Sensient Technologies Corporation Reports Results for the Quarter Ended September 30, 2020

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Oct. 16, 2020 10:55 UTC
  • Flavors & Extracts Group reports Strong Revenue and Profit Growth
  • Growth in Food and Pharmaceutical Color Sales was offset by Lower Personal Care Revenue

MILWAUKEE--(BUSINESS WIRE)-- Sensient Technologies Corporation (NYSE: SXT) reported consolidated revenue of $323.6 million in this year’s third quarter compared to $317.7 million in last year’s third quarter. Reported operating income in the third quarter was $41.2 million compared to $38.8 million in the third quarter of 2019. Reported diluted earnings per share was 78 cents in the third quarter of 2020 compared to diluted earnings per share of 75 cents in the third quarter of 2019. Foreign currency translation had an immaterial impact on revenue, operating income, and earnings per share in the quarter.

The 2020 third quarter reported results include divestiture & other related costs as well as operational improvement plan costs, which decreased third quarter net earnings by $1.4 million ($0.03 per diluted share). The 2020 and 2019 third quarter results also include the operations of the product lines divested and to be divested, which increased diluted earnings per share by $0.04 in the third quarter of 2020 and $0.02 in the third quarter of 2019. These adjustments are described in more detail under “Reconciliation of Non-GAAP Amounts” at the end of this release.

BUSINESS REVIEW

       

Reported

  Revenue    

Quarter

 

Year-to-date

  Flavors & Extracts  

9.1%

 

4.1%

  Color    

-8.3%

 

-7.0%

  Asia Pacific    

2.0%

 

1.6%

  Total Revenue    

1.9%

 

-0.7%

             
       

Adjusted

       

Local Currency (1)

  Revenue    

Quarter

 

Year-to-date

  Flavors & Extracts  

12.9%

 

7.2%

  Color    

-1.5%

 

-1.2%

  Asia Pacific    

2.1%

 

3.0%

  Total Revenue    

6.1%

 

3.0%

             
(1) Adjusted local currency percentage changes are described in more detail in the "Reconciliation of Non-GAAP Amounts" at the end of this release.

As a result of the portfolio changes made this year, Sensient has changed the name of its Flavors & Fragrances Group, to the Flavors & Extracts Group in order to more accurately reflect the Group’s product portfolio.

The Flavors & Extracts Group reported third quarter revenue of $182.9 million compared to $167.6 million reported in the comparable period last year, an increase of 9.1%. Adjusted local currency revenue increased 12.9% in the quarter. The higher revenue was primarily the result of continued growth in natural ingredients and flavors, extracts, and flavor ingredients. Segment operating income was $23.8 million in the current quarter compared to $17.6 million reported in the comparable period last year, an increase of 35.5%. Adjusted local currency operating profit increased 24.1%. The Group’s higher profit was primarily a result of the higher volumes and the favorable impact of the Group’s cost reduction initiatives, offset by higher raw material costs in natural ingredients. Foreign currency translation increased segment revenue by approximately 1% and had an immaterial impact on operating income in the quarter.

The Color Group reported revenue of $116.4 million in the quarter compared to $127.0 million in last year’s comparable period, a decrease of 8.3%. Adjusted local currency revenue decreased 1.5% in the quarter. The Group continued to have good growth in food and pharmaceutical colors; however, this growth was offset by lower volumes in the personal care business, primarily as a result of the lower demand for makeup during COVID-19. Segment operating income was $23.6 million in the quarter compared to $23.4 million in last year’s comparable period. Adjusted local currency operating income increased approximately 3.0%. Despite double digit growth rates in food and pharmaceutical colors, the lower volumes in personal care continued to negatively impact the Color Group’s operating income in the quarter. Foreign currency translation decreased segment revenue by approximately 1% and had an immaterial impact on operating income in the quarter.

The Asia Pacific Group reported revenue of $30.7 million in the quarter compared to $30.1 million in last year’s comparable period, an increase of 2.0%. Adjusted local currency revenue increased 2.1% in the quarter. The Group had favorable growth in a number of regions, which was offset by the negative impact of COVID-19 restrictions in certain countries. Segment operating income was $6.1 million in the quarter compared to $5.4 million in last year’s comparable quarter, an increase of 13.3%. Adjusted local currency operating income increased 15.5% in the quarter. The higher profit was primarily a result of the favorable volume growth in certain regions and the favorable impact of the Group’s cost reduction initiatives. Foreign currency translation had an immaterial impact on revenue and decreased operating income by approximately 1% in the quarter.

Corporate & Other reported operating costs of $12.4 million in the current quarter compared to $7.7 million in last year’s comparable period. The higher costs are primarily due to the divestiture & other costs, operational improvement plan costs, and an increase in non-cash performance-based compensation.

During the third quarter, the Company implemented an operational improvement plan, primarily in the personal care business to consolidate cosmetic manufacturing operations. The costs for this operational improvement plan are included in the Company’s Corporate & Other segment.

The Company’s non-GAAP amounts eliminate the impact of currency movements, depreciation and amortization, non-cash share-based compensation, divestiture & other related costs, operational improvement plan costs, and the results of the operations divested and to be divested to enhance the overall understanding of the Company’s performance when viewed together with the GAAP results. Refer to “Reconciliation of Non-GAAP Amounts” at the end of this release.

2020 OUTLOOK

Based upon current trends, the Company reconfirms its previously issued diluted earnings per share guidance for 2020 of $2.10 to $2.35. The full year guidance now includes approximately 5 cents of foreign currency headwinds based on current exchange rates. The Company also reconfirms its previously issued 2020 adjusted diluted earnings per share(2) guidance of $2.60 to $2.80, which excludes divestiture & other related costs, operational improvement plan costs, the results of the operations divested and to be divested, and foreign currency impacts.

The Company is also confirming its previously issued guidance, which calls for low to mid-single digit revenue growth in 2020 on a local currency basis, excluding the revenues of the product lines divested and to be divested. The Company also continues to expect 2020 Adjusted EBITDA(2) to grow at a low to mid-single digit rate and Adjusted Operating Income(2) to be flat to down at a low-single digit rate, in each case on a local currency basis. Adjusted Operating Income will be impacted by higher non-cash performance-based compensation.

The Company’s guidance is based upon current trends and the effects of COVID-19 to date. The full impacts of the ongoing COVID-19 pandemic remain uncertain and management will continue to monitor its impacts on our business.

(2) See “Reconciliation of Non-GAAP Amounts” at the end of this release for more information.

CONFERENCE CALL

The Company will host a conference call to discuss its 2020 third quarter financial results at 8:30 a.m. CDT on Friday, October 16, 2020. To participate in the conference call, contact Chorus Call Inc. at (844) 492-3726 or (412) 317-1078, and ask to join the Sensient Technologies Corporation conference call. Alternatively, the call can be accessed by using the webcast link that is available on the Investor Information section of the Company’s web site at www.sensient.com.

A replay of the call will be available one hour after the end of the conference call through October 23, 2020, by calling (877) 344-7529 and referring to conference identification number 10147899. An audio replay and written transcript of the call will also be posted on the Investor Information section of the Company’s web site at www.sensient.com on or after October 20, 2020.

This release contains statements that may constitute “forward-looking statements” within the meaning of Federal securities laws including under “2020 Outlook” above. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors concerning the Company’s operations and business environment. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements and that could adversely affect the Company’s future financial performance include the following: the impact and uncertainty created by the ongoing COVID-19 pandemic, including, but not limited to, its effects on our employees, facilities, customers and suppliers, the availability and cost of raw materials and other supplies, logistics and transportation, governmental regulations and restrictions and general economic conditions; the pace and nature of new product introductions by the Company and the Company’s customers; the Company’s ability to anticipate and respond to changing consumer preferences and changing technologies; the Company’s ability to successfully implement its growth strategies; the outcome of the Company’s various productivity-improvement and cost-reduction efforts and acquisition and divestiture activities; the success of the Company’s efforts to explore strategic alternatives for certain non-core product lines; the effectiveness of the Company’s past restructuring activities; changes in costs of raw materials, including energy; industry, regulatory, legal, and economic factors related to the Company’s domestic and international business; the effects of tariffs, trade barriers, and disputes; growth in markets for products in which the Company competes; industry and customer acceptance of price increases; actions by competitors; currency exchange rate fluctuations; and other factors included in “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, the Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, and in other documents that the Company files with the SEC. The risks and uncertainties identified above are not the only risks the Company faces. Additional risks and uncertainties not presently known to the Company or that it currently believes to be immaterial also may adversely affect the Company. Should any known or unknown risks and uncertainties develop into actual events, these developments could have material adverse effects on our business, financial condition, and results of operations. This release contains time-sensitive information that reflects management’s best analysis only as of the date of this release. Except to the extent required by applicable laws, the Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied herein will not be realized.

ABOUT SENSIENT TECHNOLOGIES

Sensient Technologies Corporation is a leading global manufacturer and marketer of colors, flavors, and other specialty ingredients. Sensient uses advanced technologies and robust global supply chain capabilities to develop specialized solutions for food and beverages, as well as products that serve the pharmaceutical, nutraceutical, cosmetic, and personal care industries. Sensient’s customers range in size from small entrepreneurial businesses to major international manufacturers representing some of the world’s best-known brands. Sensient is headquartered in Milwaukee, Wisconsin.

www.sensient.com

 

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Contacts

Amy Agallar
(414) 347-3706

Source: Sensient Technologies Corporation

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