International Flavors & Fragrances Inc. (IFF) acquired privately-held Aromor Flavors and Fragrances Ltd., the financial terms of which were not disclosed. The acquisition has been funded wholly by the company’s existing resources.
Israel-based Aromor is a specialist in producing and selling complex specialty ingredients used especially in the perfume, cosmetics and food industries. Founded in 1982, the company had roughly 90 employees.
The acquired assets of Aromor Flavors and Fragrances will be integrated into the company’s Fragrances Ingredients business. Also, Aromor has an estimated $35 million revenue generation capacity and is expected to be accretive to International Flavors & Fragrances’ 2014 earnings per share.
We believe the acquisition is consistent with International Flavors & Fragrances’ expansionary policy. The company has long been investing in acquisitions to gain access to new customers, regions or technologies. A diverse portfolio and product mix along with new business wins should help the company deliver solid results in the quarters ahead.
Over the long term, International Flavors & Fragrances hopes to achieve around 4%–6% local currency sales growth and over 10% earnings per share growth. Sales growth at Flavors and Fragrances is anticipated to be 2%–3% above industry growth. Emphasis will be given on capital spending over the years to seize upon opportunities in the emerging markets. As a percentage of sales, capital spending is anticipated to be roughly 4%–5% in 2013-2015 and roughly 3% in 2016-2018.
The Zacks Consensus Estimate for International Flavors & Fragrances is currently pegged at $4.46 and $4.90 for 2013 and 2014, respectively. These consensus estimates represent year-over-year growth of 12.1% in 2013 and 9.8% in 2014. In the next five years, earnings are estimated to grow 8.5%.
International Flavors & Fragrances currently has a market capitalization of $7.1 billion and carries a Zacks Rank #3 (Hold). Some better-ranked companies in the industry include Chemtura Corporation (CHMT), HB Fuller Co. (FUL) and Globe Specialty Metals, Inc. (GSM). All these companies carry a Zacks Rank #2 (Buy).
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