IFF so far has navigated inflation in 2022 through price increases. A similar scenario looks to be on the horizon for 2023.
“As a result of our strategic pricing actions, we have fully recovered total inflation cost to date, and we are optimistic that we will achieve full dollar cost recovery for the full fiscal year,” said Glenn R. Richter, chief financial officer, in an Aug. 9 earnings call to discuss results for the second quarter ended June 30.
Net income attributable to IFF shareholders was $107 million, equal to 43¢ per share on the common stock, which was more than triple net income of $28 million, or 11¢ per share, in the previous year’s second quarter. Net sales increased 7% to $3.31 billion from $3.09 billion.
“We are taking a very deep look at ’23,” Mr. Richter said. “We’ve run through a preliminary scenario. We’re doing an update in the coming weeks here as we plan for 2023, and our perspective at this point is we do anticipate another, I’ll say, meaningful round of cost increase from inflation. That’s going to be concentrated in our view more on raw materials.”
Soy, oils and certain commodity groups such as grains all could see significant inflation, he said.
“Energy is choppy, but likely to also be some increase modestly in energy prices and logistics as well,” he said.
In this year’s second quarter, New York-based IFF recorded an impairment charge of $120 million within certain entities in Russia due to supply chain issues, reduced product demand and exchange rate volatility caused by the Russia-Ukraine war. The company maintains operations in Russia and Ukraine and exports products to customers in Russia and Ukraine from operations outside the region. IFF has limited the production and supply of ingredients in and to Russia to only those that meet consumers’ essential needs, including food, hygiene and medicine.
In the Nourish segment, net sales increased 9% to $1.82 billion from $1.67 billion in the previous year’s second quarter. In Health & Biosciences, net sales increased 4% to $665 million from $639 million
“Nourish, which delivered year-over-year comparable currency-neutral sales growth of 15% and 18% growth in comparable currency-neutral adjusted operating EBITDA, saw strong demand, particularly in food design and flavors,” Mr. Richter said. “In Health and Biosciences, high single-digit increases in health and cultures and food enzymes, and mid-single-digit growth in animal nutrition, drove 4% comparable currency neutral sales growth for the division.”
In Scent, sales rose 5% to $580 million from $550 million. In Pharma Solutions, sales increased 5% to $244 million from $232 million.
Companywide over the first six months of the fiscal year, net income attributable to IFF shareholders was $351 million, or $1.38 per share on the common stock, which compared with a loss of $14 million in the same time of the previous year. Sales increased 18% to $6.53 billion from $5.55 billion.
By Jeff Gelski
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