Sensient Technologies Corporation (NYSE: SXT) reported
consolidated revenue of $374.3 million in this year’s second
quarter compared to $371.7 million in last year’s second quarter.
Reported operating income in the second quarter of 2023 was $51.6
million compared to $55.2 million in the second quarter of 2022.
Reported diluted earnings per share was 81 cents in the second
quarter of 2023 compared to 92 cents in the second quarter of 2022.
Foreign currency translation increased revenue by approximately 1%
in the quarter and did not have a material impact on earnings per
share in the current quarter.
BUSINESS REVIEW
Reported
Revenue
Quarter
Year-to-Date
Flavors & Extracts
-0.6
%
-1.3
%
Color
2.7
%
5.6
%
Asia Pacific
-3.5
%
3.1
%
Total Revenue
0.7
%
2.2
%
Local Currency(1)
Revenue
Quarter
Year-to-Date
Flavors & Extracts
-1.6
%
-1.4
%
Color
1.6
%
5.7
%
Asia Pacific
-0.7
%
6.9
%
Total Revenue
0.0
%
2.6
%
(1) Local currency percentage changes are described in more
detail in the "Reconciliation of Non-GAAP Amounts" at the end of
this release.
The Flavors & Extracts Group reported second quarter revenue
of $188.3 million compared to $189.3 million in last year’s second
quarter, a decrease of 0.6%. Local currency revenue decreased 1.6%
in the quarter. The Group’s revenue was negatively impacted by
lower volumes, primarily due to customer destocking in certain
product lines and market declines in certain product lines,
partially offset by favorable pricing. Segment operating income was
$24.5 million in the current quarter compared to $30.0 million
reported in the comparable period last year, a decrease of 18.5%.
Local currency operating income decreased 19.1% in the quarter. The
lower operating income was primarily due to the lower volumes and
higher input costs, partially offset by favorable pricing. Foreign
currency translation increased segment revenue and operating income
by approximately 1% in the quarter.
The Color Group reported revenue of $160.5 million in the
quarter compared to $156.3 million in last year’s second quarter,
an increase of 2.7%. Local currency revenue increased 1.6% in the
quarter. The Group benefited from higher pricing offset by lower
volumes in both the food and pharmaceutical and personal care
product lines, primarily due to customer destocking and market
declines in certain product lines. Segment operating income was
$29.2 million in the quarter compared to $31.2 million in last
year’s comparable period, a decrease of 6.3%. Local currency
operating income decreased 7.6% compared to the prior year’s second
quarter. The lower operating income is primarily a result of the
lower volumes and higher input costs, partially offset by favorable
pricing. Foreign currency translation increased segment revenue and
operating income by approximately 1% in the quarter.
The Asia Pacific Group reported revenue of $36.0 million in the
quarter compared to $37.3 million in last year’s second quarter, a
decrease of 3.5%. Local currency revenue decreased 0.7% in the
quarter, primarily as a result of lower volumes. Segment operating
income was $7.6 million in the quarter compared to $7.7 million in
last year’s second quarter, a decrease of 1.9%. Local currency
operating income increased 0.9% in the quarter. Operating income
benefited from higher pricing, which was offset by lower volumes
and higher input costs. Foreign currency translation decreased
segment revenue and operating income by approximately 3% in the
quarter.
Corporate & Other reported an operating loss of $9.7 million
in the current quarter compared to $13.7 million in last year’s
second quarter, a decrease of 29.3%, primarily due to lower
performance-based compensation.
2023 OUTLOOK
Sensient now expects 2023 full year GAAP diluted earnings per
share to be down high single digits compared to our 2022 reported
GAAP diluted earnings per share of $3.34 and also on a local
currency basis compared to our 2022 adjusted diluted earnings per
share(2) of $3.29. The Company’s previous 2023 full year GAAP
diluted earnings per share guidance was for a flat to low
single-digit growth rate compared to our 2022 reported GAAP diluted
earnings per share and on a local currency basis compared to our
2022 adjusted diluted earnings per share(2).
The Company continues to expect 2023 revenue to grow at a
mid-single-digit rate on a local currency basis compared to the
Company’s 2022 revenue. The Company now expects 2023 adjusted
EBITDA(2) to be down mid-single digits on a local currency basis
compared to the Company’s 2022 adjusted EBITDA(2). The Company’s
previous 2023 adjusted EBITDA(2) guidance was to grow at a mid-to
high single-digit rate on a local currency basis compared to the
Company’s 2022 adjusted EBITDA(2).
The Company expects its 2023 diluted earnings per share to be
impacted by higher interest rates and a higher tax rate. Based on
current exchange rates, the Company expects foreign exchange rates
to be modestly favorable for the full year.
The Company’s guidance is based on current conditions and
economic and market trends in the markets in which the Company
operates and is subject to various risks and uncertainties as
described below. We do not anticipate any divestiture related
costs, operational improvement plan costs, or results of divested
business in 2023 at this time.
(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, divestiture and
other related costs and income, and non-cash share-based
compensation. 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 2023
second quarter financial results at 8:30 a.m. CDT on Friday, July
21, 2023. 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 July 28, 2023, by calling (877)
344-7529 and referring to conference identification number 8018105.
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 July 25, 2023.
This release contains statements that may constitute
“forward-looking statements” within the meaning of Federal
securities laws including under “2023 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 Company’s ability
to manage economic and capital market conditions and the impact of
recessions and economic downturns; the impact of macroeconomic and
geopolitical volatility, including inflation and shortages
impacting the availability and cost of raw materials, energy, and
other supplies; the availability and cost of labor, logistics, and
transportation; the impact and uncertainty created by the COVID-19
pandemic and efforts to manage it on the global economy, including,
but not limited to, its effects on our employees, facilities,
customers, and suppliers, governmental regulations and
restrictions, and general economic conditions; 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; 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, 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, 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 June
30,
Six Months Ended June
30,
2023
2022
% Change
2023
2022
% Change
Revenue
$
374,313
$
371,706
0.7
%
$
743,319
$
727,227
2.2
%
Cost of products sold
252,136
240,703
4.7
%
496,479
471,378
5.3
%
Selling and administrative expenses
70,586
75,759
(6.8
%)
144,411
147,816
(2.3
%)
Operating income
51,591
55,244
(6.6
%)
102,429
108,033
(5.2
%)
Interest expense
6,352
3,083
12,354
6,076
Earnings before income taxes
45,239
52,161
90,075
101,957
Income taxes
11,206
13,514
22,391
26,239
Net earnings
$
34,033
$
38,647
(11.9
%)
$
67,684
$
75,718
(10.6
%)
Earnings per share of common stock: Basic
$
0.81
$
0.92
$
1.61
$
1.81
Diluted
$
0.81
$
0.92
$
1.60
$
1.80
Average common shares outstanding: Basic
42,043
41,893
42,006
41,879
Diluted
42,235
42,208
42,245
42,178
Results by Segment
Three Months Ended June
30,
Six Months Ended June
30,
Revenue
2023
2022
% Change
2023
2022
% Change
Flavors & Extracts
$
188,284
$
189,337
(0.6
%)
$
367,136
$
372,064
(1.3
%)
Color
160,463
156,268
2.7
%
321,624
304,706
5.6
%
Asia Pacific
36,029
37,328
(3.5
%)
76,114
73,793
3.1
%
Intersegment elimination
(10,463
)
(11,227
)
(21,555
)
(23,336
)
Consolidated
$
374,313
$
371,706
0.7
%
$
743,319
$
727,227
2.2
%
Operating Income
Flavors & Extracts
$
24,456
$
30,013
(18.5
%)
$
46,636
$
57,592
(19.0
%)
Color
29,217
31,178
(6.3
%)
61,102
61,835
(1.2
%)
Asia Pacific
7,575
7,721
(1.9
%)
16,816
15,925
5.6
%
Corporate & Other
(9,657
)
(13,668
)
(22,125
)
(27,319
)
Consolidated
$
51,591
$
55,244
(6.6
%)
$
102,429
$
108,033
(5.2
%)
Sensient Technologies Corporation (In
thousands) (Unaudited) Consolidated Condensed
Balance Sheets
June 30,
December 31,
2023
2022
Cash and cash equivalents
$
36,546
$
20,921
Trade accounts receivable
300,741
302,109
Inventories
588,459
564,110
Prepaid expenses and other current assets
42,945
47,640
Total Current Assets
968,691
934,780
Goodwill & intangible assets (net)
440,038
434,315
Property, plant, and equipment (net)
504,981
483,193
Other assets
132,502
129,326
Total Assets
$
2,046,212
$
1,981,614
Trade accounts payable
$
119,340
$
142,365
Short-term borrowings
15,436
20,373
Other current liabilities
87,870
109,415
Total Current Liabilities
222,646
272,153
Long-term debt
686,589
630,331
Accrued employee and retiree benefits
27,141
26,364
Other liabilities
55,572
53,168
Shareholders' Equity
1,054,264
999,598
Total Liabilities and Shareholders' Equity
$
2,046,212
$
1,981,614
Sensient Technologies Corporation
(In thousands, except per share
amounts)
(Unaudited)
Consolidated Statements of Cash Flows Six Months
Ended June 30,
2023
2022
Cash flows from operating activities: Net earnings
$
67,684
$
75,718
Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization
28,590
26,180
Share-based compensation expense
4,766
8,691
Net loss (gain) on assets
81
(38
)
Deferred income taxes
(2,643
)
12,244
Changes in operating assets and liabilities: Trade accounts
receivable
6,062
(41,592
)
Inventories
(16,927
)
(51,768
)
Prepaid expenses and other assets
3,534
(25,919
)
Trade accounts payable and other accrued expenses
(18,329
)
20,501
Accrued salaries, wages, and withholdings
(19,713
)
(4,188
)
Income taxes
(1,998
)
2,765
Other liabilities
595
199
Net cash provided by operating activities
51,702
22,793
Cash flows from investing activities: Acquisition of
property, plant, and equipment
(45,137
)
(32,468
)
Proceeds from sale of assets
53
92
Other investing activities
2,054
1,571
Net cash used in investing activities
(43,030
)
(30,805
)
Cash flows from financing activities: Proceeds from
additional borrowings
187,037
69,424
Debt payments
(143,923
)
(31,547
)
Dividends paid
(34,577
)
(34,446
)
Other financing activities
(8,003
)
(2,056
)
Net cash provided by financing activities
534
1,375
Effect of exchange rate changes on cash and cash equivalents
6,419
6,168
Net increase (decrease) in cash and cash equivalents
15,625
(469
)
Cash and cash equivalents at beginning of period
20,921
25,740
Cash and cash equivalents at end of period
$
36,546
$
25,271
Supplemental Information Six Months Ended
June 30,
2023
2022
Dividends paid per share
$
0.82
$
0.82
Sensient Technologies Corporation (In thousands,
except percentages) (Unaudited) Reconciliation
of Non-GAAP Amounts The following table summarizes the
percentage change in the 2023 results compared to the 2022 results
for the corresponding periods.
Three Months Ended June
30,
Revenue
Total
Foreign Exchange Rates
Local Currency
Flavors & Extracts
(0.6
%)
1.0
%
(1.6
%)
Color
2.7
%
1.1
%
1.6
%
Asia Pacific
(3.5
%)
(2.8
%)
(0.7
%)
Total Revenue
0.7
%
0.7
%
0.0
%
Operating Income Flavors & Extracts
(18.5
%)
0.6
%
(19.1
%)
Color
(6.3
%)
1.3
%
(7.6
%)
Asia Pacific
(1.9
%)
(2.8
%)
0.9
%
Corporate & Other
(29.3
%)
0.0
%
(29.3
%)
Total Operating Income
(6.6
%)
0.7
%
(7.3
%)
Diluted Earnings Per Share
(12.0
%)
0.0
%
(12.0
%)
Adjusted EBITDA
(6.0
%)
0.6
%
(6.6
%)
Six Months Ended June
30,
Revenue
Total
Foreign Exchange Rates
Local Currency
Flavors & Extracts
(1.3
%)
0.1
%
(1.4
%)
Color
5.6
%
(0.1
%)
5.7
%
Asia Pacific
3.1
%
(3.8
%)
6.9
%
Total Revenue
2.2
%
(0.4
%)
2.6
%
Operating Income Flavors & Extracts
(19.0
%)
0.3
%
(19.3
%)
Color
(1.2
%)
(0.5
%)
(0.7
%)
Asia Pacific
5.6
%
(4.1
%)
9.7
%
Corporate & Other
(19.0
%)
0.0
%
(19.0
%)
Total Operating Income
(5.2
%)
(0.8
%)
(4.4
%)
Diluted Earnings Per Share
(11.1
%)
(1.1
%)
(10.0
%)
Adjusted EBITDA
(5.0
%)
(0.6
%)
(4.4
%)
The following table summarizes the
reconciliation between Operating Income (GAAP) and Adjusted EBITDA
for the three and six months ended June 30, 2023 and 2022.
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
% Change
2023
2022
% Change
Operating income (GAAP)
$
51,591
$
55,244
(6.6
%)
$
102,429
$
108,033
(5.2
%)
Depreciation and amortization
14,440
13,124
28,590
26,180
Share-based compensation expense
2,499
4,528
4,766
8,691
Adjusted EBITDA
$
68,530
$
72,896
(6.0
%)
$
135,785
$
142,904
(5.0
%)
Sensient Technologies Corporation (In thousands,
except percentages) (Unaudited) Reconciliation
of Non-GAAP Amounts - Continued The following table summarizes
the reconciliation between Debt (GAAP) and Net Debt, and Operating
Income (GAAP) and Credit Adjusted EBITDA for the trailing twelve
months ended June 30, 2023 and 2022.
June 30,
Debt
2023
2022
Short-term borrowings
$
15,436
$
26,624
Long-term debt
686,589
498,715
Credit Agreement adjustments(1)
(19,755
)
(13,744
)
Net Debt
$
682,270
$
511,595
Operating income (GAAP)
$
191,147
$
195,411
Depreciation and amortization
54,877
52,414
Share-based compensation expense
12,213
14,076
Other non-operating (gains) losses(2)
(3,326
)
200
Credit Adjusted EBITDA
$
254,911
$
262,101
Net Debt to Credit Adjusted EBITDA 2.7x 2.0x (1)
Adjustments include cash and cash equivalents, as described in the
Company's Third Amended and Restated Credit Agreement (Credit
Agreement), and certain letters of credit and hedge contracts. (2)
Adjustments consist of certain financing transaction costs, certain
non-financing interest items, and gains and losses related to
certain non-cash, non-operating, and/or non-recurring items as
described in the Credit Agreement. The following table summarizes
the reconciliation between Diluted Earnings Per Share (GAAP) and
Adjusted Diluted Earnings Per Share for the twelve months ended
December 31, 2022.
Twelve Months Ended December 31,
2022
Diluted earnings per share (GAAP)
$
3.34
Divestiture & other related income, net of tax
(0.04
)
Adjusted diluted earnings per share
$
3.29
Note: Earnings per share calculations may not foot due to
rounding differences. 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/20230720162217/en/
Amy Agallar (414) 347-3706
Sensient Technologies (NYSE:SXT)
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