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International Flavors & Fragrances Inc. Reports Operating Results (10-Q)

August 08, 2012 | About:
10qk

10qk

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International Flavors & Fragrances Inc. (IFF) filed Quarterly Report for the period ended 2012-06-30.

International Flavors & Fragrances Inc. has a market cap of $4.5 billion; its shares were traded at around $56.52 with a P/E ratio of 15 and P/S ratio of 1.6. The dividend yield of International Flavors & Fragrances Inc. stocks is 2.2%. International Flavors & Fragrances Inc. had an annual average earning growth of 6.5% over the past 10 years. GuruFocus rated International Flavors & Fragrances Inc. the business predictability rank of 2.5-star.

Highlight of Business Operations:

Operating profit increased $14.3 million to $132.3 million (18.3% of sales) in the 2012 second quarter compared to $118.0 million (16.5% of sales) in the comparable 2011 period. The three months ended June 30, 2011 included a restructuring charge of $4.0 million associated with a pension settlement with certain employees associated with the closure of our Drogheda facility in late 2010. Excluding the $4.0 million restructuring charge noted above, operating profit improved by 8% or $10.3 million as of June 30, 2012 compared to the prior year period. The year-over-year improvement in adjusted operating profit was driven by price realization, volume and mix improvements and manufacturing efficiency that more than offset the effects of increases in raw material costs (5%) and incentive compensation accruals.

Fragrances segment profit totaled $63.6 million in the second quarter of 2012, or 17.7% as a percentage of sales, compared to $62.3 million, or 16.8% as a percentage of sales, in the comparable 2011 period. The improvement in segment profit and operating margin was due to price realization and ongoing cost discipline, along with other profit improvement efforts, including the Strategic Initiative that was announced in early 2012, that more than offset increases in raw material costs.

The effective tax rate for the three months ended June 30, 2012 was 27.7% compared with 27.4% for the three months ended June 30, 2011. The 2011 second quarter included a $5.8 million write-off of deferred tax assets as a result of U.S. state law changes enacted during that quarter that was partially offset by several items, including provision adjustments on uncertain tax positions and a favorable mix in earnings and remittances. The 2012 second quarter includes a $4.7 million provision related to the second Spanish tax withholding cases and other provision adjustments on uncertain tax positions. The year-over-year increase also reflects the absence of an R&D tax credit in the U.S. during the second quarter of 2012.

Fragrances segment profit totaled $119.7 million in the first six months of 2012, or 16.6% as a percentage of sales, compared to $131.0 million, or 17.6% as a percentage of sales, in the comparable 2011 period. The decline in profit was driven by double-digit cost increases and lower sales volumes that were only partially offset by the realization of price increases and other margin improvement initiatives, including the Strategic Initiative that was announced in early 2012.

The effective tax rate for the six months ended June 30, 2012 was 27.2% compared with 27.3% for the six months ended June 30, 2011. The six-month period ended June 30, 2011 period included a $5.8 million write-off of deferred tax assets as a result of U.S. state law changes enacted during the second quarter of 2011 that was partially offset by several items, including adjustments on uncertain tax positions and a favorable mix in earnings and remittances. The six-month period ended June 30, 2012 period included a $10.6 million benefit due to a corporate restructuring of certain of our foreign subsidiaries that was offset by $12.9 million of provisions related to the Spanish tax withholding cases and other reserve adjustments on uncertain tax positions. The year-over-year decrease also reflects a lower cost of repatriation during the six months ended June 30, 2012. Additionally, the lack of an R&D credit for the six-month period ended June 30, 2012 negatively impacted the effective tax rate for the period then ended.

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