Plant closure expenses drag profits down at IFF

By Katie Bird

- Last updated on GMT

Related tags North america Flavor United states Ceo

Sales were showing signs of recovery for International Flavors and Fragrances in the third quarter, but profits were dragged down by charges.

The New Jersey-based company posted sales for the third quarter of $612.6m, a drop of one percent when compared to last year’s figures. However, sales were negatively impacted by a stronger dollar and in local currencies they grew 2 percent.

Both of the company’s business segments posted a slight increase in sales in local currencies, flavor revenue was up 2 percent and fragrance 3 percent.

Fragrance driven by emerging markets

In the fragrance sector this was led by beauty care and functional fragrances which both achieved low double-digit gains.

However, the picture for fine fragrances and fragrance ingredients was not so positive, as the former recorded a sales decrease of 9 percent and the latter reported zero growth.

Although these segments continue to suffer, performance is significantly better than in the first half of 2009 which the company said reflects a drop in customer destocking and increased consumer demand.

As with many of its competitors, emerging markets produced stellar performances, in particular Greater Asia where sales grew 22 percent when compared to last year’s figures. Latin America reported growth of around 3 percent.

Flavor strong in North America

In contrast it was North America that led sales in the flavor business segment, reporting a 5 percent increase over the comparable quarter in 2008. Sales were flat in Greater Asia and dropped 5 percent in Latin America.

Savory flavors did particularly well with new contracts in North America and confectionary and dairy led the way in Europe, according to the company.

Operating profit for the sector was pushed up by higher prices and lower expenses and came in at $55m for the quarter, $3m higher than last year.

Conversely, at $46m the operating profit in the fragrance segment was not so strong and dropped $9m on last year’s figure. This, the company said, was due to costs related to the closure of a number of plants in Europe. Taking account of these one-off expenses leads to an increase in operating profit for the sector of $2m.

Net income down

In addition to expenses related to plant closures, costs related to the changing of the company's CEO also had a negative impact on net income for the quarter, which dropped $5m to $53m.

In mid September, Richard Amen publicly resigned as the company’s CEO and Chairman. From the October 1 the CEO position was held temporarily by three executives, CFO Kevin Berryman, group president of fragrances Nicolas Mirzayantz, and group president of flavors Hernan Vaisman. The company plans to permanently appoint Douglas Tough to the CEO position.

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