IFF stock plunges nearly 20% as inventory costs fuel big miss, sales outlook cut

The company reported second-quarter net income of $27 million, or 11 cents a share, compared with $107 million, or 43 cents a share, in the year-ago period.

Adjusted earnings, which exclude stock-based compensation expenses and other items, were 34 cents a share, compared with 93 cents a share in the year-ago period. Analysts surveyed by FactSet had forecast earnings of $1.10 a share.

Revenue declined to $2.93 billion from $3.31 billion in the year-ago quarter, while analysts had estimated $3.07 billion.

Sales in food products, IFF’s largest segment, fell 14% to $1.56 billion, while sales in the health and biosciences segment dropped 21.5% to $522 million. Analysts had forecast $1.68 billion for foods, and $550.5 million in health and biosciences sales.

“The continued customer destocking and volume pressures in the second quarter reflect the broader macroeconomic challenges facing our industry, and for IFF,” said Frank Clyburn, IFF’s chief executive, in a statement.

Clyburn added that the pressures are “largely isolated” in its functional ingredients business within its food, or “Nourish,” segment, which covers food ingredients, flavors and designs.

IFF said it now expects full-year sales to be between $11.3 billion and $11.6 billion, down from a previous estimate of about $12.3 billion, on the “expectation that volumes in the second half of 2023 will not recover as previously expected, driven particularly by continued customer destocking.”

Analysts, on average, forecast $12.16 billion.

The company said it expects “higher manufacturing absorption” costs for the year of about $180 million, up from its previous estimate of about $100 million.