Press Release

NEW YORK, Nov 08, 2011 (BUSINESS WIRE) --

International Flavors & Fragrances Inc. (NYSE: IFF), a leading global creator of flavors and fragrances for consumer products, today reported third quarter 2011 revenue of $714 million, six percent higher than the prior year period. Excluding the impact of foreign currency, revenue in local currency increased one percent. Reported earnings per share (EPS) increased five percent to $1.00 compared to $0.95 for the third quarter 2010. 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 Chief Executive Officer. "The Flavors business continued to gain market share led by our innovative health and wellness portfolio and double-digit growth in the emerging markets. 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 Care. Fortunately, our emphasis on improved pricing and cost control, as well as favorable foreign exchange benefits, helped produce positive financial results on a consolidated basis."

Mr. Tough continued, "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."

THIRD QUARTER 2011

Flavor Business Unit

Local currency sales in the third quarter increased eight percent over the prior year period as double-digit growth in the emerging markets continued to drive results. In the developed markets, growth in North America was once again the strongest, led by several health and wellness initiatives. From a category perspective, Savory continued to grow double-digits for the fourth consecutive quarter and Beverage was up high single-digits for the eighth consecutive quarter.

Operating profit increased 13 percent, or $8 million, to $71 million in the third quarter as sales growth, including pricing, and continued cost discipline drove results. Operating profit margin declined 10 bps versus the prior year period to 20.9 percent as pricing actions and cost control virtually covered the impact of higher raw material costs on operating profit margin.

Fragrance Business Unit

Local currency sales in the third quarter declined five 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.

Sales performance by region and product category follows:

Europe, Africa and Middle East

Third Quarter 2011 Highlights

• Gross profit, as a percentage of sales, was 39.0 percent compared with 42.3 percent in the prior year period as double-digit increases in raw material costs more than offset the benefits of increased pricing.
• Research, selling and administrative (RSA) expenses, as a percentage of sales, decreased 300 bps year-over-year to 21.1 percent reflecting lower incentive compensation accruals and cost control. Within RSA, research and development expense increased slightly driven by investments to support strategic growth initiatives.
• Operating profit increased $8 million to $129 million, including a $1 million benefit associated with a 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 grew four percent, or $5 million, to $128 million as pricing actions, lower incentive compensation accruals, foreign exchange benefits, and cost control drove results. Adjusted operating profit margin decreased 40 bps to 17.9 percent versus 18.3 percent in the year-ago period.
• Interest expense declined $2 million year-over-year reflecting lower levels of outstanding debt.
• The effective tax rate was 26.9 percent as compared to 27.4 percent in the prior year period primarily reflecting a U.S. Research and Development credit in the 2011 period.

About IFF

International Flavors & Fragrances Inc. (NYSE: IFF) is a leading global creator of flavors and fragrances used in a wide variety of consumer products. Consumers experience these unique scents and tastes in fine fragrances and beauty care, detergents and household goods, as well as beverages, confectionery and food products. The Company leverages its competitive advantages of consumer insight, research and development, creative expertise, and customer intimacy to provide customers with innovative and differentiated product offerings. A member of the S&P 500 Index, IFF has more than 5,500 employees working in 33 countries worldwide. For more information, please visit our website at www.iff.com.

Audio Webcast

An audio webcast to discuss the Company's third quarter 2011 financial results, and fourth quarter and full year 2011 outlook will be held today, November 8, 2011, at 10:00 a.m. EST. Interested parties can access the webcast and accompanying slide presentation on the Company's website at www.iff.com under the Investor Relations section. For those unable to listen to the live broadcast, a replay will be available on the Company's website approximately one hour after the event and will remain available on the IFF website for one year.

Cautionary Statement Under The Private Securities Litigation Reform Act of 1995

Statements in this press release, which are not historical facts or information, are "forward-looking statements" within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's current assumptions, estimates and expectations. Certain of such forward-looking information may be identified by such terms as "expect", "anticipate", "believe", "outlook", "may", "estimate" and "predict" similar terms or variations thereof. All information concerning future revenues, tax rates or benefits, energy costs, interest and other savings, capital expenditures, earnings and other future financial results or financial position, constitutes forward-looking information. Such forward-looking statements are based on a series of expectations, assumptions, estimates and projections about the Company, are not guarantees of future results or performance, and involve significant risks, uncertainties and other factors, including assumptions and projections, for all forward periods. Actual results of the Company may differ materially from any future results expressed or implied by such forward-looking statements. Such factors include, among others, the following:

• General economic and business conditions in the Company's markets and demand for the Company's products, especially given the current disruption in global economic conditions, including economic and recessionary pressures;
• Decline in consumer confidence and spending and changes in consumer preferences;
• Competitive products and pricing pressures;
• Significant fluctuations in the value of the U.S. dollar;
• Population health and political uncertainties, and the difficulty in projecting the short and long-term effects of global economic conditions;
• Movements in interest rates;
• Volatility and deterioration of the capital and credit markets, and any adverse impact on our cost of and access to capital and credit;
• Fluctuations in the price, quality and availability of raw materials;
• The Company's ability to implement its business strategy, including the achievement of anticipated cost savings, profitability, realization of price increases and growth targets;
• The level of success the Company achieves in developing and introducing new products and entering new markets;
• The impact of currency fluctuation or devaluation in the Company's principal foreign markets, especially given the current disruptions to such currency markets, and the impact on the availability, effectiveness and cost of the Company's hedging and risk management strategies;
• The outcome of uncertainties related to litigation or settlement, including pending patent litigation;
• The impact of possible pension funding obligations and increased pension expense on the Company's cash flow and results of operations;
• The effect of legal and regulatory proceedings, as well as restrictions imposed on the Company, its operations or its representatives by U.S. and foreign governments;
• Changes in federal, state, local and foreign tax legislation or the results of tax audits, assessments, or disputes may result in fluctuations in our tax obligations, effective tax rate or results of our operations;
• Any business disruptions due to political instability, armed hostilities, incidents of terrorism, natural disasters or the responses to or repercussion from any of these or similar events or conditions; and
• Adverse changes due to accounting rules or regulations.

The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the Company (such as in our other filings with the Securities and Exchange Commission ("SEC") or in company press releases) for other factors that may cause actual results to differ materially from those projected by the Company.

The Company intends its forward-looking statements to speak only as of the time of such statements and does not undertake or plan to update or revise them as more information becomes available or to reflect changes in expectations, assumptions or results. The Company can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this report or included in our other periodic reports filed with the SEC could materially and adversely impact our operations and our future financial results.

Any public statements or disclosures by IFF following this release that modify or impact any of the forward-looking statements contained in or accompanying this report will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this report.

SOURCE: International Flavors & Fragrances Inc.

International Flavors & Fragrances Inc.
Investor Relations:
Michael DeVeau, 212-708-7164