International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext Paris:IFF) reported financial results and strategic achievements for the second quarter ended June 30, 2018.
First Half 2018 Consolidated Summary: Change vs. Prior Year
Schedules at the end of this release contain reconciliations of reported GAAP to non-GAAP metrics.
Second Quarter 2018 Consolidated Summary: Change vs. Prior Year
Schedules at the end of this release contain reconciliations of reported GAAP to non-GAAP metrics
Management Commentary:
Top-line trends remained strong in the second quarter, marking the fourth consecutive quarter of mid-single digit growth,” said IFF Chairman and CEO Andreas Fibig. “Performance was broad-based, as all regions and categories improved versus prior year, driven by new wins and price increases needed to compensate for raw material inflation. In particular, we continued to see robust growth with our local and regional customers, as well as in the emerging markets - both of which grew high-single digits. In terms of bottom-line performance, we delivered a high-single digit improvement in adjusted currency neutral EPS.
Based on our strong year-to-date performance and our current outlook for the balance of the year, we are reconfirming our previously stated full year currency neutral guidance.
We are progressing toward the completion of our combination with Frutarom announced during the second quarter. We received Frutarom shareholder approval, as well as antitrust approval in the United States and Israel and we now expect to close in the fourth quarter - earlier than our previously communicated timeline, pending the remaining regulatory approvals. The integration planning process is well underway and, after nearly three months, we are more enthusiastic than ever about the opportunities ahead of us.
Together with Frutarom, IFF expects to deliver accelerated growth and offer our customers a stronger, more differentiated portfolio of integrated solutions, allowing us to expand beyond our core taste and scent businesses into nutrition. We continue to focus on driving differentiation via R&D, balancing our customer base by emphasizing fast-growing small and mid-sized customers and maximizing our portfolio by expanding into fast-growing and diverse adjacencies. Our combination, especially in the context of the strong performance both companies continue to deliver, is expected to result in significant value creation for our shareholders. We could not be more excited about what the future holds.”
Second Quarter 2018 Consolidated Financial Highlights:
Reported net sales for the second quarter totaled $920 million, an increase of 9% from
$843 million in 2017. Excluding the impact of foreign exchange, currency neutral sales increased 5% over the prior year.
Reported operating profit for the second quarter was $155 million versus $152 million reported in 2017, an increase of 2%. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted operating profit decreased by 2%.
Reported earnings per share (EPS) for the second quarter was $1.25 per diluted share versus $1.38 per diluted share reported in 2017. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted EPS improved 8%.
Management Commentary:
“Top-line trends remained strong in the second quarter, marking the fourth consecutive quarter of mid-single digit growth,” said IFF Chairman and CEO Andreas Fibig. “Performance was broad-based, as all regions and categories improved versus prior year, driven by new wins and price increases needed to compensate for raw material inflation. In particular, we continued to see robust growth with our local and regional customers, as well as in the emerging markets - both of which grew high-single digits. In terms of bottom-line performance, we delivered a high-single digit improvement in adjusted currency neutral EPS.
“Based on our strong year-to-date performance and our current outlook for the balance of the year, we are reconfirming our previously stated full year currency neutral guidance.
“We are progressing toward the completion of our combination with Frutarom announced during the second quarter. We received Frutarom shareholder approval, as well as antitrust approval in the United States and Israel and we now expect to close in the fourth quarter - earlier than our previously communicated timeline, pending the remaining regulatory approvals. The integration planning process is well underway and, after nearly three months, we are more enthusiastic than ever about the opportunities ahead of us.
“Together with Frutarom, IFF expects to deliver accelerated growth and offer our customers a stronger, more differentiated portfolio of integrated solutions, allowing us to expand beyond our core taste and scent businesses into nutrition. We continue to focus on driving differentiation via R&D, balancing our customer base by emphasizing fast-growing small and mid-sized customers and maximizing our portfolio by expanding into fast-growing and diverse adjacencies. Our combination, especially in the context of the strong performance both companies continue to deliver, is expected to result in significant value creation for our shareholders. We could not be more excited about what the future holds.”
Second Quarter 2018 Consolidated Financial Highlights
Reported net sales for the second quarter totaled $920 million, an increase of 9% from
$843 million in 2017. Excluding the impact of foreign exchange, currency neutral sales increased 5% over the prior year.
Reported operating profit for the second quarter was $155 million versus $152 million reported in 2017, an increase of 2%. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted operating profit decreased by 2%.
Reported earnings per share (EPS) for the second quarter was $1.25 per diluted share versus $1.38 per diluted share reported in 2017. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted EPS improved 8%.
Flavors Business Unit
On a reported basis, sales increased 9%, or $36.2 million, to $450.5 million. Currency neutral sales grew 6% driven by growth in all categories and all regions.
EAME increased 16% on a reported basis and 5% on a currency neutral basis, led by strong double-digit growth in Africa and the Middle East as well as mid-single digit growth in Europe. Growth was achieved across all categories, led by strong performances in Dairy, Beverage and Savory.
North America improved 9% driven by high-single-digit growth at Tastepoint℠ and strong new wins in Beverage, Dairy and Sweet.
Latin America increased 5% on a reported basis and 8% on a currency neutral basis led by strong double-digit growth in Argentina and Mexico. On a category basis, strong double-digit growth was achieved in Savory and Dairy as well as mid-single digit growth in Beverage.
Greater Asia increased 5% on a reported basis and 2% on a currency neutral basis, as strong double-digit growth in China and India was largely offset by softness in Indonesia and Thailand. On a category basis, growth was strongest in Savory, Sweet and Dairy.
Flavors segment profit increased 13% on a reported basis and 6% on a currency neutral basis, driven primarily by volume growth and the benefits from productivity initiatives.
Fragrances Business Unit
On a reported basis, sales increased 10%, or $40.9 million, to $469.5 million. Currency neutral sales improved 5%, with broad-based growth from all categories and nearly all regions.
Fine Fragrances increased 7% on a reported basis and 1% on a currency neutral basis led by double-digit growth in LATAM and low-single-digit growth in North America.
Consumer Fragrances grew 8% on a reported basis and 5% on a currency neutral basis with growth achieved in all categories. Performance was led by double-digit growth in Hair Care as well as mid-single-digit increases in Toiletries, Home Care & Fabric Care. On a geographic basis, growth was broad-based, with all regions contributing positively to the results.
Fragrance Ingredients grew 16% on a reported basis and 10% on a currency neutral basis, with increases in three of the four regions.
Fragrances segment profit was flat on a reported basis and decreased 9% on a currency neutral basis as volume growth and the benefits from productivity initiatives were more than offset by the impact of higher raw material costs, net of price increases, including the previously announced citral supply issue.