NEW YORK — International Flavors & Fragrances Inc. posted fourth-quarter earnings that dropped by nearly two-thirds, hurt by charges related to the company’s recently announced elimination of 300 positions.
IFF reported on Wednesday that fourth-quarter net earnings were down 63 percent to $15.2 million, or 16 cents a diluted share. The results included an after-tax charge of 17 cents related to IFF’s elimination of 300 jobs — 6 percent of its total workforce — in the company’s European and North American regions. Comparatively, IFF had net earnings of $40.9 million, or 43 cents, in last year’s fourth quarter.
Excluding restructuring and other charges, the company earned $31.1 million, or 33 cents, in the most recent fourth quarter, which missed analysts’ estimates of 43 cents. On that basis, IFF earned $43.6 million, or 46 cents, last year.
Total fourth-quarter sales were down 1.4 percent at $461.7 million. By division, fine fragrance sales rose 12 percent in reported dollars and were up 16 percent in local currencies, while total fragrances, which include fine fragrance, chemical fragrance and chemicals, were down 2 percent on a reported basis and up 1 percent in local currencies.
Flavor sales fell 1 percent in reported dollars, but rose 1 percent in local currencies. IFF said flavor sales, particularly in North America and Europe, were negatively affected by lower selling prices for naturals, mainly vanilla.
Richard A. Goldstein, chairman and chief executive officer of IFF, based here, said on a conference call with analysts, “We continue to believe that we are going to have some measure of success with respect to our customers accepting and recognizing raw material increases. We believe the responsible thing to do is to continue to press for price increases, and it is our job to be able to effectively explain to our customers the basis for the need. And so far I am pleased to say that we have found levels of receptivity.”
By region, fragrance and flavor sales declined in North America and Europe, and increased in Asia Pacific. Fragrance sales were driven by results in Greater China, Indonesia and Vietnam, and offset by weak sales in Japan and Australia. In Latin America, flavor sales were strongest in Mexico and Brazil. And in India, solid fragrance and flavor sales were driven by new products and strong economic conditions, the company said.
In full-year 2005, the company had net earnings, including a tax benefit, of $193.1 million, or $2.04, compared with $196.1 million, or $2.05, a year ago. Net sales were $1.99 billion, down 2 percent.
Despite the quarter’s lower-than-expected results, Goldstein remained optimistic. He said in a statement that in the full year, local currency sales to the firm’s five largest customers rose over 5 percent on top of 7 percent growth in 2004. He also noted on the conference call, “We had truly an outstanding year in fine fragrance in 2005, and we are hopeful that we are going to be able to continue the momentum in 2006.”
However, Goldstein, who will retire his roles during the firm’s May shareholders’ meeting after six years at IFF, acknowledged the company needs to improve its financial performance. “We must do more,” he said in the statement, citing the company’s restructuring efforts announced this month that are expected to “reduce costs and improve IFF’s overall profitability.”
Reorganization-related charges are expected to total $25 million to $30 million. Annual savings are seen at $16 million to $18 million.
IFF guided earnings-per-share for fiscal 2006 to $2.23 to $2.31, which is within range of analysts’ $2.28 estimate.