The New York producer of flavors and fragrances used in food and toiletries announced that first-quarter net income declined almost 7 percent to $52.5 million, or 55 cents a share, from $56.4 million, or 59 cents, in the same period last year.
This figure was 4 cents short of analysts' average, according to Thomson First Call.
Sales fell 2.2 percent to $523.1 million compared to $535 million in last year's first quarter. Fragrance sales increased 4 percent, but flavor sales fell 9 percent. The sale of its European fruit preparations business and lower selling prices for vanilla in North America and Europe hurt results, the company said.
"We, like others in the industry, continue to face challenges brought on by increased raw material costs and resistance to price increases," said Richard Goldstein, the company's CEO.
He said he hoped that the company would be able to pull through by distinguishing itself from the competition through "innovation, superior service and operating discipline".
In light of the first-quarter results, IFF cut its earnings estimate for 2005 to range of $2.20 to $2.35 a share. In January, the company projected full-year profit at $2.34 to $2.41 a share. Analysts were looking for earnings of $2.40 a share.
Shares in IFF fell $1.27, or 3.2 percent, to $38.18 in early Wednesday trading.
The ambitious Israeli flavors firm Frutarom bought IFF's European natural fruit preparations business back in August last year, just months after completing on the Swiss botanical extracts firm Emil Flachsmann.
The Tel Aviv-based maker of flavors for food and functional food industries paid €30 million for the business, giving it a firm foothold in the growing natural ingredients market.
Others changes at IFF last year also included the closure of its Dijon manufacturing facility as part of the company's ongoing plan to consolidate its flavor and fragrance operations into its larger, more specialized sites; a move IFF hopes will increase capacity utilization and further improve productivity and customer service.