IFF - Earnings call 4 2023 | International Flavors & Fragrances Inc.

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Operator

At this time, I would like to welcome everyone to the IFF Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]. I would now like to introduce Michael DeVeau, Head of Investor Relations.

You may begin.

Michael Deveau

Thank you. Good morning, good afternoon and good evening, everyone. Quarter Year Fourth Conference IFF's to and XXXX Full Call. Welcome release we financial issued afternoon, announcing a Yesterday press our results. A copy IR our found be of the website results at can on ir.iff.com. will call recorded that is note for replay. this live Please and be available being

review a forward-looking take Please our statements. to moment

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

of differ call can financial additional in refer respective non-GAAP CEO, comparability. financial materially, website. we information is believe non-GAAP release, Richter. measures, include Business that to concerning measures can actual forth our Transformation For our reconciliation and our contained the affect found Officer, presentation which be measures that Glenn Erik GAAP and press and issued please Executive that press A our factors on today and cause their which we statement factors me in Vice Financial and release set cautionary President is our both exclude to of Chief will items Today's our on Fyrwald, results the With to risk XX-K yesterday. those these

then and have any We with prepared end. will begin remarks questions you the that take at

that, With to I Erik. call turn the like to would over now

Jon Erik Fyrwald

then weeks IFF. for year After look will like teams, and to the I providing meeting and some and customers on many full strong XXXX Thank few open by joined that officially before February year will full of you, call spent on I Mike, our I and assessing our commentary provide and the time XXXX. and a sharing status globally outlook across current financial Glenn, since by the of at hello, impressed to the to Q&A. I our join operations businesses. we'll quarter U.S. fourth for who the spent and the that, teams overseas to our innovation begin would our joining results world-class last current the initial our teams visiting everyone. of all today. and call excited you I'm I I have some over company. the perspectives X, been turn IFF listening businesses. our

a a create as has science in needs. in with history high-value and and expand sustainably and which our chain leader through build creativity great IFF and and leading help ingredients platform I proud products. a customers global world a consumer customer believe value create help purpose better across to them applied partnerships to to our the solutions consumer from to meet

and The of us is have big, very joined ahead opportunity IFF. that I is we why

needed with We share this win our is bringing in profitable actions also have do our something by we'll Scent unleash to must our businesses A solid example gains and to start market to other where customers. been competition, our across deliver outperforming we the we potential businesses. have to innovation great perfect full take business, of

profitability. be And leverage very functional be overhead, our customer-centric will that and IFF will with In putting do some first, driving and by will high-quality improve and to unnecessary ingredients, both eliminating focus higher attention, so, business and as a challenged where will efficient. significantly processes with and we innovation rates and has businesses, other doing innovative also empowerment as and Flavors such Biosciences, And can IFF our deliver more performance. we instances, businesses, so attractive such by we growth of Health leadership. the effective strong in organization

outstanding across continuously into all team our debt. put creation we market for businesses reducing infrastructure and IT I do strong our and our transformative over time, this and from stakeholders. initiatives, share away We And grow to our IFF's see also value targets be and investments high-return more when by all focus R&D executors IFF achieve better businesses, must structure our upside the distractions capital of

Moving that IFF's XXXX. fourth full the achievements through factors to marked slide, walk quarter and I'll and progress through the the year next

to the to steps throughout past value Now to position and near, operational the long financial for IFFers year, term. and and have our this take continued important foundation company strengthen deliver mid

progress. the Our performance in demonstrates fourth quarter

for also While adjusted comparable and increased previously XX% across margin reported in an sales the expansion X% half adjusted year segments of year, points. to were guidance EBITDA. improvements down, XXXX of of volume ranges with full basis sales trends the in second and EBITDA comparable We've majority grew currency-neutral seen currency-neutral stated notable within our the operating us perform business enabling XXX sales

while improving through targeting performance on and strengthening exited and with ability XXXX, for year growth the are year footing, on second optimistic XXXX, progress the back year-on-year beyond. about and are XXXX the getting half we our build we this and full for of the Now this momentum to to solid

earlier, of committed we reducing said debt. our I as level are Now to

$X.XX We to announced have to have approximately This management an lightly we is as taken dividend to a our the XX% therefore by board share. is shareholders. policy the dividend and know per to quarterly not important dividend update reduce decision the

will our required, This which will, long-term financial greater will additional capital give it ability enable to value. more when growth to company debt However, the will us structure, us reduce also investments. the make which high-return strengthening give flexibility faster, create

it I'll now Glenn? over turn Glenn. to

Glenn Richter

Thank and everyone. you, hello, Erik,

X. Slide to Moving

with providing credit-adjusted our reduced this the IFF's to competitive management up committed value opportunity to and dividend actions our we long important consistent is towards payouts. dividend our new we part as returns to to allocation with have more base share. we believe $X.XX term. debt- of improvement for set remains Erik in and accelerate to quarterly long-term and framework, expect Xx that dividend taken change yield Consequently, us profit of generation durable that the per industry an provides aligned believes a work this our IFF Board is and deleveraging target the our our grow As creation We cash target and capital have structure The these of flow shareholders to mentioned, time. capital dividend EBITDA. peers net this over alongside remains firmly

Now, Slide X. on

growth volume mentioned, the for implemented IFF both in continued increase sales, performance our our business team Scent growth several in the environment. has months challenges to trends improve by Pharma, increases destocking. uncertain the reflected for last Despite sequentially impacted and over that improvement and businesses nearly resulting quarter strong fourth volume amid in initiatives operational in reflects operating sales. a to in some Erik currency-neutral strategic continued our As an the market, Nourish in $X.X in strong X% IFF. representing deliver results This generated with billion total all pressure with continued comparable

to would XX% in for functional sequentially impact currency-neutral low mid-single digits. the the improve Volumes single quarter ingredients, digits on comparable from a single QX and down in fourth fourth operating low of to digits in increase $XXX volumes continue have down excluding the quarter, if a Adjusted QX, basis. increased million totaled EBITDA

net efficiencies both We in also margin. basis from realized This XXX taken, currency-neutral favorable including gains initiatives and a operating supported year-over-year continued was comparable has increase of growth adjusted steps pricing. productivity our IFF and internal by our points EBITDA approximately EBITDA to

The the ingredients, to the are a billion our mainly lower that I fourth Nourish exchange to impairment related fluctuations. cost inflation rate impairment business. drivers due we business unfavorable on, related goodwill to primary and in of share moving wanted quarter goodwill projections recorded volume noncash Before functional of for declines to charge foreign $X.X continued

XX%. to at growth closer helped our to a us to moving net adjusted look Slide delivered robust we a with productivity strong deliver overcome fourth quarter, EBITDA realized to profitability our which inflation happy X. to equates Taking and report million, IFF in of ongoing QX, Now volume currency-neutral for I'm the conjunction price against operating comparable performance objectives. that in $XXX favorable gains pressures

executing upon these to investments Importantly, IFF remained our while and effectiveness making to programs areas. also improve growth continued productivity operational part launch XXXX, as steps focused has of in efficiency. program In additional we strategic our key on

strong segment our in continued in the a was by business quarter. performance a on declined Nourish, during functional as look XX, offset X% by In Now I'll basis softness Slide growth sales on ingredients. comparable currency-neutral provide at Flavors closer

remains of is driver meaningful operating profitability, and for worth and positive impact the weakness that our a led in actions Nourish productivity improvements terms quarter, again in While it we the functional from EBITDA. main X% pricing to increase saw adjusted noting the currency-neutral comparable ongoing sequential of ingredients improvement drove a initiatives in

in increases, of and bottom Overall, comparable year-over-year in H&B top and by EBITDA. robust growth. led Price H&B year-over-year currency-neutral XX% increase a operating growth gains increase show line across sales most to to and continue Health. comparable double-digit growth growth X% led business productivity volume segments currency-neutral a Biosciences adjusted delivered & Health

in favorable including productivity continued also XX% significant performance currency-neutral Our in XX% a comparable as Fragrance on currency-neutral pricing, and driven driven Biosciences, very deliver double-digit mid-single-digit growth & Health strong QX, growth net a comparable EBITDA, growth Fragrance. in to adjusted Like growth in Scent as Consumer increasing saw sales well operating Fine gains. Scent segment in by volume basis, by

by year ago continued sales XX% adjusted While Pharma EBITDA driven Solutions the declined as XX% primarily productivity destocking currency-neutral lower declining currency-neutral quarter. strong gains, pricing to improvements volume, comparable were comparison. and led these as and by offset experienced trends significant well comparable operating This in

positions. I'll totaled In XX. strong the sales. operations Slide fourth year, improving CapEx our discuss progress the reflecting billion, leverage the in million $XXX to X.X% was previous quarter, cash significant flow the or inventory levels. $X.XX for of from and year approximately cash a Turning increase from flow our improvement

$XXX $XXX on cash the of on helped which of working our our progress and capital intense rightsizing totaling by over an a ahead free year position, for expectations. increase saw million, sequential inventories enhance Our improvement, full led flow million focus

flow transaction-related primarily in and integration free Included items. million cash $XXX related of is about our to cost,

to $XXX in XXXX. million We delivered also in our dividends shareholders

QX. million, Our cash equivalents assets and sale $XX for $XXX totaled in held in million including cash

billion quarter Additionally, of a debt, $XX.X million we credit with the in for EBITDA debt totaled to realized adjusted gross which net a approximately sequential $XXX X.Xx. reduction

credit $X.X Our EBITDA adjusted approximately trailing XX-month totaled billion.

leverage Lucas announced our achieve targets. are which we the actions expect rightsizing additional Meyer Cosmetics our the of quarterly of dividend and and to in portfolio to balance are make, still decisive XXXX, we business, quarter our planning sale of action With taking to strengthen close first we sheet the our

our broader XX, now the end to improvements ahead. tail are of we market a On business across cautiously turn and in combination towards like Slide our I'd 'XX. Due of outlook 'XX, about for to optimistic to the the year

ingredients range the This such is given which lower 'XX, year impact largely reflects full fragrance $XX.X to our dynamics. of in of categories price-competitive and the and approach pricing to expectations billion costs isolated to prudent XXXX, in functional expect input competitive For the volume sales $XX.X negative we billion. ingredients modest as and more

pricing cost-competitive position believe increase expect to X.X% market us decline 'XX, a We approximately a in this X% increase following in in us Strategically, regain be overall more select will to XX% and 'XX in market to the in businesses. and allow share we 'XX.

of volume, pace range significant will fluid incorporated most a variable X% has In impacting and to visibility the be range. ingredients. our X% the degree the pace functional in recovery in terms of this The remains explicitly of the been bit to recovery and in

industry low this to from 'XX, believe growth down were normalized more and we our we down return However, digits a finished 'XX, as single marked improvement is mid-single where rates. we digits will

$X.X billion deliver between bottom year operating and expect we full to the line, 'XX On billion. EBITDA $X.X adjusted

volumes improved just not and expansion but segments. margin solid a assumes guidance our 'XX, profitability from across also Our

businesses. hyper-focused to to continuing while expected continuing productivity inflation, help reinvest and in labor initiatives to execute return compensation incentive mitigate the our on costs, We higher reset, are primarily

benefit Kernel of that program LBK, this inventory expense million approximately noting 'XX we 'XX. negative in estimated onetime as some Locust in It's declines, will we repeat we compensation quarter. $XXX 'XX as $XXX Bean inventory from by to of third an program is and items the in provided reset the related announced target impact absorption the which related levels our write-down in will there not volume million also worth incentive annual XXXX. A reduction impact In negative particular, previously have an be in such down from was to reduction higher offset from and the of some to inventory or payout portion our

all profitability the X work to still efforts effective, the market divisions. portfolio see improvement divisions it's across hard bolster expansion financial of predict and impact opportunity and for all providing in targeting are to and timing in While margin its while results, 'XX to our volumes improvements on with and and profile better details we our with there's recovery do,

For the $XXX first quarter, to approximately an of be approximately million. $XXX billion $X.X million adjusted billion, sales to we expect EBITDA $X.X to with

to portfolio, focused improve will reach our Throughout and financial optimize efforts relentlessly be performance deleveraging on XXXX, we targets. our our

actions our the and to significant will in 'XX performance 'XX value I'm improving capture confident IFF position creation. that taken outlook for in

With turn call back that, remarks. over the closing I'll Erik for to

Jon Erik Fyrwald

will nimble center even thrive our at Through for excited strengthening robust truly the to commitment as IFF our I'm alongside this our execution continue organization. worldwide transformative time to from commercial company. a efficient long in at become Glenn. global more honor the be you, to admired moment industry. able industry, us be to all the I IFF Thank customer teams an shared and it's a and company work joining help our navigate for critical efforts have putting leader the and category-defining teams to and do, IFF our talented the and during and we of

teams our we progress we accelerate progress meet can of industry-competitive deliver forward. customers towards needs made going the the global will returns, and ensuring evolving Our and

While to an XXXX Based margin market are improving return this was conditions, a which growth our and EBITDA trend. some volume a quarter year, results financial this and should challenging enable we in performance improving on highlight the year, expecting expansion. growth fourth

Our capital reflects improve on, structure. divestitures updated commitment the our work our continue to and we dividend policy to additional

are our am to While economic beyond. execution. for and and create well all do I on the landscape will And stakeholders on work confident but value improve we I to positioned IFF as said, be have we and our uncertain, strengthening global our XXXX progress in build our achieve to businesses sustainable is vision, focused

seeing I'd XXXX. in me partners we'll to like to for to look and thank our achieve teams welcoming what forward IFF and

With to now like that, questions. call the I'd open for

Operator

[Operator with line from Instructions] comes Baird. Panjabi of Our first Ghansham the question

Ghansham Panjabi

call what role. EBITDA differential that by just to just you a And is the congrats relates from Erik, as Glenn, you first as 'XX a your I cited. the you fixed could low single-digit relative fiscal the basis your for it the from can highlighted back guidance, question changed give XQ volume conference on on I'm variances and year-over-year are embedded cost to if XX% us November, in sense your also and new And XX%, on sort bridge absorption segment. the apart guidance also 'XX? volumes my guess year hoping you off, of what highlight between to

Glenn Richter

Easily done asked in question. a frequently

last if indulge One a closed the are the LMC year's to half results X quarter. is end the And me, XXXX, at you'll of, and So get Savory aware at adjustments will there which FSI. with start year a I'll that to basis. it's of a of Solutions you're the be normalized divestitures,

from exchange, included previously discussed we is roughly So before, foreign not of that other million it's roughly was a of basically, And million also that's $XX X/X $XX normalized of sure which factor, That's impact. I'm standpoint. the the same, had LMC. discussed reduction. updated have view we our

like-for-like So X,XXX. that of gets basis to a

million $XXX on That mix year of is impact overlap positive this million of is $XXX for inclusive the be positive. volume to forecasted Our absorption.

on volumes call, a we higher came down our As as the were quarter that from actually production standpoint. noted fourth

that different So guided. had was we than slightly

Our net million LBK. price of that basically year the zero, is the is for $XX inclusive of

reset million pricing in than we So better Then We range number. thought standpoint. certainly in that's have from XX% about that's it a dynamics be a talk that's so that for We more the but about this thought. a the that $XX negative, year. would netted can we AIP,

lower, deals And is all one-timers is being the then reset think AIP basically all new. negative is were I the lower. known. slightly slightly the absorption So FX in of

That's P&L. of and $XXX in sort is inflation. productivity about wage million, The last items the about the $XXX million are

view. So of with that's consistent our sort X-year

than question, So $X business. circa very that year. adds the about XX% less view And is of up our think billion. of think to then the relative which of volume midpoint range functional of The our the simple ingredients, it's to to I this

about range year answers area probably gives We the the us the high-end little latter. that we most the the mentioned guidance, range bit a All and slower is X% to we've cautious, year basis, Hopefully, have why X% pause we a businesses the most that's up the beginning think growth relatively the year. ramping in X% in functional as for and in of the are the of is the of actually that that range. that other flattish the ingredients projecting to been on between and the of full the sort question. X% more that difference directionally be versus But

Operator

Spector next from Josh with line The of UBS. comes question the

Joshua Spector

-- to the so on ask wanted just wanted I I to dividend.

it's that of a been now. pretty a for it's clear I So big years been cash of think pretty use couple

is what divestment probably or the So really, now as years why maybe you looked question at timing? does as think when or the that it right mean strategy versus about next? you a Has time year X was ago anything to relates the what's changed and ago, that

Jon Erik Fyrwald

is Erik. this So

of I But entire I looked made to the now. and the ago, First our board and on did talk cut at decision go here situation, wasn't and Glenn X, the team, his all, dividend talk a ahead obviously. year to February arrive to

the think in get to investment And or a in our of sheet sheet terms timing overall balance great wise I strategy. it balance efforts it's our shape. doesn't move impact

on cash but the continue flow. our strengthening work We businesses, and focused our on even obviously, to increasing more on we're portfolio working earnings optimization,

Operator

Gunther question Zechmann with Alliance The line of comes Bernstein. next from the

Gunther Zechmann

year, this year? But your to for been role in Erik, weeks. back your what maybe also you think are for free about the in please? this a appreciate IFF have Erik, and for well. And the priorities you guidance welcome sheet, as beyond few about the for what public XXXX, when And midterm I cash lastly, please. portfolio addition, I is do flow targets? Glenn, And balance how market the think

Jon Erik Fyrwald

how priorities the our I Thank And We're balance say optimization glad to priorities part -- XXXX I sheet. that again, going business. improving back and strengthen be have should to continue are our going public My is our in profitably for strengthen XXXX, we're customers and portfolio of focus you, market better Gunther. each value, with that share, each our their with we so innovation the more work market market. for can to sure they be say, strengthen R&D bring that But importantly, the that grow business they innovation that in we so on make that grow clear to customer share business innovation each to delight them. can we

with And corporately. the then we've -- that also competition. each we're too efficient us our to keep going back effective better unit to internally of back strengthening advisers had have get to and with productivity engagement businesses on the consultants, in We our very business What thirdly, driving and will others our going We're our and customers a want serving focus amount caused then winning by to reduce and productivity be focused. and office.

I'm them on too the at but roll comment, for how we'll last up the future about the with me the I'll to of get business, on look and Glenn. terms early targets, company, and and to But we'll midterm then In for back not-too-distant that? thinking it we'll in one, do the it's you team here, by it

Glenn Richter

Yes.

of million. carryover $XXX of restructure would for of for flow LMC inclusive I Savory other million the then items. and is an this free year $XXX of that's projected and $XXX onetime another that, for million Our note expectation for sale cash taxes

million full net Reg of at we're there's $XXX year million XXX, G. $XXX flow. So cash free the But

Operator

line comes Begleiter question of the Deutsche David from next with The Bank.

David Begleiter

Erik, X Erik, role. congratulations things. the new on

in in all sales First, versus on process underway? is years 'XX, can is on And the XX% you're expect pricing pricing former you've for last the cumulative press X.X% a secondly, addition, you reports reduction pricing give the in comment basis? roughly X over to solutions achieved a forecasting you up that

Jon Erik Fyrwald

we portfolio at on one, you second, and please. going rumors. can Glenn, terms getting familiar Because I'm any I'll not but in this the into can take it. have of not we're and details we All what looking might I'm with continue optimization, portfolio sense, the doesn't first not the at at I comment make But to point, that does but business any sense is work make and a for to you and for optimization, IFF price we tell we're business our on will sell employees consider that a divesting. that

that, So Glenn? with

Glenn Richter

again, once morning, Good David.

we're pointed As cumulatively. pricings anticipating. of overall years significant reflects actually we've of price declines. reflective X X.X% XX% had out, environment the very all XX%, you of inflation of sort That is

X as And terms needed of ingredient space, functional of ingredients that I most highly pretty our it to is and the been for surgical this mentioned, of locked in in year extremely this price and we P&L give point, back. point. sort So and concentrated the where to in our at is pricing Scent the we've we're much at

pretty actually that a plan. So feels safe number relative like to the

Operator

comes question De of the Lisa next line from The Neve Stanley. Morgan with

Lisa Hortense De Neve

in follow-up year? market, the on So but also think next I question for positioned structurally? line its in the it have twofold. maybe have better direct I And grow program functional I peers? the delivery with this that, then I should is mean, and we believe versus it's with And small pricing. a or more to IFF to efficiency optimization how this line the mean, peers of really ingredients about that year, positioned actually expect how is in does

comparable negative on the reductions? come or And in to So price pricing the fragrance have your price here? same customers offering reductions peers back ingredients, pricing your are

Jon Erik Fyrwald

you part take years. at X all of looked the we I'll And the very first data clearly, question. underperformed, know. over have I've the that of hard last as

share, and going on challenged are how and are strength, very be at win, we're value is strategy driving Scent I pockets we clear food an we to innovation are their each you customer have delight to We set make grow sure But can some we example, comments. needs are make opening make to tell that businesses have productivity. going how we're what to is have is mentioned What like targeted we customers that have ingredients. in to our I of they that how the their sure that our going market sure we going profitably business

the to great like our compete markets. that of to Flavors do should drive our able as you And and with fully terrific rates margins with strong know, end, So businesses others. business or each and got Scent how businesses the we've be in end Fragrances and we Givaudan businesses? growth business,

We've business got able to in Ashland should & markets, got in and and there, and strong competitive Health ingredients, fully players, with should Kerry and growth protein others. Biosciences and In margins to be competitive solutions, markets be good a business very fully and a with and other against we've unit NovaGenesis. great ingredients compete we've very food able and be we and with good our we in challenged to markets our pharmaceutical we be very with set food fully ingredient ingredient good need got businesses,

back track. X So don't we the in last next the years we'll not across on the In we X as performed like have should. get company company a I years,

Glenn Richter

Lisa, Glenn, your second addressing this is regarding functional ingredient. question

in all backwards. to XX% business know been X part caused been you for levels XXXX, working that, across service items: missteps past As happy our last 'XX, up one, of at that major the have businesses the across right plus globe. the to getting and year entire I'm conversations, standard. service had plus, on say, number the levels basically a this we Since we've to from step

as win getting about makes over just to mentioned, pipeline We much getting be talked market. combination most picked a execution that and market, very we sales smart year retain our by and is is Secondly, of year that. product track, that. our which about We business. volume right feel what up about on product, importantly, better has last been back the sense the market in pricing perhaps We've to thinking competitive by this dramatically and

being sort has the results. Ingredients general making Erik own focused mentioned, as our more sure they really the across go-to-market And strategy. item much team, been third The around that has of

cost. it's lastly, And

the largely sits of on costs, but focusing cost been goods. So the of really that we have XX% all in

cetera. SKU fixed it's material manufacturing consolidation, So very consolidation, raw And footprint et making out taking rationalization, progress. good we're costs,

quarter-to-quarter. moving good seeing in continuing year to a flattish margins. year, this start into actually sort successive QX expansion in was are We also and of watermark. last improvements We're volume see as low we're we

doing. So we Erik been mentioned, of beginning we're lot have terms a progress to what but to in of work some as do, see we've

Operator

question next with comes from Paribas. of BNP the line Tang Nicola The

Ming Tang

a were clearly could I to just give a pick side, that of wanted fragrance XXXX. you comment and in temptation functional of competitive in on side, on more this up volume volume could terms on more topics in by And you I dynamics I in the the expect the year-on-year wondering declines mean, destocking ingredients. ingredients Lisa. addition why if just expected markets? don't on in On that whether few are asked base on improvement, in and detail headwind was price this pricing in in then bit expand your And wondering these was I you bearing guess, mind, I

Glenn Richter

questions. good very Two

is some commodities. of business. more meaningful concentrated commoditized. XX% definition, of terms Scent ingredients areas in the So those X.X%, and our areas, are addition, in more in see that pricing on of functional pricing ingredients the by Those our And deflation downward

natural. it's So

is As I making we mentioned we're of and doing reflective we're of job of very in product, previously, region, environment. sort X.X% that, by the a feel by good good sure that the competitive market

We believe year optimistic. last are second bumpy. prudent, the was given The and for the question environment. more very extremely Honestly, do regarding not just that we destocking cautious we're The We're optimistic. positive cautious. think, our positive in to momentum, us, we from quarters cautious of behind seeing I stabilization before is and most of signs. business a largely why we're move can But of we couple need

Operator

The John Mizuho. with Roberts question of comes line next from the

John Roberts

whiteboard think Is Welcome you back, when you today changes need then segments And plans? start there to cyclical problem you X-parter, at going targeting your are there's just Ingredients Sounds can to business segments. different some to productivity, a those Functional that than from through that fine-tuning do significantly if gone the left X addressed X there? Erik. were complete predecessor was it's think like and of be it? completion nearing the structural just you I but Have was more make Or on to back over to DuPont? could. you

Jon Erik Fyrwald

at Thanks, it is start But significantly than when our The a is John. the of And Functional & Nutrition was it had Ingredients let me Agriculture our then. business part responsibility years I I potential than what number ago. believe higher better of makeup one. of for back that first so -- as with DuPont was

And talking market, underperformed I think good We've that focused. of because been had very what is can that us these too many what figure types I underperformed. lots we've for businesses. many, we've think I a synergies. internally of about And to in advisers of do I think businesses I've consultants. helping lots years, you it's these to in been had We've we've around out tell

is in not very and innovation by our a market tool. the are have productive. our solutions Synergy productive with goal delighting then is way and Ingredients strategy to share approach, business, with assets our customers clear The Functional with grow our is customers synergy. with our do profitably a The for very our functions, a goal going how to we that

this potential of business. to time performance the We spent significantly our have with business the leaders. I've improve

business. progress right have business right, much fully the we when so I we're with bring in to direction, competitors, our in If sure value compete headed think a to will because our we the profitably right, Food accelerate that it and grow do Food going ingredients make the they're we ingredients very good have it and customers. further do leading we competitors and

a delight structure, win. and customers, the sudden, our but a so to P&L sure business when all organization profitably units of And is then a unit and end-to-end all clear to effective, tell in of easier accountability way is terms do the grow we levers to do and it more business that's each And share, have big I access. and winning, find fan are become synergies efficient I decisions what units I'm of the business market in powerful can become everything you no drive today, that will but that of making responsibility

businesses each and are additive our our further of our right on that ensure to going we're that the synergies So are businesses. strengthen to track,

Operator

McCarthy comes of from question with next the Partners. Vertical Research line The Kevin

Kevin McCarthy

from Erik, questions please. Glenn X welcome back. side, my

more and And was the XX% for of than outlook that the Can years. this maybe there? sustainable what you year? order And your segment in guidance cost trends are input the the Bio more is improvement baking into Health importantly, level best and margin drivers your plus into secondly, X XXXX? the rank you're Your just then

Glenn Richter

Yes.

a and think result -- had was a of good volumes. improvement the I in a for So progressive H&B that very year,

Health the actually largest business, good fourth quarter. our noted, very of As a segments one had we

Secondarily, productivity.

productivity we've driven So of price. across business. really the lot a And third, net

So there's well. business decline that question, been, to as in a in your costs input second

for us H&B. expansion we I the call H&B businesses both anticipating that XX% X so we case on got demonstrate year, range be that that are So to and that the like margin to all the for note the this EBITDA business. did our expect growth of

anticipated is are mentioned, flattish costs, some deflation. this input are be materials to raw we're and at point. as I down Energy this our down, year. seeing general, Logistics In

months about balance purchase the for through run a it reminder, a to takes sheet. X As

So mentioned, that's NetZero, a as for a I positive enterprise the That's the year. overall momentum. for

for So the thanks question.

Operator

line of comes question Alexander the from next Jefferies. with Laurence The

Laurence Alexander

end around can and in can given around and issues and productivity ROIC the reviewing possible growth? you speak IFF it do productivity around not or more profit relative more targeted pre-culture of on fill, structural exit, Is about terms mindset solutions, has for margins how R&D? and And fixes, comp the discussion business firm you to initial or impressions cooperate, operational you granularity productive more see can provide do If how forth? on your markets in Erik, XXXX delever to so you XXXX

Glenn Richter

your This first I'll Glenn. question. general, cautious on part answer is In on of outlook Yes. the pretty volumes. our we're

So as I X. flattish mentioned, to

expected So this haven't we case. we've giant -- in base our year been recovery a

been starting that's In So point. of materializing, have that kind good the absence delivering the productivity. of very we at

and efforts, in efforts we aren't opening ongoing additional to accelerating take that in As have both plan. the reflected we out underway costs Erik his mentioned comments, are

comment. second will So that my be

The Relative divestitures. earnings on profile largely the external some be deleverage, market. through gives you additional to if sense softness that the there's and accomplished deleverage so in will the offsets

our driver accomplish in of we'll We very the mentioned, path. do our As are underway, on think Erik goal. terms divestitures, deleverage and achieving activities we of which biggest feel good our we targeted will be

Jon Erik Fyrwald

the confidence And in that impressions examples great well this people being relationship, of where really give products We've a got we are, then with innovation capabilities make very and are have very consumer sure can our second me much products performing Laurence. IFF's question, their developed. spent got the on happen I the strong are that so we've largest My of initial where the people. the arguably we tremendously make consumer people our innovation-driven, in much there to company but innovation businesses, of best company. your are really capabilities we time leadership great we that each across with of world, just pockets have underperformed,

teams. ever their both meeting and Fragrance relationship, customer and with of Health Consumer I've years Scent Biosciences that the best were their the dynamic in team we And And team interactions. our XX experienced our and Products with and best my team have it was

-- and another management of I when company in the interaction with leading Europe. So had top beauty care then a

that our thing, great, great their create people are hand to same love. consumer working people consumers with products glove in And

it. and do helping And sense focused customers that bring where more company. our customers to So we so then it. just more across on to makes with collaborate more winning unit the do we the even by can customers to business We do enhance more. portfolio win being it get more win and excited to not internally focused, really it so teams need I'm We by across our

there's as do we're terms but mentioned, of well, more we Glenn Now very there are productivity, in pockets productivity. on there doing can where

production in going still really early back-office Finzel that. to very already it's but corporate and operations. Ralf our his tremendous okay, And are up accelerate efforts our they're for productivity functions. had driving going productivity team that ramping That's we're and nicely. We've but phase,

sure centers businesses and make You'll systems to and IT the activity service with more shared see more that we're efficient. effective very serving

here, to it love the I so we company There's excellence got I much will. but what across get So and see. we've

Operator

the question Citi. line Cunningham The Patrick next comes from with of

Patrick Cunningham

guide. QX the on question a Just

So seasonally you ramp productivity volume midpoint in noted nice some XXX, weak at And a throughout the in about XXX it's year. quarter.

that low annualizing the of guide. is above even So end the

And you help understand just us your just Pharma then a expect destocking Solutions that conservative? guide to small you follow-up, see do So if is business? within can the of end

Glenn Richter

I'll QX, the exception is the Pharma Generally, second of the destocking Pharma the second industry, with the year. given half largely. half Yes, XXX. In the reasonable And very for we've logical second. to started with XXX just we to a do of start say part an as year structure, seen everywhere reasons, late destocking but done guide, basically, with it's of of Pharma. it's margin done we think, this anticipate the I'll be

pretty but cautious We go have volume than to good started is the the sort off side, the the for slightly year on just we generally Generally, year. volume be quarter. as average through the we lower of the want

a impact the that's there, of bit So little Patrick.

Operator

Sachs. with of line Samuelson The the Adam next Goldman comes question from

Adam Samuelson

another to then cash free those? billion previously understand of clarity Are on Can are flow slide deck by no and you of that. deal-related bridge you flow for think cash want guidance just to size to And charges, of down finally, I of make be question $XXX on It of cash kind EBITDA million And I more growth year-on-year? because longer year. provide $X $XXX investment. and flow sure 'XX. couple with even the free line? acknowledging of to million would Glenn, investment. time some flow the to timing Can deleveraging cash said I A Second, references calendar Xx the wanted the had you last in been end you targets. the of on committing any that questions clarify just One, those high-return what

Jon Erik Fyrwald

Adam, and start, can Glenn add I'll then on. Thank and you,

First aligned get with net Xx a of agree of to target as with leverage am a I debt target all, fully and to.

year-end I in stupid get like of there that tell we're see not that going goal the good us 'XX, at But to think 'XX. I make 'XX. we're can do to I'd but very 'XX, get in to end towards the you, value going destroys least significant to progress by something there

high-return win. I'll we're and them Scent, of to, just going to terms markets. alluded many Health markets, are been growth that in business we and & In strong in and great great and to chemistry call markets. invest reinforce biological units it are Flavors I've investments These Biosciences Fragrances, in

Glenn Richter

Yes.

start with a the So take you top the reconciliation from let flow I'll through cash me EBITDA. And is good question.

our the billion. So midpoint of $X guide is

expense, transaction-related. of taxes $XXX forecasting out or of interest them Reg cash $XXX million roughly back includes million. the are That later. G I'll We

capital target is cash growth And negative. a part the billion of of overall full in sort to slightly mentioned, net we business. just this then $X.X-ish get an As being little have cautious other items $XXX year up a the working miscellaneous We million year. We're operating of have others, CapEx the of of flow there's about we terms

to a invest our XXX of trying free to note, business gets of -- That $XXX as well. year. would miscellaneous about other $XXX million. taxes Reg of I sorry, largely And million bit I'm as taxes. G in other Reg the us growth a little X deal cash I of We're Reg there's for G about flow, items costs, $XXX G of million then $XXX there's that largely items, million of mentioned, transaction, but including

those that capital. note on of down million. flattish you slightly this flow year. So free $XXX million Other gets last year. around, to We're out shift of is adjusted -- Adam, had for to an cash say, back We biggest if I'd sort and year working you the improvement being conservative net year-over-year $XXX

Operator

line comes Mike of Sison with question The Wells from Fargo. next the

Michael Sison

Since last to relative a But And its light to on get that path. been Pharma, do in quarters Ingredients back? a over couple for then quick been can of to Glenn. pretty lot have X weeks. business sore the only businesses seen been sort you've a just particular get in going that Erik of chemical welcome you're on has here several Anything Erik, Functional historical back margins where turning awry you to sure think go business? terms of follow-up your years a a of clearly, back. What's of here. And different sort has reasons. for I'm business? spot The playbook work around

Jon Erik Fyrwald

question. Thanks, the Mike, with start and Ingredients I'll Functional

I having helping the by business terms customers. elements achieve bring and to delight they opportunity very lots consumers. a multiple customers the customers, delight what all, It good have Functional solution business. of is of like want food value products to of Ingredients can And First bring goals with in their value you to set, of to

-- right make are here going is cost think the is that profitably going value create strategy, the portfolio, growing is are I share, competitive And How driving So focused assets we're and that that that product make we right this, -- innovation. our on very the terms way, value then are make are to clear our value. to that costs can we are we both productivity me, so deliver competitive, we be do we're in bring very and sure that do sure in and market how on to competitive of consumers the have our spending we we the we're in that to excuse with money right our we what working the what sure business. on this really our on team is how customers

clear all goals to too execute And We've ball, is much as consultants, be focus, and that tied of real those internal sure against in to solution innovation, improve willing this taken will to too we're the many well and innovation directions. XXXX significantly different that do, get going said off set. I make in great before, I needs are the We we've beyond. the they're think what eye that listening business lots part trying to what goals, pay customer our for that got can of

Glenn Richter

voice. hear your to good Mike,

quarter you little Regarding fourth as quarter-to-quarter And a could demand. lumpy based volume Pharma, quarter. be a this on typically know, business lower is I mean,

margins the are the So always quarter. seasonally for compressed fourth

it's look that. So difficult to at

the from to initiatives of the to further. And the on of to do We drive margin plan. the other continue go-forward expect business We are standpoint. approximately margin mid-XXs tons a strength very and year this the optimistic from there's EBITDA be in up business this

the of last of the what seasonality reflective So seeing fundamentals mills, I the is think couple of over quarters, the business. function you're idle destocking, not just but

Operator

Astrachan Mark next Stifel. the The from question line comes with of

Mark Astrachan

lots keep I'll but questions, it here. guess to I narrow try of

that all lot to from into hear you So of they? better as IFF do to but from get you think about the arguably was to to how scenario today's I DuPont the was of go-to-market businesses created And thoughts you're still just guess, that an initial on negative. Erik, there a not At integrated acquired easy is holistically that of I meaning sort pretty considering how strongly provide the even still plus X suite that Is a just business. suggest investors in this that a think you, where of it, follow-up possible? corollary are customers. flattish the we businesses? are kind pre it's How years that was all all the strategy? a assets peers. your legacy of it suggest products it's comparisons still least nearly volumes, do merging the share, is Glenn. about equally, The would together. of and idea X you effective to difference competitiveness losing then a IFF Frutarom. Is And divest can relative that of across one business How closest those the standpoint, would that stark And a for

Jon Erik Fyrwald

were I Biosciences they that than saying the are together Nutrition believe the IFF plus business was by the opportunity that start The separately. DuPont, it than separately. potential, and I'll stronger Okay. is greater historical

combination that believe I very in strongly. So

Protection executed seen this a the been Crop ago, Seeds business well. I business. the great And happen was years almost to said haven't great I've on When businesses mushed Protection and got X as synergies versus Syngenta a Now, before, it before. having had we Seeds together focus the in Crop I and

losing there here that units were X IFF. we the losing margin share, the businesses do, way, we And see and out we clear synergies. clear were synergies trying same made that. lot business the competition. regaining going those had the a were as started as to that, because did that by been business We when we're business they at thing as the units, have found grew I soon We units, end-to-end versus and what to

As not Biosciences, at we're really or performing businesses at good Food Ingredients, will increase, they're the Health synergies Scent, at when well, & at decrease. Flavors, Fragrances those

the ability together different goal get well and customers to I other, the be The that, extremely got the each but have synergy, will you help businesses not When very themselves help performing can tool. assure each strong. to help have will to combination a the other do to businesses that increase, more we've synergy we by

Glenn Richter

Mark, question. the for thanks

right. You're

as to about stack, over I X% If of still we've both between think by have the probiotics, you I strengths, performing doing and be performance business including sort you XX%. Scent would over, pockets said look XX% XX% X.X% this business of enzymes, note, would negative core hit X%, in X-year the if past, cultures a But at start the business the average the you has our year. very of business, well. is H&B, about of well. we think Flavors X-year

ingredients business. the Pharma the been that results about has of the on overall It's overall we've drag which talked functional is is well. XX%, other the actually really a doing

in And it's terms line and with is stack, you positive. of view if think XX% would that, submit the -- So you separate have different you have in that clearly I a very X-year nicely competition. I

also focused year, of note too again pretty month start some have the the that until Certainly, markets a the in opportunities, is For significantly. it's is said, to we to back. early coming will consistency prospects Erik terms but the part, once month that improved realistic. above knock range more better, encouraging, XX%. by volumes to but on be that see anything we of wood trying on There's as most we're perform I it's call

question. So I appreciate the

Jon Erik Fyrwald

cost we're I The be effective supporting those that XX%, And the only more the we've more to lower win businesses. overheads and to are improvement and got -- looking thing in that, the the there is to and the for corporate for in both businesses them, that would businesses going to even opportunity. significant work add is at support with businesses with

going Food do of Ingredients around, So significantly course, but improve great there in company and opportunity, even performance, we're the to it. the rest is it turn of to to

Operator

The line of next of from Bank America. question Salvator comes with the Tiano

Salvator Tiano

a a I clear spending or X- R&D in competitive becoming a but because XXXX, X-year also trying for the, details. some say share, that the grow bit And few as comment questions a you the ask spending, to -- you XXXX of SG&A the gain focus. it but more not guess, and price that -- couple reposition business little CapEx to you of that's essentially, the strategy allow about to negative X.X% that wanted on shift market let's being because in would to mentioned you're made from share. part I next market And years, more gain necessarily a and the few What pressures, basis? on mean will

price volume? and between the are how trade-off this So thinking you strategy in about new

Jon Erik Fyrwald

I think spend is And R&D start. significant I'll So our today.

units if industry we and can efforts I it customers that think with needs better I what leaders we and fully connect very ensure it to highest are the versus spend, industry other have. you at business the look the think our value -- R&D it's but that better, leaders, competitive customers to do aligned focus

And look I that more get we I areas Fragrances, and of where On capital need will to have think spend particularly that in in Flavors significant we and win. and So R&D. there are have spending where feel the sure that capital where of to we out can have. spend strengthen similarly make good spend more very to it and capital we R&D, need and that the Biosciences spending level the optimized that we're places expenditures on it's more returns, the are we're returns we we expenditures, R&D Health but have reasonable, and businesses at

Glenn Richter

would that. add I And Yes. to just

we're in we up CapEx, a which CapEx, XX%. mentioned, our is supporting be and going core really is about As growth up year-over-year X% products core on to operational

range we a X% grow in sales around the business. to right the terms of and from need maintain what of So CapEx we're in

Operator

time. There are at questions this no further

call So I to would like concluding to the the remarks. team for back hand

Jon Erik Fyrwald

IFF. the that this Again, team want saying you got thrilled to thank I'm for got a just to at joining call at We've Well, morning. IFF. Great. great capabilities. finish be I We've by tremendous

full can our past, We our make customers completely that the haven't businesses we our all the performed potential market tell what unleash of doing businesses synergies leading sure profitably kind to I the delighted we're committed we do with and our make sure their to you. each you, that Thank but right that, potential making the in of efforts, drive and And in margins. of pleased, share innovation. that grow bring we with and by productivity through enhance very

Operator

today's conference for you participation. concludes This call. your Thank

your You may now disconnect lines.

International Flavors & Fragrances (IFF) 21 Feb 242023 Q4 Earnings call transcript