Recently, we reiterated a Neutral recommendation on New
International Flavors & Fragrances Inc.
), one of the leading creators and manufacturers of fragrance and
AVON PRODS INC (AVP): Free Stock Analysis
INTL F & F (IFF): Free Stock Analysis
INTER PARFUMS (IPAR): Free Stock Analysis
NU SKIN ENTERP (NUS): Free Stock Analysis
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The recovering global economy, which in turn is boosting consumer
spending, is seen as a prime growth catalyst for the flavors and
fragrances industry. International Flavors & Fragrances is
making every effort to leverage benefits from the rising demand
for its products.
Also, the company is undertaking initiatives to improve its
profitability through enhancement of manufacturing efficiencies.
Year-to-date 2013, International Flavors & Fragrances
announced plans to close the Fragrances facility in Indonesia,
Flavors plant in Sweden and Augusta, and Georgia based Fragrances
Ingredients manufacturing facility. An exit from these
low-margin sales activities is likely to bear fruits for the
company, going forward.
Talking of innovations, the company's recent collaboration with
Amyris to develop and commercialize cost-effective Fragrance
Ingredients deserves special mention.
Further, International Flavors & Fragrances is strengthening
its footholds in emerging markets, which we see as an added
advantage for the company. In the first quarter of 2013, the
company's business in the emerging markets grew 9% and
represented nearly 50% of total sales versus 47% in year 2012.
We believe that new business wins, geographical diversifications,
wide product lines, continuous accomplishments in research and
intense consumer insight will be advantageous for the company,
going forward. Despite these compelling long-term growth
prospects, near-term headwinds surrounding International Flavors
& Fragrances force us to remain on the sidelines.
Risks arising from foreign currency translation can prove
detrimental to the company's overseas revenue generation. Also,
disruptions in the supply or quality of ingredients or rising
prices for ingredients purchased could reduce the company's
profitability. Gross margin in the first quarter 2013 was hit
hard by higher input costs while an impact on gross margins to
the extent of 400 basis points is expected, going forward.
Others Stocks to Consider
International Flavors & Fragrances currently has a Zacks Rank
#3 (Hold). Other stocks to watch out for in the industry are
Nu Skin Enterprises Inc.
) with a Zacks Rank #1 (Strong Buy) while
Avon Products Inc.
Inter Parfums Inc.
), each holds a Zacks Rank #2 (Buy).