MILWAUKEE — The uncertainty of the coronavirus (COVID-19) could affect new product development projects of food and beverage companies, which in turn could affect Sensient Technologies Corp., a supplier of colors and flavors to such companies.

“Governments are imposing varying degrees of restrictions, sometimes changing them abruptly, which is creating uncertainty for businesses,” said Paul Manning, president and chief executive officer of Sensient Technologies Corp., in an April 29 earnings call to discuss first-quarter results. “Our customers are responding to these changes in various ways. Certain customers are deferring innovation and new product development while others are trying to adapt to keep projects alive.

“While we see an increase in demand in certain product categories in the food and beverage and personal care markets, we are seeing a lower demand in other categories, such as makeup, ice cream, confectionery and energy drinks.”

COVID-19’s impact varies depending on sales channel, geographic region and product line, he said.

“For example, orders increased in packaged food,” Mr. Manning said. “However, orders were substantially down for restaurant and quick-service sales channels. We see that trend continuing in the second quarter and possibly beyond, until the economies of the world return to a more normal rate of activity.”

Consumer demand is changing, he said.

“There may be more of a greater focus on buying local and a heightened emphasis on healthy products,” Mr. Manning said. “I am confident that our products can support this changing demand.”

Interest has increased for probiotics, which benefits the company’s bio-nutrients business that provides many of the protein sources that feed probiotic-style bacterial strains, Mr. Manning said.

Milwaukee-based Sensient Technologies Corp. posted net earnings of $20.8 million, or 49¢ per share on the common stock, in the first quarter ended March 31, which were down 37% from $32.8 million, or 78¢ per share, in the previous year’s first quarter. Revenue of $350.7 million was up 0.9% from $347.5 million in the previous year’s first quarter. Operating income of $34.6 million compared with $49.4 million. Foreign currency translation decreased revenues and operating income by 2%.

“We continue to expect profit improvement in both flavors and colors as the year progresses,” Mr. Manning said. “Despite COVID-19, we believe we are on track with our plan and outlook for the year.”

In the Color segment, operating income of $29.7 million was down 1.8% from $30.2 million in the previous year’s first quarter. Revenue of $143.5 million was down 0.3% from $143.9 million in the previous year’s first quarter. Lower volumes in inks and in the personal care business offset growth in the food and beverage colors business and in the pharmaceutical business.

“The divestitures of our three product lines — fragrances, inks and fruit prep for yogurt — are all progressing,” Mr. Manning said. “Each of these divestitures are in varying stages, and given the travel restrictions with COVID-19, the timing of each closure is uncertain. We will continue to push ahead to execute these as quickly as circumstances allow.”

In the Flavors & Fragrances segment, operating income was $20.9 million in the quarter, down 10% from $23.1 million. The decrease primarily was because of higher raw material costs, mainly in natural ingredients; the timing of cost reductions relative to lower production volumes; and the timing of inventory reductions. Revenue rose 1.6% to $186.5 million from $183.6 million behind natural ingredients growth and increases in finished flavors and extracts product lines.

Mr. Manning said COVID-19’s negative impact on quick-service restaurants will be a headwind for Sensient.

“But traditional sit-down restaurants, that doesn’t necessarily impact our business strategy,” Mr. Manning said. “Most of our products are not going into that type of restaurant establishment.”

In Asia Pacific, operating income in the quarter increased 20% to $5.1 million from $4.2 million. Revenue rose 7% to $30.4 million from $28.5 million. Orders for colors, flavors and cosmetics in China began coming back strongly in the last couple of weeks in March and into April, Mr. Manning said.

“So if China and the Far East is any indication, or at least a good data point for us, hopefully, we could see that type of trend emerging in the Americas, Europe and the Middle East,” he said. “So I'm optimistic that could happen, but I'm also cautious that there may be some brands out there that want to just kind of circle the wagons and perhaps focus on their core products, which may not be promoting as much of the health trend.”

Mr. Manning said globally all of Sensient Technologies Corp.’s production facilities are open and operating. Staffing and attendance at the facilities are at 95%.

“Our on-time delivery continues to be high at nearly 95%, as our supply chain teams are continually monitoring raw material supply base, increasing safety stock in certain areas and working to ensure raw materials are delivered to our facilities despite transportation and shipping challenges,” he said.

Sensient Technologies Corp. has adequate liquidity to meet operating and financial needs through its cash flow and available credit lines, said Stephen J. Rolfs, senior vice president and chief financial officer.

“At the end of the first quarter, we have over $250 million of unutilized capacity on our committed credit lines,” he said. “In addition, we do not have any maturities on our private placement notes until 2022. We have stress tested our credit facility covenant ratios, and we expect to be within our required covenant limits for 2020, with a goal to continue to reduce our leverage ratio as the year progresses.”