Sensient Technologies (SSF) Risk Analysis
Risk Overview Q2, 2020
Source: the company's latest filing for the period ended Jun 30, 2020, filed Aug 06, 2020
Risk Change Over Time
No filing history is available.
- Corporate Activity and Growth - Risk 1We are exposed to risks associated with our divestitures, which may impact our ability to fully realize the anticipated benefits of those transactions and could result in expenses and charges that are greater than we currently anticipate.
We have previously announced our intent to divest certain product lines. We have now completed the divestiture of our inks product line. If the fragrances (excluding the essential oils product line) and yogurt fruit preparations product lines are not sold in a timely manner, whether delayed by COVID-19 or otherwise, our profitability could be adversely impacted and management could be distracted from the core remaining businesses of the Company. We could also incur expenses with these divestitures and additional charges that are greater than we currently anticipate. Additionally, as part of our divestiture of certain fragrance product lines, we are moving our essential oils manufacturing capability to another facility of the Company. Any such move is inherently risky and could result in production delays and disruptions, which could in turn adversely impact our current and future ability to sell to customers. Divestitures also contain inherent risks that may impact our ability to fully realize the benefits of such divestiture, including possible delays in closing and potential post-closing claims for indemnification. If any of these risks materialize, the benefits of such divestitures may not be fully realized, if at all, and our business, financial condition, and results of operations could be negatively impacted. Additionally, in connection with the divestiture of our fragrances product line, a potential buyer notified us that environmental sampling conducted at our Granada, Spain, location identified the presence of contaminants in soil and groundwater in certain areas of the property. Environmental regulations, and the potential failure to comply with them, can have serious consequences, including the costs of compliance, defense, and remediation; interference with our operations or the ability to obtain required permits; civil, criminal, and administrative penalties; and negative publicity. The amount and timing of potential environmental remediation costs and complying with environmental laws associated with our Granada, Spain, location is currently estimated to be $0.8 million; however, the actual final costs may be greater than our estimates and could be material.
Risk Highlights Q2, 2020
Risk Factors Full Breakdown - Total Risks 18
- Debt & Financing - Risk 1Changes to LIBOR may negatively impact us.
LIBOR, the London interbank offered rate, is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. We have used LIBOR as a reference rate in our revolving loans, term loans, asset securitization program, and uncommitted credit facilities such that the interest due to our creditors pursuant to these loans is calculated using LIBOR. LIBOR, in its current form, is currently scheduled to disappear in 2021. Before LIBOR ceases to exist, we may need to renegotiate our credit agreements that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with a new standard, which has yet to be established. The consequences of these developments still cannot be entirely predicted, but could result in an increase in the cost of our variable rate debt, which references LIBOR, as a result of applicable margin or reference rate increases. As of December 31, 2019, 25% of our total debt referenced LIBOR. While our policy is to manage our interest rate risk by entering into both fixed and variable rate debt arrangements, we cannot provide assurance that future interest rate changes will not have a material negative impact on our business, financial position, or operating results. The Company hedges certain foreign currencies using forward contracts which are typically less than fifteen months in length. Certain forward contracts utilize LIBOR as a basis for forward point calculations and may be subject to adjustments when LIBOR ceases to exist. We do not anticipate material impacts as a result of the LIBOR transition on our contracts due to the tenor; however, cannot provide assurance that a transitional rate will be established for the settlement of outstanding contracts when LIBOR ceases to exist.
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