IFF Gains From Focus on Growth Despite Low Food Ingredient Volumes

International Flavors & Fragrances Inc. IFF is focused on gaining share in emerging markets. Its disciplined approach to capital allocation will drive growth in the coming years. The company’s acquisitions and investments also bode well. International Flavors completed the sale of its Pharma segment to focus on its core business, which should drive growth in the coming years.

However, lower volume growth for its Food Ingredients business is expected to affect margins. The company is exposed to currency-translation risks, which impact its top-line growth.

Factors Aiding IFF’s Stock

Demand for Flavors & Fragrances: International Flavors is well-poised to benefit from the demand for a variety of consumer products containing flavors and fragrances going forward. Anticipated growth in emerging markets will likely be a key catalyst. International Flavors is focused on gaining share in emerging markets.

Backed by the company’s global presence, diversified business platform, broad product portfolio, and global and regional customer base, it will be able to capitalize on the expansion in flavors and fragrances markets, and deliver long-term growth. The company’s focus on driving greater efficiencies throughout the business through costs and productivity initiatives, margin improvement and acquisition-related synergies continues to drive profits.

Portfolio Optimization Efforts: To drive growth, the company plans to step up its investment in high-return businesses, such as Flavors, Fragrances, Health, Cultures & Food Enzymes. In May 2025, International Flavors completed the divestiture of its Pharma Solutions business unit to Roquette and its nitrocellulose business to Czechoslovak Group.

At the beginning of the first quarter of 2025, the company separated its Nourish segment into the Taste and Food Ingredients segments as part of a broader strategy to reorganize businesses around end markets.

At the end of the second quarter of 2025, the company announced that it inked an agreement to sell its soy crush, concentrates and lecithin business to Bunge. This move, expected to close by the end of 2025, aligns with International Flavors’ portfolio optimization goals and includes evaluating strategic alternatives for the Food Ingredients segment. These endeavors will enable the company to focus on its core business operations, strengthen its balance sheet and maximize shareholder returns.

Disciplined Capital Allocation Approach: International Flavors continues to maintain a disciplined approach to capital allocation even as it focuses on accelerating growth through organic investments and strategic acquisitions, while returning significant capital to shareholders.

It continues to effectively manage its balance sheet by taking necessary actions to generate strong cash flow and maintain ample liquidity by reducing operational and capital expenses. The completion of Pharma Solutions' divestiture further helped International Flavors deliver a net debt to credit-adjusted EBITDA of below 2.5X.

Near-Term Concerns for International Flavors’

The company's presence in international markets (accounting for 75% of its net sales) has exposed it to currency-translation risks. The company is working to offset tariffs, but uncertainty will likely continue to pose challenges. Moreover, the Food Ingredients business is expected to see lower volume growth in 2025.

The Pharma Solutions divestiture is expected to have a negative impact of five percentage points on top-line growth and a negative impact of six percentage points on adjusted EBITDA growth in 2025. The company anticipates fiscal 2025 sales between $10.6 billion and $10.9 billion. International Flavors’ net sales were $11.48 billion in 2024.

IFF Stock’s Price Performance

In the past year, the company’s shares have lost 17.8% against the industry’s 0.8% growth.

International Flavors’ Zacks Rank & Stocks to Consider

IFF currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the basic materials space are Agnico Eagle Mines AEM, Kinross Gold Corporation KGC and Fortuna Mining Corp. FSM. AEM and KGC sport a Zacks Rank #1 (Strong Buy), and FSM has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for Agnico Eagle Mines’ 2025 earnings is pegged at $7.77 per share. The estimate indicates year-over-year growth of 83.6%. It has an average trailing four-quarter earnings surprise of 11.6%. Agnico Eagle Mines’ shares have surged 107.6% in a year.

The Zacks Consensus Estimate for Kinross Gold’s 2025 earnings is pegged at $1.67 per share, suggesting year-over-year growth of 145%. Kinross Gold’s shares jumped 135% last year.

The consensus estimate for Fortuna Mining’s 2025 earnings is pegged at 76 cents per share. The estimate implies year-over-year growth of 65.2%. Fortuna Mining’s shares have surged 145.6% in a year.

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This article originally published on Zacks Investment Research (zacks.com).

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