Sensient Technologies Reports Results for 4Q, Full Year 2014

Sensient Technologies Corporation reported fourth quarter adjusted earnings per share from continuing operations of 71 cents, an increase of 10.9% over last year’s adjusted earnings per share from continuing operations of 64 cents.
 
Consolidated revenue was $342.8 million and $350.1 million in the fourth quarters of 2014 and 2013, respectively. Adjusted operating income increased 7.6% to $48.0 million compared to $44.6 million of adjusted operating income reported in the fourth quarter of 2013.
 
Sensient’s adjusted operating margin increased 130 basis points to 14.0% in the fourth quarter. The adjusted results eliminate the impact of the 2014 and 2013 restructuring costs. As reported, diluted earnings per share from continuing operations were 55 cents and 57 cents in the fourth quarters of 2014 and 2013, respectively.
 
Reported operating income was $36.2 million in this year’s fourth quarter compared to $38.9 million in last year’s fourth quarter. Operating income was reduced by restructuring costs of $11.8 million and $5.7 million, in the fourth quarters of 2014 and 2013, respectively. As reported, operating margins were 10.6% in the fourth quarter of this year and 11.1% in last year’s fourth quarter. Foreign currency translation reduced consolidated revenue and operating income, as reported, by 3.9% and 4.4%, respectively, in the fourth quarter.
 
For the year ended Dec. 31, 2014, adjusted earnings per share from continuing operations were $3.02 compared to $2.73 in 2013, an increase of 10.6%. Consolidated revenue was approximately $1.45 billion in both 2014 and 2013. Adjusted operating income was $221.2 million in 2014, an increase of 7.6% over the adjusted operating income of $205.5 million in 2013.
 
The 2014 adjusted operating margin was 15.3%, an increase of 120 basis points over last year’s margin. As reported, earnings per share from continuing operations were $1.67 and $2.29 in 2014 and 2013, respectively. Operating income, as reported, was $130.7 million in 2014 compared to $173.8 million in 2013. The 2014 operating margin, as reported, was 9.0%. Restructuring and other costs were $90.6 million in 2014, compared to $31.7 million last year.
 
Sensient initiated a restructuring plan in the first quarter of 2014 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. For the full year, restructuring and other costs for continuing operations were $90.6 million, including $65.3 million of non-cash charges. In 2013, restructuring costs were $5.7 million in the fourth quarter and $31.7 million for the full year.
 
In connection with the restructuring plan, the Company stopped operating a business unit in the Color Group during the year, 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 73.5% to $62.1 million in the quarter, compared to $35.8 million in last year’s comparable quarter. For the full year, operating cash flows increased 23.2% to $189.2 million. Free cash flow, representing cash flow from operations less capital expenditures, was $109.8 million in 2014, more than twice the free cash flow generated in 2013. The strong cash flows in both the fourth quarter and full-year periods were driven by higher cash earnings and working capital reductions in the second half of the year.
 
The company repurchased 500,000 shares of its common stock in the fourth quarter, and 2.5 million shares during 2014. Including dividend payments, the company returned $185 million to its stockholders during the year.
 
“It was a successful year for Sensient,” said Paul Manning, president and CEO of Sensient Technologies Corporation. “The Color and Asia Pacific Groups delivered strong performances, and the Flavors & Fragrances Group continues to make progress on its strategic initiatives. Our strategy is working, and we remain committed to delivering sustainable long term value to our shareholders.”
 
The Color Group reported revenue of $115.7 million and $116.2 million in the fourth quarters of 2014 and 2013, respectively. Operating income increased 3.4% to $24.9 million from $24.1 million in last year’s fourth quarter. The Color Group’s operating margin increased 70 basis points to 21.5% in the quarter, led by strong performances from the digital inks and the North American food and beverage color businesses. In local currency, fourth quarter revenue and operating income increased by 4.3% and 8.5%, respectively.
 
For the full year, Color Group revenue was $508.1 million, an increase of 2.6% from the $495.1 million reported last year. Operating income increased 6.5% to $114.9 million compared to $107.9 million for the comparable period last year. In local currency, revenue and operating income increased by 3.7% and 7.3%, respectively.
 
The Flavors & Fragrances Group reported fourth quarter revenue of $201.9 million compared to the $209.0 million reported in the fourth quarter of 2013. Several of the Group’s businesses reported operating profit growth and higher margins in the quarter as the company continued its efforts to reduce costs and strategically reposition the Group by emphasizing higher margin, differentiated products. For the Group as a whole, operating income declined to $25.4 million, compared to $28.7 million in last year’s fourth quarter as a result of soft demand across several markets.
 
The Flavors & Fragrances Group reported revenue of $847.0 million and $876.5 million in 2014 and 2013, respectively. Operating income was $119.1 million for the year compared to $120.3 million last year. In local currency, revenue was off about 3%, and operating income was comparable to 2013.
 
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 and $36.5 million in the fourth quarters of 2014 and 2013, respectively. For the full year, revenue was $146.7 million compared to $145.2 million reported last year.
 
Foreign currency exchange rates will have a significant effect on Sensient’s 2015 reported results due to the stronger U.S. dollar. In addition, the recent strengthening of the Swiss Franc will have a further impact on the reported growth within the Color Group in 2015. Based on current exchange rates, Sensient expects 2015 reported earnings per share from continuing operations to be within a range of $3.02 and $3.12, excluding restructuring costs.