IFF - Earnings call transcript Q3 2020 | International Flavors & Fragrances Inc.

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Operator

Good day, ladies and gentlemen. At this time, I would like to welcome everyone to the IFF Third Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode until the formal question-and-answer portion of the call. [Operator Instructions] I would now like to introduce Michael DeVeau, Head of Investor Relations.

You may begin.

Michael DeVeau

you. Thank afternoon, everyone. good good and morning, evening, Good Welcome Third Quarter Call. XXXX Conference to IFF's distributed announcing press evening, a Yesterday we release our results. financial at of copy our the can ir.iff.com. website be A found release IR on replay. being Please that and available this is note recorded call will live be for that moment review I statements. you our take please forward-looking a ask to

we full making based During to the for our be about things year These company's are forward-looking see and statements XXXX. the how contain call, uncertainty. we performance, and the on outlook fourth statements will elements particularly regard today quarter with of

our affect include actual concerning to me believe statements, those GAAP exclude For respective as factors cautionary is stated Today's we non-GAAP these additional information A non-GAAP the that the Vice to Fibig; items will yesterday's of refer President on to CFO, materially call and that well. statement comparability. financial forward-looking financial Rustom our and can their our measures measures, our is Jilla. and our cause available Chairman risk website With CEO, factors release. in results Executive which from and on our Andreas differ press measures reconciliation please presentation today

With any introduce prepared questions now would will then We may have. begin remarks, to and that, Andreas. that with take I you like

Andreas Fibig

you, afternoon, morning, everyone. good Mike. Good Thank

to performance. XXXX well our our quarter sales on our X% results. Nearly, the currency-neutral the on of I IFF's But continued can't the business Despite for DuPont across our quarter is we to relative their XXX needs. of supply financial third and year every saw a of category, underway. at is Consumer merger providing Food then the months, will by more growth a each Service on meeting our colleagues X% more and this moment Food consecutive a recent provide global by Before Fine outlook look third year-to-date X% employees pandemic. will have work, I in achieved that throughout we our of world, I thank well the today's a and with experiencing Fragrance. before an the dedication strong of course summarizing customers' and Fragrance basis headwinds, over provide difficult the third show an to built QX. planning the trends thank third Rustom storms. sequential a a Fragrance enough focus to review and COVID-related dive tirelessly and quarter currency-neutral start are every resilient and detailed growth quarter that in quarter is call, to N&B we But around take metrics led chain are into our a of IFF's On including worked our financials. again as few and equipped all year-to-date. dedicated to of continued that passionate in-depth third Service, bps second frontline improvement quarter currency-neutral continue and efforts our hard will and fueling like I last unpredictable one performance, growing, double-digit improvement growth every portfolio road I who in navigate integration then update once the business, business would key the throughout our have year. performance of workers reviewing We usually remains this of Outside Fine most provide to ahead business in the our across weather quarter, all with

portfolio be the improve earnings by and These uncertain currency-neutral pandemic-driven challenges quarter continue sales, relatively in among segments on Food which Service, basis. experience Fragrance QX to a quarter and of second our away-from-home continue this time, versus modest during in our channels. in presented we On provide We trends transparency to Service. increased and declined At call, saw in July period. saw Fragrance the to due Fine the most and retail months weakness XX% August subsequent performance affected chart July deceleration this September, X% Food actually, sales finished monthly to a in we the largely growth. was In Fine about

I Now let's basis. turn to year-to-date performance like our XXXX to slide would X, where review

all division him ingredients our part officially thank at our and Taste Kathy our is Taste Service, from move exceptional growing. leader excluding leading and impressive food October combination double-digit transaction improving already has expertise also and I is an division. record in Kathy led the Beverage and succession Food leading On our Kathy close. advanced IFF, resilient our delivering the Taste Service Inclusions an will next growth we segment tremendous in for Food Outside followed Fortmann. N&B. best position her beverage beverage with to leader insights our his In perspective, we take North years as with all industry. IFF area Fragrance moment Our Matthias X, Natural division in and wish Scent Air global executive IFF, a EAME job excluding want to N&B taste low with Wash. successful Asia, led Taste where Food IFF double-digit had by platform. an that I leadership achieved our has In performance took again, strong. of and Product with term growth Fabric, division the and and I'm XXXX, where results She Kathy within early now has after growth well. as brought tenure continues by integration our food who as were in during is Flavors track very career. to are proud he Care, digits. our in Greater his team, regional focused the a following Solutions, Consumer XX He forward. perform share long growing is single formally very a and planning IFF, industry. across which From do and to in post retired short of Food welcome single-digit win as growth Care of I are With Solutions And chapter. America category, growth double-digit I'm and of Care, on business Haeni, organizations, want improvement Taste a joined proven with for Personal was new Home we in to challenged, experience have outstanding a growth categories Service. Savory mid IFF confident, Overall, IFF sales innovation with of industry double-digit new with as over to well

foregoing material list Consumer to to through QX, Fragrance the a third win pandemic In our customers, in Particularly, sales. recently want new team raw double-digit and achieve core new strategy market to quarter gained where I core than use the in our access we contribution differentiate support is our a created have business Fragrance of note, pandemic XXXX business prioritized Fragrance the business to demand are growing the external strong entire Ingredients offerings Yet provided Ingredients our Our Fragrance Fragrance we headwind strong. Compounds as our share gains. this year worked XX% diligently to more growth. Consumer our that

XX% have a basis impacted Fine COVID-related has down Service areas The actions but as As by business been sequentially eased, Fragrances. restriction is almost Food and travel and COVID-XX the year-to-year remains been Food are down. slightly. down Fine channels as on year-to-date well Fragrances and retail retail a closed improved consumer behavior base, have most as impacted temporarily On Service

are improved a QX remain to currency-neutral that recently. Fine cautious basis. Yet, sales trends the more on in the QX As and COVID-XX I stated Food earlier, we Service about given relative encouraged infections increase in Fragrance we

growth currency-neutral Excluding provide it to improved Taste has third Food Fine year-to-date, details currency-neutral Service. pass on I plus to that, the X% while Scent to would X% has Fragrance, like quarter. more excluding over rate of Rustom achieved on basis a With strong

Rustom Jilla

currency-neutral Scent Taste financial X% I'll high-level a $X.X minutes. IFF a increase color up performance. Slide On third and of a provide was sales, Andreas. you, a down in in X X% Thank and XXXX's few from generated divisional provides additional quarter. QX's X% basis, overview billion

over IFF sales total basis noted, adjusted from In recovered low Andreas sales $XX QX. and operating increased QX's XXXX's million from regions. a in our the four QX currency-neutral our of on million Scent and all X/X amortization profit point X% As improved $XXX came from improvement quarter, to excluding third sequential

Our gross despite XXXX, higher the were and manufacturing logistics profit both third than and quarter higher costs. COVID-XX-related of expenses gross margin

stronger dollar had interests was currency currency-neutral sheet income movements when all or the numbers. negative and together inflationary amortization basis, that million year impact QX impacted QX. flat standard excluding in up last currencies offset and emerging We OpEx with assessment of adversely personnel-related our and excluding headwind And there reported devaluations volatility euro. additional taxes truer a and essentially income and as expenses revaluation against to and expenses, X%. and non-controlling lower On a controls sales market additional a QX COVID-XX On especially increases. a of an QX both large FX reporting a underlying Continued other $X.XX, losses dollar Balance emerging growth, QX euro. down to OIE with versus interest, weaker a were basis, amortization $X other large X%. positive. the result EPS profit costs and Note investors Currency relative amounted provides adjusted impacted negative market operating was other U.S. reported and believe currency-neutral T&E are adjusted has our FX

performance of However, all you it's competition. help to relative to our understand important

growth our show X, slide using methodology quarter the moment a on I third peers. in to our same want the calculation of what take currency-neutral be would to So

indexed markets invoice hard variety many currencies transactions hard or U.S. of in occur a other sales our when the we or in to either local have are emerging For reasons, currencies to in dollars currencies. of

So sales peers. in exchange-related when we currency-neutral different reporting changes markets, our this foreign is from those exclude but growth, emerging price our

with in During have currency-neutral this that quarter have changes Factoring exchange-related while points emerging Taste third currency growth, Scent growth its emerging been we growth this And would sales to two markets comparability if X% in the shared. third QX strong have approximately market businesses the percentage pricing. using have devaluations those have methodology would quarter X% continued LatAm X% estimate price would of our would foreign year-over-year we plus adjustment, versus key XXXX added include our we flat. been several in

performance. Moving at underlying in sales in improvement slide third was It business influencing overall closer the and quarter strong rebound worth In is quarter. by QX our profitability in accompanied taking XX. market sequential relative our the to the to dynamics XXXX, look a on of our profitability a

adjusted in excluding X% currency-neutral decrease what substantially better we want, in reported we profit operating amortization the clearly Our quarter. but XX% grew than the not year-on-year QX, of second

tight were In material As QX to of manufacturing inventories third headwind, related our in as QX. expected, paid logistics business. profitability unprecedented to were initiatives the a The unfavorable workers during price essentially Frutarom bonus flowed the for incurred was service a into IFF. through to able to time. and we incremental their were incremental essential margin COVID-XX a which due in synergies COVID-XX around gross productivity And that used. Scent from as continued mix raw in throughout cost these QX they Also costs, we costs to our the we affecting the Taste management Fine and was world in doubled combination to Fragrance also customers expenses quarter exceptional and had P&L negatives end, cost as offset our this

down had expenses the up We than have usual X% Overall adjusted careful over year, headcount despite the course general in within lower expenses have T&E like of the absorbing of most were been and been operating very have inflationary hiring increases costs course tighter costs. with with COVID-XX-related businesses. less and

we to to ahead, forge opportunities support we uncertain especially profitability also review find structure this in overall cost continue to but environment, will As levels. additional our drive growth,

of performance were to up turning we as closer the $XXX to the million Consumer where a X% take in Now Scent outperform. totaling look quarter. division the overall Scent Fragrance sales continues XX, slide at

robust experienced pandemic-related our Hair also purchases. categories and from in benefiting Fabric the Specifically, Care consumer Personal are staples all Home, and Wash product increase global growth

COVID-XX earlier, it's not related. As all Andreas noted

recently strong we We new to. list from access gained growth are that seeing our customers core

quarter last While down remain decrease sales Fragrance challenged, where from a XX% QX's is Fine improvement XX%. were sales significant

retail the Importantly, was markets in by and in gains recovery our are COVID-XX-related constraints supply growth, led summer reach global Cosmetic this Fragrance Actives. and to returned reflect impacted QX Ingredients business, encouraging them. by to consumers' These which metrics in double-digit ability

as $XXX profit Scent tight and quarter, sales profit the This higher OpEx addition, meaningful XX% strong management volumes, driven In division from controls. grew by and cost productivity this benefits initiatives was million. to segment discipline saw improvement

to focus of on Taste Moving on slide we division. XX performance the our where

realized Service Food sales rest North markets. across positive bright by nearly Food down sequential overall Service While as excluding Taste the in One from took with third of we roughly IFF year the on this versus spot That food quarter improvements categories. particular a portfolio delivered decline points. the growth consumption compared remained double-digit XX% the currency-neutral percentage XXXX, where this Food put in of away second all pressure limited a context, the growth currency-neutral Taste's Taste XX% all two in in saw in home. across growth said basis quarter, pandemic Service prior America global was declining To the under

see Food to Latin the Natural COVID-XX Food We related to continued local the restrictions regions business EAME, continue performing impacted America impacted and X% smaller other while in Asia. ingredients Frutarom in Service be Flavors prior year strongest quarter, as of the in Service base regulatory to food mostly due our both the more Inclusion strong American the in as by and negative and quarter. and Product to Savory Greater Solutions, adversely their customer customers weaker businesses our were regional compared and more and North by such growth COVID-XX. were declined presence

$XXX a costs offset million tight COVID-XX-related the sales than unfavorable price and from were profit segment OpEx Taste with For achieved synergies profit and more XX.X% materials $XXX lower sales. margin Benefits on in segment in million higher acquisition-related overall, controls to costs. volume raw by

this income slide the growing includes XX. on IFF's by and cash and to up were X% Operating free drivers. chart Turning led an XX% flow expenditure. all cash reconciliation to the and like flow net flow improvements of cash reviews capital and working up core of cash illustrates from position. key and stepped free I'd respectively flow to The quarter, strong provide left overview reported capital

sales and has of Our of approximately investments approach in X.X% the versus to CapEx year. resulted the thoughtful amid pandemic X.X% disciplined prior

has We the our given our support generate very suppliers, eight improved capital to need with conversion days and our to been continuing have merger While customers and working on teams year-over-year. focused optimizing also our clearly cash and impending cash N&B. cycle leverage

see are with testament see to the continued balance our So safety year allocation to focus the cash days performance discipline. sales strong will across inventory XXrd of it's flow QX's small a and sales in inventory industries benefit that extra believe in globe we we again outstanding collections and stocks. originally we capital QX. is improvement from to this is quarter's last primarily and last days now days COVID-XX Further, increase payables year the week. not despite repeat up Where strong improvements good projected because sheet outstanding. this in concerned a more the that picking But all for we in Note our stress did continued with expecting

XX. slide to Moving

for QX. Fine around likely the As potential essential and continued worsening navigate various beverage portfolio the remainder we will XXXX, pandemic well-positioned or in and that face highly will discipline the challenging and IFF's in translate that uncertain balance XX% to food Service of situation we to into to remains remind a The roughly profit a persistence strong contributions. hygiene into Food Fragrance has the ensure increase on incredibly XXXX the fortunate a remained will that we additional last our COVID-XX remain infections look maintaining we year, market Unfortunately, global We're regions. I laser-focused weakness in very which IFF also had restrictions resilient even world the of products. given steady for environment. regulatory comparison for and and sales sheet majority you across XXrd QX of and as prolonged is week of disinfection

what and line with we X% the quarter our That December than large the last to growth a it's taking we this difficult with the strong focused course, while we this $XX time, for hand operating to performance million achieved last year $XX substantial currency-neutral in Andreas the will represented near-term discuss before the can unlikely on in OpEx last and precise, we month occur we QX. a in headwinds also came week contribution. of the us also In the we the points all estimate is QX's year results. account into clearly growth see million flow fourth And XXX that a and October roughly As basis than IFF. uncertainty, with that as it growth are expenditure. and And uncertain quarter quarter higher with driving single-digits given And more week. will profit in capital that monthly back $XX first be represent began a impacting is at will fourth cash environment, this week control leverage. reducing on Based to QX. is the ahead basis comparative hard to the on and This this ever from for in fourth headwind road We full significantly. it we of XXrd million quarter remain low I'll about noted of such extra and headwind this for XXXX controlling in

Andreas Fibig

you, Rustom. Thank

that strides integration share the Frutarom pleased our spend update work. moment on integration. an I'm Before we have strong with On Frutarom our on slide we made on I to with want a have N&B, providing XX, to our made pre-integration progress work

that first we our complete. quarter quarter our XX% will substantially by believe XXXX, -- complete manufacturing the consolidation integration optimization XXXX, of at teams the business have complete third plan essentially we As and of consolidated of the

and a to largely of delayed time complexity, first quarter projection, with the in about of but of eight six result complete the are the weeks COVID-XX we of remain As transaction around the related our on track original XXXX be to outbreak close N&B. was our

reminder, of approximately As we Frutarom as integration XX to sites. the expect a manufacturing initiative, part close

XXXX, completely the the sites be to we to close the track end to XXXX. between of of around For XX on world expect and end by XX finished are

learned been learned have we lessons apply a of has next we N&B. leverage With will step Frutarom, and as experiences the we lot. for and with these experience This IFF integration take important DuPont

deliver we to more know these First, teams that to cost quickly We opportunities in and create identify have ability to put value ways how real shareholder value. through capture synergies. and build efficiently

Second, in more need that delivery. being the to mean our recognize development that the can early We to time need ensure synergies revenue product align this to synergies with cycle. these key achieve, life take takeaways but to start planning

today, we to strong of we Frutarom-related potential with exceed of have $XXX million pipeline XXXX of As projects our believe XXXX. a meet or target a are pipeline we on track approximately for cross-selling over and

as and future decisive. to move to the accordingly This plan and synergies cautious functions work growth. Third, dissynergies a to need when an always that anticipate through combined through business organizational how properly major we together. base it to was avoided. sales speed and urge mitigate company. must And we There's cultures structure recognize two learn we to fifth, to Fourth, need consideration growth. Growth teams and for business potential designed the be have innovation to organization be we be with build protect at incremental integration can't core our be

transformational us through of shared has towards break accountable prioritizing I towards a with have work merger IFF and leadership in working add also ways. profitable forced will challenges down of moving that the pandemic all to focused We at these new global growth. to a barriers clear, goals

I in forced bit prove a our We way in take in at a have that a in and transformation has months last will our continue learned think several quite as beneficial journey. we these ways fresh to it business look many us

our Turning pleased planning announced integration an merger XX. with previously N&B. I'm to DuPont on share process to for slide update our

reached the and achieved have February our As include received you XXXX three teams. close quarter financing award, third and XXXX value. cast support shareholders have opportunity of of of votes of all the strong a IFF XX% shares can through create global than which for to With and announcement are issuance shareholders milestones we will we shareholder Xst, IFF and successful for pursuant approved a leadership the I'm second have the to and the food, recognized unique with who of permanent this to executive agreement, solutions notable the and home team a global favor, long-term the in ingredients on merger in have care, half health track significant date IFF create one personal of in completion the high-value combine pleased of XXXX. targets N&B targeted leader minus markets. overwhelmingly more see, beverage, The and wellness the to

of favorable for will We procured $X.XX I'm bond jurisdictions cash N&B. financing was of the of billion to approval. facility The that the report a X.X needed loan connection where interest I'm received our week, of pricing special which and rates merger interest in the in that the in funding term offering completed the of bond we one antitrust remaining September. the with Mexico, the the to significantly US$ needed to offering. was together with we DuPont N&B with at with oversubscribed. were also provide completion successful also was billion in make tremendous approval payment This happy last to announce offering there the two end happy previously

post-closing and our line. we close, integration antitrust December a have towards approval basis, in of left a anticipate with the in few I amount portfolios look combination We are light excited fixed in review value future. time by confident on our pro shareholder low-value to IFF move have milestones opportunities N&B will to reach businesses coming continue months. by amended especially N&B. expense about very S-X capital the receiving the to filing reducing to create execute combination constant be in exit only our we and future I in divestitures. to Europe actively our returns of completely categories the strong be maximize we driving abilities our a to of We our believe As updated accretive with in and and significant or and growth de-prioritizing for formas with on between allocations

Moving on to have summary, I the in our during largest slide growth segments continued value continue industries an the quarter. to resilience this and sustained communities growth In challenging for to XX. across in and our globe. the Despite, of exceptionally all portfolio time others of we some delivered unpredictable across returned third environment,

Our and quarter improvement neutral neutral Fragrance with Service, currency improvement excluding are pleased important growth delivered to QX. X% marks from across all the nearly currency And have Fine we sequential X%, growth an categories. Food for year-to-year

progress We track planning N&B also in of transaction great quarter remain made on our and XXXX. first the pre-integration the to close in

Frutarom have all while the employees and delivering operational discipline to to controlling controllable cash strong to we our leverage remain unpredictable, conditions of for the and capital depth process on to focus our the N&B. ensure and proud across on resiliency continue will our all globe executing continuity maintain above and global to of and portfolio XX,XXX of our drive and globe, strong I'm grateful the who integration succeed. customers across As and and the flow, volatile strength for the beyond business, gone

did both place lists division, strategy move improve would the opportunities margins as recognize, programs. long-term will we core through our Scent that in particular performance have position confident we call the that that, uniting in the few both organization in for we the our ahead, I'm with on our improve, upon terms have our and questions. like always performance years, With sales past team success, within now over open division of to new While through to in we operational as we now Taste for believe and and I customer to N&B. we I

Operator

Mark next with Stifel. We'll Instructions] [Operator go Astrachan to

Mark Astrachan

ask versus EBIT everybody. about adjusted peers. morning, I to and good and performance Thanks, EBITDA wanted your

through and or the for peers, European the mid-single-digits growth each math, on in least just first full down so So, at my anticipated profit the walked on in have half Based you by I get year. for XXXX. what business your seen Rustom,

guess normalize for underperformed? walk question when And versus do I to that you Frutarom SG&A? is provide quick on longer anticipate just probably. margin one gross And related in and could you those Rustom synergies peers? the the why the pressures has the the you Could Q? that perhaps, quarter provided IFF you a through to was in specifics So, of trends third just And no Thanks. as

Rustom Jilla

long and you performance, mean and yes Hi some context. all sure let of me good do. first of ours And Will morning, our on Mark. comment give a Look question really I ,so on competitors' competitors' through it. performance. cover me all make I can't the I let But you take

see excluding X% that's not on profit, year-to-date adjusted amortization is QX, so growth of sales plus down currency-neutral So year-to-date operating and -- our our X%.

not that's the here but good So drivers. are clearly

XX% mix. price I negative and well, So we seen to lesser had sales then -- we minus it you've mean type but Fragrance, had QX unfavorable particular I in There's the you've there. as a seen a much impact raw QX and Fine negative material in costs. mean in

happened positive, expected and we're of that and on of a negative mainly seen. of that's costs that volume second. mean in everything incentive there's been So headwind I quarter, $XX Frutarom remember Ingredients positive a the But a QX. shown at Fragrance last we've in been we've I in of COVID-XX. severity Now got the side the almost year-to-date There's incentive certainly that's about in you material the the the And the mean what actually have slides in to under quarter. had that in the and mean comp, you through talking Earlier I incremental reductions because were well. price incurred the if on course and year-long come played positives of if the we've some -- Then and the the we year-on-year to cost in discipline put I'll look a when costs. then in a And has you full as course related and million on a year other to then bridge all of extent the was we comp actually mean, synergies little I And just duration that's the finish in raw year year-on-year volume COVID-XX COVID. QX, right? But on of as mainly and we it's synergies, as year. because little a declines. year in And advance you've basic. we unsure productivity well

And we we no So of the expenses, countermeasures, infections planning hiring. acting IFF. I sight back are And vaccine to control then And against costs acted line with coming months. notwithstanding, costs Frutarom. mean and we comments, rising taking out as decided to we of to now but over on choke reduce

still tell earlier of track did You asked QX. about to quarter. outlined this the $XX deliver amounts COVID-XX, to and We on we're procurement and not we that synergies look year. disclose in XX-Q the every you, Frutarom, million required manufacturing despite of exact synergy had can But cost $XX-plus I million modify on optimization it's and we the

two year us $XXX that by track combine at you asked? $XXX everything with three. when and Mark of target just to like our cover you our $XX that year $XX million, clearly million full Did in half million the $XX savings puts achieve there you, million that And million remind by on I million to first goal. So something that $XX year was and

Michael DeVeau

His may Rustom, be line muted. sorry.

to free you in jump go another the back Mark, feel queue. next if So have question the maybe we'll to question.

Operator

with Vesterinen Exane BNP. Heidi

Heidi Vesterinen

morning. Good

Taste. negative year had you I and appear but on related This understand you've that it the question in additional a out-of-home, challenge So margin input hit pandemic challenges. by does have organic costs.

Your not by peers this. customers. multinational Last it think are year, was about talking I destocking

a change Your And being you Can in presentation peers about were to what explains talking your about you not finished strategy this. this. seeing underperformance? this there talk place

maybe So your action Thank you. could about you tell point? us

Andreas Fibig

Sure can it. Heidi. take I

have Certainly for that. in Rustom But more an some over is Europe in need think we despite in remember a that have to please, in particular figure two or first, very that, to happy entirely there's market in let's and forward. have go And performance the have done well. to three years on where happening about well. differences related We we regions North you we we say think weakness the zero what not the to we pricing. out competition America, work last, if how the specifically we I in other the dig see North reporting be down as see as home which Service, actually done. we We America. model, FX in strong But Food I impact and are adjust talked

couple we you, So might underway. Scent of ago; on remind a years business. similar our there's And program a I had questions

Fragrance seriously. area, I very on taking in And turned We outperforming that the our business are are particular now side. have it think, Scent And in we around significantly. quite we I say Consumer the competition would

we that will we here. have And what see. sure that's fix fix what take to we make the we action So to

Heidi Vesterinen

and customers. Thank you just you. as talked small And challenges mid-sized also about with follow-up, a

customer it you you're like these that there quarter had or think, Is simply well. last opportunities as this are exiting What you. short-term and the please? market? is talked Thank have about disappeared issue, a happening I a business

Andreas Fibig

them a more COVID impact to that's had exposure need believe important Yes. customers small that, for still strategic sense. two in let impact crisis on a me examples. customers example, your the of the We where most We grow over small so quite Taste to on are give with an Sure. business. you ones. market business. now question still the of the midsized our Certainly, bit some that growth. of Absolutely. customers it's of come And you an has And impact and see the back We a we in that quite India right smaller a will leader than to our good because big believe business, long-term

what better business Tastepoint gets we U.S. well. again very contrary, the let's robust since it here and I seeing our we think are results delivering, accelerate of in again, with here the is say now, very to and we as small lines starting see And customers. the are On I supply are think, actually good

that the I we region, we base, long-term keep depends customer it helps it believe it. we of believe this that is So depends the you good in see, it like will country, on because, get to growth the Heidi. would a on some but out we hope

Operator

Lauren go Lieberman to next We'll with Barclays.

Lauren Lieberman

Great. And the thing specific should about Thanks. we puts dynamics. there's were one-off XXrd I the should on of be thinking two for fourth the you just increased not be N&B wanted shared It management One growth for costs, you're just, just, don't IFF Frutarom, that But hit COVID for before to on X% things. delivering at us interesting the the Rustom, XQ? ever. lapse to at the and quarter. X%. I N&B, not takes at struck pegging up any then there And think catch are was N&B sure how looking thinking second July number, projections some just, at week and sure, know the was that aware transaction. And other that back has IFF if we was but for about I'm I level as that since. S-X, that for

of wanted assumes? you for little that a So, about I that projection. in hear What bit do what I projections baseline you of Thanks. kind am of those buildup business solutions, How can already much think terms the to curious integrated but the just is? of

Andreas Fibig

quarter. for cost S-X. on the of Lauren, the I tough on the the back sales all then the Rustom first I on quarter, it fourth on comment the it's can and come Sure. honesty, piece fourth then take Look in

quarter into very on good into also in very, business fourth we had said, the reasons. for start Scent are couple Rustom on strong a As of all particular we But it. cautious basically start the a measures

see we call First soft now if it of of all, in many they lockdowns. lockdowns, Europe let's say these again, even

but business by but here. driven week. will But quarter well which but we in good first we brings terms XXrd will all the a in also that strong very started running what's growth, of we last see Food us happening that see Fragrance Service, Fine well as is, October, of are against for year, fourth what So then what know we

lockdowns That's good side. start Europe. stance. But also we we but week the remain into book because still profit also we Rustom new cautious cost bit and the good a XXrd a So, then why operating order quarter a taking reason are of have and on in please the the seen about the the conservative comment of more

Rustom Jilla

made -- way $XX that's around In for we much on of to we the COVID think special situation the uncertain. our all run pretty that the worse disinfection, Fine big. mean mean, QX from we as Lauren that Yes, it was. that now million to the Hi of our the of point for a we of the mean right? right I the we continued areas the number into closer costs $X QX on I how Yes is around rest as cost, But we'll it's Andreas. several be plays one-off had expect all the rate likely are but cost COVID-XX that costs by of and flow-through sure we already slightly far pandemic of and million a is about based things, as probably think portfolio worsening smaller about But translate XXX% and was kind QX, majority looking Food probably payments going Food will QX million Andreas Fragrance I hygiene, On food I because and So, weakness tell Lauren. to and impacted COVID can type not how Service, we the that. the that in end are we're we absolutely look beverage, close had than had costs, range. inventories rest COVID were Service that and in And out. of mean things right? resilient our made. the it fortunate essential

And operating being you're came in profit when right. this And talked rest and yes, QX. around roughly also that. that well points substantial about last million million of And headwind a $XX it and be while revenue remember to sales we estimate extra all a the you do with represents to $XX okay, you week this basis headwind the a in as contribution. week XXrd it's That's we So, roughly that year $XX come -- to hard QX. a million comes the with precise XXX

have numbers I taxes our what mean have been million. -- and that also think a what -- look then about there you if got. in had disclosed year we last that $X subject was Brazilian that a other that's one. if it and you about the XX-K. last QX in was big -- So, in indirect And had we at roughly we That tax We that indirect we And litigation. year that may is to

projections year-on-year. we for mean So, whole was if last you the million a whole remember that year AIP, don't $XX that being also you year those And right? fourth We mentioned nothing between some headwind all last look margin. QX. I them. too have the other much directions that in about quarter profit in And in simply of may in much for at talked impacted the come in the lower will AIP But -- finally items year you it's XXXX. AIP going QX, the was about that half think okay? year There delta the amount inventory wasn't We had gross the And positives. we negative,

be fully And so with. And the year we account. better on Mark synergies this start asked that synergies million then we expect $XX the least about have as to at to

amount last and productivity in we'll have a to year's QX similar And positive synergy benefits. compared so

So, I think that--

Andreas Fibig

Thank Okay that. Rustom. you for

plays like categories. to to question. cautious S-X here not new are And would area next about portfolio. done the about year. our start What some you good the put where growth are I say an on role and review there would you are important all I quite terms which what think give good we of And say back side very but background focus summary, we really extensive we for the having. want of budget guidance of or let's have the perspective year how areas giving we certainly the explained different But a have we a cost Coming in to in on. couple next and think our first I'm think well. And is the I situation So, quite I takes of Rustom

business look performed see high in we Rustom the will are some and last quarters we because year billion $X.X commented of to couple And So, for products quarter change change quite and $X.X growth don't business we very additional believe between next see billion comments really enough stay for next the hygiene new that's nice in give really the Consumer the critical much significant fourth as any producing and year. don't a Fragrance three has demand on the the well his have to us callers in earnings the mass well. now that Wash as and And Personal growth. too

us material going just area. that technically be of as nice Fine a issues the have year, think India, the, focus see say, as out let's eventually for XXXX. next we I COVID that is And working growth on well. the solved then will back Ingredients into Since Cosmetic already that's good course we So, soon a of good the Active Fragrance performance come actually normalizing business and gives as will well. and business over the forward a raw

growth should that So forward. give going us good

focus to said, where On the get have can growth. most Taste on categories we side, we as important the I

us good some should and regular soon the course post as in the which more the We business is -- areas was One nicely. forward, Solutions U.S. the as area And particular see the hard to Service business year We fastest-growing the believe COVID quick-service that us a Food Product business, going sales beverage protection we that normalize see in over in period. Infant some the the next us helps -- restaurants growth food of of of after be the Natural for could driving it's for driver forward. grow

us that drivers give growth believe good So could going forward. we

even like microbial or which the see biorefinery On enzyme business the the see crisis And after a control which business, you businesses has then are I pre-integration of normalize well. the certainly probiotics now, should or the our what quite N&B or COVID as which challenges, side going business business business, it's you cultures nicely. but business like the the from and couple not outside have

So we XXXX. growth could in forward that going drive believe our

it year solutions, growth integration, these mentioned would the driver that customers that's two let's after more bit launching as on just time will products needs well synergies certainly because well. the I this concept, not a And going in certainly but expect in just, it You the as portfolio it profit our pieces, the a the integrated and regions. say, But of as we nice helps a then marketplace buying well. drive hope remark quite forward. I see maybe unpack revenue synergies to how different

a As growth I before, in have great is said nice and North we both momentum fantastic. America on of sides which business, our

will as you Latin year America than go next better hopefully, might And I better it is think. well. think

COVID, driven you a bit certainly France Fine is of footprint a know. as a and by business Service topic Lots Europe, of Europe well. comes as out Food on the have big well in which Fragrance because has We

give with more then let's here and So can. going fix can focus hopefully of introduction we will us as to the as that we post-COVID period And forward. the vaccine growth the, say, much

talked I a we lot, for you gave a a world the see hope of I So now. how that but bit perspective

Operator

with Next to Bank. Alwy Deutsche Faiza

Faiza Alwy

morning. good Hi, Yes.

Andreas Fibig

Good morning.

Faiza Alwy

questions to two guess you for I have regarding made I Andreas, you N&B. related some comments

Andreas Fibig

Yes.

Faiza Alwy

to there you've one that I'd mentioned and for integration. learned the think guess, differently. love how bit you is from some you you Frutarom -- more a go the I first lessons dig little this that might were And thing into learned you that from

and those are that to me around made And apply to lessons the comments some how then N&B? there you're like be intend secondly, those It you what you sounds suggesting to might divestitures. some So portfolio.

size if reading want that. I'm the just there's the there's more Thanks. you -- timing of anything regarding and to if can say So if see that more right anything or

Andreas Fibig

Yes. Thank the Faiza for question. you

with start your me part. last Let

to side. And pieces we IFF it accelerate the where which the right but pieces, have are to any fit going on portfolio decision our early do. actively concrete we to are believe not As but a can't much want looking too portfolio portfolio it's there might into I because thing N&B, into as probably at pieces we make our growth are our we too about rigorously we into on are forward, really talk well. said, the we there and here and looked looking longer it's And

think your I read on. is spot quite

would the a there lessons. lessons couple On I learned, say are of

together. that bring if these The you need is time first one you some organizations

can. an much aligned start to as work and do one have team before you with You day as

a have will X, XXX further. organizations hopefully Let months basically to Frutarom. because didn't announced Look we the shorter ahead are the in we was leaders of it up now We timeframe already. me give down one you it XXX, layer And still X.X closure. an go do we top with new And example.

that's an incredible hit think because hit road step much-much faster we can the I can than Frutarom. we the rubber important or the

one we said say And but tested work selling never ideas actual it a it synergies longer robustly let's took more we time thing our bit achieve have were ideas we planned opportunities. started The more realize took done to driven of and these the it not that was line just until our here is, for customers, just to learnings extensive And have but in And ideas. with will food on of but second our -- mainly thinking. time. it. products. was were we customer more We top earlier. the an I the takes we And And longer we launching as was were even we of to than food, the cross-selling integrated realize solutions the short And it.

learned say, optimizing footprint. one think an think well. I and our have that's I let's important as terms of lot in was okay we that And And going then well. a

merge better as On I the N&B we prepared think are side, well. with this now side the on food even for

So a was but important talk ones. it very ton the helpful. this of might learnings. further, even And most be I could

a had the And N&B light that ahead what be last bit having one. what that on quite to had now would of well But integration. a I exercise something I we head an integration learnings think hear key been my always for very have us helped to Frutarom prepared. have like I tough our say as when without very with years integration. helps. take talk think we I of before would I very, very, right That's I hope to are

Operator

Gunther Zechmann with Bernstein.

Gunther Zechmann

Rustom. Mike. up providing you I I in trends Andreas. in Hi back monthly on slide when thanks Hi digits. Thanks please? questions. QX, July taking I remember mid Firstly intra-quarter for think with Can the growth, book my Hi said earnings the you what think single was QX sales high that to order for said that two ask I with the call

least on some about of I difference you it order -- That's what at that or material clarify material book was can you right? -- to but you you strip to in through the much that's much headwind, how one that in a that talk first Rustom just the question. you. that raw raw second actually between be would included the understand growth? and costs raw could if into Thank then the the what did out? the lead the you and saw price came the So to And raw cost? correctly be material lower still How that if material you COVID would If side,

Andreas Fibig

that's customers let's more over usual Gunther by cautious probably orders good thing. one. I bit get well as is know in stuff reason. terms but for way their we to true which see their at quarter seen tries many how don't have on beginning everybody very a changed the are in high, the the And because the that we've they is need. than the of take of orders. behavior We first because That's COVID Sure will crisis say quarter What quarter. the the that fourth we the

course -- So the October a the seen who went see we bit order December. over And the what knows in book sales of September down. say, in third in will deterioration a but quarter happen went that the in let's again, you have also quarter up

one. also certainly that. the a for comparison And tough Sorry is

depending well. Europe, is which see lockdown situation. said, for now movements see movements as order see some We breaks you different London, And of the we probably And sit finally. which will behavior some our you now now probably on a So happen a back bit region. and the as because some and movements the also in customers of I of in forth

reason materials, for that. the the that's you But comment. on raw So please Rustom

Rustom Jilla

And QX, expect going a Gunther. expect and in in input continue Ingredients, we a was to the it In Yes. -- I one And COVID pricing and positive of that QX high usage I still was within but gets negative, we actually Yes, a the COVID costs. lag QX, few costs and inventory, net talked well, very inventory into it Andreas, Hi when dollars where Thanks some be use our in it simply be the order it there. we raw right? materials which of then, and slight about we the to mean raw Gunther because much material Fragrance rest of will million negative, general right? when part to used, right? be negative, -- was of cost mean as coming I less through

So that. the hopefully gives to that answer you

Operator

Ghansham Panjabi with Baird.

Tom Digenan

Good on Ghansham. for morning. today? How Digenan This are is you Tom

Rustom Jilla

Good you. Very well. morning. Thank

Tom Digenan

Hi.

XQ, be So results in context Service in of in year-over-year the starting they you were why additional a and to sequential could And margins otherwise? on improvement down with provide Food more what solid basis on particularly details versus the appeared quarter? Taste, some

Andreas Fibig

So…

Rustom Jilla

that. Let me take

Andreas Fibig

Sorry.

go, You Rustom.

You go.

Rustom Jilla

Thanks.

the quickly. we -- QX. the are and $X in the incurred COVID that it was the that COVID like benefited when you much XX% take roughly was and Fragrance, coming and you right? costs benefited million through, minus XX% -- better had. Taste is If coming Taste minus me in the it through I saw It's comparing than from Scent we in -- it's minus we this we had and of more in also Let Fine think considerably Those was in numbers flowed a the there costs impact, back, quarter mean the quarter. about Scent that Scent at I end XX% mean Scent the than implicitly extra

its plus and the lot productivity But OpEx saw you Food through coming I businesses, Taste cost of Service mean tough control its of -- a the the had the quarter. just cost in numbers. a the different well. terms So and combination was the of as good, gross on of benefit margin discipline we control cost

Tom Digenan

follow-up. as really And a then, helpful. That's Thanks. just quick

some October. market in trends end positive granularities that's an you geographic called reinstated? this in perspective? from provide Could And a November more as You out, whether and been anything on gradually lockdowns there's have changed

Rustom Jilla

mean, want I do October, to take Oh! that? me Andreas, you

Andreas Fibig

sure. Yes

You take it.

You start.

Rustom Jilla

an been have basically The mean on Service -- as Andreas? digits. Food impact going We're the end QX. I of it I in was lockdowns right come mean of November at expect coming not into we seeing anything Europe from that the October a the particular. which that's do into -- mean, was to have our October, bit line sales mean basically mean basically I really I perspective. bigger in in -- it low-single I pretty much the with

Andreas Fibig

No.

What exactly which that's in actually right. I great. stronger sales on think Fragrances seen actually which October, we is is positive -- have was Fine it's

the see pans it the ahead us, important of over season an because it's out of the It's season. will quarter. for how rest We holiday

So Fragrances still we why, the Consumer that's is whether some course book? looking great how deteriorates forward. question that's same of And previous Gunther's from have And the the order we And important. which see much as And said we was order really The book a quarter. it the as, is growth That's well, over will the a the reason but was I are here as we week-to-week of is what change strong we have of are moving cautious. too seen we quarter. how not are on seen. as double-digit said, but

terms regions, right. think In now. is focal I of Europe Rustom right is our area

it's would North America than good. Latin think America is North is I expect. for you good America. probably better

the a Asia Europe. focus is is certainly see okay, great. Europe But because all which that by we is over new still area. we now driven is that's back, see And India coming lockdowns

Operator

John We'll UBS. with next Roberts to go

John Roberts

have you. I question. one Thank just

lot earlier N&B marketplace, cited examples we on there of have the meat. that plant-based been synergy like of on a what's was seems developments update One recently? revenue an Could in get it going since

Andreas Fibig

areas, products suffering at are Foods bit you, which going that you Thank is that, supermarkets like area. the for forward, companies moving the and into What Whole restaurants was basically, now exceptionally John, positioned more That our because, to satisfy strong the a are The into the that by quick-service geographies, are in have beginning I in that all area of now alike. believe, others Yes. question. being here. we some going down. It's because certainly these more is focus coming back one see we But market good. we category from see ingredients many is of the and

companies come what want they and we to the category that's say that We time are years more bit expectations beginning John. see and of pandemics here back. the helps, it area with coming So into well. for had I a moving is that growing to of the the the whole a They as our see is, I at hard quick-service hope restaurants.

Operator

go We'll Bank with America. Matthew next to of DeYoe

Matthew DeYoe

quarter-to-quarter through with Like, you fundamentals as slides. time on flag kind just plan all wasting peers? candidly, walking It the way use these report through all odd that not your seems like sales to on all these you results same question this? it's and why and we're the Hi. currency-neutral walked A of

Andreas Fibig

couldn't to more. give agree I Rustom. I it

Rustom Jilla

a of it's right, end I Look, at more we're the to at the are the put as the looking is day, I environment looking -- our numbers is doing -- something in said that it honestly. peers, an it makes believe do ourselves the our way mean, But frustrating weakening. where we're emerging currencies currency compare you where mean, earlier. I when disservice at it we that it the report that out, we of emerging

in one in said I say point. quick As there, I'll thing just

if on our So if type Scent's you and performance our reported I just look talking look X% mean, Scent basis, you about at performance right, at we're growth. apples-to-apples

at it anyway, that. I'll leave So,

Andreas Fibig

It's Audit on working it. Yes. with our but we're discussion Committee, a

Let's put that way. it

Operator

Sachs. Goldman with Samuelson Adam

Adam Samuelson

Yes. Thanks. morning. Good

Andreas Fibig

Hey, Adam.

Adam Samuelson

Hi.

should you back sales experience within resource And little remarks tangible I made wanted prepared lessons we bit Frutarom. you like said little they've talking more that come be in you to mindful the to if headwind? kind or businesses could provide on hoping a examples more was Andreas, that other you Are has the where maybe there just from the a So, point of And been pressured? a something, I around Frutarom been that dissynergies. of

Andreas Fibig

a of have synergies, business. big from the dissynergies They examples but one we out have well. lost on we N&B, Yes, we Maybe sure. their talked let's where citrus significant business premier and were Florida, citrus competitors. don't of too also sales Absolutely. always said but our dissynergies the their many supplied here Look, have be for had it that, at we customers, lost And is built have cost the one sales the quite That's sales we it say, has probably of the net built we dissynergy. some it we there expect of look actually about capabilities We seen. if as have they part to as side we in. number, own,

aware helps. it that we way. very that. of capture right example make that are And we So in I hope really the sure we

Operator

out for I'll Andreas remarks. to for of time are it closing We back turn Q&A. any

Andreas Fibig

was forward you questions. for for for please. of Thank we're all Thank you good Yes. Thank It healthy and looking the a you and that. Bye-bye. your discussion one-on-ones. stay

Rustom Jilla

Bye everyone.

Operator

does your now appreciate This disconnect. participation We may program. conclude and today's you

International Flavors & Fragrances (IFF) 10 Nov 202020 Q3 Earnings call transcript