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International Flavors (IFF) Updates 2021 Sales & EBITDA Guidance

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International Flavors & Fragrances Inc. (IFF - Free Report) expects the ongoing strong demand in its markets to bolster sales and thus increased its sales guidance for the current year. Meanwhile, the company has trimmed its EBITDA guidance for 2021 to reflect the anticipated impact of inflationary costs and supply chain headwinds faced by the company and the industry at large.

The Fabric, Home, Hair Care, and Personal Wash product categories are witnessing impressive growth on the pandemic-induced increase in global consumer staples purchases. International Flavors’ largest segment, Nourish, continues to deliver strong results primarily aided by the Flavors unit. The Scent segment remains the largest growth driver, courtesy of continued strength in Consumer Fragrances and Cosmetic Actives. The segment witnessed a strong rebound in Fine Fragrance driven by volume recovery and new business win as away-from-home restrictions continued to ease and consumer behavior returned to normal levels. In the Health & Biosciences segment, the Home & Personal Care business remains robust supported by evolving consumer buying trends related to the pandemic. For the Pharma Solutions segment, growth has been witnessed in Industrial Pharma.

Driven by these favorable demand trends, sales for the first six months of 2021 soared 118% year over year to $5.5 billion. This was aided by around $2.8 billion of incremental sales attributable to the inclusion of DuPont de Nemours, Inc.’s (DD - Free Report) Nutrition & Biosciences ("N&B") business. During its second quarter 2021 conference call, International Flavors had raised sales guidance to approximately $11.4 billion, which indicated growth of 7% from 2020. Citing the ongoing strong demand in its markets, the company now anticipates to deliver sales growth higher than 8% in 2021 to approximately $11.55 billion. The company expects double-digit growth in sales in the third quarter.

Meanwhile, the company has been witnessing inflated raw material and logistics costs, and disruption in supply of raw materials and transport logistics so far this year. Despite its pricing actions and focused cost reduction efforts, these factors are likely to dent margins for the balance of the year. International Flavors now expects adjusted operating EBITDA margin for the full year to be approximately 21.5% in 2021, down from the prior expectation of 22.5%. Nevertheless, the new guidance still remains above the EBITDA margin of 22% reported in 2020.

International Flavors is well-poised to benefit from increasing demand for a variety of consumer products containing flavors and fragrances in the long haul. Anticipated growth in emerging markets remains a key catalyst. Consequently, the company is focused on gaining share in emerging markets. Backed by its global presence, diversified business platform, broad product portfolio, global and regional customer base, International Flavors will be able to capitalize on the expansion in flavors and fragrances markets and deliver long-term growth. Over time, the company has made meaningful acquisitions, which have helped expand offerings and in turn, profitability.

The company continues to maintain a disciplined approach to capital allocation even as it focuses on accelerating growth through organic investments and strategic acquisitions, and returning significant capital to shareholders. In sync with its portfolio optimization strategy to maximize shareholder value through non-core business divestitures, International Flavors has entered into an agreement to divest its fruit preparation business to Frulact. The company recently announced that it has entered into an agreement to divest its Microbial Control business unit to LANXESS for $1.3 billion.

Price Performance

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Over the past year, International Flavors’ shares have gained 16.8%, against the industry’s decline of 6.6%.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the Consumer Staples sector are Darling Ingredients Inc. (DAR - Free Report) and  MGP Ingredients, Inc. (MGPI - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darling Ingredients has an expected earnings growth rate of 91.2% for 2021. The stock has gained 119% in the past year.

MGP Ingredients has a projected earnings growth rate of 20.7% for the current year. Its shares have rallied 58% in a year’s time.