: helping them formulate the next generation pesticide products for the marketplace. And generally there's registration lag that is two to three years after those products are fully developed. So one of the key internal metrics that we turn up is our anticipated customers anticipated product launches. And we do have a window in terms of

Helping them formulate.

The next generation.

Pesticide.

Products for the marketplace and generally there is registration lag that is two to three years. After those products are fully developed so one of the key internal metrics that we track is our anticipated product our customers anticipated product launches and we do have a window in terms of.

Speaker 3: How our business is going to be impacted by those launches over the next couple years. And what I would tell you is that we remain optimistic about our growth in the crop protection segment as a result of those previous R&D activities and wins.

How our business is going to be impacted by those launches over the next couple of years and what I would tell you is that we remain optimistic about our growth in the crop protection segment as a result of those previous R&D Act.

Activities in wins.

That's good.

Speaker 6: And actually that was kind of leading into my next point, which was I do recall you reporting a couple

Great and actually that was kind of leading into my next point, which was I do recall you reporting a couple of.

<unk>.

Speaker 6: the ag business substantial wins a couple years ago. Are you saying that you're pretty confident that we should be reaching the end of that registration window as we head into 2022?

For the AG business substantial wins, a couple of years ago are you, saying that you are pretty confident that we should be reaching the end of that registration window as we head into 2022.

Hello.

Okay.

One brief moment as we reconnect.

Speaker 7: I.

Okay.

Sure.

Okay.

Okay.

Sure.

Yes.

<unk>.

Okay.

Okay.

Okay.

Okay.

Okay.

Yes.

Yes.

Yes.

Yes.

Sure.

Thanks.

Yes.

[music].

Okay.

Speaker 5: And we're now reconnecting.

And we're now reconnected you may begin.

Speaker 3: Sorry about that. It must be the new guy.

Sorry about that it must be the new guy.

Speaker 3: So we've lost connection and we are back on online and Vincent, I'm not sure exactly where we've dropped off, but I think it was as I was saying that we believe we have some items left in our pipeline. Do you have another question? Yeah.

So we have lost connection and we are back on.

Slide.

Vince and I am not sure exactly where we locked.

Dropped off but.

I think it was as I was saying that we believe we have some items left in our pipeline that you have another question.

Can you still hear me.

Yes.

Speaker 6: Perfect. Alright, well yeah, that does answer the last question. And so for the last one for me, this was a bit more anecdotal. But, you know, I've been noticing a lot more of these consumer cleaning products.

Perfect Alright.

That does answer the last question and so for the last one for me. This was a bit more anecdotal, but I've been noticing a lot more of these consumer cleaning products that are being sold.

Speaker 6: and either rehydrated at home like surface cleaners or used directly in dry form like these laundry detergent strips they're all over.

In dry form and either re hydrated at home like surface cleaners or used directly in dry for them like these laundry detergent strips, they're all over my house right now.

Speaker 6: And the wholesale pitch appears to revolve around a more attractive environmental.

The wholesales pitch appears to revolve around a more attractive environmental footprint by not having to ship water.

Speaker 6: You know, have any of these products come up on your radar yet? And if so, do they represent...

Have any of these products come up on your radar yet.

And if so do they represent any meaningful change in their surfactants requirements.

Speaker 1: Yeah, so, uh, three question Vincent and I would say, you know, this is obviously, uh, uh, uh, from a sustainability push, uh, you know, there's a lot of water shipped around the world today and a lot of consumer products. So getting concentrated.

Yes, so great question Vincent I would say this is obviously.

Our sustainability push.

There is a lot of water shipped around the world today, and a lot of consumer products, so getting concentrated.

Speaker 1: Formulations to the end-use consumer is a great way for to have reduction in scope three emissions around product use. Stepin, we have a product line within surfactants that are solid solids surfactants and highly concentrated surfactants. So we are working with the consumer product companies and to help their journey towards a more sustainable product portfolio on the store shelf.

Formulations to the end use consumer is a great way for do it to have reduction in scope three emissions around product use step and we have a product line within surfactants that are solid solid surfactants in highly concentrated surfactant. So we are working with the consumer product companies.

Yes.

<unk>.

To help.

Their journey towards a more sustainable on a product portfolio on the store shelf.

So.

That's helpful. If I could just add.

Speaker 6: caveat though I mean we used to use powdered laundry detergent and we determined that that was not optimal for a water supply. Are we going back to?

Ask a caveat, though I mean, we used to use powdered laundry detergent and we determined that that was not optimal for our water supply or are we going back to.

The old school Sultanate, and this process or is this just a completely new product line that's still facilitates.

Dry powder dry formulations.

Speaker 1: I think there's a balance. I don't see us going back to powdered detergents from an environmental footprint perspective. That technology and that processing is attractive as other new alternative processing technologies that can to what product companies have for producing highly concentrated and or some other alternative forms of solid detergent. So the active ingredient and traditional powders.

I think there is a balance I don't see.

<unk> is going back to powder.

Detergents.

From an environmental footprint perspective that technology in their processing is not as attractive as other new alternative processing technologies that consumer product companies have for producing highly concentrated <unk> to other alternative forms of solid detergents. So the active ingredient in traditional.

Powders.

Speaker 3: It was very low quite frankly and and

<unk> was very low quite frankly and.

Today's.

Speaker 3: pods or strips that you're talking about.

Pods or strips that youre talking about.

Speaker 3: much more actively formulated.

Much more actively.

Formulated.

Okay, alright, thanks, very much and again best of luck to Glenn It's Scott.

Thank you.

Speaker 5: And we have a question from Marco Rodriguez with Stonegate Capital Markets. Please go ahead and lines open. All the green and red cities for our last week.

And we have a question from Marco Rodriguez with Stonegate capital markets. Please go ahead. Your line is open.

Okay.

Thank you for taking my question.

<unk>.

I had a.

Speaker 3: A quick follow up first off, on the supply chain issue disruptions that you guys saw, you obviously called out transportation issues. I was wondering if you can maybe provide a little bit more color in regard to that. Is that a function of not being able to find trucks? The trucks have been too expensive. And then if you can, I don't know if I missed this, but can you come out on any sort of labor availability impacting me, I've seen there as well?

A quick follow up first off.

On the supply chain issue disruptions that you guys saw you obviously.

Called out transportation issues.

Issues I was wondering if you can maybe provide a little bit more color in regard to that is that a function of.

Not being able to find trucks the trucks have been too expensive and then if he can I don't know if I missed this but can you comment on any sort of labor availability and actually you may have seen there as well.

Speaker 1: Yeah, thanks, Marco. What's regards to transportation, the largest lever that's impacting the disruption is the availability of drives.

Yes, Thanks, Marco with regards to transportation.

The largest.

That's that's impacting the disruption is the availability of drivers.

Speaker 1: for these hazardous shipments, especially chemical industry, is hazardous transportation. So there is a significant driver shortage that number has been published at greater than 80,000 across the North American, the US marketplace. And the ability to close that gap is gonna take longer than I think anyone initially anticipate. Marco, can you hear us?

For these.

Hazardous shipments Kemper specialty chemical industry as hazard hazardous transportation. So there is a significant driver shortage that number's been.

Published it.

Greater than 80000 across the North America, and the U S marketplace and the ability to close that gap is going to take longer than I think anyone initially anticipate Marco can you hear us.

Yes.

Okay.

Speaker 1: So it's not an equipment availability, it's a driver issue. In terms of step-ins, impact from labor, we're not impacted from a labor perspective ourselves. Our attrition rates have remained relatively low throughout the pandemic and is not impacting our ability to produce and service our customers.

Okay.

So it's not a it's not an equipment availability, it's a driver issue in terms of Stephens.

Impacts from Labor, we don't we're not impacted from a labor perspective ourselves.

Our attrition rates.

<unk> relatively low throughout the pandemic and is not.

Impacting our ability to produce and service our customers.

Speaker 3: And then in terms of the price increases that you've been pushing through to your customers, can you comment a little bit about, I mean obviously there's a lag which you've mentioned before in the past. When is it that you think you can recover the margin from this last quarter and then obviously with the expectation that raw material prices are continuing to kind of go up, how are you kind of thinking about those potential prices, prices in the future?

Got it and then in terms of the price increases that you've been pushing through to your customers can you comment on a little bit about I mean, obviously, there's a lag.

Mentioned before in the past when is it do you think you can recover the margin.

This last quarter, and then obviously with the expectation that raw material prices are continuing to kind of go up how are you kind of thinking about those potential price increases in the future.

Speaker 2: Margot is this is what I would say that the business model has pricing built into it in both situations when raw materials comes up and when raw material goes

Michael This is really what I would say that.

The business model.

I'll have pricing built into it.

In both situations.

Raw material goes off on where raw material goes down so we have a good track record.

Speaker 2: So we have a good track record of a Johnson and prices depending on the environment. As I mentioned before, I don't think we are in the peak yet and that will require more diligence on price in 2022. But we believe the slope of both raw material and price.

Adjusting our prices depending on the environment as I mentioned before I don't think we are in the peak, yet and that that will require.

More diligence on pricing in 2022, but we believe.

Base LOE.

Both raw material and pricing.

Speaker 2: I'm going to be looking significantly lower than 2021. So we will monitor these on a weekly basis, all raw material prices and adjust and adjust with our customers. And we will continue doing the right thing and having the right balance between pricing and margins, right? I mean, we want to continue pricing volume. price Boss.

I'm going to be significantly lower at about 2021. So we will we monitor on a weekly basis.

All raw material prices.

<unk> staff and at some point with our customers. We will continue doing the right thing and having the right balance between pricing and margins right. I mean, we want to continue.

Pricing volume large volume.

Speaker 2: So we will continue making sure that we deliver the maximum return at the end, looking at all those variables.

Exactly so so we will continue making sure that all the way.

Deliver the maximum return.

IBM looked.

Looking at all those variables.

Speaker 3: understood. And then last quick question for me, I was just wondering if you can maybe provide a little bit more color on your commentaries surrounding cleaning and disinfecting. You provided guidance where your expectations that

Understood and then last quick question for me I was just wondering if you could maybe provide a little bit more color on your commentary surrounding <unk>.

Cleaning and disinfecting.

You've provided guidance where are your expectations that.

Speaker 3: The consumer side might see some growth in this new fiscal year, but you're somewhat cautiously optimistic. And the expectation is obviously the institutional cleaning side is also expected to continue to be growth. Can you maybe just talk about what is sort of driving those expectations near level of confidence there?

The consumer side might see some growth.

In this new fiscal year, but you are somewhat cautiously optimistic and the expectation is obviously the institutional credit side is also expected to continue to see growth can you. Maybe just talk about what is sort of driving those expectations and your level of confidence there.

Speaker 1: Yeah, I would say first and foremost, we do expect raw material availability to improve throughout the year. We believe outside of, I would say, biosides and liquid hand soaps and across the market in general, inventory levels are probably...

Yes.

I would say first and foremost we do expect raw material availability to improve throughout the year.

We believe.

Outside of I would say bioscience, and liquid hand, soaps and across the market in general inventory levels are probably.

Speaker 1: below where most companies would want them at this point in time. So we think the underlining demand is there. If we can get through and see the improvement in raw material availability and can reduce some of the transportation shortages, hopefully, and you know, in the second half of the year, we think that demand could be there. There.

Below where most companies would want them at this point in time. So we think the underlining demand is there if we can get through it.

See the improvement in raw material availability and can reduce some of the transportation shortages hopefully in the second half of the year.

We think that demand could be there.

Understood. Thank you guys very much for your time I appreciate it.

Thank you Marco.

Yeah.

Speaker 5: Once again, if you'd like to register for a question, please press 1-4 on your telephone.

Once again I'd like to register for a question. Please press one four on your telephone.

And there are no further questions at this time.

Speaker 8: Okay, well thank you very much for joining us on today's call. This is my last investor call.

Okay.

Thank you very much for joining us on today's call.

This is my last investor call.

Scott is ready.

The team is ready.

Speaker 8: confidence that your company is in good hands and that the best is yet to come for step in company

I am confident that your company is in good hands.

And at the best is yet to come for Stepan Company.

Thank you.

And have a great day.

Speaker 5: That concludes the call for today. We thank you for your participation. I say, please disconnect your line.

That concludes our call for today, we thank you for your participation. Please disconnect your lines.

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Speaker 5: Greetings. Thanks for standing by. Welcome to the Stepin Company Q4 full year 2021 earnings call. During presentation, our participants will be in a listen only mode. Afterwards, we'll conduct a question and answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference, you need to reach an operator, please press the zero. As a reminder, this conference has been recorded Thursday, February 17th, 2022.

Greetings. Thank you for standing by welcome to the Stefan <unk> Company Q4 full year 2021 earnings call. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone if at any time during the conference you need to reach an operator, Please press star zero.

As a reminder, this conference is being recorded Thursday February 17th 2022.

Speaker 5: And now I'd like to turn the conference over to Luis Rojo, Vice President and Chief Financial Officer. Please go ahead.

And now I'd like to turn the conference over to Luis Rojo, Vice President and Chief Financial Officer. Please go ahead.

Speaker 9: Good morning and thank you for joining the Stepan Company 4 Quarter and full year 2021 financial review.

Good morning, and thank you for joining Stepan company's fourth quarter and full year 2021 financial review.

Speaker 9: Before we begin, please note that information this conference called, Contain Forward Looking Statements, which are not historical facts.

Before we begin please note that information in this conference call contains forward looking statements, which are not historical facts.

Speaker 9: These statements involve risk and uncertainties that could cause actual results to differ materially, including but not limited to the project for our foreign operations, global and regional economic conditions, and factors detailing our security and exchange commission filings. Where Dr. John Inos on line or over the phone, when chorus you to review the investor's slide presentation.

These statements involve risks and uncertainties that could cause actual results to differ materially, including but not limited to prospects, what our floating operations lower on regional economic conditions and factors detailed in our Securities and Exchange Commission filings.

Joining us online or over the phone we encourage you to review the Investor Slide presentation.

Speaker 9: We have made available at www.stepon.com on the investors section of our website. We make these slides available at approximately the same time when the earnings releases issue. And we hope that you find the perspective helpful.

Which we have made available at www dot to step on the com under the investors section of our website. We make these slides available at approximately the same time as when the earnings release is issued and we hope that you find the perspective helpful.

Speaker 9: Now with that, I would like to turn the call over to Mr. Queen Stepan, our chairman and chief executive officer.

Now with that I would like to turn the call over to Mr. Quinn Stepan, our chairman and Chief Executive Officer.

Speaker 8: Good morning, and thank you all for joining us today.

Good morning, and thank you all for joining us today.

Speaker 8: 2021 was another difficult year for our world, our country and our industry. As COVID-19 and weather events created employee, raw material and transportation challenges that impacted global supply.

2021 was another difficult year for our world, our country and our industry as COVID-19, and weather events created employee raw material and transportation challenges that impacted global supply chains.

Speaker 8: at step in our employees' commitment and our team's agility allowed us to mostly meet customer requirements and grow income while taking significant steps to build a better, stronger, more sustainable future.

At stepping our employees commitment and our team's agility allowed us to mostly meet customer requirements and grow income.

Taking significant steps to build a better stronger more sustainable future.

Speaker 8: Are reported net income reached a record $138 million or $5.92 per diluted share while our adjusted net income was also a record at $143.5 million or $6.16 per diluted share.

Our reported net income reached a record $138 million or $5 92 per diluted share while our adjusted net income was also a record at $143 $5 million or $6 16 per diluted share.

Speaker 8: These record results were achieved despite the challenges affecting our operations.

These record results were achieved despite the challenges affecting our operations. The day the estimated negative impact of the supply chain disruptions in our operating income for the three business segments totaled $21 million during 2021.

Speaker 8: The estimated negative impact of the supply chain disruptions in our operating income for the three business segments totaled $21 million during 2021.

Speaker 8: In addition, global demand decreased for cleaning, disinfection, and personal watch products versus the pandemic peak in 2020.

In addition, global demand decreased for cleaning disinfection and personal wash products versus that pandemic peak in 2020.

Speaker 8: This impact was partially offset by higher demand within the institutional cleaning and functional product and mark.

This impact was partially offset by higher demand within the institutional cleaning and functional product end markets.

Speaker 8: Although our base polymer business was affected by supply chain disruptions, higher polymer results were driven by the Invista acquisition.

Although our base polymer business was affected by supply chain disruptions higher polymer results were driven by the Invista acquisition.

Speaker 8: especially product results were slightly ahead of those reported in 2020, but results were negatively impacted by raw material availability.

Specialty product results were slightly ahead of those reported in 2020, but results were negatively impacted by raw material availability.

Speaker 8: Our Board of Directors declared a quarterly cash dividend on Steppen's common stock of 33.5 cents per share Payable on March 15th, 2022

Our board of directors declared a quarterly cash dividend on <unk> common stock of $33.05 per share payable on March 15th 2022.

Speaker 8: Step in as increased as dividend for 54 consecutive years.

<unk> has increased its dividend for 54 consecutive years.

Speaker 8: During 2021, we returned $45 million to our shareholders, be a dividends and share by the-

During 2021, we returned $45 million to our shareholders via dividends and share buybacks. This represents an increase of 11% versus 2020 as.

Speaker 8: This represents an increase of 11% versus 2020.

Speaker 8: as previously communicated, our Board of Directors authorized another $150 million of share we purchased.

As previously communicated our board of directors authorized another $150 million of share repurchases.

Speaker 8: We remain confident in the strength and diversity of our business and its ability to generate cash that will allow us to invest in our current business to pursue strategic M&A opportunities and return cash to our shareholder.

We remain confident in the strength and diversity of our business and its ability to generate cash that will allow us to invest in our current business.

Pursue strategic M&A opportunities and return cash to our shareholders.

Speaker 8: At this point, I would like Louise to walk through a few more details about our fourth quarter and full year results.

At this point I would like Luis to walk through a few more details about our fourth quarter and full year results. Thank.

Speaker 9: Thank you, Queen. My comments will generally follow the slide presentation. Let's start with a slide five to recap the quarter. Adjust the net income for the fourth quarter of 2021 was $22.5 million or 97 cents per diluted share. A 32% decrease versus $33.1 million or $1.42 cents per diluted share in the fourth quarter of 2020.

My comments will generally follow the slide presentation, let's just start with slide five to recap the quarter.

Net income for the fourth quarter of 2021 was $22 5 million or.

Or <unk> 97 per diluted share.

32% decrease versus $33 1 million or $1 42 per diluted share in the fourth quarter of 2020.

Speaker 9: Because a just an error is a non-gap measure, we provide food reconciliation to the comparable gap measure. And this can be found in appendix two of the presentation and table two of the press relief.

Because adjusted net income is a non-GAAP measure we provide full reconciliations to the comparable GAAP measures and these can be found in appendix two of the presentation and table two of the press release.

Speaker 9: Specifically, I just want to report a net income this quarter excludes the per compensation expense of $2.4 million.

Specifically adjustment to reported net income this quarter excludes deferred compensation expense of $2 4 million.

Speaker 9: Additionally, it also excludes $3.1 million for business restructuring, the non-cast loss on the sale of corporate building, and environmental remediation reserves.

Additionally, it also excludes $3 $1 million for business restructuring the noncash loss on the sale of our corporate building and environmental remediation reserves.

Speaker 9: that the third compensation number should descend and that expense related to the company's deferred compensation plan, as well as cash settled stock appreciation rights for our emberies. Because this liability is changed with the movement in the stock price, we exclude this item from our operational discussion.

The deferred compensation numbers represent the net expense related to the company's deferred compensation plan as well as cash settled stock appreciation rights for our employees because these liabilities change with the movement in the stock price we exclude this item from our operational discussion.

Speaker 9: Like six shows a total company earnings bridge for a fourth quarter, compared to last year for quarter. And breaks down the decrease in adjusting.

Slide six shows the total company earnings bridge for the fourth quarter compared to last year's quarter and breaks down decrease in adjusted net income because this is net income the figure. It is not a here are on an after tax basis, we will cover each segment in more detail summarize surfactants and polymers had a down.

Speaker 9: because this is neck income, the figure is not here, I run an aftertack space.

Speaker 9: We will cover each segment in more detail, but to summarize, to factor some polymers are down, made driven by the one-time benefits recorded in Q4 2020. Specifically, the Miele-Zell Insurance Payment and the Chinese Government Reimports.

Mainly driven by the one time benefits recorded in Q4, 2020, specifically, Niels Zale insurance payment and the Chinese government reimbursement.

Speaker 9: excluding those two items our results are basically flat versus last year.

Excluding those two items our results are basically flat versus last year Corp.

Speaker 9: Corporate expenses and all orders were lower during the quarter due to lower the position related expense.

Corporate expenses on all orders were lower in the quarter due to lower acquisition related expenses.

Speaker 9: an incentive-based compensation expenses. The company's effective tax rate was 20% in 2021, compared to 25% in 2020. This year, over a year, decreased, was primarily a trivial to favorable one-time tax benefit.

Incentive based compensation expenses the company effective tax rate was two 8% in 2021 compared to 25% in 2020. This year over year decrease was primarily attributable to favorable one time tax benefits.

Slide seven.

<unk> segment, we sold for the quarter. So in fact, our net sales were $420 million, a 17% increase versus the prior year.

Prices increased 27%, primarily due to the pass through of higher raw material costs, as well as improved product and customer mix.

Volume was down 9% versus last year.

Speaker 9: Most of these decrease reflects lower volumes for the North America consumer product and market at the amount for cleaning, that's infection and personal wash products dropped from the peak of the pandemic. This was partially offset by very strong growth in our functional product and market and solid growth in the industrial and institutional cleaning market.

Most of this decrease reflects lower volumes sold either in North America consumer broadband market as demand for cleaning and disinfection of personal wash products that all from the peak of the pandemic.

This was partially offset by very strong growth in our functional product end markets and solid growth in the industrial and institutional cleaning market.

Speaker 9: the effect of foreign currency translation positively impacts itself by 1%. To effect and operating income, the quarter decreased $10.9 million from our review to inflation, supply chain disruptions, higher planning maintenance expenses, as well as the one-time mutual insurance payment of $3 million recognized in the fourth quarter of 2020.

Effect of foreign currency translation positively impacted sales by 1%.

So in fact on operating income for the quarter decreased $10 $9 million.

And I'll leave you to inflation supply chain disruptions, how youre planning maintenance expenses as well as the one time mill sell insurance payment of $3 million recognized in the fourth quarter of 2020.

Speaker 9: We estimated a supply chain disruption had a negative impact on operating income of approximately $3 million during the quarter. We implemented additional price increases to continue recovering our margins.

We actually made a supply chain disruption had a negative impact on operating income of approximately $3 million during the quarter.

We implemented additional price increases to continue recovering our margins.

Speaker 9: But Europe results were mainly flat from prior year due to decreased consumer product demand, which was partially offset by increased demand in functional products.

Europe results were mainly flat from prior year due to decreased consumer product demand, which was partially offset by increased demand in functional products.

Speaker 9: Latin America operating results were slightly up from last year due to strong volume growth in the functional product and marketing.

<unk> operating results were slightly up from last year.

Volume growth in the functional product end markets now.

Speaker 9: Now, turning to polymers on a slide A, let's sell $174 million, up 49% from the prior year. Telling prices increased 39% from my review to the pass root of high-euro-material costs.

Now turning to polymers on slide eight.

Net sales were $174 million.

49% from the prior year.

Selling prices increased 39%, primarily due to the pass through of higher raw material costs.

Speaker 9: Volume group 12% in the quarter, driven by 13% growth in global rigid volume. This volume growth is mostly related to the in this acquisition.

Volume grew 12% in the quarter driven by 13% growth in global rigid polyol volume growth is mostly related to <unk> acquisition.

Speaker 9: High and demand within the special people of business also contributed to volume growth.

Higher demand within our specialty polyol business also contributed to volume growth.

Speaker 9: Polymer operating in cost decrease 10 million dollars. This decrease primarily reflects supply chain disruptions and the number of coercive of two fourth quarter 2020 event.

Fortinet operating income decreased $10 million. This decrease primarily reflects supply chain disruptions and the nonrecourse.

<unk> fourth quarter 2020 event.

Speaker 9: First, a 10 million insurance recovery related to the 2020 Mio Jelly event. And second, a $1.4 million settlement received from the Chinese government.

First a $10 million insurance recovery related to the 2020 meals daily Bank.

Second a $1 $4 million settlement received from the Chinese government.

Speaker 9: We estimate the supply chain disruption had a negative impact on obade income of approximately $3 million to the quarter. Europe results in increased recent buy.

He made the supply chain disruptions had a negative impact on operating income of approximately $3 million during the quarter.

Europe results increased driven by the <unk> acquisition.

Speaker 9: turning to slide nine despite significant challenges during the year, including the global pandemic. On presidential supply chain disruptions, they completely were record full-year results.

Turning to slide nine despite significant challenge during the year, including the global pandemic compress it into supply chain disruptions. They completed a record full year results.

Speaker 9: Just the net income was a record $143.5 million, or $6.16 per minute share, an increase of 9% versus $132 million, or $5.68 per minute share in the prior year.

Adjusted net income was a record $143 5 million.

$6 16 per diluted share, an increase of 9% versus $132 million or $5 68 per diluted share in the prior year.

Speaker 9: The surfactant segment operator income was $166 million down a slide lead from 2020. Global volume was down by 5% as a result of lower demand for cleaning, the infection and personal wash products versus the pandemic big in 2020. This was partially offset by higher demand for products sold into institutional cleaning and functional product and market.

This would factor in.

Net income was $166 million.

Down slightly from 2020 global volume was down by 5% as a result of lower demand for cleaning disinfection of personal wash products versus the pandemic peak in 2020. This was partially offset by higher demand for products sold into institutional cleaning and functional product end markets.

Speaker 9: The polymer segment delivers $74 million of operating income of 8% versus last year. Global polymer volume grew 29% per halosel result of the in-b stuff, polyol acquisition.

The polymer segment delivered $74 million of operating income.

8% versus last year lower volume our volume grew 29% primarily as a result of <unk> acquisition.

Speaker 9: Specialty product operated incom was $14.2 million, basically flat versus prior year.

Specialty brought operating income was $14 $2 million basically flat versus prior year.

Speaker 9: Lastly, the estimated negative impact of the supply changes rock in our operating income was $21 million during 2021. To the fact that an impact was $12 million, $8 million, and specialty products, $1 million.

Lastly, the estimated negative negative impact of the supply chain disruption in our operating income was $281 million during 2021.

Got any impact was $12 million volume of $8 million.

In our specialty products $1 million.

Speaker 9: slide 10 shows the total company earnings for the full year of 2021, compared to 2020, and breaks down the increase in adjusted net income. Because this is net income, the figure is not here, I don't have to tax basis. To factor and what's slightly down, fully upset by polymers and one time tax benefits. We expect the fact is tax rate for 2022 to be in the range of 24 to 26%.

Slide 10 shows the total company earnings bridge for the full year of 2021 compared to 2020 and breaks down the increase in adjusted net income because this is net income. The figures noted here are on an after tax basis.

<unk> also slightly down fully offset by polymers and one time tax benefits.

We expect the effective tax rate for 2022 to be in the range of 24% to 26%.

Speaker 9: Moving on to slide 11, our balance sheet remains strong, and we have ample liquidity to investing the business.

Moving on to slide 11, our balance sheet remains strong and we have ample liquidity to invest in the business.

Speaker 9: Our leverage and interest coverage ratio continues at very healthy levels. The company has full-year capital expenditures of $195 million, as we ramp up our investment in the Serenina and low-want-4 dioxide projects.

Our leverage and interest coverage ratios continues at very healthy levels.

The company had full year capital expenditures of $195 million as we ramp up our investment in <unk>.

And a low one four dioxin projects.

Speaker 9: Beginning on a slide 12, SCOB will now update you on our 2022 Shakyayuri.

Beginning on slide 12, as Scott will now update you on our 2022, our strategic priorities.

Speaker 5: Thank you, Luis. As we wrap up 2021 and despite the supply chain challenges that we experienced together with our customers, we managed to deliver record net income. Our team delivered once again.

Thank you Luis as we wrap up 2021, and despite the supply chain challenges that we experienced together with our customers. We managed to deliver record net income our team delivered once again.

Speaker 5: Although cleaning, disinfection, and personal wash volumes declined last year versus the 2020 pandemic peak, consumer habits have changed which has led to a sustained higher level of demand versus pre-pandemic level.

The whole cleaning disinfection and personal wash volumes declined last year versus the 2020 pandemic peak consumer habits have changed which has led to a sustained higher level of demand versus pre pandemic levels Pablo.

Speaker 5: Published data shows consumers are spending up to 20% more time in their home.

Published data shows consumers are spending up to 20% more time in their homes.

Speaker 5: Our diversification strategy and the functional products continues to be a key priority for step.

Our diversification strategy and our functional products continues to be a key priority for Stepan.

Speaker 5: Our global agricultural volumes increase strong double digits in 2021. High commodity prices for corn and soybeans coupled with more planted acreage in the year drove a strong season for crop protection products in North America.

Our global agricultural volumes increased strong double digits in 2021.

High commodity prices for corn, and soybeans, coupled with more planted acreage in the year drove a strong season for crop protection products in North America.

Speaker 5: In Latin America, crop prices and a favorable exchange rate had a positive impact on exports driving higher planted acreage in Brazil.

In Latin America crop prices and a favorable exchange rate had a positive impact on exports driving higher planted acreage in Brazil.

Speaker 1: Oil field chemicals experienced record sequential volume growth as the price of oil increased 68% last year. We remain optimistic about future opportunities in this business as oil prices remain high. And we continue to promote our new cost effective product solutions that will improve oil field operator return on investment and protect their wealth.

Oilfield chemicals experienced record sequential volume growth as the price of oil increased 68% last year, we remain optimistic about future opportunities in this business as oil prices remain high and we continue to promote our new cost effective product solutions that will improve oilfield operator returned on.

Investment and protect their wells.

Speaker 5: We increased our bioside capacity last year and our investing to increase capacity and capability in certain product lines, including sulfates and peterics and alcoxilates to ensure we can meet higher requirements from our customers.

We increased our biocide capacity last year and are investing to increase capacity and capability in certain product lines, including Sulfates and <unk> and <unk> to ensure we can meet higher requirements from our customers.

Speaker 1: As discussed previously, we are increasing North American capability and capacity to produce sulfates that meet new limits on one-four-dioxing by the January 2023 regulatory deadline. One-four-dioxing is a minor byproduct generated in the manufacture of either sulfates or factants, which are key cleaning and foaming ingredients used to consume or product formulation.

As discussed previously we are increasing north American capability and capacity to produce sulfates that meet new limits on one for dioxin by the January 2023 regulatory deadlines.

<unk> is a minor byproduct generated in the manufacture of either Sulfates surfactants, which are key cleaning and folding ingredients used to consumer product formulations.

Speaker 5: through a combination of process, the optimization, and additional manufacturing equipment, Steppen will be prepared to supply customers to use the full fades that meet the new regulatory requirements.

Through a combination of process optimization and additional manufacturing equipment step and we'll be prepared to supply customers either sulfates that meet the new regulatory requirements.

Speaker 1: This project, along with our previous announcement of an Alcoxillation Production Facility at our Pasadena, Texas site, are the primary drivers of the forecast at $350 to $375 million in 2022 capital spending.

This project along with our previous announcement of an hour constellation production facility at our Pasadena, Texas site are the primary drivers of the forecasted $350 million to $375 million in 2022 capital spending.

Speaker 1: We expect to break ground capacity in the next month and estimate plant start-up by the end of 2023.

We expect to break ground capacity in the next months and estimate plant startup by the end of 2023.

Speaker 5: We are excited about the capability and the future growth that these investment projects will deliver to step income.

We are excited about the capability and the future growth that these investment projects will deliver to step in company.

Speaker 1: Tier 2 and Tier 3 customers continue to be a focus of our surfactant growth strength.

Tier two and tier three customers continued to be a focus of our surfactant growth strategy. We added 1400, new customers during 2021, and we will continue serving the strategic market for us.

Speaker 1: We added 1,400 new customers during 2021, and we will continue serving the strategic market for us.

Speaker 1: We continue to invest in enhancing our digital customer interface and capabilities to reach these customers around the world.

We continue to invest invest in enhancing our digital customer interfacing capabilities to reach these customers around the world.

Speaker 1: We made good progress last year in our fermentation program, which is focused on the development and commercialization of Ramnal lip-

We made good progress last year in our fermentation program, which is focused on the development and commercialization of round the lipids we.

Speaker 1: We are excited about the level of market interest in biobased materials, including surfact.

We are excited about the level of market interest in biobased materials, including surfactants.

Speaker 1: We expect a complete process development work this year and begin engineering desiring on modifications required to produce round the lipids at our commercial scale fermentation plant located in Louisiana, which we acquired last year.

We expect to complete process development work this year and begin engineering design modifications required to produce round of lipids that are commercial scale fermentation plant located in Louisiana, which we acquired last year.

Speaker 1: This program is in line with our commitment to a more sustainable future. As we continue to advance sustainability initiatives, we were pleased that in 2020, the Wall Street Journal recognized Stefan company within the top 100 most sustainably managed companies in the world. And in 2021, we were successful in improving our eco-virus rating from silver to gold.

This program is in line with our commitment to a more sustainable future as.

As we continue to advance our sustainability initiatives. We were pleased that in 2020, the Wall Street Journal recognized Stepan company within the top 100, most sustainably managed companies in the world and in 2021, we were successful in improving our <unk> rating from silver to gold.

Speaker 1: Our consulting work at Millstale is complete and we are now focused on implementing the recommended changes.

Our consulting work at <unk> is complete and we are now focused on implementing the recommended changes.

Speaker 1: We accelerate investments in both expense and cap-backs during 2021 to improve productivity and to increase capacity. We expect to see these benefits of our efforts in the following years.

We accelerated investments in both expense and Capex during 2021 to improve productivity and to increase capacity, we expect to see these benefits of our efforts in the following years.

Speaker 1: Polymers had a good performance during the year, despite significant supply chain disruption and challenges.

Polymers had a good performance during the year, despite significant supply chain disruption and challenges.

Speaker 1: The integration of the business acquired from Envisto was all done by our team, and we delivered more than $20 million of EBITDA in 2021.

The integration of the business acquired from Vista was all done by our team we delivered more than $20 million of EBITDA in 2021.

Speaker 1: The acquisition was accretive to both EPS and even a margin.

The acquisition was accretive to both EPS and EBITDA margins.

Speaker 1: We are investing at both of the legacy and VISTA production site to debattle that capacity and to ag capabilities to produce a broader range of Steppen's product portfolio.

We are investing at both of the legacy Investor production sites to Debottleneck capacity and to add capabilities to produce a broader range of Stephens product portfolio.

Speaker 1: Given the strength of our balance sheet, we plan to continue to identify and pursue acquisition opportunities that align with our growth and diversification strategy, including the addition of new platform chemistries that can broaden our portfolio of sustainable offerings for our customers. I will now turn the call back to Quinn for close.

Given the strength of our balance sheet, we plan to continue to identify and pursue acquisition opportunities that align with our growth and diversification strategy, including the addition of new platform Chemistries that can broaden our portfolio of sustainable offerings for our customers.

I will now turn the call back to Quinn for closing comments.

Thank you Scott.

Speaker 8: The company delivered record earnings in 2021.

The company delivered record earnings in 2021.

Speaker 8: Looking ahead to 2022, we believe demand for our products will remain strong. But the company will continue to face many of the same challenges that impacted our operations in 2021.

Looking ahead to 2022, we believe demand for our products will remain strong, but the company will continue to face many of the same challenges that impacted our operations in 2021.

In terms of segments, we are cautiously optimistic about the consumption of cleaning disinfection and personal wash products within surfactants we.

Speaker 8: We are cautiously optimistic about the consumption of cleaning, disinfection, and personal wash product within Survect.

Speaker 8: We believe I will not return to the pandemic peak levels of 2020, but will grow versus 2021.

We believe volumes will not return to the pandemic peak level of.

2020, but will grow versus 2021.

Speaker 8: We expect industrial and institutional cleaning volumes to increase as the economy is open.

We expect industrial and institutional cleaning volumes to increase as the economies open.

Speaker 8: So, acting to man within the agricultural and oil field markets should continue to grow due to higher commodity prices and new stepping technology.

Surfactant demand within the agricultural and oilfield markets should continue to grow due to higher commodity prices and new step in technologies.

Speaker 8: The long-term prospects for our polymer business remain attractive. We expect stronger demand linked to energy conservation efforts and more stringent building code.

The long term prospects for our polymer business remain attractive we expect stronger demand linked to energy conservation efforts and more stringent building codes.

Speaker 8: Additionally, we believe that the new U.S. infrastructure bill should provide tailwinds for the installation industry.

Additionally, we believe that the new U S infrastructure Bill should provide tailwind for the installation industry.

Speaker 8: However, in January , we experienced production challenges in our polymer unit at Millsdale.

However in January we experienced production challenges in our polymer unit at mill sale.

And Unfortunately, we had to declare force majeure.

At mill sale, we are producing polymers have reduced race and we are using our global network, including the inquired in Vista, Wilmington, North Carolina site to deliver products to our customers, albeit at higher cost.

We expect to resume full production in early March.

Speaker 8: We anticipate our specialty product business results will improve slightly year over year.

We anticipate our specialty product business results will improve slightly year over year.

Speaker 8: Despite continued raw material sourcing issues in higher prices, as well as our higher first quarter polymer supply chain costs, we believe underlying market demand across most segments remains strong and we are optimistic about delivering another good year.

Despite continued raw material sourcing issues and higher prices as well as our higher first quarter polymer supply chain costs.

We believe underlying market demand across most segments remains strong and we are optimistic about delivering another good year.

Speaker 8: Finally, today we are announcing my retirement from Stepping Company, effective April 25th, 2022. I'm extremely pleased that Scott will be our next CEO .

Finally.

We are announcing my retirement from staffing company effective April 25th 2022.

I am extremely pleased that Scott will be our next CEO .

Speaker 8: No one is better suited to lead us into the future. Under his leadership, the business has diversified its market presence, delivered innovative, sustainable technologies, and completed multiple acquisitions which have contributed to record results.

No one is better suited to lead us into the future under his leadership the business has diversified its market presence.

Delivered innovative sustainable technologies and completed multiple acquisitions, which have contributed to record results.

Speaker 8: It has been an honor and privilege to serve as a third founding family, the EO of Stepping Company.

It has been an honor and privilege to serve as a third founding family CEO of Stepan company.

Speaker 8: I am proud not only of the value that we have created for employees, customers and you, our shareholders, but how we have delivered those results.

I'm proud not only of the value that we've created for employees customers and you our shareholders, but how we have delivered those results.

Speaker 8: I am grateful to the Steppen employees around the world whose unwavering commitment to our mission has allowed us to grow and will ensure our future success. This concludes our prepared remarks. At this time, I am grateful to the Steppen employees around the world whose unwavering commitment to our mission has allowed us to grow and will ensure our future success.

I am grateful to the step and employees around the world, whose unwavering commitment to our mission has allowed us to grow and will ensure our future success.

This concludes our prepared remarks.

At this time, we would like to turn the call over for questions. Scott can you. Please review the question the instructions for the question portion of today's call.

Speaker 8: Scott, can you please review the instructions for the question portion of today's call?

Speaker 1: Thank you. If you'd like to register a question, please press the one followed by the four in your telephone. You will hear a three-tone prompt to acknowledge your request.

If you'd like to register a question. Please press the one followed by the four and your telephone.

Here are three ton prompt to acknowledge your request.

Speaker 1: If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. And if you are using a speaker phone, please lift your hands head before entering your request. Once again, that's one four to register for a question, one brief moment for the first question. We do have a question from Mike Harrison with C-Port Research Partners. Please go ahead and open.

Your question has been answered and you would like to withdraw your registration. Please press. The one followed by the <unk> and if you are using a speaker phone. Please lift your handset before entering your request once again Thats one four to register for a question on performance for the first question we.

We do have a question from Mike Harrison with Seaport Research Partners. Please go ahead. Your line is open.

Speaker 4: Hi, good morning and congratulations to Scott on the promotion and to Quinn on the retire.

Uh huh.

Hi, good morning, and congratulations to Scott on the promotion and Quinn.

The retirement announcements.

Speaker 8: Thank you Mike. We're both up and forward to that

Thank you Mike. Thank you, Mike we're both looking forward to that.

Yeah.

Speaker 4: understood. Was wondering if you can give a little bit more color on the intuitionary and supply chain disruption impact?

Understood.

Was wondering if you can give a little bit more color on the inflationary and supply chain disruption impacts across the different segments, I think a little bit what we're trying to understand.

Speaker 4: across the different segments. I think a little bit while we're trying to understand.

Speaker 4: You gave the $7 million total impact from disruption in the fourth quarter. I try to understand how much of that is price-cost lag. How much of it is maybe related to limited raw material availability or some other production inefficiencies. And are those issues getting better as we get into Q1 and Q2 or could they actually worsen in the first half of the year?

You gave the $7 million total impact from disruption in the fourth quarter I'm trying to understand how much of that is price cost lag.

<unk> of it is maybe related to limited raw material availability or some other production inefficiencies and are those issues getting better.

We get into Q1, and Q2 or could they actually worse than in the first half of the year.

Speaker 9: Thanks Mike for the question. This is a look. I'm not getting to all the specific details as you can imagine. This is a broader number on the impact of Q4, and more importantly, on the impact for total 2021.

Thanks, Thanks, Mike for the question this is the space.

Look I am not.

Without getting into all the specific details as you can imagine this thesis.

Rotor number on the impact of Q4 and more importantly on the impact for total 2021, so as I mentioned in my remarks.

Speaker 9: So as I mentioned in my remarks, all the supply chain disruption that we saw in the marketplace because of raw material availability, because...

All of this supply chain disruption that we saw in the marketplace because of raw material availability because logistics.

Speaker 9: lack of availability was in jeopardy in total around $21 million in operating income. So on a pre-tax basis and I gave the numbers by business units. So it's accessible, it's a sizeable impact that...

Lack of availability was inject in total around $21 million in operating income so on a pretax basis and I gave the numbers by business unit. So is it possible is a sizeable impact that prevented us to grow even further would it be.

Speaker 9: prevented us to grow even further our business.

Speaker 9: If you look at, let me give you a little bit more perspective on the inflation and pricing. But...

If you look at let me give you a little bit more perspective on the fleet inflation on pricing, but if you look at our numbers cost of goods sold.

Speaker 9: If you look at our numbers, cost of good souls are up 31%. That when volume is up 2%.

31% <unk> volume is up 2%. So we are seeing significant inflation in raw materials are north of 30% in logistics north of 25%.

Speaker 9: So we are seeing significant inflation in raw material, north of 30%, in logistics, north of 25%. And as you have seen in our numbers, we have done a very good job managing our pricing and our needs.

And as you have seen in our numbers we have done.

Very good job managing our pricing on our mix. So we closed the year with 22% price mix, but we get our improvements quarter after quarter right, 13% in Q1, 20% in Q2, 28% in Q3, 29% in Q4, so Joel we have a lot.

Speaker 9: So we close the year with 22% price mix, but we've got all improvements quarter after quarter, right, 13% into one, 20% into two, 28% into three, 29% into four. So...

Speaker 9: You always have a lack between cost and pricing, but the team has done a very good job of trying to recover all the inflation that we're seeing with pricing and mix. The 22%, as you can do the math, is $400 million in pricing and mix. So we're pleased with the performance from the team, and we will continue working on productivity, and working on pricing, and working on mix.

<unk> between cost and pricing, but the team has done a very good job of.

Trying to recover all the inflation that we're seeing with pricing on the 22% as you can do the math is $400 million in pricing. So we're pleased with the performance.

From the team and we will continue we will continue working on productivity on working on pricing and working to.

Speaker 9: to gradually improve our margins. And if I could just cut touch on them.

So get out really improve or improve our margins.

If I could kind of just cut.

On the raw material.

Speaker 8: availability raw materials within our surfactant business are generally significantly improved.

Availability raw materials within our surfactant business are generally.

Significantly improved there are still some issues with regard to propylene oxide and fatty acid availability.

Speaker 8: still some issues with regard to procline oxide and fatty acid availability that we're still dealing with that this whole supply chain is dealing with. But the other raw materials are present.

That.

Bad debt, we're still dealing with it this whole supply chain is dealing with but the other raw materials are are are present.

Speaker 8: The issue that we're still facing that is problematic.

The issue that we're still facing that is problematic.

Speaker 8: is transportation availability. And that is kind of a universal issue in the United States today. And I would say there's some gradual improvement in there, but it's still a big issue. And talking with our suppliers and our customers, we anticipate that that'll be with us through the first half of the year.

Is transportation availability and that is a kind of a universal.

Issue in the United States today, and I would say there is.

Some gradual improvement in there, but it is still.

It's still a big issue in <unk>.

Talking with our suppliers and our customers.

Anticipate that that will be with us through the first half of the year.

Speaker 4: I appreciate all the color there, Luis. I guess I would just ask as a follow up, the you guys run on FIFO inventory. So I guess I'm asking, have we already seen peak raw materials run through to the PNL in Q4, or is Q1 going to be the peak for raw material costs?

Alright, I appreciate all the color there Louise so I guess I would just ask as a follow up.

The you guys run on.

FIFO inventory, so I guess im asking have we already seen peak raw materials run through to the P&L in Q4 or is Q1 going to be the peak for raw material costs.

Speaker 9: Look, the situation, I mean, we have a broad background, of course, of raw materials and summer going up, summer starting to stabilize. But look, oil is already a $93.

Look the situation.

We have a broad basket of course of raw materials on some amount of going not saw modest that's starting to stabilize tullow oil is already at $93. So I don't think we are in the peak now.

Speaker 9: So I don't think we are in the peak yet. Now, the slope of increase has significantly changed, right? I mean, the slope of increases that we saw in Q2, Q3, and Q4 and for the average of the 30% plus in 2021, that is low, it's significantly lower now, but with all of above $90, I don't think we are in the peak.

Now the slope of increase has significantly changed right I mean, the slope of the increases that we saw in Q2 Q3 and Q4.

For the average of the 30% plus in 2021 that is will be significantly lower now, but with oil above $90. I don't think we are adding to begin.

Speaker 4: All right, I appreciate that. And then in terms of the Noseville facility mentioned,

Alright, I appreciate that and then in terms of the mills deal facility you mentioned.

Speaker 4: some disruption there and declaring force major. How much lower is production now or operating rate now versus 100% or where you would expect to be? And can you also talk about the changes that are being recommended and implemented at that facility based on your work with consultants?

Some disruption there and declaring force majeure.

Much lower as production now we're operating right now versus a 100% or where you would expect to be and can you also talk about the changes that are being recommended and implemented at that facility based on your work with consultants.

Yes. Thanks.

Speaker 5: So we experienced the power disruption in early January that subsequently caused damage to our polymer plant, which were in the process of getting back online and as Quinn mentioned earlier, getting back to full production rates by March 1st. Today, we're running it about half capacity at the site, but our supplementing supply from our global networks is Quinn mentioned earlier.

So we experienced a power disruption in early January that.

Subsequently caused.

Damage to our polymer plant, which we're in the process of getting back online and as Quint mentioned earlier getting back to full production rates by March one today, we're running at about half capacity at the site, but are supplementing supply from our global networks.

<unk> mentioned earlier.

Speaker 5: So once we get the units back to full production rates in early March, we have a long list of items that we will be working on to get that reliability up so we can handle the power blips in the future. And that work will commence in starting in Q2.

So once once we get the units back to full production rates and <unk>.

Early March.

We have a long list of items that that we will be working on to too.

Get that reliability up so we can handle the power blips in the future and that work will commence in starting in Q2.

Speaker 5: So, $57 million impact is what we think will be seeing in Q1. In Q1-22, the $5.27 million that's gorgeous, especially, is on a pre-backed base.

There was a $5 $7 million impact is what we think.

We will be seeing in the.

In Q1.

Q1, 'twenty towards the $5 million to $7 million as Scott just mentioned is on a pre tax basis.

Speaker 4: Perfect. That's very helpful. And then a couple of quick questions. First of all, Louis, the tax rate, your guidance is quite a bit higher than the 20% you saw in 2021. What causes the variability in the tax rate? It seems like it's jumped around the past few years.

Perfect.

That's very helpful.

And then a couple of quick questions first of all Luis on the tax rate guidance is quite a bit higher than the 20% you saw in 2021, what causes the variability in the tax rate. It seems like it's jumped around the past few years.

Speaker 9: Yeah, great question Mike. We have had the opportunity to deliver some one of the tax projects in the last few years, and especially in 2021. If you look at the tax rate in the US, the 21 plus the state, it's an average tax rate for many companies over around 24, 25%. And if you look at our country mix outside of

Yeah, Great question Mike.

We have had this opportunity to deliver some.

One backs up projects in the last few years and especially in 'twenty 2021, if you look at the tax rate in the U S. The 21, plus the state is an average tax rate.

Many companies look around 2425% and if you look at our country mix outside of the U S.

Speaker 9: You get to an average tax rate of 26%. So roughly between 25, 26. That's our normal...

You will get to our average tax rate of 26% so roughly between 25% 26, that's our normal.

Speaker 9: tax rate. We have the opportunity last year as we were some tax projects.

Tax rate, we had the opportunity last year rewards tax projects, we did emerge in Brazil of our diverse acquisition that would be it a few years ago, you know the low in Brazil.

<unk> will for tax purposes, so that provided.

Speaker 9: one time help in 2021. So we are not expecting, we don't have any of those type of projects in 2022. We will continue looking for opportunities, but at this point, we don't envision any critical project that is going to reduce our normal tax rate, which is between 24 and 26%. All right, and then I was also curious on the fourth quarter revenue contribution from Invista. I know you said about 120 million in revenue for the source.

A nice one time help in 2021, so we're not expecting we don't have any.

Any of those type of projects in 2022, we will continue looking for opportunities, but but at this point, we don't envision any critical projects that has gone out reviews, our normal tax rate, which is between 24 and 26%.

Speaker 9: between 24 and 26%.

Speaker 4: Right. And then was also curious on the fourth quarter revenue contribution from Invista. I know you said about 120 million in revenue for the full year. But what did it do in Q4? And maybe give you a chance to comment on how that business is performing relative to your expectations roughly a year since you acquired it. Thank you.

Alright, and then was also curious on the fourth quarter revenue contribution from this I know you said about $120 million in revenue for the full year, but what did it do in Q4, and maybe give you a chance to comment on how that business is performing relative to your <unk>.

Spectation roughly a year since you acquired it thank you.

Speaker 9: Yeah, we provided the 120 and as you know, we had the business for 11 months in 2021. So you can easily see that it's around $10 million per month, but you know that this business has its ownality, right? I mean, Q40 is typical in the lower.

Yes, yes, we provided a one too many.

And as you know we had the business for 11 months in 2021. So you can easily see that around $10 million per month, but do note that this business has seasonality right. I mean Q4 is typically the lowest quarter.

Speaker 9: quarter of the year of accessibility. So I'm not going to give you the exact number. You can imagine that it's below 30 million dollars.

Quarter of the year. This seasonality so I'm not going to give you. The exact number you can imagine that is below $30 million.

Speaker 9: I'm below the normal average. And I would say we were very pleased with the integration effort by our employees around the world.

So the normal average and I would say, we're very pleased with the integration.

By our.

By our employees around the world.

Speaker 8: The volumes increase as a result of our

The volumes.

Increase is a result of our.

Speaker 8: the underline market growth and the efficiency of which we integrated that into our supply chain work.

The underlying market growth and the efficiency at which we integrated that into our supply chain work.

Speaker 8: We were able to improve the margins on European base, and we're very pleased with the overall contribution of the business and it's right to early start, it's ahead of our plan. The business generated an excess of $20 million of EBITDA in 2021.

We were able to improve.

Improve the margins.

On the European <unk>.

Base basis.

We're very pleased with the overall.

The contribution of the business in it.

Right.

<unk> early start it's ahead of our plan.

Business generated an excess of $20 million of EBITDA in 2012.

'twenty one.

Speaker 9: Yeah, that put us basically ahead of our target like two years, right? We promise you guys six and a half to seven and a half multiple after two years. We are basically delivering that in the first year.

Again that put us basically ahead of our target like two years right. We've promised you guys six five to seven five multiple after two years we are.

Basically delivery bad in the first year.

Okay.

Alright, thanks very much.

Thanks, Mike.

Speaker 1: All right, next question is from Vincent Anderson with the Steeple. Please go ahead, your lines open.

Our next question is from Vincent Anderson with Stifel. Please go ahead. Your line is open.

Yes. Thanks can you hear me okay.

Yes.

Speaker 6: Good morning, Dan. Good morning. And I'll echo Mike's, you know, sincere congratulations to Quinn and Scott.

Good morning.

Good morning, and I'll Echo my sincere congratulations to Quintin Scott Paul.

Quite I'm not sure when we can expect your artisanal line of skin and hair care products as you enter the next phase of your career, but I can imagine there is going to walk away completely.

Speaker 6: So sorry, maybe a bit more granularity on where the stocking was most concentrated between your tier one and tier two, tier three customers, and then how the

So sorry, maybe a bit more granularity on where destocking was most concentrated between your tier one and tier two tier three customers and then how that might be impacting your broader expectations for mix impact on margins in surfactants next year or this year I should say, yes.

Speaker 5: Yeah, thanks, this is Scott. You know, the destocking that we experienced in 2021 was really centered around biopytes used in disinfection products both for home and in industrial applications.

Yes. Thanks expenses this is Scott.

The destocking that we experienced in 2021 was really centered around bio sites used in.

Disinfection products, both for home and industrial applications.

Speaker 5: I'd say the other area was in liquid hand soaks. I think as we all witnessed in 2020 and 2021, the myriad of products that were available in the market on the store shelves did cause, I think a fast spot in the supply chain, which had to be worked through in 2021. And I would say that impacted both Tier one and Tier two, Tier two, because the world is equally.

I'd say the other area was in liquid hand soap so I think as we've all witnessed in 2020 in 2021, the myriad of products that were available in the market on the store shelves did cause.

Think of that spot in the supply chain, which had to be worked through in 2021 and I can.

Let's say that impacted both tier one and tier two tier three customers equally.

Speaker 5: where we see ourselves in 2022. We're hopeful that most of that inventory has been flushed through the system and that we will see more normal as demand going forward into Quinn's earlier point. We believe that will be above pre-pandemic levels, but not as high as the volumes we saw in 2020. Okay, that's helpful.

Where we see ourselves in 2022 were hope that hopeful that most of that.

Inventory has been flushed through the system and that we will see more normalized demand going forward into Quinn's earlier point, we believe that will be above pre pandemic levels, but not as high as the volumes we saw in 2020.

Okay. That's helpful. Thanks, and then.

Maybe switching over to functional surfactants.

Speaker 6: Yeah, just given the inherent volatility of those end markets, I was curious how you measure your own performance in areas like ag and oil.

Just given the inherent volatility of those end markets I was curious how you measure your own performance in areas like AG in oilfield and if there are any kind of broad targets that you'd be willing to share with us heading into 2022.

Speaker 6: And if there are any kind of broad targets that you'd be willing to share with us.

Speaker 5: no uh... you hit it on the head then to these markets are volatile i think oil field obviously more volatile than ag uh... you know you do have a a good underlining trend tailwind in the crop

No.

You hit it on the head bids that these markets are volatile I'd say oilfield, obviously more volatile than AG.

You do have a a good underlining trend tailwind in the crop.

Speaker 5: crop production market with the need to feed the planet and with renewable fuels taking a larger stage going forward. There's really bullish undertones for continued demand for haha haha haha haha haha haha haha haha haha haha haha hahaha haha haha haha haha haha haha haha haha haha haha haha haha haha haha haha haha haha haha

Crop production market with the need to plan it and.

And with renewable fuels, taking a larger stage going forward theres really bullish on <unk> for continued.

Demand for crop protection products oilfield, obviously is more volatile.

Speaker 5: Oil field obviously is more volatile. I think that's, you know, in terms of how we look at it and forecast going forward, it's not a science by any means.

I think thats.

In terms of how we look at it and forecast going forward.

It's not a science by any means.

Speaker 8: What I would say is one of the key metrics for us in terms of our R&D efforts within the ag space. We're tracking fairly closely our wins at the customer interface in terms of...

What I would say is one of the key metrics for us in terms of our R&D efforts within the AG space.

We're tracking fairly closely our wins at the customer interface in terms of.

Speaker 8: helping them formulate the next generation pesticide products for the marketplace. And generally there's registration lag that is two to three years after those products are fully developed. So one of the key internal metrics that we, we expect is our anticipated product, our customers anticipated product launches. And we do have a window in terms of

Helping them formulate.

The next generation.

Pesticide products for the marketplace and generally there is registration lag that is two to three years. After those products are fully developed so one of the key internal metrics that we track is our anticipated product our customers anticipated product launches and we do.

We have a window in terms of.

Speaker 8: how our business is going to be impacted by those launches over the next couple years. And what I would tell you is that we remain optimistic about our growth in the crop protection segment as a result of those previous R&D activities and wins.

How our business is going to be impacted by those launches over the next couple of years and what I would tell you is that we remain optimistic about our growth in the crop protection segment as a result of those previous R&D.

Activities in wins.

That's.

Speaker 6: And actually that was kind of leading into my next point, which was I do recall you reporting a couple

Great and actually that was kind of leading into my next point, which was I do recall you reporting a couple of pretty substantial for.

Speaker 6: the Ag Business substantial wins a couple years ago. Are you saying that you're pretty confident that we should be reaching the end of that registration window?

For the AG business substantial wins, a couple of years ago are you, saying that you are pretty confident that we should be reaching the end of that registration window as we head into 2022.

Okay.

Hello.

Speaker 8: Vincent, I'm not sure exactly where we locked dropped off, but I think it was as I was saying that we believe we have some items left in our pipeline. So do you have another question? Yes.

Vince and I am not sure exactly where we locked.

Dropped off but.

I think it was as I was saying that we believe we have some items left in our pipeline.

You have another question.

Can you still hear me.

Yes.

Speaker 6: Perfect. Alright, well yeah, that does answer the last question and so for the last one for me This was a bit more anecdotal, but you know, I've been noticing a lot more of these consumer cleaning products

Perfect Alright.

That does answer the last question and so for the last one for me. This was a bit more anecdotal, but I've been noticing a lot more of these consumer cleaning products that are being sold and dry form and either re hydrated at home like surface cleaners or used directly in dry for them like these laundry detergent strips.

Speaker 6: and either rehydrated at home like surface cleaners or used directly in dry form like these laundry detergent strips they're all over

They are all over my house right now.

Speaker 6: and the whole sales pitch appears to revolve around a more attractive environmental.

And the whole sales pitch appears to revolve around a more attractive environmental footprint by not having to ship water.

Speaker 6: You know, have any of these products come up on your radar yet? And if so, do they represent...

Have any of these products come up on your radar yet.

And if so do they represent any meaningful change in their surfactants requirements.

Speaker 5: Yeah, so, a great question Vincent, and I would say, you know, this is obviously from a sustainability push, you know, there is a lot of water shipped around the world today and a lot of consumer products. So getting concentrated.

Yeah. So great question Vincent I would say this is obviously.

From a sustainability push.

There is a lot of water shipped around the world today, and a lot of consumer products, so getting concentrated.

Speaker 5: Formulations to the end use consumer is a great way for it to have reduction in scope three emissions around product use. Step in, we have a product line within surfactants that are solid solids or factors and highly concentrated surfactants. So we are working with the consumer product companies and to help their journey towards a more sustainable product portfolio on the store shelf.

Formulations to the end use consumer is a great way for do it to have reduction in scope three emissions around product use step and we have a product line within surfactants that are solid solid surfactants and highly concentrated surfactants. So we are working with the consumer product companies.

And.

To help us.

Their journey towards a more sustainable product portfolio on the store shelf.

So.

That's helpful. If I could just add.

Speaker 6: caveat though I mean we used to use powdered laundry detergent and we determined that that was not optimal for a water supply. Are we going back to?

As a caveat, though I mean, we used to use powdered laundry detergent and we determined that that was not optimal for our water supply or are we going back to.

The old school Sulphur in it in this process or is this just a completely new product line that's still facilitates.

Dry powder dry formulations.

Speaker 5: I think there's a balance. I don't see us going back to powdered detergents from an environmental footprint perspective. That technology and that processing is not as attractive as other new alternative processing technologies that consumer product companies have for producing highly concentrated and or some other alternative forms of solid detergent. Yeah, so the active ingredient and traditional powders you

I think there is a balance I don't.

Don't see us going back to powdered.

Detergents.

And environmental footprint perspective that technology in their processing is not as attractive as other new alternative processing technologies that consumer product companies have for <unk>.

Producing highly concentrated <unk> to other alternative forms of solid detergents. So.

The active ingredient in traditional powders.

Speaker 8: is was very low quite frankly and and

It was very low quite frankly and and and.

Today's.

Speaker 8: pods or strips that you're talking about is much more actively formulated. Formulated.

Pods or strips that youre talking about.

Much more actively.

Formulated.

Okay, alright, thanks, very much and again best of luck.

When Scott.

Thank you.

Speaker 1: We have a question from Marco Rodriguez with Stoney 8 Capital Markets. Please go ahead, lines open. All good. Everybody sit here for a while.

And we have a question from Marco Rodriguez with Stonegate capital markets. Please go ahead. Your line is open.

Okay.

Thank you for taking.

My question.

I had a.

Speaker 3: A quick follow up first off, on the supply chain issue disruptions and you guys saw you obviously called out transportation issues. I was wondering if you can maybe provide a little bit more color in regard to that. Is that a function of not being able to find trucks? The trucks have been too expensive. And then if you can, I don't know if I missed this, but can you come on on any sort of labor availability and asking me a scene there as well?

A quick follow up first off.

On the supply chain issue disruptions that you guys saw you obviously called out transportation.

Issues I was wondering if you can maybe provide a little bit more color in regard to that is that a function of.

Not being able to find trucks. The trucks has been too expensive and then if he can I don't know if I missed this but can you comment on any sort of labor availability as you may have seen there as well.

Speaker 5: Yeah, thanks, Marco. What's regards to transportation, the largest lever that's impacting the disruption is the availability of drives.

Yes, Thanks, Marco with regards to transportation.

The largest lever that's that's impacting that disruption is the availability of drivers.

Speaker 5: for these hazardous shipments, especially chemical industry, is hazardous transportation. So there is a significant driver shortage that number has been published at greater than 80,000 across the North American, the US marketplace. And the ability to close that gap is gonna take longer than I think anyone initially anticipated. Marco, can you hear us?

For these.

Hazardous shipments Kemper specialty chemical industry as.

Hazardous transportation. So there is a significant driver shortage that number's been published.

Published it.

Greater than 80000 across the North America, and the U S marketplace and the ability to close that gap is going to take longer than I think anyone initially anticipate Marco can you hear us.

Yes.

Okay.

Speaker 5: So it's not an equipment availability, it's a driver issue. In terms of step-ins, impact from labor, we're not impacted from a labor perspective ourselves. Our attrition rates have remained relatively low throughout the pandemic and is not impacting our ability to produce and service our customers.

Okay.

So it's not a it's not an equipment availability, it's a driver issue in terms of Stephens.

Impacts from Labor, we don't we're not impacted from a labor perspective ourselves.

Our attrition rates.

Remained relatively low throughout the pandemic and is not.

Impacting our ability to produce and service our customers.

Speaker 3: And then in terms of the price increases that you've been pushing through to your customers, can you comment on a little bit about, I mean obviously there's a lag which you've mentioned before in the past. When is it that you think you can recover the margin from this last quarter? And then obviously with the expectation that raw material prices are continuing to kind of go up, how are you kind of thinking about those potential prices, prices in the future?

Got it and then in terms of the price increases that you've been pushing through too.

And customers can you comment on a little bit about I mean, obviously theres, a lag, which you've mentioned before in the past when is it do you think you can recover the margin.

This last quarter, and then obviously with the expectation that raw material prices are continuing to kind of go up how are you kind of thinking about those potential price increases in the future.

Speaker 10: Marco, this is what I would say is that the business model has pricing built into it in both situations. When raw materials comes up and when raw material comes up.

Michael This is really what I would say that.

The business model.

I'll have pricing built into it.

In both situations.

Raw material goes off on where raw material goes down so we have a good track record.

Speaker 2: So we have a good track record of adjusting our prices depending on the environment. As I mentioned before, I don't think we are in the peak yet and that will require more diligence on price in 2022. But we believe the slope of both raw material and price.

Adjusting our prices depending on the environment as I mentioned before I don't think we are in the peak Gen and that that will require.

More diligence on pricing in 2022, but we believe.

Basically loan.

Both raw material and pricing.

Speaker 2: I'm going to be looking significantly lower than 2021. So we will monitor this on a weekly basis, all raw material prices and adjust and adjust and talk with our customers and we will continue doing the right thing and having the right balance between pricing and margins, right? I mean, we want to continue pricing volume.

I'm going to be significantly lower at about 2021. So we will we monitor on a weekly basis.

All raw material prices.

I'll stop and at some point with our customers, we will continue doing that.

<unk> been having the right balance between pricing and margins right I mean, we want to continue.

Pricing volume large audience.

Speaker 2: So we will continue making sure that we deliver the maximum return at the end, looking at all those barriers.

So so we will continue making sure that our.

We deliver the maximum return.

IBM.

Looking at all those variables.

Speaker 3: understood. And then last quick question for me, I was just wondering if you can maybe provide a little bit more color on your commentaries around being, uh, cleaning and disinfecting, um, you know, you've provided guidance where your expectations that.

Understood and then last quick question for me I was just wondering if you could maybe provide a little bit more color on your commentary surrounding <unk>.

Cleaning and disinfecting.

You've provided guidance where are your expectations that.

Speaker 3: The consumer side might see some growth in this new fiscal year, but you're somewhat cautiously optimistic. And the expectation is obviously the institutional cleaning side is also expected to continue to see growth. Can you maybe just talk about what is sort of driving those expectations near level of confidence there?

The consumer side might see some growth.

In this new fiscal year, but you are somewhat cautiously optimistic and the expectation is obviously the institutional credit side is also expected to continue to see growth can you. Maybe just talk about what is sort of driving those expectations and your level of confidence there.

Speaker 5: Yeah, I would say first and foremost, we do expect raw material availability to improve throughout the year. We believe outside of, I would say, biosides and liquid hand soaps and across the market in general, inventory levels are probably...

Yes.

I would say first and foremost we do expect raw material availability to improve throughout the year.

We believe.

Outside of I would say bioscience, and liquid hand, soaps and across the market in general inventory levels are probably.

Speaker 5: below where most companies would want them at this point in time. So we think the underlining demand is there. If we can get through and see the improvement in raw material availability and can reduce some of the transportation shortages, hopefully, and you know, in the second half of the year, we think that demand could be there. Please top off, yes. Yeah.

Below where most companies would want them at this point in time. So we think the underlying demand is there if we can get through it.

See the improvement in raw material availability and can reduce some of the transportation shortages hopefully in the second half of the year.

We think that demand could be there.

Understood. Thank you guys very much for your time I appreciate it.

Thank you Marco.

Yeah.

Speaker 1: Once again, if you'd like to register for a question, please press 1-4 on your telephone.

Once again, if you'd like to register for a question. Please press one four on your telephone.

And there are no further questions at this time.

Speaker 8: Okay, well thank you very much for joining us on today's call. This is my last investor call.

Okay.

Thank you very much for joining us on today's call.

This is my last investor call.

Scott is ready the team is ready.

Speaker 8: confidence that your company is in good hands and that the best is yet to come for step in company.

I am confident that your company is in good hands and.

And that the best is yet to come for Stepan company.

Thank you.

Have a great day.

Speaker 1: That concludes the call for today. We thank you for your participation. I say, please disconnect your line.

That concludes our call for today, we thank you for your participation and ask you. Please disconnect your lines.