Flavor Company IFF Juggles Proposed Merger and Pandemic Management
13 Mai 2020 - 12:53AM
Dow Jones News
By Kristin Broughton
International Flavors and Fragrances Inc., which makes colors,
smells and tastes in many consumer goods, is facing a dual
challenge of managing through a pandemic while preparing to close a
major deal.
IFF in December reached a deal to merge with DuPont de Nemours
Inc.'s nutrition business. The transaction, expected to close in
the first quarter of 2021, would establish New York-based IFF as a
top supplier of ingredients to U.S. food companies, and expand its
offerings in fast-growing areas such as plant-based proteins and
probiotics.
When the coronavirus pandemic began to unfold earlier this year
and started to disrupt global supply chains, the company activated
its contingency plans, adding it as one more actionable item on its
things-to-do list ahead of the planned merger.
In January and February, as the virus began to spread in China,
IFF began stockpiling chemicals and ingredients to ensure that
virus-related lockdowns wouldn't disrupt its production and
manufacturing.
"It's been strong -- our response and our supply chain -- but
it's stressed," said Rustom Jilla, IFF's chief financial
officer.
Mr. Jilla, who joined IFF in January after serving as finance
chief at MSC Industrial Supply Co., said the company began seeing
the pandemic's financial impact in mid-March, when local
governments began closing nonessential businesses. Lower demand for
luxury scents and food-service ingredients was offset by higher
sales of scents used in cleaning products and flavors for potato
chips and other consumer-pantry items, the company said
Tuesday.
"What we have seen is a mixed effect," Mr. Jilla said. IFF's net
income for the quarter ending March 31 rose 14% from a year earlier
to $124.6 million.
The financial impact of the pandemic, including higher inventory
costs, will be more apparent in the year ahead, according to Mr.
Jilla. He said the company has taken additional measures to
conserve cash, such as delaying some capital expenditures.
As IFF's crisis-management plans have been kicked into gear,
Andreas Fibig, the company's chairman and chief executive, has been
overseeing the DuPont integration, Mr. Jilla said.
IFF on Monday said the combined company will include four
divisions focused on tastes, scents, health and pharmaceutical
solutions. The new divisions will be formed by mixing business
lines from both companies, IFF said.
Asked by an analyst during IFF's earnings call Tuesday whether
the pandemic has changed the company's views on the planned merger,
Mr. Fibig said integration planning remains on track, though
meetings have happened over videoconference calls rather than in
person.
The company has received approvals from U.S. regulators, and is
now focused on securing support from IFF shareholders in September,
Mr. Fibig said.
"We really need to make sure that we're ready for day one [of
the merged company]," he said.
Write to Kristin Broughton at Kristin.Broughton@wsj.com
(END) Dow Jones Newswires
May 12, 2020 18:38 ET (22:38 GMT)
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