New flavour wins in Latin America went some way to offsetting weaker customer demand acutely felt in the US, but top line performance for the third quarter was largely disappointing and the outlook remains bearish.
Although sales for the group grew by 3.9 per cent from $462.8m in 2002 to $480.9 million for the quarter ended 30 September this year, the figures benefited from thestrengthening of various currencies, most notably the euro, the pound sterling and the australian dollar, in relation to the US dollar. Sales for the third quarter 2003 would have slipped by about 1 per cent had exchange rates remained constant.
"Against a weak consumer confidence backdrop, we continue to see sharply fluctuating order patterns in both flavours and fragrances, most notably in North America," said Richard Goldstein, chairman and CEO of International Flavors and Fragrances.
North America flavour and fragrance sales for the third quarter dropped respectively by 1 per cent and 13 per cent and in total the region declined 7 per cent.
In Europe the picture may have been a little brighter but local currency flavour and fragrance sales in the region dropped by 2 per cent. Sales for the quarter were at their weakest in France, Germany, the UK and Switzerland, reported IFF.
Turning to Latin America, new customer wins saw flavour sales rising by 6 per cent for the region, benefiting from increases of 77 per cent, 39 per cent and 15 per cent in Central America, Argentina and Brazil respectively, reflecting the benefit of new wins and, in Argentina, an improved economic environment.
The less than dazzling results for the third quarter were felt in the diluted earnings for the nine month period ended 30 September 2003 which fell to $1.42, from $1.43 for the same period in 2002.
Faced with a tougher environment, IFF's president said that the company is continuing - plans announced back in October 2000 - to reorganise with the ultimate aim of shaving some $25 to $30 million off annual costs.
A guarded vision may best describe the company's outlook for the full year 2003 concentrated in Goldstein's words this week. "Many of our customers have chosen to delay or downsize their product launches until they see a stronger economic recovery. In updating our guidance for the full year 2003, we are assuming that these weak conditions and demand will persist for the balance of the year."