IFF - Earnings call transcript Q1 2021 | International Flavors & Fragrances Inc.

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Operator

I would like to introduce Michael DeVeau, Head of Investor Relations.

You may begin.

Michael DeVeau

Thank you. Good morning, good afternoon, and good evening, everyone. Welcome to IFF's first quarter 2021 conference call. a quarter announcing outlook as full issued for financial for we XXXX. first the well evening, press our release results the Yesterday as our website be of on release copy can A our the IR at ir.iff.com. found note and be live available being will this is replay. Please that recorded call for review ask I to you statements. take please forward-looking that moment a our

containing current the the elements slide XXXX. and outlook performance call, the about company's for we which we During uncertainty, X expectations on of will state the have statements These on our be statements cautionary making forward-looking out and based laid statement. under

N&B legacy comparability on periods the months, to and turn Rustom then additional I our President we'll Vice our reconciliation IFF items X, these can also that, measures available that results me you With the today cause over forward press CFO, months we’ll like have. will that include on release. For risk February and measures, of our our respective Executive actual XXXX. Jilla. defined from please questions remarks now factors of light results begin statements February any and as may our materially quarter, and to results would Today's merger non-GAAP XXXX exclude refer call call presentation differ three and concerning as Andreas. in financial that information using financial those comparability. Fibig; believe Please Andreas looking our GAAP to affect take with cautionary non-GAAP We'll of the CEO, to prepared their to in March for in the and the the in results have which is be stated we both for website. and that Chairman statement two XXXX allow first combined historical A measures completion is on to With factors note

Andreas Fibig

have I performance of continues you also business, share will following our by N&B transaction to performance of integrate Rustom business for segment. then that XXXX, to us detailed a quarter the review and would everyone and the year well, an to with in confident leverage completion of begin our continue region remainder overview dynamics will first and Mike the for today. our we I'm business progress a is IFF financial an our and which call providing as flow by joining DuPont to will more to cash beyond. you efforts February. segment a start and in update regarding provide Thank cover thank built like of level of highlighting you, I today's well. the including review and momentum strong results the off and

first growth our quarter. be two a And would notable to that currency average quarter. in than first ago Now combined our currency If our basis and beginning strong in we to year days normalize a I review developments had have X, XXX We X%. factor performance growth of basis neutral X%. growth X% to on compared like and in at first X% fiscal slide we also a less the the first would less change two to because approximately of X% our XXXX. combined on been neutral quarter quarter traditional in Also, to sales comparison year were calendar, have achieved the rather for strong calendar, would approximately with or

on leveraging flows and basis all will team's XX free reflecting points, EBITDA to margin our target. management strong to execution meet generate our improved by of track diligent IFF the also operating cost remain strategy. adjusted Our continues cash

business XXXX an agreement is beverage third pending to conditions, was industry. our to full preparations numerous the say our food in For in $XX with preparation XXXX. divestiture and and we light, step quarter regulatory optimization ratio also I'm divest times. segment including expected the in leverage reached X.X approximately The specializes portfolio food close first to quarter have for pleased our food our customary performance the to This preparation approvals. closing sales million is IFF's of business terms first The contributed of strategy. food to

through more we expect progress as So news XXXX.

see, toward forward. carriers foundation solid discipline we've things As focus to you can on momentum, started established with solid We've execution. a

front mission leading in on industry our is As execute shareholders. said of for us, to to deliver before we have the our opportunities plan returns and our

our as quarter an leveraging value new we squarely capabilities in innovation will we and remain our into further goods second and chain reach objectives consumer a commercial leader for As to focused business products. the move ourselves establish global

X, on dynamics slide like to sales would first results. discuss briefly our I influenced have our quarter Now that regional financial

countries As different how there you all notably impacts know, managing differences of are are in the continued pandemic. significant the

are the in business seeing So across to talk we dynamics we our world. want to the

growth that sales to of reflects pleased our growth in most America our are across was solid regions in which report all nearly our the impressive results This operating segments? America, segment. North North in in In portfolio QX. saw performance We our use scent performance

combined India. to continue driven by in healthy growth digit across markets, and achieving currency China all a neutral performance sales, We X% Asian double in see increase primarily

these global an roles currency America, related key conditions. digits by are in heavily Brazil driven sales Western overall to with impact our like their Europe the our and growth Indian I we see and about In many related region is overall grappling double pandemic. best India, in in that of we That would to to vaccination out local saw country a growth optimistic resulted could COVID-XX decline We very must has India entire EMEA markets Two ones said, everyone restrictions highlights as the primarily across loved sales. in in and for improvement and increase which ease. the continue and increase sales. we X% remain ongoing in hope the wish related colleagues in in QX. rates Latin Central recovery recognize restrictions XX% with [Indiscernible] we and region's rapid hardship in to challenges pleased term While near the across a and that as call be region the to see challenged

have to supply to with the will press As teams those related our to we we leading that pressure on ensure work and receive pandemic regional solutions continue remain our most diligently ahead, customers expect. communities, our to particularly adapt that the they come continue chain

now first quarter more a you slide our to move X, key can segments view. I business get to Let's so like would IFF's performance across review sales granular

to Nourish, divisions. scent our solutions pharma pleased report We across goals and are solid

currency group by X% largest combined sales of neutral in achieve Our flavors. force led Nourish robust performance

continued headwinds continue combined currently sales consumer We performance digits in and the declines X%, first pandemic the is see continued achieving that a largest driven all will strong cosmetic continuous fourth across in digit its active strengths fine to food food neutral fragrances, channel for of and growth and growth driven This driver service. Scent divisions quarter trends double strong costs fragrance. in mid by the primarily quarter. four design by improve which was single in down rebound

strong combined currency performance with neutral sales For X% pharma achieved scores division, solutions continued subcategories. and across all we entire division of

pressures in bioscience of have decreased we and an neutral were and initiatives year home are and offset and against digit personal microbial by combined of Together, strong grain global meeting markets. care in ambitious division diversified the continue demand is our marketplace. I the increased a in and sales we and X% processing. ago needs positioned double currency well portfolio control growth the Our [Indiscernible] to health that complexity feel core comparison, our very executing

want segment adjusted Now turning slide particularly summary EBITDA margin. show to our to performance, that X, a business regard operating with I to level highlights

more on to segment we are detail, it slide this execute year earnings focused forward we focusing operating our to driving know, be package first standard on in performance. group plans. in as our Rustom but you I wanted performance specifically included our as quarter going will year on overall present will As integration cover efficiencies much

and to that margin I'm great favorable benefiting the QX capture for driving in scent see highlights expansion, worth pharma and division Nourish logistics pressured division, HMV results rebrand have the costs, overshadowed did which in EBITDA higher progress effort strong continued volumes which margin solutions discipline largest early our team fine team materials with from to our a and adjusted Some were productivity Within fragrance the savings. of In operating the mix cost by strong and very mentioning. pleased job, growth are increased accomplished. has raw

third have down organizational agreements to are the on identified the transition and announced leaders many company leadership our succeed. completing management completed combined Since all N&B. combination from They've our perspective, ensure several roles XX, incredible like structure DuPont. and to From that tools an to are February have achieved on working global employees which established level IT schedule regarding integration we for of to a progress also would integration are IFF all CEO integration on our team. closely we resources operating update I with organizational an have milestones, migration provide all and you office DuPont Now we the need with provided to comprehensive leaders. slide of with the service way they our exiting reflect from and efforts financial with our These and

will cross a projects, integrated have selling we XX both that of solutions expect to synergy fund synergy accelerate our revenue this year. ability the target On robust our meet pipeline million we and including

and we achieved invoiced our detergents. wind cross And in a first health selling bioscience sales significant our April. we've This by quarter divisions

with expressions of pleased continue customers. far are effort with and so We project demand our pipeline the from and

modest of From synergy We to our P&L underway seeing are synergy days. million. already the meet confident rate and year benefits on are we early target in given perspective, cost run our three are ability we XXX

meet XXXX million We synergy the a in million. savings the to year three of a quarter. rate course I our our financial call XX one $XXX over of cost over pass target us expect more provide of first track review performance and to would full year will detailed who synergy year a Rustom our well in cost increase these know on like putting to target to the cost

Rustom Jilla

Thank you, Andreas.

me a by basis, deeper or division. including a consolidated results. scent in foreign into In exchange increase on strong X% financial year-over-year benefits, let led quarter X.X our First, in billion primarily a combined solutions and sales, pharma X% go our bit neutral currency performances up first IFF generated the

average more recollect our currency may to This revenues is are applying to to comparable our practice XXXX makes you neutral and rates. growth from currency rates us dollar derive common non-US we prior onwards, As competitors. year more or FX the

and and inflation other related higher was cost Our and Nourish reductions to freight raw in improve gross XXX headcount Meanwhile, our pharma and material tight H&B plant points, logistics basis from enabled X%. of by and higher expense aggressive costs impacted management year-on-year by disruptions. input rates, sales arising cost weather at growth QX and margin by adjusted program led deliver inventories RSA to us EBITDA operating headwinds

As excluding earnings per for sales QX, of was aside, operating comp most an growth the delivered EBITDA X% also growth. adjusted first XXXX neutral combined IFF adjusted and strong currency our quarter. with difficult $X.XX share amortization

slide X% former on basis. grew N&Bs expansion of currency like now beverages point growth which XX, performance EBITDA I'd neutral sales capabilities Nourish Now of the cost includes combined Nourish, by X% discuss operating a led X.X strong a the basis first quarter business. Adjusted food billion margin quarter for XX representing and to totaled with the on management. enhanced

all business labels over by our flat this sweeteners. by drove solutions growth digits, and performance emulsifiers, Nourish's regions. grew but nearly double Within protein was year softness ingredients in offset was in at year which Looking

year-over-year. of service, digits particularly related design food pandemic single impact which declined food Continued challenges mid

lesson, will top this a in of recover, of retail from pandemic other As priority the the segments growth and and area and home while our continue to Nourish strong remainder for the effects in XXXX. channels maintaining COVID-XX to away returning performance remain

Moving to and slide biosciences and XX. health

EBITDA of noted comparison. a As be that year operating a lower year-over-year by sales margin the was currency segment logistics but It XX Andreas XX% neutral primarily X% noted, was driven pressured costs. average on H&B basis had this neutral robust declined positive combined raw two should material and and at operating and basis against points, solid higher also decline currency was Adjusted growth volumes X%. by

offset pre-COVID percentage period supported trends prior points. to personal when approximately and persisted consumer year-over-year QX, were the in grew growth overall through this evolving Microbial teen impacted growth mid impacted performance processing also control pandemic cycling impacted Our and nutrition to has grain quarter the home to digits animal this strong five H&B's declined by and that but care which buying business related overall growth. by that continued year, compared double by

the improvement pleased are recycle that quarter, the were as We over businesses comparable. in of these April to positive and showed first course say

are health which evolving performance care ever tremendous that to We trends and more a personal encouraged of consumer before. than testament the by is home prioritize individual

slide scent's a strong our significant to discuss scent the wide Overall, performance our with very results now division. pleased to has we Turning XX to been contribution of are company which growth.

productivity. from X%. approximately favorable margin X% expansion division generated entire continued by as currency X% neutral a with at in X% combined million against well. ago sales the scent growth driven strong Adjusted mix representing segment improved point fragrance period On well as two volume the EBITDA Our a growth basis is operating predominantly a as and year growth basis across exceptional XX XXX total year recovery growth fine

fine as to live strength cosmetic consumer and cause strong a and incomes resulted fragrance continued from business performance segment. wins behavior volume coupled levels experienced traditional in restrictions of more the new home mid by we our began teens across fragrances division business actives rebound, away continued growth driven last recovery to to consumer quarter, the in entire another recovery for with this returned As solid see and

call digits is three strong providing all also the quarter. double new first growing contributions with Our customers in

slide the division. our solutions discuss I on results pharma XX. like of fourth to Now would

growth mentioned, sales operating combined previously IFF's a while of had quarter based As overall solid grew in contributions currency solutions XXX in an million adjusted Pharma higher sales. net delivered neutral X%. impressive X% growth QX EBITDA broad made solutions representing and pharma by

growth average Taken XX% year period context impressive basis, growth on is X%. in a approximately of their the prior in at two the basis

division of shut we and margin higher pharma. to saw the pharma solutions industrial led by supporting related with this raw margin sale, nitrocellulose pleased solution costs year. higher related had down in solutions weather the material availability in cost growth to We're logistics pharma the CVs of supply challenges We Midwest distribution due specifically, Looking performance specialty at chain majeure two for gross pharma to bad adjusted pharma volume more impacted by temporarily global performance core pharma EBITDA business, raw hurt material higher factors industrial plants the and force quarter core proteins proving with and and sales success due goods cause was and costs. the earlier and which in very instrumentals first decline

dynamics Now turning to and allocation I'd top our to like review remain slide capital a cash which flow XX, priority.

cash see, As XXX you million. will our at operating flow was very strong

quite generation. pleased are We with cash QX

is global like our In support in we quarter N&B the usually as we future we expect came after banking had A of inventory where year, up legacy to generated areas $XXX some this deal and fees, costs job etc. such build a businesses team by we'd capital also a For lowest QX first achieve of a QX cost quarter great and to in don't cash our off the But payments QX million, can XX bonus XX expenses, CapEx large investment consulting quarter, approximately outcome. working as growth. million large dividends shareholders. to quarter we related to flow of or of typically part therefore comparative success distributed may core XX QX's million legacy our March. cash great outcome and X.X% flow working million, from capital headwinds combined last reset XXX million sales. sales we strong as we IFF Free We in the year. of net slows this or generation was was And and have X.X%

times ahead at our slide of noted X. merger as by times Our leverage X.X leverage. expectation adjusted post back has first quarter Andreas is divided credit which EBITDA This is of X.X on net ended debt

provide generated will the above generate year original full be future expected to full Legacy XXXX. N&B XXXX in to in year our Now some flow In billion IFF cash only strong invest million, million approximately and higher we this to target XX XXXX but our XX of to meet net to slightly in context. combined capacity XXX And will legacy of expect term demand free more deleveraging production months merger X CapEx be on be deal long sales. in close. quarter we remain reflecting times share debt XXX meet this post dividend payments of X.X% will our will adjusted to projection track The of credit EBITDA three from year we count.

sales Turning to in we adjusted that slide on our update EBITDA to XX, series. forma outlook. segment basis, XXXX combined via our a learning consolidated on pro so for I and remind doing assets April, mid want But for and provided a I'd like of metrics level on and to each before additional provide full everyone an year our the XXXX lab detail segments financial

EBITDA previously and conference the operating SX. XX%. guidance Please comparable in and XXXX of understand months presentation quarterly which combined XXXX a XXXX XXXX. In the look commitment results approximately of fourth revenue IFF. of shareholders in And XXXX currency combined N&B for and months to our We and appendix the combined of for XX our generated that our call margin as pro for new helping February, part full providing are the IFF the year in of an of includes XX.X remember resumed XX to combined IFF this historical at initial XX now forma X%. our adjusted growth billion basis company's back with gave provided additional neutral be we order N&B was quarter full On months transparency IFF our directly of approximately in to

in and N&B's January more February million. approximately actual be completing and Moving and of XXX note transitioning that in sales the merger was on light guiding forward IFF are with were N&B please January XXXX, recording Also, million XXX XXXX in year to to operating XX months on we X. months results excludes adjusted actual the of aligned of which XX EBITDA

sales, Given to the stronger expectations the of are forecasting that we quarter, incremental rest QX quarter recover pricing our prior our FX through costs, preliminary year April was first XXXX. growth results, rest the the toughest fact sales to compared our and of

We to input a combined of driven XX% with beginning approximately seen have by in margin. of growth have including logistics. an the EBITDA the Since approximately and raw revenues, sales therefore be or operating XX.XX XXXX X% cost our the increased we plus in expectations costs adjusted year, rise for goods billion materials

raw selected kernels, vegetable increase seeing we're and turpentine, bean In oil, in glycol. commodities, terms material a of soy, large costs, propylene

In increased as greatly result addition, freight costs higher of are a rates.

For up example, go the also global of to challenges additional like us earlier air required supply non-availability strong This due year. seeing freight three to discussions and index times is majeure we're to in our at an freight contracted to exposure. uplift to rates. force volumes due has containers back this cover chain pricing demand And have

time are quarters over high lag interest focus that ongoing second our With on range that rate achieve including growth, check the the the confident to short expectations time average can understanding the can we are term. cost a sharing with benefits basis. are be quarter. adjusted goal single Ultimately, combined can end regard CapEx, adjusted ended basis. combined from on and pressure and all we depreciation, fully the regard pass margin we new before year, reduction, started acceleration tax pricing by an to weighted our around in fully we operating gross increase pricing EBITDA the a expenses digits the We're in amortization where full that we we our amortization, of While QX, there effective for first also of a is out and we're confident through is with which optimistic growth assist quarter adjusted that along margin pleased excluding the we EBITDA XX%. year with full IFF, also To modeling currency versus nice revenue the the a should realized, our

will to more need moderately exit some expect to that and our expectations. DuPont deliver metrics similar by The don't and amortization quickly This of jurisdiction. these is approximately as planned. XXXX broadly for equivalent IT XXXX we work was on these preliminary reflects we some XX.X%. this be accounting the XXXX we the a worth a related than provide CapEx intangibles effective most line transition it's with to Collectively, our closing change the grow, With to solid decisions I'd services agreements as metrics to While full who still and remarks. in in like excluding in We're elaborated adjusted to purchase turn qualified call global confidence early tax probably our providing IFF to rate, in first basis time, the XX.X% Andreas of and also finalize, year and higher even that, upon, environment. noting for invest with is back will now ability IFF's results

Andreas Fibig

for quarter you wrap XXXXs over and have while bottom we as has Rustom truly deliver all proud during call IFF by achieve was our last worked solid and who for integrating and All initiatives, to exceptional us a our thanks all results. again a I top to especially today's envy accomplished to to of the up strides much tirelessly enormous making to of thank execute and been It busy employees have to would joining business be you all around today. the Thank pandemic. family. this quarter business like global and successfully line an giving our the first world customers

the key our financial we ultimately non core I shareholders. beyond more important for will emphasize business tightening diversifying our and want organization greater our be our capacity businesses, to step portfolio first our by results, By efficient a QX value and with innovation to IFF on business. diversify food Looking great focus growth generating this across our agreeing in to optimizing preparation re business took strategy solid that

will QX meet financial and goals. to right As team place have that structures combined company the we're together, in we right we all enter confident ensure operational that the newly our

industry started scores firmly and leading strong to optimistic customers come yet over innovative targeting And our more our highest all each sales believe Rustom our we growth by the I'm and that coming of products and With be world. that integration create and partner. backed defines test strong to the should that to proud commitment have N&B in by is future accelerated I the and be a As around year-over-year that taking a every pleased of as to leading we industry tremendously it services ingredients improvements best quarter from delivering to diversified financial second we stated, our quarters means with mentioned, agile have single the the are what we and I QX open call digit full solutions accomplished Thank range. showcase learning that a you. I to the would and like stronger, company questions. for process are

Operator

our Please question go Sison We ahead. will take [Operator Mike Wells Fargo. first from Instructions] with

Michael Sison

Nice slide I the thought In start really X, to year. that helpful. was

You do sales X% X% range. show to that growth some businesses at

to other each about over maybe now. you what about that the these X% below you product the that in owned about Can the confidence months three think can years? get the for business to you your couple since lines you sort of and to talk businesses happen owned now you've of have business needs next If range X% that

Andreas Fibig

well our growth was actually quarter a was the really that that first And start toughest the year. Mike expect comparison. into you quarter, good Thank question. over think the which the the of the course Yes, for all said of accelerate as we Yes. was that's second first as driven will Rustom I

sales So the reason expectations that's we the why year. our raised for

that's think I important.

is say the cosmetic first on at quarter in the coming business actives. all unit, now parts and growth the first quarter see great different of which So the We good the see fine scent second a business. the of you good. real I we to still fantastic is look recovery starting would on fragrances really also if which

that's on for and elevated So as well us fragrances the level. important super stay basically consumer

bioscience elements. you see to a health you If go couple the and business, of

you digits. situation grow and microbial which health last enzyme by should And the business single You much see recovery conscious the that will food year. was and hurt a see the very control mid of business,

going doing the will solid up. And important well. doing remark. on in Nourish in are very that's And the well. the probably the and And countries see on flavors economies turnaround a are as you taste, So in then But service protein that's on alternative a solutions, legacy performance very food as well. side, parts, the proteins well then general new opening via very particular,

seen We as regions opening will turn in the in and as Europe, well. the good economies these Europe and growth seen have up presentation you've as pandemic are the as after but soon of most around

bit here. that Mike, hope, more I gives So you color a

Operator

We will take our from next with question go ahead. Mark Astrachan Stifel. Please

Mark Astrachan

Yes, thanks. morning, And everyone.

Andreas Fibig

Morning.

Mark Astrachan

as is from when peers quarter not term to X% even the I adjusting FX had and sustain that recent something has also question. tougher comparisons It's yours, below changes in guess related to asking tough was I for currency been by there targets comparison. gives growth neutral, below we peers frequently first have that growth still what long who you but X% tough that hear broader years that guess, company probably as out your implied most about why folks gains confidence IFF can the share

that summarized you Thank do balance do paying can just over we is been of who peer attention in question peers by kind just confidence year what the an as see So the gives applied related squeeze guidance I you how long which a as acceleration want maybe term? well of And how you group to? and use performance? performance be now, traditionally, all or did does it's should measure measure the your your to you. versus measure fair we to What

Andreas Fibig

question last me first. with start So let the

the well, you together. in basically service all should us, put you a named ingredients. you relevant carry group some think maybe in and are which actually have of peer food mix particular then nice companies are I And for very the for as the

these what will do are We of want categories. strategic all potential. and certainly we we we we gross we behind that emphasize completely our a doing, in what believe to actually midterm on So terms is done of resources have margin where categories have the assessment the

business, if the sure think gross, to it's these at categories I you a of X% example, the health, into very behind And put look and that example, like comparison there where of probiotics of outgrow on with the good strong last Some X% adjust here. just was year you resources if we the are we start can days, make the for for year. competition in the for

actually business flavors the have performing are the well. the of quite and is pieces we start well. are seen So coming we happy some very portfolio with Like

the we And that's in some everything which it I Sison microbial before and see on see back. We see business are we when back. growth rest a You why all accelerate coming mentioned the related, that turnaround raised is we Mike which and the and we service the control protein our as plant is based that's asked of signals the to now really our coming for reason expectation solid said are food good year. These track a the well. own

Operator

from we Samuelson And with Goldman next take question go will Adam Please our Sachs. ahead.

Adam Samuelson

Yes, morning thanks. Good everyone.

Andreas Fibig

Morning.

Adam Samuelson

on very increases material hoping trends. Obviously, I about So trade are costs dynamic the a the color environment ask and the in materials of was some raw to raw note noted.

for of few how at that balance? much your kind the price the make of how cost has end expecting year kind we increased incremental ago? I year the to that a Just calling months initial How and and magnitude sure price understand on much provided you're of relative look think to trying reformulation we or

Rustom Jilla

Rustom. Right. Adam its

take question. me that Let

of increases where increased our But back we've challenges. plus chain them mostly some your cost our in offset in have to in couple be since and do to obviously any them. air Also logistics areas demand then to last of okay, seen freight supply not expecting single whole specific single we by higher talked requires about and to large inflation freight answer XXXX sharply a with a to of inventory this strong combined in raw volume due us material go customers. rates, And part this in year. materials. We've low we digits inflation higher question raw mid the case, your expect we to bean be increases, declines. soy, But modest So costs started digits, bunch on some

Operator

next Roberts Please with move will John we ahead. go with UBS. And

Unidentified Analyst

four on for Hey, the guys, for this is John. were extra they details, the quite website the helpful. the lining Lucas Thanks segments for on

the much provide for each budget? of spend you some of the And same centralized much of how is R&D R&D roughly in of could new you one on is the fifth segment? percent Thanks. breakdowns segments? So on versus Do how four R&D sales the control the

Andreas Fibig

thank Lucas for the you question.

company we is went within certainly all have industry. in annual R&D a for are approximately is look we and is can budget different and we R&D we combined about the X.X% leader put sales. behind. terms the dollars best technologies through our the $XXX done the categories million And of where of R&D What So actually

And actually towards that that highest on we’re So our of means return bioscience. health and vitalizing money fair spend opportunities. we investment the a amount

that's think important. very-very I

goes forward. is But half have of think one certainly one. So of development which probably at the our going have and centralized the biotech R&D the area is and we investment a least helps. on R&D name to big I as that area, application rest customers then approach for enzymes, of biotech super areas for probiotics, the goes of into technologies just investment and application I of said, it the our we and into And I some example, important and main the cultures hope for lapse. centralized piece our certainly the

Operator

Faiza ahead. question will our And take we Alwy next go with Please Deutsche Bank. from

Faiza Alwy

Yes. Hi. Good morning.

to about their looking comprise reduce of to only of legacy we're a flavors So about . COGs. these business in I for fragrances X% And a X% and CPG wanted time I lot are COGs to when ask companies know

cutting But sort hurt. seen being customers get maybe stand sort or would to this. some of of on in customers and your any more ingredients impacted more of color are expensive how costs, expensive active on IFF those of ingredients, that benefit there should expensive, lower versus the so be but think business early is Thanks. that the to other if get far products context about to more we've from to differentiate by in used some often And while how sort you ingredients. leaning stand great are need can we there examples if areas to any their of items these business, the more to combined be So just lower of

Andreas Fibig

And R&D it question. with the ties good Faiza, very well question previously.

let's fragrances. So flavors we are not and offering, say the certainly just

a much have solutions. now technologies we of set broader innovative and So

So first it. the can marketplace, also that but in costs. reduce can And can we differentiators play with all of help to

new costs example, modulation basically opportunities have that really the products. sweeteners gives and formulate also for to really technology, cost platform. our We some we input technology our the example terms reduce their And in reduce for use legacy in our on pathways. endless the fermentation leading can For But IFF platforms to costs, side biotech of of use can us customers. the we reduce for via partner biotech we allowing ingredients to that with create now

bringing them also to solutions actually a to and our us clients are find their gives reduce own approach costs. super help to innovative not win everything customers together just synergistic but So which helping very customers

are I here. and think we in a good position spot very-very

Operator

America. our We Deyoe with next Please go ahead. will Matthew of from take Bank question

Matthew Deyoe

Hi, yes.

So I legacy XQ comments and call. made some the exposure on its earnings business NMB India about

some of kind Is commentary elevated like your but you're portfolio, seem receive there. through did there you seeing quarter. current is number into was we if questions their wondering walk it's of what made and India relative to exposure it the Just what a could the perhaps to it exposure it

Andreas Fibig

our We're the X% digit. business of you up Yes, Matt, question India. double in the India. for Actually, was X% to QX on probably thank

pandemic you're very asking that a And was situation it terms because good it right it's performance. now. of such So a interesting it's in the desperate

any cautious with of of basis and which are we our regular haven't a India. country but kind we with seen on is the talk slowdown I interesting, manager So business

and impact business. about haven't we won any business on we cautious far So has are our seen negative the But business. the X% total of

Operator

next Please Baird. go We move will ahead. Panjabi with Ghansham with

Ghansham Panjabi

such development product everybody. vaccines the of the then your been digits? so offsets seeing from low at customer given get to new broader early mobilities for you. increase And to as the has in in in updated to the EBITDA cost morning, clarify, you it Thanks improved sort as recovery? U.S. and are raw perhaps the related guidance, Thank a Andreas raised deployed a are what inflation cost the inflation as and relates China, material mid position regions much. Good they level question also single separately as positive

Andreas Fibig

Yes.

Let part. raw me get started and then for I material hand Rustom it over the to

So our coming we demands from see customers which is really more good. all in

it development new some customers a with with big it small quarter into And development actually even has I well customers. second our happening. side, don't the shown back start many see coming or start see quarter, is it's So and in on a good first and of fragrance well. categories, of very as it And we see in which we which excellent the We good our product is the just strong the think sign. fine as excellent

So short our answer, we see part Rustom smaller well. uptick go of see yes, with it, it all we an material. you raw the second as customers and if on

Rustom Jilla

Absolutely. Yes.

it So our stain pressure go a to because customers. takes our margin gross to expect that's And negative we back on do this year.

all So students the have discussions it. the rest pricing and additional of

recover seeing be envisage do to extent the material of fiscal this full increases and in we're we raw that expect to year okay. we able to So able be the to not

do sales. positives. through. positives coming have do as do And We we sales from We However, FX lower a have RSA have percentage from we I volumes. do coming higher mean, of positives positives the from have

a EBITDA, on down your a the with the can on focus of everything adjusted perspective mean, our that confident the full So bit. the our reduces operating we're a quite basis, dollars. it, EBITDA goal the I reduction talked end achieve day, negative or we've about And operating on the we combined of cost at rest year margin that combined

Andreas Fibig

important what on the integration, developments. because the with to now good have just buffer we Rustom was that's flexibility think basically an I these side saying, RSA point

Operator

our Zechmann next question Bernstein. go Please from take We'll with ahead. Gunther

Gunther Zechmann

that of X%, How Because Thank that morning just page to Can that gave Mike. gave for You slide, organic pricing? with and ask on outlook? you first good like XX material. believe Rustom raw been back would guidance growth to out and of growth. still discussion volumes. around you coming your please much reported be you sales not all guidance. is have most then if Andreas, a sales But you. the Hi, split XX, have sales Can of Rustom how in all of believe a much I growth like will X% organic when the I a I that months, last

Andreas Fibig

planning. what, what comment I be raw The currency sales are maybe can the That's look growth usual organic as and Rustom? That's Rustom start X%. So on neutral. can then materials. we will

Rustom Jilla

thing X% Okay, as say to year. that helping for is the so I was us as the whole the I same FX number mean, going that we well was the mean, effectively see I in

clarify? just the, path on Gunther that Does of do specified quantified was other haven't not And recover the path, So we in but that terms right. but the we costs. not material of that part all, recovery, hasn't yet, increase your all question of to in expect

Operator

take we'll go question And our Please next with from Jeff ahead. Zekauskas JPMorgan.

Jeff Zekauskas

X%. of seems that in your XXX million looking which and the wondering that region, scale? secondly, a is at was Is that a look And that I or you XXX growth in what's Western global billion? it it What the was does in you that's Central much. contemplate? very how it review, or other and in million sales business businesses rate sales your the Europe than magnitude for the the Thanks divestitures such the so your of negative issue about remainder sales in Europe the region contracted year? different What's have

Andreas Fibig

And about non-core targeting see the now. composition Europe. thank have The COVID terms X% That's main me, opening right that's a last probably was now of as end the impact in least comes right a fine the economies lot fragrance in of might questions. impacted important out hopefully well. what Because impact. us. with be biggest with business of of businesses And what of think And are we service our it magnitude which I growth. hope probably for rates the at seen that is have now. that the Europe in, of actually you answer food Europe good we around the see for actually of we up a in the the the it Yes, for And year increasing sales European to and the April of of was Europe here. we divestitures I already Jeff up example, the vaccination on helps you business. we first good for lot on really expect really-really is question to impact turnaround And because the has signs let

Operator

with PJ Citi. with next go will Please We move Juvekar ahead.

PJ Juvekar

business Yes. to that you've during pandemic. fragrances hit Hi, good the cannot morning. fine talked and take businesses service, a food Andreas about

level? and Rustom people they As your quickly to you pre-pandemic one for materials, opens start how top up going can out, mentioned question And economy then get of the sort or rattle rank them Thank what material top raw off. Can combined six is the order we five you exposure talk of your them so the of company? understand you. sort raw about

Andreas Fibig

expected really it the in to end what's good. happening than said, in on particularly faster will But get a as service I than I out pre-pandemic probably see might expected. still But of us a XX Okay, it's which Europe last is more Food say Food we what the fine levels. we year. first. very-very we and hit will take of then longer, to quarter. Rustom? started more fine third the focus fragrance we optimistic dependent now levels, year. that say now right would I in let back to had But are believe end second and would the think next last here Europe. seeing we me side, little now to the it service year get get on takes be we until optimistic I will and back pre-pandemic of is I

Rustom Jilla

And And do mean, turpentine mentioned, them. well, have Yes, related standout And one we kernels force say work will and it glycol in of majeure I as something there. locust is I is much way smaller back. that would much we largest bean oil as several is the two and vegetable but one of dimension. then fundamentally soy was propylene last its of that the and that the smaller

Operator

from our take Tomkins ahead. next question We'll Ryan go Please with Jefferies.

Ryan Tomkins

size, getting that much. a your geography be invoice guiding little there's who very like secured or wondering you or bit guide be you've traction I'm the of then selling in the since selling products, an of rate Yes, just solution a core And maybe quite there. interesting for than D&A gone a housekeeping one. Hello, any implied up tax you're with has information looks think if and will Thanks you noticed in could better everyone. of QX, more first the QX. customer the idea what I profile might now will bit, terms and is it for what was higher give

So comment Thank you whether that appreciated. about very we could have would just a that be much.

Andreas Fibig

I’ll absolutely. Sure, one, take one. the first takes second the Rustom

sell that to cross between customer. we health cross selling win had first And was seeing in a in and with it a the big first and bioscience business. thing our actually scent is our So big business are we

a on business. get through something the we because scent combination our side, it's basically where access have we enzyme good So

promising said, very as product because which So in European good think bigger global good detergent on very-very and see is a area, I side, customer, think we I I the the customer. And pipeline. it's

coming on for side in our food also Now the also Nourish division.

Rustom. it XX for over actually it's well. I promised XX. So this make we very-very now actually hand think million year, going we And And the I can in nicely quite-quite to

Rustom Jilla

we before is the ex-amount, actually the us we Andreas. I EBITDA, Yes. rest the never be really, I our Thanks useful, because guided mean, about are no to out people mean, modeling, when that EPS, all had have doing P&L we talking thought as would that. that of pointed more There to specifically change

XX.X% what I the whole at P&L mean, had if that's to did. the mean, So right. was adjusted I for that we ex- XX.X P&L you and XXXX, look clarify, we numbers really the year

the then fact add those just communicated of it rest had so the XXX we and the XX.X number roughly and the And this and basis with came and tax an between which N&B difference profile, going expected. then that just to the is like year, two, points about the is we're a higher

Operator

from Connelly question Mark ahead. our take go next Please Stephens. We'll with

Mark Connelly

the meaningfully working nice merger on out continue that benefits do Thanks, the we working past changed from Rustom leaving progression the of look you has get capital, you capital normal to very integration? progress discrete if think any

Rustom Jilla

inventory year, of be working performance. was eight the look the inventory. working the N&B improve that I all. No, to we legacy very-very driving strong driven way days and a That day HIF&F capital looking had IFF I capital improvement mean, for roughly at payables I wouldn't first and mean, had an in same by quarter. rest legacy we

As satisfy dollars increases DSO strain also, and hand. stable the the building actually at raw talking going the lessen in on we're we and we'll inventory supply the legacy the to material go the be through forward demand year. on cost year I N&B mean, increase rest to pretty our of are about chain

so end to haven't specifically core the we And factored all a working that's And little year, expect of up forecast basically, by capital. we'd I the But would it think in. go bit.

as with CapEx pretty We we X that the the cash well. of flow are the the still billion deliver working everything. year with free much have capital to mind And with for that's able in

Operator

our De Neve next take Morgan from question Stanley. We'll with Lisa

Lisa De Neve

just from my guys, side. Hi, two

segments you expect the where return back we've talked to about far, sales So growth. to

flagged some a of quarter. which your some fragrance, to stocking should normalize for relates example, going perhaps to segments done incredibly quite have as immunity exposed quarters level the So coming talking But peers we're as side through categories about as other the in which it mean, sales, some I of coin, the of first categories especially the consumer consider in we well. the have well,

sort you. your So Thank to be get this. helpful it very of would view on

Andreas Fibig

the might side and year we where double we very that you important had we good look digit if see I which look the expect digit agree a categories in growth developments actually in. situation category. single but where is, in with forecast of consumer Sure normalization, are a is last see good If a we here different maybe the at I bit still fragrance Lisa. forward, on categories will great news going Absolutely. some being at all the our actually growth almost we growth of the

is we where probiotics. category comparables very have strong Another

this seen for double months, couple for was it You might have a legacy of growth year. digit N&B last

So mid but in still single forward. see normalization grows we digit here, a the range going will

are the strong quite call of these out are I going would growth. categories all terms which looking forward So actually the in two others

Operator

from Targett with take our question We'll next go ahead. James Please Berenberg.

James Targett

I comp? question underlying I in and Thank enzymes. the just there and terms growth last taking stock the think top that on sort division, is market demand the just we you're in about pass to to food on back makes or just follow new in price go is past anything to through afternoon. And pricing IFF cost Good how Hello. that? there terms the legacy harder and just health take about pricing wanted long ask in health cultures just of did Or on a Is N&B bioscience you. easier negative and the of may business, down which input there? up to of and thinking than anything

Andreas Fibig

Yes.

to And it the It and second take very-very-very comparisons. tougher to, strong, what last That's that with was question quarter, very end or because this Let make the let's quarter digit. me into first start double first. say, it year. is year it basically of hard and up was is second

we say, coming is will business strong. is And very-very actually in growth. piece demand as and as on We good double well out did growth the And underlying have seen, that H&B let's for we of health see the of QX, example out bioscience normalizes soon as because good. digit the

prices hope as basically the On that that pass question you and as some first for some the pricing it's easier businesses time to of side part. the is I answers through F&F as of legacy businesses. with raise a F&F the on, so the were long saying compared like it not it's is the

Operator

Please we will Lauren And Lieberman take our with Barclays. from question go final ahead.

Lauren Lieberman

lot. that covered closer I Great, a year. I But wouldn't curious was N&B XX billion calling just Good case we're low billion strikes was the management only I more as morning. thing XX. difference. that a thanks. for the know given for for I flow being about was It really cash that's something have the for like One guidance IFF, to me a at at the explain number, this month bit know free you X.X a looking XX. all originally think

guidance Thanks. flow curious free of So lower year? just cash on I was thoughts kind that for the why

Andreas Fibig

Rustom?

Rustom Jilla

the Lauren XX factor, The through XX hi. a Yes. of course, number. is months versus coming

as expect inventory business, to originally in We normal expected N&B we than run, also then the business going and as CapEx higher well. We're that. the rest little all we the of we the invest integration a rest in we and said, slightly than flows bit and strong EBITDA, of envisaged that's building more a And capacity, as add the of fundamentally business legacy through. it the to I so end mean, is just maintenance,

Operator

call now And to further like any this at questions for I'd closing remarks. the time. no that to shows I it we Fibig Andreas have would turn over

Andreas Fibig

year. sales then talk busy a quarter expectations for see would day lots of end the productive as months and we company like rest the also quarter two also the that you've external first and and that it that a and for Yes. Certainly seen of environment. handled soon. positive you you combined and a first for parts With Thank to I participation. well believe moving very again actually, in you. good of wish was to Thank I thank employees the the development us and you and for the because But I IFF the

Operator

you conclude you your disconnect and any time. conference. does this participation today’s Thank And for may at

International Flavors & Fragrances (IFF) 11 May 212021 Q1 Earnings call transcript