NEW YORK - International Flavors & Fragrances Inc. (NYSE: NYSE:IFF) reported a challenging fourth quarter, with earnings per share (EPS) of $0.72, falling short of Wall Street's expectations by $0.06. The company's revenue for the quarter was $2.7 billion, aligning closely with the analyst consensus of $2.69 billion.
However, the company's outlook for the full year 2024 dampened investor sentiment, as IFF forecasted revenue between $10.8 billion and $11.1 billion, well below the consensus estimate of $11.43 billion. Following the earnings release, IFF's stock price dropped significantly by 7.3%.
IFF CEO Erik Fyrwald expressed optimism despite the uncertain operating environment, highlighting sequential improvements in volume and double-digit growth in adjusted operating EBITDA on a currency-neutral basis. Fyrwald also noted the company's updated dividend policy aimed at strengthening the capital structure and enhancing financial flexibility.
The reported net sales for the fourth quarter saw a 5% decrease compared to the previous year, while currency-neutral sales increased by 1%, driven by growth in the Scent and Health & Biosciences segments. The quarter's loss before taxes was significantly impacted by a non-cash goodwill impairment charge of $2.6 billion. Excluding this charge, the adjusted operating EBITDA for the quarter was $461 million, marking a 17% increase on a currency-neutral basis, primarily due to favorable net pricing and productivity gains.
For the full year 2023, IFF reported net sales of $11.48 billion, an 8% decrease from the previous year. The company faced a reported loss before taxes of $2.52 billion for the year, again largely due to the goodwill impairment charge. The adjusted operating EBITDA for the year was $1.98 billion, with a decrease of 10% on a currency-neutral basis, as pricing and productivity gains were unable to fully offset lower volumes and manufacturing absorption related to inventory reduction efforts.
The company's cash flow from operations for the full year was $1.44 billion, with free cash flow totaling $936 million. IFF's total debt to trailing twelve months net loss at the end of the fourth quarter was (3.9)x, with net debt to credit-adjusted EBITDA at 4.5x.
In light of the continued macroeconomic uncertainty, IFF expects volume growth to be between 0% and 3% for 2024, with pricing expected to decline approximately 2.5%. Despite these challenges, the company anticipates that comparable currency-neutral adjusted operating EBITDA will grow at a faster rate than sales, between 3% and 11%, driven by improving volumes and productivity gains.
The company's Board of Directors, in conjunction with the management team, has revised the dividend policy, reducing the expected quarterly dividend by approximately 50% to $0.40 per share, which corresponds to $1.60 per share annually.
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