By  on August 5, 2014

Shares of International Flavors and Fragrances Inc. fell nearly 4 percent in morning trading Tuesday as the company expressed concerns about cost pressures in the back half of the year.

The remarks followed disclosure of results for the second quarter during which the firm exceeded analysts’ earnings expectations.

In the three months ended June 30, the New York-based firm reported net income of $110.3 million, or $1.35 a diluted share, 7.8 percent above the $102.3 million, or $1.24, reported in the second quarter of 2013. Excluding special items, EPS came in at $1.37, 2 cents above the consensus estimate of analysts tracking the company.

Revenues grew 4.1 percent to $788.4 million from $757.6 million.

IFF’s fragrance unit reported 1 percent growth in operating profit, to $90.8 million, on a 7.6 percent increase in sales to $412.9 million, representing 52.4 percent of the company total.

Overall fragrance growth in emerging markets was twice the rate of that for mature markets.

However, fine fragrance sales were up 2 percent and flat on a currency-neutral basis, with a 10 percent increase in Latin America and a 14 percent increase in Greater Asia offset by a flat performance in North America and a 1 percent decline in the Europe-Africa-Middle East region.

“Although our overall fine fragrances category was flat this quarter, on a two-year basis, fine fragrances had growth of 7 percent, which is above our long-term target and market performance,” said Nicolas Mirzayantz, group president, fragrances.

Echoing statements by other IFF executives, Mirzayantz noted, “We expect input cost pressures to impact our P&L around the end of the year and to be a developing headwind for 2015. We are proactively engaged in pricing discussions with select customers to offset this inflationary pressure.”

Shares declined 3.9 percent to $97.95 in morning trading on the New York Stock Exchange.

Doug Tough, IFF’s 65-year-old chief executive officer, will step down from that post on Sept. 1 to be succeeded by Andreas Fibig, an IFF director since 2011 who has been president of Bayer HealthCare Pharmaceuticals, a division of Bayer AG. Tough will remain chairman.

First-half net income rose 12.4 percent to $217 million, or $2.64 a diluted share, as revenues ascended 4.9 percent to $1.56 billion.

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