NEW YORK — Effectively raising prices 8% in the first quarter ended March 31 because of inflationary pressures led IFF to increase its guidance for 2022 fiscal-year sales. It also made communicating with customers an even higher priority.
“There are pushbacks,” said Franklin K. Clyburn, chief executive officer, in a May 10 earnings call. “I think some of the pushbacks are in some of the smaller customers, some of our emerging-market customers where price is much more sensitive. We are seeing pushback there, but all in all, we feel as though we are in a good place, and we'll continue to work closely with our customers to navigate, which is, as we all know, unprecedented times.”
Glenn R. Richter, chief financial officer, added, “Simply put, with 60% of our cost structure related to raw materials, energy and logistics, it's sort of impossible for us to absorb those level increases.”
He said dialogue with customers has been “very, very good.”
IFF executives now expect full-year 2022 sales to be about $12.6 billion to $13 billion, up from a previous guidance of $12.3 billion to $12.7 billion.
Net income of $246 million, equal to 96¢ per share on the common stock, in the quarter compared with a loss of $40 million in the previous year’s first quarter. Reported net sales increased 31% to $3.23 billion from $2.47 billion, driven primarily by incremental sales related to the merger with DuPont Nutrition & Biosciences. Currency neutral sales increased 13%.
“While the macroeconomic environment remains incredibly dynamic with continuing inflationary pressures at the moment, we are pleased with the actions taken by our teams to manage through these challenges,” Mr. Richter said. “We took a very proactive approach and quickly instituted broad-based pricing actions across our portfolio in response to these pressures. Consequently, the actions we have taken have resulted in a full dollar-cost recovery of total inflation cost in the first quarter.
“Unfortunately, since our February earnings call, we have seen additional increases in raw material, logistics and energy costs and are diligently working with our customers on incremental pricing actions.”
Volume, although up 5%, softened in the quarter, he said. The company now is targeting low-single-digit volume growth for the fiscal year.
“We have reduced our volume expectations given a more challenging environment, including lost revenues as a result of the Russia-Ukraine war, continued global supply chain issues and anticipated softer consumer demand as a result of higher energy prices and general inflation negatively impacting consumer spending,” Mr. Richter said.
The first-quarter results included a charge of about $20 million related to expected credit loss on receivables from customers in Russia and Ukraine.
“We limited production and supply of ingredients and into Russia, to only those that meet the essential needs of people, including food, hygiene and medicine,” Mr. Clyburn said. “Our plan at this time is to continue to supply to the best of our ability in accordance with sanctions, logistics availability and other key factors.”
Net sales in the Nourish segment increased 32% to $1.73 billion from $1.31 billion. On a comparable basis, currency neutral sales increased 16% thanks to double-digit growth in food design and ingredients and high single-digit growth in flavors.
Net sales in Health & Biosciences increased 55% to $661 million from $426 million. On a comparable basis, currency neutral sales in Health & Biosciences increased 10% with growth across all segments. Double-digit growth came in health, microbial control and grain processing. High-single-digit growth came in cultures and food enzymes and animal nutrition.Net sales in Scent increased 2.8% to $585 million from $569 million. Net sales in Pharma Solutions increased 54% to $249 million from $162 million.