NEW YORK — Sluggish consumer demand ate into IFF volume numbers in the third quarter ended Nov. 30. Volume was challenged in two IFF segments, Nourish and Health & Biosciences, said Glenn Robert Richter, chief financial officer, in a Nov. 8 earnings call.
“To provide some more color, nearly two-thirds of our volume decline in the quarter came in protein solutions, which is part of the Nourish business, where we have seen customer destocking to address higher inventory levels in response to sluggish end consumer demand,” he said. “In H&B, our health volumes were also challenged in the third quarter, a direct result from weakening market demand in the US and Europe reflected in public market data.”
Low volume could carry over into next year.
“Looking into 2023, the current macroeconomic environment makes us cautious, and as a result, we anticipate that we will be in a low-volume growth environment, particularly in the first half of next year,” Mr. Richter said.
New York-based IFF had a net loss attributable to shareholders of $2.20 billion in the third quarter, which compared with net income of $194 million, or 76¢ per share on the common stock, in the previous year’s third quarter. Net sales of $3.06 billion were down slightly from $3.07 billion.
IFF now expects full-year sales to be about $12.4 billion to $12.5 billion, down from a previous outlook of $12.6 billion to $13 billion, principally due to an unfavorable impact from foreign exchange and a more challenging operating environment.
In IFF’s Nourish business, net sales rose 2.5% to $1.70 billion from $1.66 billion. Strong performances came in flavors, ingredients and food design, Mr. Richter said. Currency-neutral adjusted operating EBITDA declined 4% as lower volumes offset price increases and productivity gains.
“We also, within the ingredients business, did make some trade-offs from a pricing perspective,” said Franklin K. Clyburn, chief executive officer. “We had some of our protein solutions business that was capacity-constrained, where we did increase price, made some volume trade-offs to preserve some margin, but it’s primarily destocking. So that is the main reason, and we’re also assuming in that business that will continue in the fourth quarter.”
In Health & Biosciences, net sales of $512 million were down 17% from $618 million. Growth of mid-single-digit percentages came in culture and food enzymes, health, home and personal care, and animal nutrition. Currency-neutral adjusted operating EBITDA declined 1% as lower volumes offset price increases and productivity gains.
In IFF’s Scent business, net sales rose 1.9% to $591 million from $580 million. In the Pharma Solutions business, net sales shot up 22% to $257 million from $211 million.
Over the first nine months of the fiscal year, IFF had a net loss attributable to shareholders of $1.85 billion, which compared with net income of $180 million, or 75¢ per share, in the same time of the previous year. Nine-month net sales rose 11% to $9.60 billion from $8.63 billion.“Through the first nine months, we continued to take strategic pricing actions as necessary to offset inflationary pressures, and as a result, have fully recovered total inflation cost to date,” Mr. Clyburn said.