IFF sales up, profits decline

11 Nov 2016

IFF has reported net sales of $777.0 million, an increase of 2% from $765.1 million in the third quarter of 2015, but reported operating profit declined from $156.7 million in the third quarter of 2015 to $124.3 million.

IFF sales up, profits decline

IFF has reported its third quarter financial results. Reported net sales totalled $777.0 million, an increase of 2% from $765.1 million in the third quarter of 2015. Excluding the impact of foreign exchange, currency neutral sales increased 3%.

Reported operating profit declined from $156.7 million in the third quarter of 2015 to $124.3 million in the third quarter of 2016, including a charge of $25 million related to a reserve for litigation. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted operating profit decreased 4% as volume growth and the benefits associated with cost and productivity initiatives were more than offset by unfavourable mix and manufacturing performance as well as increases in research, selling and administrative costs (RSA), including planned strategic investments.

Reported earnings per share (EPS) decreased from $1.31 per diluted share in the prior year period, to $1.12 per diluted share compared to the third quarter of 2016. Excluding the impact of foreign exchange and those items that affect comparability, adjusted currency neutral EPS declined 1%, as lower year-over-year shares outstanding and a favourable year-over-year effective tax rate were more than offset by operating profit performance.

“In the third quarter, we continued to drive the execution of Vision 2020,” said Chairman and CEO Andreas Fibig. “In the key areas we’ve identified – encapsulation, modulation, North America, Africa and the Middle East – we continue to make progress against our strategic goals. We also accelerated our efforts in M&A recently, with the addition of approximately $160 million in expected annualized sales from David Michael and Fragrance Resources – both of which complement our strategic vision well.

“Financially, third quarter currency neutral sales grew 3%, led by an improved performance in Flavors and the contribution from the IFF | Lucas Meyer Cosmetics acquisition. Driven by new win performance, growth was achieved across both business units. From a currency neutral operating profit perspective, we anticipated performance to be muted given the timing of planned investments, yet results came in softer than expected due principally to unfavorable mix and higher manufacturing costs. As we progress in the fourth quarter, we are optimistic that sales, operating profit and EPS growth – on a currency neutral basis – will all improve sequentially.

“For the full year, despite challenging conditions given a higher level of economic uncertainty and limited volume growth by many consumer packaged goods companies, we are pleased to say that we are in a position to deliver solid top- and bottom-line growth in 2016. Longer-term, we believe that our investment in innovation will enable us to accelerate sales performance while simultaneously driving productivity improvements to ensure sustainable profit growth. We’re confident that by doing so, the cumulative benefits will lead to improved value creation for our customers, employees and shareholders.”