Sensient Technologies (NYSE:SXT) executives told investors the company delivered higher revenue and profit in 2025 on a local-currency basis, while acknowledging that tariff-related supply chain disruptions and unusual weather events weighed on fourth-quarter results in certain businesses.
2025 performance and fourth-quarter headwinds
Chairman, President and CEO Paul Manning said Sensient posted 3% local-currency revenue growth in 2025 alongside 10% local-currency Adjusted EBITDA growth and 15% local-currency adjusted EPS growth. Manning added that each operating group generated adjusted local-currency operating profit growth during the year and improved EBITDA margins, contributing to a 100-basis-point improvement in the company’s overall adjusted EBITDA margin.
Natural color conversion: “single largest opportunity”
Manning reiterated that conversion from synthetic to natural colors represents “the single largest opportunity in the company’s history.” He said the industry push remains active in the U.S., Canada, and parts of Latin America, and he emphasized that Sensient has invested for years in natural color technologies, production capacity, quality systems, supply chain capability, and commercial resources to compete for the opportunity.
In the Q&A, Manning said Sensient invoiced “on the order of about $5 million” tied to conversions during the third and fourth quarters of 2025, describing the impact as modest so far. He expects some conversions in the first half of 2026, with an acceleration in the second half as customer timelines approach. He also described the conversion process as complex, often requiring extensive formulation work, potential consumer testing, stability testing that can take six to 12 months, and packaging updates that can also take six to 12 months.
Asked about FDA guidance related to “no artificial color” labeling, Manning said he did not believe it would materially change conversion timing, though it could provide clarity in some cases. He also said he has not seen customer wavering tied to potential delays in West Virginia legislation, arguing the trend is increasingly driven by consumer expectations. Manning cited public brand commitments reflected on FDA materials and pointed to statements that some companies are targeting a January 1, 2028 deadline, while noting Walmart had indicated interest in moving sooner.
Segment results: Color strength, Flavors weather impacts, Asia tariff disruptions
- Color Group: 2025 local-currency revenue rose 7.4% and local-currency operating profit increased 16.9%. Adjusted EBITDA margin improved to 23.7% from 22.1%. In the fourth quarter, the group delivered 7% local-currency revenue growth, record new sales wins, and 7.2% adjusted local-currency operating profit growth. Manning said profit leverage will be challenged near term due to investments intended to support a $1 billion sales goal tied to natural colors.
- Flavors & Extracts Group: 2025 local-currency revenue declined 1.3%, while local-currency operating profit rose 3.4%. Adjusted EBITDA margin increased to 16.7%. In the fourth quarter, local-currency revenue fell 2.4% and adjusted local-currency operating profit declined 11.6%, which management attributed largely to severe rains in California that disrupted agricultural ingredient harvesting. Manning said the disruption contributed to a one-time inventory loss of about $3 million in the quarter. He also noted the agricultural ingredients business faced lower volumes and higher crop costs through 2025, but said the business reached an “inflection point” and the company expects a “much improved” agricultural-ingredients top line in 2026.
- Asia Pacific Group: 2025 local-currency revenue grew 2.4% and adjusted local-currency operating profit rose 3.8%. Fourth-quarter local-currency revenue declined 1.9% and local-currency operating profit was flat, primarily due to tariff-driven supply chain disruptions. Fourth-quarter adjusted EBITDA margin was 22.6%, up 90 basis points year over year. Management said it expects a bounce back to be “heavily weighted” toward the back half of 2026, with flat revenue anticipated in the first quarter of 2026 versus the prior-year period.
Financial details, cash flow and balance sheet
CFO Tobin Tornehl reported fourth-quarter 2025 revenue of $393.4 million, up from $376.4 million a year earlier. Operating income was $38.2 million, down from $42.0 million, and included $6.3 million of Portfolio Optimization Plan costs (about $0.12 per share). Excluding those costs, adjusted operating income was $44.5 million, compared with $42.9 million in the prior-year quarter; in local currency, adjusted operating income was flat. Fourth-quarter interest expense rose to $7.5 million from $6.4 million, and the consolidated adjusted tax rate was 17.1% versus 24.9% in the year-ago quarter.
Cash flow from operations in the fourth quarter was $45 million, up from $21 million a year earlier. Capital expenditures were $32 million in the quarter and $89 million for the full year. Net debt to adjusted EBIT stood at 2.3x as of Dec. 31, 2025.
2026 outlook: growth expected to accelerate in the second half
Management guided for consolidated 2026 local-currency revenue growth of mid-single-digit to double-digit, with faster growth expected in the second half. The company also expects local-currency adjusted EBITDA growth in the mid-single-digit to double-digit range and local-currency adjusted EPS growth of mid- to high-single digits, with stronger performance anticipated later in the year as natural color conversion revenue increases, particularly in the third and fourth quarters.
On investment, Sensient plans consolidated capital expenditures of $150 million to $170 million in 2026 and said it expects to be “north of $125 million” again in 2027. Management said natural color conversion-related capex is expected to total $225 million to $250 million between 2025 and 2028. The company said it will evaluate acquisition opportunities but does not anticipate share buybacks in 2026, and it expects debt to rise due to capex and working capital needs, with 2026 interest expense guided to about $36 million and an expected tax rate of about 25%.
Manning also discussed near-term margin dynamics in Color, suggesting investments could pressure EBITDA margin in the first half, while he expects leverage to rebuild as conversions scale. He said the company is investing in technical resources, commercial capacity, and accelerated R&D to avoid being late to customers’ conversion schedules.
About Sensient Technologies (NYSE:SXT)
Sensient Technologies Corporation is a global leader in the manufacture and supply of colors, flavors and fragrances for a broad range of end-markets. The company develops and produces ingredients that enhance the appearance, taste and scent of products in the food, beverage, nutraceutical, pharmaceutical, personal care and household sectors. Its portfolio includes natural and synthetic colorants, botanical and artificial flavor systems, fragrance compounds and specialty chemical offerings tailored to customer specifications.
Within its flavor and fragrance division, Sensient provides custom formulations for sweet, savory and umami taste profiles along with fragrance blends for personal care and cosmetic applications.
