New York, Sep. 9 - International Flavors and Fragrances Inc said Wednesday it has begun talks to close two European plants, though such a move wouldn't result in cost savings for two years.
The New York-based company, which supplies chemicals for popular scents, said it has started a collective consultation process with employees at a fragrance compounding facility in Drogheda, Ireland, and a fragrance ingredients plant in Haverill, U.K.
The closures would be part of an "ongoing infrastructure review," the company said.
International Flavors, like many of its peers in the chemical industry, is working to move away from high-volume, low-margin chemical commodities into the lucrative specialty chemical market.
"We will work closely with the employee representatives during the consultation period to ensure all employees are treated with the dignity and sensitivity they deserve," Beth Ford, executive vice president for the supply chain, said in a statement. "However, as difficult as these decisions are, we must do what we can to build a stronger IFF."
In connection with closing the plants, the company said it would take a charge of $25 million to $30 million. About $15 million to $20 million would be recorded in the third quarter, the company said.
Yet while the closures would result in an annual savings of about $17 million to $20 million, IFF said that wouldn't be fully realized until 2011.
Meanwhile, International Flavors said it is on track to report that its third-quarter local currency sales rose more than 2 percent.
"While we recognize that we continue to be in a very fluid global economy, we are encouraged with the revenue growth we are seeing to date and the progress being made on cost reductions," Chief Financial Officer Kevin Berryman said in the statement.
Shares of New York-based IFF closed Tuesday trading at $35.78. The stock has traded between $24.72 and $45.21 in the past 52 weeks.