Fresh off its acquisition of Fragrance Resources, International Flavors & Fragrances Inc. reported a 2 percent net sales increase for the third quarter, but a 20.7 percent dive in profits to $124.3 million from $156.7 million year-over-year.

Longer term, the company is expecting growth to come from its acquisitions. The Fragrance Resources deal is expected to close in early 2017, but IFF has recently acquired Lucas Meyer Cosmetics, plus Ottens Flavors and David Michael for its flavors business.

“If we assume for a moment that we close on Fragrance Resources, we have done actually four deals in the last 15 months, which will roughly add just right now without the growth in the future $264 million in sales and they’re actually quality assets which will help us in terms of mix and in total diversifying our customer base as well,” said Andreas Fibig, IFF chief executive officer, on the company’s earnings call. “So that’s something, plus the synergies which might come out of these acquisitions, which will help us to achieve our goals.”

For the quarter, IFF’s earnings per share were $1.12, down from $1.31 year-over-year. Net sales were up to $777 million from $765.1 million for the prior-year period.

“In the third quarter, we continued to drive the execution of Vision 2020,” said Andreas Fibig, chairman and and chief executive officer of IFF. “In the key areas we’ve identified — encapsulation, modulation, North America, Africa and the Middle East — we continue to make progress against our strategic goals. We also accelerated our efforts in M&A recently, with the addition of approximately $160 million in expected annualized sales from David Michael and Fragrance Resources — both of which complement our strategic vision well.”

Lucas Meyer Cosmetics, acquired in 2015 in order to bolster the company’s position in the makeup ingredients market, contributed to sales growth, the company said. Acquisitions had a 1 percent positive impact on the company’s fragrances division’s sales and profits, the company said. Sales for the unit were $410.1 million for the quarter, while profits were $85 million. Fine fragrances was down 3 percent as double-digit growth in Asia and low-single-digit growth in North America were offset by softness in Latin America and Western Europe. Consumer fragrances were flat, with growth in sales from fabric care and personal wash. Fragrance ingredients gained 9 percent driven by organic sales and contributions from the Lucas Meyer unit.

“For the full year, despite challenging conditions given a higher level of economic uncertainty and limited volume growth by many consumer packaged goods companies, we are pleased to say that we are in a position to deliver solid top- and bottom-line growth in 2016,” Fibig said. “Longer term, we believe that our investment in innovation will enable us to accelerate sales performance while simultaneously driving productivity improvements to ensure sustainable profit growth. We’re confident that by doing so, the cumulative benefits will lead to improved value creation for our customers, employees and shareholders.”

“We are slightly lowering the previous guidance we provided earlier this year,” said IFF chief financial officer Richard O’Leary on the company’s earnings call. “Nevertheless the viability of our business remains strong and we expect to deliver growth across all of our key financial metrics on a currency neutral basis. For the full-year, we see currency neutral sales improving 4 percent to 5 percent versus 2015 with broad based contributions from organic and inorganic business. Currency neutral operating profit is expected to go 3.5 percent to 4.5 percent in large part due to the benefits of cost and productivity improvements, increased volumes and the benefits of acquisitions.”

 

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