IFF – Market expectations are for record-high Uniform ROA, but management may have concerns about sales, integration plans, and costs

• International Flavors & Fragrances Inc. (IFF:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 31.8x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about sales performance in several segments, integration plan execution, and costs.
• Specifically, management is confident increases in the Health and Home & Personal Care segments were offset by pressures in Microbial Control and Grain Processing. Additionally, they may lack confidence in their ability to sustain sales performance in several segments, drive overall group operating efficiencies while executing integration plans, and meet their three-year run rate synergy target of $400 million. Moreover, management may have concerns about raw material availability and distribution costs being impacted by the shutdown of two plants, the time lag in input costs for some legacy F&F businesses, and pandemic-driven headwinds in Food Design driven by continued declines in Food Service.