Sensient Technologies Reports Results for 3Q 2014

Sensient Technologies Corporation reported third quarter adjusted earnings per share from continuing operations of 78 cents, an increase of 8.3% over last year’s adjusted earnings per share from continuing operations of 72 cents. Consolidated revenue was $364.5 million and $370.5 million in the third quarters of 2014 and 2013, respectively.
 
Adjusted operating income increased 2.5% to $57.1 million compared to $55.7 million of adjusted operating income reported in the third quarter of 2013. Sensient’s adjusted operating margin increased 70 basis points to 15.7% in the third quarter. The adjusted results eliminate the impact of the 2014 and 2013 restructuring and other costs\. As reported, diluted earnings per share from continuing operations were 47 cents and 64 cents in the third quarters of 2014 and 2013, respectively.
 
Reported operating income was $36.1 million in this year’s third quarter compared to $49.1 million in last year’s third quarter. Operating income was reduced by restructuring costs of $21.0 million and $6.6 million, in the third quarters of 2014 and 2013, respectively. As reported, operating margins were 9.9% in the third quarter of this year and 13.3% in last year’s third quarter.
 
For the nine months ended Sept. 30, 2014, adjusted earnings per share from continuing operations were $2.31 compared to $2.09 in the first nine months of last year, an increase of 10.5%. Consolidated revenue was $1.1 billion in the first nine months of both 2014 and 2013. Adjusted operating income was $173.2 million in the first nine months of 2014, an increase of 7.7% over the adjusted operating income of $160.9 million in the first nine months of last year.
 
As reported, earnings per share from continuing operations were $1.13 and $1.72 in the first nine months of 2014 and 2013, respectively. Operating income, as reported, was $94.4 million in the first nine months of this year compared to $134.9 million in the first nine months of 2013. Restructuring and other costs were $78.8 million in the first nine months of 2014, compared to $26.0 million for the comparable period last year.
 
Sensient initiated a restructuring plan in the first quarter of this year to eliminate underperforming operations, consolidate manufacturing facilities, and improve efficiencies within the company. In 2013, the company incurred restructuring costs to relocate the headquarters of the Flavors & Fragrances Group and consolidate manufacturing facilities. In connection with the restructuring plan, the company stopped operating a business unit in the Color Group during the quarter, and its results are being reported as a discontinued operation for all periods reported. The reported loss from discontinued operations includes both operating losses and restructuring costs related to this business unit, net of tax.
 
Cash provided by operating activities increased 20.8% to $57.7 million in the quarter, compared to $47.7 million in last year’s comparable quarter. The increase was driven by higher cash earnings and improvements in receivables and inventories. The company has repurchased two million shares of its common stock this year, and including dividend payments, the company has returned more than $140 million to shareholders through Sept. 30, 2014.
 
“Sensient’s strong third quarter results were in line with our expectations,” said Paul Manning, president and CEO of Sensient Technologies. “The Color Group continues to deliver consistent growth and sustainable profit margins. The Flavors & Fragrances Group is on track to deliver operating margins in the high teens within the next few years. We remain optimistic about growth opportunities for both Groups.”
 
The Color Group reported revenue of $127.8 million in the quarter, an increase of 3.1% from the $124.1 million reported in the comparable period last year. Operating income increased 4.3% to $29.1 million from $27.9 million in last year’s third quarter. The Color Group’s operating margin increased 30 basis points to 22.8% in the quarter, as several business units delivered double digit profit growth, led by the digital inks business.
 
For the nine months ended September 30, 2014, Color Group revenue was $392.4 million, an increase of 3.6% from the $378.9 million reported in the first nine months of last year. Operating income increased 7.4% to $90.0 million compared to $83.8 million for the comparable period last year.
 
The Flavors & Fragrances Group reported third quarter revenue of $215.5 million compared to the $225.0 million reported in last year’s third quarter. Operating income was $30.2 million compared to $31.2 million in last year’s third quarter. The Flavors & Fragrances Group’s operating margin increased to 14.0% in the quarter as several business units reported double-digit operating profit growth in the quarter.
 
The Flavors & Fragrances Group reported revenue of $645.1 million and $667.5 million in the first nine months of 2014 and 2013, respectively. Operating income was $93.7 million for the first nine months of 2014, an increase of 2.3% compared to the $91.6 million reported in the comparable period last year.
 
The Corporate & Other segment, which includes the Company’s operations in Asia Pacific, and the flavor businesses in Central and South America, reported revenue of $36.2 million in the third quarters of both 2014 and 2013. For the nine months ended September 30, 2014, revenue was $110.5 million compared to $108.7 million reported in the first nine months of last year.
 
Sensient has revised its 2014 diluted earnings per share guidance to be within the range of $2.98 and $3.02, excluding restructuring and other costs. The company’s previous guidance had been a range between $2.95 and $3.02 per share.