International Flavors & Fragrances(US:IFF)2022-11-06 16:00Financial Performance - In Q3 2022, sales decreased by $8 million, or 0.3%, to $3.063 billion compared to $3.071 billion in Q3 2021; on a currency neutral basis, sales increased by 6%[192] - Gross profit in Q3 2022 decreased by $89 million, or 8%, to $1.001 billion, representing 32.7% of sales, down from 35.5% in Q3 2021[193] - Adjusted operating EBITDA in Q3 2022 decreased by $36 million, or 6%, to $612 million, which is 20.0% of sales, compared to 21.1% in Q3 2021; on a currency neutral basis, it increased by 2%[194] - Net sales for Q3 2022 decreased by $8 million, or 0.3%, to $3.063 billion compared to $3.071 billion in Q3 2021, but increased by 6% on a currency neutral basis[197] - The company experienced a net loss of $2.195 billion in Q3 2022, compared to a net income of $197 million in Q3 2021, resulting in a diluted net loss per share of $8.60[196] Segment Performance - Nourish segment sales increased by 2% to $1.703 billion, while Health & Biosciences sales decreased by 17% to $512 million in Q3 2022[198][200] - Pharma Solutions segment sales increased by 22% to $257 million, with a 28% increase on a currency neutral basis[202] - Nourish Segment Adjusted Operating EBITDA decreased by $40 million, or 12%, to $287 million in Q3 2022, with a margin of 16.9% compared to 19.7% in Q3 2021[215] - Health & Biosciences Segment Adjusted Operating EBITDA decreased by $14 million, or 9%, to $137 million in Q3 2022, with a margin of 26.8% compared to 24.4% in Q3 2021[216] - Scent Segment Adjusted Operating EBITDA decreased by $11 million, or 8%, to $119 million in Q3 2022, with a margin of 20.1% compared to 22.4% in Q3 2021[218] - Pharma Solutions Segment Adjusted Operating EBITDA increased by $29 million, or 73%, to $69 million in Q3 2022, with a margin of 26.8% compared to 19.0% in Q3 2021[219] Impairments and Charges - Goodwill impairment of $2.250 billion was recorded for the Health & Biosciences reporting unit due to carrying value exceeding fair value[183] - The company reported an impairment of goodwill of $2.250 billion in Q3 2022, related to the Health & Biosciences reporting unit[208] - The company recorded a charge of approximately $120 million related to the impairment of long-lived assets in Russia during Q2 2022[187] Cash Flow and Debt - Cash flows provided by operating activities decreased to $189 million, or 2.0% of sales, compared to $1.126 billion, or 13.1% of sales, in the prior year[245] - Cash flows provided by investing activities increased significantly to $887 million, driven by business divestiture proceeds and higher capital expenditures[248] - Cash flows used in financing activities rose to $1.087 billion, primarily due to higher repayments of commercial paper and increased cash dividend payments[250] - Total debt as of September 30, 2022, was $10.812 billion, with net debt at $10.274 billion after accounting for cash and cash equivalents[260] - The net debt to credit adjusted EBITDA ratio was 3.93 to 1.0, indicating compliance with financial covenants[257] Market and Operational Challenges - The company continues to face uncertainties and increased costs due to the ongoing COVID-19 pandemic, impacting margins and operating results[189] - The company anticipates inflationary pressures on input costs, including raw materials, transportation, and energy, which may affect future profitability[270] - The company faces risks related to supply chain disruptions and geopolitical developments, which could impact operations and financial performance[271] - The company has substantial indebtedness, which may affect liquidity and the ability to return capital to shareholders[271] Strategic Initiatives - The company is organized into four reportable segments: Nourish, Health & Biosciences, Scent, and Pharma Solutions, reflecting a diverse portfolio across various markets[174] - The integration of the N&B business is expected to yield benefits and synergies, although the timeline for realizing these benefits remains uncertain[271] - The company is focused on optimizing its manufacturing operations, with expected capital expenditures planned for 2022[270] - The company is pursuing a portfolio optimization strategy, including the divestiture of its Microbial Control business and the acquisition of Health Wright[270] - The company is committed to innovation and responding to consumer trends, which is critical for maintaining competitiveness in the market[271] - The company is actively managing its working capital and inventory balances to mitigate financial risks[271]