Q2 2019 Earnings Call
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As a reminder, this conference is being recorded Wednesday July 24th 2019.
Your speaker for today is Mr. Luis Rahul.
I would now like to turn the conference over to Mr., Reid, Rahho, Vice President and Chief Financial Officer.
Go ahead please.
Good morning, and thank you for joining Stepan Companys second quarter 2019 financial review.
Before we begin please note that information in this call is going to school gonna stay in forward looking statements.
Which had an all historical facts. These statements involve risk and uncertainties that could cause actual results to differ materially.
Including but not limited to prospects, but also affording operational but all of them, but you are not economic conditions and factors detailed in our securities and Exchange Commission on fighting.
Whether you're joining us online over the phone we encourage you to review the Investor Slide presentation.
Which we have made available a door to door to door you thought to step on the call on the Investor Relations section of our website.
We make these thislife available at approximately the same time I was the earnings releases issue.
We hope that you find the information on perspective helpful.
Now with that I would like to turn the call over to Queens Steppers, Dunja, Our chairman President and Chief Executive Officer.
Thank you Louise good morning, and thank you all for joining us today.
Despite many challenges in the first half of the year the company matched its 2018 record first half adjusted net income.
Surfactant operating income excluding the negative impact of the it cost effective equipment failure and foreign currency translation was down slightly.
Wet weather in the United States Farm belt negatively impacted surfactant income.
The polymer business improved significantly versus the first quarter results.
On the strength of a 5% volume growth and margin improvement.
North American and European rigid polyol volumes grew 15% and 9% respectively. During the first half of the year.
Our specialty products business results were higher versus the prior year quarter due to improved margins within the food and nutritional business and order timing differences within our pharmaceutical business.
Second quarter, adjusted net income was $35.1 million or one dollar and 50 cents per diluted share versus $32.2 million or one dollar and 39 cents per diluted share in the prior year.
Surfactant operating income for the quarter was down primarily due to lower volumes at personal care.
The exit of the sulfonation business in Germany.
The equipment failure at the economy pack, Mexico facility and foreign exchange impacts.
The caught effect facility is now fully operational and the company's insurance provider has acknowledged this incident is a covered event.
The company is pursuing insurance recovery for damaged equipment incremental supply chain expenses and business interruption.
Global surfactant volume decreased 8%, principally due to the company's exit from the sulfonation business in Germany.
And lower demand in the global personal care end market.
The polymer business was up versus the prior year, primarily due.
To higher volume and slight margin improvement.
Global polymers sales volume increased 5% versus the prior year quarter.
North American and European rigid polyol sales volume grew 9%, 19% and 10% respectively.
Our specialty products business results were higher due to improved volume and margins within our medium chain triglyceride product line and order timing differences within our pharmaceutical business.
Our board of directors declared a quarterly cash dividend on Stepans common stock of 25 cents per share pair payable on September 13th 2019.
At this point I would like Luis to walk through a few more details about our second quarter results.
Thank you Wayne My comments will generally follow the slide presentation.
Let's just start with a slight fall to recap the quarter.
Just the net income for the second quarter of 2019 with $35.1 million or $1.50 cents per diluted share.
A 9% increase versus $32.2 million or $1.39 cents per diluted share in the second quarter of 2018.
Because our 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 on table two of the press release.
Specifically adjustments to reported net income this quarter.
Come see stuff I, just meant for deferred compensation expense restructuring expenses and other non operational items.
Adjusted net income for the quarter exclude deferred compensation expense of $1.44 million or six cents per diluted share.
Compared to the first compensation income of $1.4 million or six cents per diluted share in the same period last year.
Deferred compensation numbers represent the net expense related to the company deferred compensation plan I swear last cash settled stock appreciation rights, what I would name please.
Because these liabilities change with the movement in the stock price, we exclude this item from our operational discussion.
Adjusted net income for the quarter also excludes $300000 or one cents per diluted share of after tax business restructuring charges related to the ongoing decommissioning costs related to the Canadian plant closure in 2017.
And the Germany sulfonation shut down in 2018.
We expect an additional $1 million of after tax the commission expense out what kind of media and German plant in 2019.
Additionally, adjusted net income excludes $2.2 million or nine cents per diluted share of after tax to buy domains that remediation expense.
The majority of the quarter and yet expense reflects environmental remediation costs associated with the company's Maywood, New Jersey site.
Finally, adjusted net income excludes $900000 of after tax expense associated with the company's voluntary prepayment of outstanding principal balance of these 588% senior notes.
Slide five shows that total company earnings bridge for the second quarter.
Compared to last year's second quarter breaks down the increase in adjusted net income.
Because this is net income these fee good us not a here I don't on after tax basis.
We will go at each segment in more detail, but to summarize so in fact almost down while volume it on a space as the polls were up versus the prior year.
Favorable net interest expense was related to hiring that is in coming to us that a company cash repatriation in 2018.
The company's effective tax rates tax rate was 21.8% for the first half of 2019 versus 20.7% for the first half of 2018.
These year over year increase was primarily attributed to a favorable nonrecurring tax benefit in 2018.
With respect to full year 2019 effective tax rate to be in the range of 21% to 24%.
The slight seeks focus on sort of fact on segment results for the quarter.
Surfactant operating income decreased $2 million, but even by volume on favorable impact of foreign currency translation on the exit of the guarantee some financial business.
This was partially offset by operating income margin improvement of 70 basis points due to raw material price reduction on cost reduction efforts.
So in fact, the net sales were $313 million.
Down 12% from the same quarter to vote.
Volume decreased 8%, mostly due to the company's exit from commercial sulfonation in Germany in 2018.
Lower demand in the North America personal care and agriculture markets and the impact of that got baked Mexico equipment failure.
Selling prices went down 2% from Malibu to pass through of lower raw material costs.
The translation impact of a stronger us dollar decreased net sales by 2% on operating income by $500000.
In the breach we show North America nature in the same category, because our surfactant business in Asia is relatively small.
Most of this will fact on production in that region is used to support business in the United States.
North America decrease was primarily due by lower commodity personal care volumes on soft decode drug demand due to the wet weather in the United States State Farm belt.
Latin America losses associated with it caught up bake, Mexico Sulfonation equipment failure were offset by one time benefits related to obviate the backs frequently project in Brazil.
They got baked Mexico facility is now fully operational and we have begun to recapture market share.
The company's insurance provider has a knowledge this incident covert even for insurance recovery. Therefore, we believe that majority of the impact. It's just a timing issue will recall that in future quarters.
European results were flat despite lower volume on gross profit from the exit of the low margins information business in Germany.
And on favorable foreign exchange translation.
Now turning to polymers on slide seven.
Polymet operating income increased $2.5 million or 12% versus the prior year quarter.
Primarily due to higher volumes and improved margins.
Net sales for the quarter was $141 million in line with the prior year period.
Volume increased 5%, primarily due to high higher in North America, and Europe be unfold yields yields ingredient formulation and insulated metal panels, partially offset by lower volumes.
Selling prices declined 3% on this translation impact of a stronger us dollar negatively impacted net sales by 2%.
Global Polyol volumes increased 11% year to report your growth in North America, Europe and Asia.
The strong market demand driven by increased insulation standards on growth in construction was partially offset by lower specialty polyol volumes.
North America audio results increased due to 19% volume growth in Greece, Polyols and margin improvements.
European results were down slightly primarily due to unfavorable foreign exchange translation.
Threed polyol volumes were up 10% year to date, PRT installation and recovery from the 2017 and the challenges.
China results improve on double digit volume growth driven by call it storage insulation demand.
Finally, VA every sold decreased due to lower volumes.
The specialty products operating income increased $1.7 million versus the prior year quarter, primarily due to improved volume and margins. We think the medium chain for glycerin Emcps product line.
On order timing differences within our pharmaceutical business.
Turning to slide eight our balance sheet remains as strong as we continue to having not net debt.
We returned an $80 million to our shareholders via dividend and share repurchase in the first half of 2019.
We also increased our cash dividend for the 50 onest consecutive year.
Placing us in a very select group of companies.
Beginning on slide nine we will now update you on our strategic priorities and plans to increase shareholder value.
Thank you release.
Despite the challenging current environment, we believe our surfactant strategy will deliver value for our shareholders.
Our focus on end market diversification tier two and tier three customers as well as our cost out activities should continue to improve our margins.
Given the strong volume growth in the first half we believe our polymer business will continue to benefit from the growing market for insulation materials and that the business should deliver both full volume.
Full year volume growth and incremental margin improvement versus 2018.
On the strength of our first half earnings we believe full year specialty product results will improve versus 2018.
Overall, we remain cautiously optimistic about the balance of the year.
After a good start.
We are well positioned to continue our momentum by focusing on our strategic priorities.
Market diversification customer intimacy innovation operational excellence and M&A.
Our core values, which are ingrained throughout the entire organization service a foundation for the company's execution of this strategy.
Turning to slide 10.
Weve made good progress on our market diversification efforts, which continues to be a key component of our strategy.
Although volume to the functional end markets decreased during the quarter on lower demand for agricultural products in North America due to wet weather, our agricultural volume in Latin America increased 32%.
We are expanding our presence in specialty our consulates with new dedicated technical resources and have introduced 13, new products over the past 18 months.
Next our focus on customer intimacy continues to be a priority in order to deliver growth within our tier two and tier three surfactant customer base and to maintain our market leadership position and several of our key businesses.
Although tier two and tier three surfactant customer volumes decreased 9% during the quarter, primarily due to the exit of the sulfonation business in Germany, and the equipment failure at the account effect, Mexico facility contribution margin from this customer segment improved slightly.
Global rigid polyol volume increased 14% during the quarter due to strong market demand driven by increased insulation standards.
European.
Our insulation market recovery.
From their previous MD challenges and growth in construction.
We remain optimistic about continued growth of the rigid polyol market due to increased insulation standards energy conservation efforts and growth in the construction.
Globally.
Innovation is also a key aspect of our strategy as a leader in the rigid polyester polyol market. We continue to work on developing the next generation of value added technologies for our customer base.
Our agricultural chemicals business has developed and commercialized 10, new products over the last year, which are helping customers around the world improve the performance and the environmental profile of pesticide formulations.
Our patent pending technology for fracking, including and flowback modifiers and friction reducer bird boosters are helping oilfield customers maintain or increase production at lower cost.
Current oil prices should accelerate adoption.
The use of Biocides is growing in the fracturing market due to regulations that restrict the use of freshwater which should provide opportunities for our bias side of quaternary products.
The launch of stepping clot helio is well underway.
North American personal care customers are responding positively to a new hair care conditioner ingredient that is mild and safer for the environment.
During the quarter, we had our first step and quite Helios sale in North America.
And we have now entered also introduced the product to our Latin American customer base.
Next operational excellence is an integral part of our strategy.
We believe that the application of Sulfonation best pack practices.
Network synergies and drive cost savings opportunities will create long term value from our economy pack acquisition.
Restructure of the specialty product office in the Netherlands is complete.
Cost savings should be realized going forward as we absorb the sites supply chain Q a in R&D functions into other step in locations.
We are also delivering savings on the shutdown of our surfactant operations at divesting, Germany plant.
We will continue to examine our asset base for opportunities to further optimize and improved capacity utilization and to more efficiently serve our customers around the world.
Finally, M&A represents an important tool as a means to deliver EPS growth.
Given the strength of our balance sheet, we will continue to prudently assess M&A opportunities to fill gaps in our product portfolio and to add new platform Chemistries.
Our core values customer focus.
People first continuous improvement integrity growth and innovation.
And sustained sustainability describe how we will accomplish our plan.
The market provides challenges and opportunities.
We feel we are well positioned to capture opportunities for you our shareholders.
This can close our prepared remarks at this time.
We'd like to turn the call over for questions. Misty. Please review the instructions for the question portion of todays call.
Thank you.
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One moment please for the first question.
Your first question is from Mike Harrison.
With Seaport Global Securities.
Hi, good morning.
Good morning, Mike.
Morning.
Quinn I was wondering if you can talk a little bit about the margin performance in the polymers business.
Really trying to get a sense of.
Just how sustainable that improvement could be.
Clearly you guys got some benefits from from volume leverage.
As well as from raw materials versus pricing.
Just wondering if we're also seeing maybe some restructuring benefits or maybe if you could walk through the drivers there that would be helpful.
Okay.
I think as we looked at our first quarter, we came into the year with high raw material costs due to the in preparation.
Have in inventory due to an inventory build in anticipation of a potential freezing of the river.
And then during that period raw material prices declined that negatively impacted our margins in Q1. So Q2 I believe is more representative of where we will be kind of going forward in the polymer.
The polymer segment of our business.
In terms of margins for the balance of the year.
Alright, and then over on the surfactant side.
Can you.
Quantify the impact of that one time.
Recovery and were there any other one time.
Benefits really.
Segment.
The value of the onetime.
It was approximately $2 million yes.
Basically offset any losses that we had in Mexico.
All right and speaking of the losses in Mexico and.
Is that when you said it was up and running will it be fully up and running for the entire third quarter or should we think of the third quarter as kind of a.
A ramp up or transition period, and maybe we're back to normal by the fourth quarter.
So the plant is up and running today in terms of our ability to recapture some of the business that we lost during the outage I would anticipate that that would ramp up Q3 Q during Q3, and then into Q4.
So so.
We are projecting that that business will be profitable in the second half of the year.
With incrementally getting better Q4 over Q3.
Okay.
And not as an example, not as significant a a needle mover into for the balance of 2018.
Losses will stop but it won't significantly impact.
Profitability.
Positively correct.
Okay.
And then as it relates to the AG demand that you were seeing is that something that's run its course at this point so the weakness there or do you have some customers that maybe came out of this planting season with high inventory levels for herbicides or insecticides, and you're going to potentially see some slower demand as we get into the next growing season.
Kind of first half of 2020.
I think were up.
Personal opinion I think we're absorbing a lot of that that decrease in the AG business in Q2 and Q3.
Today, we are projecting kind of Q4, which would be the next growing season to be back on track with with traditional levels.
Okay.
And then last question for me is on the specialty business. It's not one that we talk about very often but obviously a very strong quarter I know that that's a business where you have been trying to make some improvements to the cost structure you mentioned, the Netherlands office closure, but I also know that that MCP business I had had some market related challenges. If we go back a couple of years. So just wondering is that better performance that we're seeing are related to your internal efforts or improvement in the emcp market or both.
Both.
Both.
So and we also expanded production capability in that for that product line.
During 2018, so we do have increased we are able to support some increased quantities in the marketplace today and margins have improved as well so.
The.
The largest percentage of the increase of that business is due to the MCT line today.
Both volume and margins.
All right. Thank you very much.
Thanks, Mike have a good day.
And your next question is from the line of Vincent Anderson with Stifel.
Yes, Thank you for taking my questions.
Good morning could you.
Morning.
I was hoping you could you could quantify the volume headwinds in surfactants between the plant outage the shutdown in Germany, and then with the remainder being the decline in customer demand and then if you also don't mind expanding on the weakness and personal care products.
So.
Roughly.
25% of the.
The decrease so two of the 8%.
As associated with.
The shutdown of the business in Germany.
And then we would say roughly.
Okay, let's call it another 2% to 3% is associated with.
The the kind of pack that yes fair with the economy back outage, maybe a little maybe closer to two and three and then.
Maybe another 2% associated with a personal care added and then the rest would be the balance of our product line.
So thats helpful. And then personal care was there anything specific was it a major contract that moved against you or is that a broader slowdown.
So.
One of the.
Value propositions that we offer the marketplace is that we are feedstock agnostic.
And there are times in the marketplace when customers change their feedstocks from either natural base to petroleum based or vice versa, and we help them save money by facilitating.
There that that feedstock flexibility for them in this case, we have two large customers that are in middle of a transition.
From one feedstock to another that transition has been delayed so we've had some start up issues primarily.
In the personal care marketplace, and what we anticipate in those conversions have started in Q3.
So we anticipate Q3 Q4 volumes improving versus where we were in the first half.
Because of that.
That value that we offer the marketplace, but the customer delays turns the implementation in 2019.
That's very helpful. I mean, if I stack it all up it sounds like close to 5% to 6% of the 8% volume decline can be characterized as onetime.
In nature.
Does that is that a good way of thinking about it.
That you didn't transitions occur on a regular basis and so I don't know that I would I don't know that I would go fully into it in that.
Okay, Yes, I would think that maybe a little bit of an overstatement.
Okay, all right fair enough.
And then when I look at where you had headwinds in surfactants.
Did that translate to a negative mix impact on margins.
Okay.
Certainly certainly lower AG or agricultural volumes and negatively impact our mix, but.
So I would say that in the big picture those volumes are relatively small so I would say that's a small picture in the in the big picture.
Okay.
And then you talked about raw material benefits in surfactants as well.
Was that more related to timing of pass through of raw material declines.
Or is there a more sustainable expansion in the spread over your raw material costs that we can look for going forward.
Yes, generally our strategy as we implement our strategy more functional products.
More tier two tier three customers that has a favorable impact on our margins.
And raw materials overall.
From us or.
Surfactant perspective, Oleochemical raw materials as well as ethylene derivatives are at the lower end of their.
Recent historical prices and.
So so maybe some benefit from from lower pricing.
Raw material pricing.
But.
We would say, it's more reflective of our customer and end market mix.
Okay. Thanks.
I'm going to sneak one last one here on the West Bank I will make some of these raw materials to go up a slightly Indian eggs in the next couple of quarters. So this is we believe wedding not need to be on the bottom.
Okay.
Last one from me.
Rigid polyols, there's something like two thirds of your polymer business and that would imply a pretty significant volume decline on the rest of the polymer segment in order to pull volume growth down to 5% can you expand on what's happening there right now.
At our salad commodity Falcon hydride business volumes were down significantly in the first half of the year.
And.
Some of that as customer related but quite frankly, I think some of that could be end market related as well.
If we look at.
Kind of a.
Parts of our business that generally reflect more reflect the economy than other parts certainly Falcon hydride does and our distribution business does and I think you've seen or may have seen the brand tag issued a profit warning and and.
From what we understand other distributors in the marketplace. Their volumes are were challenged in Q2. So so.
So when we say were cautiously optimistic for the for the balance of the year a big part of that is we're not sure exactly what's going to happen with the economy in the second half of the year. So we are beginning to see some slowdown.
In some of our market segments, and and certainly Falcon hydride is in that category I will tell you that volumes in the month of January appear to be back on track, but were watching that very very cautiously I'm sorry July July July .
The science in July are back on track in that space.
But we're watching that very carefully.
Okay. Thank you.
And our next question is from the line of Jason Rodgers with Great Lakes review.
Yes, I did want to just follow up with the surfactant business.
It seems like you have some of these issues are short term in nature like the shutdown in Germany in the equipment failure I'm just wonder if you could provide an outlook on when you expect volume growth to return in surfactants and.
You know is this is this until that happens do you see operating margins are under pressure in that business.
You know we're not anticipating.
Significant volume recovery or growth in 2000 for the balance of 2019.
In our in our particularly at our North American surfactant business.
I think as I mentioned, we will see some recovery of our personal care volumes.
So we are anticipating that to happen in the second half, but but but not a lot of fundamental mark market driven growth.
In our surfactant business, we do have opportunities in the AG in the oilfield market.
That are not market related that are more customer focused so we do anticipate that our oilfield volumes will improve in the second half of the year.
But from a.
At all it's still off a relatively small base from a from a global surfactant business.
We are seeing.
Some some growth in Europe .
And.
Again, thats off a smaller base, because we did exit permanently exit the sulfonation business in Germany.
All right and I did want to ask about the environmental <unk> remediation costs, so that wasn't broken out separately on the.
Press release, and wondered where that is located in the income statement.
Okay.
In I mean this is included in non mean expenses, that's why you'll see the admin costs increase in Q2 versus Q2 18.
Got it thank you.
The next question is from Kirk stick more Meyer.
With Keybanc capital.
Hey, good morning, guys congratulations on the quarter.
Thank you.
Yes, it's work that's why we call work.
[laughter].
Hey.
I just wanted to.
Dig in a little bit more on on Europe on the polymer side.
Just wanted to try to get a better sense of what you're seeing from.
Kind of an underlying demand standpoint sort of the growth there it was a little bit stronger than I expected. So just trying to kind of parse out how much of the strength and particularly the volume growth is.
Underlying demand strength versus this recovery from the MD issues.
Yes, I would say there is a little bit of both.
And it's hard to differentiate exactly which is coming from the MD I.
Recovery versus the market growth I will tell you that virtually all of our customers and in Europe are growing at this point in time.
So.
But it's hard.
It's hard for us to tell exactly how much is empty I recovery, but.
We do believe that growth.
We'll continue or are the strength in the market will continue.
Year over year.
In Europe .
For the balance of 2019.
Got it.
And then if I could follow up on the polymer margins.
Maybe asked a similar question a different way.
Looks like margins were up call. It 240 basis points year over year, how much of that do you think was attributed to the raw material benefit.
Virtually all of it.
Okay.
Got it and what I would.
What I would say you also on the on the margins on on on polymers.
If you look at the first half I mean, we mentioned.
The low margins in Q1, we were coming from a Q1 off 10% roughly 16% in Q2. So when you think about the average of 13% for the for the first half.
That is that is not a good position that we believe is a healthy is a healthy margin situation. If you look at if you look at what we did last year I mean, we closed last year up 12 12.2 on what we are saying that we added spacing on this business volume growth on some margin improvements by we're not expecting to take these a few points higher we believe what about what are going to improve versus the 12% that we had last year, but not dramatically too to get on to historical levels on peak so.
So I see more of it you know the first half 13, 13, and a half are saying us out.
That's a good number for now.
Great. Thank you that's helpful.
As a reminder to register for a question press Star the number one on your telephone keypad.
And we do have a follow up question from the line of Mike Harrison with Seaport Global.
Just a couple quick ones on the polymers business first of all you mentioned some of the regulatory drivers for increasing polyol demand or insulation demand.
It's been a while since we've seen a that business growing can you maybe just give us an update though on the regulatory environment and kind of the pace at which those more stringent regulations are being adopted in as you look at different regions is you look at Europe or the U.S. China.
I'm not looking at the dumb math today.
Eric I don't have that map in front of me.
But generally speaking states across the United States continue to adopt more stringent building codes regulations or recommendations from an installation perspective with an intent to save.
Energy.
And so that activity continues.
And it.
It continues to over a period of time slowly add to the amount of insulation in the thickness of installation.
And that that is required in the United States.
Similar.
The U.S. is generally recommendations and in Europe , they tend to be mandates and we can provide an update to you and to to the market in terms our perspective in terms of increased polyol consumption. We've had a map in our some of our investor.
Regulations, and we'll make that available to you and on the web site that will quantify that a little bit more yes.
But magic and growth continues to be that either they have but I'm going to overbuild and only volume side, you saw the 19% into us on that 10% in.
In Europe , and maybe to answer the question, a little more or differently.
In our planning and our long term planning process today, we used to have six or 7% growth for the polymer market overall and I think we've.
Kind of.
Taking that down a little bit, but we do anticipate kind of 5% sustained growth for for our polyol products.
For the market for our polyol products.
Over the next five years, so that 5% growth rate is what we attributed to market growth, but and that is driven a lot by insulation standards.
Got it got it and then.
Over in China, you Didnt reference necessarily the.
Insulation regulations or the environment driving demand there, but you referenced a cold storage insulation demand.
Can you maybe talk about that cold storage insulation market, a little bit how big is that relative to roofing installation and maybe what's driving the strength in China.
Yeah.
So so today there is not a roofing market in China do could do to the current regulations. So.
Due to fire concerns the Chinese have.
Banned the use of Polyiso insulation in large.
Multi storey buildings for.
For years.
So the market that is currently available to us in China is for cold storage.
And so so thats the market that we're currently pursuing we will also adopt and add additional case related product lines.
To be made at that site over a period of time.
On the cold storage is significant growth opportunity in China.
Approximately 30% of the food that's used in China is spoiled in its delivery to the marketplace. So there's there's significant need for refrigerated.
Infrastructure infrastructure, rather than be trucks or whether they be.
Buildings, and warehouses associated with cold storage to preserve their food and so that is a growth market today and that has.
Enabled us to swing from a loss to profitability in that marketplace today.
Interesting okay. Thanks very much.
Thank you Mike.
You also have a follow up question from the line of Vincent Anderson from Stifel.
Asus.
Thank you.
So you recently went even further and simplifying your balance sheet.
Should we take this as an indication that you are pursuing acquisition opportunities that may require more capital than just whats available in your Undrawn term term debt facility right now.
Hi.
I would say that task operational at this time as we are working on a number of smaller.
Acquisitions at this time that we could fund internally with existing cash.
We'll we'll determine if those happen or don't happen over the next.
Next couple of months, but.
We continue to look for other larger things that that we may need additional cash for but.
Nothing is imminent or.
On.
In our sites at this point in time, but we will continue looking I mean as you know this is one of our leg on the on the good old they M&A opportunity as you know.
We have blamed you if M&A capacity more than a billion dollar adding capacity. If you think about our balance sheet. So we will continue looking and this will be a key growth this value for them.
For the next five years as more lumpy.
Thank you.
And then just just briefly you mentioned that you made your first sale of Stepan clot.
Do you have a rough idea of what percentage of your current surfactants revenues are coming from products released in call. It the past two or three years.
I don't have it here yet.
Hey.
Adam.
That's okay.
So at least it would be asked for it and to see the progress.
Yes.
We need to make more progress in that regard and we have.
And we're looking forward to the our new Chief Technology Officer, and sustainability Officer, Jason Kuyper, who we have recently hired from Syngenta to have a positive impact on our innovation metrics going forward.
Perfect. Thanks, so much.
Thank you.
Mr. Luis fraud or no further questions at this time I will now turn the call back over to you. Please continue with your presentation or closing remarks.
Hi, This is Quinn Stepan. Thank you very much for joining us today on today's call. We appreciate your interest in ownership and Stepan company. We look forward to reporting to you our on our third quarter 2019 call. Thank you very much and have a great day.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your line.
Thanks.