IFF PROFITS PLUMMET 96.2%
Byline: Jennifer Weitzman
NEW YORK — Sluggish North American flavor sales, an unfavorable exchange rate and special restructuring charges exacted a costly toll on International Flavors & Fragrances Inc.’s financial results.
The New York-based creator and manufacturer of flavor and fragrance products said its fourth-quarter profits sank 96.2 percent, to $1.4 million, or 1 cent a share. That compares with income of $36.6 million, or 35 cents in the year ago period. Results include figures from its former flavors and fragrances competitor Bush Boake Allen, which it acquired Nov. 3, and from the nonrecurring charges related to its own reorganization.
Still, sales results for the quarter ended Dec. 31 improved 14.5 percent to $384.5 million, including BBA’s results for the 58 days since its acquisition. In the year-ago quarter, sales were $336 million. Excluding the BBA revenues for the period since the acquisition, IFF’s sales declined 5.1 percent, to $318.6 million.
The news made only slight waves with investors. The company’s stock rose 4 cents, or 19 percent, to $21.29 on the New York Stock Exchange.
“We are in the process of finalizing our operating strategies and integration plans that are expected to create significant cost-saving opportunities, allow IFF to operate more efficiently and enable us to better service our customers,” said IFF’s Richard A. Goldstein, chairman and chief executive, adding that additional details are expected by the end of February.
IFF purchased BBA during the fourth quarter for $48.5 a share, or about $970 million, to further enhance its flavors business.
Goldstein said on a conference call that IFF has “established and populated the managing structure that will drive the company going forward by taking the best people from both IFF and BBA.” In addition, he said the company is making progress in “formulating plans and strategies to implement various aspects of integration and achieve the synergies committed to at the time of the acquisition and reorganization.”
The company said in October that it sought to put together a unified structure organized globally under the broad umbrellas of business development and operations rather than into separate divisions for flavors and fragrances. The move would help to reposition the company for future successes, Goldstein noted on a call at that time.
In the fourth quarter, IFF recorded $24.2 million, or 16 cents a share, of charges relating to the reorganization as well as costs related to the BBA integration. For the full year, it recorded nonrecurring charges of $41.3 million, or 27 cents.
Excluding those reorganizational charges, but including costs related to management changes, consolidation of production facilities and related actions such as early retirements, IFF recorded net income, with BBA, fell 56 percent, to $17.1 million, or 18 cents a share, versus profits of $38.9 million, or 37 cents.
Not incorporating profits from BBA, but including the nonrecurring charges, net income for IFF decreased 75.8 percent to $8.9 million, or 9 cents a share, from $36.6 million, or 35 cents. Sales from IFF exclusively fell 5.2 percent, to $318.8 million, from sales of $336 million.
Excluding the reorganizational one-time charge and eliminating sales gains from BBA, IFF’s net income fell 36.8 percent to $24.6 million, or 25 cents, from $38.9 million, or 37 cents.
The reorganization will cost IFF between $90 million and $100 million in pretax charges over the next 18 to 24 months, but is expected to yield annual savings in the range of $25 million to $30 million by 2003.
For the year, IFF net income fell 24.1 percent, to $123 million, or $1.22 a share, from $162 million, or $1.53. Excluding nonrecurring charges, but including sales from BBA, profits fell 20.8 percent, to $149.8 million, or $1.48, from $189.2 million, or $1.79. Excluding the charges and BBA, IFF’s income fell 16.9 percent, to $157.2 million, or $1.56.
Income for IFF, excluding BBA and including the nonrecurring charges, fell 19.5 percent, to $130.5 million, or $1.29, from $162 million, or $1.53.
Sales for the year, including results from BBA, rose 1.6 percent, to $1.46 billion from $1.44 billion. Without BBA, sales dropped 3 percent to $1.4 billion.
Looking ahead, Goldstein said IFF is still finalizing its integration, reorganization and operating plans for 2001 but that it remains comfortable with its own 2001 earning targets.
Fragrance sales in local currencies during the fourth quarter, excluding BBA sales, were led by a 15 percent increase in the Europe, Africa and the Mideast region (EAME), and a 7 percent jump in North America.
Asia-Pacific and EAME led the growth in flavor sales, with local currency increases of 11 and 4 percent, respectively. North America flavor sales declined 15 percent.