European restructuring lowers IFF's earnings

Related tags Percent Flavor Iff

Reorganization activities in Europe caused a dip in International
Flavors & Fragrances' earnings in the third quarter of 2004,
but North America continued to see strong growth, particularly in
its flavors division.

The New York based company reported a decrease in earnings per share for the third quarter compared to the same period last year - down by $0.10 to $0.44.

IFF, however, passed this dip off as the result of restructuring charges relating to the sale of its fruit preparations businesses in Switzerland and Germany to fellow flavour firm Frutarom in May this year and the closure of its Dijon, France plant.

The company noted that had these charges been taken into account, 2004 third quarter earnings per share would have increased by 2 percent over the previous year reaching $0.58.

Third quarter sales were 5 percent up on 2003, totaling $506.2 million, though, as the company acknowledged, this increase was in part due to the strengthening of various currencies in relation to the dollar. Had exchange rates remained constant, sales would have increased by a less impressive 2 percent.

Nonetheless, Richard Goldstein, the CEO of IFF, said he was confident the company was on the right track.

"Our sales and operating performance is largely due to our continued focus on customer service and our research and development initiatives,"​ he said.

North America led the pack with a 16 percent growth in flavor sales, while fragrances grew 14 percent.

IFF, however, has had a more turbulent time in Europe, where a two percent increase in fragrance sales was offset by a 10 percent decline in flavor sales. The company blamed this decline largely on the poor summer weather in most of Europe compared to the heat-wave of the previous year. The sale of its Swiss and German fruit preparations businesses also impacted sales.

With a view to the future, IFF added that it completed consultations with the French employee works council in Dijon last week and will proceed with the sale of its French fruit preparations assets to Frutarom and the closure of its Dijon manufacturing facility. The sale of the French fruit assets is now expected to be completed in the fourth quarter of 2004, while the Dijon facility is expected to close in the first quarter of 2005 following the transfer of production to other IFF locations.

This closure is part of the company's ongoing plan to consolidate its flavor and fragrance operations into its larger, more specialized sites; a move IFF hopes will increase capacity utilization and further improve productivity and customer service.

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