How Did IFF’s Flavors Segment Perform in 3Q17?
IFF’s Flavors segment in 3Q17
International Flavors and Fragrances’ (IFF) Flavors segment saw a decline in its revenue contribution to the company’s overall revenue. This segment accounted for 46.9% in 3Q17 compared to 47.2% in 3Q16. The segment reported revenue of $409.8 million in 3Q17, an increase of 11.7% on a year-over-year basis. In 3Q16, the segment reported revenue of $366.9 million.
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The growth in the segment’s revenue was primarily driven by the continued contribution from the acquisitions of David Michael and PowderPure. The segment’s revenue witnessed growth in all regions. North America once again recorded the highest growth at 28%, followed by EMEA (Europe, Middle East, and Africa) with 12%, while the Greater Asia and Latin America regions rose 2% and 1%, respectively.
Segment’s profit and margins
The segment reported a net profit of $91.4 million, an increase of 17.9% on a year-over-year basis. In 3Q16, the segment reported a net profit of $77.5 million. The segment’s margins also improved during the quarter to 22.3% in 3Q17 compared to 21.1% in 3Q16, implying an increase of 120 basis points on a year-over-year basis. The increases in the segment’s net profit and net profit margin were mainly driven by increased sales due to volume growth and productivity initiatives.
The segment revenue will continue to grow from the benefits of the acquisition in 4Q17. Further, the expansions of the Cairo site could also drive the growth in the region and in turn help the segment grow. Also, the productivity measures are expected to help the segment’s margin to improve in 4Q17.
Investors can hold IFF indirectly by investing in the iShares U.S. Basic Materials ETF (IYM), which invests 1.4% of its portfolio in IFF. The fund also provides exposure to DowDuPont (DWDP), Monsanto (MON), and LyondellBasell (LYB), which have weights of 24.9%, 7.0%, and 4.3%, respectively, as of November 7, 2017.