Sensient Chugs Along

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Sensient Technologies (NYS: SXT) , the flavors, colors, and fragrance producer, reported an increase in third-quarter net income, backed by secular growth in volumes across all segments. The company's results were in line with analyst expectations. Let's take a closer, Foolish look at the numbers to see what's up with Sensient.

Sensing the numbers
Sensient's revenues increased by 7% to $363.8 million while also managing to post a robust 10% increase in net income to $32 million due to slightly lower interest and tax expenditure.

On the margins front, the company managed to keep gross margins steady at 31%, the same level as the previous year's quarter. Selling, general, and administration margins rose slightly by 60 basis points to 17.8%. Net income margins also saw a slight improvement by 20 basis points to 8.8%.

Looking at industry peers, McCormick's (NYS: MKC) third-quarter revenues grew by 16% to $920.4 million. However, net income declined 10% to $92 million due to rise in commodity prices.

H.B. Fuller (NYS: FUL) also reported higher quarterly revenues at $387.8 million, 15% higher than the year-ago quarter. Net Income, on the other hand, managed to jump 22% to $23.2 million primarily due to product price increases.  

Coming back to Sensient, the company's color business reported a 7% increase in revenues to $121 million. Out of this, favorable foreign currency exchange rates added 4% to revenues for the quarter. Operating income also saw record levels up by 14.2% to $22.9 million.

The flavors and fragrances segment also saw revenues go up by 7% to $221.2 million. Out of this, favorable foreign currency exchange added 3% to revenues for the quarter. Good performance in the U.S. flavor business can be attributed to the growth of revenues in this segment.

Spreading its wings and trimming the fat
Sensient also recently announced that it would acquire its joint venture partner's interest in Les Colorants Wackherr do Brazil. This company makes cosmetic ingredients for applications such as makeup and nail polish. The move would give Sensient a stronger presence in the South American market.

In order to improve efficiency and profitability, the company also plans to slash costs at some of its foreign divisions. This move is expected to attract a $4 million expense in the coming fourth quarter.

The Foolish bottom line
Sensient seems to be doing just fine for now. I feel that the company will be able to continue its satisfactory performance, if the economy does not experience further deterioration.

At the time this article was published Keki Fatakia does not hold shares in any of the companies mentioned in this article.Motley Fool newsletter serviceshave recommended buying shares of McCormick. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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