Sensient(US:SXT)2021-10-15 15:59Financial Data and Key Metrics Changes - The company reported a consolidated adjusted local currency revenue growth of 13% for Q3 2021 compared to Q3 2020, with adjusted local currency EBITDA up by 12.9% and adjusted local currency EPS increasing by 9.1% [11][37][44] - GAAP diluted earnings per share for Q3 2021 was $0.80, which included divestiture costs and operational improvement plan costs [35][41] - The leverage ratio improved to 2.0 times adjusted EBITDA, down from 2.6 a year ago, indicating a solid balance sheet position [41][118] Business Line Data and Key Metrics Changes - The Flavors & Extracts Group achieved 12% adjusted local currency revenue growth and 16% adjusted local currency profit growth, with growth across almost all product lines [12][19][22] - The Color Group delivered 18% adjusted local currency revenue growth and 15% adjusted local currency profit growth, driven by strong demand in food and pharmaceutical colors [13][24][25] - The Asia Pacific Group reported 10% adjusted local currency revenue growth and 11% adjusted local currency profit growth, with a focus on sales execution and customer service [14][27][28] Market Data and Key Metrics Changes - The company noted challenges in the supply chain, including increased input costs and logistics delays, but remains optimistic about managing these issues through pricing increases and safety stock [16][18] - There is a strong demand for natural colors and flavors across key product lines and regions, with expectations for continued growth in the fourth quarter and into 2022 [25][29] Company Strategy and Development Direction - The company is focused on customer service, product delivery, and sales execution, which have led to a high level of new product wins [15][31] - The completion of divestitures allows the company to concentrate on key markets such as food, pharmaceuticals, and personal care [30] - The company anticipates mid-single-digit revenue growth for the Flavors & Extracts Group and Color Group, with a focus on maintaining strong margins [32][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate supply chain challenges and maintain growth momentum into 2022 [18][100] - The company is optimistic about the recovery of the personal care segment, particularly in makeup, which is expected to gain traction in Q4 [72][96] - Management highlighted the importance of new product launches and customer wins as key drivers for future growth [54][99] Other Important Information - The company completed the acquisition of Flavor Solutions, contributing approximately $2.4 million in revenue for the quarter [21][38] - A 5% increase in the quarterly dividend was announced, reflecting a commitment to capital allocation and shareholder returns [41][42] Q&A Session Summary Question: Concerns about inflation and its impact on volumes - Management acknowledged that while inflation could lead to shrinkflation strategies among customers, the diversified customer base and ongoing new product launches may offset potential volume risks [52][54] Question: Operating leverage and personal care outlook - Management explained that pricing lags inflation, but expects operating leverage to improve in Q4, particularly in personal care as demand recovers [66][70] Question: Competitive pressure in the market - Management noted that while competition exists, the focus remains on executing the company's strategy and serving customers effectively [81][82] Question: Growth opportunities in extracts - Management highlighted both organic and inorganic growth opportunities in the extracts market, emphasizing the potential for acquisitions [86][87] Question: Update on M&A and balance sheet strategy - Management confirmed the successful integration of Flavor Solutions and indicated a willingness to pursue further acquisitions while maintaining a flexible balance sheet [115][118]