NEW YORK—International Flavors & Fragrances Inc. (IFF), a global creator of fragrances for consumer products, reported third quarter 2011 (3Q11) revenue of $714 million, six percent higher than the prior year period. Excluding the impact of foreign currency, revenue in local currency increased 1 percent. Reported earnings per share (EPS) increased 5 percent to $1.00 compared to $0.95 for the third quarter 2010 (3Q10). EPS in 2011 included a $0.01 per share benefit associated with the reversal of restructuring liabilities, as compared to a $0.03 per share expense related to restructuring efforts in Europe in the prior year period. Excluding these items from each period, adjusted EPS for the third quarter increased two percent to $1.00 versus $0.98 in the prior year quarter.
"Our category, customer and geographic diversity continued to support our financial results in the third quarter," said Doug Tough, Chairman and CEO. "In Fragrances, results were pressured by price-driven volume declines in Ingredients, where changes in volume are more price sensitive, and a general weakening of our more discretionary categories such as Fine Fragrance and Beauty Cares.
"Given our year-to-date performance, plus a more cautious outlook for the fourth quarter, we now expect local currency sales growth and adjusted EPS growth to approach the low end of our long-term financial targets for the full year 2011. Despite the challenging economic conditions, we continue to believe we can deliver adjusted operating profit growth above our long-term targets driven by our efforts in pricing, the benefit of previous restructuring activities, and cost control initiatives."
Local currency sales in the third quarter declined 5 percent against a 15-percent increase in the prior year period. In Fine Fragrance & Beauty Care, new business wins and price increases were more than offset by volume declines on existing business. Functional Fragrance results were similar to year-ago levels as new business wins, the realization of price increases and continued success in the Home Care category balanced volume declines. Fragrance Ingredients was most challenged, as price increases to reduce the impact of rising raw materials costs substantially impacted volumes of some lower value-added products.
Operating profit decreased by $9 million to $59 million in the third quarter, including a $1 million benefit associated with the reversal of restructuring liabilities, as compared to a $2 million expense related to restructuring efforts in Europe in the prior year period. Excluding these items from each period, adjusted operating profit declined by $12 million as strong double-digit increases in raw material costs and lower sales more than offset sequential improvements in pricing, the benefits associated with the European restructuring, and disciplined cost control. Adjusted operating profit margin fell 330 bps to 15.7 percent versus the year-ago period.
