International Flavors & Fragrances Inc. (New York) reported third quarter 2010 revenue of $673 million, 10% higher than the prior year quarter. Revenue in local currency increased 13% as foreign currency had a three percentage point impact on results. "Our third quarter performance marks the continuation of excellent results," said IFF chairman and CEO Doug Tough. "All categories performed at or above expectations, as both flavor and fragrance results were once again supported by strong new win performance. This outstanding top-line performance combined with our continued focus on cost discipline enabled us to deliver a margin profile that has not been achieved in over five years."
Tough continued, "As we look towards the balance of the year, we expect local currency sales in the fourth quarter to remain strong, albeit approaching more normalized levels. We believe that our teams' continued ability to win new business will be a critical driver of results going forward as it appears that the benefits of restocking are subsiding. We expect that this performance will support our efforts to drive market share improvements while also creating long-term value for our shareholders."
Flavor Business Unit
Local currency sales in the third quarter increased 10% over the comparable 2009 period as all regions reported strong results. For the third consecutive quarter, an accelerated level of demand from existing accounts and new business wins led to double-digit growth in Europe, Africa, the Middle East (EAME) and Greater Asia. Performance in North America continued to benefit from double-digit performances in both confectionery and eeverage; while Latin America experienced strong double-digit growth in confectionery, savory and dairy.
Reported operating profit increased 15% year-over-year, or $8 million, to $63 million in the third quarter. This increase was driven by accelerated sales growth, improving input costs and continued margin improvement initiatives. Operating profit margin in the quarter improved 100 bps to 21.0% versus 20.0% in the prior year period.
Fragrance Business Unit
Local currency sales in the third quarter increased 15% over the prior year period as all regions reported double-digit growth. New business wins and increased volumes once again drove double-digit growth in fine fragrance. In beauty care, the strong trends in hair care and toiletries continued, as each category grew at a double-digit rate. Functional fragrance results were solid, as a double-digit performance in home care more than offset challenging year-over-year comparison from the prior year period. In fragrance ingredients, local currency sales increased 18% as continued improvements in underlying demand aided results.
Operating profit increased by $22 million to $69 million in the third quarter, including a $2 million charge related to ongoing restructuring efforts in Europe as compared to $11 million related to restructuring costs in the prior year period. Excluding these items, adjusted operating profit grew 23 percent, or $13 million to $71 million. As a result, adjusted operating profit margin for the quarter increased 190 bps to 19.0%, driven by strong new win performance, favorable input costs and benefits from ongoing profit improvement initiatives.