Sensient(US:SXT)2021-07-23 19:48Financial Data and Key Metrics Changes - The second quarter GAAP diluted earnings per share was $0.61, which included $7 million or approximately $0.16 per share of costs related to divestitures and operational improvement plans [28] - Consolidated adjusted revenue was $333.6 million, an increase of 9.1% in local currency compared to the second quarter of 2020 [30] - Adjusted local currency EBITDA was up approximately 6% for the quarter, and adjusted local currency EPS was up 8.6% for the quarter [30] Business Line Data and Key Metrics Changes - The Flavors & Extract Group reported 9% adjusted local currency revenue growth and 13% adjusted local currency operating profit growth [9][16] - The Color Group achieved 7% adjusted local currency revenue growth and 5% adjusted local currency profit growth, driven by a rebound in the Personal Care business [9][20] - The Asia-Pacific Group delivered 11% adjusted local currency revenue growth and 22% adjusted local currency profit growth [10][24] Market Data and Key Metrics Changes - The food and pharmaceutical product line revenue was up mid-single digits for the quarter, with improvements noted in Europe and Latin America [21][22] - Personal Care revenue was up double digits in the quarter, with expectations for continued improvement in the second half of the year [23] - The company noted strong growth in food colors and flavor product lines despite the ongoing impacts of COVID-19 [15] Company Strategy and Development Direction - The company completed the acquisition of Flavor Solutions, which enhances its technology platforms and expands its portfolio for clean label flavors [11] - The company is actively looking for other acquisition opportunities that align with its strategic initiatives in food, pharmaceutical excipients, and personal care [12] - The company anticipates mid-single-digit revenue growth for Flavors & Extracts and Color Group, with a focus on maintaining strong operating profit margins [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth outlook for the second half of the year, citing strong customer activity and product launches [41][42] - The company is managing supply chain challenges and rising input costs, with a strong ability to pass these costs onto customers [14][44] - Management remains optimistic about the recovery of the Personal Care business and expects improved operating leverage in the second half of the year [49][72] Other Important Information - The company’s leverage ratio improved to 2 times debt-to-adjusted EBITDA, down from 2.7 times a year ago, indicating a solid balance sheet position [33] - The company expects adjusted local currency revenue to grow at a mid-single-digit rate for 2021, an increase from previous guidance [36] Q&A Session Summary Question: Update on volumes for the three segments and raw material inflation - Management indicated a positive outlook for volumes across all segments, with strong fundamentals remaining intact despite geographic differences [41][42] - They noted the ability to pass on input cost increases to the market, with some raw material prices expected to regress [44][45] Question: Contribution margins in the Color Group - Management acknowledged that operating leverage would improve in the second half of the year as Personal Care volumes recover [48][49] Question: Product development and customer activity - Management reported a return to normal product launch activity, with increased engagement from multinational customers [51][54] Question: Concerns about weather impacts on natural products - Management expressed confidence in their diversified growing base, mitigating risks from weather extremes [56][58] Question: Insights on the Flavor Solutions acquisition - Management highlighted the complementary technologies and strong customer relationships that Flavor Solutions brings to the company [90][92] Question: Inflation concerns and ability to pass on costs - Management reassured that they can manage through inflation and have a diversified raw material supply base to mitigate risks [105] Question: Acquisition environment and competition - Management noted that the acquisition environment remains stable, with a focus on strategic and financially sound opportunities [109][110]