IFF suffers through paprika

Experienced a slowdown in order and sales activity for products which include this raw material, primarily due to delayed shipments which were quarantined while materials were tested.

16/06/05 International Flavors and Fragrances has said that it has experienced a slowdown in order and sales activity for products which include paprika, primarily due to delayed shipments which were quarantined while materials were tested. As a result, the Company’s second quarter sales could be negatively impacted by as much as $10 million (approximately 2% of the quarter’s expected sales). In addition, the Company has expensed approximately $5 million in costs related to the contaminated raw material, comprised mainly of the write-off of affected materials and additional cost of testing incurred. The Company will seek full indemnification from its supplier, the supplier’s insurers and, to the extent required, its own insurers with regard to any potential customer claims. There can be no assurance, however, of the final outcome of any claims made, or of the timing or extent of indemnification from the supplier and its insurers.

IFF recently learned that it was one of a number of companies to receive, from a Spanish supplier, paprika that contained low levels of non-food grade coloring. IFF stressed that it does not add non-food grade colorants to its flavorings or raw materials. As soon as IFF confirmed that the quality of the paprika was compromised, the Company (i) initiated a process to identify the IFF products that contained the ingredient and immediately began contacting its customers who had received these products; (ii) quarantined the inventory of all potentially affected materials; (iii) supplemented its supplier qualification process and expanded its testing procedures; and (iv) voluntarily held shipments of potentially affected product until it could complete this testing. Testing and risk assessment on these materials has been essentially completed, affected lots were limited, replacement of contaminated product is virtually completed, and all products are now being distributed in the normal course of business.

Based on the foregoing, the Company expects earnings per share in the 2005 second quarter to be reduced by approximately $.06 - $.07. The Company will release its second quarter results on July 27, 2005 at which time it will provide updated guidance on its sales and earnings per share expectations for the full year 2005.