NEW YORK–(BUSINESS WIRE)– International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext Paris:IFF), a leading global creator of flavors, fragrances and cosmetic actives for consumer products, reported financial results and strategic progress for the second quarter ended June 30, 2015.
Win Where We Compete: achieve market leadership position in key markets, categories & customers
- Emerging markets +7% on a currency neutral basis
- Middle East and Africa currency neutral sales +22%
- Flavors North America +5% including the acquisition of Ottens Flavors
- Home Care increased high-single-digits globally on a currency neutral basis
Innovating Firsts: strengthen position and drive differentiation in priority R&D platforms
- Fabric Care grew mid-teens on a currency neutral basis driven by encapsulation technology
- Encapsulation grew strong double-digits in Toiletries, Home Care, and Personal Wash
- Flavors Latin America continued double-digit growth trend led by proprietary delivery system
- Sweetness and Savory Modulation portfolio grew strong double-digits
Become Our Customers’ Partner of Choice: attain commercial excellence
- Growth achieved across both global and regional accounts, with regionals outpacing in Flavors
- Expanded product offerings with acquisition of Lucas Meyer Cosmetics (LMC) in third quarter
- Launched & marketed Amber Xtreme TM for broad use within the fragrance industry
St rengthen and Expand the Portfolio: pursue value-creation through collaborations & acquisitions
- Accelerated growth potential by entering into cosmetic actives via acquisition of LMC
- Successfully completed Ottens Flavors acquisition – increasing market share in North America
- Established collaboration with Duke University for flavor modulation & the University of Liverpool for delivery systems in fragrances
“Strategically, we initiated the implementation of Vision 2020, which centers on building greater differentiation, accelerating profitable growth and increasing shareholder value,” said Chairman and CEO Andreas Fibig. “While still in the early days of execution, we are seeing that our identified strategic imperatives are the right ones.
“In the areas where we are targeting a market leadership position – Africa, the Middle East, and North America – we are seeing accelerated growth. We continue to leverage our long-standing presence in the emerging markets as they grew 7% on a currency neutral basis led by a 22% increase in the Middle East and Africa and strong growth in India, Brazil and Argentina. We also fortified our market share in North America – achieving the number two position in Flavors – as we successfully closed the acquisition of Ottens Flavors.
“Delivery systems across both flavors and fragrances continue to be a driver of results, proof that our focus on differentiating technology is correct. The strong trends in Fabric Care and Beverage continued in the second quarter, led by our encapsulation technology in fragrances and proprietary delivery system in flavors. In addition, we are very pleased that our sales of sweetness and savory modulation portfolio improved strong double-digits in the second quarter – an example that we are providing our customers with innovative solutions that win in the marketplace.
“Our continued commitment to provide our customers with in-depth local consumer understanding, superior innovation, outstanding service, and the highest quality products allowed us to capture the growth potential of faster-growing regional accounts, most noticeably in Flavors in the second quarter. We also broadened our product offerings – expanding into the more rapidly growing cosmetic actives industry with the recent acquisition of Lucas Meyer Cosmetics – offering our customers greater options to support their strategic growth initiatives.
“In line with our focus on strengthening and expanding our portfolio, we diligently pursued value-creation opportunities in partnerships and collaborations. We recently signed a partnership with Duke University focusing on finding effective flavor modulators that are novel to our industry. In addition, we are collaborating with the University of Liverpool to enhance our delivery system capabilities in fragrances.
“Leveraging our strong cash flow generation and commitment to Vision 2020, we increased our dividend by 20% for the third quarter and authorized an additional $250 million share repurchase – bringing our payout ratio to about 55% of our estimated adjusted net income in 2015.
“In the second quarter, we delivered financial results in line with the guidance we provided at our recent Investor Day. Currency neutral sales improved 4% on an organic basis or 5% including the acquisition of Ottens Flavors. Overall top-line performance continues to be driven by new wins – which remain solid – with growth balanced across both business units. Adjusted operating profit, on a currency neutral basis, grew 7% as a result of currency neutral gross margin expansion and lower RSA expenses. This solid operational performance, combined with a lower effective tax rate and a year-over-year decrease in average shares outstanding, drove currency neutral adjusted EPS higher by 10%.
“For the full year 2015, we expect currency neutral sales to grow about 6%, including approximately 2 percentage points related to the acquisitions of Ottens Flavors and Lucas Meyer Cosmetics. We expect this growth, combined with our continued cost control, should lead to approximately 9% adjusted operating profit growth and about 10% adjusted EPS growth, all on a currency neutral basis. Like many U.S. multinational companies, foreign exchange will continue to impact our financial results throughout the balance of the year. Based on where exchange rates are today, we would expect full year sales to be down approximately 1% and adjusted operating profit to rise 4% including the impact of currency.”
Fragrances Business Unit
- Currency neutral sales improved 4% led by double-digit growth in EAME and mid-single-digit improvement in Latin America.
- Fine Fragrances increased 2% led by double-digit performance in EAME. This strong growth more than offset softness in Latin America, where economic conditions, particularly in Brazil, have impacted discretionary spending.
- Consumer Fragrances grew 6% led by double-digit growth in Fabric Care and high-single-digit growth in Home Care. On a geographic basis, EAME and Latin America each had mid-teen growth rates.
- Fragrance Ingredients declined 3% primarily related to a strategic decision not to engage in lower margin businesses, and instead, utilize capacity to further strengthen the Fragrance Compounds business.
- Fragrance currency neutral segment profit improved approximately 5% driven by volume growth, cost savings initiatives and productivity programs. Segment profit margin on a currency neutral basis increased 20 basis points to 20.2%.
- On a reported basis, sales decreased 4% to $395.1 million in the second quarter compared with $412.9 million in the prior year quarter. Fragrances segment profit decreased 6%, or $5.6 million, to $79.9 million.
Flavors Business Unit
- Currency neutral sales grew 7%, including approximately 3 percentage points related to the acquisition of Ottens Flavors. All categories experienced broad-based growth, with the strongest results in Beverage and Savory.
- Greater Asia increased 6% driven by mid-single-digit gains in Savory, Beverage and Dairy. On a country perspective, strong growth was achieved in India, Indonesia and the Philippines, which more than offset a slight decline in China.
- EAME improved 6% led by a double-digit gain in Savory and mid-single-digit growth in Beverage. The Middle East and Africa reported the highest growth, improving over 20%, driven by strong new win performance.
- North America grew 5% reflecting additional sales related to the acquisition of Otten Flavors and high-double-digit growth in Dairy. As the Company explained at its Investor Day, the core business was soft principally due to underlying trends with select customers.
- Latin America increased 14% as all categories reported positive growth. The double-digit trend in Beverage continued for the seventh consecutive quarter. Savory and Dairy also grew double-digits as a result of strong new win performance.
- Flavors currency neutral segment profit improved approximately 1% as the benefit of topline growth, productivity and cost control initiatives was reduced by a year-over-year increase in incentive compensation expense and the inclusion of amortization of intangibles related to the acquisition of Ottens Flavors. Segment profit margin on a currency neutral basis decreased 140 basis points to 22.6% from 23.9% in the prior year quarter.
- On a reported basis, sales decreased 1%, or $3.0 million, to $372.5 million from $375.5 million in the prior year quarter. Flavors segment profit decreased 7%, or $6.8 million, to $84.0 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 August 12, 2015.
A live webcast to discuss the Company’s second quarter 2015 financial results will be held on August 11, 2015, at 10:00 a.m. EDT. 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 global creator of flavors and fragrances used in a wide variety of consumer products. Consumers experience these unique scents and tastes in fine fragrances and beauty care, detergents and household goods, as well as beverages, sweet goods and food products. The Company leverages its competitive advantages of consumer insight, research and development, creative expertise, and customer intimacy to provide customers with innovative and differentiated product offerings. A member of the S&P 500 Index, IFF has more than 6,200 employees working in 32 countries worldwide. For more information, please visit our website at www.iff.com; follow us on 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 second quarter and full year 2015, 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