Earnings call transcript Q3 2022

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Operator

Good morning. At this time, I would like to welcome everyone to the IFF Third Quarter 2022 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 Mr. Investor of Head DeVeau, Relations. Michael

You may begin.

Michael DeVeau

financial Good Welcome to you. afternoon, be issued announcing found morning, release IR of conference good everyone. evening we our release press at good on and a A IFF's can Yesterday copy the afternoon, call. Thank results. website third ir.iff.com. our XXXX quarter

note this call to will replay. for available a that is minute and Please Please our review statements. forward-looking be being recorded take live

company's making see be business forward-looking contain we'll performance call, the based we and These about how elements the things are statements During outlook. statements and of on uncertainty. today

and For differ release. factors materially, the statement that to to refer actual XX-K our cautionary results contained additional press information please factors and can concerning risk cause our in

measures, set will to exclude press in believe these include that we reconciliation financial is comparability. measures release. non-GAAP financial presentation measures items forth non-GAAP affect GAAP those A of our respective which their Today's

today our Frank With me CFO, President is Richter. CEO, our on Clyburn; Executive Glenn and Vice call the and

with begin that will have. may prepared questions then take you remarks any and We

I that, now With introduce like Frank. would to

Frank Clyburn

begin you, the providing implementing Thank hello, you will Thank joining an today. operating strategy. in refreshed and our On continue I call, update everyone. us on to we strong today's and progress for make Mike by reviewing

on completing We at are Xth towards process are strategic the focused with December progress as Day. ever great refresh you on sharing enhancing and our operational our making plan and Investor this

Once any our the financial we year-to-date detailed discuss open outlook call at to who a Glenn, will and performance look of the then up then remainder will over call quarter third will then and for XXXX. for I share questions. turn complete, our the our provide results

unpredictable to our I ahead, an colleagues our dedicated continues and do to work deliver the thank we a for our customers. Before to always tirelessly to continue do world. want be It year colleagues as around take I moment, to move

members determination are to team our IFF team's and global I to so ingenuity. servicing and customers truly Our our committed be by continue inspired

Now our our X, plan refresh this like beginning provide to complete putting and to enhanced update begin regarding with strategic I'd into Slide an action. progress

now are customers and executing divisional in integrated the and begin with focused, these our operationalize strategies strategies diligently new value-additive We and to working our marketplace.

chapter near trusted next effective maximize ensure most and is company's in are value to and our our can extend both partner This employees market we shareholders customers our be transformation IFF we to the long-term. and and the as for intended in a to innovative position going as to them,

review our with what process. this Let is leadership focused key we to and defend our me what on we've business and portfolio of business grow and key geographies markets, review review our our we ensure customers. and accounts are in able to through comprehensive and new extend designed accomplished industry This enterprise-wide

markets high-performing This reduce has growth This identifying capital in lens, allow to foster geographies as reinvest portfolio us in long-term on our optimization and to included us debt end well opportunities. that evaluating even our portfolio headwinds. opportunities divestiture and amid will invested enable through discipline businesses ongoing additional a attractive identify external and as growth return will

entire are our return us important an maximizing business across and business. only help also been not opportunities only focusing value streamline that ensure to highest the endeavor, but has the we profile It the on

incentives model accountability ownership. to company commercial better to refining IFF's organizational and We One ensure in engagement key roles ensure the and structure process our realign and are strengthen enhance talent operating in culture, of

conditions, our should We and under them to our believe strategies are of achieve accelerated all for more year allocation we full aspirations as capital business prioritizing term while deliver normalized growth also XXXX the financial necessary finalizing well what as longer high-performing the businesses.

confident with am our that at sharing I advantage more collective on this We to our all and stakeholders. to fully IFF of forward clear planning, capitalize you December deliver look will With portfolio Investor value our foundational on X. Day

X. performance Despite months, environment our last execute market IFF volatile to top achieve IFF's highlights continued strong bottom on has line year-to-date. I'd to and priorities the over of provide a Moving slide to nine like to results. operational

take we the delivered grew pressures comparable and billion. currency-neutral necessary XX% sales, as actions months, to first billion Year-to-date operating and fully offset strategic result $X total to-date. nine have in EBITDA inflation to cost $X.X which as continued recovered Through to our adjusted we growth X% comparable translates to a have inflationary pricing currency-neutral

by processes captured we through productivity in our supply synergies efficiencies focusing deal-related extremely the first and million manufacturing chain Turning of months in on operational and over $XXX procurement, optimizing XXXX. nine our efficiency to and valuable

one productivity given our full is the year and Accelerating represents XXXX. heading more priorities economic of increasingly top challenging important fourth the into and quarter environment

we economic initiatives To platform end, on global quarter beyond chain profit call. and manufacturing this second we services our are supply shared accelerating conference end-to-end expanding our our outlined and existing efforts

are We cost go-forward support long-term our to efficiency growth. to our strategy, all to growth priorities drive optimized These we positioning are to be strategic at profitable and around us structure while critical looking greater effectiveness. drive now total ensure initiatives will

as President am from team To joined our Operations Vice Global to within Ralf Vice Supply to Materials support executive as business us where recently & and of improvement welcome Performance pleased our Integrated I International continuous Executive served Chain. he efforts most Technologies He President group Honeywell Officer. operations, Finzel

forward IFF's operational of will our brings customer his success a deliver on leadership ensures be to as be sustainable satisfaction continuous and decades productivity Ralf he goals. net contributor on he will and focus improvement, accountable moving experience excellence, key to

am globally be pleased Procurement move who Chief responsible IFF's Alex we've to leading procurement that procurement a new Officer, I Turolla announce in procurement. brings supply from of will from to strategic where Vice billion Mondelēz with addition, to end-to-end hired experience Direct joins goal operations $XX most In served as significant Senior all Global and sourcing. for President, the he International managing recently Alex who chain Sourcing Materials, globally, efforts

We at the of against progress portfolio to third divestiture Microbial having quarter. now our successfully beginning optimization the efforts completed the also Control of our continue business

used credit adjusted were times second net the times of The from ratio EBITDA to proceeds quarter. end to X.X at reduce debt the X.X our to

As each mentioned to and capital our to deleveraging of our continue earlier, profitability divestitures potential improve opportunities the and and additional businesses our other achieve we optimization of non-core explore target. assess and timely structure

as to performance Now, deeper over our of I'll third Glenn into dive the a turn to well of overview as each quarter businesses. it of our an provide

Glenn Richter

and Solutions IFF to welcome on everyone. XX% Frank Nourish driven double-digit third by $X.X overview in like of eight, would an I sales, basis, representing approximately growth growth you, comparable provide Thank currency-neutral billion quarter and our on divisions. Starting a year-over-year In QX, our Pharma generated slide primarily in performance.

running and is across quarter, businesses growth strong Pricing basis, a a and were were at growth our our Scent and which growth expected, factors And in that two-year most challenged. strong strong the year quarter. was of noted the ago volumes marginally volumes down volume to be comparison, average while X%. about as third Pharma It we parts on seen have contributor volume X% in should Nourish H&B

Protein our To demand. Solutions, provide to where seen in volume in response decline customer in nearly color, to some came we business, quarter of higher sluggish Nourish two-thirds end of have inventory destocking which consumer address the more is part levels the

adjusted negatively were direct we quarter, delivered and comparable EBITDA operating the faced Yet from and X% productivity pricing market of volumes reflected challenged In gains, through H&B, in IFF affected market significant strategic the third on weakening margin a result in basis. data. also Europe demand inflationary by pressures held markets. in across public Gross a our our growth US currency-neutral the was

We dollar business. to to we a In share impact amortization EBITDA saw the third to approximately impact adverse our sales, excluding headwind also $X.XX. an delivered per The earnings foreign on exchange. solid strong due an X% be adjusted X% on continued of quarter,

want Before Biosciences and we to rate the quarter recorded a are and that impacts The variations. Health drivers of $X.XX on cost primary exchange increases business. & impairment to business moving in lower non-cash I unfavorable to impairment charge the inflation due third related billion macroeconomic goodwill rates goodwill interest to our on, projections continued for of volume, adverse foreign related share

performance I all of provide third Now of we our currency-neutral moving achieved to segments growth sales sub-business will year-over-year of business slide business across the units. quarter, growth all across In nearly a sales segments. our the overview our brief broad-based XX% X, and by driven of

quarter saw strong strong with & Ingredients despite growth another pressure growth had business. Grain from in single-digit Nourish Processing and also performance our particularly Design. encouraging Food Flavors, Biosciences double-digit Health and

both industrial Ingredients increase with driven sales single-digits, Fragrance Scent pharma. the in an sales again Pharma Consumer Fine saw growth XX% our strength businesses. thanks Fragrance, by continued in to currency-neutral in and rebound continues Solutions continued impressive and high

to profitability slide for looking XX and the our quarter. Turning at

Comparable to fully due currency-neutral X% EBITDA actions adjusted million. EBITDA recover inflation. to adjusted quarter Third total grew operating totaled pricing the $XXX disciplined year-over-year

also productivity We operational efficiencies gains program, from headwinds. which helped volume achieved have offset productivity meaningful our and

last continue maintain targeted to will material offset profitability. taking quarter, appropriate to discussed clearly we are while signs As easing, seeing of inflation we inflation raw actions

Now growth discuss top-line segments. of another quarter our performance double-digit each underlying Flavors Nourish Food a to sustained on impacting business currency-neutral delivered growth was Ingredients, of in on Design slide the basis business. our quarter. XX, by sales XX% strong and I'd year-over-year and growth Nourish's like driven dynamics third the in

driven growth Food delivering mid and maintain strong by Nutrition growth & also Culture offerings. Health, in Biosciences currency-neutral Animal sales single-digit & comparable Enzymes, X% & Health Home our Personal Care performance in

X% respectively productivity offset currency-neutral of and EBITDA volumes. segments these for However, lower each we operating we decreases, discussed adjusted year-over-year in price X% earlier comparable as were increases our by gains and saw

with due Ingredients division single-digit growth volume strong and driven increases The high in performance growth Consumer by Fragrance sales productivity gains. quarter, once EBITDA to Fine growth, delivered Fragrance. and our in growth division again also mid-teen Scent X% saw price Fragrance in currency-neutral adjusted a operating Our currency-neutral growth this and X%

strong contributed leading the strong benefited the our an quarter growth impressive performance, currency-neutral XX% and by Solutions industrial. with growth EBITDA. very also in Solutions led XX% achieved Pharma double-digit Scent, pricing operating strong Similar sales, in growth to we gains pharma currency-neutral actions in from to volume, productivity adjusted and Pharma in

finishing X.X% result I Turning our generated Slide $XXX XX, negative nine $XXX now in approximately would from free CapEx of months cash $XXX first nine Through million. with our operations, million to The the we or months, leverage is position. through to was cover flow flow net cash sales. that like cash at a million and

and higher cash of slowing been has much levels by due free significantly combination a flow increases service and to volumes. to Our strategic impacted customer improved inventories inflation,

cash In addition, costs. included flow in deal our one-time numbers and are free integration-related

for and of implementing Much managing driven on will believe targets while are focus specific with each business we concert maintain parts result, the leveraging intense we of an new with S&OP improve in our all initiatives inventory unit, a improve processes our efficiency be customers. inventories flow levels to a series high tools this cash to As service down. across our which will business to of continuing by

addition, position. working cash taking to CapEx In reduce spend be we actions targeted to further capital and metrics improve our other improve will

to achieving continue make target. we towards Importantly, progress deleveraging our

As quarter recent finished Microbial Control EBITDA improved which totaled to Frank times debt $XXX mentioned with billion. gross equivalents cash we times, debt proceeds quarter while net was for supported divestiture. to X.X million, the We ratio third credit-adjusted our our from the by cash earlier, $XX.X and of X.X from

on our for the Turning Slide some consolidated want of the year. outlook our update expectations provide XX, remainder on I to to

foreign challenging face have exchange, and These business to since Our continues operational inflationary last persistent quarter. and increased pressures. conditions challenges other industry only with economic broader

by are environment. certainly across growth sales quarter, businesses of the each in especially We encouraged this achieved this consistent our

for further end-market our lower to adjusting decelerate expect exchange sales expectations are remain we due we foreign demand to significant QX, headwind. expect to as volume However, a and we

now also will year In we of comparable billion sales full and present between $XX.X full are factors, adjusted $XX.X growth factors operating and year adjusting to sales currency-neutral XX%. and expect light These of these X% billion our EBITDA. challenges guidance to

we as though discipline $X.X and at guidance billion, we volumes. end offset results strong are this and bottom reconfirming operating our EBITDA to headwinds of to $X.X persistent billion We be maintain of anticipate to cost accelerate productivity softer the range adjusted

into in the the cautious. us macroeconomic Looking a XXXX, next particularly low-volume result, And in be year. as growth half we current environment, of anticipate we first will makes a environment that

easing, and raw pricing energy In materials raw do require anticipate addition, year-over-year while inflation see increases markets, material we will in continued which additional volatile some actions. we

continue will our strong and allocation we to resource a focus across As our and our refine on accelerating discipline result, cost business. examine productivity to

ensure remains We resilient. will support implement pricing surgically, business also continue actions to our to profitability our

currency-neutral sales planning reinvest growth price comparable on EBITDA strong sales to growth our comparable the are in business as more early we to XXXX, still drive in currency-neutral more by driven in growth. a and process, predominantly accelerate it's targeting while long-term And basis, we with profitable momentum modest be

forward will exchange be continue rates. as headwind, a to current Foreign we roll spot

spend at Day, Investor XXXX will on few time in weeks. We our more a

I'll it back Frank, now turn closing comments. to for

Frank Clyburn

tremendously have and customers IFF of Glenn. proud laser-focused world. work accomplished solutions we our around as last exceeding the quarter, in teams the the expectations of I am you, Thank innovative at developing the our on remain

As our demonstrated from environments. ability, are time global you I our QX team's confident as we see most and to though can the even with moving navigate outlook, we complex caution, and have into again am

our we actions, year-end shifts and focus driving challenge. to intensely we pricing in any portfolio We to objectives, or growth. delever closely on on to customers balance our continue the remain work through sheet profitable are and with optimization controlling the accelerate said, market meet emerging Glenn implement monitoring focused As address the effectively continue surgically our to controllable, productivity and

As progress this and ability leveraging and made you become I growth have am our long-term By business value know, IFF's year our the of initiatives, resilient strong in environment. creation laser-focused we foundation drive strengthen market be being on efficient. confident and significant to regardless to more our

Before like be upcoming about Investor details New would X up the to City. official I questions, will York call share which our held Day, December I Wednesday, on in open to

position, the including innovate ahead and we customers, on excited about grow generate for capitalize business leadership event and are our more for our to We our future. IFF productivity the this for host will share opportunities strong how

interactive department. please to New will hope all out, promises sent for Registration to but and feel we be out not informative what York We also forward and our look received live links City. This been you broadly travel us, that to will seeing have engaging experience. reach there in-person the have be if you join Relations for for or to those questions, webcasted an to have you one free Investor cannot event,

up call With the open for that, I would questions. to like

Operator

you, Frank. Thank

We will Sachs. now today Samuelson Our of the now your Instructions] Adam is line begin open. the line Adam, [Operator question from Q&A with first session. Goldman comes

Adam Samuelson

which I guess year-to-date more everyone. been question morning, Good Thanks. Yes. flow, has challenged. a on cash

on Can that I to so Thanks. a what's think, broadly, be? on this improving target of the an provide the cash Glenn, free we XXXX $XXX more ultimately just previously or might flow you there's as million year. out conversion of update plan go been cash what into shake beyond? And and

Glenn Richter

Clearly, morning, Hey, question. challenging good Adam. more it principally been than inventory Yes. year for Thanks our this driven by has balances. much expected been that's very the and

of million. I $XXX So, can year, in the you the start maybe, even first back cited the actually if

be in costing been year-end. are. way, the at that's where pricing/inflation reduction outside And addition, million there's began a year a to of incremental billion additional million. We $XXX plan. $XXX about that, the expect inventories And from of $X it's combination target. another that at we since was we of That's about of million $XXX us By

We the million Frank building about inventories year. $XXX with up the for quarter inflation. $XXX raw of as based service on is start is large That the based basically ended was of from third material levels. -- that a inventories About mentioned, had $XXX million basically on, million

higher with inventory. has basically ended importantly, demand down we've up slowed and But

again, So, our delta that's million about original from target. $XXX

to We get confident, $XXX are that going back. fully we're million

to in We even year first targeted of that targeting get and more. expect the next half back

in tax element that $XXX timing collectively been us. On has and really payments, terms business about some top there's our That's for down of million. of differences our slowed a

adjustments get us of north So of sort to $XXX those million.

about than volume-related related million higher softer million about inventories inflation, $XXX million and in another $XXX $XXX tax. outlook minus billion, earnings to previous some on $X its slightly So addition timing

that's over $XXX million. little So a

from flow the script, costs. note Control and flow of would in of in I given it for this its That's business. that GAAP free take flow, our year, deal-related our our as very includes we material cash directly basis integration a cash cash so our us That Microbial mentioned terms free statement. within reported, sale

items costs, and standup set the transaction-related of for some the deal number paid of at as were all integration-related basically the part costs. for So

it sort about million. netted -- So $XXX that's in there's against of million will $XXX this year, that be

if than it's a basis, That's million. on $XXX will. reported you So more

But cash really the charge frankly operating and against flow of is a to $XXX million It's it's really a related oranges. when little of apples businesses. bit sales an

of flow I'd say of million another over sort again, we'd $XXX the this gets cash our Of inventory That So that to will year, of to expect of would I'd And as we are back. million the timing over that $XXX get time, sitting gaps north back $XXX million. point a time. year. the And incremental operating of million. million from materials over the taxes us little clearly, raw that's bit $XXX maybe get this in sort to this expect true $XXX clearly start year, inventory year. the

as we to well. So expect over reverse time, that

So hopefully, was that helpful.

Operator

Mr. you, with is Thank from next line Stifel. the is Samuelson. open. The Mark your question of Astrachan Mark, now line

Mark Astrachan

Thanks morning, question. start on I guess last and follow-up just the wanted everyone. Yeah. to to I

down assume more about you flow H&B business. So I that thinking investment implies for free wrote cash that. broadly, incremental the

improvement Obviously, is, can talked But underlying with maybe of over XX and do other So competitors the look free kind next about some that? XX, there, for out like cash would are reasonable flow your comment of of what the kind productivity those of on levels? XXXX targets in beyond? rate having of context a fund reasonable broadly how drivers. you of business of Certainly, sort cash you the question the you sort just months flow free

is And volumes. just then question on second

fourth think then do driving about the XXXX down of half through at before the I mid Which you. quarter. least are that? will those single-digits how categories be challenged implying guess you easier? comparisons are trends in get the Thank would volumes You're first And

Glenn Richter

it's objectives to we're on morning. cash flow, our that Mark, Hey, to our longer-term hold to Relative Good Capital Markets Glenn. going Day.

actually targets. month have less to about to trends. talk it some we're flow specifically of And that. the Frank to We'll more our a longer-term from I'll than chance So a away discuss turn then over

Frank Clyburn

things good morning. wanted couple A highlight. of to Mark, Hey, I that

correct. are You

where quarter we're versus the and posted. now We are we decelerate in factors volumes the seeing. right you I'll a are do that just assuming really areas for the focus what number that give us QX And it's fourth two

the and business our this are dietary I'll we even Mark. end-market signaled start making Health quarter, supplements. seeing & consumers with division, under are think both Biosciences health slow as I In in choices probiotics health I earlier the between demand

So slowing in to in North are expect particular Europe. through in And in seeing we America. that business destocking end-market that continue as use and fourth we we well the seeing are some health also in also quarter

businesses. health So what seeing our we're that's in

through on now we're the We Nourish September we And assuming this In back. Mark. of we prepared into similar remarks, see more come under business. And as as Ingredients We the are inventory fourth was went the our mentioned aspect quarter. July we and trend started we're deceleration August seeing a go primary of will quarter, see did to that seeing continue I in highlighted Mark, also in is destocking we October, down. the saw down. we what

did had perspective. but some made within some a some business We some trade-offs the where capacity-constrained, pricing Protein primarily margin, preserve that increase our also it's business trade-offs make did Ingredients price volume destocking. we was to We Solutions of from

that in assuming and that So the reason we're continue the main quarter. that business fourth also is will in

in We'll hopefully at growth. but we're into first business. what Markets Capital 'XX we color more you to expecting on lot as we're Mark, the that's in half we're get what 'XX, explain As we anticipating some a gives Day, for what volume go seeing least moderate of the

growth we that an back time seeing other and us QX, in I X%. you a well. Scent over important And The in good we would particular as two-year we I it's we do are are that, period highlight for step the volumes thing, though think this still and growing if highlighted take Pharma mentioned through our and reminder

isolation areas, those really where as deceleration we're mentioned. continues I the that is So, in primarily highlighted seeing is two which anticipating the

Operator

question. line now your Roberts comes next Thank Suisse. of question Credit you the open. your with from for is John, The line John

John Roberts

Great. on The discount the affect higher but other Thank affected rate only & you. segments goodwill assume would to as write-downs seem Health goodwill have the Bioscience, well. I

the little worsening must the segments? be a you relative the other difference the be why & to Bioscience relative Health macro to Bioscience the So, other longer-term in Could for appear Health & the longer-term for for assumptions assumptions to macro bit segments. assumptions discuss

Glenn Richter

of John, that amount for Yes, intangibles more are business. related and the Actually thanks to the the goodwill it's question. allocated to

prior million to definition, of the acquisitions. acquisition. of you're the that -- And me directly N&B books. let to So by and $XX from just had the the about were the of by sure on aware, each as background intangibles goodwill way quarter the our of They're assigned majority of to They end I'm well divisions. related is we four

that those Nourish in sort but intangibles has IFF is businesses. somewhat against the Pharma right? H&B you of well. a burden So it's and H&B two will, heavy goodwill and business allocation legacy terms if not, do in Nourish, Pharma of So, as obviously concentrated

to write-down was on prior the sitting intangibles the about XX% of goodwill and of context For H&B. books

two point event be or largely So annual there Point it is The interest if there's that within do to rate you're an do may impairment environment. to one. the an year. is, test an event suggests the that's attributable required to have

in projections. basically the discounted the you because forward down. basically the rates. run do exchange on you part a business projections forward each So the businesses, Those cash you of for were were of H&B flow do The way brought calculation is

earnings played but of rate. the slightly it businesses the Part lower But role. rates to exchange exchange we use lower discount have So, have meaningful the current performance, significant is operating actually is the most because a all variable rates.

are aware, everyone's the As well up going rapidly. rates interest

the cash than what higher flow use that's billion. rate the in year we discount ago So a was were for required resulted $X.XX to and materially the

disclosures that have in do We our we about XX% cushion on note Pharma.

goodwill the don't expect Scent given sign carry would will Nourish, the and the be second the and the significant impact amount be that under that would you you of have a relative because intangibles other business. the less business As It is goodwill for that IFF basis intangible to legacy as scrutiny, just on businesses, much.

really we're it's reflective the minor exchange the some it's to rate reflection So -- experiencing on of what outlook say business the more extent, from I'd environment the and and of a interest rate.

Operator

Thank you. The next line question is from with the line open. Gunther, Bernstein. of now Gunther your Zechmann is

Gunther Zechmann

Thank Mike. Frank, morning, Glenn you. and Good

Now volumes rounds demand you said price around reported pricing your also similar getting even QX pricing. in QX. that as you're which getting just XX% weakening guidance new peers know from what well flagging harder what on pretty tougher. implies is We environment, and to a That's

stronger lower do into So volumes the this you of XXXX year And how that due that the to think expectations as down-trading opposed increases you also What or much then? indicated, do how as you cost well? through are demand develop into see to please? you for consumer your destocking price raw material pushed next are

Glenn Richter

start afternoon, Gunther. I'll actually inflationary the Good environment. talking by about

volume. then think relative it to pricing I up probably dynamics will Frank about talk pick to

materials all, First a clearly are relative the raw deceleration in we of marketplace. to environment seeing

actually step let very looking our in maybe kind XXXX three back going that's down. forward. flat happening me of and for overall logistics to components. So favorable certain outlook about commodities is terms slightly One talk But in of

not up but the in which addition for just supply helping chain, on by time in ease is that deliver only of terms encouraged of able our sure freight, making We to we're are an to cost customers.

that's So a plus.

customers very everybody have And is What to that. it's many volatile doing energy pricing we direct been incredibly doing have that's variable with to been implementing surcharges our is Energy or as call knows. difficult as tied prices.

impact. fairly ebb upon of happening terms in And will in the with globally and you're as That players. the market well again, what's the be more depending to that's flow market many consistent with dynamic. concentrated aware European that So tends

there are an commodity raws, pulp as -- to are that buckets chemicals chain And I seeing then and/or seeing supply example; as synthetics; groups we would still it environment the example. by we're certain that in where basically pressure. relates impacted energy three inflationary an as so put are

clearly roll-off pricing we're or year. contractual we this some Secondarily, seeing had hedging on

there modest So are palm price And to year-over-year, decline that's increases actually et are while soybean, impacting. as cetera. beginning for oil, certain they us, categories some commodity that represent such

are that, expecting year's related to digits be it, the in And we of so raw inflation what high had this terms half to about of year, next we single call impact.

to a little thoughtful in are everyone's passed would commodity environment consumer, tighten slowdown be bit terms to You correct up. a definition By through. with in in trying more pricing of continues prices be

We go pricing. XXXX market for to are about to

have being customer what sense We tied to marketplace. spent a makes or surgical energy of relative of in lot very the terms pricing what in directly to we're seeing

have, to round offset we again, pricing are much number what another of but actions we residual materials. raw lower -- a the expecting versus it are be we So will XXXX

Frank Clyburn

And part not pricing have volume. and this to our strong lower impacted volumes Gunther, price about Gunther, second it do broadly, is that regards the actions of the With your Frank. we question increases, see

what's at pricing. look many the you happening our if are peers of fact also increasing market, In in

So see impact. do not we an that as

to Gunther reached se, not have many In losses our share they and this with of seen per of that any in out doing we've we signaled because customers our actions. concert fact, clearly we've also them. pricing been obviously And have

and some I volume capacity-constrained. trade-offs The within a price our Ingredients increase were we was one to made where is where trade-off did highlight did we We business margins. conscious that preserve made area

is that that one highlight. would I the So area

main business destocking what The other their working thing customers And is the for year-end it with to wanting appropriately. our are regards to is that mentioned, -- and is what at we're primarily is is levels obviously our seeing their manage the inventory as is driver, looking capital Gunther. driver

So, the that's driver. really

though, and Capital market global our portfolio to customers all with is at things How new spend we'll ways customers, build the one regional bring to and will time I Markets our more looking full of The increasing customers really the work execution. on say the do acquisition? of as share forward continue last with we as to thing well that, Day we with commercial of customer our customers key our really IFF are

be And time growth, on at in Markets here to for talking Capital more really some our Day Gunther. spending that focus I'll our area aspirations about plans

more much to come. So,

Operator

you, Thank Zechmann. Mr.

Our of from Heidi your the Vesterinen now Heidi, next with is line open. is today BNP line question Paribas.

Heidi Vesterinen

Morning.

outlook I have. many in than although by your driven destocking So, I any QX, outlook noticed a or out Thank market factors? IFF-specific recent have significantly your do another them decline trends that question weakened Have cautious peers or aren't that earlier appreciate your more major on much you calling weeks, you. We volume please. is reported in of

Frank Clyburn

it's highlighted, the as start that destocking October. as we the through And that to mentioned. Heidi, also, really in went seeing Heidi, September, in did And are the we particular I Frank. Yes. we month I in and see quarter of

for at in have recent though And to look for sales we so guided as prepared we're our points those appropriately that into taking we've the as So, data forecast feel we our we mentioned remarks. top fourth this most now line obviously quarter, is consideration. why that

we business, very the though confident back to The were full we is a do performance. as to you though still year are take the one exchange, X% that XX%, thing a though I step growing if Heidi excluding highlight for do overall want and is good feel

October. I and manage last the it's seeing take said to QX some wanting I due approach seeing primarily quarter this customers to to then of on our we're challenges, the And the inventory. and couple clearly, think prudent based end mentioned we what of months is where in fourth the is as Like in we're

Operator

Thank you.

line is your with is open. Deutsche Our Bank. David next question of the David, line from Begleiter

Anthony Mercandetti

Anthony Mercandetti is on for This morning. Good David.

touched be was XXXX? much how if the on XXXX you the call, it can bit to pronounced end markets wondering then destocking you And and what on a the destocking expecting will elaborate more a maybe into but be first in of regards to maybe throughout You in I maybe more QX. you're regions particular expect headwind half

Glenn Richter

Glenn. this Hey, I'd do predict. it's us. really demand. joining us to We Anthony difficult is Thanks end-consumer very track for say closely for

extensive we're very doing. key data; that from byproduct, dialogues in get believe customers demand the with what end-consumer we our destocking scanner the So addition secondarily, largely of as in the a in declining what to information terms obviously, seeing. contributors what And we to do are they're

And solutions; of they're we one And follow in firms things as value couple see what and of in reporting, pronounced a you think in CPG end the these Frank about terms you end related market had second, had drops in a booms decline. see protein at probiotics. note the of major of COVID as we most big as particularly categories: some look it mentioned, double-digit probiotics, which understandable would the why market. And the of the it's to big, are and

our relative point they place. A of have how to into believe Others that the end number quarter course, know. is by a second their two customers they ball indicated to this and they next year. the this That, long that believe where that good don't will going. we extend this assumes in consumer consumer. inventories is have of Point So first have to of will is may we destocking one crystal that communicated believe run, have relative really year-end, us they

So for -- for Investor performance our financial consumer we'll will outlook perspective next we but we providing XXXX, our on outlook ultimately we the and more the be think potentially down factoring further slow destocking year. as do our relative be to at Day about

question. So appreciate the

Operator

next with line question from of open. Mike Our Sison your the comes Wells Fargo. line is Mike,

Mike Sison

it you bit into little quarter. each seem what the segments on as a think maybe XXXX, about learned think of businesses in does those of unfolds? color And we're if Hi you you've do folks heading and when perform give XXXX. recession those us like guys, we a now, nice should think portfolio downturn head into Frank, the how

Frank Clyburn

Yeah.

So thanks of Mike couple for the question. A things.

As think though I ingredients at be going total in resilient resilient at about If if the look overall Nourish, when into with and a and are that portfolio you very feel one end recession, as should we of we the very we you beverage, would portfolio, our Mike look markets overall. start food I clearly there. -- say

and a business segment Flavors also Our Food is resilient then Design.

very exclude from destocking nearest would you our overall near-term we if about be in division times. perspective, we're So think were resilient of an that the some that recessionary challenges talking inventory to

thought is interesting challenge what of Fragrance. one I at be look the in really have more would a Mike Scent that a the If would that business we be is recession area Fine

our good year seeing business are and Fragrance strong overall we really However, hang Fine this our continued to growth with growth. well in overall volume has Scent business there in very good

particular, a think a Cultures we think if & up and business look also Personal business Mike. Enzymes that Health within is & up Care Biosciences, Food I good well, during clearly, Home or holds & As at think you about Health really holds In we very recession. Biosciences, &

segment Obviously of clearly resistant. then pharma resilient marketplace, call, we've that challenges but probiotic we're see in highlighted as in a this time. the fairly health And period very in being we seeing the overall recessionary on

That's much With we XXXX headwinds challenging We'll all time more outlook. team. the spending something we are do see as of mentioned, that you said, on that as share obviously our some horizon. a on

different the But will very Mike resilient overall more here for and spend businesses even Markets lot we time Mark something -- think feel a unpacking our should at you. say, Day we Capital clearly of across of it's I business or

Operator

Panjabi with Ghansham, Sison. Thank line of next open. Baird. the now Mr. line comes The is question from your you, Ghansham

Matt Krueger

actually Matt Hi. sitting Ghansham. Good morning. This in Krueger is for

that your hoping was I So touch some could on of we initiatives internal here. own

we of backdrop some tougher half can XXXX macroeconomic are the offsets as into internal back the of and that across year? this into counter what So business the the cycle

offset concerns so the And be? the a downturn when business? you might those what what are already if this? And actions primary taking entering some Are to of for

Frank Clyburn

which in And initiatives this have primarily focused Frank. on significant group chain. I'll supply our been Hi. start. on is highlighted we've This operations where our our year productivity focus we our

looking economic manufacturing our group at and on logistics operations really focusing of in We're our costs. or choices profit key a as decisions driver

progress So have his would we in And Glenn really first in prepared highlighted productivity. start, remarks. that made good improved think I I that

-- total things for go our that is additional as into an are you cost IFF. we that said, looking now With base or the a downturn at one of

we looking on talk call. highlighted beyond about we ways accelerating us focus think productivity our operations So and at you've our about to heard second that are manufacturing

preserving share that base also ways Capital to and think That's accelerate there Markets Day. we are cost much more two We going productivity, our while are things. something to do reduce

One to our also sure in our making innovation really investment two we're working and growth. continuing drive to customers on focus with

So will as head Day, into to more XXXX. Capital to but productivity Markets come we do accelerate able be we think at we

Operator

question. Thank your you for

the your UBS. question Josh of line from next with is is Spector, Our open. Mr. Spector line

Josh Spector

Yeah. the morning. Thanks. was discuss in the in I Good Scent wondering you'd if margins quarter.

you prior talked about that segment previously longer later about much to maybe I calls You price/cost. year. taking catch-up talked on next believe,

improvement mean, appears pretty you a quarter. it I this step-change big made

And So of change that few from for the what happened any quarter? quarters expectations forward here? third in does your Thanks.

Glenn Richter

Hey, our the things very that progress for quarter making. third of by Josh. of to in is, trend inflation. versus pleased price beginning Good We're the are the morning. Scent sort normalize first business Yeah. One Two are half versus exhibited is the year. we

been happening catch-up year pricing of been with That round raw for of another sort implemented. to was what's materials. there has So

first margin So the next to year. half it's we of been extremely helpful expect that the to performance, normalize into and gross relative

has very to team But undertaken manage costs continue to actions then their secondarily, tightly. the also

expenses, their the to also quarter first RSNA third So improvement as that showed you'll half notice well. from the

smartly well to growth currency-neutral as of additional top manage So that actions of taking a on that. implemented and a and on paced the pricing make bottom nice line, team the is and result they manner had quite sure year-over-year maintaining volumes a productivity

Operator

you. Thank

comes line line of question with is now Parkinson Parkinson, open. from next the Mizuho. Christopher Our Mr. your

Christopher Parkinson

Great. Thanks so much.

for still of your seeing Thank to few on the understand backdrop still preliminary I raws we transportation those entering is general you just currently just it what your remarks. just just save I you're basis a result want to tangentially You also just least it. and kind lot much. just costs you want on Analyst and Day, circle at then of considering cost how XQ so you hit to the logistics, Despite in it can but a appears highlight should these other challenging. a XXXX? back operating be being solid,

Glenn Richter

to Hey, relative flattish to yeah, slightly down. Chris, costs year-over-year logistics pretty

improvement chain. nice seen supply the global we've actually So in

we've I As we seen this have pressure raws mentioned half year. of previously, still about what

categories continued think Ukraine continue material off. that high our function see So as of a supply in And of a It's single sort about to being those chain and issues. contracts war prices function it digit escalation in cost. certain that's total driven by of by also raw are other rolling areas affected on energy global

pressures capture. of only of to it our to not to everything be need as do round a of And still So that, managing pricing sort next half of way this a byproduct but the actions, meaningful go for basically call rate cost our as on we Frank had offset year, around us structure smart mentioned well. as those of

Operator

you. Thank

from Our of line next Edge. Jonathan, open. Consumer Jonathan question line is the now comes Feeney with your

Jonathan Feeney

much. very Thanks morning. Good

than margins on pricing prioritizing what cases customers business protect customers a consumers. volume you think, pricing is with -- specifically, dealing some meant. over how pretty are got good to presumably your primary your – trade-down in other I to I've But handle you among mentioned taking

within And legacy DuPont customers portfolio, the trade there down innovating Are or Because that XXXX. IFF? competitor? in signs of that is handle, how are a your good newer not you. a How sort all on do the to we felt that different businesses pretty of trade-down? businesses, your before I Thank how to worked had going

Glenn Richter

couple it let private from consumer Well, in answer from with to inflation, pressure Obviously, me visible to there branded dimensions, under Jonathan. movement attempt a is of the label. a

play and We both the both although across So that Europe the Europe. customers more that's in pronounced in US, spaces. play in happening

general consistent our not general, from In the markets. but both cases, in all serve between label margins fairly we private branded and are So standpoint.

up also saving that customer environments, money it's look while the It about it's is moving happens the in we at in generally, reformulations, this business. hold very actually will to relative our The to environment. think formulations through they consumer standpoint, do from pronounced more all and branded of So but well label private type of across constant. how shift

the solution terms take deliver consumer. reformulate So we same them, with basically to cost for out work the and very closely of in products helping them

consumer The oftentimes still of and reduce the stay is, may while this I would the clearly say marketplace branded is thing, within consumer third to they behavior happening relative in the dosage. is actually will

care less usage, as as products about and fabric or that less an think home So sort personal softener of example.

So factor But customers' that's essence, in of lower as as sort well our result as may that business, affects in is another marketplace the also it well. business. the in that happening volumes

helpful. hopefully, So, that's

Frank Clyburn

though is thing would Yes. we customers continue The only important our the seeing, Jonathan, for innovation still that how important I future. think to it's I do see add,

going fact what are So as as the which regards we very engage our our to us, still et new think down-trading innovation, very near-term, some seeing seeing, to with and from Glenn for wanting we're to work of we high pipeline engagement we projects But with with future customers be them forward. some for us is is, going important and cetera. mentioned, the

that's And on to that's that seeing for I focused something that a make to wanted just We're not them wanting that really innovate of So reinforced. their helping also sure we're customers to not future is pullback growth. on. deliver something

Operator

Feeney. Mr. you, Thank

open. Our Matthew, last DeYoe with line America. line Bank of of your today question is from the Matthew now comes

Matthew DeYoe

me. Excuse Yes.

little to basically $X maybe a a the raw So on from Nourish. decremental -- on in offsetting price gain revenue fairly question downshift XQ in Basically a at like EBITDA. you odds commentary. you lost sharp that's ask wanted And and $X with every margins I

there? of, how does into margin set-up happened So progression XQ? And what for kind that,

Glenn Richter

how underlying demand our decline we're volumes Yes. to address problems. relative order factor in the Matt, is and inventory to flow the trying manufacturing quarter in one to correct to cash offset

third demand. the than as dropped even So so Nourish more the result quarter production a of volumes in for that were

issue absorption an hitting that's there's the So business. to relative

of dollar if So will. the you flow-through marginal the does affect sort of that

sort that pressures inflationary Also were, some the per outside quarter-to-quarter effects. things se energy of kind the period like was other not some of, terms in of there and of

one volumes hard H&B our an to, more in QX. Nourish little also that's we've normalize and volume business down pronounced bit QX order factor quarter collectively hitting another as pronounced our a to sort a in in the in And is it's of, So sort being, get of, reduction seen decline. inventories more in apples-to-apples. But and it's to a

factor a that you cited. that's So in calculus

Matthew DeYoe

Thank you.

Operator

time. further There waiting are this no questions at

turn my Clyburn, it's the call back Frank closing over to pleasure to So remarks. for

Frank Clyburn

the So hear X about to to thank see some IFF. we of in call. really for the going Investor future can us reinvest spend productivity December weeks next time forward. I'm about sharing in we'll to and growth in with with you our despite extremely of front are the where the forward everyone future to Day be excited very challenges, an Hopefully, of We of our joining you look able our drive our near-term continue we'll excited IFF you and couple aspiration in how perspective, from the why innovation business

you look New the So in seeing forward our to York call. of many City for joining and on you Xth, thank

Operator

quarter Thank for That XXXX call. earnings all IFF third participation. concludes you your the

your disconnect You now may lines.

International Flavors & Fragrances (IFF) 8 Nov 222022 Q3 Earnings call transcript