International Flavors & Fragrances Remains Cautiously Optimistic in Plans for Sustaining Long-Term Growth

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Researched by Industrial Info Resources (Sugar Land, Texas)--Since reorganizing into two business units in 2006, International Flavors & Fragrances Incorporated (NYSE:IFF) (IFF) (New York, New York) has sustained long-term growth of about 1% higher than the world's gross domestic product and is planning for further growth, Chairman and CEO Rob Amen said on November 18 at the Morgan Stanley Global Consumer & Retail Conference in New York. "We're pleased, given the environment in which we're operating," he said. "And we continue to develop very nicely in the countries in Latin America and Greater Asia, where we believe the best growth opportunities are going to exist." As an industry that grows off of the population and disposable income, the company relies heavily on four areas of expertise to connect with consumers' demands:

• Research and development
• IFF spends about 8.5% of sales in this area, which has about 170 scientists. Since 1997, the company has been awarded 190 patents, and it expects between 21 and 25 more by the end of 2008.
• Creativity
• The company has 14 creative centers across the world where it adapts flavors or fragrances.
• Consumer understanding
• The company conducts hundreds of thousands of interviews worldwide and compiles the information into a database that the perfumers and flavorists use. IFF studies emotions and reactions related to each unique product on top of functionality, Amen said.
• Regulatory expertise
• All of the company's products are either consumed in the body or used on the body. Therefore, it must work with the world's regulatory agencies, which can sometimes be challenging. "It takes a body of knowledge that is not easily developed," Amen said.

He said the rise in input costs this year has hurt the company's margins. "We must continue to work with our customers to get reasonable cost recovery," he said. "But in addition, we have to collaborate with our customers where we can to reformulate to the benefit of both. I expect to see substantial progress in 2009." Amen said IFF's key strategic initiative is to build a stronger and more efficient company by focusing on three growth areas: organic growth, geography, and new products and product applications.

Looking forward, Amen said the company is waiting to see what develops. "Every day seems to have a surprise," he said. "But at this stage, we're optimistic we'll be equal to, if not better, than the same quarter last year. Looking ahead, our business plans do anticipate a weaker consumer environment, especially in the developed markets, and we're developing contingency plans, should that weakness turn into diminished demand. But we're not seeing it so far." At the end of October, IFF reported third-quarter net income of $57.68 million, down 2% compared with the same period last year. However, sales for the quarter rose 6% to $618 million.

"Overall, we feel good about the fundamentals of our business, the strength of our company and the soundness of our strategies," Amen said. "And I believe our goal to help consumer-products companies build their brands will enable IFF to grow long-term value for shareowners."

IFF creates and manufactures flavors and fragrances for consumer-products firms. Its product portfolio includes perfumes, snacks, skin-care products and a variety of other household goods. Founded in 1889, the company has 5,000 employees and sales and manufacturing facilities in more than 30 countries.

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