9 May 2012 --- Flavor giants International Flavors & Fragrances Inc. (IFF) and Symrise have both reported robust sales growth for their flavor businesses.
IFF reported first quarter 2012 revenue of $711 million, one percent lower than the prior year period. Excluding the impact of foreign currency, revenue in local currency increased one percent. Reported diluted earnings per share (EPS) for the quarter were $0.99 compared to $1.03 in the first quarter 2011. Excluding an expense of $0.01 per share in the first quarter 2012 related to the previously-announced restructuring initiative, adjusted EPS declined three percent to $1.00 versus $1.03 in the prior year quarter.
"IFF continued to execute its strategy and generated results broadly in line with our expectation," said IFF Chairman and Chief Executive Officer Doug Tough. "The diversity and strength of our category and geographic portfolios, combined with our cost discipline, helped ease the impact of rising raw material costs, softness in Fragrance Ingredients, and a challenging macroeconomic environment. Going forward, we expect our business trends will improve over the course of the year as we continue to capitalize on our strong emerging market presence, healthy research and development pipeline, and profit improvement initiatives."
For the Flavors Business Unit, sales increased three percent over the prior year period while local currency sales grew five percent. On a like-for-like basis, which excludes a one percentage point impact associated with the exit of low-margin business, local currency sales increased six percent. Overall growth can once again be attributed to a double-digit performance in the emerging markets led by Africa, Asia and the Middle East. In the developed markets of North America and Western Europe, more modest growth continued to be driven by health and wellness initiatives.
Operating profit increased one percent, or $1 million, to $80 million as volume growth, higher pricing and cost discipline primarily drove results. Operating profit margin decreased 50 bps versus the prior year period to 22.8 percent due to higher raw material costs.
But sales decreased four percent over the prior year period for the Fragrances Business Unit while local currency sales declined three percent. Fine Fragrance & Beauty Care sales showed significant improvements versus the fourth quarter 2011 driven by positive trends in Fine Fragrance. In Functional Fragrance, strong new wins in Fabric Care continued to drive solid sales results. Despite a sequential improvement versus the fourth quarter 2011, Fragrance Ingredients remained under pressure as higher prices to protect margin continued to have a negative impact on volume.
Operating profit declined 18 percent, or $13 million, to $56 million as increases in raw material costs and volume declines more than offset higher prices and cost control initiatives. Operating profit margin fell 280 bps to 15.5 percent versus the year-ago period.
The news came as Symrise AG reported a strong start to the 2012 fiscal year. The Group posted robust sales growth and achieved the targeted EBITDA margin of 20% despite higher raw material brightening costs. Over the course of the quarter, Symrise benefited from improving market conditions and as a result saw a stronger demand for its products. Compared to the prior-year quarter sales rose 4% to €432.6 million (Q1 2011: €416.8 million). This development was driven in large part by the disproportionate growth seen in business with global customers. North and Latin America also provided notable growth impetus.
Dr. Heinz-Jürgen Bertram, Chief Executive Officer of Symrise AG, said: “Symrise is off to a solid start for the current fiscal year. After the subdued development at the beginning of this year, the market environment improved faster than originally anticipated. Our business with global customers has grown especially rapid. In addition, we maintained our profitability at our targeted margin level of 20% despite high raw material costs. We also expanded our market presence with targeted acquisitions and strengthened our focus on innovation in fast growing market segments. In view of the positive developments seen in this quarter, we are raising our sales outlook for the current financial year.”
Symrise generated sales of €432.6 million during the first quarter of 2012 (Q1 2011: €416.8 million). After a reserved start to 2012, economic development brightened over the course of the first quarter, particularly in March, and stimulated a positive boost to demand. With an increase of 4% (2% at local currency), the Group has laid the foundation for further growth over the course of the year.
Latin America continued its positive development, achieving a sales increase of 10% (10% at local currency). Particularly Oral Care, Sweet and Beverage application areas contributed to this growth. Business in North America significantly recovered, posting sales growth of 13% (9% at local currency). This was mainly supported by high demand in Life Essentials and Oral Care. Sales in Asia/Pacific were up 5% (1% at local currency). The individual segments developed very favorably in this region. Sales in the EAME region decreased by 2% against the prior-year quarter (-2% at local currency). A positive development in Fine Fragrances could not fully compensate for the lower demand in the UV Protection and in Aroma Molecules.
The company’s Flavor & Nutrition Division increased sales by 5% to €208 million (Q1 2011: €198 million) in the first quarter 2011. At local currency, this corresponds to a sales growth of 3%. The division benefited from its strong position with global customers and the expansion of its activities in North America.
With a sales rising by 11% at local currency, Flavor & Nutrition experienced particularly dynamic growth in North America. The main drivers were strategically important global customers, with whom Symrise generated a wide range of new business in the first quarter. In EAME, sales rose by 3% at local currency. The emerging markets in Eastern Europe, Africa and the Middle East were significant contributors here. In Latin America, sales were also up by 3% at local currency compared to the previous year. Asia/Pacific, on the other hand, experienced a slow start to the year. At local currency, sales came in 1% lower than in the previous year. This is primarily due to the weak demand in the first two months, which showed considerable signs of improvement in March.
In the first quarter, Symrise strengthened the growing business Consumer Health by entering into an exclusive partnership with Indevex Biotech to focus on joint research, as well as the development of new product concepts. With the partnership, Symrise has secured access to a Scandinavian biotech network with existing product partnerships.
EBITDA in the Flavor & Nutrition division remained stable compared to the prior-year period and amounted to €42 million (Q1 2011: €42.2 million). Despite moderate sales growth and cost impacts from higher raw material prices, the EBITDA margin held strong at 20.3% (Q1 2011: 21.3%).
Based on the positive economic developments in the first quarter, Symrise is more confident for Fiscal Year 2012 than at the beginning of the year. If the economy continues to improve the Company sees good opportunities to exceed the expected market growth. Symrise expects additional impetus, particularly during the second half of the year, once the expanded production capacities for Menthol begin operation in Holzminden. Against this background, Symrise is raising its sales forecast and is now targeting sales growth between 3% and 5% for the year. However, the European sovereign debt crisis continues to represent an unsecure factor for both, the European and the global economy. In addition, Symrise expects raw material prices to remain volatile in 2012. Regardless, Symrise aims at sustainable, profitable growth and continues to target an EBITDA margin of about 20 percent for the 2012 fiscal year.