IFF Sales Drop 7% Due To Coronavirus Pandemic Impact; Shares Fall In Pre-Market

International Flavors & Fragrances Inc. (IFF) said on Monday that sales dropped 7% in the first eight weeks of the second quarter driven by continued pressure particularly felt by small- and mid-sized customers as a result of the coronavirus pandemic.

Shares declined 2.1% to $135 in Monday’s pre-market trading. The maker of flavors and fragrances said that lower sales volumes combined with additional COVID-19 manufacturing and procurement costs, reduced gross profit by 12% on a reported basis compared to the same period last year. However, rigid cost management and continued productivity initiatives partly offset these challenges, the company said.

“These past eight weeks have coincided with the peak of restrictive regulatory actions around the world. We remain fortunate that most of our business is in end-markets and categories with relative strength, but we are not totally immune,” said IFF Chairman and CEO Andreas Fibig. “Given the easing of restrictions in many countries that we are seeing in June, I am cautiously optimistic that sales and profit will improve as economic activity resumes.”

IFF said the categories most exposed to temporary consumer access disruptions to retail markets, such as fine fragrance and away-from-home channels, including food service, experienced “significant pressure”. These categories accounted for about 15% of total 2019 revenue.

Meanwhile, IFF experienced “solid” demand for products used in packaged food, beverage, hygiene and disinfection products, which represented about 85% of total 2019 revenue.

On a geographic breakdown, North America sales showed resiliency, while the emerging markets, especially India and several Latin American countries, were impacted by COVID-19 as fierce regulatory restrictions were put in place to protect communities. In China, where restrictions have already eased, growth has sequentially improved, the company said.

IFF shares have jumped 46% since reaching a multi-year low in March and are now trading about 8% higher than at the start of the year.

Wall Street analysts are divided on the stock between 3 Buy ratings versus 2 Hold and 1 Sell rating adding up to a Moderate Buy consensus. The $137.40 average analyst price target suggests shares are fully priced and are poised to be on the downside in the coming year. (See IFF stock analysis on TipRanks).

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