Sensient Technologies Reports Results for 3Q 2012
Sensient Technologies Corporation reported diluted earnings per share of 66 cents in the quarter, a third quarter record and an increase of 3.1% over the 64 cents earned in last year’s third quarter. In local currency, third quarter earnings per share increased 7.8% as the impact of foreign currency translation reduced reported earnings by three cents per share. Foreign currency translation also significantly reduced revenue and operating income in the quarter.
Revenue was $369.4 million in the third quarter, compared to $363.8 million in last year’s third quarter. Operating income increased to $50.7 million from the $49.9 million reported in the comparable period last year. In local currency, both revenue and operating income increased by more than 5% in the quarter.
Diluted earnings per share were $1.94 for the first nine months of 2012, an increase of 5.4% over the $1.84 reported in last year’s first nine months. Foreign currency translation reduced year to date earnings by seven cents per share. In local currency, revenue increased 4.5% and diluted earnings per share increased 9.2% in the first nine months of this year.
Cash flows from operations increased to $43.1 million in the third quarter, up 8.4% from the $39.7 million generated in last year’s third quarter. Debt was reduced by more than $13 million in the third quarter.
“Sensient delivered another strong performance in the third quarter despite the difficult economic conditions,” said Kenneth P. Manning, chairman and CEO of Sensient Technologies. “We continue to see opportunities for growth in all of our groups and I remain very optimistic about the company’s future.”
The Color Group reported revenue of $120.7 million in the third quarter, compared to $121.0 million reported in the comparable period last year. Operating income increased 2.5% to a third quarter record of $23.5 million, from $22.9 million in last year’s third quarter.
The Color Group’s focus on higher value products resulted in stronger operating margins. The operating margin in the quarter increased to 19.4%, up from 18.9% reported in last year’s third quarter.
The Flavors & Fragrances Group reported third quarter revenue of $224.7 million compared to $220.3 million in last year’s third quarter. Operating income was $31.8 million in the quarter compared to $33.1 million in the third quarter of 2011. Third quarter results were affected by customer inventory destocking and higher raw material costs.
The Corporate & Other segment, which includes the Company’s operations in Asia Pacific and China, and the flavor businesses in Central and South America, reported revenue of $40.8 million in the quarter, an increase of 8.4% over the $37.6 million reported in last year’s third quarter.
Siegwerk Forced to Pass On Higher Costs
The printing inks industry in Germany is sounding the alarm. The prices of raw materials are rising worldwide. Within three years, the annual average price of colophony, a resin obtained from coniferous trees, has doubled. But without colophony, the production of printing inks for newspapers and packaging materials is not possible. In addition, the dramatic rises in energy and transport costs are also placing great strains on the industry.
“There is no end to the price spiral in sight, so that now we have to pass on the rising purchase costs to our customers,” said Michael Müller-Samson, head of the Web Offset Department at the internationally active Siegwerk Group, whose headquarters is in North Rhine-Westphalia.
“For years now, our industry has been caught in the raw materials trap,”Mr. Müller-Samson added. “Global demand is rising, particularly in the emerging markets, while the production capacities on the supply side are falling. The price ‘temperature curve’ on the markets has broken all records in the past few months and continues to fluctuate wildly. Through the enormous rise in costs it is no longer profitable to manufacture certain products.”
The prospects are gloomy: the situation will become more acute. The profit margins of the raw material suppliers have fallen sharply, as have the demand quantities. Suppliers are searching for alternative sales markets, which offer them higher revenues and the possibility of consolidation. The consequences for the printing industry will be further shortages and rising prices.
“Anyone who does not earn enough, does not invest – and then the competitiveness falls,” said Siegwerk CEO Herbert Forker. “The developments in the raw material and energy prices are therefore threatening the existence of many companies.”
“In many areas we have had to absorb the rising costs ourselves and have not passed on the cost increases to our customers over the last few years,” reported Mr. Forker.
They had consciously contributed towards strengthening the competitiveness of the industry closely associated with the printing inks business, namely the publishing and advertising industry, with respect to the digital media.
“Our common objective is to maintain the attractiveness of printed products such as high-quality packaging, newspapers or advertising supplements and, where possible, further improve them,” Mr. Forker explained.