IFF Reports Record Second Quarter 2007 Results

08/08/07 International Flavors & Fragrances Inc., a leading global creator of flavors and fragrances, has reported growth in sales and net income for the second quarter of 2007. Earnings per share were $.87 in the quarter, representing a 30 percent increase from the second quarter of 2006. The second quarter included the benefit of a tax ruling relating to prior years; as a result, accrued tax liabilities were reduced, increasing net income and earnings per share in the quarter by $10 million and $.11, respectively. On a comparable basis, excluding this tax adjustment, the 2007 second quarter earnings per share would have been $.76, representing a 13 percent gain over the 2006 quarter.

“We are pleased with the continued growth in sales, operating profit and earnings. During the second quarter, we made progress against our business priorities, which include focusing on our customers and building a stronger organization,” said Robert M. Amen, Chairman and Chief Executive Officer of IFF.

“Looking ahead, we believe we are well-positioned to continue to grow in line with our goals. Our recent share repurchase and dividend announcement underscores our confidence in our ability to build shareholder value and invest for our growth.”

Sales rose 8 percent in the second quarter to $574 million compared to $531 million in the prior year period. Sales benefited from the generally weaker U.S. dollar, mainly against the Euro and Pound Sterling; at comparable exchange rates, sales would have increased 5 percent over the 2006 quarter.

Flavor sales grew 11 percent, due to new wins and volume growth. Flavor sales increased in each region, both in local currency and dollars.

Fragrance sales increased 6 percent, led by 11 percent growth in fine fragrance and beauty care sales, a result of new product introductions and the continued success of existing creations. Functional fragrance and ingredient sales increased 4 percent and 1 percent, respectively.

• Gross profit, as a percentage of sales, totaled 42.9%, the same as the prior year quarter. The sales growth drove improved expense absorption, most notably in flavors; lower selling prices for fragrance ingredients and the impact of scaling up production in the new fragrance ingredient facility in China offset this improvement.

• Selling and Administrative expenses, as a percentage of sales, were 15.9% in the current quarter compared to 16.5% in the prior year quarter, reflecting good cost control.

• Interest expense increased by $2 million from the prior year, primarily due to higher average interest rates on borrowings; the average interest rate for the second quarter was 4.2% compared to 3.3% for the 2006 quarter.

• The effective tax rate for the quarter was 19% compared to 28% in the prior year quarter, reflecting the above tax ruling benefit. The tax rate benefited by 11 percentage points resulting from the reversal of $10 million of previously established tax accruals no longer required based on rulings obtained from applicable tax jurisdictions.