Sensient Technologies Corporation (NYSE: SXT), a leading
provider of flavors and colors for the food, pharmaceutical, and
personal care markets, today reported financial results for the
third quarter ended September 30, 2023.
Third Quarter Consolidated Results
- Reported revenue increased 0.8% to $363.8 million versus last
year’s results of $361.1 million. On a local currency basis(1),
revenue decreased 2.0%.
- Reported operating income declined 6.2% to $44.5 million
compared to $47.5 million recorded in the third quarter of 2022. On
a local currency basis(1), operating income decreased 9.8%. Local
currency adjusted EBITDA(1) was down 7.1% in the third quarter, as
a result of lower sales volumes.
- Reported diluted earnings per share was 75 cents in the third
quarter of 2023 compared to 85 cents in the third quarter of 2022,
a decrease of 11.8%. Local currency EPS(1) decreased 15.3% in the
third quarter as a result of lower sales volumes and higher
interest expense.
“As expected, the destocking headwinds and market environment
impacted the quarter. Our teams continue to focus on winning new
business and providing high levels of service to our customers. Our
underlying business remains strong. I expect our focus on customer
service and sales execution will result in a return to improved
revenue growth as market dynamics improve,” said Paul Manning,
Sensient’s Chairman, President, and Chief Executive Officer.
Third Quarter Group Results
Reported
Local Currency(1)
Revenue
Quarter
Year-to-Date
Quarter
Year-to-Date
Flavors & Extracts
2.1
%
-0.2
%
-0.5
%
-1.1
%
Color
-4.3
%
2.3
%
-8.2
%
1.1
%
Asia Pacific
4.4
%
3.6
%
4.3
%
6.1
%
Total Revenue
0.8
%
1.7
%
-2.0
%
1.0
%
Reported
Local Currency(1)
Operating Profit
Quarter
Year-to-Date
Quarter
Year-to-Date
Flavors & Extracts
-12.4
%
-16.9
%
-13.6
%
-17.5
%
Color
-18.7
%
-6.7
%
-23.4
%
-7.8
%
Asia Pacific
16.4
%
8.9
%
15.8
%
11.6
%
Total Operating Profit
-6.2
%
-5.5
%
-9.8
%
-6.1
%
The Flavors & Extracts Group reported third quarter revenue
of $191.0 million, an increase of $4.0 million versus the prior
year’s third quarter. The Group’s revenue benefited from favorable
pricing and exchange rates, partially offset by lower volumes,
primarily due to customer destocking and market declines in certain
product lines. Segment operating income was $23.1 million in the
current quarter, a decrease of $3.3 million compared to the prior
year’s third quarter. The lower operating income was primarily due
to the lower volumes and higher input costs, partially offset by
favorable pricing and exchange rates.
The Color Group reported revenue of $145.0 million in the
quarter, a decrease of $6.5 million compared to the prior year’s
third quarter. The Group’s revenue was negatively impacted 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, partially offset by higher
pricing and exchange rates. Segment operating income was $22.9
million in the quarter, a decrease of $5.3 million compared to the
prior year’s third quarter results. The lower operating income is
primarily a result of the lower volumes and higher input costs,
partially offset by favorable pricing and exchange rates.
The Asia Pacific Group reported revenue of $36.8 million, an
increase of $1.6 million compared to the prior year’s third
quarter. The Group’s revenue benefited from favorable pricing,
partially offset by lower volumes. Segment operating income was
$8.1 million in the quarter, an increase of $1.1 million compared
to the prior year’s third quarter. Operating income benefited from
higher pricing, which was offset by lower volumes and higher input
costs.
Corporate & Other reported operating expenses of $9.6
million in the current quarter, compared to $14 million of
operating expenses reported in the prior year’s third quarter,
primarily due to lower performance-based compensation.
2023 OUTLOOK
Sensient now expects 2023 full year GAAP diluted earnings per
share to be down low double 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(1) of $3.29. The Company’s previous 2023 full year GAAP
diluted earnings per share guidance was for GAAP diluted earnings
per share to be down high single digits 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(1).
The Company now expects 2023 revenue to grow at a low
single-digit rate on a local currency basis compared to the
Company’s 2022 revenue. The Company’s previous 2023 revenue
guidance was for a mid-single-digit growth rate on a local currency
basis compared to the Company’s 2022 revenue. The Company continues
to expect its 2023 adjusted EBITDA(1) to be down mid-single digits
on a local currency basis compared to the Company’s 2022 adjusted
EBITDA(1).
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.
(1)
Please refer to “Reconciliation of
Non-GAAP Amounts” at the end of this release for more information
regarding our non-GAAP financial measures.
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
third quarter financial results at 8:30 a.m. CDT on Friday, October
20, 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 October 27, 2023, by calling (877)
344-7529 and referring to conference identification number 2925227.
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 24, 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 September
30,
Nine Months Ended September
30,
2023
2022
% Change
2023
2022
% Change
Revenue
$
363,829
$
361,076
0.8
%
$
1,107,148
$
1,088,303
1.7
%
Cost of products sold
250,202
239,318
4.5
%
746,681
710,696
5.1
%
Selling and administrative expenses
69,096
74,265
(7.0
%)
213,507
222,081
(3.9
%)
Operating income
44,531
47,493
(6.2
%)
146,960
155,526
(5.5
%)
Interest expense
6,294
3,672
18,648
9,748
Earnings before income taxes
38,237
43,821
128,312
145,778
Income taxes
6,694
7,773
29,085
34,012
Net earnings
$
31,543
$
36,048
(12.5
%)
$
99,227
$
111,766
(11.2
%)
Earnings per share of common stock: Basic
$
0.75
$
0.86
$
2.36
$
2.67
Diluted
$
0.75
$
0.85
$
2.35
$
2.65
Average common shares outstanding: Basic
42,045
41,896
42,020
41,885
Diluted
42,233
42,242
42,241
42,199
Results by Segment
Three Months Ended September
30,
Nine Months Ended September
30,
Revenue
2023
2022
% Change
2023
2022
% Change
Flavors & Extracts
$
190,997
$
187,046
2.1
%
$
558,133
$
559,110
(0.2
%)
Color
144,939
151,469
(4.3
%)
466,563
456,175
2.3
%
Asia Pacific
36,774
35,221
4.4
%
112,888
109,014
3.6
%
Intersegment elimination
(8,881
)
(12,660
)
(30,436
)
(35,996
)
Consolidated
$
363,829
$
361,076
0.8
%
$
1,107,148
$
1,088,303
1.7
%
Operating Income
Flavors & Extracts
$
23,078
$
26,337
(12.4
%)
$
69,714
$
83,929
(16.9
%)
Color
22,925
28,200
(18.7
%)
84,027
90,035
(6.7
%)
Asia Pacific
8,095
6,952
16.4
%
24,911
22,877
8.9
%
Corporate & Other
(9,567
)
(13,996
)
(31,692
)
(41,315
)
Consolidated
$
44,531
$
47,493
(6.2
%)
$
146,960
$
155,526
(5.5
%)
Sensient Technologies Corporation (In
thousands) (Unaudited) Consolidated Condensed
Balance Sheets
September 30,
December 31,
2023
2022
Cash and cash equivalents
$
31,985
$
20,921
Trade accounts receivable
284,668
302,109
Inventories
587,024
564,110
Prepaid expenses and other current assets
41,477
47,640
Total Current Assets
945,154
934,780
Goodwill & intangible assets (net)
432,970
434,315
Property, plant, and equipment (net)
506,549
483,193
Other assets
125,503
129,326
Total Assets
$
2,010,176
$
1,981,614
Trade accounts payable
$
110,973
$
142,365
Short-term borrowings
22,807
20,373
Other current liabilities
90,037
109,415
Total Current Liabilities
223,817
272,153
Long-term debt
648,556
630,331
Accrued employee and retiree benefits
26,830
26,364
Other liabilities
53,317
53,168
Shareholders' Equity
1,057,656
999,598
Total Liabilities and Shareholders' Equity
$
2,010,176
$
1,981,614
Sensient Technologies Corporation (In thousands,
except per share amounts) (Unaudited)
Consolidated Statements of Cash Flows Nine Months Ended
September 30,
2023
2022
Cash flows from operating activities: Net earnings
$
99,227
$
111,766
Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization
43,360
39,262
Share-based compensation expense
7,285
12,476
Net (gain) loss on assets
(81
)
283
Deferred income taxes
2,082
20,465
Changes in operating assets and liabilities: Trade accounts
receivable
18,830
(39,520
)
Inventories
(21,455
)
(112,021
)
Prepaid expenses and other assets
842
(39,598
)
Trade accounts payable and other accrued expenses
(20,572
)
24,110
Accrued salaries, wages, and withholdings
(16,749
)
1,819
Income taxes
(6,536
)
(4,342
)
Other liabilities
587
198
Net cash provided by operating activities
106,820
14,898
Cash flows from investing activities: Acquisition of
property, plant, and equipment
(67,718
)
(51,703
)
Proceeds from sale of assets
130
94
Acquisiton of new businesses
-
(1,048
)
Other investing activities
2,036
947
Net cash used in investing activities
(65,552
)
(51,710
)
Cash flows from financing activities: Proceeds from
additional borrowings
197,577
187,715
Debt payments
(174,083
)
(87,657
)
Dividends paid
(51,900
)
(51,681
)
Other financing activities
(8,034
)
(2,056
)
Net cash (used in) provided by financing activities
(36,440
)
46,321
Effect of exchange rate changes on cash and cash equivalents
6,236
11,330
Net increase in cash and cash equivalents
11,064
20,839
Cash and cash equivalents at beginning of period
20,921
25,740
Cash and cash equivalents at end of period
$
31,985
$
46,579
Supplemental Information Nine Months Ended
September 30,
2023
2022
Dividends paid per share
$
1.23
$
1.23
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 September 30, Revenue
Total ForeignExchangeRates Local Currency
Flavors & Extracts
2.1
%
2.6
%
(0.5
%)
Color
(4.3
%)
3.9
%
(8.2
%)
Asia Pacific
4.4
%
0.1
%
4.3
%
Total Revenue
0.8
%
2.8
%
(2.0
%)
Operating Income Flavors & Extracts
(12.4
%)
1.2
%
(13.6
%)
Color
(18.7
%)
4.7
%
(23.4
%)
Asia Pacific
16.4
%
0.6
%
15.8
%
Corporate & Other
(31.6
%)
0.0
%
(31.6
%)
Total Operating Income
(6.2
%)
3.6
%
(9.8
%)
Diluted Earnings Per Share
(11.8
%)
3.5
%
(15.3
%)
Adjusted EBITDA
(3.9
%)
3.2
%
(7.1
%)
Nine Months Ended September 30, Revenue
Total ForeignExchangeRates Local Currency
Flavors & Extracts
(0.2
%)
0.9
%
(1.1
%)
Color
2.3
%
1.2
%
1.1
%
Asia Pacific
3.6
%
(2.5
%)
6.1
%
Total Revenue
1.7
%
0.7
%
1.0
%
Operating Income Flavors & Extracts
(16.9
%)
0.6
%
(17.5
%)
Color
(6.7
%)
1.1
%
(7.8
%)
Asia Pacific
8.9
%
(2.7
%)
11.6
%
Corporate & Other
(23.3
%)
0.0
%
(23.3
%)
Total Operating Income
(5.5
%)
0.6
%
(6.1
%)
Diluted Earnings Per Share
(11.3
%)
0.4
%
(11.7
%)
Adjusted EBITDA
(4.7
%)
0.5
%
(5.2
%)
The following table summarizes the reconciliation between
Operating Income (GAAP) and Adjusted EBITDA for the three and nine
months ended September 30, 2023 and 2022.
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
% Change
2023
2022
% Change
Operating income (GAAP)
$
44,531
$
47,493
(6.2
%)
$
146,960
$
155,526
(5.5
%)
Depreciation and amortization
14,770
13,082
43,360
39,262
Share-based compensation expense
2,519
3,785
7,285
12,476
Adjusted EBITDA
$
61,820
$
64,360
(3.9
%)
$
197,605
$
207,264
(4.7
%)
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 September 30, 2023 and 2022.
September
30, Debt
2023
2022
Short-term borrowings
$
22,807
$
21,947
Long-term debt
648,556
547,190
Credit Agreement adjustments(1)
(19,463
)
(30,694
)
Net Debt
$
651,900
$
538,443
Operating income (GAAP)
$
188,185
$
195,946
Depreciation and amortization
56,565
52,485
Share-based compensation expense
10,947
15,618
Other non-operating (gains) losses(2)
(3,783
)
122
Credit Adjusted EBITDA
$
251,914
$
264,171
Net Debt to Credit Adjusted EBITDA
2.6x
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/20231019942912/en/
Amy Agallar (414) 347-3706 investor.relations@sensient.com
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