International Flavors & Fragrances Inc.(IFF) reported encouraging results for the third quarter of fiscal 2011. Adjusted earnings per share in the quarter increased 2% year over year to $1.00 compared with 98 cents in the year-ago quarter. Results in the reported quarter, however, were 4 cents below the Zacks Consensus Estimate of $1.04 per share.
GAAP EPS, including restructuring expenses, in the quarter was $1.00 versus 95 cents in the year-ago quarter.
Revenue
Net sales in the third quarter were $713.8 million, up 6% year over year but below the Zacks Consensus Estimate of $722 million. On a constant currency basis, revenue increased by 1% 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 third quarter increased 13.0% year over year to $340.6 million and accounted for 47.7% of total revenue. Constant currency growth was 8% year over year. Revenue from the Fragrances business was roughly 52.3% of total revenue amounting to $373.2 million, flat year over year. On a constant currency basis, Fragrances business registered a 0.5% decline over the year-ago quarter.
From a geographical perspective, revenue from North America increased 3% year over year, while results from EAME registered an escalation of 8%, or a 2% decline on a constant currency basis. Revenue from Latin America increased 2% or was flat on a constant currency basis and from Greater Asia it soared by 17% or 10% on a constant currency.
Margins
Gross margin in the third quarter decreased by 330 basis points to 39.0% based on higher cost of sales. Research and development expense as a percentage of sales also decreased by 40 basis points to settle at 7.5% while selling and administrative expense decreased by 260 basis points to 13.6%.
Adjusted operating margin in the quarter was 17.9% compared with 18.3% in the year-ago quarter. Interest expense plummeted 16.0% to $10.3 million in the quarter. Tax rate in the quarter was 26.9% versus 27.4% in the third quarter of 2010.
Balance Sheet
Exiting the third quarter, International Flavors & Fragrances had cash and cash equivalents of approximately $107.3 million compared with $123.4 million in the previous quarter. Long-term debt, net of current portions, was roughly $757.1 million versus $767.4 million in the previous quarter.
Cash Flow
Cash flow from operating activities for the third quarter was $114.6 million versus $80.7 million in the year-ago quarter. Capital spending was $29.0 million compared with $16.6 million in year-ago quarter.
During the quarter, the company paid dividends totaling $21.8 million.
Outlook: For the fiscal year 2011, management looks forward to achieving the lower-end of its local currency sales growth target of 4%-6% and EPS growth of over 10%, based on year-to-date performance and a cautious fourth quarter outlook. However, the company expects to achieve its operating profit growth of over 7%-9%.
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.
INTL F & F (IFF): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment