International Flavors & Fragrances Inc.

This is our first report on International Flavors and Fragrances (IFF), one of the global market leaders in the production of cosmetic active and natural health ingredients for use in consumer products. The company delivered a mixed set of results in its most recent quarter as it failed to meet the market expectations on the revenue front but managed an earning beat. The increase in sales in the quarter was driven primarily by double-digit growth in its pharma and nourish solutions divisions. In the quarter, pricing was quite a strong contributor to the growth, and in the quarter, volumes were down marginally.The management is working diligently to operationalize its new divisional strategies and execute integrated, focused, and value-additive strategies in the marketplace and with its customers. In spite of its volatile market environment, IFF continues to execute its operational priorities for achieving strong bottom and top-line results. IFF invested $30 million to expand its regional footprint in Singapore. It also continues to progress against its portfolio optimization efforts, having completed successfully the divestiture of its Microbial Control business at the beginning of the quarter. We initiate coverage on the stock of IFF with a ‘Hold’ rating.