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Sensient Technologies Corp.'s (Milwaukee) flavors & fragrances group posted a drop in second-quarter revenue amid soft European markets as well as inventory destocking and higher raw material costs. However, it reiterated its 2012 outlook and remains optimistic about the third quarter and beyond.
During the company's conference call, Kenneth P. Manning, Sensient Technologies CEO and president, said the company did have some softness with some of the product lines within the flavor group, "But we do feel like a lot of that is behind us and we’re feeling good for the rest of the year," Manning added.
For the rest of the year, Sensient expects growth in the flavor group to be in the mid-single digits in local currency. Still, executives on the call said the flavors unit has a "much tougher time in Europe" as compared to its higher-margin color division. The flavor group was hurt by softness in certain European markets, inventory destocking by key customers and higher raw material costs during the second quarter.
However, James P. McCarthy, president, flavors & fragrances group, sees improving results ahead. "We continue to look at new products and development," he said. "We have a strong pipeline going into the second half of the year."
For the quarter, the flavors & fragrance group posted revenue of $218.9 million, a drop from $225.8 million in the comparable year-ago second quarter. Second-quarter operating income for the segment fell to $33.5 million, compared to $35.9 million a year ago. Foreign currency translation decreased revenue and operating income by 4% and 3%, respectively.
Sensient's total company revenue fell to $367.8 million in the second quarter compared to $377 million a year ago, hurt by foreign currency translation (in local currency, revenue rose 2% and operating income climbed 5% compared to last year’s second quarter). Total second-quarter net income rose to $34.91 million, or 70 cents a share (including the impact of litigation costs), from $33.49 million, or 67 cents a share, a year earlier.
Sensient is maintaining its 2012 full-year earnings outlook of $2.50 to $2.59 a share. Separately, the company issued a quarterly cash dividend of 22 cents a share payable September 4 to shareholders of record on Aug. 8, 2012.