Sensient Reaffirms its 2022 Guidance
Sensient Technologies Corporation (NYSE: SXT) reported
consolidated revenue of $361.1 million in this year’s third quarter
compared to $344.3 million in last year’s third quarter. Reported
operating income in the third quarter of 2022 was $47.5 million
compared to $47.0 million in the third quarter of 2021. Reported
diluted earnings per share was 85 cents in the third quarter of
2022 compared to 80 cents in the third quarter of 2021. Foreign
currency translation decreased revenue by approximately 4% and
earnings per share by approximately 6% in the present quarter.
The 2021 third quarter reported results included divestiture
& other related costs and operational improvement plan costs,
which in total decreased 2021 third quarter diluted earnings per
share by $0.04. The 2021 third quarter reported results also
included the operations of the divested product lines, which were
not material to diluted earnings per share in the third quarter of
2021. We did not make any adjustments to our 2022 third quarter
reported results for divestiture & other related costs,
operational improvement plan costs, or results of the divested
product lines. The adjustments to our reported results 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
3.0%
-0.5%
Color
8.8%
11.8%
Asia Pacific
5.3%
9.5%
Total Revenue
4.9%
4.7%
Adjusted
Local Currency(1)
Revenue
Quarter
Year-to-Date
Flavors & Extracts
6.7%
6.9%
Color
14.6%
16.0%
Asia Pacific
14.5%
17.2%
Total Revenue
9.9%
11.0%
(1) Adjusted local currency percentage changes are
described in more detailin the "Reconciliation of Non-GAAP Amounts"
at the end of this release.
The Flavors & Extracts Group reported third quarter revenue
of $187.0 million compared to $181.7 million in last year’s third
quarter, an increase of 3.0%. Adjusted local currency revenue
increased 6.7% in the quarter. The Group benefited from pricing
across all of its product lines. Segment operating income was $26.3
million in the current quarter compared to $25.2 million reported
in the comparable period last year, an increase of 4.7%. Adjusted
local currency operating income increased 5.6% in the quarter. The
higher operating income was primarily due to the favorable pricing,
partially offset by higher input costs. Foreign currency
translation decreased segment revenue by approximately 3% and
segment operating income by approximately 1% in the quarter.
Segment operating income as a percent of revenue in the third
quarter of 2022 was 14.1%.
The Color Group reported revenue of $151.5 million in the
quarter compared to $139.2 million in last year’s third quarter, an
increase of 8.8%. Adjusted local currency revenue increased 14.6%
in the quarter. The Group had strong volume growth and higher
pricing in both Food & Pharmaceutical Colors and Personal Care.
Segment operating income was $28.2 million in the quarter compared
to $27.3 million in last year’s comparable period, an increase of
3.5%. Adjusted local currency operating income increased 10.9%
compared to the prior year’s third quarter. The higher operating
income is primarily a result of the higher volumes and favorable
pricing, partially offset by higher input costs. Foreign currency
translation decreased segment revenue by approximately 6% and
segment operating income by approximately 7% in the quarter.
Segment operating income as a percent of revenue in the third
quarter of 2022 was 18.6%.
The Asia Pacific Group reported revenue of $35.2 million in the
quarter compared to $33.4 million in last year’s third quarter, an
increase of 5.3%. Adjusted local currency revenue increased 14.5%
in the quarter. The higher revenue was a result of strong volume
growth and higher pricing. Segment operating income was $7.0
million in the quarter compared to $6.6 million in last year’s
third quarter, an increase of 5.3%. Adjusted local currency
operating income increased 16.3% in the quarter. The higher
operating income was primarily a result of the favorable volume
growth and higher pricing. Foreign currency translation decreased
segment revenue and operating income by approximately 9% and 11%,
respectively, in the quarter. Segment operating income as a percent
of revenue in the third quarter of 2022 was 19.7%.
Corporate & Other reported operating costs of $14.0 million
in the current quarter compared to $12.1 million in last year’s
third quarter, an increase of 16.0%. Adjusted local currency
operating expenses for Corporate & Other increased 23.5% in the
quarter primarily due to higher performance-based compensation.
2022 OUTLOOK
Sensient is reconfirming its expectation for 2022 full year GAAP
diluted earnings per share to grow at a high-teen growth rate
compared to the Company’s 2021 reported GAAP diluted earnings per
share of $2.81. Our full year 2022 guidance does not include any
material divestiture & other related costs, operational
improvement plan costs, or results of divested businesses.
The Company continues to expect 2022 revenue to grow at a high
single-digit rate in local currency compared to the Company’s 2021
adjusted revenue(2). The Company continues to expect its 2022
adjusted EBITDA(2) and diluted earnings per share to grow at a high
single- to double-digit rate in local currency compared to the
Company’s 2021 adjusted EBITDA(2) and the Company’s 2021 adjusted
diluted earnings per share(2) of $3.13.
The Company expects full year 2022 earnings per share reported
on a U.S. dollar basis to be impacted by foreign currency headwinds
of approximately twenty cents based on current exchange rates.
The Company’s guidance is based on current conditions and trends
in the economy and the markets in which the Company operates and is
subject to various risks and uncertainties as described below. The
Company will continue to monitor the impacts of the COVID-19
pandemic and the conflict between Russia and Ukraine on our
business.
(2) See “Reconciliation of Non-GAAP Amounts”
at the end of this release for more information.
USE OF NON-GAAP FINANCIAL MEASURES
The Company’s non-GAAP financial measures eliminate the impact
of certain items, which, depending on the measure, include:
currency movements, depreciation and amortization, non-cash
share-based compensation, divestiture & other related costs,
operational improvement plan costs and income, and the results of
the divested operations. These measures are provided 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.
CONFERENCE CALL
The Company will host a conference call to discuss its 2022
third quarter financial results at 8:30 a.m. CDT on Friday, October
21, 2022. 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 28, 2022, by calling (877)
344-7529 and referring to conference identification number 2992460.
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 25, 2022.
This release contains statements that may constitute
“forward-looking statements” within the meaning of Federal
securities laws including under “2022 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 COVID-19 pandemic, including, but not
limited to, its effects on our employees, facilities, customers,
and suppliers, the availability and cost of raw materials, energy,
and other supplies, the availability and cost of labor, logistics,
and transportation, governmental regulations and restrictions, and
general economic conditions, including inflation; the uncertain
impacts of the ongoing conflict between Russia and Ukraine on our
supply chain, input costs, including energy and transportation, and
on 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, acquisition and divestiture activities, and operational
improvement plan; 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, 2021, as updated and supplemented by the
Company’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2022, 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
Sensient Technologies Corporation (In thousands, except
percentages and per share amounts) (Unaudited)
Consolidated Statements of Earnings
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
% Change
2022
2021
% Change
Revenue
$
361,076
$
344,287
4.9
%
$
1,088,303
$
1,039,816
4.7
%
Cost of products sold
239,318
229,216
4.4
%
710,696
697,538
1.9
%
Selling and administrative expenses
74,265
68,113
9.0
%
222,081
212,670
4.4
%
Operating income
47,493
46,958
1.1
%
155,526
129,608
20.0
%
Interest expense
3,672
3,037
9,748
9,792
Earnings before income taxes
43,821
43,921
145,778
119,816
Income taxes
7,773
10,009
34,012
28,300
Net earnings
$
36,048
$
33,912
6.3
%
$
111,766
$
91,516
22.1
%
Earnings per share of common stock: Basic
$
0.86
$
0.81
$
2.67
$
2.17
Diluted
$
0.85
$
0.80
$
2.65
$
2.16
Average common shares outstanding: Basic
41,896
42,024
41,885
42,140
Diluted
42,242
42,206
42,199
42,287
Results by Segment
Three Months Ended September
30,
Nine Months Ended September
30,
Revenue
2022
2021
% Change
2022
2021
% Change
Flavors & Extracts
$
187,046
$
181,667
3.0
%
$
559,110
$
561,979
(0.5
%)
Color
151,469
139,239
8.8
%
456,175
408,166
11.8
%
Asia Pacific
35,221
33,442
5.3
%
109,014
99,599
9.5
%
Intersegment elimination
(12,660
)
(10,061
)
(35,996
)
(29,928
)
Consolidated
$
361,076
$
344,287
4.9
%
$
1,088,303
$
1,039,816
4.7
%
Operating Income
Flavors & Extracts
$
26,337
$
25,164
4.7
%
$
83,929
$
76,718
9.4
%
Color
28,200
27,253
3.5
%
90,035
79,462
13.3
%
Asia Pacific
6,952
6,601
5.3
%
22,877
19,146
19.5
%
Corporate & Other
(13,996
)
(12,060
)
(41,315
)
(45,718
)
Consolidated
$
47,493
$
46,958
1.1
%
$
155,526
$
129,608
20.0
%
Sensient Technologies Corporation (In thousands)
(Unaudited) Consolidated Condensed Balance
Sheets
September 30,
December 31,
2022
2021
Cash and cash equivalents
$
46,579
$
25,740
Trade accounts receivable
287,197
261,121
Inventories
501,382
411,635
Prepaid expenses and other current assets
45,582
42,657
Total Current Assets
880,740
741,153
Goodwill & intangible assets (net)
404,840
435,009
Property, plant, and equipment (net)
440,439
446,478
Other assets
113,189
122,853
Total Assets
$
1,839,208
$
1,745,493
Trade accounts payable
$
132,904
$
125,519
Short-term borrowings
21,947
8,539
Other current liabilities
100,574
98,247
Total Current Liabilities
255,425
232,305
Long-term debt
547,190
503,006
Accrued employee and retiree benefits
27,854
28,579
Other liabilities
54,225
43,178
Shareholders' Equity
954,514
938,425
Total Liabilities and Shareholders' Equity
$
1,839,208
$
1,745,493
Sensient Technologies Corporation (In thousands, except
per share amounts) (Unaudited) Consolidated
Statements of Cash Flows Nine Months Ended September 30,
2022
2021
Cash flows from operating activities: Net earnings
$
111,766
$
91,516
Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization
39,262
38,828
Share-based compensation expense
12,476
6,431
Net loss on assets
283
203
Loss on divestitures and other charges
-
13,774
Deferred income taxes
20,465
3,793
Changes in operating assets and liabilities: Trade accounts
receivable
(39,520
)
(35,290
)
Inventories
(112,021
)
(15,898
)
Prepaid expenses and other assets
(39,598
)
(15,016
)
Trade accounts payable and other accrued expenses
24,110
24,007
Accrued salaries, wages, and withholdings
1,819
1,763
Income taxes
(4,342
)
(1,155
)
Other liabilities
198
3,192
Net cash provided by operating activities
14,898
116,148
Cash flows from investing activities: Acquisition of
property, plant, and equipment
(51,703
)
(37,608
)
Proceeds from sale of assets
94
201
Proceeds from divestiture of businesses
-
36,790
Acquisition of new businesses
(1,048
)
(13,875
)
Other investing activities
947
1,348
Net cash used in investing activities
(51,710
)
(13,144
)
Cash flows from financing activities: Proceeds from
additional borrowings
187,715
55,589
Debt payments
(87,657
)
(67,534
)
Purchase of treasury stock
-
(31,467
)
Dividends paid
(51,681
)
(49,468
)
Other financing activities
(2,056
)
(582
)
Net cash provided by (used in) financing activities
46,321
(93,462
)
Effect of exchange rate changes on cash and cash equivalents
11,330
(1,373
)
Net increase in cash and cash equivalents
20,839
8,169
Cash and cash equivalents at beginning of period
25,740
24,770
Cash and cash equivalents at end of period
$
46,579
$
32,939
Supplemental Information Nine Months Ended
September 30,
2022
2021
Dividends paid per share
$
1.23
$
1.17
Sensient Technologies
Corporation
(In thousands, except percentages and
per share amounts)
(Unaudited)
Reconciliation of Non-GAAP
Amounts
The Company's results for the three and
nine months ended September 30, 2022 and 2021 include adjusted
revenue, adjusted operating income, adjusted net earnings, and
adjusted diluted earnings per share, which exclude divestiture
& other related costs, operational improvement plan costs and
income, and the results of the divested operations.
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
% Change
2022
2021
% Change
Revenue (GAAP)
$
361,076
$
344,287
4.9
%
$
1,088,303
$
1,039,816
4.7
%
Revenue of the divested product lines
-
(1,622
)
-
(29,399
)
Adjusted revenue
$
361,076
$
342,665
5.4
%
$
1,088,303
$
1,010,417
7.7
%
Operating income (GAAP)
$
47,493
$
46,958
1.1
%
$
155,526
$
129,608
20.0
%
Divestiture & other related costs – Cost of products sold
-
-
-
28
Divestiture & other related costs – Selling and administrative
expenses
-
241
-
13,473
Operating loss (income) of the divested product lines
-
70
-
(2,398
)
Operational improvement plan - Selling and administrative expenses
(income)
-
483
-
(2,010
)
Adjusted operating income
$
47,493
$
47,752
(0.5
%)
$
155,526
$
138,701
12.1
%
Net earnings (GAAP)
$
36,048
$
33,912
6.3
%
$
111,766
$
91,516
22.1
%
Divestiture & other related costs, before tax
-
241
-
13,501
Tax impact of divestiture & other related costs(1)
-
1,179
-
283
Net loss (earnings) of the divested product lines, before tax
-
70
-
(2,398
)
Tax impact of the divested product lines(1)
-
(18
)
-
590
Operational improvement plan costs (income), before tax
-
483
-
(2,010
)
Tax impact of operational improvement plan(1)
-
(115
)
-
44
Adjusted net earnings
$
36,048
$
35,752
0.8
%
$
111,766
$
101,526
10.1
%
Diluted earnings per share (GAAP)
$
0.85
$
0.80
6.3
%
$
2.65
$
2.16
22.7
%
Divestiture & other related costs, net of tax
-
0.03
-
0.33
Results of operations of the divested product lines, net of tax
-
-
-
(0.04
)
Operational improvement plan costs (income), net of tax
-
0.01
-
(0.05
)
Adjusted diluted earnings per share
$
0.85
$
0.85
0.0
%
$
2.65
$
2.40
10.4
%
Note: Earnings per share calculations may
not foot due to rounding differences.
(1) Tax impact adjustments were determined
based on the nature of the underlying non-GAAP adjustments and
their relevant jurisdictional tax rates.
Sensient Technologies Corporation (In thousands)
(Unaudited) Reconciliation of Non-GAAP Amounts -
Continued Results by Segment
Three Months Ended September
30,
Adjusted
Adjusted
Revenue
2022
Adjustments(2)
2022
2021
Adjustments(2)
2021
Flavors & Extracts
$
187,046
$
-
$
187,046
$
181,667
$
(1,312
)
$
180,355
Color
151,469
-
151,469
139,239
(310
)
138,929
Asia Pacific
35,221
-
35,221
33,442
-
33,442
Intersegment elimination
(12,660
)
-
(12,660
)
(10,061
)
-
(10,061
)
Consolidated
$
361,076
$
-
$
361,076
$
344,287
$
(1,622
)
$
342,665
Operating Income
Flavors & Extracts
$
26,337
$
-
$
26,337
$
25,164
$
66
$
25,230
Color
28,200
-
28,200
27,253
4
27,257
Asia Pacific
6,952
-
6,952
6,601
-
6,601
Corporate & Other
(13,996
)
-
(13,996
)
(12,060
)
724
(11,336
)
Consolidated
$
47,493
$
-
$
47,493
$
46,958
$
794
$
47,752
Results by Segment
Nine Months Ended September
30,
Adjusted
Adjusted
Revenue
2022
Adjustments(2)
2022
2021
Adjustments(2)
2021
Flavors & Extracts
$
559,110
$
-
$
559,110
$
561,979
$
(27,616
)
$
534,363
Color
456,175
-
456,175
408,166
(1,638
)
406,528
Asia Pacific
109,014
-
109,014
99,599
(295
)
99,304
Intersegment elimination
(35,996
)
-
(35,996
)
(29,928
)
150
(29,778
)
Consolidated
$
1,088,303
$
-
$
1,088,303
$
1,039,816
$
(29,399
)
$
1,010,417
Operating Income
Flavors & Extracts
$
83,929
$
-
$
83,929
$
76,718
$
(2,859
)
$
73,859
Color
90,035
-
90,035
79,462
548
80,010
Asia Pacific
22,877
-
22,877
19,146
(87
)
19,059
Corporate & Other
(41,315
)
-
(41,315
)
(45,718
)
11,491
(34,227
)
Consolidated
$
155,526
$
-
$
155,526
$
129,608
$
9,093
$
138,701
(2) For Revenue, adjustments consist of revenues of the
divested product lines. For Operating Income, adjustments consist
of the results of the divested product lines, divestiture &
other related costs, and 2021 operational improvement plan costs
and income.
Sensient Technologies Corporation (In
thousands, except percentages)
(Unaudited)
Reconciliation of Non-GAAP Amounts - Continued
The following tables summarize the percentage change in the 2022
results compared to the 2021 results for the corresponding periods.
Three Months Ended September 30, Revenue
Total ForeignExchangeRates Adjustments(3)
AdjustedLocalCurrency Flavors & Extracts
3.0
%
(2.9
%)
(0.8
%)
6.7
%
Color
8.8
%
(5.5
%)
(0.3
%)
14.6
%
Asia Pacific
5.3
%
(9.2
%)
0.0
%
14.5
%
Total Revenue
4.9
%
(4.4
%)
(0.6
%)
9.9
%
Operating Income Flavors & Extracts
4.7
%
(1.1
%)
0.2
%
5.6
%
Color
3.5
%
(7.4
%)
0.0
%
10.9
%
Asia Pacific
5.3
%
(11.0
%)
0.0
%
16.3
%
Corporate & Other
16.0
%
(0.1
%)
(7.4
%)
23.5
%
Total Operating Income
1.1
%
(6.5
%)
1.8
%
5.8
%
Diluted Earnings Per Share
6.3
%
(6.3
%)
5.5
%
7.1
%
Adjusted EBITDA
2.2
%
(5.6
%)
N/A
7.8
%
Nine Months Ended September 30, Revenue
Total ForeignExchangeRates Adjustments(3)
AdjustedLocalCurrency Flavors & Extracts
(0.5
%)
(2.4
%)
(5.0
%)
6.9
%
Color
11.8
%
(3.8
%)
(0.4
%)
16.0
%
Asia Pacific
9.5
%
(7.4
%)
(0.3
%)
17.2
%
Total Revenue
4.7
%
(3.3
%)
(3.0
%)
11.0
%
Operating Income Flavors & Extracts
9.4
%
(1.2
%)
(4.0
%)
14.6
%
Color
13.3
%
(4.9
%)
0.9
%
17.3
%
Asia Pacific
19.5
%
(9.6
%)
(0.5
%)
29.6
%
Corporate & Other
(9.6
%)
0.0
%
(30.4
%)
20.8
%
Total Operating Income
20.0
%
(5.1
%)
8.4
%
16.7
%
Diluted Earnings Per Share
22.7
%
(5.1
%)
12.8
%
15.0
%
Adjusted EBITDA
12.8
%
(4.0
%)
N/A
16.8
%
(3) For Revenue, adjustments consist of revenues of the divested
product lines. For Operating Income, Diluted Earnings per Share,
and Adjusted EBITDA, adjustments consist of the results of the
divested product lines, divestiture & other related costs, and
2021 operational improvement plan costs and income.
The following table summarizes the reconciliation between Operating
Income (GAAP) and Adjusted EBITDA for the three and nine months
ended September 30, 2022 and 2021.
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
% Change
2022
2021
% Change
Operating income (GAAP)
$
47,493
$
46,958
1.1
%
$
155,526
$
129,608
20.0
%
Depreciation and amortization
13,082
13,011
39,262
38,828
Depreciation and amortization, divested product lines
-
(49
)
-
(146
)
Share-based compensation expense
3,785
2,243
12,476
6,431
Divestiture & other related costs, before tax
-
241
-
13,501
Results of operations of the divested product lines, before tax
-
70
-
(2,398
)
Operational improvement plan costs (income), before tax
-
483
-
(2,010
)
Adjusted EBITDA
$
64,360
$
62,957
2.2
%
$
207,264
$
183,814
12.8
%
We have included each of these non-GAAP measures in order to
provide additional information regarding our underlying operating
results and comparable period-over-period performance. Such
information is supplemental to information presented in accordance
with GAAP and is not intended to represent a presentation in
accordance with GAAP. These non-GAAP measures should not be
considered in isolation. Rather, they should be considered together
with GAAP measures and the rest of the information included in this
release and our SEC filings. Management internally reviews each of
these non-GAAP measures to evaluate performance on a comparative
period-to-period basis and to gain additional insight into
underlying operating and performance trends, and we believe the
information can be beneficial to investors for the same purposes.
These non-GAAP measures may not be comparable to similarly titled
measures used by other companies.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221020005709/en/
Amy Agallar (414) 347-3706
Sensient Technologies (NYSE:SXT)
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