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Press release from Business Wire

IFF Reports First Quarter 2012 Results

<p class='bwalignc'> <i>Local Currency Sales Up 1%, Sales Decreased 1%</i> </p> <p class='bwalignc'> <i>Adjusted Operating Profit Fell 8%, Reported Operating Profit Declined 9%</i> </p> <p class='bwalignc'> <i>Adjusted EPS Down 3%, Reported EPS Decreased 4%</i> </p>

Tuesday, May 08, 2012

IFF Reports First Quarter 2012 Results06:40 EDT Tuesday, May 08, 2012 NEW YORK (Business Wire) -- International Flavors & Fragrances Inc. (NYSE: IFF), a leading global creator of flavors and fragrances for consumer products, today reported first quarter 2012 revenue of $711 million, one percent lower than the prior year period. Excluding the impact of foreign currency, revenue in local currency increased one percent. Reported diluted earnings per share (EPS) for the quarter were $0.99 compared to $1.03 in the first quarter 2011. Excluding an expense of $0.01 per share in the first quarter 2012 related to the previously-announced restructuring initiative, adjusted EPS declined three percent to $1.00 versus $1.03 in the prior year quarter. “IFF continued to execute its strategy and generated results broadly in line with our expectation,” said IFF Chairman and Chief Executive Officer Doug Tough. “The diversity and strength of our category and geographic portfolios, combined with our cost discipline, helped ease the impact of rising raw material costs, softness in Fragrance Ingredients, and a challenging macroeconomic environment. Going forward, we expect our business trends will improve over the course of the year as we continue to capitalize on our strong emerging market presence, healthy research and development pipeline, and profit improvement initiatives.” FIRST QUARTER 2012Flavors Business Unit Sales increased three percent over the prior year period while local currency sales grew five percent. On a like-for-like basis, which excludes a one percentage point impact associated with the exit of low-margin business, local currency sales increased six percent. Overall growth can once again be attributed to a double-digit performance in the emerging markets led by Africa, Asia and the Middle East. In the developed markets of North America and Western Europe, more modest growth continued to be driven by health and wellness initiatives. Operating profit increased one percent, or $1 million, to $80 million as volume growth, higher pricing and cost discipline primarily drove results. Operating profit margin decreased 50 bps versus the prior year period to 22.8 percent due to higher raw material costs. Fragrances Business Unit Sales decreased four percent over the prior year period while local currency sales declined three percent. Fine Fragrance & Beauty Care sales showed significant improvements versus the fourth quarter 2011 driven by positive trends in Fine Fragrance. In Functional Fragrance, strong new wins in Fabric Care continued to drive solid sales results. Despite a sequential improvement versus the fourth quarter 2011, Fragrance Ingredients remained under pressure as higher prices to protect margin continued to have a negative impact on volume. Operating profit declined 18 percent, or $13 million, to $56 million as increases in raw material costs and volume declines more than offset higher prices and cost control initiatives. Operating profit margin fell 280 bps to 15.5 percent versus the year-ago period. Sales Performance by Region and Category:     First Quarter 2012 vs. First Quarter 2011Fine & Beauty Care   Functional   Ingredients   Total Frag.   Flavors   Total           North AmericaReported4%1%-1%1%3%2%   EAME ¹Reported-9%3%-17%-7%0%-4% Local Currency -7% 5% -16% -5% 3% -2%   Latin AmericaReported4%6%-10%3%3%3% Local Currency 5% 6% -10% 4% 4% 4%   Greater AsiaReported-4%-9%-25%-10%7%0% Local Currency -3% -9% -26% -10% 8% 1%   TotalReported-3%0%-12%-4%3%-1% Local Currency -2%   1%   -12%   -3%   5%   1%   ¹ Europe, Africa and Middle EastFirst Quarter 2012 Highlights Gross profit, as a percentage of sales, was 40.2 percent, compared with 41.6 percent in the prior year period, as higher prices were more than offset by strong increases in raw material costs. Research, selling and administrative (RSA) expenses, as a percentage of sales, decreased 10 bps to 22.9 percent versus the prior year period, reflecting continued cost discipline. Operating profit declined $12 million to $121 million, including an expense of $2 million associated with the previously-announced restructuring initiative. Excluding this item, adjusted operating profit fell eight percent, or $11 million, to $123 million as pricing actions and cost discipline were more than offset by sharp increases in raw material costs. Excluding this same item, adjusted operating profit margin declined 150 bps versus the year-ago period to 17.2 percent. Interest expense declined $1 million year-over-year reflecting lower levels of outstanding debt. The effective tax rate was 26.5 percent as compared to 27.3 percent in the prior year period reflecting a net benefit associated with certain European tax matters and lower repatriation costs. Cash flow from operations increased by $88 million to $53 million in the first quarter 2012 driven by improvements in working capital, and lower year-over-year incentive compensation and tax payments. About IFF International Flavors & Fragrances Inc. (NYSE: 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 5,600 employees working in 32 countries worldwide. For more information, please visit our website at Audio Webcast An audio webcast to discuss the Company's first quarter 2012 financial results, and second quarter and full year 2012 outlook will be held today, May 8, 2012, at 10:00 a.m. ET. Interested parties can access the webcast and accompanying slide presentation on the Company's website at 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. 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 the Company's expectation regarding improving business trends in 2012 and the Company's ability to capitalize on its strong emerging market presence, research and development pipeline, and profit improvement initiatives to capitalize on those trends. Accordingly, these forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in the Company's business that could cause actual results and events to differ materially from those in the forward-looking statements. 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 February 28, 2012. 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 risk factors include, but are not limited to: (1) the economic climate for the Company's industry and demand for the Company's products; (2) the ability of the Company to successfully implement its recent restructuring initiative and achieve the estimated savings; (3) fluctuations in the price, quality and availability of raw materials; (4) decline in consumer confidence and spending; (5) changes in consumer preferences; (6) the Company's ability to predict the short and long-term effects of global economic conditions; (7) movements in interest rates; (8) the Company's ability to implement its business strategy, including the achievement of anticipated cost savings, profitability, realization of price increases and growth targets; (9) the Company's ability to successfully develop new and competitive products and enter and expand its sales in new and other emerging markets; (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) uncertainties regarding the outcome of, or funding requirements, related to litigation or settlement of pending litigation, uncertain tax positions or other contingencies; (13) the impact of possible pension funding obligations and increased pension expense, particularly as a result of changes in asset returns or discount rates, on the Company's cash flow and results of operations; (14) 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; (15) adverse changes in federal, state, local and foreign tax legislation or adverse results of tax audits, assessments, or disputes; (16) any business disruptions due to political instability, armed hostilities, incidents of terrorism, natural disasters or the responses to or repercussion from any of these or similar events or conditions; and (17) adverse changes due to accounting rules or regulations. 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 update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. International Flavors & Fragrances Inc.Consolidated Income Statement(Amounts in thousands except per share data)(Unaudited)     Three Months Ended March 31,   2012 2011 %Change   Net sales $ 710,616 $ 714,271 (1 ) Cost of goods sold   425,217     416,811 2 Gross profit 285,399 297,460 (4 ) Research and development 57,408 57,456 (0 ) Selling and administrative 105,416 106,619 (1 ) Restructuring and other charges, net 1,668 28 Interest expense 10,811 11,680 Other (income) expense, net   (246 )   6,056 Income before taxes 110,342 115,621 (5 ) Taxes on income   29,286     31,578 (7 ) Net income $ 81,056   $ 84,043 (4 )       Earnings per share - basic $ 1.00 $ 1.04 Earnings per share - diluted $ 0.99 $ 1.03   Average shares outstanding Basic 80,777 80,049 1 Diluted 81,667 81,150 1 International Flavors & Fragrances Inc.Condensed Consolidated Balance Sheet(Amounts in thousands)(Unaudited)     March 31, December 31, 2012 2011 Cash & cash equivalents $ 76,526 $ 88,279 Receivables 521,606 472,346 Inventories 555,017 544,439 Other current assets   192,216   212,156 Total current assets 1,345,365 1,317,220   Property, plant and equipment, net 611,441 608,065 Goodwill and other intangibles, net 706,827 708,345 Other assets   349,765   331,951 Total assets $ 3,013,398 $ 2,965,581   Bank borrowings and overdrafts, and current portion of long-term debt $ 92,594 $ 116,688 Other current liabilities   428,258   447,878 Total current liabilities 520,852 564,566   Long-term debt 777,953 778,248 Other liabilities 513,537 515,360   Shareholders' equity   1,201,056   1,107,407 Total liabilities and shareholders' equity $ 3,013,398 $ 2,965,581         International Flavors & Fragrances Inc.Consolidated Statement of Cash Flows(Amounts in thousands)(Unaudited)     Three Months Ended March 31, 2012 2011 Cash flows from operating activities:   Net income $ 81,056 $ 84,043 Adjustments to reconcile to net cash provided by (used in ) operations: Depreciation and amortization 19,039 17,962 Deferred income taxes (16,313 ) 17,915 Gain on disposal of assets (806 ) (807 ) Stock-based compensation 2,990 4,817 Changes in assets and liabilities Trade receivables (41,220 ) (55,564 ) Inventories (801 ) (11,933 ) Accounts payable (22,286 ) (19,272 ) Accruals for incentive compensation (6,756 ) (55,597 ) Other current payables and accrued expenses 23,420 (18,234 ) Changes in other assets/liabilities   14,313     1,726   Net cash provided by (used in) operating activities   52,636     (34,944 )   Cash flows from investing activities:   Additions to property, plant and equipment (28,758 ) (19,375 ) Purchase of insurance contracts (636 ) (217 ) Maturities of net investment hedges 1,960 - Proceeds from disposal of assets   68     144   Net cash used in investing activities   (27,366 )   (19,448 )   Cash flows from financing activities: Cash dividends paid to shareholders (25,086 ) (21,657 ) Net change in revolving credit facility borrowings and overdrafts (16,194 ) 51,572 Proceeds from issuance of stock under stock plans 1,104 3,479 Excess tax benefits on stock-based payments   1,312     816   Net cash (used in) provided by financing activities   (38,864 )   34,210   Effect of exchange rates changes on cash and cash equivalents 1,841 820 Net change in cash and cash equivalents (11,753 ) (19,362 ) Cash and cash equivalents at beginning of year   88,279     131,332   Cash and cash equivalents at end of period $ 76,526   $ 111,970         International Flavors & Fragrances Inc.Business Unit Performance(Amounts in thousands)(Unaudited)   Three Months Ended March 31, 2012 2011 Net Sales Flavors $ 349,887 $ 338,587 Fragrances   360,729     375,684   Consolidated 710,616 714,271   Segment Profit Flavors 79,680 78,954 Fragrances 56,081 68,704 Global Expenses (13,186 ) (14,273 ) Restructuring and other charges, net   (1,668 )   (28 ) Operating profit 120,907 133,357   Interest Expense (10,811 ) (11,680 ) Other income (expense), net   246     (6,056 ) Income before taxes $ 110,342   $ 115,621       Operating Margin Flavors 22.8 % 23.3 % Fragrances 15.5 % 18.3 % Consolidated 17.0 % 18.7 % International Flavors & Fragrances Inc.Reconciliation of Income(Amounts in thousands)(Unaudited)   The following information and schedules provide reconciliation information between reported GAAP amounts and certain adjusted amounts. This information and schedules 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.         First Quarter 2012Items Impacting ComparabilityReported(GAAP)Restructuring &Other CostsAdjusted(Non-GAAP)   Net Sales $710,616 - Cost of goods sold 425,217 - Gross Profit285,399 - Research and development 57,408 - Selling and administrative 105,416 - RSA Expense 162,824 - Restructuring and other charges, net 1,668 (1,668 )1   - Operating Profit120,907 1,668 122,575 Interest expense 10,811 - Other (income) expense, net (246 ) - Income before taxes 110,342 1,668 112,010 Taxes on income 29,286 (621 ) 29,907 Net income   81,056         1,047       82,103   Earnings per share - diluted$0.99 $ 0.01 $1.00   1 Related to restructuring program announced in Q1 2012         First Quarter 2011Items Impacting ComparabilityReported(GAAP)   Restructuring &Other CostsAdjusted(Non-GAAP)   Net Sales $714,271 - Cost of goods sold 416,811 - Gross Profit297,460 - Research and development 57,456 - Selling and administrative 106,619 - RSA Expense 164,075 - Restructuring and other charges, net 28 (28 )1   - Operating Profit133,357 28 133,385 Interest expense 11,680 - Other (income) expense, net 6,056 - Income before taxes 115,621 28 115,649 Taxes on Income 31,578 5 31,573 Net income   84,043       33       84,076   Earnings per share - diluted$1.03 $ 0.00 $1.03   1 Related to restructuring program announced in Q3 2009 International Flavors & Fragrances Inc.Investor Relations:Michael DeVeau, 212-708-7164