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International Flavors & Fragrances Inc IFF

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Raising IFF FVE to $145 on Improved Medium-Term Outlook; Shares Fairly Valued

Seth Goldstein, CFA Senior Equity Analyst

Analyst Note

| Seth Goldstein, CFA |

International Flavors and Fragrances reported decent third-quarter results as higher costs partially offset sales growth in most segments. Management maintained its 2021 revenue guidance of 8% growth versus 2020, but reduced EBITDA margin guidance by 50 basis points to 21% because of higher costs. However, with many of IFF's sales being made on annual contracts, we expect the company will be able to fully pass along all cost inflation in 2022 and be able to raise prices again in 2023. As a result, once costs subside, we expect margins will sharply increase as higher prices will remain in place. As such, we have increased our outlook for 2022 and 2023. Having updated our model to reflect these changes, we raise our IFF fair value estimate to $145 per share from $140 as our increased medium-term forecast is slightly lower near-term outlook. Our wide-moat rating is unchanged.

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Company Profile

Business Description

International Flavors & Fragrances produces ingredients for the food, beverage, health, household goods, personal care, and pharmaceutical industries. The company makes proprietary formulations, partnering with customers to deliver custom solutions. The nourish segment, which generates roughly half of revenue, is a leading flavor producer and also sell texturants, plant-based proteins, and other ingredients. The health and biosciences business, which generates around one fourth of revenue, is a global leader in probiotics and enzymes. IFF is also one of the leading fragrance producers in the world. The firm also sells pharmaceutical ingredients such as excipients and time-release polymers.

521 West 57th Street
New York, NY, 10019-2960
T +1 212 765-5500
Sector Basic Materials
Industry Specialty Chemicals
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 13,700