TechDogs-"Sensient Technologies Corporation Reports Results for the Quarter Ended June 30, 2022"

Manufacturing Technology

Sensient Technologies Corporation Reports Results for the Quarter Ended June 30, 2022

By Business Wire

Business Wire
Overall Rating

Double-Digit Growth in Reported and Adjusted Revenue

Sensient Operating at or Above its 2022 Guidance


MILWAUKEE--(BUSINESS WIRE)--Sensient Technologies Corporation (NYSE: SXT) reported consolidated revenue of $371.7 million in this year’s second quarter compared to $335.8 million in last year’s second quarter. Reported operating income in the second quarter of 2022 was $55.2 million compared to $35.8 million in the second quarter of 2021. Reported diluted earnings per share was 92 cents in the second quarter of 2022 compared to 61 cents in the second quarter of 2021. Foreign currency translation decreased revenue by approximately 3% and earnings per share by approximately 5% in the present quarter.

The 2021 second quarter reported results included divestiture & other related costs and operational improvement plan costs, which in total decreased 2021 second quarter diluted earnings per share by $0.16. The 2021 second quarter reported results also included the operations of the divested product lines, which decreased diluted earnings per share by $0.01. We did not make any adjustments to our 2022 second 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

5.5%

-2.2%

Color

17.3%

13.3%

Asia Pacific

15.5%

11.5%

Total Revenue

10.7%

4.6%

Adjusted

Local Currency (1)

Revenue

Quarter

Year-to-Date

Flavors & Extracts

8.8%

7.0%

Color

21.9%

16.8%

Asia Pacific

23.0%

18.6%

Total Revenue

14.9%

11.6%

(1) Adjusted 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 $189.3 million compared to $179.4 million in last year’s second quarter, an increase of 5.5%. Adjusted local currency revenue increased 8.8% in the quarter. The Group had favorable pricing and volume growth in Flavors, Extracts & Flavor Ingredients, and favorable pricing in Natural Ingredients, partially offset by lower volumes in Natural Ingredients. The lower volumes in Natural Ingredients were primarily a result of a limited supply of onion combined with strong 2021 demand. Segment operating income was $30.0 million in the current quarter compared to $24.5 million reported in the comparable period last year, an increase of 22.3%. Adjusted local currency operating income increased 23.9% in the quarter. The higher operating income was primarily due to the favorable pricing and volume growth in Flavors, Extracts & Flavor Ingredients, and favorable pricing in Natural Ingredients, 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 second quarter of 2022 rose to 15.9%.

The Color Group reported revenue of $156.3 million in the quarter compared to $133.2 million in last year’s second quarter, an increase of 17.3%. Adjusted local currency revenue increased 21.9% in the quarter. The Group had strong volume growth and higher pricing in both Food & Pharmaceutical Colors and Personal Care. Segment operating income was $31.2 million in the quarter compared to $25.6 million in last year’s comparable period, an increase of 21.7%. Adjusted local currency operating income increased 23.9% compared to the prior year’s second 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 4% and segment operating income by approximately 5% in the quarter. Segment operating income as a percent of revenue in the second quarter of 2022 was 20.0%.

The Asia Pacific Group reported revenue of $37.3 million in the quarter compared to $32.3 million in last year’s second quarter, an increase of 15.5%. Adjusted local currency revenue increased 23.0% in the quarter. The higher revenue was a result of strong volume growth and higher pricing. Segment operating income was $7.7 million in the quarter compared to $5.8 million in last year’s second quarter, an increase of 33.3%. Adjusted local currency operating income increased 43.3% 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 8% and 10%, respectively, in the quarter. Segment operating income as a percent of revenue in the second quarter of 2022 rose to 20.7%.

Corporate & Other reported operating costs of $13.7 million in the current quarter compared to $20.2 million in last year’s second quarter, a decrease of 32.3%. Adjusted local currency operating expenses for Corporate & Other increased 14.0% 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 now expects 2022 revenue to grow at a high single digit rate in local currency compared to the Company’s 2021 adjusted revenue(2). The Company’s previous 2022 revenue guidance was for a mid-to-high single digit growth rate in local currency. The Company is reconfirming its expectation for 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 now expects full year 2022 earnings per share reported on a U.S. dollar basis to be impacted by approximately twenty-three cents of foreign currency headwinds based on current exchange rates. The Company’s previous guidance anticipated twelve cents of foreign currency headwinds.

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 ongoing 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 second quarter financial results at 8:30 a.m. CDT on Friday, July 22, 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 July 29, 2022, by calling (877) 344-7529 and referring to conference identification number 5230009. 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 26, 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 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, energy, and other supplies, the availability and cost of labor, logistics, and transportation; 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; governmental regulations and restrictions, and general economic conditions, including inflation; 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.

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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 June 30, Six Months Ended June 30,

2022

2021

% Change

2022

2021

% Change

Revenue

$

371,706

$

335,827

10.7%

$

727,227

$

695,529

4.6%

Cost of products sold

240,703

224,233

7.3%

471,378

468,322

0.7%

Selling and administrative expenses

75,759

75,841

(0.1%)

147,816

144,557

2.3%

Operating income

55,244

35,753

54.5%

108,033

82,650

30.7%

Interest expense

3,083

3,322

6,076

6,755

Earnings before income taxes

52,161

32,431

101,957

75,895

Income taxes

13,514

6,495

26,239

18,291

Net earnings

$

38,647

$

25,936

49.0%

$

75,718

$

57,604

31.4%

Earnings per share of common stock:

Basic

$

0.92

$

0.62

$

1.81

$

1.37

Diluted

$

0.92

$

0.61

$

1.80

$

1.36

Average common shares outstanding:

Basic

41,893

42,135

41,879

42,199

Diluted

42,208

42,267

42,178

42,328

Results by Segment Three Months Ended June 30, Six Months Ended June 30,

Revenue

2022

2021

% Change

2022

2021

% Change

Flavors & Extracts

$

189,337

$

179,401

5.5%

$

372,064

$

380,312

(2.2%)

Color

156,268

133,207

17.3%

304,706

268,927

13.3%

Asia Pacific

37,328

32,317

15.5%

73,793

66,157

11.5%

Intersegment elimination

(11,227

)

(9,098

)

(23,336

)

(19,867

)

Consolidated

$

371,706

$

335,827

10.7%

$

727,227

$

695,529

4.6%

Operating Income

Flavors & Extracts

$

30,013

$

24,536

22.3%

$

57,592

$

51,554

11.7%

Color

31,178

25,615

21.7%

61,835

52,209

18.4%

Asia Pacific

7,721

5,793

33.3%

15,925

12,545

26.9%

Corporate & Other

(13,668

)

(20,191

)

(27,319

)

(33,658

)

Consolidated

$

55,244

$

35,753

54.5%

$

108,033

$

82,650

30.7%

Sensient Technologies Corporation
(In thousands)
(Unaudited)
Consolidated Condensed Balance Sheets

June 30,

December 31,

2022

2021

Cash and cash equivalents

$

25,271

$

25,740

Trade accounts receivable

295,948

261,121

Inventories

452,161

411,635

Prepaid expenses and other current assets

48,146

42,657

Total Current Assets

821,526

741,153

Goodwill & intangible assets (net)

417,538

435,009

Property, plant, and equipment (net)

443,675

446,478

Other assets

120,483

122,853

Total Assets

$

1,803,222

$

1,745,493

Trade accounts payable

$

140,776

$

125,519

Short-term borrowings

26,624

8,539

Other current liabilities

96,516

98,247

Total Current Liabilities

263,916

232,305

Long-term debt

498,715

503,006

Accrued employee and retiree benefits

28,193

28,579

Other liabilities

53,431

43,178

Shareholders' Equity

958,967

938,425

Total Liabilities and Shareholders' Equity

$

1,803,222

$

1,745,493

Sensient Technologies Corporation
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Cash Flows
Six Months Ended June 30,

2022

2021

Cash flows from operating activities:
Net earnings

$

75,718

$

57,604

Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization

26,180

25,817

Share-based compensation expense

8,691

4,188

Net (gain) loss on assets

(38

)

206

Loss on divestitures and other charges

-

13,511

Deferred income taxes

12,244

1,702

Changes in operating assets and liabilities:
Trade accounts receivable

(41,592

)

(26,902

)

Inventories

(51,768

)

19,357

Prepaid expenses and other assets

(25,919

)

(15,573

)

Trade accounts payable and other accrued expenses

20,501

9,632

Accrued salaries, wages, and withholdings

(4,188

)

(3,944

)

Income taxes

2,765

1,953

Other liabilities

199

1,710

Net cash provided by operating activities

22,793

89,261

Cash flows from investing activities:
Acquisition of property, plant, and equipment

(32,468

)

(25,550

)

Proceeds from sale of assets

92

169

Proceeds from divestiture of businesses

-

36,255

Other investing activities

1,571

(254

)

Net cash (used in) provided by investing activities

(30,805

)

10,620

Cash flows from financing activities:
Proceeds from additional borrowings

69,424

25,997

Debt payments

(31,547

)

(62,578

)

Purchase of treasury stock

-

(22,507

)

Dividends paid

(34,446

)

(33,027

)

Other financing activities

(2,056

)

(582

)

Net cash provided by (used in) financing activities

1,375

(92,697

)

Effect of exchange rate changes on cash and cash equivalents

6,168

1,352

Net (decrease) increase in cash and cash equivalents

(469

)

8,536

Cash and cash equivalents at beginning of period

25,740

24,770

Cash and cash equivalents at end of period

$

25,271

$

33,306

Supplemental Information
Six Months Ended June 30,

2022

2021

Dividends paid per share

$

0.82

$

0.78

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 six months ended June 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 June 30,

Six Months Ended June 30,

2022

2021

% Change

2022

2021

% Change

Revenue (GAAP)

$

371,706

$

335,827

10.7%

$

727,227

$

695,529

4.6%

Revenue of the divested product lines

-

(2,207

)

-

(27,777

)

Adjusted revenue

$

371,706

$

333,620

11.4%

$

727,227

$

667,752

8.9%

Operating income (GAAP)

$

55,244

$

35,753

54.5%

$

108,033

$

82,650

30.7%

Divestiture & other related costs – Cost of products sold

-

3

-

28

Divestiture & other related costs – Selling and administrative expenses

-

11,685

-

13,232

Operating loss (income) of the divested product lines

-

459

-

(2,468

)

Operational improvement plan - Selling and administrative expenses

-

(3,494

)

-

(2,493

)

Adjusted operating income

$

55,244

$

44,406

24.4%

$

108,033

$

90,949

18.8%

Net earnings (GAAP)

$

38,647

$

25,936

49.0%

$

75,718

$

57,604

31.4%

Divestiture & other related costs, before tax

-

11,688

-

13,260

Tax impact of divestiture & other related costs

-

(1,689

)

-

(896

)

Net loss (earnings) of the divested product lines, before tax

-

459

-

(2,468

)

Tax impact of the divested product lines

-

(115

)

-

608

Operational improvement plan income, before tax

-

(3,494

)

-

(2,493

)

Tax impact of operational improvement plan

-

455

-

159

Adjusted net earnings

$

38,647

$

33,240

16.3%

$

75,718

$

65,774

15.1%

Diluted earnings per share (GAAP)

$

0.92

$

0.61

50.8%

$

1.80

$

1.36

32.4%

Divestiture & other related costs, net of tax

-

0.24

-

0.29

Results of operations of the divested product lines, net of tax

-

0.01

-

(0.04

)

Operational improvement plan income, net of tax

-

(0.07

)

-

(0.06

)

Adjusted diluted earnings per share

$

0.92

$

0.79

16.5%

$

1.80

$

1.55

16.1%

Note: Earnings per share calculations may not foot due to rounding differences.
Sensient Technologies Corporation
(In thousands)
(Unaudited)
Reconciliation of Non-GAAP Amounts - Continued
Results by Segment

Three Months Ended June 30,

Revenue

2022

Adjustments (1)

Adjusted
2022

2021

Adjustments (1)

Adjusted
2021

Flavors & Extracts

$

189,337

$

-

$

189,337

$

179,401

$

(1,415

)

$

177,986

Color

156,268

-

156,268

133,207

(792

)

132,415

Asia Pacific

37,328

-

37,328

32,317

-

32,317

Intersegment elimination

(11,227

)

-

(11,227

)

(9,098

)

-

(9,098

)

Consolidated

$

371,706

$

-

$

371,706

$

335,827

$

(2,207

)

$

333,620

Operating Income
Flavors & Extracts

$

30,013

$

-

$

30,013

$

24,536

$

(45

)

$

24,491

Color

31,178

-

31,178

25,615

504

26,119

Asia Pacific

7,721

-

7,721

5,793

-

5,793

Corporate & Other

(13,668

)

-

(13,668

)

(20,191

)

8,194

(11,997

)

Consolidated

$

55,244

$

-

$

55,244

$

35,753

$

8,653

$

44,406

Results by Segment

Six Months Ended June 30,

Revenue

2022

Adjustments (1)

Adjusted
2022

2021

Adjustments (1)

Adjusted
2021

Flavors & Extracts

$

372,064

$

-

$

372,064

$

380,312

$

(26,304

)

$

354,008

Color

304,706

-

304,706

268,927

(1,328

)

267,599

Asia Pacific

73,793

-

73,793

66,157

(295

)

65,862

Intersegment elimination

(23,336

)

-

(23,336

)

(19,867

)

150

(19,717

)

Consolidated

$

727,227

$

-

$

727,227

$

695,529

$

(27,777

)

$

667,752

Operating Income
Flavors & Extracts

$

57,592

$

-

$

57,592

$

51,554

$

(2,925

)

$

48,629

Color

61,835

-

61,835

52,209

544

52,753

Asia Pacific

15,925

-

15,925

12,545

(87

)

12,458

Corporate & Other

(27,319

)

-

(27,319

)

(33,658

)

10,767

(22,891

)

Consolidated

$

108,033

$

-

$

108,033

$

82,650

$

8,299

$

90,949

(1) 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 June 30,
Revenue Total Foreign
Exchange
Rates
Adjustments (2) Adjusted
Local
Currency
Flavors & Extracts

5.5%

(2.5%)

(0.8%)

8.8%

Color

17.3%

(3.9%)

(0.7%)

21.9%

Asia Pacific

15.5%

(7.5%)

0.0%

23.0%

Total Revenue

10.7%

(3.4%)

(0.8%)

14.9%

Operating Income

Flavors & Extracts

22.3%

(1.3%)

(0.3%)

23.9%

Color

21.7%

(4.6%)

2.4%

23.9%

Asia Pacific

33.3%

(10.0%)

0.0%

43.3%

Corporate & Other

(32.3%)

0.0%

(46.3%)

14.0%

Total Operating Income

54.5%

(5.8%)

31.2%

29.1%

Diluted Earnings Per Share

50.8%

(4.9%)

34.2%

21.5%

Adjusted EBITDA

22.6%

(4.1%)

N/A

26.7%

Six Months Ended June 30,
Revenue Total Foreign
Exchange
Rates
Adjustments (2) Adjusted
Local
Currency
Flavors & Extracts

(2.2%)

(2.1%)

(7.1%)

7.0%

Color

13.3%

(2.9%)

(0.6%)

16.8%

Asia Pacific

11.5%

(6.6%)

(0.5%)

18.6%

Total Revenue

4.6%

(2.8%)

(4.2%)

11.6%

Operating Income

Flavors & Extracts

11.7%

(1.2%)

(6.4%)

19.3%

Color

18.4%

(3.6%)

1.3%

20.7%

Asia Pacific

26.9%

(8.9%)

(0.9%)

36.7%

Corporate & Other

(18.8%)

0.0%

(38.2%)

19.4%

Total Operating Income

30.7%

(4.3%)

12.5%

22.5%

Diluted Earnings Per Share

32.4%

(4.4%)

17.4%

19.4%

Adjusted EBITDA

18.2%

(3.2%)

N/A

21.4%

(2) 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 six months ended June 30, 2022 and 2021.

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

% Change

2022

2021

% Change

Operating income (GAAP)

$

55,244

$

35,753

54.5%

$

108,033

$

82,650

30.7%

Depreciation and amortization

13,124

13,018

26,180

25,817

Depreciation and amortization, divested product lines

-

(48

)

-

(97

)

Share-based compensation expense

4,528

2,075

8,691

4,188

Divestiture & other related costs, before tax

-

11,688

-

13,260

Results of operations of the divested product lines, before tax

-

459

-

(2,468

)

Operational improvement plan costs (income), before tax

-

(3,494

)

-

(2,493

)

Adjusted EBITDA

$

72,896

$

59,451

22.6%

$

142,904

$

120,857

18.2%


Contacts

Amy Agallar
(414) 347-3706


Read full story here

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First published on Fri, Jul 22, 2022

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