01—Abstract
Summary
Summary of the 10-Q filed November 5, 2024. Cited figures are marked; the original filing is the authoritative source.
International Flavors & Fragrances Inc. (IFF) reported third-quarter 2024 net sales of $2.925 billiona, up 4% on a reported basis and 7% on a currency neutral basis versus $2.820 billion in the prior-year quarter.
Gross profit rose to $1.052 billionb (36.0% of sales) from $924 million (32.8%), and operating profit increased to $249 million from $150 million. Net income attributable to IFF shareholders was $59 million, or $0.23 per diluted share, compared with $25 million, or $0.10, a year earlier. For the first nine months, net sales declined 1% to $8.713 billion, though currency neutral sales rose 3%, and net income attributable to IFF shareholders was $289 million, or $1.13 per diluted share, against $43 million a year earlier.
The nine-month results were shaped by portfolio changes. The Company recorded a $365 millionc pre-tax gain on the April 2024 divestiture of its Cosmetic Ingredients business, and a $314 million loss on assets classified as held for sale, mainly tied to the planned sale of the Pharma Solutions disposal group, which also carried a $64 million goodwill impairment. The Pharma Solutions sale is expected to close in the second quarter of 2025, and an October 2024 agreement to sell the nitrocellulose business was disclosed as a subsequent event.
Total debt was $9.099 billiond at September 30, 2024, down from $10.071 billion at December 31, 2023, and the Company stated it was in compliance with its financial covenants, with a net debt to credit adjusted EBITDA ratio of 3.89 to 1.0. Cash flow from operations for the nine months was $702 million, compared with $795 million in the prior-year period, reflecting higher working capital needs.
Cash dividends paid totaled $411 million, and the quarterly dividend was $0.40 per share. Segment Adjusted Operating EBITDA for the nine months was $1.734 billion versus $1.519 billion, led by Nourish and Scent.
02—Key points
Key Highlights
- Third-quarter 2024 net sales of $2.925 billion rose 4% reported and 7% currency neutral; gross margin expanded to 36.0% from 32.8%.
- Net income attributable to IFF shareholders was $59 million ($0.23 per diluted share) in Q3 2024, versus $25 million ($0.10) a year earlier.
- Nine-month net income attributable to IFF shareholders reached $289 million ($1.13 per diluted share), supported by a $365 million pre-tax gain on the Cosmetic Ingredients divestiture.
- A $314 million loss on assets held for sale and a $64 million goodwill impairment were recorded in the nine months, both related to the Pharma Solutions disposal group.
- Total debt fell to $9.099 billion from $10.071 billion at December 31, 2023, and the Company reported compliance with all financial covenants.
- Nine-month operating cash flow declined to $702 million from $795 million, mainly due to higher working capital.
- Pending divestitures include Pharma Solutions (expected close in Q2 2025), nitrocellulose (agreed October 2024), and a portion of the Savory Solutions business in Turkey (expected Q1 2025).
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, International Flavors & Fragrances kept $0.02.
- Revenue$2.92B100.0%
- Cost of revenue−$1.87B64.0%
- Gross profit$1.05B36.0%
- Operating costs−$803.0M27.5%
- Operating income$249.0M8.5%
- Interest, other & tax−$190.0M6.5%
- Net income$59.0M2.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 5, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $2.92B$2.82B | +3.7% |
| Cost of Revenue | $1.87B$1.90B | −1.2% |
| Gross Profit | $1.05B$924.00M | +13.9% |
| R&D Expenses | $162.00M$157.00M | +3.2% |
| SG&A Expenses | $495.00M$444.00M | +11.5% |
| Operating Income | $249.00M$150.00M | +66.0% |
| Interest Expense | $74.00M$90.00M | −17.8% |
| Net Income | $59.00M$27.00M | +118.5% |
| EPS (Basic) | $0.23$0.10 | +130.0% |
| EPS (Diluted) | $0.23$0.10 | +130.0% |
| Shares Outstanding (Basic) | 256.00M255.00M | +0.4% |
| Shares Outstanding (Diluted) | 257.00M256.00M | +0.4% |
05—Questions
Frequently Asked Questions
What drove the improvement in third-quarter 2024 profitability?
Gross profit increased $128 million, or 14%, to $1.052 billion, driven by volume increases and favorable net pricing, and cost of goods sold fell $23 million on lower raw material costs and manufacturing expenses. Operating profit rose to $249 million from $150 million, although S&A expenses increased $51 million on higher incentive compensation and divestiture-related costs.
Why did nine-month net income look so much higher than the prior year?
Net income attributable to IFF shareholders was $289 million versus $43 million, largely because of a net gain on business disposals of $348 million, primarily from the Cosmetic Ingredients sale. This was partly offset by a $314 million loss on assets classified as held for sale and a $64 million goodwill impairment, both related to the Pharma Solutions disposal group.
What is the status of the Pharma Solutions sale?
The Company agreed to sell the Pharma Solutions disposal group in the first quarter of 2024, and the transaction is expected to close in the second quarter of 2025. At September 30, 2024, its fair value of $2,708 million (fair value of $2,740 million less estimated costs to sell of $32 million) was below carrying value, prompting the year-to-date loss. Net proceeds must be used to repay borrowings under the 2026 Term Loan Facility.
How is the Company's debt and liquidity position?
Total debt was $9.099 billion at September 30, 2024, compared with $10.071 billion at December 31, 2023. Cash and cash equivalents were $569 million, and $1.347 billion was available under the $2.000 billion Revolving Credit Facility. The net debt to credit adjusted EBITDA ratio was 3.89 to 1.0, and the Company stated it was in compliance with all financial covenants.
Are there any significant legal or regulatory matters investors should monitor?
The filing discloses ongoing investigations by the European Commission, the UK Competition and Markets Authority, the U.S. Department of Justice, the Swiss Competition Commission and the Mexican Competition Commission into potential anticompetitive conduct in the fragrance businesses. The Company said it is unable to predict the duration or outcome of these investigations. Putative class action lawsuits in Canada and the United States are also pending, and the Company cannot predict their outcome.
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