International Flavors & Fragrances (IFF) has reported net sales for the first quarter of $727.8 million, an increase of 2% from $710.6 million in the first quarter of 2012. Excluding the impact of foreign currency, local currency sales increased 3%.
Net income totalled $90.7 million compared with $81.1 million in the prior year first quarter.
“We are pleased with our performance this quarter, which resulted in an adjusted EPS improvement of 19%. In the first quarter, we delivered like-for-like sales growth of 4%, supported by strong underlying momentum in both Fragrance Compounds and Flavors, reflecting the diversity and strength of our category and geographic portfolios,” said Doug Tough, chairman and CEO of IFF.
“This quarter we achieved strong new win rates owing to the innovative abilities of our business segments, combined with our expertise in proactively providing customers with solutions based on the strength of our creative, consumer insight, and research and development teams. Our overall sales were also supported by 9% local currency growth in the emerging markets, with double-digit sales growth in many developing countries, including Brazil and China.”
“As expected, gross margins in the first quarter benefited from the combined impact of previous price increases and modest raw material cost declines. Based on our strategy of maximizing our portfolio, gross margins also benefited from strong innovation-based wins, an improved product mix in part due to the exit of low-margin sales activities in Flavors, as well as various other cost savings and value-enhancing initiatives.”
“We took several actions during the quarter to enhance our manufacturing efficiency and consolidate our geographic footprint. During the quarter, we made the decision to close our Flavors facility in Knislinge, Sweden and our Fragrances facility in Jakarta, Indonesia and transfer production to our larger facilities in The Netherlands and Singapore, respectively. We also announced the formal opening of our technologically-advanced Flavors manufacturing facility in Guangzhou, China to provide dry and liquid flavors to the Company’s regional and global food and beverage customers, as we continue to support future growth in the region.”
“And, last week we took further steps to strengthen our innovation platform, improve operating efficiencies and meet customers’ growing needs. On Tuesday, we announced our multi-year collaboration with Amyris, a leading biotechnology company, to develop and commercialize sustainable and cost-effective ingredients using a biotechnology platform. On Friday, we announced our intention to close our Fragrances Ingredients manufacturing facility in Augusta, Georgia, and consolidate production into existing Ingredients plants. The plant closure is one of several actions we are taking to ensure the long-term profitability of our Fragrance Ingredients business and strengthen our competitive position.”
“We entered the year with increased optimism with the expectation for an improving operating environment, a robust R&D pipeline, and strong customer relationships and partnerships. We see solid momentum in each of our business units, and expect to deliver stronger sales growth in the second quarter as we continue to focus on leveraging our geographic reach, strengthening our innovation platform and maximizing our portfolio. We believe that by executing on these three strategic pillars, we will be able to grow our business this year in line with our long-term targets.”
Sales in emerging markets accounted for 49% of total company sales in the first quarter and experienced growth of 9%.
Reported sales for the Flavours Business Unit increased 2% to $356.4 million, compared with $349.9 million in the first quarter of 2012.
On a like-for-like basis, which excludes the exit of low-margin sales activities, local currency sales increased 6% in the quarter, driven, said the company, by strong new wins and residual benefits of previously taken pricing.
Sales growth was led by high single digit growth in Dairy and Beverage due to increased sales using IFF’s modulation technologies. Savoury increased mid-single digits, and Sweet also had positive growth this quarter.
Gross margins in the Flavors business increased over the prior year quarter primarily as a result of the benefit of favourable raw material costs and residual pricing, as well as mix improvements including the continued exit of low-margin sales activities.
Flavours segment profit increased 4% to $83.0 million in the first quarter of 2013, up from $79.7 million in the prior year quarter.
