IFF reports record-setting sales in “pivotal” Frutarom acquisition year

14 Feb 2019 --- International Flavors & Fragrances Inc. (IFF) has reported that net sales for the full year totaled US$4 billion, an increase of 17 percent from US$3.4 billion in 2017 driven by mid-single digit growth in both Taste and Scent and the contribution of sales related to Frutarom, the biggest acquisition in IFF’s history. For the year, pricing contributed approximately 2 percentage points to growth for both Taste and Scent.

“2018 was a pivotal year in the long and successful history of IFF,” says Andreas Fibig, IFF Chairman and CEO. “As an organization, we delivered on all our key financial metrics and completed our acquisition of Frutarom – the largest in our industry to date – all while successfully navigating a challenging and dynamic market environment.”

“We achieved strong advancements in both top and bottom line results in 2018. Highlights include our record-setting sales of approximately US$4 billion – including sales related to Frutarom, as well as mid-single digit growth in both Taste and Scent – and strong adjusted EPS ex amortization of US$6.28.”

“We also made progress strategically to establish ourselves as a global leader in taste, scent and nutrition through the Frutarom acquisition. This combination helps us create a truly differentiated portfolio with an increased focus on naturals and health and wellness. It also provides us opportunities to expand into attractive and faster-growing categories and broadens our complementary and growing customer base.”

On October 4, 2018, the Frutarom acquisition was completed. The results for Frutarom have been included from the closing date, and as a result do not represent a full quarter. On a reported basis, sales were US$359.6 million. On a standalone basis, Frutarom sales improved 3 percent on a like-for-like basis driven by strong growth in Natural Product Solutions and F&F Ingredients. The Core business – excluding Trade & Marketing – grew 4 percent on a like-for-like basis versus prior year. Segment profit contributed US$27 million in the fourth quarter; US$66 million excluding amortization.

For the full year, IFF’s reported earnings per share (EPS) was US$3.79 per diluted share versus US$3.72 per diluted share reported in 2017. Excluding those items that affect comparability, adjusted EPS ex amortization was US$6.28 per diluted share in 2018 versus US$6.23 in the year-ago period as adjusted operating profit growth and a lower year-over-year adjusted effective tax rate more than offset higher interest expense and shares outstanding, both due to the Frutarom acquisition.

On a reported basis, sales increased 6 percent, or US$105.2 million, to US$1.7 billion. Currency neutral sales grew 5 percent driven by growth in all regions and across all categories. Improvements were driven by high-single digit growth in North America, with strong double-digit growth at Tastepoint. EAME, led by double-digit growth in Africa and the Middle East, and Latin America, driven by strong double-digit growth in Argentina, both achieved mid-single digit growth.

Taste segment profit increased 10 percent on a reported basis and 6 percent on a currency neutral basis, driven primarily by volume growth and the benefits from productivity initiatives.

IFF reported that sales remained constant at US$401.6 million in 2018 for the company’s Taste Division in Q4. Currency neutral sales improved 2 percent, with growth in three of four regions. Performance was led by mid-single digit growth in North America and Greater Asia, the latter, which saw double-digit growth in India and high-single digit increases in Indonesia and China.

Taste segment profit decreased 5 percent on a reported basis and 7 percent on a currency neutral basis, as volume growth and the benefits from productivity initiatives were more than offset by higher Research, Selling and Administrative expenses, the company reportsed.

In an interview with FoodIngredientsFirst yesterday, Tim Larsen, Managing Director in Houlihan Lokey’s Consumer, Food & Retail Group, said that M&A activity in adjacent non-traditional areas, as well as forays into natural raw materials are set to continue to top the food ingredients mergers scene, should favorable market dynamics remain.

Several major acquisitions by major flavor players in 2018, included Givaudan’s acquisition of Naturex and IFF buying Frutarom. Symrise’s recent purchase of ADF/IFDF suggests further consolidation during 2019, as major flavor players look beyond their base to target the more holistic concept of taste.