Second-quarter profits at fragrance supplier International Flavors & Fragrances Inc. declined 14.5 percent to $67 million, or 83 cents a diluted share, from $78.4 million, or 87 cents, in the same period a year ago, on higher interest expense related to borrowings for an accelerated share repurchase program last year.
This story first appeared in the August 1, 2008 issue of WWD. Subscribe Today.
IFF, which posted results Wednesday night, reported that, excluding special items like a tax adjustment and employee separation costs, adjusted earnings per share for the quarter ended June 30 were 81 cents versus 72 cents a year ago. Wall Street analysts were expecting earnings per share of 80 cents, according to Yahoo Finance.
Quarterly revenues were $636.1 million, up 10.9 percent from $573.7 million last year, a 4 percent gain in local currencies.
Employee separation costs of $3.4 million were primarily due to the departure of IFF’s senior vice president and chief financial officer, Douglas J. Wetmore, who stated last month he would step down to pursue other career opportunities. The company named Richard A. O’Leary, 48, as its interim cfo on Thursday.
Second-quarter interest expense more than doubled to $18.5 million from $8.4 million in the year-ago period, a 120.9 percent jump, sending pretax earnings down 10 percent to $87.2 million from $97 million last year.
While sales at IFF’s fragrance business unit were up by 8 percent during the second quarter to $346.3 million, a 1 percent uptick in local currencies, chairman and chief executive officer Robert A. Amen noted during a conference call with analysts that North America remains a challenging market. North American fragrance sales declined by 11 percent, which was an improvement from a 23 percent drop during the first quarter.
By region, fragrance sales were up 18 percent in greater Asia, 15 percent in Europe and 14 percent in Latin America.
“Our non-U.S. sales in the second quarter amounted to 75 percent of total revenue, with more than one-third coming from the world’s emerging markets,” said Amen.
Fragrance accounted for 54.4 percent of quarterly sales, while the remainder was generated by the firm’s flavors business.
For the first half, profits were down 12.8 percent to $123 million, or $1.52 a diluted share, from $141.1 million, or $1.56, last year. Interest expense totaled $36.8 million, a 120 percent increase from $16.7 million, while sales reached $1.23 billion, an 8.2 percent rise from $1.14 billion during the prior year.