International Flavors & Fragrances Inc. (IFF) reported better-than-expected results for fourth-quarter 2014. Adjusted earnings came in at $1.07 per share, above the Zacks Consensus Estimate of $1.03. Also, the bottom line improved 16.3% over the year-ago tally of 92 cents per share.
For 2014, the company’s adjusted earnings were $5.08 per share, up from $4.46 in 2013 and above the Zacks Consensus Estimate of $5.05.
Revenues
International Flavors & Fragrances generated net revenue of $756.1 million in the quarter, reflecting an increase of 4% year over year. The top line surpassed the Zacks Consensus Estimate of $735 million.
On a constant currency basis, revenues climbed 7% year over year. The top-line improvement was driven by better performance in both the business segments as well as extra working days.
International Flavors & Fragrances operates in two segments: Flavors and Fragrances.
Revenues derived from the Flavors business increased 4% year over year to $356.3 million. It accounted for nearly 47.1% of total revenue. On a constant currency basis, Flavors revenues rose 6% year over year.
The Fragrances business generated $399.8 million in revenues, up 5.7% year over year. It represented 52.9% of total revenue in the quarter. On a constant currency basis, revenues grew 7% year over year.
From a geographical perspective, revenues from North America increased 7% year over year; while revenues from Europe, Africa and the Middle East (“EAME”) were up 2% year over year or 7% on a constant currency basis. Revenues from Latin American operations increased 6% year over year or 8% on a constant currency basis; while those from Greater Asia were up 3% year over year or 5% on a constant currency basis.
For 2014, International Flavors & Fragrances’ net revenue totaled $3,088.5 million, up 5% year over year.
Margins
International Flavors & Fragrances’ adjusted gross margin came in at 43.6% as against 43.8% recorded in the year-ago quarter. Research and development expenses, as a percentage of sales, stood at 8.2%, down 150 basis points (bps) year over year; while selling and administrative expense inched down 70 bps to 17.9%.
Adjusted operating margin was 17.5% versus 15.4% in the year-ago quarter. Interest expense increased 8% year over year to $12 million.
Balance Sheet and Cash Flow
Exiting fourth-quarter 2014, International Flavors & Fragrances had cash and cash equivalents of $478.6 million, up compared with $404.8 million in the preceding quarter. Long-term debt edged up 0.1% sequentially at $934.2 million.
In 2014, International Flavors & Fragrances generated cash of $518.4 million from its operating activities, reflecting an increase of 27.2% year over year. Capital spending totaled $143.2 million, up 6.7% from $134.2 million in 2013.
Cash dividends paid during the year amounted to $133.2 million versus $87.3 million paid in the previous year.
Outlook: For 2015, International Flavors & Fragrances anticipates its revenues and operating profits to come in line with its long-term targets. For earnings per share, the company predicts growth in high-single digits.
With a market capitalization of $8.7 billion, International Flavors & Fragrances presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Penford Corp. (PENX), Daqo New Energy Corp. (DQ) and Israel Chemicals Ltd. (ICL). While Penford sports a Zacks Rank #1 (Strong Buy), both Daqo New Energy and Israel Chemicals carry a Zacks Rank #2 (Buy).
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