Sensient to divest non-core product lines as Q3 earning plunge 33%

USA – Global colors, flavors, and fragrances company, Sensient Technologies has unveiled plans offloading its inks, fruit preparation and fragrance business lines as as the company seeks to further solidify its strategic focus.

According to the Sensient’s CEO and president, Paul Manning, the business lines have been significant headwinds for the company for several years, especially after the company reported a 33% decline in net earnings during its recent third quarter.

Speaking during a conference call to discuss third-quarter financial results, Manning said that the move will enable the company to refocus and maximize its investments in core businesses and improve overall product portfolio as well as growth prospects.

“I anticipate that our ability to deliver consistent results will be greatly improved without the headwinds and distractions of these business lines,” Manning said.

Sesnsient intends to use the proceeds from the sale of the businesses to reduce debt as well as acquire businesses in its core focus areas.

Going forward, the company said it will exclusively concentrate on its key strategic markets; food colors, finished flavors and extracts, cosmetics, pharmaceuticals and natural ingredients.

“We’ve experienced some exceptionally challenging market dynamics this year. Our actions to continue to focus the Company, divest non-strategic business lines, reduce costs and focus on free cash flow will provide better results going forward,” Manning added.

Sensient has been struggling with the impacts of market dynamics across various regions, which saw the company’s net earnings during the third quarter ended Sept 30 drop 33% to US$31.9 million from US$47.2 million posted last year.

During the period under review, revenue fell 7% to US$317.7 million from US$342.7 million while operating income was US$38.8 million, compared to US$50.3 million in the comparable period last year.

Manning pointed out that the overall market in North America and Europe for food and beverages, which includes a broad array of product categories from pet foods to soup has been down for the trailing 12 months.

This has directly impacted the business particularly in its flavor ingredient product lines, which has a significant presence in soup and yogurt as well as other categories.

Sensient highlighted that tariffs have also weighed down its perfromance, as a result of higher costs for certain raw materials from China as well as creating conditions in certain regions, which have led to deferred product launches, destocking in general uncertainty.

“Despite the slowdown, we are experiencing successes in a number of areas such as ice cream, natural colors and pharmaceuticals. In addition, our North American savory business is turning around and is well positioned for next year,” Manning noted.

As the company continues to pursue measures to consolidate its balance sheet, it now anticipates that full-year EPS will be in the range of $2.90 to $3 per share.

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