IFF Reports Strong Third Quarter 2015 Results
International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext Paris: IFF) reported financial results and strategic achievements for the third quarter ended September 30, 2015.
Win Where We Compete: achieve market leadership position in key markets, categories & customers
- North America Fragrance Compounds +7% led by double-digit Hair Care & Home Care growth
- Fragrances currency neutral sales in China +6% driven by strong growth with regional customers
- Home Care grew high-single-digits, on a currency neutral basis, as a result of strong new wins
- Flavors North America +19% including the acquisition of Ottens Flavors
- Flavors Latin America up double-digits, on a currency neutral basis, for the 8th consecutive quarter
Innovating Firsts: strengthen position and drive differentiation in priority R&D platforms
- Encapsulation-related sales improved double-digits in Fabric, Toiletries and Home Care
- Sweetness and Savory Modulation portfolio grew strong double-digits
- Commercialized two captive fragrance ingredients that drive greater differentiation
- Launched second natural taste modulator of 2015 to build consumer-preferred products
- Developed new capsule chemistry to strengthen participation beyond Fabric Care
Become Our Customers’ Partner of Choice: attain commercial excellence
- IFF-LMR Naturals & Haitian Vetiver partner certified “For Life” by the Institute of Marketecology
- Achieved additional core list status with several key customers across both flavors and fragrances
- Won North America innovation award with one of IFF’s largest Flavors customers
- Awarded Supplier Excellence award with one of IFF’s largest Fine Fragrance customers
- Gained industry-leading membership in the Together for Sustainability sustainable sourcing initiative and recognized by CDP as a world leader for corporate action on climate change
Strengthen and Expand the Portfolio: pursue value creation through collaborations & acquisitions
- Lucas Meyer Cosmetics achieved double-digit currency neutral sales growth on a standalone basis
- Ottens Flavors sales improved double-digits with strongest growth coming from regional customers
- Announced partnership with Vapor Communications to pioneer the future of digital scent
“We are pleased to report strong financial results in the third quarter, despite ongoing volatility in many key international markets,” said Chairman and CEO Andreas Fibig. “Thanks in large part to the diversity of our business and our recent acquisitions, we achieved strong revenue growth, gross margin expansion and double-digit increases in adjusted operating profit and adjusted EPS – all on a currency neutral basis.
“Currency neutral sales improved 7%, including three percentage points of growth relating to the acquisition of Ottens Flavors and Lucas Meyer Cosmetics. Overall our top-line performance continues to be driven by strong new wins, particularly in Fragrance Compounds, where the contributions from new wins were at the highest levels in nearly two years. Adjusted operating profit and adjusted EPS on a currency neutral basis grew at a rate faster than sales, both up 10%, as we benefitted from gross margin expansion and fixed cost leverage.
“With a focus on building greater differentiation, accelerating profitable growth and increasing shareholder value, we continued to make strides against our Vision 2020 strategy. In North America – one of the areas we are targeting for leadership positions – the Flavors team has done a nice job integrating our recent acquisition of Ottens Flavors. Leveraging their defined go-to-market strategy – geared toward ensuring we are the partner of choice for key regional accounts – Flavors North America was up 19%. In China, Fragrances grew 6% on a currency neutral basis, despite the volatile economic environment, as we continued to have success with many of the strong regional Consumer Fragrance brands.
“Delivery systems across both flavors and fragrances continued to drive growth. The strong trends in Fabric Care and Beverage continued in the third quarter, led by our encapsulation technology in fragrances and proprietary delivery system in flavors. We were also pleased with the sales of our sweetness and savory modulation portfolios which continued to produce strong results, increasing strong double-digits.
“In addition to the strides we have made from a market share and innovation perspective, we also made progress in our never-ending quest to “become our customers’ partner of choice.” Capitalizing on the trends in naturals, IFF-LMR Naturals received its fourth “For Life” Social Responsibility designation for its Haitian Vetiver operations. We are proud that our commitment to embedding sustainability throughout our business practices and our corporate culture is being acknowledge as evident by our recent CDP Climate “A” List perfect score. We also won an innovation award in North America with one of our largest Flavors customers, which recognizes partners for their thought leadership, and were awarded a supplier excellence award with a large Fine Fragrance customer.
“Strengthening and expanding our portfolio is a focus of ours as we diligently pursue value-creation opportunities in partnerships and collaborations. In the third quarter, we completed the acquisition of Lucas Meyer Cosmetics which helped us expand our product offerings beyond flavors and fragrances into cosmetic active ingredients. We are pleased to report that Lucas Meyer Cosmetics achieved strong double-digit currency neutral sales growth on a standalone basis – a good indication that we are putting our capital to work in areas that accelerate growth. To maintain our legacy of pioneering firsts, we also announced a partnership with Vapor Communications, which we believe will put us on the forefront of digital scent in the years to come.
“Based on our strong year-to-date results and our outlook for more modest sales growth in the fourth quarter – due to challenging comparisons that include an extra week of sales in the prior year – we continue to believe we can deliver 6% full year 2015 currency neutral sales growth, including acquisitions. To correspond with our top-line performance, we continue to believe we can deliver approximately 9% adjusted operating profit growth and 10% adjusted EPS growth, both on a currency neutral basis for full year 2015”.
Fragrances Business Unit
- Currency neutral sales improved 6%, including approximately two percentage points related to the acquisition of Lucas Meyer Cosmetics. Growth was led by high-single-digit growth in Latin America and mid-single-digit improvement in Greater Asia.
- Fine Fragrances increased 1% led by EAME, which improved 5%, as a result of very strong new wins. In Latin America, challenging economic conditions continue to impact Fine Fragrance sales, although the growth rate improved versus the second quarter.
- Consumer Fragrances grew 7% with broad-based growth led by a double-digit increase in Fabric Care and high-single-digit increase in Hair Care. On a geographic basis, all regions delivered growth, led by double-digits in Latin America, all on a currency neutral basis.
- Fragrance Ingredients grew 6% driven by the acquisition of Lucas Meyer Cosmetics. Our organic Fragrance Ingredients sales remained soft as we continued to utilize capacity to further strengthen our internal Fragrance Compounds business.
- Fragrances currency neutral segment profit improved approximately 15% driven by volume growth, benefits from cost and productivity initiatives and lower incentive compensation expense. Segment profit margin on a currency neutral basis increased 180 basis points to 22.4%.
- On a reported basis, sales decreased 2% to $406.0 million in the third quarter compared with $415.1 million in the prior year quarter. Fragrances segment profit increased 5%, or $4.3 million, to $90.9 million.
Flavors Business Unit
- Currency neutral sales grew 8%, including approximately four and a half percentage points related to the acquisition of Ottens Flavors. All categories experienced broad-based growth, with the strongest results in Beverage and Dairy.
- EAME improved 4% led by high-single-digit growth in Beverage. Western Europe reported the highest growth, improving 9%, driven by strong new win performance.
- North America grew 19% reflecting additional sales related to the acquisition of Ottens Flavors and high-double-digit growth in Dairy.
- Latin America increased 20% as all categories reported positive growth. The strong double-digit trend in Beverage continued for the 8th consecutive quarter. Savory and Dairy also grew double-digits as a result of strong new win performance.
- Greater Asia remained constant as growth in Indonesia, India, Singapore and Japan was offset by softness in China, most notably due to a challenging economic environment.
- Flavors currency neutral segment profit improved approximately 9% as sales growth, gross margin expansion and cost and productivity benefits more than offset the inclusion of amortization of intangibles related to the acquisition of Ottens Flavors. Segment profit margin on a currency neutral basis increased 10 basis points to 22.2% in the prior year quarter.
- On a reported basis, sales were flat going to $359.1 million from $358.7 million in the prior year quarter. Flavors segment profit remained constant at $79.8 million from $79.7 million.
A copy of the Company’s Quarterly Report on Form 10-Q will be available on its website at www.iff.com or at sec.gov by November 11, 2015.
A live webcast to discuss the Company’s third quarter 2015 financial results will be held on November 10, 2015, at 10:00 a.m. EST. Investors may access the webcast and accompanying slide presentation on the Company's website at www.iff.com under the Investor Relations section. For those unable to listen to the live broadcast, a recorded version of the webcast 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.
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 6,200 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 and LinkedIn.
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 for the fourth quarter and full year 2015, expected returns from our recent acquisitions and partnerships, and our ability to generate shareholder returns and sustain our long-term growth performance. 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 March 2, 2015. 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) the Company’s ability to implement its Vision 2020 strategy; (2) volatility and increases in the price of raw materials, energy and transportation; (3) the economic and political risks associated with the Company’s international operations; (4) the Company’s ability to benefit from its investments and expansion in emerging markets; (5) fluctuations in the quality and availability of raw materials; (6) changes in consumer preferences and demand for the Company’s products or a decline in consumer confidence and spending; (7) the Company’s ability to implement its business strategy, including the achievement of anticipated cost savings, profitability, realization of price increases and growth targets; (8) the Company’s ability to successfully develop new and competitive products that appeal to its customers and consumers; (9) the impact of a disruption in the Company’s supply chain or its relationship with its suppliers; (10) the impact of currency fluctuations or devaluations in the Company’s principal foreign markets; (11) any adverse impact on the availability, effectiveness and cost of the Company’s hedging and risk management strategies; (12) the effects of any unanticipated costs and construction or start-up delays in the expansion of the Company’s facilities; (13) the Company’s ability to successfully execute acquisitions, collaborations and joint ventures; (14) the Company’s ability to manage unanticipated costs and other adverse financial impacts in connection with its acquisitions; (15) the effect of legal and regulatory proceedings, as well as restrictions imposed on the Company, its operations or its representatives by U.S. and foreign governments; (16) adverse changes in federal, state, local and foreign tax legislation or adverse results of tax audits, assessments, or disputes; and (17) 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.
International Flavors & Fragrances Inc.
VP, Global Corporate Communications & Investor Relations:
Michael DeVeau, 212-708-7164
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