IFF Reports First Quarter 2018 Results
International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext Paris: IFF) reported financial results and strategic achievements for the first quarter ended March 31, 2018.
“We have started the year very well, with robust growth across all of our key financial metrics,” said IFF Chairman and CEO Andreas Fibig. “Top-line trends remained strong in both businesses, with new wins, volume and pricing all contributing to growth. Our focus to drive differentiation, balance our customer base, maximize our portfolio and generate return is yielding strong results. Growth with local and regional customers was strong, growing four times faster than our global customers. Cosmetic Active Ingredients, sweetness and savory modulation, and POWDERPURE, on a standalone basis, also all grew double-digits.
“Cost and productivity initiatives continued to play an integral role in our ability to invest in the business while delivering robust profit growth. Through the combination of these initiatives, as well as our strong sales growth, we delivered double-digit operating profit and EPS growth.”
Mr. Fibig added, “We are off to a strong start to the year and that gives us added confidence in achieving our financial objectives for 2018. And while it’s still early in the year, we believe we will be closer to the upper end of our previously communicated sales and operating profit guidance range.”
First Quarter 2018 Consolidated Financial Highlights
Reported net sales for the first quarter totaled $931 million, an
increase of 12% from
$828 million in 2017. Excluding the impact of foreign exchange, currency neutral sales increased 7% over the prior year.
- Reported operating profit for the first quarter was $175 million versus $130 million reported in 2017, an increase of 34%. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted operating profit grew 12%, principally driven by volume growth, the benefits associated with cost and productivity initiatives and favorable sales mix.
- Reported earnings per share (EPS) for the first quarter was $1.63 per diluted share versus $1.45 per diluted share reported in 2017. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted EPS improved 12%.
Flavors Business Unit
- On a reported basis, sales increased 11%, or $42.9 million, to $449.0 million. Currency neutral sales grew 6% driven by growth in all categories and nearly all regions.
- EAME increased 24% on a reported basis and 11% on a currency neutral basis, led by strong double-digit growth in Africa and the Middle East as well as mid-single digit growth in Europe. Growth was achieved across all categories, led by strong performances in Dairy, Savory, and Beverage.
- North America improved 10% driven by double-digit growth at Tastepoint℠ and strong new wins in Beverage and Dairy.
- Latin America decreased 2% on a reported and currency neutral basis. Mid-single digit growth in South Cone was more than offset by softness in Mexico and Colombia – both of which grew strong double-digits in the year-ago period. On a category basis, strong double-digit growth was achieved in Savory as well as low-single digit growth in Dairy.
- Greater Asia increased 6% on a reported basis and 2% on a currency neutral basis, as double-digit growth in India and China was muted by softness in Indonesia and the ASEAN region. On a category basis, growth was strongest in Sweet, Savory and Dairy.
- Flavors segment profit increased 18% on a reported basis and 15% on a currency neutral basis, driven primarily by volume growth, the benefits from productivity initiatives and favorable sales mix.
Fragrances Business Unit
- On a reported basis, sales increased 14%, or $59.8 million, to $481.9 million. Currency neutral sales improved 8%, with broad-based growth from all categories and regions.
- Fine Fragrances increased 12% on a reported basis and 4% on a currency neutral basis led by strong double-digit growth in LATAM and North America.
- Consumer Fragrances grew 11% on a reported basis and 6% on a currency neutral basis with growth achieved in all categories. Performance was led by high-single digit increases in Home Care, Toiletries, and Hair Care. On a geographic basis, growth was broad-based, with all regions contributing positively to the results.
- Fragrance Ingredients grew 26% on a reported basis and 18% on a currency neutral basis, with growth in all regions as well as very strong double-digit growth in Cosmetic Active Ingredients.
- Fragrances segment profit increased 20% on a reported basis and 12% on a currency neutral basis driven primarily by volume growth and the benefits from cost and productivity initiatives.
IFF to Combine with Frutarom Industries Ltd.
In a separate press release issued today, IFF announced its intention to combine with Frutarom Industries Ltd. to create a global leader in taste, scent and nutrition. To access the press release, please visit our press release page here.
A live webcast to discuss the Company’s first quarter 2018 financial results will be held on May 7, 2018, at 8:00 a.m. ET. Investors may access the webcast and accompanying slide presentation on the Company's IR website at ir.iff.com. For those unable to listen to the live webcast, a recorded version will be made available on the Company's website approximately one hour after the event and will remain available on IFF’s website for one year.
Cautionary Statement Under The Private Securities Litigation Reform Act of 1995
This press release includes “forward-looking statements” under the Federal Private Securities Litigation Reform Act of 1995, including statements regarding our outlook in our full year 2018 guidance, including our focus to drive differentiation, balance our customer base, maximize our portfolio and our ability to deliver growth across all of our key financial metrics and the impact of our actions on value creation for our shareholders. These forward-looking statements are qualified in their entirety by cautionary statements and risk factor disclosures contained in the Company’s Securities and Exchange Commission filings, including the Company’s Annual Report on Form 10-K filed with the Commission on February 27, 2018. The Company wishes to caution readers that certain important factors may have affected and could in the future affect the Company’s actual results and could cause the Company’s actual results for subsequent periods to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. With respect to the Company’s expectations regarding these statements, such factors include, but are not limited to: (1) macroeconomic trends affecting the emerging markets; (2) the Company’s ability to implement and adapt its refreshed Vision 2020 strategy; (3) the Company’s ability to successfully identify and complete acquisitions in line with its Vision 2020 strategy, and to realize the anticipated benefits of those acquisitions; (4) the Company’s ability to realize the benefits of its cost and productivity initiatives, (5) the impact of the disruption in supply of citral from BASF on the price and availability of citral in 2018; (6) the Company’s ability to effectively compete in its market, and to successfully develop new, cost-effective and competitive products that appeal to its customers and consumers; (7) changes in consumer preferences and demand for the Company’s products or a decline in consumer confidence and spending; (8) the Company’s ability to benefit from its investments and expansion in emerging markets; (9) the impact of recently enacted U.S. tax legislation on the Company’s effective tax rate in 2018 and beyond; (10) the impact of currency fluctuations or devaluations in the principal foreign markets in which it operates; (11) the economic and political risks associated with the Company’s international operations, including challenging economic conditions in China and Latin America; (12) the impact of any failure or interruption of the Company’s key information technology systems or a breach of information security; (13) the Company’s ability to attract and retain talented employees; (14) the Company’s ability to comply with, and the costs associated with compliance with U.S. and foreign environmental protection laws; (15) the Company’s ability to realize expected cost savings and efficiencies from its profitability improvement initiative and other optimization activities; (16) volatility and increases in the price of raw materials, energy and transportation; (17) price realization in a rising input cost environment (18) fluctuations in the quality and availability of raw materials; (19) the impact of a disruption in the Company’s supply chain or its relationship with its suppliers; (20) any adverse impact on the availability, effectiveness and cost of the Company’s hedging and risk management strategies; (21) the Company’s ability to successfully manage its working capital and inventory balances; (22) uncertainties regarding the outcome of, or funding requirements related to litigation or settlement of pending litigation uncertain tax positions or other contingencies; (23) the effect of legal and regulatory developments, as well as restrictions or costs that may be imposed on the Company or its operations by U.S. and foreign governments; (24) adverse changes in federal, state, local and international tax legislation or policies, including with respect to transfer pricing and state aid, and adverse results of tax audits, assessments, or disputes; and (25) changes in market conditions or governmental regulations relating to our pension and postretirement obligations. New risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risks on the Company’s business. Accordingly, the Company undertakes no obligation to publicly revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Use of Non-GAAP Financial Measures
We provide in this press release (1) Currency Neutral Sales, (2) Adjusted Operating Profit and Currency Neutral Adjusted Operating Profit and (3) Adjusted EPS and Currency Neutral Adjusted EPS, which exclude restructuring costs and other significant items of a non-recurring and/or nonoperational nature such as legal charges/credits, gain on sale of assets, operational improvement initiatives, integration costs, FDA mandated recall costs, acquisition related costs and U.S. Tax reform (often referred to as “Items Impacting Comparability”) and, with respect to the currency neutral items, the impact of foreign currency movements. We provide these metrics as we believe that they are useful in providing period to period comparisons of the results of our operational performance. When we provide our expectations for our currency neutral metrics in our full year 2018 guidance, we estimate the anticipated FX impact by comparing prior year results to the prior year results restated at exchange rates in effect for the current year based on the currency of the underlying transaction. When we provide our expectations for our Adjusted Operating Profit and our Adjusted EPS in our full year 2018 guidance, the closest corresponding GAAP measures (expected reported Operating Profit and EPS) and a reconciliation of the differences between the non-GAAP expectation and the corresponding GAAP measure generally are not available without unreasonable effort due to inherent difficulty of forecasting the timing and amount of reconciling items that would be excluded from the GAAP measure in the relevant future period and the relevant tax impact of such reconciling items on EPS. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results. Currency Neutral Sales, Adjusted Operating Profit, Currency Neutral Adjusted Operating Profit, Adjusted EPS and Currency Neutral Adjusted EPS should not be considered in isolation or as substitutes for analysis of the Company’s results under GAAP and may not be comparable to other companies’ calculation of such metrics.
International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext Paris: IFF) is a leading innovator of sensorial experiences that move the world. At the heart of our company, we are fueled by a sense of discovery, constantly asking “what if?”. That passion for exploration drives us to co-create unique products that consumers taste, smell, or feel in fine fragrances and beauty, detergents and household goods, as well as beloved foods and beverages. Our 7,300 team members globally take advantage of leading consumer insights, research and development, creative expertise, and customer intimacy to develop differentiated offerings for consumer products. Learn more at www.iff.com, Twitter , Facebook , Instagram , and LinkedIn.
International Flavors & Fragrances Inc.
Michael DeVeau, 212-708-7164
VP, Corporate Strategy, Investor Relations & Communications
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