High raw material costs continue to weigh on IFF in Q1

By Caroline Scott-Thomas

- Last updated on GMT

High raw material costs continue to weigh on IFF in Q1

Related tags Flavor

High raw material costs continued to impact International Flavors and Fragrances (IFF) in the first quarter, as it reported a 4% decline in net profit, the company reported on Wednesday.

Net profit fell to $81m in the quarter ended March 31, compared to $83m for the prior year period, while revenue fell 1% to $710.6m compared with $714.3m a year ago.

Revenue in the company’s flavors segment grew 3% to $350m, which the company attributed to double-digit growth in emerging markets, and continued interest in health and wellness initiatives in North America and Western Europe, as was the case for the prior year period. A 1% increase in the flavors segment operating profit, to $80m, was driven by higher pricing, the company said.

Meanwhile, revenue and profit in IFF’s fragrance segment were both down, by 4% and 18% respectively, as higher prices failed to offset lower sales volumes and higher raw material costs.

 IFF chairman and CEO Doug Tough said in a statement that the results were broadly in line with the company’s expectation.

"The diversity and strength of our category and geographic portfolios, combined with our cost discipline, helped ease the impact of rising raw material costs, softness in Fragrance Ingredients, and a challenging macroeconomic environment,”​ he said. “Going forward, we expect our business trends will improve over the course of the year as we continue to capitalize on our strong emerging market presence, healthy research and development pipeline, and profit improvement initiatives."

Financial analysis firm Morningstar said in a research note that IFF’s focus on emerging markets should help it to offset slower growth in more mature markets, but volume declines, particularly in the fragrance ingredient segment, have outweighed benefits.

“Some of IFF's customers maintain in-house flavor and fragrance development capabilities, which could add another layer of competitive pressure,”​ Morningstar said.

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