IFF Settles Issues with Mane Fils

New York-based, International Flavors & Fragrances Inc’s (IFF - Analyst Report) and V. Mane Fils reached an agreement to end the latter’s lawsuit concerning Monomenthyl Succinate (MMS).

International Flavors & Fragrances settled all patent and non-patent claims brought forward in the United States District Court by Mane. The claimant has patents issued in 1998, covering the use of MMS as a cooling additive in food and beverage products.   

As part of the settlement, the company will have to pay $40 million as royalty to Mane and also discontinue making and selling its Cooler 1 products while Cooler 2 products will have MMS, as agreed to by the parties.

The company is a creator and manufacturer of fragrance and flavor products having operations in the United States and internationally. Reviving global economy has accelerated consumer spending, which is acting as a positive driver for the flavors and fragrances industry.

Moreover, going forward, IFF’s success will be driven by new business wins, substantial geographical diversifications, wide product lines, continuous accomplishments in research and intense consumer insight.

The company recently came out with its third quarter financial results and reported adjusted earnings per share growth of 2% year over year. Net sales grew 6% year over year attributable to new business wins and higher sales volumes in all geographical regions. 

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%.

Notwithstanding the favorable view, results in the near term are likely to be influenced by higher raw material costs. Moreover, competition is intensifying in the industry with the company facing strong competition from its peers including Danisco A/S and Firmenich SA.

The current Zacks Consensus Estimate for earnings per share for the fourth quarter of 2011 is 71 cents, which reflects a year-over-year growth of 2.48%. Estimates for the fiscal year 2011 and 2012 are $3.73 and $4.09, representing annual growth of 10.71% and 9.68%, respectively.

We currently maintain a Neutral recommendation on the stock.

Read the full analyst report on IFF