IFF's 4Q Beats Estimate - Analyst Blog

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International Flavors & Fragrances Inc. ( IFF ) reported its fourth quarter and fiscal year 2011 financial results on February 9, 2012. Adjusted earnings per share in the quarter increased 7% year over year to 74 cents compared with 69 cents in the year-ago quarter. Results in the reported quarter were three cents above the Zacks Consensus Estimate of 71 cents per share.

GAAP EPS, including an expense of 44 cents related to the previously announced patent litigation settlement and restructuring costs, in the quarter was 30 cents versus 68 cents in the year-ago quarter.

In FY11, adjusted EPS came in at $3.74, reflecting an increase of 11% year over year and a cent above the Zacks Consensus Estimate of $3.73.

Revenue

Net sales in the fourth quarter were $644.4 million, up 2% year over year and above the Zacks Consensus Estimate of $639 million. On a constant currency basis, revenue increased by 2% year over year. The increase in revenue was attributed to new business wins and higher sales volumes in all geographical regions. 

The company operates in two segments: Flavors and Fragrances.

Revenue from the Flavors business in the fourth quarter increased 8.0% year over year and organically to $322.7 million and accounted for 50.1% of total revenue. Revenue from the Fragrances business was roughly 49.9% of total revenue amounting to $321.6 million, down 3% year over year and organically. 

From a geographical perspective, revenue from North America increased 4% year over year, while results from EAME registered an escalation of 7%, or 2% on a constant currency basis. Revenue from Latin America increased 2% or 1% on a constant currency basis and from Greater Asia it soared by 10% or 6% on a constant currency basis. 

In FY11, total revenue increased 6% year over year to $2,788.0 million and surpassed the Zacks Consensus Estimate of $2,785 million.

Margins

Gross margin in the fourth quarter decreased by 210 basis points to 37.9% based on higher cost of sales. Research and development expense as a percentage of sales also decreased by 100 basis points to settle at 8.1% while selling and administrative expense increased by 320 basis points to 20.8%.

Adjusted operating margin in the quarter was 14.1% compared with 13.4% in the year-ago quarter. Interest expense plummeted 8.6% to $10.7 million in the quarter.

Balance Sheet

Exiting the fourth quarter, International Flavors & Fragrances had cash and cash equivalents of approximately $88.3 million, down from $107.3 million in the previous quarter. Long-term debt, net of current portions, was roughly $778.2 million versus $757.1 million in the previous quarter.

Cash Flow

Cash flow from operating activities in the fiscal year 2011 was $189.2 million versus $315.1 million in the previous year. Capital spending increased to $127.5 million versus $106.3 million in 2010.

During the year, the company paid dividends totaling $90.3 million and repaid long-term debt of roughly $123.7 million.

International Flavors & Fragrances is one of the leading companies engaged in the creation and manufacturing of fragrance and flavor products in the United States and internationally. We believe that the company's success will be driven by its substantial geographical presence and product mix.


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



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