IFF reveals mixed financial results, expects ongoing sales pressure after Q1 decline

10 May 2023 --- International Flavors & Fragrances (IFF) has reported its Q1 financial results, disclosing a 6% decline in sales to US$3.02 billion. Growth in the supplier’s Food Design and Flavors division of its leading business, Nourish (overall sales down 5%), could not offset the sales reduction of its Ingredients company segment.

“We delivered first quarter 2023 results in line or ahead of our expectations amidst a challenging operating environment,” says Frank Clyburn, CEO at IFF.

The company expects its sales volumes “to remain under pressure” in Q2 and accelerate during the year’s second half. The company will adjust prices and drive cost savings via productivity and restructuring moves.

IFF stock went down 7.02% yesterday after the company published its financial report.

High inflation, soft demand
The ingredients company experienced mixed results across its portfolio. In the Health & Biosciences business (sales down 22%) growth in Cultures & Food Enzymes and Home & Personal Care couldn’t offset a decrease in sales in Health, Animal Nutrition and Grain Processing.

Moreover, although its Scent and Pharma Solutions businesses increased sales (up 4% and 2% respectively), the Scent business saw a dip in sales in its Ingredients segment and the Pharma Solutions in its Industrial one.

Nonetheless, Fine Fragrance and Consumer Fragrance for Scent, and Pharma for the Pharma Solutions business, allowed the company to increase sales.

“Our team successfully navigated soft end-market demand and customer inventory destocking as they executed on our priorities to deliver our financial commitments. As we look ahead to the balance of the year, we continue to believe our volume performance will improve, yet acknowledge that market conditions remain uncertain,” explains Clyburn. 

IFF is working in reducing milk use in ice cream.“As such, we remain steadfast in our focus to control what we can control as we solidify profitability, maximize cash flow and drive portfolio optimization to generate strong returns for our shareholders.”

The business also expects to improve cash flow by reducing existing inventories.

IFF on the move
During the first financial quarter of the year, IFF has made strategic business moves to increase profitability, expand market reach and reduce its outstanding debt.

This month, IFF launched solutions based on its Howaru probiotic ingredient. The company has developed new concepts to address limited menopause product offers. 

Last month, it announced that it is tapping into stabilizer and flavor-modulating solutions to reduce milk use in ice cream. The business expects to cut recipe costs by 25%. 

Meanwhile, it has increased its innovation capabilities with two new flavor labs in Northern Europe. The sweet and culinary flavor creation labs are the latest addition to the company’s expansive campus in Brabrand, Denmark.

Continuing its divestment strategy that started last year, IFF sold its Flavor Specialty Ingredients Business to Exponent in a US$220 million deal. The transaction is expected to be finalized in Q3. 

By Marc Cervera