Sales +6%; Adjusted Operating Profit +7%; Adjusted EPS +11%, all
on a currency neutral basis
Regulatory News:
International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext
Paris:IFF) reported financial results and strategic achievements
for the first quarter ended April 1, 2016.
First Quarter 2016 Consolidated Summary: Growth vs. Prior
Year ¹
Adjusted Currency
Neutral(Non-GAAP)
Adjusted (Non-GAAP) Reported (GAAP) Sales
OperatingProfit
EPS Sales
OperatingProfit
EPS Sales
OperatingProfit
EPS Consolidated 6% 7% 11% 1% 3% 1% 1% 3% (6)%
Acquisition Impact 4% 3% 3% 4% 3% 3% 4%
2% 3%
¹ Schedules at the end of this release contain reconciliations
of reported GAAP to non-GAAP metrics.
First Quarter 2016 Strategic Highlights: Currency Neutral
Performance
Innovating Firsts: strengthen position and drive
differentiation in priority R&D platforms
- Encapsulation-related sales grew
high-single-digits led by Fabric Care and Toiletries
- Commercialized two new flavor molecules
and one new natural sweetness modulator
- Sweetness and savory modulation
portfolio continued to grow strong double-digits
Win Where We Compete: achieve market leadership position
in key markets, categories & customers
- North America sales +11% driven by
acquisitions and strong growth in Fragrances
- Middle East & Africa grew
double-digits with strong growth in both flavors and
fragrances
- Home Care grew mid-single-digits led by
double-digit growth in Latin America
- Flavors Latin America sales +8% in the
quarter; +14% on a 2-year average basis
Become Our Customers’ Partner of Choice: attain
commercial excellence
- IFF | Lucas Meyer Cosmetics won a
silver innovation award at In-Cosmetics
- IFF rated gold by EcoVadis for
Sustainability; ranked top supplier
- Joined World Business Council for
Sustainable Development
Strengthen and Expand the Portfolio: pursue value
creation through collaborations & acquisitions
- IFF | Lucas Meyer Cosmetics achieved
double-digit growth on a standalone basis
- IFF | Ottens Flavors posted solid
growth on a standalone basis led by regional customers
Management Commentary
“We are pleased with how we started 2016, in light of the
volatile global operating environment and against our strongest
year-ago growth comparison,” said Chairman and CEO Andreas Fibig.
“Currency neutral sales growth was strong, improving 6%, with
broad-based contributions from our acquisitions and organic
growth. Performance in both Flavors and Fragrances accelerated
sequentially with nearly all categories showing improvement versus
the fourth quarter of 2015. In terms of profitability, we achieved
strong gross profit performance driven primarily by volume growth,
the benefits of productivity initiatives and contributions of
acquisitions. This enabled us to strategically reinvest in our
business while simultaneously delivering 7% adjusted operating
profit and 11% adjusted EPS growth, all on a currency neutral
basis.
“We also continue to make strides in our Vision 2020 strategy
focused on building greater differentiation, accelerating
profitable growth and increasing shareholder value. Innovation and
R&D are crucial to our success, demonstrated by delivery
systems in both Flavors & Fragrances continuing to be a growth
driver in the quarter. In Fragrances, encapsulation-related sales
grew high-single-digits, led by Fabric Care and Toiletries. In
Flavors, our sweetness & savory modulation portfolio sales grew
strong double-digits, led by Savory, Dairy and Beverage.
Simultaneously, we commercialized two new flavor molecules and one
new natural sweetness modulator to continue to build
consumer-preferred solutions.
“We are pleased with our results in targeted growth areas such
as North America, where we saw an 11% sales increase for the first
quarter of 2016 driven by our recent acquisitions and strong growth
in Fragrances. In the Middle East & Africa, the strong growth
trends we experienced in 2015 continued into the first quarter, in
which we saw a double digit increase, with strong performance in
both flavors and fragrances. In Latin America, Flavors grew 8% on a
currency neutral basis against a very strong 21% prior year
comparison, driven in part by continued success leveraging
innovation with key customers.
“In addition to the progress we have made from an innovation and
market share perspective, we continue to position ourselves to be
our customers’ partner of choice and go-to supplier. In the first
quarter of 2016, IFF | Lucas Meyer won an innovation award at the
In-Cosmetics for Miniporyl™. Our continued commitment to intertwine
sustainability into all aspects of our business and corporate
culture has led us to be rated gold by EcoVadis and ranked a top
supplier. We also joined the World Business Council for Sustainable
Development which is an organization of forward-thinking companies
that stimulate the global business community to create a
sustainable future for business, society and the environment.
“Our strategic acquisitions have also continued to perform well.
IFF | Ottens Flavors posted solid growth on a standalone basis led
mostly by regional customers and IFF | Lucas Meyer Cosmetics
achieved double-digit growth on a standalone basis.
“Although we have started the year well, we continue to remain
cautiously optimistic in our previously stated financial guidance
for 2016 given the persistent volatility in the market.”
First Quarter 2016 Segment Summary: Growth vs. Prior
Year
Currency
Neutral (Non-GAAP) Reported (GAAP) Sales
SegmentProfit
Sales
SegmentProfit
Fragrances: 8% 15% 3% 9% Acquisition Impact 4% 2% 3% 2%
Flavors: 4% 1% (1)% (1)% Acquisition Impact 4%
3% 4% 3%
Fragrances Business Unit
(Currency Neutral Performance unless otherwise noted)
- Currency neutral sales improved 8%,
including approximately 4 percentage points related to the
acquisition of IFF | Lucas Meyer Cosmetics. All regions delivered
growth led by a double-digit increase in North America and
high-single digit growth in Latin America.
- Fine Fragrances increased 7% driven by
strong new win performance. From a regional perspective, North
America achieved strong double-digit growth, followed by
mid-single-digit growth in EAME and low-single digit growth in
Latin America.
- Consumer Fragrances grew 6% with broad
based growth across all sub-categories. Technology-driven
innovation in Fabric Care and Personal Wash contributed
high-single-digit increases. On a geographic basis, all regions
delivered growth led by a double-digit increase in Latin America
and mid-single-digit growth in North America.
- Fragrance Ingredients grew 15%,
inclusive of sales related to IFF | Lucas Meyer Cosmetics
acquisitions. On an organic basis, trends in Fragrance Ingredients
improved sequentially versus the fourth quarter 2015.
- Fragrances currency neutral segment
profit improved approximately 15% principally driven primarily by
strong volume growth, and the benefits from cost and productivity
initiatives. Segment profit margin on a currency neutral basis
increased 130 basis points to 21.7%.
- On a reported basis, sales increased
3%, or $13 million, to $410.8 million. Fragrances segment profit
increased 9%, or $7.6 million, to $89.2 million.
Flavors Business Unit
(Currency Neutral Performance unless otherwise noted)
- Currency neutral sales grew 4%,
including approximately 4 percentage points related to the
acquisition of IFF | Ottens Flavors. Growth was led by
high-single-digit increases in North America and Latin America and
low-single-digit growth in Greater Asia.
- EAME decreased 1% as softness in
Western Europe more than offset a high-single-digit improvement in
the Middle East and Africa, which was driven by strong new
wins.
- North America improved 9%, reflecting
the contribution of additional sales related to the acquisition of
IFF | Ottens Flavors.
- Latin America increased 8% against a
very strong 21% growth in the prior year period, as all categories
reported growth. Savory, Sweet and Dairy all reported double-digit
growth.
- Greater Asia grew 2% led by new win
performance in Dairy and Sweet.
- Flavors currency neutral segment profit
improved approximately 1% primarily resulting from the contribution
of our acquisition and productivity initiatives. Segment profit
margin on a currency neutral basis decreased 60 basis points to
24.6% in the prior year quarter.
- On a reported basis, sales decreased
1%, or $4.6 million, to $372.5 million. Flavors segment profit
decreased 1% to $91.8 million from $92.7 million.
FY 2016 Guidance: Growth vs. Prior Year
The Company’s full year 2016 guidance:
Currency Neutral FX Impact
Reported* Organic M&A
Total
Sales 2.0 - 3.0% ~1.5% 3.5 - 4.5% ~(2)% 1.5 -
2.5%
Operating Profit 3.5 - 5.5% ~1.5% 5.0 - 7.0% ~(3)% 2.0
- 4.0%
EPS 5.0 - 7.0% ~1.5% 6.5 - 8.5% ~(3)% 3.5 - 5.5%
* Excludes items impacting comparability
A copy of the Company’s Quarterly Report on Form 10-Q will be
available on its website at www.iff.com or at sec.gov by May 11,
2016.
Audio Webcast
A live webcast to discuss the Company’s first quarter 2016
financial results will be held on May 10, 2016, at 10:00 a.m. EDT.
Investors may access the webcast and accompanying slide
presentation on the Company's IR website at ir.iff.com. For those
unable to listen to the live webcast, a recorded version will be
made available on the Company's website approximately one hour
after the event and will remain available on IFF’s website for one
year.
Cautionary Statement Under The Private
Securities Litigation Reform Act of 1995
This press release includes “forward-looking statements” under
the Federal Private Securities Litigation Reform Act of 1995,
including statements regarding our outlook for fiscal year 2016.
These forward-looking statements are qualified in their entirety by
cautionary statements and risk factor disclosures contained in the
Company’s Securities and Exchange Commission filings, including the
Company’s Annual Report on Form 10-K filed with the Commission on
March 1, 2016. The Company wishes to caution readers that certain
important factors may have affected and could in the future affect
the Company’s actual results and could cause the Company’s actual
results for subsequent periods to differ materially from those
expressed in any forward-looking statements made by or on behalf of
the Company. With respect to the Company’s expectations regarding
these statements, such factors include, but are not limited to: (1)
the Company’s ability to implement its Vision 2020 strategy; (2)
the Company’s ability to successfully identify and complete
acquisitions in line with its Vision 2020 strategy, and to realize
the anticipated benefits of those acquisitions; (3) the Company’s
ability to effectively compete in its market, and to successfully
develop new and competitive products that appeal to its customers
and consumers; (4) changes in consumer preferences and demand for
the Company’s products or a decline in consumer confidence and
spending; (5) the Company’s ability to benefit from its investments
and expansion in emerging markets; (6) the impact of currency
fluctuations or devaluations in the principal foreign markets in
which it operates, including the devaluation of the Euro; (7) the
economic and political risks associated with the Company’s
international operations, including challenging economic conditions
in China and Latin America; (8) the impact of any failure of the
Company’s key information technology systems or a breach of
information security; (9) the Company’s ability to attract and
retain talented employees; (10) the Company’s ability to comply
with, and the costs associated with compliance with U.S. and
foreign environmental protection laws; (11) the Company’s ability
to realize expected cost savings and efficiencies from its
profitability improvement initiative and other optimization
activities; (12) volatility and increases in the price of raw
materials, energy and transportation; (13) fluctuations in the
quality and availability of raw materials; (14) the impact of a
disruption in the Company’s supply chain or its relationship with
its suppliers; (15) any adverse impact on the availability,
effectiveness and cost of the Company’s hedging and risk management
strategies; (16) the Company’s ability to successfully manage its
working capital and inventory balances; (17) uncertainties
regarding the outcome of, or funding requirements related to
litigation or settlement of pending litigation uncertain tax
positions or other contingencies; (18) the effect of legal and
regulatory developments, as well as restrictions or costs that may
be imposed on the Company or its operations by U.S. and foreign
governments; (19) adverse changes in federal, state, local and
international tax legislation or policies, including with respect
to transfer pricing and state aid, and adverse results of tax
audits, assessments, or disputes; and (19) changes in market
conditions or governmental regulations relating to our pension and
postretirement obligations. New risks emerge from time to time and
it is not possible for management to predict all such risk factors
or to assess the impact of such risks on the Company’s business.
Accordingly, the Company undertakes no obligation to publicly
revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
Meet IFF
International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext
Paris: IFF) is a leading innovator of sensorial experiences that
move the world. At the heart of our company, we are fueled by a
sense of discovery, constantly asking “what if?”. That passion for
exploration drives us to co-create unique products that consumers
taste, smell, or feel in fine fragrances and beauty, detergents and
household goods, as well as beloved foods and beverages. Our 6,700
team members globally take advantage of leading consumer insights,
research and development, creative expertise, and customer intimacy
to develop differentiated offerings for consumer products. Learn
more at www.iff.com, Twitter , Facebook, Instagram, and
LinkedIn.
International Flavors & Fragrances Inc. Consolidated
Income Statement (Amounts in thousands except per diluted
share data) (Unaudited)
Three Months Ended March 31, 2016 2015 %
Change Net sales $ 783,312 $ 774,907 1 % Cost of goods sold
423,103 428,630 (1 )% Gross profit
360,209 346,277 4 % Research and development expenses 63,385 63,462
(0 )% Selling and administrative expenses 123,543 118,995 4 %
Amortization of acquisition-related intangibles 6,061 1,840 229 %
Restructuring and other charges, net — 187
(100 )% Operating profit 167,220 161,793 3 % Interest
expense 12,478 11,095 12 % Other income (154 ) (5,710
) (97 )% Income before taxes 154,896 156,408 (1 )% Taxes on income
36,293 28,150 29 % Net income $ 118,603
$ 128,258 (8 )% Earnings per share -
basic $ 1.48 $ 1.58 Earnings per share - diluted $ 1.47 $ 1.57
Average shares outstanding Basic 79,666 80,654 Diluted
80,055 81,195
International Flavors & Fragrances
Inc. Condensed Consolidated Balance Sheet (Amounts in
thousands) (Unaudited)
March 31, December 31, 2016 2015 Cash & cash
equivalents $ 528,877 $ 181,988 Receivables 609,587 537,896
Inventories 600,696 589,019 Other current assets 152,369
146,981 Total current assets 1,891,529 1,455,884
Property, plant and equipment, net 733,939 732,794 Goodwill and
other intangibles, net 1,253,265 1,247,393 Other assets
283,727 285,383 Total assets $ 4,162,460 $ 3,721,454
Bank borrowings and overdrafts, and current portion of long-term
debt $ 133,692 $ 132,349 Other current liabilities 579,056
609,779 Total current liabilities 712,748 742,128
Long-term debt 1,369,955 937,844 Non-current liabilities 444,197
446,492 Shareholders' equity 1,635,560
1,594,990 Total liabilities and shareholders' equity $ 4,162,460 $
3,721,454
International Flavors & Fragrances Inc.
Consolidated Statement of Cash Flows (Amounts in
thousands) (Unaudited) Three Months
Ended March 31, 2016 2015
Cash flows from
operating activities: Net income $ 118,603 $ 128,258
Adjustments to reconcile to net cash provided by operating
activities: Depreciation and amortization 26,697 19,985 Deferred
income taxes 4,193 13,932 (Gain) loss on disposal of assets (2,713
) 34 Stock-based compensation 5,930 5,387 Pension contributions
(7,410 ) (54,048 ) Changes in assets and liabilities: Trade
receivables (60,655 ) (62,891 ) Inventories 3,256 13,172 Accounts
payable (29,375 ) 4,618 Accruals for incentive compensation (11,598
) (27,675 ) Other current payables and accrued expenses 10,456
12,585 Other assets/liabilities, net (25,769 )
(21,881 ) Net cash provided by operating activities 31,615
31,476
Cash flows from investing
activities: Additions to property, plant and equipment (22,512
) (19,381 ) Proceeds from disposal of assets 1,366
1,450 Net cash used in investing activities
(21,146 ) (17,931 )
Cash flows from financing
activities: Cash dividends paid to shareholders (44,826 )
(37,971 ) Net change in revolving credit facility borrowings and
overdrafts (124,602 ) 265 Deferred financing costs (4,796 ) —
Proceeds from issuance of long-term debt 555,559 — Loss on
pre-issuance hedges (3,244 ) — Proceeds from issuance of stock
under stock plans 163 227 Excess tax benefits on stock-based
payments 1,032 8,597 Purchase of treasury stock (40,007 )
(10,660 ) Net cash provided by (used in) financing
activities 339,279 (39,542 ) Effect of
exchange rates changes on cash and cash equivalents (2,859 ) (8,887
)
Net change in cash and cash equivalents 346,889 (34,884 )
Cash and cash equivalents at beginning of year
181,988 478,573
Cash and cash equivalents
at end of period $ 528,877 $ 443,689
International Flavors & Fragrances Inc. Business Unit
Performance (Amounts in thousands) (Unaudited)
Three Months Ended March 31, 2016
2015
Net Sales Flavors $ 372,508 $ 377,108
Fragrances 410,804 397,799
Consolidated 783,312 774,907
Segment Profit
Flavors 91,813 92,727 Fragrances 89,237 81,598 Global Expenses
(13,870 ) (11,564 ) Restructuring and other charges, net (101 )
(187 ) Acquisition and related costs (1,037 ) (500 ) Operational
improvement initiative costs (268 ) (281 ) Spanish capital tax
settlement 1,446 —
Operating
profit 167,220 161,793 Interest Expense (12,478 )
(11,095 ) Other income, net 154 5,710
Income before taxes $ 154,896 $ 156,408
Operating Margin Flavors 24.6 % 24.6 % Fragrances 21.7 %
20.5 % Consolidated 21.3 % 20.9 %
International Flavors
& Fragrances Inc. Sales Performance by Region and
Category (Unaudited)
First Quarter 2016 vs. 2015 Percentage
Change in Sales by Region of Destination Fine
ConsumerFragrances
Ingredients Total Frag.
Flavors Total North
America Reported 19% 6% 29%
14% 9% 11% EAME Reported
-2% -5% 4% -2% -9% -5%
Currency Neutral 5% 1% 10% 4%
-1% 2% Latin America Reported
-9% 6% -6% 1% -1% 0%
Currency Neutral 3% 10% -4% 8%
8% 8% Greater Asia Reported
-5% 2% 14% 4% -3% 0%
Currency Neutral -4% 5% 16% 6%
2% 4% Total Reported 0%
2% 12% 3% -1% 1% Currency
Neutral 7% 6% 15%
8% 4% 6%
Currency neutral growth is calculated by translating prior year
sales at the exchange rates used for the corresponding 2016
period.
International Flavors & Fragrances Inc. GAAP to
Non-GAAP Reconciliation Foreign Exchange Impact
(Unaudited)
Q1
Consolidated
Sales
OperatingProfit
EPS % Change - Reported (GAAP) 1%
3% -6% Items Impacting Comparability 0% 0% 7%
%
Change - Adjusted (Non-GAAP) 1% 3% 1%
Currency Impact 5% 4% 10%
% Change - Currency Neutral
(Adjusted) 6% 7% 11%
Q1
Flavors
Sales
SegmentProfit
% Change - Reported (GAAP) -1% -1% Currency
Impact 5% 2%
% Change - Currency Neutral 4%
1%
Q1
Fragrances
Sales
SegmentProfit
% Change - Reported (GAAP) 3% 9% Currency
Impact 5% 6%
% Change - Currency Neutral 8%
15%
International Flavors & Fragrances
Inc.GAAP to Non-GAAP Reconciliation(Amounts in
thousands)(Unaudited)
The following information and schedules provide
reconciliation information between reported GAAP amounts and
non-GAAP certain adjusted amounts. This information and schedules
are not intended as, and should not be viewed as, a substitute for
reported GAAP amounts or financial statements of the Company
prepared and presented in accordance with GAAP.
First Quarter 2016 Items Impacting
Comparability
Reported(GAAP)
Restructuringand
OtherCharges
OperationalImprovementInitiativeCosts
Acquisitionrelatedcosts
SpanishCapital
TaxSettlement
Adjusted(Non-GAAP)
Net sales 783,312 Cost of goods sold 423,103 (101 )
(a) (268 ) (b) (889 ) (c)
Gross profit 360,209 101 268 889
361,467 Research and development expenses 63,385 Selling and
administrative expenses 123,543 (148 ) (c) 1,446 (d)
124,841
RSA Expense 186,928 Amortization of acquisition-related intangibles
6,061 Restructuring and other charges, net —
Operating
profit 167,220 101 268 1,037 (1,446 )
167,180 Interest
expense 12,478 Other income (154 ) Income before taxes 154,896 101
268 1,037 (1,446 )
154,856 Taxes on income 36,293 19 67 367
(402 )
36,344 Net income 118,603
82 201 670
(1,044 )
118,512
Earnings per share - diluted $ 1.47 $ — $ — $ 0.01 $ (0.01 )
$ 1.47 (a) Accelerated depreciation related to
a partial plant closing in Europe. (b) Accelerated depreciation
related to a partial plant closing in Asia. (c) Expense related to
the fair value step up of inventory and additional transaction
costs related to acquisition of Lucas Meyer. (d) Amounts expected
to be received related to the Spanish capital tax settlement. * The
Company tracks the amount of amortization recorded on recent
acquisitions in order to monitor its progress with respect to its
Vision 2020 goals. The following amounts were recorded with respect
to recent acquisitions: $2.6M related to Lucas Meyer and $1.6M
related to Ottens Flavors.
First Quarter 2015
Items Impacting Comparability
Reported(GAAP)
Restructuringand
OtherCharges
OperationalImprovementInitiativeCosts
TaxSettlements
Acquisitionand
RelatedCosts
Adjusted(Non-GAAP)
Net sales 774,907 Cost of goods sold 428,630 (281 )
(b)
Gross profit 346,277 281
346,558 Research and
development expenses 63,462 Selling and administrative expenses
118,995 (500 ) (d)
120,335 RSA Expense 182,457 Amortization
of acquisition-related intangibles 1,840 Restructuring and other
charges, net 187 (187 ) (a)
Operating profit 161,793 187 281
500
162,761 Interest expense 11,095 Other income (5,710 )
Income before taxes 156,408 187 281 500 Taxes on income 28,150 66
70 10,478 (c) 175 38,939
Net income 128,258
121 211
(10,478 ) 325
118,437
Earnings per share - diluted $ 1.57 $ — $ — $
(0.13 ) $ —
$ 1.45 (e) (a) Costs related to
the Fragrance Ingredients Rationalization. (b) Related to a partial
plant closing in Asia. (c) Settlements due to favorable tax rulings
in jurisdictions for which reserves were previously recorded for
ongoing tax disputes. (d) Related to the acquisition of Ottens
Flavors. (e) The sum of these items do not foot due to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160509006602/en/
International Flavors & Fragrances Inc.Michael DeVeauVP,
Global Corporate Communications & Investor
Relations212.708.7164Michael.DeVeau@iff.com
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