International Flavors & Fragrances Inc’s (IFF) adjusted earnings came in at $1.37 per share in second-quarter 2014, reflecting an increase of 20.2% from $1.14 earned in the year-ago quarter. The bottom-line result surpassed the Zacks Consensus Estimate of $1.35 per share.
Including one-time items, the company reported Generally Accepted Accounting Principles (GAAP) earnings of $1.35 per share, up 8.9% year over year.
Revenues
International Flavors & Fragrances generated net revenues of $788.4 million, up 4.1% year over year, but below the Zacks Consensus Estimate of $795.0 million. On a constant currency basis, revenues climbed 4% year over year.
The company operates in two segments: Flavors and Fragrances.
Revenues from the Flavors business grew marginally by 0.4% year over year to $375.5 million, accounting for 47.6% of total revenue. On a constant currency basis, revenues increased 1% year over year.
The Fragrances business, comprising 52.4% of total revenue, generated $412.9 million revenues, up 7.6% year over year. On a constant currency basis, revenues rose 6% year over year.
From a geographical perspective, International Flavors & Fragrances' revenues from North America inched up 1% year over year; while revenues from Europe, Africa and the Middle East (EAME) were up 7% year over year or 2% on a constant currency basis. Revenue from Latin American operations increased 4% year over year or 7% on a constant currency basis; while from Greater Asia, revenue was up 3% year over year or 6% on a constant currency basis.
Margins
International Flavors & Fragrances’ adjusted gross margin was 45.1%, up 90 basis points (bps) year over year on the back of new business wins, effective product mix, innovations and cost reductions. Research and development expense, as a percentage of sales, was at 8.4%, down 10 bps year over year, while selling and administrative expenses increased by 40 bps to 16.9%.
Adjusted operating margin was 19.8% versus 19.2% in the year-ago quarter. Interest expense came down by 11.3% to $11.4 million.
Balance Sheet
Exiting second-quarter 2014, International Flavors & Fragrances’ cash and cash equivalents were $326.9 million, up 21.7% from $268.6 million in the preceding quarter. Long-term debt inched up 0.11% sequentially at $932.6 million.
Cash Flow
International Flavors & Fragrances generated cash of $154.0 million from its operating activities in the first-half 2014 as compared with $118.0 million in the year-ago comparable period. Capital spending was $60.2 million, relatively flat year over year.
Cash dividends paid totalled $63.4 million in the first half of 2014, significantly above $27.7 million paid in the year-ago period.
Along with the earnings release, International Flavors & Fragrances announced that its board of directors, on Aug 4, had authorized an increase of 8 cents or 21% in the quarterly dividend rate. The revised rate now stands at 47 cents per share versus the earlier 39 cents and will be paid on Oct 7 to shareholders of record as on Sep 25.
Outlook
International Flavors & Fragrances anticipates lower volume in North America for its Flavors business in third-quarter 2014. Taking this into account, the company lowered its 2014 sales growth guidance to the range of 4–6% from 5–7% projected earlier. The revised forecast includes 1% contribution from the Aromor acquisition.
Operating profit will be boosted by cost reductions and manufacturing efficiencies. International Flavors & Fragrances expects double-digits growth for both adjusted operating profit and adjusted earnings per share.
With a market capitalization of $7.8 billion, International Flavors & Fragrances presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Green Plains Inc. (GPRE), Minerals Technologies Inc. (MTX) and Globe Specialty Metals, Inc. (GSM). While Green Plains and Minerals Technologies sport a Zacks Rank #1 (Strong Buy), Globe Specialty Metals holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment