IFF - Earnings call transcript Q2 2024 | International Flavors & Fragrances Inc.

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Operator

At this time, I would like to welcome everyone to the IFF's Second Quarter 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 Call. Second IFF's to XXXX Conference Welcome Yesterday financial results. issued a announcing our press release afternoon, we A the website at copy our ir.iff.com. on of release can found be IR be being Please live call that replay. is note and this will available for recorded

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

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

their Today's Fyrwald, and me the on which we our comparability. respective exclude is With presentation set believe press measures, CEO, is Glenn issued Erik these affect yesterday. Executive Business non-GAAP President, A Transformation we will our financial those reconciliation release items to non-GAAP that GAAP the forth include CFO measures Richter. in today Vice that of and Officer, call measures financial

remarks with call With you end. questions have We now may will any take the and I Erik. to to then turn at over would like the that, begin prepared

Jon Erik Fyrwald

and the I'm update we refresh Mike, during brief implementing across call, thank hello, framework Well, the quarter. all organization. positive in solid a second performance to our a strategic we provide on are Also, and today's the everyone. we and you join today making you, in strategic will share progress excited business-led our are IFF delivered

over members. facilities customers IFF pleasure of had thousand sales months, last travel to to that X/X and X team and our met our our the several have over great of of with I've together represent Now many the

and team get been customers to IFF on to needs our moves great make leadership our special performance. and I've better makes strengthen serve to strategic improve company and tactical our to what able feedback

today potential and and resulting behind better I'm And our for more entire to our very making strategic of changes the the customers. pleased rallying for IFF need the to unleash We is have innovation we that future. leading refresh are listened the team to IFF bringing at make

over Now I'm we solid our is our first in on IFF high productivity single with margin delivered last growth increased On performance sales second the digits delivered in track. growth is and volume results & beginning year, year, Nourish, quarter, X. Health to last have great IFF building EBITDA improvement half is quarter's it comparable momentum quarter. volume driven pleased another through initiatives. basis, and led operating growth by a and and and the with Slide This significant Biosciences by Scent, of expansion and the adjusted a and the better XX% on a

optimistic ahead, XXXX. remainder we looking are of the Now for cautiously

raising performance solid the our are for we and Glenn outlook date this our Given this year. about full more sales operating in minutes. to a both and this adjusted few speak year, guidance EBITDA will

encouraging take customers while encouraging results. healthy have productivity continue that steps bringing to to and yielding on refocus we innovation, it's Now are leading taken driving IFF the

right we making got I've the do. satisfied that advancing before, about are we've are We confidence and potential. refresh, solid we a to But more but IFF's are progress on spoken work I've toward lot business-led got the achieving full not track

Slide to X. Moving

environment, the structured peers. underperformed and to sheet effectively complex on last a update had balance to company our on focus X our to was fast-moving would on and businesses core our underinvest constraints divestitures. our strategy the work I a quarter, last refresh led did like The company operating the in give model. and across our relative we progress on I organization as navigate challenging we years, to IFF focused As a brief to business-led has not and

of quarters have to several taken had our decisive back growth now get on have actions as track. businesses we We

focus, position innovation be customer forward people, our strategy excellence. our key will driven an Our X powerhouse as by and pillars: our moving our operational

We success, drive we will over market our growth share to engage while time. people profitable deliver empower customer and

continue and applications needs our the in in being will products that while develop quality future, safety, relentless our customers' sustainable our We are to new with in to also commitment all the and aligned efficiency now operations. and

close promote several Pharma operating our and announced greater Solutions, taken end-to-end of already which refocusing an track have first We performance. is of divestiture and better pivot on to XXXX half accountability business-led including model and that steps to the will resetting in model, the still our toward operating

employee positive We are improve to hard working are seeing engagement and also results.

building lean Furthermore, companies. a best-in-class to are across and Functional executing product versus focusing where to capabilities quarter, with each corporate define exist plan Health strategic business units of support units refreshed gaps These and to Scent & our as for include expertise and X-year collaboration. Ingredients development. last biotech and closer strategy innovation enhance speed, our having they turnaround close we plans are leveraging Flavors and functions a agility Biosciences' business platforms mentioned and our on Also,

we Scent and businesses to & as to as we such prioritize growth Health investments. R&D Flavors, Biosciences, commercial Now started investments our value and increase have highest already

our and including next digital increase how to same serve capacity believe and these the transformation, We we that investments lead implementation. we with providing generate profitably. the sales us years ERP At investments, efficiency time, continue bolster growth of opportunities several to plan incremental improve customers will strong will us targeting our CapEx for X% to returns our accelerate to about

mind, it with raised at progress which are for the year to to growth targets drive achieving. businesses. achieve now Glenn? for and for Lastly, our our closer are over And that significant to as continued our we track results, we of across each continue value we guidance committed I'll to on pass creation growth in profitable quarterly we look are delivering demonstrate the Glenn a our shareholders.

Glenn Richter

us joining all today. for thank Thank you you, Erik, and

X% billion to noted, our as and As the in of by grew comparable nearly revenue H&B quarter. sequentially Scent, each every IFF across on second improve growing with Revenue currency-neutral performance basis strong a Erik Nourish, continued high below digits Volumes business. had single a just quarter. increased $X.X

strong volume to adjusted productivity increase and initiatives quarter. from the a Our XX% together EBITDA comparable operating in growth gains contributed in

XXX XX% to quarter improved operating Our a off first XX.X% margin adjusted third time first the basis comparable the on by strong over and points EBITDA of basis, quarter we building were a XXXX. since

segments. quarter consistent lower second double-digit improvements I'll Bean Nourish of a Flavors, comparable and both led was by by on Ingredients growth modestly Nourish an basis. the X, deeper of adjusted period. Slide a in high and the increased profitability dive currency was in of single-digit operating Functional and to in declined well onetime volume Functional and comparison comparable Kernel productivity ago sales volume Ingredients with to expansion. growth as into we XX% inventory was with Turning Flavors year strong Both write-down X%, increase plan. This growth quarter each sales as in improvements the driven neutral strong EBITDA our bit year-over-year consecutive as volume by in a delivered gross demonstrated offset pricing, Locust The margin pricing. the

probiotics. in Fragrance strong quarter in a of year we gains. and wins $XXX growth achieved a on revenue currency-neutral growth were volume operating profit Fragrances a double-digit strong, digits, Fine and increase and EBITDA led on up comparable in led basis, increased a the and both adjusted sales to delivered new Health, a In from Biosciences growing sales H&B Net $XXX for X% quarter growth. we in in million, also Fragrance mid-single all strong XX% million, XX% comparable $XXX strong operating basis. uptick performance up EBITDA ago. & led of million, delivered noteworthy currency-neutral with remained comparable comparable XX% by by Ingredients Scent, a a Consumer Health businesses adjusted and

million. to with in revenue Lastly, unfavorable volume our we with mix items. plan Pharma onetime $XXX Solutions in segment Profitability growth declined through returned line managed this as and of

$XXX Turning X.X% or was Slide year-to-date Cash $XXX CapEx sales. flow operations while this to quarter, totaled million million XX. roughly of from

up million we half the as expect we the ramp year. For be will the approximately that second CapEx $XXX in year, of

cash from through a $XXX cash quarter of ago our QX million free in cash year $XXX the in sequentially $XXX an last approximately quarter, increase the of and increase reported from equivalents the paid and million, end in dividends million. position million Our We totaled flow $XX and period. significant totaled $XXX million second

to we working of or to as credit continued credit continue of driven which also the occurred divestiture, from to adjusted make compared to capital our debt the our debt performance, This XXXX. ratio our goals completed second yielding $XXX half our which with achieving closure over quarter. first It's and reduced to IFF the net expect Solutions, the in that progress Pharma Xx of following at deleveraging by EBITDA in of toward quarter to gross including by first Ingredients of committed important target of well EBITDA net X.Xx to operational a end note we the was last end, management quarter. Cosmetic completion divestiture as improved at of Xx early quarter, the the be remain less solid achieving million adjusted debt

year. to given the and of and are we performance like both in turn our consolidated operating ranges, raising financial I'd XX, Slide EBITDA stronger-than-expected our half sales On where guidance for to 'XX, the our adjusted operational outlook first

of net $XX.X expectation We the majority to now our sales year, are be in billion portfolio growth $XX.X that than half rates growth half. range of billion, continue at of in the volume albeit our the lower will first the expecting across the reflecting to back

and full range assumption of volume under results to a to for to we now demand the cautious achieve Given balance our outlook up for X%. mixed indicators this the X% we the by companies Operating relative X% X% year. of expect recent the announced growth, previously of remain economic the in year, from to CPG late,

It second in of our This budget also operating relative the strong $X.X greater given On up also previously communicated a profitability performance a raised annual billion guidance. of compensation spending to incentive the of we and billion, business versus we performance second line, of $X.X guidance be bottom our strength should $X.X noted year from to our view with level half in to factoring are incremental range adjusted previously increase billion EBITDA our the the reflects related $X.XX range stated half billion. consistent that half our to first reinvestment. the from of

in identified that 'XX. to will Specifically sales the innovation of rates, of team strategy growth our the and results expect part investments focus and will will closer XXXX exchange given. to on as range Based a execution yield within our current impact market to X% Refresh, has our adverse that FX in we R&D be strategy, business development, accelerate X% that X%

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

it Now I'll remarks. turn back for closing to Erik

Jon Erik Fyrwald

Glenn. Well, thank you,

As of at pleased improvement throughout solid performance I team's year first over am year, especially a the with top as the call, shared it significant lows. prior the of represents our the the half I

to I moving this We to this that and meeting attractive by to team we've recognize I'm made great market's the goals investments on behind shareholder right towards advantage results, progress And thank the energized to to resulting differentiate goal. believe we including track focus world desire increasing returns to our every achieve by share rallying of the strategy. needs much advance lot we and progress our making our far want our company. making year, and our so businesses, IFF-er we be more the we full win and the especially delivering of the Already, profitable passion help have are customers, time. I driving marketplace in deliver better teams our around the our customer of because our do IFF meet customers want same over in for these innovation-led and refresh We a to positioned taking to tailwinds will yet and are potential progress we this strategic entire high-growth growth. on to the focus are efficiently continue in relentlessly the

Functional As and remainder are will executing market our year, in And steadfast actions remain we're create bringing including a we the near-term strong look IFF. ahead products Ingredients I'm the initiatives. I innovations to simultaneously across new with we operational taking to business, will a while executing the confident priorities stronger and turnaround of productivity the the strategy

call with for now Now I would the that, open to like questions.

Operator

[Operator the Josh comes Instructions] with from Spector question Our UBS. first of line

Joshua Spector

a quarter congrats First, on solid really second here.

X second wanted half. is I pieces first So of in the the EBITDA ask to really related here around sequencing

a pretty versus implied XQ XQ then in seasonal step down is material XQ step the your So and down.

say expected, view And to So maybe moving reflection bit were do that's volumes, driving comps get in that largely the related to The lift than to that you so harder through, the easy of, around clearly like XQ it that's XQ? maybe is up volumes seems is would sequentially stable, it the versus better but in is think, I half X% X% X% what flowing your around pretty second a a a little stronger bar was X%. then just but beat.

you seeing are side might what missing? So the that be on volume we

Glenn Richter

to thanks with the EBITDA for start question. your and come Josh, then the questions. back I'll one second we'll

more We half second growth fourth volume expecting modest specifically the of the are in year, quarter. in the

QX. X% a year-over-year about forecasting are We uplift flattish and QX in volume in

X%. was last a sequentially year, negative and reminder, negative negative XX%, negative X%, As X%

end from the cautious continues year. the few be economic to ago. And a the well on very, a very aware, sort secondarily, combination indicators a, you're overlap now probably of, somewhat are more last anemic. negative than then months are as were And they We consumer QX, of

So seasonal. half that's a second portion is is what's half, that the really in driving versus expectations. The volume of revenues sort big EBITDA lower the reflection second first of of half

second is about expect in year, million guide notably than is first in our We that revenue the million the less on lowest. of always which year half $XXX based $XXX our will we seasonally of basically, the be the quarter, the our fourth in that half

that half we in drives $XX half. versus investing the of million really incremental half will are back to add million the the majority year. $XX I about that also the So OpEx of in second the the vast first change

performance to this Given the reinvest growth to year, to we 'XX. 'XX accelerate want begin and for

equation. the of piece another that's So

Operator

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

Ming Tang

for more It and Glenn. and quite more could through how those and R&D actually forward And from you quantification as also few if we feed CapEx some feeds of to some gave incremental next well? specific that years 'XX last you and examples around color few I of the OpEx expect should helpful 'XX? answer contribute commercial to or that extrapolate was give terms on on nicely wondering a this capacity. there Could the you in investments you give step-up, efforts going on your

Jon Erik Fyrwald

Thanks to years, as Great. to the our 'XX, And R&D, and million we're businesses. enhance increasing beyond. includes, Scent And company way, that question, Glenn Flavors in R&D investment very about in spend we're in both OpEx, we're the Health impact of mentioned, fragrances $XX & biotech in Biosciences, out by excited million 'XX Scent into year for that accelerating have our Nicola. and that with and flavors the coming That come and $XX increased course, putting our Biotech the capabilities to this new and -- will Flavors. transformation to the includes, with

want Obviously, more and our We leadership we continue to are a R&D position. for area, We're Flavors. naturals, leaders and also strengthen in increasing great find the for to trend both towards naturals. market that Scent to

And in Ingredients commercial our we're products we're Functional sell business, Also capability all of portfolio. adding higher-value Functional businesses, X better in service our technical capability. adding those Ingredients more we that to have across

of always On me, have that businesses, Biosciences, capacity, the all Biosciences, high-growth Flavors, -- side, the of we're high-quality CapEx Scent all ensure OpEx markets product all the in those we Health on our & lines. world -- for to around but especially or reliable, adding and across supply excuse those Health for X & very customers

Thank years in we very significant grow that that you. business making aggressively units. to and continue those up continue we'll ensure now investment to the coming we're to So ramp profitably

Operator

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

John Roberts

when X, that tell the Erik, this Slide Or fully in reorganization on be where quarter. new your replaces is has Congrats model you predecessor operating end-to-end or started, model on place? will you us fully the the place? can it in are

Jon Erik Fyrwald

produce and say clarity cleaned R&D, energized Yes. making that is a that the and the operations, I each executed R&D been from the that of drive for the of of our into together it are in those functions all that that take starting our really through uncertainty execute strategies very They're being And I to getting And put and it units. would able operations think teams can of up. while has the then the very starting drive the feel there of innovation to very The And the to to progress, people. lot terms the energy by the I in benefits seeing And place. ability the good that. we're the a will We're -- well ability business received Thanks been elements to what take do John. has business and to gears by and feel -- and strengthened support benefits, commercially. commercial improvements all clarity to and set fully decision-making, their strength in in being of then you and it strategy the from creation get to to commercial excited and tell working business get question. by but it being we're

to the the to competitive The as to more businesses to of the where where less And clarity it win, the sure put where that comes units, clarity -- of we productivity we interesting which business on increases also, make that collaborate us is thing margins. where business the productivity to do units, they each from then we gives effectively. investment, unit, need the better ability we're get enable investment cost-wise need focus you put drive need and that having other more on to also We're of what strategy we're able that's and we a focused really X-year and with to that on investing. by and plan, way, here differentiate where their between more

that of is the the where where so less driven now And businesses they lots with and that that corporately more complexity much leverage and consultants customers sense. and programs collaboration, makes much from synergy and the of lots synergy corporate where know

X have end X units. good And by the the making we'll and when we're all units progress. business that's the So reporting start year, well, of we'll operating

Operator

Our with line Ghansham Baird. of from next Panjabi comes question the

Ghansham Panjabi

want to on more just entail Does relates CapEx company then is it in with of the Erik, been I a to And the resources the back an roughly billion to it refresh piece, that strategic R&D. acquisition. to more $X.X of sales? overlay also the as CapEx spending as has accountability? DuPont specific repositioning R&D Or spending percentage go post

as sort X% you're the back, sequencing right you forward? CapEx that adding growth So basically your comments was look back to about as maintenance about and that going sales CapEx? of think just to go Is to you CapEx now

Jon Erik Fyrwald

Yes. Very the Thanks important. for question.

me CapEx. Let with the start

we -- growth before, have with investments we well the we operate up make strategies, our of So need spend the that to the some to that strategic ambitions sure but we making growth our were more with them we to need that now clarity units, realize know basic, quality. with also plants reliably in we have clarity standards business that our on investments underinvested to are foundational to we high have

foundational. on of got need the we that we've deliver those growth that kind and growth investments that ERP make sure that that, of targets. make top some facilities have to targets, are we're We are aggressive to we have But to going on --

will to those grow to percentage sales think full the On Biosciences Health increase potential. we our benefit get of the we I that R&D Scent Flavors businesses are their R&D as in spend we continue spend, business really our of important and businesses. it R&D & we spend and will as that a ensure be and strengthen the those businesses increasing And in absolutely

that Functional towards sure it got and enough heavily the and that track to right competitive returns. CapEx, with the continue Ingredients are leaning good On take which business side, position on set. competitive making very, And it the part making on of to we're Each get When focused has consolidation we've around manufacturing got talk empowered we're involve cost its have sure each the and driving and way. business our able business costs we're will initial but about each the across And we of you. productivity our that it's by within then we productivity we've get also right our we'll productivity some more then that some corporate and company. lean that the progress of pushing to turn fully will And a of to finally, productivity high that's very that, business strengthening corporate the functions that corporate improve a support and lead productivity invest units unit those on of now for Thank leader talking innovation business competitive to be units. we're margins making functions. about effectively sure that units make has efficiently in on functions facilities, and

Operator

question next Our of Owen Kristen line the Oppenheimer. from comes with

Kristen Owen

we if of some know to could the wanted of the unpack I volume QX. each in businesses behind drivers

understand restock between incentives pricing end-user Just talked mix demand, the of help about. channel that and/or you've us some the

Glenn Richter

question. the no you the What for actually consumer. we're incremental improvement in seeing thank is Kristen,

everyone I Bev Food the what's tracks are happening, and HPC neither know sort any strengthening really or but market. showing So in of

believe, things. So is our we growth, a function of volume X

in at We would destocking in pretty restocking the lagged think note First first the volume of Pharma the it year. done other we the a of that forward. largely this improving the bit. that last half destocking we know, lack I so at end end significant, as see year, trajectory do were you done prior Pharma's of time. see Pharma businesses, was any All of the all, from so this year, going point not at largely of quarter the for

believe And of function by board. And generally the things. of we we across or sort better of competitors really We segment. we're at terms in closely volume vis-a-vis it's performing a our are where performance also very pleased track X key our entire

year, call innovation the our pipeline, lot to to mentioned, One actually back secondarily, to pipeline business. then special Erik for increased We win And have very and new of spend the has as Ingredients rebuild really a relative our business business pipeline. ability is, our would focus, our third, I energy the innovation we've intensity strongly a win back business. and come Ingredients some on a and experienced of of deflation that, as this is that start played launched pricing X%, the actually into in efforts reinvesting had business at remediation well. that's we quarter of reminder, that based Ingredients second out has the very year X% and in the the year. We last the Part about out the sales our volumes in accelerate taking business alone. plus

So confident continues pause that's a we terms not us characterize. we're of can we how the the sort in in give of consumer. but strength what we're of Again, control, to seeing lot market because just

Operator

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

Patrick Cunningham

some is update cash the upward, any the in to guidance should any of incremental and there and guidance for items OpEx Given but CapEx, monitoring free we year there? increase revised flow be

Glenn Richter

Patrick, thanks for the question.

still are year guiding $XXX of full million. We

part reflect million. $XXX we it $XXX upped our was higher were in year, the to our quarter, guidance to in As started million the of previous end when we a the guidance. last We reminder, towards pointing

costs, be cash $XXX We million cetera. of to Those the are make taxes, a position items. with fees, in basically guidance. to related flow that, million capital our support it. mentioned, note free implementation that right growing, G of includes inventories et to as transactions, higher $XXX Reg continue would higher earnings are roughly to I the largely up we as are the businesses sure to There'll slightly working have be are expecting

guided $XXX taking very Reg with which more G the that for as year, we out, is for adjusting the million previously what So like with consistent cost we're well.

Operator

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

Michael Sison

outlook. and quarter nice Guys,

you driven In volume new nice single-digit terms the XQ. the in a how of I recovery think has Ingredients, high strategy Functional recovery? had

In just of thoughts addition, EBITDA And bit for margin? share up the it second a improve? Is little meaningfully? half on Can your Did pricing Functional Ingredients. is you then it lower. details on

Glenn Richter

nicely expectations. Yes, the trajectory Ingredients, to Functional progressing is against EBITDA performing relative gross our actually not Mike. line profit only very well, the and Thanks, top is

So the normalizing quarter basis, year. a write-off for on including LBK alone, for second like-for-like the last

first consistent about consistent that, we XXX full and going we with the in where year to margin, So from the if be. well you is which normalize up gross points of for were as terms basis is quarter think

EBITDA As had high last the dropped mentioned business single-digit margin. we to year,

Our basically been mid-teens. goal it has to get to

recovery set the really are well the Generally, cost be last the low on performing structure global manufacturing begun to initiatives the second of teens of our the XXXX. We've in of very innovation going pipeline, begin some footprint. of implement half to well. tracking is kick next year they're initiatives The are volume focused fully to but in, in year, recovery, to sales the We those this year.

where sort progress So, date. against Mike. get to Thanks, business, are. a another full a we have back we to lot But but We of of good work put we to actually year effort to have do. still think lot of that plus sort of the business

Operator

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

Adam Samuelson

and detail profitability from to steps of earnings the returns get needs where be off a within that Glenn, the more it that question last a and the business to keying little and and just tangible on some more answer, margin of Ingredients perspective. Maybe Erik, Functional improve

the strategic remarks, plan refreshed kind in alluded there. I you of think a a prepared to

is that lower about So talk mix about to to some kind and Is different on your really you manufacturing business facility peers you the consolidation there was to you performance and space? at a end very in that challenging of which 'XX, -- can markets against intention how of think And that categories? your XXXX, it's -- lower look in across product costs? kind been compares nicely up volume

Jon Erik Fyrwald

the question. Thanks Yes. for

business getting progress transforming good on back we're the healthy. and it think I making

still back we're that played going make ahead supply, out the serving they that's by moves market about enabled goal some productivity to We with productivity, margin well. the improvement goals that have the before that us to about still of has making expected, had of We've reliable But customer-focused, market sure our margin very we enabled price it them -- well. that in and volume had and as as has achieved combination resulted some about in business. was serious sure significant achieve we're recovery us with which making customers price that to well, others actually that have -- the done giveback, aggressive as realize and some

So we're track. very much on

of ensure got our able work the is us well, the operating for what business. so which it to lot for Functional what that that a that hard that plants combination that business, the segments, to of plus efforts, on of on what volumes really got working which margins still focusing But competitive productivity driving have tells we've we've a want making customers, are Ingredients where costs room focus we sure getting very we our We've on a geographies we're aggressive the a and clarity progress. and strategy in It's been commercial to approach are go. target customers,

another that and believe team Glenn got they're year to be, but back the plus business As we mentioned, we've where the proud of I'm should that very, get very to making. progress

Operator

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

David Begleiter

sustainable I in quarter, is on business. that to growth your strong share in you can in and probiotics what's second the performance how improving Health been Erik, return working know performance With you've growth? the driving

Jon Erik Fyrwald

the Great. question, David. Thanks for

has well. is and increasing I approach, health nicely. particularly there's on capability. also And gut know, our -- is is would a very First market finished focused you which say of all, working significant which think emphasis we commercial And I and format up added that U.S. we've great. recently the healthy as lot health on rebounded picking

thought there Health at areas to the in I've other IFF. and But we're a the the you, doing turn years. And that's home, bode got strong actually helpful way, will And and like coming a were in exciting job then out by to now went that that of really because has team better, have great IFF because which some really great and left they they Our tell good bringing for happening some some but to previous there IFF making back come salespeople think well pipeline in things now that were back come it's got very well. that done finally, years we've performance is our back is business starting what I progress. current as

Operator

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

Salvator Tiano

trends some or volumes. firstly, back I ask bunch to considering impact of sales in they mentioned your of get volume. to Fragrance to CPGs discounting the a you about a moving recent want to on may products are they how are couple And

volumes So SKUs said And year? the that? this another COVID, in about customers boost and has on more you hearing lot could post your of by innovations been this your runs And they're of are give now. about the other so a perhaps there steam helping hand, return after customers far? has slate How done product risk in is results your innovation been with XXXX And, new out that which important and focus? have your is any this this next

Jon Erik Fyrwald

Obviously, -- innovation. of want CPGs like growth very customers And seeing we're flavors in And with or a content one do. to examples what's doing the for working modulation innovation. drivers really strategy what we're Flavors strong same terrific business, profitable for the the significantly with through enhance about they just their health reduce lower of is that's and ability but love the is levels, all our because salt And couple and desire happening we sugar sugar that is our way question. well. key is salt the that the our drive way we a for to you more and from gets of and Thanks of most better their growth strengthen there. to And is our us health hearing to taste, which

the are our in the to that Fine emotions want the also, example, companies working trigger with have. to fragrance to enhance business for customers, fine We ability Scent Fragrance

these cost, products, of very them TikTok on products, to with our happen. you of Algorithm example product And about emotions as But Tilbury, brings helps to of and her a to for AI triggers we cocoa google, relaxation, tool, well consumers. to IFF her of IFF drive are innovation, online another seeing product a extremely SCENTCUBE for high. that bring with Charlotte which together are you is talks go this And team you other how and she out Charlotte search products an great range used we're prices productivity, energy, Just our with exciting different -- Tilbury, innovative was doing to product wanted which it another come that line one slate whole brings such brings develop products. romance, if make another then joy, product brings develop that fragrances

then our with extender cocoa in take helping have lactose-free recently launched company, the are We same exact Flavors is lactose at they the significantly businesses capabilities and into it and amount is of a that our exciting having lower taste other our fiber. the Biosciences and in think we companies same very global I have that where one use, food China cost. reduce cocoa out really they a And developed large turn but milk example -- enzymes

and China, that so calorie lactose-intolerant big healthier you you as many you. is in lower know, are so And many, for there market. And lactose-free milk consumers get a

off. ability bring on that great really their this is our focus work innovation to to innovation drive them So with and helps growth paying our customers profitably

Operator

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

Mark Astrachan

into think you had like of clarifications. July I something go versus outlook outlook over One, XQ? on? something solid those It I in you the sight to I'm that have theorizing, XQ year. it it your things X year, Is so the guess the are guidance off like I you of from there curious balance be that we sounds weaker line on you to that just about to X the starts. XQ going has just resets is XQ. year, as any consider gotten comp? to next think incentive year, one-offs just volume how next then this are guess And disaggregate mentioned pieces, into

Glenn Richter

in Mark, we thanks the little this for time. visibility very questions. have QX, point at

good very quarter a the the bank. to is Obviously, the a view July third we view have good and We have in book. September. And towards current then month

a this at point to give sort So any not time direction there's of on in data lot us of QX. points

overlapping are year. Beyond, an prior from we improvement

So dynamics do that consumer the are think again, in flattish. the they year And market. we do versus restock we're either. We going see that until be not the We will to happening market restocking see don't firms of a CPG negative demand think They're conservative. in X%. QX negative strength last X% basically suggests end that

strong actually all out really The those begin -- guide prior $X.XX book XXX% year, go question. that million next businesses, our as aggregate so year we normalized an you to very and back quarter but as emerge. One-offs That's accruing make just that is because the across us to billion, a other relative into about payout of significant of incremental most items cautious far takes that's probably until $X.X of million the just Thank standpoint. So P&L. share that order next to year basically our most sort and always That's and on get annual we fourth significant a of plan, $XXX factors puts the be of very AIP. is of includes there's within significant for good item all -- where plan performance variable incentive from to versus you. are, the are $XXX billion see this that by think we $XXX our million the year will

Operator

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

Kevin McCarthy

EBITDA and continue progress good will it the in Pharma though appears pretty the quarter, upgrade on of balance some the deal. as and pending the likely that sheet with most making You're course,

sheet repaired, things so if would were Are ahead, in to other if speak. a to a question like to not Erik, were when mind that time strategically my you'd that fully be, capital So have jump we constraint? to is you the balance do there

Jon Erik Fyrwald

Scent all absolutely, have next as companies digital both would And capability, and see capacity Well, products continue & with opportunities commercial capability We R&D, And opportunities bring looking collaboration lot then of the we year to us thanks Biosciences and enough useful business, that complementary significantly bolt-on to for a world. returning to businesses. our the and always expand especially to opportunity our technologies at CapEx plans organic really sell with around foresee strengthen question. well make sure that be to capabilities, I sometime are also acquisition our our for opportunities Health Flavors that in investments, as us.

already areas. So we in will more proactive working and our these we're get strategies -- you'll us see on

Glenn Richter

Yes.

point, anything as focus emphasize of provide either question. is we small complementary is I a a cetera, acquisitions given continue think to our We're progress business. feel large out the also the this be to it's strength, prioritize jaded et phenomenal history like a that would to say, place. way And in organic. technology, on important completely the bolt-ons, really to a the Erik relative as portfolio to I'll have going acquisitions mentioned, geographic At we here

Jon Erik Fyrwald

and like way are integrated the immediately, take company's seen done if years over here. positive clearly years a of had performance which you've in that in bolt-on backwards XX as well, And at thoughtfully, carefully gap the distract I that last enhances fill think us experience, it my acquisitions Yes. with you a and doesn't look strategic last doesn't the lot we've and X CEO, happened that's a a experience

Operator

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

Lisa Hortense De Neve

question. one and follow-up one have I

on ERP on over improve this also risks investments, ERP whether the there's detail the to you impact customers And including can please years? how some please position local And Can share regional follow-up particular. and your your type the I will one system? And really So just is on the program, multinationals how can digital the in they of are implementing or execute you CapEx sorry, one have last system, how the exposure has versus provide more. you second and any organization? And of your couple customers share these multinational the evolved moment? dynamic to question versus at with and customers

Jon Erik Fyrwald

Great.

very an examples. and first first just of step-by-step you to the also risk approach and a minimize that implementation. of you ERP give couple just minimize investment wasted tell careful are to and take And is question taking that me very we I'll let So

called corporate getting our better which system, our in done fine, the step enabling very steps We've less already going for us implementing in first already. less the coming week as going additional Workday and cFIN, something was then done corrections. place. So and our next implemented system development That's better this finance called far, to planned in people it's so and just ERP and better do The years. step and closes with we've improvements, the we'll and the was systems. past HR do less X complexity It's in

out manpower, minimum and required do spread the by So it the step to we're make step well on to doing the that with risk. spread and it sure we out focus investment it

Glenn Richter

We're If comments I X could converting. just is, currently will be so of we X SAP. incidences add on

if We will. them you next probably will into pipe, single a over X the be converting years

ERPs, be be have done. approximately one going we very you also legacy the important actually over is million It's if will $XXX a Erik's We leveraging the already will. business to that to basically one of separated launch over of a the add we're so we sort year on That's basically ago X, to of ERP to period and our pipe, before the comments way IFF with X-year out get Pharma that of conversion. we divestiture to little on want our control of microbial get

good million year it's about Pharma's over once done, think So next half shape $XX in a about a second years. the this year we'll of the and X be as the

Jon Erik Fyrwald

locals, tell our and really closely we product do is about multinationals, do the global innovation I'm to on capability co-creation world on been and locals representing XX% about we talking that our can what work with customers, how your regionals, need you, innovation, at it, really, of of to over met customers just well, do we I probably regionals and tap X/X, of top-to-top and lines. with better with I would I've excited and I've And people over revenues to and of global us, our with all second many their Now around together our them the about way strong. major into more look what desire to the people even discussions question, work multinationals, very

what market, what the as that's or so of serve our we locals, has our but ability works innovation what core in enhanced ability them multinationals, our to the of powerhouse, our will the business globals we of is around regionals our capability, the for and our and rates -- large -- our commercial I and better and which as with regionals drive of we to And growth the increase each history more excuse core units. them that the of a part markets the serve believe customers enhances a focus world, of on better understanding do our also ahead as me, strategies the part it our

Operator

Our line the Lieberman next comes from of with question Barclays. Lauren

Lauren Lieberman

quarter So you guidance have XQ. given X quick and questions. forward One was guys EBITDA and historically sales for just you for didn't

policy of So in just I some gross beyond mentioned and deflation bunch could bridge -- on walk half? through you detail think expansion points productivity we gross on the should raw margin in helpful, should if basis progression any we approach? too. was those just benefit? that the was was slides. expect know productivity could a materials are And we curious, kind back then of how the of I change programs the to about get maybe the in we like a And LBK, But in just be gains to margin margins, a secondly lapping XXX the in release,

Glenn Richter

QX. provide Yes. Lauren, we actually for did outlook

the line for billion quarter. $X.XX top we $XXX So EBITDA, $X.XX million to million guided then $XXX to of billion. relative And to

terms of bit say flattish running time. see see significant are point from to to as second to half. consistently this a that it's this in solid improvement the But versus half first year. second we LBK other a the and first our of -- of much do outlook that's where material half the quarter-to-quarter the volumes by the forecasting and quite have downside a the the we of driven difference really like to little So gross are deliver gross of that's progression won't going still Relative terms upside so margin second in half relative be net generally so be productivity the the we for quarter. for nor of basket We for first half. half to And year-over-year in don't up we half margin on year The because let's are upside absorption the of continuing is raw any at programs versus the the in balance more significant in the first items. year, the

that's hopefully, So helpful.

Operator

comes Jeff the Zekauskas line from Our question JPMorgan. with next of

Jeffrey Zekauskas

cost your a your Two you was into do be second were questions. volumes second in volume there quarter? sold July? they down would your goods diminishment on sales. question X% your And down the sequentially How they Was to of compare know How again, I said are of July? half... materials raw much that flat the Lauren's down? to how flat to once in growth try Or

Glenn Richter

yes. Sequentially,

So I'll answer.

concentrated Our materials that's versus to in in in around the net of the Functional basically the the largely price is year Ingredients raw half equivalent total first year-over-year. prior, X.X% reduction in business,

use in reinvest. Functional largely So to concentrated we that's Again, basically that Ingredients.

material the quarter. started standpoint. we a So would well. of businesses the relatively off good very a are raw year-over-year note have July other that start I flat, from

However, their the with the be tighter tends month X strong month inventories to very our this We the Jeff, in and been softest. diminishes is at our the a is third. believe the very, consistent the last just and sort third quarters, managing of first pattern from has of of end the quarter, is outlook, then customers quarter. Generally, it second this

quarters. that's couple a of So as consistent we've July, in seen what been but in start pattern terms of good a last good, with the

Operator

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

Daniel Rizzo

Rizzo Dan for on is This Laurence.

Just question. one

certain noncore? Are where them can sell or businesses mean, we making maybe divestitures? them I them improving there because potential just you more they're So you're so can any expect

Jon Erik Fyrwald

the Functional other our also on focused and strategy turning performance and focus each the our of well. right Biosciences, is rates around on business are Ingredients total doing Scent for and Fragrances, Health of our & well, businesses businesses. our of through now Flavors enhancing that And refresh business. We're this those going and divestiture We Pharmaceuticals performing today, growth

as we're and 'XX performing pharmaceuticals, But totally for separate before, we on we'll if an and give strategy. now, mentioned right you change well our focused update strengthening any in I As XXXX there's in beyond.

Operator

questions There are registered time. this at no

I'll remarks. So pass back to call Erik the over closing for

Jon Erik Fyrwald

and the improvements to that 'XX, today. our deliver further only not but I'm everybody me but just thank and Yes, half, to 'XX team not our deliver strengthen today for making of innovation beyond. focus second IFF productivity and joining in call to very strengthen we're our proud our let customer for and only the the

day. have thank a you IFF and interest great in So for your

Operator

Thank participation. That concludes today's your you call. for

disconnect now your may You line.

International Flavors & Fragrances (IFF) 7 Aug 242024 Q2 Earnings call transcript