IFF results suffer from weak fragrance sales

By Katie Bird

- Last updated on GMT

Related tags North america United states

International Flavors and Fragrances reports an increase in turnover and reiterates predictions for future growth, although fragrance sales continue to disappoint.

The New York-based company is suffering from the challenging economic environment in North America although strength in emerging markets is helping to offset some of the loss.

US sales struggle

Net sales for the second quarter of 2008 came in at $636m, an 11 per cent increase on the same period last year. However this figure was positively affected by currency fluctuations and is nearer 4 per cent in local currency terms, according to the company.

North American sales were particularly badly hit, especially in the fragrance division, although the quarter benefited from strong sales outside of the region.

“While North America continues to be a challenge, total company revenue benefited from growth in the Greater Asia and Latin American regions where sales grew 20 percent or more,”​ said IFF CEO Robert M. Amen.

In fact, more than 75 percent of the quarter’s total revenue came from outside North America and over a third from emerging markets, explained Amen.

However, this was not enough to offset the rising costs and the company’s bottom line fell 14 per cent to $6.7bn.

Fragrance drags down results

In a similar picture to this year’s first quarter it was fragrance sales that dragged down results.

On a local currency basis, sales for the division increased 1 per cent, reflecting an 11 percent decline in North American sales that was offset by strong results in the emerging markets.

Operating profit within the division also suffered, dropping 3 per cent to $56m.

It was not all doom and gloom within the division however as Amen expressed hope for the company’s fine fragrances sector that suffered particularly badly earlier this year, saying the latest results showed there was light at the end of tunnel.

Similarly the fragrance ingredients sector that suffered in the first quarter due to a drop in demand in the developed markets, improved as expected, he said.

Flavors boost the overall picture

Within the flavors division things look more positive with an 8 per cent increase in sales revenue.

Performance in Latin America was particularly strong as it was in Greater Asia with sales up 36 and 22 percent respectively.

According to the company, positive sales can be put down to new customers as well as increasing business with existing clients.

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