International Flavors CEO Discusses Q3 2010 Results – Earnings Call Transcript
International Flavors & Fragrances Inc. (
)
Q3 2010 Earnings Call Transcript
November 4, 2010 10:00 am ET
Executives
Mike DeVeau – IR Manager
Doug Tough – Chairman and CEO
Nicolas Mirzayantz – Group President, Fragrances
Hernan Vaisman – Group President, Flavors
Kevin Berryman – EVP and CFO
Analysts
Silke Kueck – JPMorgan
John Roberts – Buckingham Research
Mike Sison – KeyBanc Capital Markets
Mark Astrachan – Stifel Nicolaus
Lauren Lieberman – Barclays Capital
Jeff Zekauskas – JPMorgan
Sam Yake – BGB Securities
Presentation
Operator
Compare to:
Previous Statements by IFF
»
International Flavors & Fragrances Inc. Q2 2010 Earnings Call Transcript
»
International Flavors & Fragrances Inc. Q1 2010 Earnings Call Transcript
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International Flavors & Fragrances Inc. Q4 2009 Earnings Call Transcript
»
International Flavors & Fragrances Inc. Q3 2009 Earnings Call Transcript
At this time I would like to welcome everyone to the International Flavors & Fragrances third quarter 2010 earnings conference call. All lines will be on a listen-only mode until the formal question-and-answer portion of the call.
I would now like to introduce Michael DeVeau, Investor Relations Manager. You may begin.
Mi
ke
DeVeau
Thank you, Operator, and good morning everyone. With me on the call today in New York is our Chairman and CEO, Doug Tough; our Group President of Fragrances, Nicolas Mirzayantz and our Executive Vice President and CFO, Kevin Berryman. Hernan Vaisman, our Group President of Flavors is also joining us. However, he will be participating from Asia. This call is being recorded and will be available for playback on our Web site.
Please keep in mind that during this call we will be making forward-looking statements about the company’s performance, particularly with respect to the fourth quarter of 2010. These statements are based on how we see things today and contain some elements of uncertainty.
For additional information concerning factors that can cause actual results to differ materially from forward-looking statements, I ask you to refer to the cautionary statements and risk factors contained in today’s earnings release and on IFF’s filing with the SEC.
Some of today’s prepared remarks will (inaudible) non-GAAP financial information which excludes those items that affect comparability. These items are laid out in our reconciliation to comparable GAAP measures, which is also available on our Web site.
With that, I’d like to turn the call over to Doug.
Doug Tough
Thank you, Mike. Good morning and good afternoon and good evening to everyone. Before reviewing our recent results I would like to briefly update you on the progress of our strategic review.
Historically, at IFF we have evaluated all of our business sectors, whether customers, regions and categories, by subtracting our operating cost and taxes from our sales to determine profits. This approach, however, did not take into consideration the other costs that went in the sale, such as capital investments.
As part of our strategic review, we now have incorporated all costs to create a more robust fact base across our entire business portfolio. During the evaluation process we reconfirmed that both our Flavor and Fragrances businesses are sound.
Like most businesses, however, it appears there are areas where we have the potential to accelerate our top line growth by placing greater emphasis on the right categories, regions and customers, and improve our overall profitability by implementing margin enhancing solutions such as cost reduction or changes to our pricing on parts of the portfolio that are underperforming.
Now, I know many of you are eager to hear the full specifics of our review, but you can appreciate that we do not wish to divulge specifics for obvious competitive reasons.
In our next phase, which will take us through the balance of this year, I have asked our company leaders to develop solutions in those areas where we think we have the opportunity to improve. We will begin to incorporate these solutions into our 2011 plan.
Now, we won’t specify all parts of our strategic work. There are a few areas that I can cover. First, innovation remains a very important aspect of our business, both to date and into the future.
During our third quarter, we created a new position of Senior Vice President, Research and Development to which we promoted Dr. Ahmet Baydar to fill the role. Ahmet Baydar will be responsible for leading IFF’s efforts in innovation, technological development, and external collaborations, all of which are vital to our ability to serve our customers well and generate innovative solutions and new products to drive our future growth. Dr. Baydar has an extensive background in, both Flavor and Fragrance R&D, making him well suited for this key leadership position. Reporting directly to me, he has joined our senior leadership team and has the full support of the company and our Board in pursuit of his goals. So within R&D the trends in health and wellness are very attractive.
As we all try to live a healthier lifestyle, we are in search of foods that have less sugar, less salt, less fat but still taste great. Starting from a position of strength, we already invest substantial resources in the discovery and the development of molecules, natural ingredients, and delivery systems.
I am pleased to report and Hernan will go into greater detail that our health and wellness tools such as sugar and salt reduction solutions have led to a very high success rate with our customers in this quarter. My expectation is that as we reemphasize our investments in this area, we will continue to capitalize on this dynamic trend.
From a geographic perspective, the emerging markets will continue to be a critical component of our company’s long-term global strategy. IFF already has a large percentage of sales in the emerging markets as well as a high market share position relative to our overall portfolio. Year-to-date through September sales to emerging markets accounted for 44% of our total global sales. Looking ahead, we will continue to focus on these markets due to their attractive growth rates.
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