Performance in 1Q17
International Flavors & Fragrances’ (IFF) Fragrance Business segment was the biggest revenue contributor for the company. The segment had a revenue share of ~51% in 1Q17. The segment reported revenue of $422.1 million in 1Q17—an increase of 2.8% compared to $410.8 million in 1Q16.
The segment’s revenue increase was primarily driven by a good performance in the fine fragrance business with 10% growth due to the acquisition of Fragrance Resources. The consumer fragrance business grew 2% due to the acquisition of Fragrance Resources and growth in the fabric care segment. Finally, the fragrance ingredients business rose 2% due to high demand in Latin America and EMEA (Europe, the Middle East and Africa).
Net income and margin
International Flavors & Fragrances’ Fragrance Business segment reported net income of $81.7 million in 1Q17 compared to $89.2 million in 1Q16—a decrease of 8.4% YoY (year-over-year). The segment reported a net income margin of 19.40% in 1Q17 compared to 21.7% in 1Q16—a decrease of 230 basis points YoY. The segment’s net income was negatively impacted by the increase in raw material prices, unplanned expenses, and the negative impact of foreign exchange hedge.
The Fragrance Business segment is expected to continue its upward revenue trend primarily driven by the acquisition of Fragrance Resources. Cost and productivity benefits are expected to drive the net income.
Investors can indirectly hold International Flavors & Fragrances by investing in the ProShares Ultra Basic Materials ETF (UYM). UYM has invested 1.20% of its holdings in International Flavors & Fragrances. The fund’s top holdings include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON) with weights of 8.1%, 8.1%, and 5.9% as of May 8, 2017.
In the next part, we’ll look at how the Flavors Business segment performed in 1Q17.