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International Flavors (IFF) to Sell Savory Solutions Group

International Flavors & Fragrances IFF announced it has entered into an agreement to divest the Savory Solutions Group to PAI Partners. The deal values the business at around $900 million. IFF intends to use the cash proceeds (net of taxes and expenses) to repay its debt. The sale aligns with IFF’s strategy to focus on highest-return businesses, improve capital structure and enhance its growth profile.

The Savory Solutions Group primarily focuses on ingredients for prepared foods and foodservice and includes products for butchers, and plant-based solutions for the vegan and vegetarian markets.  The business generated revenues of around $475 million over the last 12 months. It has units across Austria, Germany, Italy, Ireland, Poland, Canada, Mexico and Thailand and employs around 1,800 people.

PAI Partners is a leading global private equity firm with a strong focus on the food and consumer industry. IFF and PAI Partners expect to close the deal in the second quarter of 2023, subject to customary closing conditions.

Earlier this month, International Flavors provided details of its updated strategic plan and new operating model. The financial and strategic initiatives that the company elaborated on were - growth-focused strategy, enhanced cost & productivity initiatives, financial guidance, redesigning operating model, portfolio optimization, and governance and leadership.

IFF intends to transform its operating model into a more customer-centric and market-backed approach. To this end, it will conduct business in three core end markets — Food and Beverage, Home and Personal Care, and Health. IFF anticipates the new operating model to be completely operational by the end of 2023.

International Flavors & Fragrances also stated that it aims to continue to optimize its portfolio to improve its capital structure. The company had identified Savory Solutions, Texturants, Emulsifiers & Sweeteners and Protein Solutions as underperformers, which it intends to either exit or take initiatives to improve their results. The company had stated that by the end of the first quarter of 2023, it will announce the sale of three non-core assets. The proceeds from these are projected at $1.2 billion and will be utilized to lower debt levels. The current announcement of the Savory Solutions Group is in sync with this.  

To drive growth, IFF plans to step up its investment in high-return businesses such as Cosmetic Ingredients, Fine Fragrance, Flavors, Cultures & Food Enzymes, Health, Food Design (excluding the Savory Solutions unit that is being divested), Fragrance Ingredients and Consumer Fragrance.

Price Performance

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In the past year, International Flavors’ shares have lost 28.6% compared with the industry’s 33% decline.

Zacks Rank & Key Picks

International Flavors currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Consumer Staples sector are Archer Daniels Midland ADM, Ambev ABEV, and Coca-Cola Europacific Partners CCEP. ADM sports a Zacks Rank #1 (Strong Buy), while ABEV and CCEP hold a Zacks Rank #2 (Buy) at present.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Archer Daniels Midland’s earnings surprise in the last four quarters was 26.2%, on average. In the past 60 days, its earnings estimates have gone up 8% for 2022. For the ongoing year, the bottom line is estimated to be $7.47, suggesting growth of 44% from the previous year’s level. ADM stock has gained 44% in the past year.

Ambev has an estimated year-over-year earnings growth rate of 6.7% for the current fiscal year. The earnings per share estimate is currently pegged at 16 cents. The estimates have been revised by 7% north in the past 60 days. ABEV has an average trailing four-quarter earnings surprise of 4.4%. Its shares have gained 7% over the past year.

Coca-Cola Europacific Partners has an estimated year-over-year earnings growth rate of 1.5% for the current fiscal year. The earnings estimate is currently pegged at $3.40 per share. The estimates have been revised 3.3% north in the past 60 days. CCEP shares have gained 3% over the past year.

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