Stepan Company (NYSE:SCL) Q4 2022 Earnings Call Transcript

David Silver: Okay, great. And I should have mentioned 1,4-dioxane. And of course, last question, and this would be on your marketing. And it has to do with your strategy for Tier 2, Tier 3 customer development. But you did mention, I think, a net addition, customer base of about 550, for 2022. And I’m just wondering, if we should think about a particular target for next year, and more to the point, do you think you’ve kind of, I don’t know, cherry picked or high graded the opportunities out there on the Tier 2, Tier 3 base of customers, or should we expect that there will be — that this will be a multi-year effort going forward? And you’ll continue to kind of broaden the base of Tier 2, Tier 3 customers that you work with, and the products and services that you provide there.

So, should we expect the growing portion of your revenue and earnings to come from Tier 2, Tier 3 going forward, or is the progress to date kind of a good measure where — what we should expect going forward?

Scott Behrens: Yeah, no. David, great question. We’ve been, I think, pretty clear that growing this Tier 2, Tier 3 segment is a major portion of our company’s growth strategy. We continue to invest in sales, marketing and R&D to support our continued growth with this segment on a global basis. We’ve identified that target for prospective customer list in Tier 2, Tier 3 around the worlds in the tens of thousands. And in becoming more efficient, and in reaching and securing orders from these customers around the world is our focus. And the 550 is a good number, we’re proud of that, and that leads to improve profitability for our company, and that’s our expectation going forward as our teams and they continue to execute and deliver those new customers on a net basis and that’s hundreds per year.

David Silver: That’s great. Thank you very much. I appreciate all the all the detail.

Operator: Thank you for your question. One moment, we have a follow-up question. Our follow-up question will be coming from Mike Harrison of Seaport. Your line is open.

Mike Harrison: Hi. Just a couple more for me. In terms of the Surfactants business, I’m curious if you’re seeing any trading down happening within the laundry portions of the business or personal care? And if you are seeing that is it something that’s happening in all regions, or is it maybe more, as you called out Latin America, maybe the consumers are under a little bit more pressure because of inflation. And I guess, are you seeing this trend around trading down? Is it getting worse as you look at Q1, or is it pretty stable?

Scott Behrens: Yeah, great question, Mike. I would, from my opinion, trading down in high inflationary environments is a universal trend. It’s not geographic specific. And yes, so consumers will trade down from premium to mid-tier to economy-tiers, and the economy tiers and mid-tiers also include private label. So I do think there’s been — that trend — we’ve seen that trend from our lens with sales to customers in multiple regions. Is it getting worse? I don’t know if I can comment on whether it’s getting worse or not. It’s just, it’s an uncertain view right now with destocking and everything in terms of what the trend is, but it definitely happened in Q4.

Mike Harrison: All right. And then just looking at the working capital numbers that you guys provided, it looks like working capital improved a little bit compared to Q3. It does look like your net debt went up, though. What was cash from operations in the fourth quarter, or the full year, whatever you can disclose on cash flow would be very helpful?