Sensient Technologies Corporation Reports Results for the Quarter Ended March 31, 2021

Sensient Technologies Corporation Reports Results for the Quarter Ended March 31, 2021




Sensient Technologies Corporation Reports Results for the Quarter Ended March 31, 2021

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

MILWAUKEE–(BUSINESS WIRE)–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 detail
in 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

Contacts

Amy Agallar

(414) 347-3706