IFF Beats on Q3 Earnings, Lags Revs - Analyst Blog


International Flavors & Fragrances Inc. ( IFF ) reported third-quarter 2013 adjusted earnings per share of $1.22, up 13.0% from the year-ago earnings of $1.08. Results were 4 cents above the Zacks Consensus Estimate of $1.18.

Including one-time items, the company reported GAAP earnings per share of $1.20, up from 20 cents in the year-ago quarter.


International Flavors & Fragrances generated net sales of $742.3 million in the reported quarter, a 4.7% year-over-year growth driven by increased demand in emerging markets. However, revenues marginally missed the Zacks Consensus Estimate of $744.0 million. On a constant currency basis, revenues inched up 4% year over year.

By segments, in third-quarter 2013, revenues from the Flavors business increased 3% year over year to $349.4 million and accounted for 47% of total revenue. Revenues from the Fragrances business were roughly 53.0% of total revenue amounting to $392.9 million, up 7% year over year.

On a geographical basis, revenues from North America were flat year over year, while results from Europe, Africa and Middle East (EAME) rose 7% (up 3% on a constant currency basis). Revenues from Latin America increased 6% (up 8%) and Greater Asia revenues were up 6% (up 8%).


International Flavors & Fragrances' gross profit margin in the third quarter increased 131 basis points (bps) to 43.8% based on new strategies, favorable volume, sales mix and raw material costs. Research and development (R&D) expense, as a percentage of sales, expanded 72 bps to settle at 8.9%. Selling and administrative expense, as a percentage of sales, increased 46 bps to 15.9%.

Adjusted operating margin in the quarter was 19.4% compared with 18.9% in the year-ago quarter. Interest expense shot up 17.3% to $11.6 million in the quarter.

Balance Sheet

Exiting the third quarter of 2013, International Flavors & Fragrances' cash and cash equivalents stood at $343.1 million, down 6.2% from $365.9 million in the previous quarter. Long-term debt increased marginally to $933.5 million compared with the previous quarter.

Cash Flow

In the nine months ended Sep 30, 2013, the company generated cash from operating activities of $257.3 million, up from $137.6 million in the year-ago comparable period. Capital spending also widened and totaled $86.4 million in the first nine months of 2013 versus $84.2 million in the prior-year period.

Going forward, the company expects to witness moderate year-over-year growth in the fourth quarter of 2013. Continued investments in R&D are expected to boost margins in the coming quarters.

International Flavors & Fragrances is one of the leading companies engaged in the creation and manufacture of fragrance and flavoring products in the United States and internationally. The company currently has a $6.8 billion market capitalization.

The stock currently carries a Zacks Rank #4 (Sell). Other stocks to watch out for in the industry include Ecolab Inc. ( ECL ), Ferro Corporation ( FOE ) and HB Fuller Co. ( FUL ). All of these stocks carry a Zacks Rank #2 (Buy).

ECOLAB INC (ECL): Free Stock Analysis Report

FERRO CORP (FOE): Free Stock Analysis Report

FULLER(HB) CO (FUL): Free Stock Analysis Report

INTL F & F (IFF): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ECL , FOE , FUL , IFF



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