Fragrance sales continue to disappoint for IFF

By Katie Bird

- Last updated on GMT

Related tags Profit Marketing

International Flavors and Fragrances has reported a drop in profits this quarter due to higher input costs and a shift to lower margin products.

Although third quarter sales were up 6 percent to reach $618m, the company did not manage to translate this into a profit gain.

In addition, a significant proportion of sales growth was driven by currency and on a local currency basis sales growth was closer to 2 percent.

Gross profit for the quarter, as a percentage of sales, dropped to 40.0 percent from 41.9 percent, which the company put down to a shift in the sales mix to lower margin products affecting all regions and market segments.

Commenting on the results CEO Robert M. Amen said: “Rising material and input costs have put pressure on our profitability throughout the year. And while we have made some progress toward our cost recovery goals, our year-to-date efforts have been insufficient to maintain our operating margins.”

Nevertheless, he remains confident that IFF will be able to ‘navigate through the current economic environment’ in order to achieve its long term objectives.

Fragrance drags results down

The fragrance business unit continued to hold the company back and sales on a local currency basis were flat.

Within the fine fragrances and beauty care division, North America was trailing behind with a 14 percent decline in sales compared to last year’s figures.

IFF was quick to point out, however, that this was an improvement on the figures from the first two quarters of this year.

Results were better from other regions, particularly Latin America and Greater Asia, but operating profit still dropped from $55.8m to $54.8m.

Commenting on the results from the sector Amen said: “We are seeing an improvement in our fragrances business, though challenges still remain.”

Flavors lead the way

The flavors business unit led the company’s results with a 9 percent (5 percent in local currency) increase in sales.

Latin America and Greater Asia performed particularly well with new wins in the beverage and confectionary categories.

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