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International Flavors & Fragrances Inc.’s (IFF) fourth-quarter revenue jumped 6%—led by double-digit growth in the emerging markets—as fragrance compounds marked a third consecutive quarter of strong growth and fragrance ingredients grew for the first time since the first quarter of 2011. (See IFF Q3 results here.)
For the quarter ended December 31, the company said its net income rose to $68.1 million from $24.4 million a year ago. Excluding the patent litigation settlement and restructuring charges from the prior year’s results, adjusted net income increased 11% to $68.1 million from $61.1 million a year earlier.
Fourth-quarter revenue rose 6% to $680.5 million from $644.3 million in the prior year quarter. Excluding the impact of foreign currency, local currency sales rose 8%. On a like-for-like (LFL) basis, which excludes the exit of flavors low-margin sales activities, local currency sales increased 10%. The company’s expanding footprint in emerging markets accounted for 49% of fourth-quarter sales.
In the company's fragrance unit, fourth-quarter revenue rose 10% to $354 million, up 13% in local currency. Fragrance compounds had local currency growth of 15%, marking the third consecutive quarter of accelerated growth. Fragrance ingredients had local currency sales growth of 6%, marking the first quarter of growth since the first quarter of 2011.
Strong new customer wins and broad-based growth in its fragrance compounds business drove local currency sales growth of 15%, with double-digit growth in Latin America, Greater Asia and North America and solid growth in Europe Africa Middle East (EAME). Fine fragrance and beauty care booked 19% local currency sales growth and functional fragrance had 12% local currency sales growth.
For its flavor business, fourth-quarter revenue inched 1% to $326 million from $323 million in the prior-year quarter. Local currency sales increased 3% in the fourth quarter fueled by stronger growth in the emerging markets of Southeast Asia and Latin America combined with steady growth in the developed markets of North America and Western Europe.
On a like-for-like (LFL) basis, flavor unit local currency sales increased 7% over the prior year quarter, led by 15% LFL growth in North America. From an end-use category perspective, local currency sales growth was fueled by double-digit growth in beverages, particularly in North America, followed by solid growth in savory and dairy, primarily in greater Asia.
For the full year, IFF said its net income slipped to $254.1 million from $266.9 million a year ago, as the company booked a charge related to its previously announced Spanish tax settlement. Excluding charges in the current and year-ago period, net income rose 7% to $327.5 million from $306.2 million a year earlier.
Revenue for the full year rose 1% to $2.8 billion, with the fragrance segment contributing 51% of total consolidated revenue. Local currency sales increased 4% for the full year, reflecting accelerated momentum throughout the year. On a like-for-like basis, sales increased 5%. The emerging markets accounted for 47% of full-year sales.
For the full year, fragrance compounds had local currency growth of 7%, compared with 1% local currency growth in 2011. Fragrance ingredients, although improving over the course of the year, declined 10% in local currency sales in 2012 versus 2011.
Flavor's local currency sales were up 5% for the full year and rose 8% on a LFL basis, supported by 9% growth in emerging markets. Greater Asia, flavors largest region, delivered growth of 7% for the full year growth, or 8% on a LFL basis. The developed market of North America delivered like-for-like growth of 9%.