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International Flavors April, May Sales Dip 7% on Coronavirus Woes
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International Flavors & Fragrances Inc. (IFF - Free Report) provided its business performance update for the initial eight weeks of second-quarter 2020 amid the coronavirus crisis.
The company’s sales dropped 7% on a reported basis and 3% on a currency neutral basis, year over year, during the first two months of the June-end quarter. This downside resulted from the prevalent pressure in certain end-market categories across few countries on account of the coronavirus pandemic and particularly with small- and mid-size customers.
International Flavors witnessed significant demand for its products used in packaged food, beverage and personal care and hygiene products on the COVID-19 crisis during the April-May period. Currency neutral sales for this category grew 3%, year on year, while the Consumer Fragrances business grew in double digits. Notably, these end markets represent approximately 85% of International Flavors’ total revenues in 2019.
Meanwhile, the company witnessed pressure in two categories, Fine Fragrance and Food Service, which represented around 15% of total revenues in 2019. Currency neutral sales for these categories plummeted 40% year over year. These downsides are primarily a result of the travel and shelter-in-place restrictions and the closure of retail outlets. The operating margin in the ongoing quarter might be affected by the sales decline in these higher margin categories.
The company’s business in North America performed resiliently, while the emerging markets, primarily India and several Latin American countries were hurt by the coronavirus crisis and regulatory restrictions. Growth in China has sequentially improved after restrictions were lifted in the country.
Gross profit declined 12% year over year on lower sales volumes and an unfavorable mix, along with additional manufacturing and procurement costs related to COVID-19. However, these were offset by cost management and continued productivity initiatives. Focus to drive efficiencies throughout the business through costs and productivity actions, margin improvement, acquisition-related synergies and favorable taxes will keep driving overall profits in the near term.
The company has experienced disruption in supply of raw materials and transport logistics in markets where governments have implemented the strict regulations, including Italy, Spain and India. As a result, shipments for some orders have been delayed. The company continues to fulfill customer demand, despite logistics issues around the world while almost all of its global manufacturing facilities remain operational under this turbulent situation.
The global market for flavors and fragrances continues to grow on increasing demand for a variety of consumer products containing flavors and fragrances. The market is projected to grow approximately 2-3% by 2021, primarily on anticipated growth in emerging markets. Consequently, International Flavors & Fragrances is focused on gaining share in emerging markets. Over the past five years, the company’s currency neutral sales growth rate in emerging markets has outpaced that of developed markets. Backed by the company’s global presence, diversified business platform, broad product portfolio, global and regional customer base, it will be able to capitalize on the expansion in flavors and fragrances markets and deliver long-term growth. The company continues to advance its integration planning with DuPont (DD - Free Report) Nutrition & Biosciences.
Price Performance
Over the past year, International Flavors’ shares have lost 8.2% compared with the industry’s decline of 10%.
Zacks Rank & Key Picks
International Flavors currently carries a Zacks Rank #4 (Sell).
Clorox has a projected earnings growth rate of 9.3% for fiscal 2020.The stock has appreciated 30.1% in the past year.
B&G Foods has an expected earnings growth rate of 21.3% for the current year. Shares of the company have gained 27.1% over the past year.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
International Flavors April, May Sales Dip 7% on Coronavirus Woes
International Flavors & Fragrances Inc. (IFF - Free Report) provided its business performance update for the initial eight weeks of second-quarter 2020 amid the coronavirus crisis.
The company’s sales dropped 7% on a reported basis and 3% on a currency neutral basis, year over year, during the first two months of the June-end quarter. This downside resulted from the prevalent pressure in certain end-market categories across few countries on account of the coronavirus pandemic and particularly with small- and mid-size customers.
International Flavors witnessed significant demand for its products used in packaged food, beverage and personal care and hygiene products on the COVID-19 crisis during the April-May period. Currency neutral sales for this category grew 3%, year on year, while the Consumer Fragrances business grew in double digits. Notably, these end markets represent approximately 85% of International Flavors’ total revenues in 2019.
Meanwhile, the company witnessed pressure in two categories, Fine Fragrance and Food Service, which represented around 15% of total revenues in 2019. Currency neutral sales for these categories plummeted 40% year over year. These downsides are primarily a result of the travel and shelter-in-place restrictions and the closure of retail outlets. The operating margin in the ongoing quarter might be affected by the sales decline in these higher margin categories.
The company’s business in North America performed resiliently, while the emerging markets, primarily India and several Latin American countries were hurt by the coronavirus crisis and regulatory restrictions. Growth in China has sequentially improved after restrictions were lifted in the country.
Gross profit declined 12% year over year on lower sales volumes and an unfavorable mix, along with additional manufacturing and procurement costs related to COVID-19. However, these were offset by cost management and continued productivity initiatives. Focus to drive efficiencies throughout the business through costs and productivity actions, margin improvement, acquisition-related synergies and favorable taxes will keep driving overall profits in the near term.
The company has experienced disruption in supply of raw materials and transport logistics in markets where governments have implemented the strict regulations, including Italy, Spain and India. As a result, shipments for some orders have been delayed. The company continues to fulfill customer demand, despite logistics issues around the world while almost all of its global manufacturing facilities remain operational under this turbulent situation.
The global market for flavors and fragrances continues to grow on increasing demand for a variety of consumer products containing flavors and fragrances. The market is projected to grow approximately 2-3% by 2021, primarily on anticipated growth in emerging markets. Consequently, International Flavors & Fragrances is focused on gaining share in emerging markets. Over the past five years, the company’s currency neutral sales growth rate in emerging markets has outpaced that of developed markets. Backed by the company’s global presence, diversified business platform, broad product portfolio, global and regional customer base, it will be able to capitalize on the expansion in flavors and fragrances markets and deliver long-term growth. The company continues to advance its integration planning with DuPont (DD - Free Report) Nutrition & Biosciences.
Price Performance
Over the past year, International Flavors’ shares have lost 8.2% compared with the industry’s decline of 10%.
Zacks Rank & Key Picks
International Flavors currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Consumer Staples space are The Clorox Company (CLX - Free Report) and B&G Foods, Inc. (BGS - Free Report) , both flaunting a Zacks Rank of 1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Clorox has a projected earnings growth rate of 9.3% for fiscal 2020.The stock has appreciated 30.1% in the past year.
B&G Foods has an expected earnings growth rate of 21.3% for the current year. Shares of the company have gained 27.1% over the past year.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>