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International Flavors (IFF) Q2 Earnings Miss Estimates, Up Y/Y

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International Flavors & Fragrances Inc. (IFF - Free Report) reported adjusted earnings of $1.50 per share in second-quarter 2021, missing the Zacks Consensus Estimate of $1.51 by a whisker. The bottom-line figure, however, increased 10.3% from the year-ago period.

Including one-time items, the company reported earnings per share of 11 cents compared with the prior-year quarter’s 74 cents.

International Flavors’ net sales came in at $3,089 million in the June-end quarter, reflecting a year-over-year surge of 158%. This was driven by the additional sales related to the merger with DuPont de Nemours, Inc.’s (DD - Free Report) Nutrition & Biosciences (N&B) business.

The top-line figure surpassed the Zacks Consensus Estimate of $2,991 million. During the April-June quarter, currency neutral sales were up 9%, aided by double-digit growth in Scent and Nourish as well as strong increase in Health & Biosciences.

Operational Highlights

During the reported quarter, International Flavors’ adjusted cost of goods sold was significantly up 177% year over year to $1,984 million. Adjusted gross profit climbed 129.2% year over year to $1,105 million. Adjusted gross margin came in at 36% compared with the 40% witnessed in the year-ago quarter.

Research and development expenses flared up 102% year over year to $164 million. Adjusted selling and administrative expenses shot up 98% year on year to $384 million during the second quarter. Adjusted operating EBITDA came in at $679 million compared with the prior-year quarter’s $239 million. Adjusted operating EBITDA margin was 22% compared with the year-earlier quarter’s 20%.

Segmental Performances

Revenues in the Nourish segment soared 142% year over year to $1,668 million during the June-end quarter. Adjusted operating EBITDA was $324 million, reflecting year-over-year growth of 128%.

Revenues generated in the Health & Bioscience segment came in at $639 million compared with the year-earlier quarter’s $34 million. Adjusted operating EBITDA was $190 million in the quarter compared with $10 million in the prior year quarter.

Scent segment revenues came in at $550 million compared with the year-ago quarter’s $475 million. Adjusted operating EBITDA increased 34% year over year to $117 million.

Revenues in the Pharma Solutions were $232 million in the second quarter. Adjusted operating EBITDA was $48 million.

Financial Position

International Flavors had cash and cash equivalents of $942 million at the end of second-quarter 2021, up from the $657 million witnessed at the end of 2020. Long-term debt increased to $11.3billion as of Jun 30, 2021, from $3.8 billion as of Dec 31, 2020.

International Flavors generated $698 million of cash from operating activities in the first half of the current year compared with the prior-year period’s $208 million. Capital invested in purchasing property, plant and equipment totaled $165 million during the six-month period ended on Jun 30, 2021 compared with the prior-year period’s $80 million. Dividend paid summed $274 million in the first half of 2021.

2021 Guidance

International Flavors now estimates sales of $11.4 billion in 2021, up from the prior estimate of $11.25 billion. Adjusted EBITDA margin is projected at around 22.5%, lower than its previous guidance of 23%. Given the rising raw material costs, the company is implementing price-hike actions and reducing expenses to support long-term profitability.

Price Performance

Over the past year, International Flavors’ shares have gained 19.6%, against the industry’s loss of 10.3%.

Zacks Investment Research
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Zacks Rank & Key Picks

International Flavors currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Consumer Staples sector are Inter Parfums, Inc. (IPAR - Free Report) and Darling Ingredients Inc. (DAR - Free Report) . While Inter Parfums flaunts a Zacks Rank #1 (Strong Buy), Darling Ingredients carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inter Parfums has an expected earnings growth rate of 67.7% for 2021. The stock has gained 78.5% in the past year.

Darling Ingredients has a projected earnings growth rate of 72.4% for the current year. Its shares have rallied 120.5% in a year’s time.