Net Sales for IFF Decrease 8% in Q3 2023

Net sales for IFF in the third quarter 2023 were $2.82 billion, an 8% decrease for the quarter ended Sept. 30, 2023 compared with the prior-year period.

 

“In the third quarter we delivered both sales and profit ahead of our expectations,” said IFF CEO Frank Clyburn. “Our volume performance improved sequentially across the majority of our business, and we continued to benefit from our pricing actions and productivity initiatives. Our emphasis to drive working capital improvement yielded strong free cash flow generation, led by a significant reduction in inventory over the course of the year. As we look ahead, we remain committed to delivering our previously announced full year 2023 sales guidance range, and now believe that we can achieve full year 2023 adjusted operating EBITDA at the mid to high-end of our previously announced guidance range.”

 

Clyburn continued, “We also continue to execute our portfolio optimization efforts with the announced sale of Lucas Meyers Cosmetics. Additionally, we are rapidly pursuing divestitures within our portfolio to further reduce our outstanding debt and strengthen our capital structure.”

 

On a comparable basis, currency neutral sales decreased 3% versus the prior-year period, as growth in scent and health & biosciences was more than offset by softness in nourish and pharma solutions. 

 

Volume performance improved sequentially across nearly all businesses, yet remained challenged versus the year-ago period, and pricing continued to be strong.

 

Income before taxes on a reported basis for the third quarter was $59 million. Adjusted operating EBITDA for the third quarter was $506 million. On a comparable basis, currency neutral adjusted operating EBITDA declined 10% versus the prior-year period, as pricing and productivity gains were more than offset by lower volumes and unfavorable manufacturing absorption related to the company's inventory improvement program.

 

Reported earnings per share (EPS) for the third quarter was $0.10. Adjusted EPS excluding amortization1 was $0.89 per diluted share.

 

Cash flows from operations at the end of the third quarter was $795 million, and free cash flow defined as cash flows from operations less capital expenditures totaled $405 million. This cash flow performance was driven primarily by a strong improvement in inventories and led by a greater than $600 million reduction in inventory versus year-end 2022. 

On a reported basis, third quarter sales were $1.45 billion. On a comparable basis, currency neutral sales decreased 7% against a strong double-digit comparison from the year-ago period. Flavors returned to growth in the third quarter and Food Design remained resilient, down modestly versus the prior-year period. Functional Ingredients performance improved sequentially yet declined mid-teens versus the year-ago period.

 

Nourish adjusted operating EBITDA was $178 million and adjusted operating EBITDA margin was 12.3% in the third quarter. On a comparable basis, currency neutral adjusted operating EBITDA declined 26% as price increases and productivity gains were more than offset by lower volumes and unfavorable manufacturing absorption related to the company's inventory reduction program.

On a reported basis, third quarter sales were $518 million. On a comparable basis, currency neutral sales increased 2% driven by growth in cultures & food enzymes, grain processing, home & personal care and animal nutrition.

 

Health & Biosciences adjusted operating EBITDA was $150 million and adjusted operating EBITDA margin was 29.0% in the third quarter. On a comparable basis, currency neutral adjusted operating EBITDA improved 12% led by price increases and productivity gains.

On a reported basis, third quarter sales were $615 million. On a comparable basis, currency neutral sales1 increased 7% led by double-digit growth in consumer fragrance and a high-single digit increase in fine fragrance, with balanced contributions from volume and price.

 

Scent adjusted operating EBITDA was $131 million and adjusted operating EBITDA margin was 21.3% in the third quarter. On a comparable basis, currency neutral adjusted operating EBITDA increased a very strong 19% led by net favorable price to inflation and productivity gains.

The company reconfirmed its full year 2023 sales guidance range of $11.3 billion to $11.6 billion and now expects to be at the mid to high end of its full year 2023 adjusted operating EBITDA guidance range of $1.85 billion to $2.0 billion driven primarily by favorable price to inflation and improved productivity.

 

Based on current market foreign exchange rates, the company expects that foreign exchange will have approximately 2% adverse impact to sales growth and approximately a 6% adverse impact to adjusted operating EBITDA growth in 2023.