MILWAUKEE — Inflation will carry over into 2023, and “it’s anybody’s guess” when it stops and allows Sensient Technologies Corp. to moderate its price increases, said Paul Manning, president and chief executive officer.
“So you could very well have a situation where we continue to price in the front half of the year and don't have to, and perhaps even have the ability to back off some pricing, in the back half of the year,” he said in an Oct. 21 earnings call to discuss third-quarter financial results. “So trying to predict that in any one 90-day period is going to be particularly tricky.”
Following its pricing actions, Milwaukee-based Sensient Technologies achieved gains in the quarter ended Sept. 30. Net earnings of $36 million, or 86¢ per share on the common stock, were up 6% from $33.9 million, or 81¢ per share, in the previous year’s third quarter. Revenue rose 4.9% to $361 million from $344 million.
“We continue to experience increases in our input costs, including raw materials, transportation, energy and labor,” Mr. Manning said. “We are addressing these rising input costs with disciplined pricing actions, and we continue to maintain a higher inventory position to address ongoing supply chain challenges. While we have seen some signs of relief in select raw materials, most categories remain elevated, and we saw continued increases in costs this quarter across the company.”
Investing in inventory has been the main reason for lower cash flow from operations this year, said Stephen J. Roll, chief financial officer.
“We continue to invest in inventory to support the high demand we are experiencing and to ensure we have appropriate safety stock positions as supply chain and energy challenges continue,” he said. “We believe future inventory increases will be modest.”
In Sensient’s flavors and extracts group, revenue of $187 million was up 3% from $181.7 million. Segment operating income of $26.3 million was up 4.7% from $25.2 million.
“The natural Ingredients business has faced a volume headwind throughout 2022 as a result of onion availability,” Mr. Manning said. “I had initially anticipated the return to normalcy in this product line in Q3, but that did not fully materialize. We are now better positioned on our supply of the product, and I expect volumes to improve in the future.”
In the colors group, revenue of $151.5 million was up 9% from $139.2 million. Segment operating income increased 3.5% to $28.2 million from $27.3 million. Sensient in early October announced the acquisition of Endemix Doğal Maddeler AS, a vertically integrated color and extracts company based in Istanbul that serves the food and beverage markets and works with multinational companies in Europe, the Middle East and Asia.
“Our recent acquisition of Endemix will strengthen our supply chain and support the strong project wins we are seeing in natural colors,” Mr. Manning said. “The integration of Endemix has begun, and I expect this integration will continue throughout 2023.”
In the Asia Pacific group, revenue of $35.2 million was up 5% from $33.4 million. Segment operating income rose 5% to $7 million from $6.6 million.Over the first three quarters of the fiscal year, Sensient Technologies had net earnings of $111.8 million, or $2.67 per share on the common stock, up 22% from $91.5 million, or $2.17 per share, in the same time of the previous year. Revenue jumped 4.7% to $1.09 billion from $1.04 billion.