International Flavors and Fragrances Inc. has posted sales gains for the fourth quarter and fiscal 2016.
For the fourth quarter, consolidated net sales increased to $762.6 million from $715.6 million in the year-ago period. The flavors division posted $377.6 million in sales, up from $334.2 million year-over-year, while the fragrances unit posted $384.9 million, up from $381.4 million in the year-ago period. Operating profit was $108.3 million, down from $121 million for the prior-year period.
For fiscal 2016, consolidated net sales were nearly $3.1 billion, up 3 percent from $3 billion in fiscal 2015. For the full year, the flavors segment posted about $1.5 billion in sales, up from $1.4 billion, and the fragrances division posted $1.6 billion in sales, an increase from $1.58 billion for 2015. Operating profit for the year was $567 million, down from $588 million for 2015. IFF said the decline was because of a $49 million litigation charge.
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IFF has made a series of acquisitions lately that have bolstered sales increases, chief executive officer Andreas Fibig said. “On a full-year basis, we continued to make strategic and financial progress while successfully navigating through a volatile and challenging market environment,” Fibig said. “Growth in fragrance encapsulation, sweetness and savory modulation, and in the Middle East and Africa — all strategic priorities for us – continued in 2016. We also successfully commercialized four captive fragrance ingredients, expanded our core list participation with several key customers and added approximately $160 million of future annual revenue with the acquisitions of David Michael and Fragrance Resources — the latter of which closed in January of 2017. We expect that these achievements should provide us with opportunities to consistently grow our business in the future.”
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IFF issued guidance for the year for 3 to 4 percent organic sales growth, with 4 to 5 percent growth in operating profit and 5 to 6 percent growth in earnings per share. The company is expecting a $10 million pre-tax charge related to its productivity program in the first quarter of the year. Overall IFF expects that program, which will reduce its global workforce by 5 percent, to result in annual run-rate savings of $40 million to $45 million.
“By segment, IFF’s organic growth in the fourth quarter reflected weaker-than-anticipated results in the fragrance segment,” wrote Stifel analyst Mark Astrachan in a note. “Fragrances were up 1 percent in local currency driven by growth in fabric care, home care and fragrance ingredients, compared to our expectations for over 5 percent growth. Fine fragrances declined 8 percent on a constant-currency basis, decelerating sequentially across 2016 and negatively impacted by high volume erosions, weak economic conditions in Latin America and the portfolio transition of two large customers. Consumer fragrances grew 3 percent, led by double-digit growth in home care and high-single-digit growth in fabric care, partially offset by personal wash. Flavors partially offset disappointing fragrance results, growing 14 percent versus expected growth of 10 percent.”