Stepan Co (SCL) Q1 2021 Earnings Call Transcript

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Stepan Co (SCL -2.03%)
Q1 2021 Earnings Call
Apr 27, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Stepan Company Q1 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Luis Rojo Vice President and Chief Financial Officer. Please go ahead.

Luis E. Rojo -- Vice President and Chief Financial Officer

Good morning and thank you for joining Stepan Company's first quarter 2021 financial review. Before we begin, please note that information in this conference call contains forward-looking statements, which are not historical facts. These statements involve risk and uncertainties that could cause actual results to differ materially including but not limited to prospects for our foreign operations, global and regional economic conditions, and factors detailed in our Security and Exchange Commission filings. Whether you are joining us online or over the phone, we encourage you to review the investor slide presentation, which we have made available at www.stepan.com under the Investors section of our website. We made these slides available at approximately the same time as when the earnings release is issued, and we hope that you find the information and perspective helpful. Now with that, I would like to turn the call over to Mr. Quinn Stepan, our Chairman and Chief Executive Officer.

F. Quinn Stepan -- Chairman and Chief Executive Officer

Thank you, Luis. Good morning and thank you all for joining us. As vaccines are rolled out across the country, we hope you and your families have had a chance to be vaccinated and that you will continue to stay safe and healthy. We at Stepan remain committed to doing our part by supporting customers that supply essential cleaning, disinfection, and personal wash products to the market. Before we discuss our results, I would like to introduce Scott Behrens, our new President and Chief Operating Officer, who will be joining us today. Scott has been a key leader at Stepan for the past 28 years. We are pleased to recognize Scott's contributions to our success with his promotion and are excited about the challenge he brings to this role and the impact he will have on the value of our company for you and for all shareholders. Welcome, Scott. The company had a good start to the year and delivered record quarterly income. The best financial quarter our company has ever had. Adjusted net income was $42.4 million or $1.82 per diluted share, up 75% from $24.2 million or $1.04 per diluted share last year when we had the power outage at our Millsdale facility. For the quarter, surfactant operating income was up 47% primarily due to improved customer and product mix. Our polymer business was up 140% on the strength of 32% global sales volume growth. Part of the volume growth was driven by the INVISTA acquisition, organic market growth, and a rebound in our PA business. our Specialty Product business results were down due to lower margins within our MCT product line. Our Board of Directors declared a quarterly cash dividend on Stepan's common stock of $0.305 per share payable on June 15, 2021. Stepan has increased its dividend for 53 consecutive years. Luis will walk you through a few more details about our first quarter results.

Luis E. Rojo -- Vice President and Chief Financial Officer

Thank you, Quinn. My comments will generally follow the slide presentation. Let's start with the Slide 4 to recap the quarter. Adjusted net income for the first quarter of 2021 was at a record $42.4 million or $1.82 per diluted share, a 75% increase versus $24.2 million or $1.04 per diluted share in the first quarter of 2020. 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 2 of the presentation and Table 2 of the press release. Specifically, adjustment to reported net income this quarter consist of adjustment for deferred compensation and some minor restructuring expenses. Adjusted net income for the quarter excludes deferred compensation expense of $1.7 million or $0.08 per diluted share compared to deferred compensation income of $3.6 million or $0.15 per diluted share in the same period last year. The deferred compensation numbers represent the net expense related to the company's deferred compensation plan as well as cash-settled stocks appreciation rights for our employees. Because these liabilities change with the movement in the stock price, we exclude these items from our operational discussion.

Slide 5 shows the total company earnings bridge for the first quarter compared to last year first quarter and breaks down the increase in adjusted net income. Because this is net income, the figures noted here are on an after-tax basis. We will cover each segment in more detail, but to summarize, surfactants and polymers were up significantly, while Specialty Product was a slightly down versus the prior year.

Corporate expenses and all others were higher during the quarter due to the higher acquisition-related expenses and incentive-based compensation. The company's first quarter effective tax rate was 23.6% compared to 22.5% in the prior year quarter. This year-over-year increase was primarily attributable to a less favorable geographical mix of income. We expect the full year 2021 effective tax rate to be in the range of 23% to 26%.

Slide 6 focuses on Surfactant segment results for the quarter. Surfactant net sales were $371 million, a 13% increase versus the prior year. Selling prices were up 13% primarily due to an improved product and customer mix and the pass through of higher raw material costs. Volume was flat versus the prior year. Higher demand for products sold in our functional product end markets, principally agriculture and oilfield was offset by lower North America sales volume into our consumer product end market. The reduction in North America consumer product volumes was due to suppliers force measure following the severe weather in Texas. Consumer Products volume outside North America grew low single digits. Surfactant operating income for the quarter increased $17 million or 47% versus the prior year. The increase was primarily due to an improved product and customer mix and lower supply chain expenses with the non-recurrence of the Millsdale plant power outage in the prior year. North America results increased primarily due to an improved product and customer mix. Brazil results were up, driven by higher volumes and improved customer and product mix. Mexico volume was also up high-single digit. Europe results increased slightly due to an improved product and customer mix.

Now turning to polymers on the Slide 7. Net sales were $150 million in the quarter, up 41% from the prior year quarter. Total sales volume increased 32% in the quarter primarily due to 32% growth in rigid volume. Global rigid polyol volumes excluding the INVISTA acquisition was up 8% versus the prior year. Volume for PA increased significantly, given the weak base due to the Millsdale power outage in the prior year. Selling prices increased 7% and the translation impact of a weaker US dollar positively impacted net sales by 2%. Polymer operating income increased $10 million or a 140% primarily due to strong sales volume growth and lower supply chain expenses due to the non-recurrence of the Q1 2020 Millsdale plant power outage. North America polyol results increased due to higher volumes and lower supply chain expenses in the current year quarter. Europe results increased due to double-digit volume growth in rigid polyol primarily due to the INVISTA acquisition. Asia and Latin America Polymer results decreased slightly versus prior year due to a one-time extra cost in Q1 2021. Volume in Asia grew a strong double-digit. specialty Product net sales were $16 million for the quarter, In line with the prior year. Sales volume was up 4% between quarters and operating income declined $1.4 million. The operating income decrease was primarily attributable to lower margins within our MCT product line giving higher raw material prices.

Moving on to Slide 8. Our balance sheet remains strong, and we have ample liquidity to invest in the business. Our leverage and interest coverage ratios continues at very solid levels. The total cash reduction from $350 million to $151 million was driven INVISTA acquisition in the first quarter of 2021. We had a strong cash from operations in the first quarter of 2021 which was used for CapEx investments, dividends, and incentive-based compensation payments -- payments. The Company also experienced higher working capital requirements, which is typical for the first quarter.

Beginning on the Slide 10, Scott will now update you on our 2021 strategic priorities.

Scott Behrens -- President and Chief Operating Officer

Thank you, Luis. I am pleased to be joining our earnings call and look forward to continuing to contribute to the success our team has had generating for our shareholders. As we wrap up the first quarter of 2021, we believe our business will remain strong. We continue to prioritize the safety and health of our employees, as we deliver products that contribute to the fight against COVID-19. Our EPA approved biocidal formulations kill the specific novel virus that causes COVID-19 and allow our customers to provide the public with additional tools to protect their families and fight the pandemic. We believe Surfactant demand in the consumer product end markets should remain strong as a result of changing consumer habits and sustained higher use of disinfection, cleaning and personal wash products. Core cleaning and disinfecting product lines drove volume growth in Europe and Latin America offset by lower volume in the US due to raw material disruptions related to the Texas weather incident. We are increasing capacity in certain product lines biocides and amphoterics to ensure we can meet anticipated higher requirements from our customers. We are also increasing North American capability and capacity to produce low 1,4-dioxane sulfates. As previously explained, recent regulations passed in New York will require reduced levels of 1,4-dioxane in on-shelf consumer products by January 1, 2023. 1,4-dioxane is a minor byproduct generated in the manufacture of ether sulfate surfactants which are key cleaning and foaming ingredients in consumer products. Through a combination of process optimization and additional manufacturing equipment, Stepan will be prepared to supply customers ether sulfates that meet the new regulatory requirements. This project is the primary driver of our increased 2021 capital expenditure forecast of $150 million to $170 million. We are working with our customers to ensure these product projects deliver our financial return targets. Tier 2 and tier 3 customers continue to be a focus of our strategy. We grew tier 2 and tier 3 volume by 9% in the first quarter and increased customer penetration adding 362 new customers during the quarter. Our diversification strategy into functional markets continues to be a key priority for Stepan. During the first quarter, global agricultural volumes increased with strong growth obtained in the post-patent pesticide segment and eight new products launched throughout the world. Oilfield volume was up double digits due to higher oil prices. We remain optimistic about future opportunities in this business as oil prices have recovered to the $60 per barrel level. We remain fully committed to delivering productivity gains across the company. We delayed productivity project implementation at Millsdale to allow the team to focus on COVID-19 related market opportunities. Work on the project has now begun, and we expect to see the benefits in 2022 and beyond.

Polymers had a good quarter as the business is gradually coming back after a challenging year due to COVID restrictions. The long-term prospects for our polyol business remain attractive as energy conservation efforts and more stringent building codes should increase demand. The integration of INVISTA is going well, and we expect to deliver on our internal commitments during 2021. The acquisition is expected to be accretive to both EPS and EBITDA margins in 2021. The company expects the multiple on a post synergy basis to be between 6.5 and 7.5 times. We expect to deliver full run rate synergies within two years. The company also acquired a fermentation plant located in Lake Providence, Louisiana in February 2021. This acquisition is part of Stepan's further development of bio surfactant technology following the acquisition of NatSurFact in 2020. Stepan has strong knowledge of surfactant chemistry, and we are excited about fermentation as a new platform technology for our next generation of surfactants, as customers look to achieve sustainability goals while maintaining key performance attributes. We continue to optimize our fermentation process technology including downstream processing. The Louisiana plant will require additional investment to manufacture our target product portfolio but will provide world scale capabilities to support customers in both functional product and consumer product applications. Given the strength of our balance sheet, we will continue to identify and pursue acquisition opportunities to fill gaps in our portfolio and to add new platform chemistries. I will now turn the call back to Quinn for closing comments. Quinn?

F. Quinn Stepan -- Chairman and Chief Executive Officer

Thank you, Scott. The company just completed its best quarter ever. Looking forward, we believe our surfactant volumes in the consumer product end markets should remain strong as a result of continued heightened demand for disinfection, cleaning, and personal wash products. We anticipate that demand for surfactants within the agricultural and oilfield markets will improve versus 2020. Global demand for rigid polyols continues to recover from pandemic related delays and cancellation of reroofing and new construction projects. This gradual recovery combined with our first quarter 2021 acquisition of INVISTA's aromatic polyester polyol business should position our polymer business to deliver strong growth versus prior year. We anticipate our Specialty Product business results will improve slightly year-over-year. After a record first quarter and despite experiencing significant raw material price increases, we are cautiously optimistic about the remainder of the year. This concludes our prepared remarks. At this time, we would like to turn the call over for questions. Daisy please review the instructions for the question portion of today's call.

Questions and Answers:

Operator

Thank you. [Operator Instruction] One moment please for our first question. Our first question comes from the line of Vincent Anderson with Stifel. Please proceed with your question.

Vincent Anderson -- Stifel -- Analyst

Good morning, gentlemen, and nice job...

F. Quinn Stepan -- Chairman and Chief Executive Officer

Good morning, Vincent.

Vincent Anderson -- Stifel -- Analyst

So normally we see some seasonality in your polymer margins but just between the good start to the year and the supplier outages, INVISTA, being early in the synergy window, how should we think about the margin cadence during the peak construction months this year?

F. Quinn Stepan -- Chairman and Chief Executive Officer

If we take a look at our polymer margins with the significant raw material price increases that we have experience in the market, particularly in North America. I would say that our margins are down so far in 2021 versus prior year and we are, we're trying to, we have announced price increases to recapture some of the increase in raw material prices, and we'll be looking to do more of that as the year continues.

Vincent Anderson -- Stifel -- Analyst

All right, thank you. And in surfactant margins, can you remind us what the year-ago impact was from Millsdale just to help frame a little bit more precisely what the price mix impact was on margins this quarter? And then just following on that with regard to raw materials, have you already been able to put through price initiatives for the products impacted by raw material availability or is there going to be a little bit of a lag where once you have that supply back then you start price discussions again?

Luis E. Rojo -- Vice President and Chief Financial Officer

Hi, Vince. Let me take the first one and Scott will comment a little bit more about pricing, but let me give you some perspective about the comparisons between Q1 2020 because I know it is a lot of -- it is a little bit higher with everything that happened last year. If you look at the 75% growth that we had on net -- on net income and on EPS. If you exclude the Millsdale event from the base, it is more around a 20% growth. So, as you know, we produce both surfactants and polymers in our Millsdale facility. So both -- both businesses were impacted in Q1 2020 with higher costs, the force measure that we had. So if you -- so my point is, we mentioned last year that the costs in Q1 were roughly $10 million, you can call it a little bit more than $10 million after tax and that's why I'm saying the true comparison will be a growth of 20%.

Scott Behrens -- President and Chief Operating Officer

Vincent, in terms of surfactant margins and pricing, I think quarter-over-quarter, our mix is better, was better in Q1 versus 2020 because we've had three months of a higher demand related to the COVID product portfolio versus one month in 2020. In terms of, in terms of price increases, we started to see raw material inflation mid-Q1. So, we've already taken actions in our surfactant business to try and recover the inflation we've, we are seeing and we'll continue to see in Q2.

F. Quinn Stepan -- Chairman and Chief Executive Officer

And from a product mix and customer mix perspective, we continue to make progress in our tier 2, tier 3 customer initiative and are benefiting from higher sales in the agricultural and oilfield space.

Vincent Anderson -- Stifel -- Analyst

All right, great, thanks for, thanks for all the color there. If I could sneak in a quick one around the fermentation business. First, how does that ramp-up going in terms of staffing some of the more specialized roles? And then second added curiosity, how many independent production lines does that asset that you purchased have in terms of being able to easily segregate them if you were to acquire additional fermentation product portfolios?

F. Quinn Stepan -- Chairman and Chief Executive Officer

So, let's start with the -- where we are in the development process. We are in the R&D phase at this point, working on optimization of the fermentation process itself. We do have staff that is schooled and educated in fermentation. So, that is being done inside from a technology development perspective with outside help for pilot scale experimental runs. In terms of the manufacturing site in Lake Providence, Louisiana, there are up to four independent trains that could be commissioned for individual product production, but we are, we are looking at what our future portfolio will entail and that's to be determined.

Vincent Anderson -- Stifel -- Analyst

All right, great, thanks. Thanks everyone.

Operator

Our next question comes from the line of Mike Harrison with Seaport Global Securities. Please proceed with your question.

Michael Harrison -- Seaport Global Securities -- Analyst

Hi, good morning. And let me add my congratulations on a strong start to the year.

F. Quinn Stepan -- Chairman and Chief Executive Officer

Thank you, Mike. Good morning.

Michael Harrison -- Seaport Global Securities -- Analyst

I wanted to kind of come back to this question about the better COVID demand that you saw in Q1 or you're seeing the benefits from enhanced cleaning and disinfection demand in this quarter, I think what we're trying to figure out is how do we think about the comps as we head into the second quarter when we did see some elevated demand for those products, but maybe talk a little bit about how your capacity has changed in the past 12 months, maybe what the mix looks like today versus 12 months ago, maybe any way that you can help, help us understand how much sustainably higher different the business is today than it was prepandemic?

F. Quinn Stepan -- Chairman and Chief Executive Officer

So, our base surfactant business last year, we saw an 8% growth for the year in our kind of our core cleaning products and more, quite frankly, in our disinfectant products. But as we look at, you asked some questions relative to our capacities. So, for our amphoteric product line, we talk about efficiency gains at our manufacturing plants. So, we've been able to apply lean and efficiency tools to significantly increase the capacity that we have from existing assets for our amphoteric product lines, which are a big part of our growth that we're, that we have and will continue to experience. From a biocidal perspective, we've added some new reactor capabilities in Mexico. So, we think we have sufficient capacity to support the market growth at this point in time.

Luis E. Rojo -- Vice President and Chief Financial Officer

Yeah, Mike. The only thing that I will add is we also in our prepared remarks, we talked about the impact of a weather incident in Texas. So, we are just coming -- or the whole industry shows coming out of out of that event, and we need to see how, how this evolve in the following weeks and month, but that had also an impact on raw materials and everything.

F. Quinn Stepan -- Chairman and Chief Executive Officer

And then the other part of your question is will we see sustained demand from COVID related market opportunities and what our customers are saying is that they believe that individual's cleaning standards have changed and that it is sustainable as the market goes forward. We believe that there may be some decline in consumer washing habits as we go forward, but those are going to be offset by enhanced cleaning in the industrial and institutional markets because maybe Scott, you want to comment on one of our customers has recently been talking about telling you?

Scott Behrens -- President and Chief Operating Officer

Yes. So as economies reopen around the world, a lot of the hospitality industry is going to I believe trying in store public confidence that themselves and their families can be safe in these public places, so visible cleaning should be a big part of the economies reopening around the world. So, rather than cleaning crews during the cleaning and disinfection at 4:00 AM when nobody is in the lobby, we expect to see more visible cleaning habits in the public forum. And that could provide a boost for our business.

Luis E. Rojo -- Vice President and Chief Financial Officer

Yeah, Mike, I think we have talked it in the past, all the cleaning protocols in all these industries. Right. When you think about schools, when you think about restaurants, hospitals, airplanes, all of that -- all those cleaning protocols have changed. And that's it means that we all, I mean, our customers believe there is going to be more demand in the future as the economies reopen and we'll see how that impact, offset or not, the consumer.

Michael Harrison -- Seaport Global Securities -- Analyst

[Inaudible] that makes sense. Maybe just to help frame up the impact of the supply disruptions. I think you mentioned that outside the US, your consumer business was up low-single digits, and it sounds like in the US or in North America, your business [Inaudible] down a little bit. Is that the way we should think about it, it's the supply disruptions were maybe like a 3% or 4% impact on North American demand, and how does that flow-through is that, does that demand just get lost or does it get made up as we get into Q2 or maybe Q3?

F. Quinn Stepan -- Chairman and Chief Executive Officer

Okay. So Mike, let me help you out a little bit. I think the impact for our North America in primarily commodity surfactants is probably $1 million to $2 million in operating income impact for our North American surfactant business.

Luis E. Rojo -- Vice President and Chief Financial Officer

And you've got all your other points totally right, Mike, we saw low single-digit growth outside North America in our consumer business, and North America was down because of the weather issue.

Michael Harrison -- Seaport Global Securities -- Analyst

All right. And then the last question is on the Ag business which sounded like it was really strong. But it seems like this is new products that you're introducing as well as your positioning. I think particularly in Asia, you called out there may be more, more Stepan driven as much as a better market than last year when there were some destocking going on in North America. Can you maybe give a little bit more color on how you're feeling about the ag business?

F. Quinn Stepan -- Chairman and Chief Executive Officer

Yeah, Mike. It is starting off, commodity prices, corn and soybeans are -- have almost doubled over the last 12 months. So there is a strong anticipation that the planting on a global basis will be significantly up. So, customers are preparing for that increased demand for pesticides. So, we have seen good volume growth in all of our regions, and we expect that to continue. We got to get through the planting seasons here in the northern Hemisphere, but so far so good. And I think it's nice to see ag and even our oilfield business showing, showing good strong growth in recovery after the impacts to both those businesses in 2020.

Michael Harrison -- Seaport Global Securities -- Analyst

All right, thanks very much.

F. Quinn Stepan -- Chairman and Chief Executive Officer

Thanks, Mike.

Operator

Our next question comes from the line of Marco Rodriguez with Stonegate Capital Markets. Please proceed with your question.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Good morning, everybody. Thank you for taking my questions.

F. Quinn Stepan -- Chairman and Chief Executive Officer

Good morning, Marco.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

I was wondering if maybe you could talk a little bit more about the integration efforts with INVISTA, maybe if you can kind of frame where you sort of set their timelines as far as any specifics that you might be able to provide us. And then if you could also maybe discuss a little bit about the debottlenecking opportunities that you mentioned at the acquisition date?

F. Quinn Stepan -- Chairman and Chief Executive Officer

Yeah. So what I would tell you that many people from Stepan have been actively working on the integration. Just to remind everybody, we purchased about $100 million aromatic polyester polyol business in two locations on a global basis. We ended up acquiring a relatively small commercial staff and relatively small R&D facilities or R&D people with that as well. So from a people perspective, the integration has been relatively easy, and we're very excited to have those new skills and new capabilities joining our company, and then we've got the two plant sites. The plant site in North America is relatively underutilized or significantly underutilized, and we think we have sufficient capacity to support market growth for the next decade or so with those assets. What we're working on today at that site is to provide backup capabilities for our, Stepan's legacy technologies at that site as well, so that we can provide business continuity for our customers. The initial phase of that activity will be done in Q3 and then what we've already seen is that due to some raw material availability issues, we've seen some switching back and forth between the two sites already in North America and in Europe where we have supplied some -- have had some customers move from legacy INVISTA products to Stepan products, and we anticipate that that will occur over a period of time and technology will switch and we'll utilize both plants effectively and efficiently. So, we're pretty pleased with the progress so far, as we said in the script that the profitability so far is up. We're encouraged that the market for polyester polyol is growing and has rebounded nicely. Excluding the acquisition, our base business was up 8%, so that's indicative of market growth. So, so far so good. We'll report more in the next quarter.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Understood. Thank you. Very helpful. Then on the surfactants side, the strategy to push more into the Tier 2, Tier 3 has obviously yielded some very nice growth for you guys. Last year, and it looks like it was pretty strong here this quarter as well. Just kind of based on what you've learned over the past 12 months or so, maybe if you can talk to how perhaps you might be looking at any sort of approaches or changes in approaches to your sales and market opportunities to this group?

Scott Behrens -- President and Chief Operating Officer

Marco, I think we've, we put together, I think a pretty good sales and marketing strategy to go after that the growth in the Tier 2 Tier 3 space. It's been working. It's been working very well. And we've got a broad range of distribution partners around the world that are really committed to our strategy and work very well with us in implementing our marketing plans across the world. So, I don't see any, any real change now, if your question is related to the COVID environment and customer engagement, we are enhancing our digital customer engagement strategy, bringing more of our tools online around our product technologies and formulation offering. So, we are doing some obvious modifications to bring more digital content to customers while we're kind of grounded from travel at this point in time.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Got it. And then last quick question from me, just kind of following up on a prior question on the passing through of the higher prices from raw materials. I'm not sure if I caught it, but did you, were you able to push through most or the majority of those higher costs or is there a confidence level that you have that you might be able to share in terms of your ability to push that through to the end customer? Thank you.

F. Quinn Stepan -- Chairman and Chief Executive Officer

Yeah. Marco, I think we're a little bit behind in the polymer space and that's why you've seen some compression in our polymer margins and I think we're in pretty good shape on surfactants. We've announced one mid-quarter price increase, and I think there'll be a little bit more, but I think we're better suited in surfactants and polymers today.

Luis E. Rojo -- Vice President and Chief Financial Officer

And we need to continue monitoring these, Marco, on how raw material goes in the next weeks and months. At the end, this is a very dynamic piece right pricing and we will always try to maximize margins and share to deliver the best value and the highest value creation for Stepan. So we will, I think the company has proved that we can manage margins pretty well in both environments when raw material goes down and when raw material goes up.

F. Quinn Stepan -- Chairman and Chief Executive Officer

And I guess I would also make a comment is due to the Texas freeze and North America, our inventories. I think many inventories across the supply chain are low today. So we've got, as we think about the hurricane season coming in not too distant future, we need to start building inventories to prepare for the US Gulf Coast hurricane season as well. So, we've got some work to do relative to getting our inventories back up to a level where we're comfortable.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Got it. On this date, I really appreciate the time guys. Thank you.

F. Quinn Stepan -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of David Silver with CL King. Please proceed with your question.

David Silver -- CL King and Associates -- Analyst

Yeah, hi, good morning. Thank you.

F. Quinn Stepan -- Chairman and Chief Executive Officer

Good morning, David.

David Silver -- CL King and Associates -- Analyst

Hey. Yeah, I'm going to apologize in advance. I did unfortunately join the call a few minutes late, so I may be making you repeat yourself here. So, there is a number of kind of striking kind of sequential, sorry, year-over-year improvements, I just wanted to hone in on a couple of them. I guess, Quinn, were you or Luis it's were you able to call out the accretion or the benefits of the polyols acquisition this quarter. In other words I'm guessing the revenues were kind of at a little bit above that $100 million run rate, but is there any, did you call out what the incremental effect was on earnings per share this quarter as a result of having the coke business as part of [Speech Overlap]

Luis E. Rojo -- Vice President and Chief Financial Officer

No David, we didn't, we didn't specifically call out there, the INVISTA numbers. As Quinn was mentioning, we're pleased with the, with the first two months, we were ahead of our internal goals and as we mentioned when we did the acquisition, the acquisition is going to be EPS accretive even the first year and it's going to be accretive to our EBITDA margins, and we expect 6.5 to 7.5 multiple after two years of synergies and you know that we paid $165 million. So, you can do some math there.

F. Quinn Stepan -- Chairman and Chief Executive Officer

And what we would say is, as I mentioned, that the market is growing and is rebounding nicely and volume is ahead of our, ahead of our internal target at this point in time.

David Silver -- CL King and Associates -- Analyst

Okay, great. And the next question is more related to just some comments about incremental margins. So, if I look at maybe page 2 of your earnings release, and I just compare for the surfactants and the polymers segments, if I compare the delta on the revenue line to the delta on the operating income line, it seems like the incrementals are unusually -- are very, very high, very robust this quarter year-over-year, and I'm certain that Millsdale factors into that, but could you make some comments about, I guess the incremental margins that you're seeing as your, as your volumes tick up here. In other words, I guess comments on how well fixed costs are being absorbed and raw material price increases are being matched with offsetting price increase is just some qualitative commentary to kind of wrap around the, just a simple math as far as the incremental, incremental profit on the extra dollars sold. Sorry, go right ahead.

F. Quinn Stepan -- Chairman and Chief Executive Officer

So, David, I'll make some comments, qualitative comments, and I'll let Luis jump in with some of the numbers, if you will, but certainly the quarter benefited as you pointed out from the from the lower expenses at our Millsdale facility. So that, so that's the first point I want to make. The second point is mixed. We have, if you take a look at Q1 2021 versus Q1 2020, we have significantly more biocide sales in the, in the month and we also have improving oil field and agricultural business and then you see also improved Tier 2 Tier 3 business year-over-year. So, the customer mix and the product mix have more of an impact to our margin improvement than absolute margin of the raw material costs for our commodity product lines.

Luis E. Rojo -- Vice President and Chief Financial Officer

Yeah, I think, as I mentioned before, David, of course, the comparison with Q1 2020 is not apples to apples. We had a big given last year as we all know. So, the growth that you see, if you exclude that is more like a 20% growth and that type of growth is driven by product and customer mix in surfactants and the INVISTA acquisition and the growth of volume in our polymers business. if you think our EBITDA margins for the quarter that we're just reporting, if you look at the appendix 5 of the presentation, you will see surfactants close to 18% of EBITDA margin, we feel good about those margins and the driver there again is product and customer mix and you see our polymers in the 17% because of, of course Q1 is seasonally low because not all the volume is there.

F. Quinn Stepan -- Chairman and Chief Executive Officer

So and what you've heard from us over the last couple of years is a consistent focus on our strategy, which is Tier 1 customers commodity surfactants provide economies of scale that business as has improved over the last year and a half, two years, so that's good. That business is growing, but also that gives us strength to leverage those assets, again some more specialized customer mix and also that position allows us to sell more specialty chemicals, more specialty products to a broad-based customer mix and so, so that strategy in our surfactant business continues to provide an opportunity to pay dividends for 53 consecutive years, but that -- but that strategy, there's ups and downs. But we feel pretty good about the mix and the capabilities and the services that we're bringing to the market, bringing to the customers.

David Silver -- CL King and Associates -- Analyst

Okay, great. This next question I think is kind of more or less a supply chain related question but with demand high and with margins favorable, I mean I think internally, there has to be a priority on just maintaining reliable operations and hitting your production and delivery targets and I mean I scratch my head and I just think over the last 12 months, I mean there has been a very severe pandemic that's affected a number of your production and distribution sites. The Texas freeze that you talked about. There was the Illinois River locks work that was uncertain, but it was something a little bit different that kind of posed a threat to your supply chain I guess and a few other things, but I guess as you look at, as you plan for the whole year, and you want to kind of hit your internal targets up and down in terms of production and deliveries and things like that. I mean what additional steps do you take here or how do you kind of view the challenge of kind of building in maybe redundancy or additional capabilities to ensure that you optimize what you're able to accomplish in the current robust, environment. Thanks.

F. Quinn Stepan -- Chairman and Chief Executive Officer

So the first comment I would make you made a statement about having some difficulty keeping our plants up and running as a result of COVID. What I would tell you is that we have had virtually no disruption in our supply chain over the last year and a half as a result of COVID primarily because we take it very, very seriously and have instituted precautions across our supply chain network on a global basis and our employees are being very diligent and trying to keep themselves safe. So, we have had COVID in our, in our across our population that reflects the communities in which we live and work, but we have not had any supply disruptions. Relative to reliability of assets and capacity utilization of our assets, so we, our capacity utilization has increased and so there is less flex that we have within our supply chain network today than we have had over the last couple of years. We continually try to squeeze more productivity out of our existing assets, and I will tell you we're using lean tools, as I mentioned earlier, and we always seem to find a little bit of a little bit more capacity in those assets and our supply chain team is doing a good job. The investments in reliability that we are making continue to increase a little bit. So, we need to spend money on our plant sites and we need to reinvest, so we can have the reliability that the market needs us to. So, your point is well taken, and it is a priority for the company given the extent that the customers depend on us to continue to make those products or so they can have material on the store shelves. It's a responsibility we take very seriously and it cost money to maintain our plants to do that.

David Silver -- CL King and Associates -- Analyst

Okay, thanks for that. I apologize if I implied that the pandemic has caused meaningful disruptions to your to your specific facilities or operations. I solely meant it in terms of a challenge to be to be addressed, maybe on a continuing basis, but not that it had disrupt -- major disruptive effects to date. Okay, that's fine. I'm done. That's it for me. I appreciate all the color. Thank you.

F. Quinn Stepan -- Chairman and Chief Executive Officer

Thank you, David.

Operator

As a reminder to [Operator Instructions] There are no further phone questions at this time.

F. Quinn Stepan -- Chairman and Chief Executive Officer

Well, thank you all very much for joining us on today's call. We appreciate your interest and ownership in Stepan Company. Please stay safe and healthy. Wash your hands frequently and use disinfectants to clean surfaces in your homes and at work. Have a great day. Thank you.

Operator

[Operator Closing Comments]

Duration: 52 minutes

Call participants:

Luis E. Rojo -- Vice President and Chief Financial Officer

F. Quinn Stepan -- Chairman and Chief Executive Officer

Scott Behrens -- President and Chief Operating Officer

Vincent Anderson -- Stifel -- Analyst

Michael Harrison -- Seaport Global Securities -- Analyst

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

David Silver -- CL King and Associates -- Analyst

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