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

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Nov 08, 2011
International Flavors & Fragrances Inc. (IFF, Financial) filed Quarterly Report for the period ended 2011-09-30.

International Flavors & Fragrances Inc. has a market cap of $4.96 billion; its shares were traded at around $61.31 with a P/E ratio of 16.7 and P/S ratio of 1.9. The dividend yield of International Flavors & Fragrances Inc. stocks is 2%. International Flavors & Fragrances Inc. had an annual average earning growth of 5% over the past 10 years. GuruFocus rated International Flavors & Fragrances Inc. the business predictability rank of 4-star.

Highlight of Business Operations:

Fragrance operating profit for the third quarter of 2011 was $59 million, or 15.9% as a percentage of sales, a 14% decrease from $69 million, or 18.4% as a percentage of sales in 2010. The 2011 and 2010 periods included $0.6 million of income from the reversal of prior provisions and $2.4 million of expense, respectively, pertaining to restructuring expense associated with the rationalization of our European fragrance manufacturing footprint. Excluding these restructuring charges from each period, operating profit decreased $12 million to $59 million (15.7% of sales) in 2011 versus $71 million (19.0% of sales) during 2010. The decline in operating profit was driven by higher raw material costs and lower sales volume in existing business that more than offset the realization of price increases, benefits associated with the European rationalization, other profit improvement initiatives and lower incentive compensation expenses. Operating margin also benefited from favorable foreign currency exchange rate movements of 50 bps.

The Fragrances business experienced a 3% increase in reported sales and was flat in LC terms compared to 18% LC sales growth during the comparable 2010 period. Continued gains in new business performance with our customers combined with the realization of price increases effectively offset lower volumes on existing business. Year-over-year LC sales performance was led by double-digit growth in Home Care along with low single-digit gains in Fine & Beauty Care and Fabric Care categories. Offsetting these gains was a 6% decline in Ingredients compared to a 21% increase during the 2010 period. LC growth within the regions was led by GA at 3%, mainly due to new

In the first nine months of 2011, Flavors operating profit totaled $221 million, or 21.6% as a percentage of sales, an increase of 17% compared to $189 million or 20.9% as a percentage of sales in the comparable 2010 period. The improvement in profitability was mainly driven by strong sales growth and increased operating leverage, the realization of price increases and margin improvement initiatives that more than offset the effects of higher raw material costs and less favorable sales mix.

Fragrance operating profit for the first nine months of 2011 was $186 million or 16.6% as a percentage of sales, a decrease of 2% compared to $190 million or 17.5% as a percentage of sales reported in 2010. The 2010 period included $9 million of restructuring related charges as compared to $3 million in 2011 related to the rationalization of our European fragrance manufacturing footprint. Excluding restructuring charges in the first nine months of each period, operating profit decreased $9 million to $190 million (16.9% of sales) versus $199 million (18.3% of sales) during 2010. The decline in profit was driven by sharply higher input costs and weaker sales mix that could only be partially offset by the realization of price increases, the benefits of the European restructuring, other margin improvement initiatives, and lower incentive compensation.

Working capital of $808 million at September 30, 2011 increased $144 million compared to $664 million at December 31, 2010. Additions to property, plant and equipment for the nine month period ended September 30, 2011 totaled $75 million versus $54 million in the prior year period. The increase in additions versus last year reflects planned investments in capacity and new technologies, mainly in the emerging markets. Gross additions to property, plant and equipment are expected to approximate 5% of sales for the full year 2011.

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