Flavors & Extracts Group and the Asia
Pacific Group Report Strong Revenue and Profit Growth
Personal Care Continues to be Negatively
Impacted by the COVID-19 Pandemic
In April, the Company Completed the Divestiture
of Fragrances
Sensient Technologies Corporation (NYSE: SXT) reported
consolidated revenue of $359.7 million in this year’s first quarter
compared to $350.7 million in last year’s first quarter. Reported
operating income in the first quarter of 2021 was $46.9 million
compared to $34.6 million in the first quarter of 2020. Reported
diluted earnings per share was 75 cents in the first quarter of
2021 compared to 49 cents in the first quarter of 2020. Foreign
currency translation increased revenue and earnings per share by
approximately 3% and 4%, respectively, in the quarter.
The 2021 first quarter reported results include divestiture
& other related costs and operational improvement plan costs,
which in total decreased first quarter net earnings by $3.1 million
($0.07 per diluted share). The 2020 first quarter results include
divestiture & other related costs which decreased net earnings
by $10.9 million ($0.26 per diluted share). The 2021 and 2020 first
quarter results also include the operations of the product lines
divested or to be divested, which increased diluted earnings per
share by $0.05 in the first quarter of 2021 and $0.03 in the first
quarter of 2020. These adjustments are described in more detail
under “Reconciliation of Non-GAAP Amounts” at the end of this
release.
BUSINESS REVIEW
Reported
Revenue
Quarter
Flavors & Extracts
7.7%
Color
-5.4%
Asia Pacific
11.1%
Total Revenue
2.6%
Adjusted
Local Currency (1)
Revenue
Quarter
Flavors & Extracts
8.9%
Color
-1.9%
Asia Pacific
4.7%
Total Revenue
4.0%
(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 first quarter revenue
of $200.9 million compared to $186.5 million reported in the
comparable period last year, an increase of 7.7%. Adjusted local
currency revenue increased 8.9% in the quarter. The higher revenue
was the result of strong growth in all product categories. Segment
operating income was $27.0 million in the current quarter compared
to $20.9 million reported in the comparable period last year, an
increase of 29.5%. Adjusted local currency operating income
increased 21.2%. The Group’s higher profit was primarily a result
of the higher volumes, product mix from strong flavor sales, and
the favorable impact of the Group’s cost reduction initiatives.
Foreign currency translation increased both segment revenue and
operating income by approximately 2% in the quarter.
The Color Group reported revenue of $135.7 million in the
quarter compared to $143.5 million in last year’s comparable
period, a decrease of 5.4%. Adjusted local currency revenue
decreased 1.9% in the quarter. The Group continued to experience
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 continued lower demand for makeup due to the
COVID-19 pandemic. Segment operating income was $26.6 million in
the quarter compared to $29.7 million in last year’s comparable
period, a decrease of 10.3%. Adjusted local currency operating
income decreased 13.3% compared to prior year’s first quarter. The
lower operating income is primarily a result of the lower volumes
in personal care and unfavorable product mix in food &
pharmaceutical colors. Foreign currency translation increased
segment revenue and operating income by approximately 2% and 3%,
respectively, in the quarter.
The Asia Pacific Group reported revenue of $33.8 million in the
quarter compared to $30.4 million in last year’s comparable period,
an increase of 11.1%. Adjusted local currency revenue increased
4.7% in the quarter. Segment operating income was $6.8 million in
the quarter compared to $5.1 million in last year’s comparable
quarter, an increase of 33.5%. Adjusted local currency operating
income increased 31.4% in the quarter. The higher profit was
primarily a result of the favorable volume growth combined with
lower operating costs. Foreign currency translation increased
segment revenue and operating income by approximately 6% and 1%,
respectively, in the quarter.
Corporate & Other reported operating costs of $13.5 million
in the current quarter compared to $21.0 million in last year’s
comparable period, a decrease of 36.0%. The lower costs are
primarily due to lower divestiture & other costs reported in
the first quarter of 2021 compared to the amount recorded in the
first quarter of 2020. Adjusted local currency operating expenses
for Corporate & Other increased 18.5% in the quarter primarily
due to higher performance based executive compensation.
In April 2021, the Company completed the divestiture of its
Fragrances product line.
2021 OUTLOOK
Sensient is reconfirming its previously issued 2021 guidance for
GAAP diluted earnings per share to grow at a mid to high single
digit growth rate compared to the Company’s 2020 reported GAAP
diluted earnings per share of $2.59. Our full year 2021 guidance
includes approximately 30 cents per share of estimated divestiture
& other related costs, the results of the operations to be
divested, and the operational improvement plan costs.
The Company is also reconfirming its previously issued 2021
adjusted local currency revenue (2) to grow at a low to mid-single
digit rate and adjusted local currency EBITDA (2) to grow at a
mid-single digit rate. The Company also continues to expect, on a
local currency basis, 2021 adjusted diluted earnings per share (2)
to grow at a mid-single digit growth rate compared to the Company’s
2020 adjusted diluted earnings per share of $2.79.
The Company expects earnings per share reported on a U.S. dollar
basis to benefit by approximately ten cents based on current
exchange rates.
The Company’s guidance is based upon current trends, current tax
law, 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.
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 the results of the
operations divested or to be divested. 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 2021
first quarter financial results at 8:30 a.m. CDT on Friday, April
23, 2021. 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 April 30, 2021, by calling (877)
344-7529 and referring to conference identification number
10153329. 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 April 27, 2021.
This release contains statements that may constitute
“forward-looking statements” within the meaning of Federal
securities laws including under “2021 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, the availability of 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, acquisition and divestiture activities, and operational
improvement plan; 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, 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
Sensient Technologies Corporation (In thousands, except
percentages and per share amounts) (Unaudited)
Consolidated Statements of Earnings Three Months Ended
March 31,
2021
2020
% Change
Revenue
$
359,702
$
350,677
2.6%
Cost of products sold
244,089
238,784
2.2%
Selling and administrative expenses
68,716
77,332
(11.1%)
Operating income
46,897
34,561
35.7%
Interest expense
3,433
4,307
Earnings before income taxes
43,464
30,254
Income taxes
11,796
9,481
Net earnings
$
31,668
$
20,773
52.4%
Earnings per share of common stock: Basic
$
0.75
$
0.49
Diluted
$
0.75
$
0.49
Average common shares outstanding: Basic
42,263
42,284
Diluted
42,389
42,307
Results by Segment Three Months
Ended March 31,
Revenue
2021
2020
% Change
Flavors & Extracts
$
200,911
$
186,498
7.7%
Color
135,720
143,495
(5.4%)
Asia Pacific
33,840
30,449
11.1%
Intersegment elimination
(10,769
)
(9,765
)
Consolidated
$
359,702
$
350,677
2.6%
Operating Income
Flavors & Extracts
$
27,018
$
20,871
29.5%
Color
26,594
29,664
(10.3%)
Asia Pacific
6,752
5,059
33.5%
Corporate & Other
(13,467
)
(21,033
)
Consolidated
$
46,897
$
34,561
35.7%
Sensient Technologies Corporation (In thousands)
(Unaudited) Consolidated Condensed Balance
Sheets
March 31,
December 31,
2021
2020
Cash and cash equivalents
$
28,000
$
24,770
Trade accounts receivable
257,289
234,132
Inventories
350,294
381,346
Prepaid expenses and other current assets
51,978
48,578
Assets held for sale
49,597
52,760
Total Current Assets
737,158
741,586
Goodwill & intangible assets (net)
427,453
434,220
Property, plant, and equipment (net)
442,080
445,493
Other assets
114,318
119,561
Total Assets
$
1,721,009
$
1,740,860
Trade accounts payable
$
101,225
$
107,324
Short-term borrowings
6,057
9,247
Other current liabilities
76,138
82,045
Liabilities held for sale
15,353
17,339
Total Current Liabilities
198,773
215,955
Long-term debt
524,244
518,004
Accrued employee and retiree benefits
29,198
28,941
Other liabilities
43,148
43,624
Shareholders' Equity
925,646
934,336
Total Liabilities and Shareholders' Equity
$
1,721,009
$
1,740,860
Sensient Technologies Corporation (In thousands, except
per share amounts) (Unaudited)
Consolidated Statements of
Cash Flows
Three Months Ended March 31,
2021
2020
Cash flows from operating activities: Net earnings
$
31,668
$
20,773
Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization
12,799
12,404
Share-based compensation expense
2,113
1,177
Net loss on assets
161
14
Loss on divestitures and other charges
1,238
10,558
Deferred income taxes
4,257
4,077
Changes in operating assets and liabilities: Trade accounts
receivable
(27,237
)
(41,684
)
Inventories
27,621
29,058
Prepaid expenses and other assets
(13,239
)
(6,048
)
Trade accounts payable and other accrued expenses
(6,242
)
2,773
Accrued salaries, wages, and withholdings
(10,872
)
1,611
Income taxes
5,742
1,662
Other liabilities
955
553
Net cash provided by operating activities
28,964
36,928
Cash flows from investing activities: Acquisition of
property, plant, and equipment
(14,244
)
(9,411
)
Proceeds from sale of assets
69
6
Proceeds from divestiture of businesses
4,059
-
Other investing activities
286
4,505
Net cash used in investing activities
(9,830
)
(4,900
)
Cash flows from financing activities: Proceeds from
additional borrowings
21,530
9,669
Debt payments
(8,999
)
(11,104
)
Purchase of treasury stock
(11,665
)
-
Dividends paid
(16,535
)
(16,500
)
Other financing activities
(228
)
(249
)
Net cash used in financing activities
(15,897
)
(18,184
)
Effect of exchange rate changes on cash and cash equivalents
(7
)
(11,912
)
Net increase in cash and cash equivalents
3,230
1,932
Cash and cash equivalents at beginning of period
24,770
21,153
Cash and cash equivalents at end of period
$
28,000
$
23,085
Supplemental Information Three Months Ended
March 31,
2021
2020
Dividends paid per share
$
0.39
$
0.39
Sensient Technologies Corporation (In thousands, except
percentages and per share amounts) (Unaudited)
Reconciliation of Non-GAAP Amounts
The Company's results for the
three months ended March 31, 2021 and 2020 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
the results of operations divested or to be divested.
Three Months Ended March
31,
2021
2020
% Change Revenue (GAAP)
$
359,702
$
350,677
2.6%
Revenue of the product lines divested or to be divested
(25,570
)
(36,585
)
Adjusted revenue
$
334,132
$
314,092
6.4%
Operating income (GAAP)
$
46,897
$
34,561
35.7%
Divestiture & other related costs – Cost of products sold
25
190
Divestiture & other related costs – Selling and administrative
expenses
1,547
11,653
Operating income of the product lines divested or to be divested
(2,927
)
(1,385
)
Operational improvement plan - Selling and administrative expenses
1,001
-
Adjusted operating income
$
46,543
$
45,019
3.4%
Net earnings (GAAP)
$
31,668
$
20,773
52.4%
Divestiture & other related costs, before tax
1,572
11,843
Tax impact of divestiture & other related costs
793
(934
)
Net earnings of the product lines divested or to be divested,
before tax
(2,927
)
(1,385
)
Tax impact of the product lines divested or to be divested
723
297
Operational improvement plan costs, before tax
1,001
-
Tax impact of operational improvement plan
(296
)
-
Adjusted net earnings
$
32,534
$
30,594
6.3%
Diluted earnings per share (GAAP)
$
0.75
$
0.49
53.1%
Divestiture & other related costs, net of tax
0.06
0.26
Results of operations of the product lines divested or to be
divested,
net of tax
(0.05
)
(0.03
)
Operational improvement plan costs, net of tax
0.02
-
Adjusted diluted earnings per share
$
0.77
$
0.72
6.9%
Note: Earnings per share calculations may not foot due to rounding
differences.
Results by Segment
Three Months Ended March
31,
Adjusted Adjusted
Revenue
2021
Adjustments (1)
2021
2020
Adjustments (1)
2020
Flavors & Extracts
$
200,911
$
(24,889
)
$
176,022
$
186,498
$
(27,445
)
$
159,053
Color
135,720
(536
)
135,184
143,495
(9,072
)
134,423
Asia Pacific
33,840
(295
)
33,545
30,449
(121
)
30,328
Intersegment elimination
(10,769
)
150
(10,619
)
(9,765
)
53
(9,712
)
Consolidated
$
359,702
$
(25,570
)
$
334,132
$
350,677
$
(36,585
)
$
314,092
Operating Income
Flavors & Extracts
$
27,018
$
(2,880
)
$
24,138
$
20,871
$
(1,218
)
$
19,653
Color
26,594
40
26,634
29,664
(133
)
29,531
Asia Pacific
6,752
(87
)
6,665
5,059
(34
)
5,025
Corporate & Other
(13,467
)
2,573
(10,894
)
(21,033
)
11,843
(9,190
)
Consolidated
$
46,897
$
(354
)
$
46,543
$
34,561
$
10,458
$
45,019
(1) For Revenue, adjustments
consist of revenues of the product lines divested or to be
divested. For Operating Income, adjustments consist of the results
of the product lines divested or to be divested, divestiture &
other related costs, and operational improvement plan costs.
Sensient Technologies Corporation (In thousands, except
percentages) (Unaudited)
Reconciliation of Non-GAAP
Amounts - Continued
The following table summarizes
the percentage change in the 2021 results compared to the 2020
results for the corresponding periods.
Three Months Ended March
31,
Revenue
Total
Foreign Exchange Rates
Adjustments (2)
Adjusted Local
Currency
Flavors & Extracts
7.7%
2.4%
(3.6%)
8.9%
Color
(5.4%)
2.4%
(5.9%)
(1.9%)
Asia Pacific
11.1%
5.9%
0.5%
4.7%
Total Revenue
2.6%
2.7%
(4.1%)
4.0%
Operating Income
Flavors & Extracts
29.5%
1.9%
6.4%
21.2%
Color
(10.3%)
3.3%
(0.3%)
(13.3%)
Asia Pacific
33.5%
1.3%
0.8%
31.4%
Corporate & Other
(36.0%)
0.0%
(54.5%)
18.5%
Total Operating Income
35.7%
4.1%
31.3%
0.3%
Diluted Earnings Per Share
53.1%
4.1%
44.8%
4.2%
Adjusted EBITDA
4.9%
2.8%
N/A
2.1%
(2) For Revenue, adjustments consist of revenues of the
product lines divested or to be divested. For Operating Income,
Diluted Earnings per Share, and Adjusted EBITDA, adjustments
consist of the results of the product lines divested or to be
divested, divestiture & other related costs, and operational
improvement plan costs. The following table summarizes the
reconciliation between Operating Income (GAAP) and Adjusted EBITDA
for the three months ended March 31, 2021 and 2020.
Three
Months Ended March 31,
2021
2020
% Change Operating income (GAAP)
$
46,897
$
34,561
35.7
%
Depreciation and amortization
12,799
12,404
Depreciation and amortization, product lines divested or to be
divested
(49
)
(80
)
Share-based compensation expense
2,113
1,177
Divestiture & other related costs, before tax
1,572
11,843
Results of operations of the product lines divested or to be
divested, before tax
(2,927
)
(1,385
)
Operational improvement plan costs, before tax
1,001
-
Adjusted EBITDA
$
61,406
$
58,520
4.9
%
The following table summarizes the reconciliation
between Net cash provided by operating activities (GAAP) and Free
Cash Flow for the three months ended March 31, 2021 and 2020.
Three Months Ended March 31,
2021
2020
% Change Net cash provided by operating activities
(GAAP)
$
28,964
$
36,928
(21.6
%)
Capital expenditures
(14,244
)
(9,411
)
Free Cash Flow
$
14,720
$
27,517
(46.5
%)
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/20210423005103/en/
Amy Agallar (414) 347-3706
Sensient Technologies (NYSE:SXT)
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