IFF’S THIRD-QUARTER NET DOWN 41.2%
NEW YORK — Special charges, sluggish North American sales and unfavorable exchange rates caused International Flavors & Fragrances Inc.’s third-quarter earnings to sink 41.2 percent.
For the quarter ended Sept. 30, net income was $28.9 million, or 29 cents a share. Year-ago earnings were $49.2 million, or 46 cents. The most recent quarter included nonrecurring pretax charges related to its reorganization initiative of $7.7 million, or 5 cents, for employee separation costs. Year-ago figures include $710,000 in nonrecurring pre-tax charges.
Excluding the one-time charges in the most recent quarter, the company reported earnings of 34 cents a share beating Wall Street’s and its own expectations of 33 cents by a penny.
Sales for the period declined 6.9 percent to $339.6 million against $364.7 million in the year-ago period.
North American sales fell 8 percent during the quarter, primarily due to slow business conditions for many of its food customers. Fragrances were down 1 percent, slightly better than the company’s expectations, while fine perfumery fell in the mid-single digits for the period. Soap and household products proved to be the bright spot, pulling in sales 20 percent higher than a year ago.
More positive results outside of the North American market were tempered by unfavorable currency exchanges because of the strong U.S. dollar.
The Asia-Pacific region saw an 8 percent increase in local currency sales for the period.
Sales for Europe, Africa and the Mideast, which the company grouped together, increased 4 percent on a local currency basis.
On a consolidated basis, local currency sales for the entire company declined approximately 2 percent compared to a year ago.
As previously reported, IFF disclosed plans earlier this month to globally reorganize the company into the broad divisions of business development and operations, rather than into separate divisions for flavors and fragrances. The reorganization, which will result in the appointment of a single regional manager to oversee operations in each of the company’s geographic areas, will also focus the company on improved customer service — an area where IFF acknowledges it’s been lacking.
Over the next 18 to 24 months, the firm anticipates taking $90 million to $100 million in charges related to the reorganization.
IFF is also slated to buy competitor Bush Boake Allen Inc. in a $970 million deal. Richard Goldstein, chairman and chief executive, said on a conference call that he expects the the deal to be closed and the integration of the companies to begin “full-force” by mid-November.
“We’re communicating a need for change and a need to reinvent ourselves,” Goldstein said on the call when asked about the company’s ongoing reorganization. In general, he said the company was responding well to the winds of change and that “the sense, the pulse of the group is very positive, very strong.”
For the nine months, net income decreased 3 percent to $121.6 million, or $1.19 a share, against $125.4 million, or $1.18, in the comparable 1999 period. Results for the nine months include pretax nonrecurring charges of $17 million this year and $29.5 million last year.
Sales for the period declined 2.3 percent to $1.08 billion from $1.10 billion a year ago.