Why International Flavors & Fragrances Shares Are Diving Today

International Flavors & Fragrances Inc (NYSE: IFF) shares are trading lower by over 22% after the company reported worse-than-expected Q2 results and a reduced FY23 outlook.

Revenue of $2.93 billion, flat Y/Y, missed the consensus of $3.11 billion.

On a comparable basis, currency-neutral sales fell 4% Y/Y, on weakness in Nourish (-9% Y/Y) and Health & Biosciences (-3% Y/Y) business. 

Operating cash flow at the end of the second quarter was $375 million, and FCF totaled $85 million.

Segment Adjusted operating EBITDA declined to $510 million from $700 million a year ago. 

Adjusted EPS of $0.86 missed the street view of $1.10.

As of June 30, 2023, cash, cash equivalents, and restricted cash stood at $652 million. 

Dividend: IFF declared a quarterly cash dividend per share of $0.81, payable on October 5, 2023, to shareholders of record as of September 22, 2023.

FY23 Outlook: The company lowered guidance for sales to $11.3 billion-$11.6 billion (vs. consensus $12.15 billion) from around $12.3 billion prior and adjusted operating EBITDA to $1.85 billion-$2.0 billion from about $2.34 billion earlier. 

The guidance reflects slower-than-expected volume recovery in H2 2023 on continued customer destocking. On a comparable basis, IFF projects volume to decline in mid-to-high-single digits (vs. flattish Y/Y guided earlier).

Strategic transformation initiatives: IFF is focusing on enhancing the performance of its Functional Ingredients business by boosting commercial resources and concentrating on key global accounts, targeting 2% to 4% of annual productivity via operational efficiencies, focusing on the strongest product lines and discontinuing the underperforming ones. 

The company will start reporting separate business results for the Functional Ingredients business unit in Q1 2024.

IFF expects the initiatives to deliver comparable currency-neutral sales growth in low-single-digits and adjusted operating EBITDA margin in the mid-teens over the next three years, with a strong improvement in 2024.

Also Read: IFF Launches Axtra PHY GOLD Phytase Enzyme For In-Feed Use In The EU

Price Action: IFF shares are down by 22.4% at $62.28 premarket on the last check Tuesday.