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International Flavors & Fragrances Buys 70% Stake in Leagel

Zacks

International Flavors & Fragrances Inc. IFF recently announced that its Frutarom division has acquired 70% stake in Leagel. Based in San Marino, Italy, a family-owned company, Leagel, is a leading producer of ice cream and gelato ingredients in Europe. The company specializes in artisanal taste, toppings and texture which are sold directly to ice cream and gelato shops.

The buyout positions the International Flavors & Fragrances well with its previous acquisition of SDFLC Brasil Indústria E Comércio Ltda. ("SDFLC") in 2017. SDFLC is a top Brazilian producer of taste solutions for ice creams and desserts.

Notably, by combining these companies, International Flavors & Fragrances will create a global platform for the ice-cream ingredients business, expand its geographical presence and leverage cross-selling opportunities.

Leagel serves 1600 direct customers and distributors, with a geographic reach in 25 European countries. The company has a wide range of offerings from individual artisanal ingredients, to a full suite of products and equipment for the ice cream and gelato retailer. Moreover, International Flavors & Fragrances retains an option for the remaining 30% stake in Leagel to be exercised after three years.

Shares of International Flavors & Fragrances have lost around 9.9%, over the past year, against the industry’s 1.3% growth.



In 2017, Frutarom had paid $33 million to acquire 80% of SDFLC’s shares. Last October, International Flavors & Fragrances completed the acquisition of Frutarom, an Israeli company which develops, produces and markets flavors and fragrances with expansion into fast-growing categories, like savory solutions, natural colors, natural food protection and health ingredients. Together, International Flavors and Frutarom created a global leader in natural taste, scent and nutrition, with a broader customer base, more diversified product offerings and increased exposure to end markets, including those with a focus on naturals, and health and wellness.

In the Dec-end quarter, International Flavors & Fragrances’ adjusted earnings per share declined 19% on a year-over-year basis to $1.22 per share. However, net sales surged 43% year over year to $1.22 billion.

For 2019, International Flavors & Fragrances has provided its sales guidance of $5.2-$5.3 billion. Adjusted earnings per share are expected in the band of $4.90-$5.10 and adjusted earnings, excluding amortization, will likely be in the range of $6.30-$6.50. However, the company expects raw material costs to inflate in the current year.

The global market for flavors and fragrances continues to grow, propelled by rising demand for a variety of consumer products containing flavors and fragrances, which bodes well for the company's growth. Moreover, the company will gain on cost-cutting efforts, productivity initiatives, acquisitions despite input-cost inflation, unfavorable foreign currency and high debt levels.

Internationa Flavors & Fragrances, Inc. Price and Consensus


Internationa Flavors & Fragrances, Inc. Price and Consensus | Internationa Flavors & Fragrances, Inc. Quote

Zacks Rank & Stocks to Consider

International Flavors & Fragrances currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Basic Materials sector are Ingevity Corporation NGVT, Innospec Inc. IOSP and Materion Corporation MTRN, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingevity has an expected earnings growth rate of 17.9% for 2019. The company’s shares have rallied 34.8%, over the past year.

Innospec has a projected earnings growth rate of 3.5% for the current year. The stock has appreciated 17.3% in a year’s time.

Materion has an estimated earnings growth rate of 12.6% for the ongoing year. The company’s shares have gained 4.8%, in the past year.

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