IFF Reports Strong First Quarter 2016 Results
Sales +6%; Adjusted Operating Profit +7%; Adjusted EPS +11%, all on a currency neutral basis
First Quarter 2016 Consolidated Summary: Growth vs. Prior Year ¹
Adjusted Currency Neutral |
Adjusted (Non-GAAP) | Reported (GAAP) | |||||||||||||||||||||||
Sales |
Operating |
EPS | Sales |
Operating |
EPS | Sales |
Operating |
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
“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
“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 |
“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 |
Segment |
Sales |
Segment |
|||||||||
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 inNorth America and high-single digit growth inLatin 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 inLatin 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 inNorth 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 andLatin America and low-single-digit growth inGreater Asia . -
EAME decreased 1% as softness in
Western Europe more than offset a high-single-digit improvement in theMiddle East andAfrica , 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
Audio Webcast
A live webcast to discuss the Company’s first quarter 2016 financial
results will be held on
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
Meet IFF
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 |
Consumer |
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 |
Operating |
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 |
Segment |
||||||
% Change - Reported (GAAP) | -1% | -1% | ||||||
Currency Impact | 5% | 2% | ||||||
% Change - Currency Neutral | 4% | 1% | ||||||
Q1 Fragrances |
Sales |
Segment |
||||||
% Change - Reported (GAAP) | 3% | 9% | ||||||
Currency Impact | 5% | 6% | ||||||
% Change - Currency Neutral | 8% | 15% | ||||||
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 |
Restructuring |
Operational |
Acquisition |
Spanish |
Adjusted |
|||||||||||||||||||
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 |
Restructuring |
Operational |
Tax |
Acquisition |
Adjusted |
|||||||||||||||||||
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/
Source:
International Flavors & Fragrances Inc.
Michael DeVeau
VP,
Global Corporate Communications & Investor Relations
212.708.7164
Michael.DeVeau@iff.com