Q4 2020 Sensient Technologies Corp Earnings Call
Good morning, and welcome to the <unk> Technologies Corporation, 2024th quarter and year end earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.
I would now like to turn the conference over to Mr. Steve Roth. Please go ahead Sir.
Good morning, I'm, Steve Roberts, Senior Vice President and Chief Financial Officer of <unk> Technologies Corporation, I would like to welcome all of you to associates fourth quarter earnings call. I'm joined this morning by Paul Manning, <unk>, Chairman, President and Chief Executive Officer.
This morning, we released our 2024th quarter financial results a copy of the release and our Investor presentation is now available on our website at <unk> Dot com.
During our call today, we will reference certain non-GAAP financial measures, which we believe provide investors with additional information to evaluate the company's performance.
And improve the comparability of results between reporting periods. These non-GAAP financial results should not be considered in isolation from or as a substitute for financial information calculated in accordance with GAAP.
A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is available in our press release.
We encourage investors to review these reconciliations in connection with the comments we make this morning.
I would also like to remind everyone that comments made this morning, including responses to your questions.
It may include forward looking statements.
Our actual results may differ materially, particularly in view of the uncertainties created by the COVID-19 pandemic governmental attempts that remedial action and the timing of a return of more normal economic activity.
We urge you to read sense against previous SEC filings and our forthcoming 10-K for a description of additional factors that could potentially impact our financial results.
Please bear these factors in mind, when you analyze our comments today.
Now, we'll hear from Paul Manning Thanks, Steve.
Morning.
<unk> reported fourth quarter earnings this morning, and I'm very pleased to report that we delivered adjusted fourth quarter local currency revenue growth of seven 9% and adjusted local currency operating profit growth of 19, 2%.
We continue to have strong results from our flavors and extracts group, our food and pharmaceutical business in the color group.
And in our Asia Pacific Group.
Our results were at the top end of our EPS guidance for the year.
Overall, the company had a strong financial and operating performance in 2020.
Flavors and extract group had an outstanding year, achieving high single digit revenue growth and double digit profit growth.
Within the color group, the food and pharmaceutical business also had a strong year with mid single digit revenue growth and double digit operating profit growth in 2020.
The company's cash flow from operations increased over 23% and we reduced debt by over $90 million in 'twenty and 'twenty.
We completed two of our three divestitures and signed a purchase agreement for the third which we expect to close in the first half of 'twenty 'twenty one.
Our focus over the past years on customer service levels has been a significant factor for our strong revenue growth in 2020.
Our continued focus on sales execution, along with lower overall sales attrition across all three groups.
It's paying off and should continue to benefit future periods.
In addition, our focus on reducing fixed costs has also contributed to our overall profit improvement and strong operating leverage.
Flavors and extract group had a great year in 2020 and finished with a very strong fourth quarter.
With adjusted local currency revenue growth of 14% and adjusted local currency profit growth of 55 per cent.
The group's revenue and profit growth are driven by high sales win rate lower sales attrition.
Focus on sales execution.
Robust customer service and our continued transition to more value added product solutions.
The cost reduction initiatives from our earlier restructuring efforts along with our ongoing fixed cost takeout initiatives have also contributed to the overall profit and margin improvement.
Within the flavors and extract group the natural ingredients business had a strong year with double digit local currency sales growth.
Our natural ingredients business supplies, CPG food service and innovative food and spice companies around the world with the highest quality natural organic and value added ingredients.
This business continues to grow by leveraging its robust supply chain strong customer service model and focus on new product development.
The business is well positioned for further growth in the years to come.
Overall, the flavors and extract group's operating profit margin was up over 300 basis points in the quarter and 50 basis points for the year.
Over the long term I expect the flavors and extract group to deliver mid single digit revenue growth with continued operating profit margin improvement.
Within the color group revenue for food and pharmaceutical colors is up mid single digits for the quarter and year.
The group continues to see solid demand for natural colors, and functional extracts used in food nutraceutical and pharmaceutical OTC applications.
The growth on these areas as a result of our focus on clean label technologies innovated natural color solutions strong customer service and sales execution.
As a result of these efforts the business achieved a high win rate throughout 2020, which will continue to benefit 'twenty 'twenty, one and future years.
Also within the color group revenue in personal care continues to be down as a result of the negative impacts of COVID-19.
Overall, the demand for makeup and hair care products in North America, Europe, and Asia was down substantially in 2020.
Given the uncertainty with COVID-19, I anticipate continued strong headwinds for personal care at least through the first half of 'twenty 'twenty one.
Despite this impact we continue to make progress on our operational improvement plan, which is designed to consolidate some of our cosmetic manufacturing operations.
These actions will better align our cost structure in the personal care business for long term sustainable growth.
And continued strong operating leverage.
Long term for the color group I expect to I continue to expect mid single digit revenue growth from food and pharmaceutical colors, driven by new product launches and growth in natural colors and extracts.
Once the impacts of COVID-19, subside I expect mid single digit revenue growth from our personal care business. As a result of its strong technology platform and market trends toward natural products in skin hair and makeup.
Over the long term, we expect to maintain our EBIT margin at or above 20% for the color group.
Within our Asia Pacific Group, we are seeing high sales win rate as a result of the group's focus on sales execution and building a stronger customer service and technology driven organization.
The group's revenue continues to be negatively impacted in certain regions by COVID-19 restrictions.
However, as these restrictions begin to ease the group should resume mid to high single digit revenue growth.
Overall, the group's local currency adjusted revenue was up 3% for the year and local currency operating profit was up over 14 per cent for the year.
Yeah.
In summary, I expect flavors, and extracts Asia Pacific and our food and pharmaceutical businesses to each grow revenue at a mid single digit rate in 'twenty and 'twenty one.
Our personal care business will continue to face headwinds for at least the first half of 'twenty 'twenty one due to COVID-19.
Our operating profit margin within the color group continues to be around 20%, which is a good long term level for the group.
The operating profit margin for our flavors and extract group continues to grow and we expect a 50 to 100 basis point improvement in 2021.
Our balance sheet and cash flow are strong we've made good progress on reducing our inventory, which we reduced by more than 30 days in 2020.
There's still more opportunity to reduce our inventory further.
We continue to invest in good ROI capital projects, and we are evaluating sensible acquisition opportunities.
On an acquisition, we will continue to pay down debt and we have the option to buy back stock.
For the before I turn the call over to Steve I wanted to take a moment to recognize all of our employees who supported our success throughout 2020.
Our employees remain committed to keeping our plants open and delivering our products to our customers on time.
I'm very proud of the way that our employees adapted to a constantly changing environment tirelessly worked to ensure a safe and healthy workplace, all while supporting our essential mission to provide ingredients to the food pharmaceutical and personal care markets.
Steve will now provide you with additional details on the fourth quarter results.
Thank you Paul and my comments this morning, I will be explaining the differences between our GAAP results on our adjusted results. The adjusted results for 2020 in 2019 remove the impact of the divestiture related costs, the operations divested or to be divested the impact of the costs related to our operational improvement plan.
And a onetime COVID-19 related payment to our employees, we believe that the removal of these items provides a clearer picture to investors of the company's performance. This also reflects how management reviews, the companys operations and performance.
During the fourth quarter, the company's board of directors approved a onetime payment to our employees to recognize their commitment during the COVID-19, pandemic and the extra ordinary or an unforeseeable challenges associated with COVID-19.
The cost of this payment is approximately $3 million.
Our fourth quarter GAAP diluted earnings per share was <unk> 59.
Included in these results are $3 2 million or approximately 7% per share of costs related to the divestitures the cost of the operational improvement plan and the onetime COVID-19 payment in.
In addition, our GAAP earnings per share. This quarter include approximately six cents of earnings related to the results of the operations targeted for divestiture.
Which represents approximately $25 2 million of revenue in the quarter.
Last year's fourth quarter GAAP results include approximately one set of earnings per share from the operations to be divested and approximately $33 7 million of revenue.
Excluding these items consolidated adjusted revenue was $309 5 million an increase of approximately seven 9% in local currency compared to the fourth quarter of 2019.
This revenue growth was primarily a result of the flavors and extracts group, which was up approximately 14% in local currency.
Consolidated adjusted operating income increased 19% in local currency to $36 8 million in the fourth quarter of 2020.
This growth was led by the flavors and extracts group, which increased operating income by 54, 9% in local currency.
The Asia Pacific Group also had a nice growth in operating income in the quarter up seven 8% in local currency.
Operating income in the food and pharmaceutical business in the color group was up nearly 15% in local currency.
The increase in operating income in these businesses as a result of the volume growth Paul mentioned earlier combined with the overall lower cost structure across the company.
The overall impact of Covid on the Companys results has been a net negative.
The impact on our food and pharmaceutical businesses is mix, but as we have discussed the negative impact in our personal care business within the color group was significant in 2020.
Our adjusted local currency EBITDA increased 16, 9% in the quarter and three 2% for the full year of 2020.
Our cash flow from operations was extremely strong in 2020.
53% for the quarter and up 23% for the year due to our strong earnings growth and significant efforts to reduce our inventory levels.
Capital expenditures were $52 million for 2020, and our free cash flow increased 58% in the quarter and 21% for the year.
We have reduced debt by approximately $90 million since the beginning of the year our debt to adjusted EBITDA is now at two four down from two nine at the start of the year.
Now turning to 2021.
We expect GAAP EPS to be up mid to high single digits compared to our 2020 reported GAAP EPS of $2 59.
Our full year guidance for 2021 includes approximately 25% to 30.
Of divestiture related costs operational improvement plan costs, and the impact of the businesses to be divested.
On an adjusted basis, we expect our 2021 adjusted local currency EPS to be up mid single digits compared to our 2020 adjusted EPS of $2 79.
We also expect our adjusted local currency EBITDA to grow at a mid single digit rate in 2021.
Based on current tax law, we expect our tax rate to be in line with our rate in 2020.
Our reported results.
The impact of currency and based on current exchange rates, we expect our earnings to benefit by approximately 10.
Due to currency.
As we have discussed the impact of Covid on the company in 2020 was a net negative the impact on our food and beverage business was mixed as new product launches were low in the quick service restaurant market was negatively impact net.
Nevertheless, negatively impacted other areas such as savory products saw solid growth for.
More of the market decline in the makeup industry has significantly impacted the color groups personal care business and we expect this to continue into 2021.
The exact timing of a recovery for our personal care business from the impact of Covid is uncertain, but we could see year over year improvements starting in late second quarter.
In conclusion over the long term, we continue to expect revenue to grow at a mid single digit rate in each of our groups.
And our adjusted EBITDA to grow at a mid single digit rate or better in.
In terms of our capital allocation priorities, we will continue to pay down debt in the near term we.
We anticipate our capital expenditures to be in the range of $55 million to $65 million in 2021, we.
We also continue to evaluate acquisition opportunities and we have the ability to buy back stock.
We expect to complete the sale of our fragrance business and the operational improvement plan in the first half of 2021.
The completion of our divestitures and the operational improvement plan allows us to focus on our key customer markets on food pharmaceutical and personal care, while providing the foundation for future revenue and margin growth.
Thank you for your time. This morning, we will now open the call for your questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Yeah.
Our first question is from Heidi <unk> with Exane. Please go ahead.
Hi, good morning.
Follow up question on the strong growth in flavors clean.
On the 14% first of all could you. Please quantify how much was volume and price.
And then the second question on flavors, we know that you have big exposure to the U S markets and the U S market overall was very very strong last year.
Much of your growth do you think like Mark at current then and how much do you think was driven by the initiatives you outlined and.
You regaining customers that you had not.
And on that point on customer as you know is there for either can go on.
To regain the many customers who had previously disappointed.
Let's start with that.
Okay. So a couple a couple of comments and the U S.
So the U S market as we observed was it kind of went in cycles or ways. However, you want to describe it a lot of the volume growth, which certainly towards the first half of the year as consumers were stockpiling by the second half of the year a lot of that stockpiling had had receded.
I think that's one point number two product launches we are certainly down throughout 2020.
Really across the board in these categories now the product launches by our estimates we're down about 10% and just the raw number of product launches, but when you consider the value of those launches it was down quite a bit more than that in other words. It was a lot of smaller customers launching fewer launches from.
The bigger customers, meaning less value attainable.
For for suppliers.
So those are two factors I think that the reduction in launches. It was it was a second half factor I think the the volumes as I mentioned, we're really kind of were very heavy in the beginning and then were much lower towards the end of the year, but as you can see in our flavor group.
Our growth accelerated throughout the year and so I think it's fair to say that we grew well in excess of the market in <unk>.
Second half regardless of what we could believe that market rate today. It was probably in actuality about it <unk> to 5% volume growth in some of these segments other segments were quite a bit higher.
So our success was really kind of across the board in the U S. In each of our key segments.
The flavor group and certainly within the food colors and pharma group.
So we spent a lot of time focusing on our core customers are b and C customers and to your question about regaining them.
The restructuring has many many years gone now I think that debt, we are well past.
Those impacts I think really the success is built upon the new wins that we've generated our ability to hold onto the business that we have which was something that really hurt us.
Certainly back in 2019 and 2018.
So I think these are two very very key factors as you look at 2021, Theres certainly a lot of opportunity for us to continue to win to continue to maintain the business that we have.
We're in a part of the market that is very very aggressive about launching products to end consumers and so we like our chances. There. We think we compete very very effectively there.
With respect to your volume price for that.
I'll, let Steve take that sure. So the flavor growth was largely volume driven I would say price was about.
About 1% so most of the growth there was volume.
Thanks. So then if I could follow up on the you talked about product launches being down. So do you see that picking up and do you see innovation appetite picking off for a while.
Hey.
<unk> flavors.
Well one of the bellwethers, we use as our rate of sampling to customers. So interestingly enough. Our sampling was down probably 10% to 15% on average during 2020, consistent with about a 10% to 15% reduction in launches with our customers.
So as we look forward here I think are sampling would suggest that we believe a mid single digit revenue growth rate is achievable in 2021, I think the launches would be more of a back half factor than they would be in the first half factor.
That is absolutely true when you're thinking about our personal care business.
But EBIT in our food business I think there's definitely indications as we look at our pipeline that most of the launches of 2021, we would anticipate being more back heavy.
Second half type timing than first half timing.
That's using the sample bellwether certainly as we talk with our customers I think that would.
We would see.
We certainly see indications that AAV tremendous interest in our customers launching we have a lot of customers who have taken this opportunity during COVID-19 to really revitalize their product line.
Leaning up labels introducing more natural ingredients. So there was a lot of very good activity in 2020, I think for the long term of the of the market, but the real short answer here Hi. It is I would say second half in particular for personal care on launches.
Second half for food and beverage, but I would anticipate some incremental improvement here in the first half in food and beverage.
Thank you.
Again, if you have a question. Please press Star then one the next question is from Mark Connelly with Stephens Inc. Please go ahead.
Thank you a couple of things.
Mark back to the first half of last year.
Well really the second quarter when when you got hit hard in categories like ice cream and Candy and energy can you talk about how much recovery, you've actually seen in those particular categories.
Yeah, I would say that ice cream youre right. The first half of last year was pretty bad.
Particularly in Europe.
As the year progressed, the ice cream market improved in the Americas, but it continued to be.
Feeling a lot of headwinds in Europe much of that is driven occasion for us right. So a lot more ice cream is consumed outside the home and Europe than say the Americas market.
And so we saw that continue to be a big headwind in Europe, because folks aren't going out.
Kandy, you know I think in the traditional areas that we would play I highly colored highly flavored products I think that growth was pretty there there were a lot of headwinds there throughout 2020.
If anything maybe second half was a little less worse than first half, but I wouldn't say it was buy much there.
Definitely been improvements in chocolate, but we don't really play in that area because its not colored and it's it's not flavor would be on cocoa flavors and things that we don't necessarily.
Indulging on the energy side energy drinks, we saw pretty steady growth and stay pretty steady market really across the world from Asia to the Americas to Europe on energy drinks and that's certainly yet.
Debt that had a good year for us.
Okay. That's helpful and second question.
You've obviously made a lot of progress over the last couple of years on your manufacturing footprint, but in the last couple of quarters. There was some talk about maybe some more room to go there is that it can be a significant initiative or is that just sort of EBITDA margin.
No I would say it's at the margin I mean, our big work with the restructuring phase one and phase two many years ago, principally directed that flavors I think we've got the right footprint substantially.
That divestitures that you saw and we completed and in the.
For the last 12 months those we're certainly on top of that and certainly very much portfolio driven so I think in the wake of that where we are far more streamline organization food and beverage pharma along with personal care, it's a very very focused portfolio for us.
I like our footprint, but I'll tell you we're always looking at areas to enhance the business right, where we took out 30 days inventory actually I think there's like more like about 34 in 2020, there's still more for us to do where we're not a we're not by any means done with optimizing the organization from a manufacturing stand.
Point for an SG&A standpoint.
But yeah, there is no massive restructuring on contemplating.
But we're always looking to take out costs to optimize the organization.
To utilize technology to really.
Improving efficiencies around here, so still a lot of good opportunities there we got a big team working on that for us and so I think.
These are going to be very very helpful. As we continue to improve the operating profit margin in particular in flavors.
And if I could just slide in one more question Paul.
Wanted to lower customer attrition, you've obviously made some significant changes in the way you are.
Mark at your products is there more room to run there or have you hit your lower attrition targets.
Well, you always want attrition to be zero. So I suppose it's more of a philosophical target and are on a real target, but yeah. I mean, our attrition is substantially down and you know there's some of that attrition is natural customers they have a product they.
<unk> D listed they removed from the market. So that's kind of a natural thing that you would expect in the markets that we're serving which is to say then you got to win a lot of new projects to make up for the things that are being pulled from the market.
But there's other attrition attrition driven by providing poor service or letting your customer down in some other way and this is a part on particularly focused on and everybody out there and Cynthia knows I hate losing business and so we make a very strong point of.
Really blanketing, our customers with really good customer service, it's a very fundamental part of running any business, but I think it is often something that gets lost in the day to day activities and the other things that businesses may indulge in.
So no we're very very focused on that I think 2020 was a real banner year in terms of improving and reversing some of those trends you might've seen in say 18 and 19.
So I I like I like that and the last point on the attrition is there.
There are certainly more sophisticated products that we've been.
Focused on selling and our groups those tend to be far more defensible.
We tend to say sticky business that.
It represents a very good and technically sophisticated answer for a customer that perhaps other competitors don't have.
Or there would be tremendous risk in contemplating swapping those out. So those are some of the things we think about with respect to attrition, it's going to be an ongoing part of how we think commercially.
So yeah, I I like I'd like to get it down even lower if I could.
That's very helpful. Thank you.
The next question is a follow up from Heidi <unk> with Exane. Please go ahead.
Hi, again.
Our call Paul what is your outlook on raw material costs and pricing, please and specifically in natural ingredients I think last year, you had talked about on cost headwind for wanting to leave it there if we look at 2021.
And then the second question is on what is your exposure to the plant based trend please and perhaps if you could.
Give us some examples and peer exposure there and then lastly, you talked about.
Looking at sensible acquisitions, what sort of sensible acquisitions are you interested in green.
Okay. So I'm going to talk about I'll. So I'll start with your price raw material I have Steve speak more specifically about our F&I business, which I know folks can be interested in.
I think in general we don't see a tremendous amount of inflation on raw materials as we went into annual pricing discussions.
There are of course always some.
There were a couple of products that were somewhat problematic for us over the last year due to availability or or some other factors, but in general raw material inflation was was very very reasonable really across the board.
On an overall impact to us and so therefore.
The growth in 'twenty and 'twenty, one for us is going to be at more of a volume game than a pricing game certainly we may take some surgical pricing here and there, but it's not say a broad based initiative for us.
As a revenue contribution in 2021 so.
If I had to project I would say probably 80, 90% of our growth will come from volume and then the balance would come from price.
On your question about plant based.
Yeah, that's a real booming market right now lot of companies getting involved with that one.
It's a really good technical challenge and what's nice about it is that the most of the producers for these products. It's an open market. There are no such things as core listings on all these other constraints on trade that in my opinion, you see in other parts of the market.
This is a whoever has the best technical solution wins, so we like competing there we've actually done quite well there in particular with our natural color solutions.
So we like that market I think there's some real continued potential in that market for for a number of years to come.
But it's one that really requires a lot of the technology to get it right. Let me let me go back to that raw material went on on F&I, Steve If you Wanna say sure there so on F&I or Cynthia natural ingredients for everybody's benefit. This is a product line within the within the flavor and extract group.
Our dehydrated onion, garlic chili peppers, other types of products like that and.
Paul I had mentioned in his prepared comments that it's done very well this year on the top line.
So looking at the supply chain on the cost for that into next year.
For the crop look a little better other parts of the crop looks about the same so no.
No big change in the cost structure, there and I think we also.
I've gone out with pricing.
To recapture whatever we needed to so no big change on the cost front, there and we expect that product line to perform.
Well into 'twenty, one as it did in 'twenty.
And then your third question Heidi on on <unk>.
Sensible acquisitions so.
With a much more focused portfolio.
These are really portfolios. So we want to continue to invest in I would tell you that any one of our product lines could constitute good.
Avenues to acquire so whether we're talking about food colors pharmaceutical excipient personal care ingredients of which there are many.
Everything ranging from <unk> to surface treated pigments.
Any one of these things could potentially be in the mix for us.
And so it's an interesting market right I mean, there's a lot of startup companies out there there's a lot of more established companies out there.
And we insist on being able to acquire and earn a return for our shareholders and so when I say sensible.
I'm talking about our ability to implement.
To generate the returns that would be.
I think something in the interest of our shareholders and so maybe there are fewer of those but these things sort of tend to move in cycles.
And so we can be very very patient on some product segments, but I'm optimistic that there may be something kind of of interest.
In 2021.
But I would not anticipate you're going to see us make some sort of blockbuster acquisition. In 2021, I think we are we want to be very very prudent, but hey, you never know something bigger could come along too and so we're very very open to a lot of range a range of possibilities there, but we got to make sure we're <unk>.
<unk> and earning a return on that that acquisition.
Thank you.
Okay. Thanks.
Gives me. The next question is from Mitchell Ram go Paul with Sidoti. Please go ahead, yes.
Yes, hi, good morning, Thanks for taking the questions.
Firstly I just wanted to as you look back at 2020, and I know, it's a little subjective, but if you can give us a sense as what that's for what you think the impact of Covid was on in terms of the bottom line.
Well as Steve mentioned it was very much it was a net negative to the company.
Leading that net negative was clearly our personal care and more specifically our makeup portion of that business.
With people not going out it just took a real toll skull, where the food and beverage. It was also somewhat mixed right foodservice was hit very very hard on the first half less so in the second half, but still a headwind.
Kandi does a comment.
Mark mentioned, Ed asked earlier that was a problem that was a headwind ice cream was sort of a headwind, but then it wasn't.
And so it's a real mixed bag, but I would suppose in conclusion. It was very much a net negative for us.
Now what was a net positive for us as we really took this as an opportunity to invest in parts of our business.
It's a really really focus commercially on our customers and just to service the hell out of them and then I think we really accomplish that mission in a very meaningful way and I think that really was instrumental in helping us to win a lot of business.
In this market. So we were viewed as being very reliable.
And a lot of fronts, whether it's delivering samples are delivering shipments.
People knew it was open for business and we took our mission very very seriously. So I think that was certainly a benefit from COVID-19.
As we go into 'twenty. One you know I think everybody is optimistic that the second half is going to improve and we do see incremental improvements with.
With respect to product launches and customer activity.
So.
We're optimistic that we can achieve our mid single digit growth rate for the year.
Okay that sounds great and then.
It relates to the operating plant improvement it seems youre about halfway through that then.
I'm, assuming the guidance for this is also baking in some contribution from those.
Those initiatives.
Yeah. This is you know.
When you think about what we've done in the past. This is a fraction on the order of magnitude scale, which is to say, we're really talking about a couple of facilities.
Not not a huge economic impact from a charge off.
Most of that being non cash and so we're we're speaking in terms of millions rather than say tens of millions.
But no that those are progressing quite nicely.
We have a lot of experience borne of restructuring and so I feel very confident that we'll get that done and we will get that done correctly, but that will be really a kind of a first half event is where we will conduct a lot of that activity and then we should expect to see some of those benefits again fairly nominal benefits.
Second half of the year, and then probably more like 2022 is where youll see the full impact of that and that would be really in the color group and the personal care segment is where you'd see that.
Okay, no, thanks and well.
But the divestitures are coming to a close with one more to go I was just curious as you look at now with the revamped our product offering are you now.
If you're very comfortable with I know, you're always could add something here or there, but in terms of just the existing business. How comfortable are you with that going forward now in terms of being able to really go from nice growth.
I like it I like our odds there we've demonstrated a very nice track record and certainly our food colors, and I think personal care right before Covid, we had done quite well over the years. So I like our chances there great markets I think we are very strong.
The strategies there I think we have very good portfolios I think our innovation programs are really really good.
And we have great leaders.
And what drives a lot of the success around here as we insist on having leaders who are really smart and really tough and they operate with a high degree of integrity and we have that there.
And ditto for the flavors and extract group right same type of leaders in the same types of expectations and markets with really good underlying trends and growth.
Whether it's converting two extracts from a natural flavor.
Or having a much more desirable label for our customer a lot of great opportunities continue in my estimation in flavors and extracts for sure.
And then of course, our F&I business.
With trends towards more local production with trends towards real food.
I think it is also similarly, well suited to have a successful year and a successful future and and then again to the acquisition point, where we can layer on.
Fill a gap on the portfolio, maybe open up a market that we're not in that those could be real good reasons to to add something on top of that but the portfolio I think as.
Is really really strong it's really good.
You know the businesses that we sold.
As I said once before fundamentally good businesses, but unless you're willing to invest a lot more in them. They probably makes sense in the arms of a much larger organization that can.
Cultivate them in a way that either we couldn't or we were not interested in based on our preference for these other segments.
Okay. Thanks.
And then finally, if you can just.
Give some color on the you got some collaboration is that a way of really sort of having on them.
Our local partnership to gain more traction within the.
China market or is that you know.
On the platform to just expand globally still.
Well certainly it it goes a long way in China.
And it does this is a global partnership and so we see really good opportunities China's a very good cosmetic market for us.
And we're optimistic that that market fully recovers and we go back and resume our very strong and high growth rates.
And this partnership with yachts and I think as it is indicative of the types of things that we're working on with our customers and so on that case, a lot of co development and a lot of insight sharing and I think they recognize and we recognize a good collaboration potential to grow not only within the Asian market, but beyond.
So we're quite excited about that and and again I think we've got great opportunities.
In that cosmetic business in Asia Pacific for sure.
Okay. Thanks for taking the questions.
Okay. Thanks Mitra.
The next question is from David Green with Bolt Haven. Please go ahead.
Mr. Green. Your line is open on all right, Paul Hi, Hi, Amy sure that Hello, David Hello, Dave.
Can you hear me, yes, sure Hey, How're you doing.
We are.
Having the right day was five degrees Fahrenheit I hope you're well.
Yeah.
Yes, we are aware of we'd be we'd be tuned on zero here.
Oh.
A couple of quick questions. Please.
When you when you talk about sales execution, what does that actually mean in practice and what are you actually doing better here.
Just on the flavors business specifically.
Obviously very very strong are there any specific end markets that are driving that.
And then two final questions. If I may one is.
Net promotes of school I don't know if that's an internal benchmark that you have on whether you could give us some color on it.
And finally, just that seems to be a trend in the industry.
Towards a full service end to end offering I'm just wanted to get your thoughts on that on how well placed.
You all.
Okay. So on the first one on sales execution, what does that mean, it's a good question right because it sounds very very simple and in principle on concept. It is it's about the basics of being very very responsive to your customer.
A good understanding of what his or her expectations are versus what you're willing to do a lot of the the distinctions are the problem with customer interactions as the expectations are very very different.
Some customers may be expecting these eight things you're only willing to give them three.
Others expect to and you give them eight and so I think it's a lot about gaining alignment between you and the customer and so a lot of our commercial strategy has been built around you got to pick the right customers and you've got to pick the ones, where we can successfully compete and we can successfully deliver things that make them better and help them make.
Money and so I think our focus on serving our customers.
And making their lives better making their business better, making helping them make more money. That's how we think about sales and so then it manifests itself obviously in a very close contact and very good focus on the fundamentals of selling very close management and collaboration with our salespeople and fundamentally good support.
<unk>.
I want our salespeople.
To get as much bonuses, they possibly can.
And so in order to do that they have to execute on their job, but the organization is to support very strongly what theyre doing as well and so these are our cultural aspects of our business that I think are continue to improve.
But like everything around here, we got a lot of areas. We want to continue to work on and get better at and that is certainly no exception.
Your second question.
I I think I heard you say net promoter score, which I and I don't know what that is what what does that mean David.
But it's it's basically.
Our school well.
Where do you generally at school that your customers are giving you in terms of the feedback.
How well your thing, but not I guess not all companies will have it but it's.
Yeah, and we don't and there's no debt that I'm aware of no necessarily.
Indisputable benchmark for the markets that we're serving in on that metric.
So yes, we do to answer the question more conceptually, we do take and asked for a lot of feedback from our customers and we do ask them to compare us with others.
But I don't have that quantified in this net promoter score matrix, but it sounds kind of interesting I'll take a look at that.
On your third one, though the full service and I think some folks who describe this as integrated selling.
We're offering a basket of goods or being a one stop shop or any one of those descriptions.
In my estimation and I think the opinion on most folks in this company that is something that is dependent on the customer I don't believe that that is a broad based approach.
Because at the end of the day, you got to ask yourself, what does the customer get from that Yeah, you may get something for that but what is your customer again why does he care and a lot of times. They don't in fact, they don't want it at all they they want you to deal with them independently depending on the ingredient, but in other cases, it could be quite helpful and and helpful to the customer.
So we tend to take a rather surgical view.
Or at least surgical execution of that concept in the market and I think that's the right way to approach it.
And then our policies on the.
Any specific end markets driving the flavors business.
Oh, Yeah, I'm, sorry, yeah, I think that the the growth was pretty broad based.
Despite even some of the headwinds that you heard me describe I mean, certainly we did quite well in savory.
Our sweetened beverage business, our F&I business each of these businesses perform very very well.
And for a lot of the reasons, we talked about now there were headwinds foodservice is a big headwind in a number of our businesses.
As was the ones that I mentioned before candy and ice cream certain beverages, where as well.
Hit pretty hard during the pandemic gum really was wiped out.
And a lot of ways and a lot of markets it was down 30% 40%.
So the growth that we experienced was really acquisition of a lot of new customers.
Growing with the B and C customers that continue to launch products and then again focusing on our service model, which I think enabled us to really.
To win a lot of business across the really across each of these segments and I would say these are not just commented for the Americas. They these are comments that I think are applicable in Europe.
And in Asia as well.
Hmm.
I'm sorry, one one quick one on them.
So if we take the <unk>.
The end markets, where there was more of a headwind. So Q I saw can be gum as well that you mentioned, how much would they be as a percentage of flavors in terms of end market.
I guess small enough that we could overcome them in in some of these markets I don't have that specific breakdown in front of me but.
There was a lot on there was a lot of headwinds in some of these markets there were tailwind than others and our distribution worked in our favor I suppose is the conclusion that we would we would offer.
Okay.
Great. Many thanks, Okay. Thanks, David.
There are no further questions at this time I will turn the conference back to the company for any closing remarks.
Okay. Thank you everyone for your time. This morning that will include that will conclude our call and thank you again for tuning in to hear about the results.
The conference has concluded you may now disconnect.
Okay.
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