Sensient Technologies Corporation (NYSE: SXT) reported
consolidated revenue of $369.0 million in this year’s first quarter
compared to $355.5 million in last year’s first quarter. Reported
operating income in the first quarter of 2023 was $50.8 million
compared to $52.8 million in the first quarter of 2022. Reported
diluted earnings per share was 80 cents in the first quarter of
2023 compared to 88 cents in the first quarter of 2022. Foreign
currency translation decreased revenue by approximately 1% and
earnings per share by approximately 2% in the current quarter.
BUSINESS REVIEW
Reported
Revenue
Quarter
Flavors & Extracts
-2.1%
Color
8.6%
Asia Pacific
9.9%
Total Revenue
3.8%
Local Currency(1)
Revenue
Quarter
Flavors & Extracts
-1.3%
Color
10.0%
Asia Pacific
14.6%
Total Revenue
5.2%
(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 first quarter revenue
of $178.9 million compared to $182.7 million in last year’s first
quarter, a decrease of 2.1%. Local currency revenue decreased 1.3%
in the quarter. The Group’s revenue was negatively impacted by
lower volumes, primarily due to customer destocking in certain
product lines, partially offset by favorable pricing. Segment
operating income was $22.2 million in the current quarter compared
to $27.6 million reported in the comparable period last year, a
decrease of 19.6%. Local currency operating income decreased 19.5%
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 decreased segment revenue by
approximately 1% and was not material to segment operating income
in the quarter.
The Color Group reported revenue of $161.2 million in the
quarter compared to $148.4 million in last year’s first quarter, an
increase of 8.6%. Local currency revenue increased 10.0% in the
quarter. The Group benefited from higher pricing and higher volumes
in the food and pharmaceutical product line, offset by lower
volumes in the personal care product line, primarily due to
customer destocking. Segment operating income was $31.9 million in
the quarter compared to $30.7 million in last year’s comparable
period, an increase of 4.0%. Local currency operating income
increased 6.3% compared to the prior year’s first quarter. The
higher operating income is primarily a result of the favorable
pricing, partially offset by higher input costs. Foreign currency
translation decreased segment revenue by approximately 1% and
segment operating income by approximately 2% in the quarter.
The Asia Pacific Group reported revenue of $40.1 million in the
quarter compared to $36.5 million in last year’s first quarter, an
increase of 9.9%. Local currency revenue increased 14.6% in the
quarter, primarily as a result of higher volumes and higher
pricing. Segment operating income was $9.2 million in the quarter
compared to $8.2 million in last year’s first quarter, an increase
of 12.6%. Local currency operating income increased 18.0% in the
quarter, primarily as a result of the higher volumes and pricing,
partially offset by higher input costs. Foreign currency
translation decreased segment revenue and operating income by
approximately 5% in the quarter.
Corporate & Other reported an operating loss of $12.5
million in the current quarter compared to $13.7 million in last
year’s first quarter, a decrease of 8.7%, primarily due to lower
performance-based compensation.
2023 OUTLOOK
Sensient is reconfirming its expectation for the 2023 full year
GAAP diluted earnings per share to be flat to low-single digit
growth compared to our 2022 reported GAAP diluted earnings per
share of $3.34.
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 continues to expect 2023
diluted earnings per share to be flat to low-single digit growth on
a local currency basis compared to the Company’s 2022 adjusted
diluted earnings per share(2) of $3.29. The Company continues to
expect 2023 adjusted EBITDA(2) 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
first quarter financial results at 8:30 a.m. CDT on Friday, April
28, 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 May 5, 2023, by calling (877) 344-7529
and referring to conference identification number 5575502. 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 May 2, 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 March
31,
2023
2022
% Change
Revenue
$
369,006
$
355,521
3.8
%
Cost of products sold
244,343
230,675
5.9
%
Selling and administrative expenses
73,825
72,057
2.5
%
Operating income
50,838
52,789
(3.7
%)
Interest expense
6,002
2,993
Earnings before income taxes
44,836
49,796
Income taxes
11,185
12,725
Net earnings
$
33,651
$
37,071
(9.2
%)
Earnings per share of common stock: Basic
$
0.80
$
0.89
Diluted
$
0.80
$
0.88
Average common shares outstanding: Basic
41,970
41,865
Diluted
42,255
42,148
Results by Segment
Three Months Ended March
31,
Revenue
2023
2022
% Change
Flavors & Extracts
$
178,852
$
182,727
(2.1
%)
Color
161,161
148,438
8.6
%
Asia Pacific
40,085
36,465
9.9
%
Intersegment elimination
(11,092
)
(12,109
)
Consolidated
$
369,006
$
355,521
3.8
%
Operating Income
Flavors & Extracts
$
22,180
$
27,579
(19.6
%)
Color
31,885
30,657
4.0
%
Asia Pacific
9,241
8,204
12.6
%
Corporate & Other
(12,468
)
(13,651
)
Consolidated
$
50,838
$
52,789
(3.7
%)
Sensient Technologies Corporation (In
thousands) (Unaudited) Consolidated Condensed
Balance Sheets
March 31,
December 31,
2023
2022
Cash and cash equivalents
$
24,017
$
20,921
Trade accounts receivable
312,530
302,109
Inventories
573,706
564,110
Prepaid expenses and other current assets
49,639
47,640
Total Current Assets
959,892
934,780
Goodwill & intangible assets (net)
437,871
434,315
Property, plant, and equipment (net)
493,779
483,193
Other assets
131,185
129,326
Total Assets
$
2,022,727
$
1,981,614
Trade accounts payable
$
121,290
$
142,365
Short-term borrowings
24,849
20,373
Other current liabilities
88,512
109,415
Total Current Liabilities
234,651
272,153
Long-term debt
679,779
630,331
Accrued employee and retiree benefits
27,224
26,364
Other liabilities
52,852
53,168
Shareholders' Equity
1,028,221
999,598
Total Liabilities and Shareholders' Equity
$
2,022,727
$
1,981,614
Sensient Technologies Corporation (In
thousands, except per share amounts) (Unaudited)
Consolidated Statements of Cash Flows Three Months Ended
March 31,
2023
2022
Cash flows from operating activities: Net earnings
$
33,651
$
37,071
Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization
14,150
13,056
Share-based compensation expense
2,267
4,163
Net loss (gain) on assets
8
(48
)
Deferred income taxes
(2,351
)
4,211
Changes in operating assets and liabilities: Trade accounts
receivable
(7,142
)
(20,841
)
Inventories
(4,374
)
(11,901
)
Prepaid expenses and other assets
(2,062
)
(11,111
)
Trade accounts payable and other accrued expenses
(19,251
)
(10,267
)
Accrued salaries, wages, and withholdings
(21,187
)
(12,425
)
Income taxes
2,548
7,063
Other liabilities
698
137
Net cash used in operating activities
(3,045
)
(892
)
Cash flows from investing activities: Acquisition of
property, plant, and equipment
(22,278
)
(12,736
)
Proceeds from sale of assets
1
89
Other investing activities
(602
)
434
Net cash used in investing activities
(22,879
)
(12,213
)
Cash flows from financing activities: Proceeds from
additional borrowings
50,827
40,099
Debt payments
(1,351
)
(6,275
)
Dividends paid
(17,255
)
(17,211
)
Other financing activities
(7,669
)
(1,679
)
Net cash provided by financing activities
24,552
14,934
Effect of exchange rate changes on cash and cash equivalents
4,468
4,606
Net increase in cash and cash equivalents
3,096
6,435
Cash and cash equivalents at beginning of period
20,921
25,740
Cash and cash equivalents at end of period
$
24,017
$
32,175
Supplemental Information Three Months Ended March
31,
2023
2022
Dividends paid per share
$
0.41
$
0.41
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 March
31,
Revenue
Total
Foreign
Exchange
Rates
Local
Currency
Flavors & Extracts
(2.1%)
(0.8%)
(1.3%)
Color
8.6%
(1.4%)
10.0%
Asia Pacific
9.9%
(4.7%)
14.6%
Total Revenue
3.8%
(1.4%)
5.2%
Operating Income
Flavors & Extracts
(19.6%)
(0.1%)
(19.5%)
Color
4.0%
(2.3%)
6.3%
Asia Pacific
12.6%
(5.4%)
18.0%
Corporate & Other
(8.7%)
(0.1%)
(8.6%)
Total Operating Income
(3.7%)
(2.2%)
(1.5%)
Diluted Earnings Per Share
(9.1%)
(2.3%)
(6.8%)
Adjusted EBITDA
(3.9%)
(1.9%)
(2.0%)
The following table summarizes the reconciliations between
Operating Income (GAAP) and Adjusted EBITDA for the three months
ended March 31, 2023 and 2022.
Three Months Ended March
31,
2023
2022
% Change
Operating income (GAAP)
$
50,838
$
52,789
(3.7%)
Depreciation and amortization
14,150
13,056
Share-based compensation expense
2,267
4,163
Adjusted EBITDA
$
67,255
$
70,008
(3.9%)
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 March 31, 2023
and 2022.
March 31,
Debt
2023
2022
Short-term borrowings
$
24,849
$
7,475
Long-term debt
679,779
530,005
Credit Agreement adjustments(1)
(11,525
)
(18,590
)
Net Debt
$
693,103
$
518,890
Operating income (GAAP)
$
194,800
$
175,920
Depreciation and amortization
53,561
52,308
Share-based compensation expense
14,242
11,623
Other non-operating (gains) losses(2)
(3,359
)
8,544
Credit Adjusted EBITDA
$
259,244
$
248,395
Net Debt to Credit Adjusted EBITDA
2.7x
2.1x
(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.
With respect to Net Debt to Credit Adjusted EBITDA, this represents
our leverage ratio as calculated for purposes of compliance with
covenants under our Credit Agreement. In addition to use for these
purposes, management utilizes this measure to assess leverage
trends and may from time to time disclose it to investors to be
used for these purposes.
Category: Earnings
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version on businesswire.com: https://www.businesswire.com/news/home/20230427005623/en/
Amy Agallar (414) 347-3706
Sensient Technologies (NYSE:SXT)
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