IFF Reports First Quarter 2011 Results
Our top-line performance was once again driven by double-digit growth in the emerging markets. In the developed markets, strong demand for our innovative products, such as healthier and more natural offerings, drove high single-digit growth.
5/11/2011 --- International Flavors & Fragrances Inc., a leading global creator of flavors and fragrances for consumer products, reported first quarter 2011 revenue of $714 million, nine percent higher than the prior year period. Revenue in local currency also increased nine percent as foreign currency had a limited impact on results in the quarter. Reported earnings per share (EPS) increased 29 percent to $1.03 compared to $0.80 for the first quarter 2010. Excluding an expense of $0.05 per share in the first quarter 2010 related to restructuring efforts in Europe, adjusted EPS for the quarter increased 21 percent to $1.03 versus $0.85 in the prior year quarter.
"We are pleased with our excellent start to 2011, especially given that we are comparing to a very strong year-ago performance of double-digit growth," said Doug Tough, Chairman and Chief Executive Officer. "Our top-line performance was once again driven by double-digit growth in the emerging markets. In the developed markets, strong demand for our innovative products, such as healthier and more natural offerings, drove high single-digit growth. This strong top-line performance provided operational leverage that when combined with our continued focus on cost discipline drove a double-digit increase in operating profit."
Mr. Tough continued, "While our first quarter performance was strong, our initial local currency sales levels have shown some pressure as we enter the second quarter, in light of challenging year-over-year comparisons. Nonetheless, we are optimistic that our performance in the first quarter, coupled with the opportunities we see throughout the remainder of the year, give us the confidence to achieve our long-term targets of four to six percent local currency sales growth, seven to nine percent operating profit growth and 10 percent plus EPS growth for the full year 2011."
Flavor Business Unit
Local currency sales in the first quarter increased 12 percent over the prior year period as double-digit growth in the Beverage, Savory and Confectionery categories drove strong results. Overall performance was once again driven by net new business wins and increased volumes with existing customers. In North America and Europe, Africa and the Middle East (EAME), double-digit growth in Beverage and Savory were the primary contributors to mid-teen growth. Results in Greater Asia remained strong, as double-digit trends in Beverage and Dairy continued into the first quarter. In Latin America, solid growth was achieved as Confectionery and Dairy each grew double-digits.
Operating profit was very strong, increasing 28 percent, or $17 million, to $79 million in the first quarter. This increase can mainly be attributed to accelerated sales growth and continued cost discipline that more than offset the developing input cost environment. As a result, operating profit margin improved 280 bps to 23.3 percent versus 20.5 percent in the prior year period.
Fragrance Business Unit
Local currency sales in the first quarter increased seven percent against a very strong comparable in the prior year period. Emerging market performance continued to grow double-digits as new business wins across all categories drove results. Double-digit growth in Fine Fragrance and Beauty Care were realized for the fifth consecutive quarter as new business wins continued to drive results. Functional Fragrance results were solid as new business wins and a strong performance in Home Care more than offset volume erosion on existing business. Fragrance Ingredients growth was solid as price initiatives drove results.
Operating profit increased by $13 million to $69 million in the first quarter, including a $5 million expense related to restructuring efforts in Europe in the first quarter 2010. Excluding this item, adjusted operating profit grew 13 percent, or $8 million. As a result, adjusted operating profit margin for the quarter increased 110 bps to 18.3 percent, as volume growth, higher pricing, the benefits from the previously announced European facilities rationalization, continued internal cost initiatives, and favorable mix more than offset the developing input cost environment.
First Quarter 2011 Highlights
* Gross profit, as a percentage of sales, was 41.6 percent compared with 41.3 percent in the prior year period. This increase was attributable to strong sales growth and margin improvement initiatives that more than offset higher input costs.
* Research, Selling and Administrative (RSA) expenses, as a percentage of sales, decreased 160 bps year-over-year to 23.0 percent reflecting strong operating leverage and lower incentive compensation accruals that were offset by business reinvestments to support future growth.
* Operating profit increased $29 million to $133 million, including a $5 million expense related to restructuring efforts in Europe in the prior year period. Excluding this item, adjusted operating profit grew $24 million, as accelerated sales growth and continued cost discipline drove results. Adjusted operating profit margin increased 190 bps to 18.7 percent versus 16.8 percent in the year-ago period.
* Interest expense in the first quarter declined $1 million year-over-year reflecting higher capitalized interest and lower levels of outstanding debt.
* The effective tax rate in the quarter was 27.3 percent compared to 28.4 percent in the comparable period last year. The year-over-year decrease reflects lower repatriation costs.
