Press Release Details

MILWAUKEE--(BUSINESS WIRE)-- Sensient Technologies Corporation (NYSE: SXT) reported earnings per share of 78 cents in the fourth quarter of 2018 compared to 31 cents in last year’s fourth quarter. Revenue was $324.6 million in this year’s fourth quarter compared to $328.9 million in the comparable period last year. Operating income was $45.3 million in the fourth quarter of 2018 and $47.4 million in last year’s fourth quarter. Foreign currency translation decreased revenue and operating income by approximately 2% and earnings per share by approximately 6% in the fourth quarter.

For the year ended December 31, 2018, earnings per share were $3.70 compared to $2.03 for the year ended December 31, 2017. Revenue was approximately $1.4 billion in both 2018 and 2017. Operating income was $203.4 million and $167.8 million for the years ended December 31, 2018 and 2017, respectively. Foreign currency translation increased full year 2018 revenue by approximately 1%, but did not have a significant impact on operating income or earnings per share.

The reported results include the impact of the Tax Cuts and Jobs Act (“2017 Tax Legislation”) and restructuring and other costs, which are described in more detail under “Reconciliation of Non-GAAP Amounts” below. The impact of the 2017 Tax Legislation decreased net earnings by $0.4 million, or 1 cent per share, in the current quarter and increased net earnings by $6.6 million, or 16 cents per share for the full year of 2018. In 2017, the impact of the 2017 Tax Legislation decreased net earnings by $18.4 million, or 42 cents per share, in both the fourth quarter and for the full year 2017.

In 2017, restructuring and other costs reduced operating income by $2.9 million ($4.7 million after-tax or 11 cents per share), in the fourth quarter and $48.1 million ($42.5 million after-tax or 96 cents per share), for the full year of 2017. The Company completed its restructuring activities in 2017 and did not incur any restructuring or other costs in 2018.

The adjusted results, discussed below, eliminate the impact of restructuring and other costs, and the 2017 Tax Legislation, and enhance the overall understanding of the Company’s performance when viewed together with our GAAP results. Refer to “Reconciliation of Non-GAAP Amounts” below. Sensient’s adjusted earnings per share were 79 cents in this year’s fourth quarter, compared to 84 cents in the comparable period last year. Fourth quarter adjusted operating income was $45.3 million, compared to $50.3 million reported in the fourth quarter of 2017. Foreign currency translation decreased adjusted operating income and adjusted earnings per share by approximately 2% in the fourth quarter of 2018.

For the year ended December 31, 2018, adjusted earnings per share were $3.55, an increase of approximately 4%, from last year’s result of $3.42. Adjusted operating income was $203.4 million for the full year of 2018 compared to $215.9 million in the comparable period last year. Foreign currency translation increased full year 2018 adjusted operating income and adjusted earnings by approximately 1%.

Cash provided by operating activities was $83.5 million for the full year of 2018 compared to $36.3 million in the prior year. The 2018 cash flows provided by investing activities includes $91.1 million of cash receipts on sold receivables compared to $141.5 million in the comparable period last year that were previously reported as cash provided by operating activities. Total debt decreased $56.5 million in the fourth quarter of 2018.

The Color Group reported revenue of $127.1 million in the quarter compared to $126.2 million in last year’s fourth quarter, an increase of approximately 1%. Segment operating income was $22.9 million in the quarter compared to $25.5 million in last year’s fourth quarter. Foreign currency decreased both revenue and operating income by approximately 3% in the period. The Group’s lower profit was primarily driven by higher input costs and product mix. In the fourth quarter, the Company continued to experience customer inventory destocking within the Cosmetic business.

For the full year, the Color Group reported revenue of $553.5 million, an increase of approximately 5% from $526.4 million reported in the comparable period last year. Segment operating income increased approximately 1% to $114.9 million compared to $113.4 million reported in 2017. Foreign currency translation increased operating income by approximately 1% in 2018 and had a minimal impact on revenue during the year.

The Flavors & Fragrances Group reported fourth quarter revenue of $175.5 million compared to $178.5 million reported in the comparable period last year. Segment operating income was $22.3 million in the fourth quarter compared to $24.1 million reported in the fourth quarter of 2017. The Group’s post-restructuring sales have stabilized and pricing and cost pressures in the natural ingredients business have subsided. The Group’s lower profit was primarily a result of overall soft market demand in the quarter in certain product categories. The Fragrances, BioNutrients, and European Sweet & Beverage businesses delivered solid revenue growth in the quarter. Foreign currency translation decreased revenue and operating income by approximately 1% in the quarter.

For the full year of 2018 and 2017, the Flavors & Fragrances Group reported revenue of $746.9 million in both years. Segment operating income was $96.4 million in 2018 and $114.3 million in 2017. Foreign currency translation increased revenue by approximately 1% in 2018 and had a minimal impact on operating income.

The Asia Pacific Group reported revenue of $31.1 million in the fourth quarter compared to $31.9 million reported in the comparable period last year. Segment operating income was $5.6 million and $6.0 million in the fourth quarters of 2018 and 2017, respectively. Foreign currency translation decreased segment revenue and operating income by approximately 3% and 1%, respectively. For the full year of both 2018 and 2017, revenue was $123.2 million. Segment operating income was $20.9 million and $20.8 million in 2018 and 2017, respectively. Foreign currency translation increased operating income by approximately 1% in 2018 with a minimal impact on revenue.

Corporate & Other reported operating costs of $5.5 million in the current quarter and $8.2 million in the fourth quarter of 2017. For the full year, the Corporate & Other segment, had operating costs of $28.8 million compared to $80.7 million in 2017. The lower costs this year are primarily a result of the absence of restructuring and other costs, and lower performance based executive compensation.

“We remain confident in our long-term strategy and we are working on a number of exciting projects. I am optimistic for 2019 and beyond,” said Paul Manning, Chairman, President and CEO of Sensient Technologies Corporation.

For 2019, the Company expects low to mid-single digit local currency consolidated revenue growth. Expectations for local currency revenue growth within the Flavors & Fragrances segment are consistent with this consolidated expectation. Expectations for local currency revenue growth in the Color and Asia Pacific segments are slightly above the consolidated expectation. Within the Color segment, revenue growth will be driven by new project wins and conversions of existing food and beverage products to natural color solutions.

Local currency operating income growth within the Flavors & Fragrances, Color, and Asia Pacific segments are expected to grow at a mid-single digit rate in 2019. These expectations apply to full year results for 2019. Results by quarter will vary and the expectation is results will strengthen after the first quarter. As an example, both the Flavors & Fragrances and Color segment results are expected to improve over the course of the year as pricing is implemented to offset input cost inflation, and as mix improves. In summary, we expect each of our three operating business segments, excluding corporate expense, to deliver mid-single digit operating income growth.

Expectations for consolidated operating income and EPS in 2019 are tempered by several headwinds the Company faces relative to 2018 adjusted EPS. These headwinds are non-cash share based compensation and income taxes. The Company’s compensation program features strong ties to performance, particularly in the executive team’s stock based compensation, which is 100% performance based. As a result of this pay philosophy, the Company recorded an unusually low level of non-cash stock based compensation expense in 2018 to reflect lower than expected payouts on equity grants to the executive team. Also in 2018, the Company’s adjusted tax rate was reduced by a number of proactive planning opportunities which may not recur in 2019.

As a result of the headwinds above, the Company expects local currency 2019 earnings per share to be down 8% to 11% in comparison to 2018 reported earnings per share of $3.70 and down 4% to 7% in comparison to 2018 adjusted EPS of $3.55. In addition, we expect earnings per share reported on a U.S. dollar basis to be impacted by currency headwinds of approximately five cents, or 1% to 2%, based on current exchange rates. Since consolidated local currency Adjusted EBITDA⁽²⁾ will not be impacted by these headwinds, the Company expects this metric to grow at a rate in excess of consolidated operating income and earnings per share. The Company expects consolidated Adjusted EBITDA to grow at a mid-single digit rate in 2019 on a local currency basis.

CONFERENCE CALL

The Company will host a conference call to discuss its 2018 fourth quarter and full year financial results at 9:00 a.m. CST on Friday, February 15, 2019. To participate in the conference call, please contact InterCall Teleconferencing at (888) 818-9025 and refer to conference identification number 8442319. A webcast of the conference call will be available on the Investor Information section of the Company’s web site at www.sensient.com.

A replay will be available beginning at 2:00 p.m. CST on February 15, 2019, through 11:00 p.m. CST on February 22, 2019, by calling (404) 537-3406 and referring to conference identification number 8442319. An audio replay and written transcript of the call will be posted on the Company’s web site at www.sensient.com after the call concludes.

This release contains statements that may constitute “forward-looking statements” within the meaning of Federal securities laws including under “2019 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 pace and nature of new product introductions by the Company and the Company’s customers; the Company's ability to successfully implement its strategy to create sustainable, long-term shareholder value; the Company’s ability to successfully implement its growth strategies; the outcome of the Company’s various productivity-improvement and cost-reduction efforts; changes in costs or availability of raw materials, including energy; industry and economic factors related to the Company’s domestic and international business; growth in markets for products in which the Company competes; industry and customer acceptance of price increases; actions by competitors, including increased intensity of competition; the loss of any customers in certain product lines in which our sales are made to a relatively small number of customers; product liability claims or product recalls; the costs of compliance, or failure to comply, with laws and regulations applicable to our industries and markets; changing consumer preferences and changing technologies; currency exchange rate fluctuations; estimates related to the Tax Cuts and Jobs Act and its effects on our results; and failure to complete and integrate future acquisitions or dispositions. 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. Additional information regarding these risks can be found in our most recent Annual Report on Form 10-K and subsequent reports that we file with the SEC.

ABOUT SENSIENT TECHNOLOGIES

Sensient Technologies Corporation is a leading global manufacturer and marketer of colors, flavors and fragrances. Sensient employs advanced technologies at facilities around the world to develop specialty food and beverage systems, cosmetic and pharmaceutical systems, inkjet and specialty inks and colors, and other specialty and fine chemicals. The Company’s customers include major international manufacturers representing most of the world’s best-known brands. Sensient is headquartered in Milwaukee, Wisconsin.

www.sensient.com

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Amy Agallar
(414) 347-3706

Source: Sensient Technologies Corporation