DD DuPont de Nemours Inc

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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