Yahoo Finance International Flavors (IFF) Divests Savory Solutions Business
International Flavors & Fragrances IFF has announced the completion of the previously announced divestiture of its Savory Solutions unit to PAI Partners. The sale aligns with IFF’s strategy to focus on highest-return businesses, improve capital structure and enhance its growth profile.
The Savory Solutions Group primarily focuses on ingredients for prepared foods and food service and includes products for butchers and plant-based solutions for the vegan and vegetarian markets. The business generated revenues of around $475 million over the last 12 months. It has units across Austria, Germany, Italy, Ireland, Poland, Canada, Mexico and Thailand and employs around 1,800 people. The company will now be rebranded as NovaTaste.
International Flavors entered into this sale agreement in December 2022 and had valued the Savory Solutions business at around $900 million. IFF had said that it intends to use the proceeds (net of taxes and expenses) to lower its debt levels.
This move is in sync with the company’s efforts to transform its operating model into a more customer-centric and market-backed approach. To this end, it plans to conduct business in three core end markets, which are Food and Beverage, Home and Personal Care, and Health. IFF anticipates the new operating model to be completely operational by the end of 2023.
IFF is optimizing its portfolio to improve its capital structure. The company had identified a few businesses as underperformers, which it intends to either divest or take initiatives to improve their results. Among these, Savory Solutions has now been divested successfully. In March 2023, the company inked a deal to sell the Flavor Specialty Ingredients business, which is expected to be completed in November 2023.
To drive growth, IFF plans to step up its investment in high-return businesses such as Cosmetic Ingredients, Fine Fragrance, Flavors, Cultures & Food Enzymes, Health, Food Design (excluding the Savory Solutions unit), Fragrance Ingredients and Consumer Fragrance.
International Flavors reported adjusted earnings of 87 cents per share for first-quarter 2023, down 49% from the year-ago quarter. Net sales were $3,027 million in the quarter, decreasing 6% year over year mainly owing to lower volumes across most segments. The company is bearing the brunt of the recent slump in consumer demand due to muted spending in the wake of the current inflationary pressures.
International Flavors estimates sales of $12.3 billion for 2023, down from $12.4 billion reported in 2022. Currency-neutral sales growth for the year is expected to be 5%. The adjusted EBITDA for 2023 is expected to be $2.34 billion, which reflects a decline of 4.7% from $2.46 billion reported in 2022. Foreign currency translation will likely affect sales growth by 1% and adjusted operating EBITDA growth by 3%.
Even though demand has been weak lately, it will eventually pick up as the inflationary pressure eases and demand for consumer products containing flavors and fragrances resumes at prior levels. The company will be able to capitalize on the expansion in flavors and fragrances markets and deliver long-term growth by virtue of its global presence, diversified business platform, broad product portfolio and global and regional customer base.
Price Performance
In the past year, International Flavors’ shares have lost 41.5%, compared with the industry’s 21.3% decline.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
International Flavors currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Consumer Staples sector are Clorox CLX, Coty COTY and Vita Coco Company COCO. CLX and COTY sport a Zacks Rank #1 (Strong Buy), while COCO carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Clorox’s fiscal 2023 earnings per share suggests growth of 9%, from the year-ago earnings. The consensus mark for CLX’s earnings per share has moved up by 5% in the past 30 days. CLX has a trailing four-quarter earnings surprise of 25.5%, on average. Its shares have gained 12.5% in the past year.
The consensus estimate for Coty’s 2023 earnings per share projects an increase of 89.3% from that reported in the last year. The consensus estimate for 2023 earnings have moved 43% upward in the past 30 days. COTY’s shares have gained 54% in the past year.
The consensus mark for Vita Coco’s current financial year’s earnings per share suggests a 191% surge from the year-ago reported figure. The consensus mark for COCO’s earnings has moved up 5% in the past 30 days. COCO has a trailing four-quarter earnings surprise of 9.2%, on average. Its shares have soared 119% in a year’s time.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Vita Coco Company, Inc. (COCO) : Free Stock Analysis Report
International Flavors & Fragrances Inc. (IFF) : Free Stock Analysis Report
The Clorox Company (CLX) : Free Stock Analysis Report
Coty (COTY) : Free Stock Analysis Report
