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

November 04, 2010 | About:

International Flavors & Fragrances Inc. (NYSE:IFF) filed Quarterly Report for the period ended 2010-09-30.

International Flavors & Fragrances Inc. has a market cap of $4.03 billion; its shares were traded at around $50.72 with a P/E ratio of 16 and P/S ratio of 1.7. The dividend yield of International Flavors & Fragrances Inc. stocks is 2.2%. International Flavors & Fragrances Inc. had an annual average earning growth of 5.4% over the past 10 years. GuruFocus rated International Flavors & Fragrances Inc. the business predictability rank of 5-star.IFF is in the portfolios of Brian Rogers of T Rowe Price Equity Income Fund, Mario Gabelli of GAMCO Investors, Charles Brandes of Brandes Investment, Chuck Royce of Royce& Associates, Bruce Kovner of Caxton Associates, Bill Frels of Mairs & Power Inc. , Murray Stahl of Horizon Asset Management, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC, Manning & Napier Advisors, Inc.

Highlight of Business Operations:

Selling and administrative expenses (S&A), as a percentage of sales, decreased slightly to 16.2% versus 16.5% last year. Overall spending increased $8 million versus the prior year quarter, mainly driven by higher provisions for incentive compensation of $6 million; $4 million related to contingency provisions and fees, higher pension costs plus select investments and spending to support the higher level of business activity. These factors were partially offset by favorable foreign currency movements and the inclusion in the 2009 period of approximately $5 million of costs related to the change in CEO.

In the third quarter of 2010, interest expense totaled $12.2 million compared to $13.5 million in 2009. The reduction was due to debt repayments of more than $210 million made during the second half of 2009. Average cost of debt was 5.1% for the 2010 period compared to 4.6% in 2009.

In the third quarter 2010, Flavors operating profit totaled $63 million, or 21.0% as a percentage of sales, compared to $55 million or 20.0% in 2009. The improvement in profitability was mainly driven by strong sales growth and related absorption, favorable input costs, stronger sales mix and continuing margin improvement initiatives. These improvements were partially offset by higher incentive compensation costs and investments in business development.

Fragrance operating profit for the third quarter of 2010 was $69 million or 18.4% as a percentage of sales, compared to $47 million or 14.0% reported in 2009. The 2010 period included $2.4 million of restructuring related charges related to the rationalization of our European fragrance manufacturing footprint compared to $10.5 million in the third quarter of 2009. Excluding restructuring charges in each period, operating profit increased $13 million to $71 million (19.0% of sales) versus $58 million (17.1% of sales) during 2009. The improvement in profit was driven by higher volumes, ongoing profit improvement initiatives, good cost leverage on R&D and S&A expenses, favorable sales mix and favorable input costs. These improvements were partially offset by higher incentive compensation costs and inventory write-offs and transition costs associated with the rationalization of our Fragrance and Ingredients operations in Europe.

Global expenses represent corporate and headquarters-related expenses which include legal, finance, human resources and other administrative expenses that are not allocated to an individual business unit. In 2010, Global expenses for the third quarter were $11 million compared to $14 million during the third quarter of 2009. The decline reflects $5.4 million of costs associated with the change in CEO during the 2009 period partially offset by higher incentive compensation accruals and litigation related costs.

Read the The complete Report

About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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