IFF - Embedded Expectations Analysis - 2021 08 10
International Flavors & Fragrances, Inc. (IFF:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 31.8x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about sales performance in several segments, integration plan execution, and costs.Specifically, management is confident increases in the Health and Home & Personal Care segments were offset by pressures in Microbial Control and Grain Processing. Additionally, they may lack confidence in their ability to sustain sales performance in several segments, drive overall group operating efficiencies while executing integration plans, and meet their three-year run rate synergy target of $400 million. Moreover, management may have concerns about raw material availability and distribution costs being impacted by the shutdown of two plants, the time lag in input costs for some legacy F&F businesses, and pandemic-driven headwinds in Food Design driven by continued declines in Food Service.
International Flavors & Fragrances is a creator and manufacturer of taste, scent and complementary adjacent products, including cosmetic active and natural health ingredients. The company's operating segments are Taste and Scent. The Taste segment develops a range of different flavors and taste offerings for its customers, most of which are tailor-made. The company's Taste business is comprised of various portfolios across flavor compounds, savory solutions, inclusions and nutrition and specialty ingredients. The Scent segment creates fragrance compounds and fragrance ingredients for the household and personal care products. The company also produces cosmetic active and functional ingredients for use in cosmetics.
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