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IFF Reported Record First Quarter Revenues

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International Flavors and Fragrances’ 1Q18 revenue

International Flavors and Fragrances (IFF) reported revenue of $930.9 million in 1Q18, an increase of ~12.4% on a YoY (year-over-year) basis. In 1Q17, IFF reported revenue of $828.3 million. IFF’s 1Q18 revenue beat analysts’ estimate of $911.3 million and set a record for the company’s first-quarter revenue. Since 2013, IFF’s first quarter revenue has grown at a CAGR (or compound annual revenue growth rate) of 5.0%.

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IFF’s revenue growth was primarily driven by the addition of new clients, an increase in volumes, and higher prices. Revenue grew in both of IFF’s reporting segments. We’ll discuss each of the reporting segments in detail later in this series. From a geographical perspective, all of its operating regions witnessed positive growth during the quarter. A significant portion of IFF’s revenue growth was organic growth. A very small portion of the revenue growth was related to the acquisition of PowderPure.

2018 revenue guidance

IFF expects the strong demand in both of its reporting segments to continue. As a result, IFF expects its revenue to grow in the range of 3.0%–5.0% on a neutral currency basis, which is unchanged from its previous guidance. The acquisition of Frutarom might also help to boost IFF’s growth depending on when the deal is closed.

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Management comments

Andreas Fibig, IFF’s chair and CEO, said, “We have started the year very well, with robust growth across all of our key financial metrics. Top-line trends remained strong in both businesses, with new wins, volume and pricing all contributing to growth. Our focus to drive differentiation, balance our customer base, maximize our portfolio and generate return is yielding strong results. Growth with local and regional customers was strong, growing four times faster than our global customers. Cosmetic Active Ingredients, sweetness and savory modulation, and POWDERPURE, on a standalone basis, also all grew double-digits.”

Investors looking for indirect exposure to IFF can invest in the First Trust Horizon Managed Volatility Domestic ETF (HUSV), which invests 1.9% of its portfolio in IFF. The other holdings of the fund include Ecolab (ECL), Lockheed Martin (LMT), and PPG Industries (PPG), which have weights of 2.8%, 1.5%, and 1.5%, respectively, as of May 7.

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