|IFF Reports Third Quarter 2010 Results|
Adjusted Operating Margin 18.3%, Reported Operating Margin 17.9%
Adjusted EPS Increased 20%, Reported EPS Up 44%
NEW YORK, Nov 04, 2010 (BUSINESS WIRE) --
International Flavors & Fragrances Inc. (NYSE: IFF), a leading global creator of flavors and fragrances for consumer products, today reported third quarter 2010 revenue of $673 million, 10 percent higher than the prior year quarter. Revenue in local currency increased 13 percent as foreign currency had a three percentage point impact on results. Reported earnings per share (EPS) were $0.95, compared to $0.66 for the third quarter 2009. EPS in 2010 included a $0.03 per share expense related to ongoing restructuring efforts in Europe, while third quarter 2009 included a $0.16 per share expense relating to restructuring and employee separation costs. Excluding these items, adjusted EPS for the third quarter increased 20 percent to $0.98 versus $0.82 in the prior year quarter.
"Our third quarter performance marks the continuation of excellent results," said IFF Chairman and Chief Executive Officer Doug Tough. "All categories performed at or above expectations, as both Flavor and Fragrance results were once again supported by strong new win performance. This outstanding top-line performance combined with our continued focus on cost discipline enabled us to deliver a margin profile that has not been achieved in over five years."
Mr. Tough continued, "As we look towards the balance of the year, we expect local currency sales in the fourth quarter to remain strong, albeit approaching more normalized levels. We believe that our teams' continued ability to win new business will be a critical driver of results going forward as it appears that the benefits of restocking are subsiding. We expect that this performance will support our efforts to drive market share improvements while also creating long-term value for our shareholders."
Flavor Business Unit
Local currency sales in the third quarter increased 10 percent over the comparable 2009 period as all regions reported strong results. For the third consecutive quarter, an accelerated level of demand from existing accounts and new business wins led to double-digit growth in Europe, Africa, Middle East (EAME) and Greater Asia. Performance in North America continued to benefit from double-digit performances in both Confectionery and Beverage; while Latin America experienced strong double-digit growth in Confectionery, Savory and Dairy.
Reported operating profit increased 15 percent year-over-year, or $8 million, to $63 million in the third quarter. This increase was driven by accelerated sales growth, improving input costs and our continued margin improvement initiatives. Operating profit margin in the quarter improved 100 bps to 21.0 percent versus 20.0 percent in the prior year period.
Fragrance Business Unit
Local currency sales in the third quarter increased 15 percent over the prior year period as all regions reported double-digit growth. New business wins and increased volumes once again drove double-digit growth in Fine Fragrance. In Beauty Care, the strong trends in Hair Care and Toiletries continued, as each category grew at a double-digit rate. Functional Fragrance results were solid, as a double-digit performance in Home Care more than offset challenging year-over-year comparison from the prior year period. In Fragrance Ingredients, local currency sales increased 18 percent as continued improvements in underlying demand aided results.
Operating profit increased by $22 million to $69 million in the third quarter, including a $2 million charge related to ongoing restructuring efforts in Europe as compared to $11 million related to restructuring costs in the prior year period. Excluding these items, adjusted operating profit grew 23 percent, or $13 million to $71 million. As a result, adjusted operating profit margin for the quarter increased 190 bps to 19.0 percent, driven by strong new win performance, favorable input costs and benefits from ongoing profit improvement initiatives.
Sales performance by region and product category follows:
Third Quarter 2010 Highlights
International Flavors & Fragrances Inc. (NYSE: IFF), is a leading global creator of flavors and fragrances used in a wide variety of consumer products and packaged goods. Consumers experience these unique scents and tastes in fine fragrances and beauty care, detergents and household goods, as well as beverages, confectionery and food products. The Company leverages its competitive advantages of brand understanding and consumer insight, combined with its focus on R&D and innovation, to provide customers with differentiated product offerings. A member of the S&P 500 Index, IFF has sales, manufacturing and creative facilities in 32 countries worldwide. For more information, please visit our website at www.iff.com.
An audio webcast to discuss the Company's third quarter 2010 financial results and outlook will be held today at 10:00 a.m. EST November 4, 2010. Interested parties can 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 replay will be available on the Company's website approximately one hour after the event and will remain available on the IFF website for one year from the date of broadcast.
Cautionary Statement Under The Private Securities Litigation Reform Act of 1995
Statements in this quarterly release, which are not historical facts or information, are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are based on management's current assumptions, estimates and expectations. Certain of such forward-looking information may be identified by such terms as "expect," "anticipate," "believe," "outlook," "guidance," "may" and similar terms or variations thereof. All information concerning future revenues, tax rates or benefits, interest and other savings, earnings and other future financial results or financial position such as our ability to satisfy our cash requirements, constitutes forward-looking information. Such forward-looking statements involve significant risks, uncertainties and other factors. Actual results of the Company may differ materially from any future results expressed or implied by such forward-looking statements. Such factors include, among othersthe following: general economic and business conditions in the Company's markets, including economic and recessionary pressures; energy and commodity prices; decline in consumer confidence and spending; the impact of currency fluctuation or devaluation in the Company's principal foreign markets and the impact on the availability, effectiveness and cost of the Company's hedging and risk management strategies; political uncertainties; fluctuating interest rates; volatility of the capital and credit markets and any adverse impact on our cost of and access to capital and credit; fluctuations in the price, quality and availability of raw materials; the Company's ability to implement its business strategy, including the achievement of anticipated cost savings, profitability and growth targets; the outcome of uncertainties related to litigation; the impact of possible pension funding obligations and increased pension expense on the Company's cash flow and results of operations; and 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. The Company intends its forward-looking statements to speak only as of the time of such statements and does not undertake or plan to update or revise them as more information becomes available or to reflect changes in expectations, assumptions or results.
Any public statements or disclosures by IFF following this report that modify or impact any of the forward-looking statements contained in or accompanying this report will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this report.
Certain other factors which may impact our financial results or which may cause actual results to differ from such forward-looking statements are also discussed in the Company's periodic reports filed with the Securities and Exchange Commission and available on the IFF website at www.iff.com under "Investor Relations." You are urged to carefully consider all such factors.
(1) Includes the following reclassifications and revision for the three and nine months ended September 30, 2009 to conform to the current year presentation: Cost of goods sold $0.1 million and $0.4 million, respectively; Research and Development (R&D) $(1.8) million and $(5.6) million, respectively; Selling and Administrative $1.7 million and $5.2 million, respectively. The adjustments to R&D above for the three and nine months ended September 30, 2009 include $(1.0) million and $(4.7) million, respectively, related to the revision of excess foreign R&D credits from income tax expense.
Certain reclassifications have been made to the prior year's operating activities to conform to the 2010 presentation.
(1) Includes $(1.0) million for the three months and $(4.7) million for the nine months ended September 30, 2009 related to the revision of excess foreign R&D credits from income tax expense to conform to current year presentation.
International Flavors & Fragrances Inc.
The following information and schedule provides reconciliation information between reported GAAP amounts and certain adjusted amounts. This information and schedule is not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.
SOURCE: International Flavors & Fragrances Inc.
International Flavors & Fragrances Inc.