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Beauty and fragrance performance cannot aid IFF as revenues slip

By Andrew MCDOUGALL , 07-Nov-2012

Despite Fragrance Compounds posting a sales increase in the third quarter, it was to no avail as International Flavors & Fragrances’ revenue dropped.

Reported revenue for the quarter totaled $709.0 million, a decrease of 1 percent from $713.8 million in the third quarter of 2011.

Meanwhile, sales of Fragrance Compounds, which includes Fine and Beauty Care and Functional Fragrance, increased 9 percent in local currency, marking the second consecutive quarter of accelerated growth in this segment.

Compounds up, Ingredients down

The third quarter local currency sales growth reflects double-digit growth in Fine Fragrance, Toiletries and Personal Wash, with the emerging markets growing in the high single-digits, led by 15 percent local currency sales growth in the Latin America region.

“Fragrance Compounds achieved 9 percent local currency growth, which was the result of 10 percent growth in Fine and Beauty Care and 8 percent growth in Functional Fragrance,” says CEO Doug Tough.

However, sales of Fragrance Ingredients declined 12 percent meaning the Fragrance business unit reported that revenue decreased to $368.3 million, compared with $373.2 million in the third quarter of 2011.

“We saw strong momentum in every region and end-use product category, with the exception of Fragrance Ingredients,” adds Tough.

Margin recovery

However, despite the decrease in sales, the IFF boss highlights that the business delivered solid top-line growth and margin recovery in the quarter, which he says [reflects] the strength, stability and diversity of our business, even with ongoing economic uncertainty in many parts of the world.”

“By focusing on the execution of our strategic priorities we achieved local currency growth of 7 percent on a like-for-like basis, which was the highest growth we have achieved since the first quarter of 2011.”

This has been enabled thanks to the strategic investments IFF has made in emerging markets over the last few years, as it looks to drive the business forward in the long run.

Effects of Sandy

Looking ahead at the fourth quarter, Tough took a moment to explain that IFF’s operations were impacted by Hurricane Sandy, resulting in short-term disruptions in power, manufacturing and information technology systems.

Most of these disruptions have been resolved, and as a result, orders are being processed and shipped from all of its sites, and all its critical business systems are operational.

“We are currently assessing the costs and other impacts resulting from the hurricane, and we do not expect them to have a material financial impact on our fourth quarter results,” he adds.

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