Q4 2021 International Flavors & Fragrances Inc Earnings Call
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Speaker 1: At this time, I would like to welcome everyone to the IFF fourth quarter and full year 2021 earnings conference call. Our participants will be in a listen-only mode until the formal question and answer portion of the call.
At this time I would like to welcome everyone to the I S. S fourth quarter and full year 2021 earnings conference call. All participants will be in a listen only mode until the formal question and answer portion of the call to <unk>.
Speaker 1: To ask a question at that time, please press the star 1 on your telephone keypad. If you would like to remove your name from the queue, please press the pound key. Participants will be announced by their name and company. In order to give all participants an opportunity to ask their question, please press the star 1 on your telephone keypad.
I ask a question at that time. Please press star one on your telephone keypad, if he would like to remove your name from the queue. Please press the pound key participants will be announced by their name and company in order to give all participants an opportunity to ask their questions.
Speaker 1: We request a limit of one question per person. I would now like to introduce Michael Devaux, head of investor relations. You may begin.
We request a limit of one question per person I would now like to introduce Michael Deveau head of Investor Relations you may begin.
Speaker 3: Thank you. Good morning, good afternoon, and good evening, everyone. Welcome to IFF's fourth quarter and full year 2021 conference call.
Thank you good morning, good afternoon, and good evening, everyone welcome to Iff's fourth quarter and full year 2021 conference call.
Speaker 3: Yesterday, we issued a press release announcing our fourth quarter and full year 2021 financial results and outlook for 2020.
Yesterday, we issued a press release announcing our fourth quarter and full year 2021 financial results and outlook for 2022.
Speaker 3: A copy of the release can be found on our IR website at ir.ifs.com.
A copy of the release can be found on our IR website at IR Dot Dot com.
Speaker 3: Please note that this call is being recorded live and will be available for replay. I ask that you please take a moment to listen to the recording.
Please note that this call is being recorded live and will be available for replay.
I ask that you. Please take a moment to review our forward looking statements.
Speaker 3: During the call, we were making forward-looking statements about the company's performance and outlook based on the current state of the business.
During the call we are making forward looking statements about the company's performance and outlook based on the current state of the business.
Speaker 3: These statements contain elements of uncertainty, which we have laid out on slide two under the cautionary.
These statements contain elements of uncertainty, which we've laid out on slide two under the cautionary statement.
Speaker 3: For additional information concerning the factors that can cause actual results to differ materially from our forward-looking statements, please refer to our cautionary statement and risk factors stated in our press.
For additional information concerning the factors that could cause actual results to differ materially from our forward looking statements. Please refer to our cautionary statement and risk factors contained in our press release.
Speaker 3: Today's presentation will include non-GAAP financial measures, which exclude those items that we believe affect comparability.
Today's presentation will include non-GAAP financial measures, which exclude those items that we believe affect comparability.
Speaker 3: A reconciliation of these non-GAAP financial measures to their respective GAAP measures is available on our website.
A reconciliation of these non-GAAP financial measures to their respective GAAP measures is available on our website.
Speaker 3: Please note that we will be using combined historical results for the fourth quarter to find this three months of legacy IFF results and three months of NMB results and for the full year to find this 12 months of legacy IFF January to December and 11 months of NMB February to December in the both 2020 and 2021 periods to allow comparability in light of the merger completion on February 1, 2021.
Please note that we will be using combined historical results for the fourth quarter defined as three months of legacy ISF results and three months of MMP results and for the full year defined as 12 months of legacy <unk>.
January to December and 11 months of F&B February to December .
2020, and 2021 periods to allow comparability in light of the merger completion on February one 2021.
Speaker 3: With me on the call today is our Chairman and CEO , Andreas Fibig, and our Executive Vice President and CFO , Glenn Richter. We will begin today's call with our prepared remarks and then take any questions you have at the end. I would now like to turn the call over to Andreas.
With me on the call today is our chairman and CEO , Andreas <unk> and our executive.
Vice President and CFO , Glenn Director, we will begin today's call with our prepared remarks, and then take any questions. You have at the end I would now like to turn the call over to Andreas.
Speaker 4: Thank you, Mike, and hello everyone. Thank you for joining us today. Before we dive into our results for the fourth quarter in full year 2021, I think it's important to acknowledge that this has been a transformational year for IFS.
Thank you, Mike and Hello, everyone. Thank you for joining us today before we dive into our results for the fourth quarter and full year 2021, I think it's important to acknowledge that this has been a transformational year for <unk>, we continued to make tremendous progress amidst the global complex.
Speaker 4: We continue to make tremendous progress amid the global, the complex global operating environment. With a world-class team and an unmatched portfolio, IFF has become a global leader in high-value ingredients and solutions for the global food, beverage, home and personal care, and health and wellness markets.
Global operating environment with a world class team and an unmatched portfolio ICF has become a global leader in high value ingredients and solutions for the global food beverage home and personal care and health and wellness markets.
Speaker 4: IFF is a significantly larger, stronger and more diversified organization than when we began our transformation several years ago. The enhanced scale gained through our combination with NNB makes us an even more powerful, innovative and trusted partner to all our customers.
<unk> is a significantly larger more diversified organization than when we began our transformation several years ago and then.
Hence scale gains through our combination with NMB makes us an even more powerful innovator and trusted partner to our customers.
Speaker 4: On a personal level, I must also reflect on what has been a tremendous and highly satisfying journey leading IFF. Together we have taken a number of strategic actions that have transformed IFF into the category defining leader it is today. And I'm also incredibly optimistic about IFF's future. The company's leadership team going forward has the right expertise to lead IFF's next chapter of growth and excellence in execution.
On a personal level I must also reflect on what has been a tremendous and highly satisfying journey, leading iff's together, we have taken a number of strategic actions that have transformed <unk> into a category defining leader. It is today and I'm also incredibly optimistic about <unk> future.
Company's leadership team going forward has the right expertise to lead <unk> next chapter of growth and excellence in execution.
Speaker 4: I and the entire IFF team are pleased that Frank Clyburn will join IFF as our Chief Executive Officer effective February 14.
I and the entire team are pleased that Frank Claiborne will join <unk> as all our Chief Executive Officer effective February <unk>.
Speaker 4: Frank brings extensive experience leading complex global businesses and overseeing large-scale integrations. He is a proven operator and will enhance the team's focus on execution to benefit our customers, teams and shareholders. It has been a privilege to lead such a talented global team and I know that with the recent appointment of both Frank and Glenn, IFF will be in good hands.
Greg brings extensive experience leading complex global businesses and overseeing large scale integrations is approved them operate and hence the team's focus on execution to the benefit of our customers teams and shareholders.
It has been a privilege to lead such a talented global team and I know that was the recent appointment of both Frank and then either we'll be in good hands.
Speaker 4: We also recently announced the appointment of Barry Bruno to IFF's Board of Directors as an independent director. Barry is a welcome addition to our board as he has significant experience leading innovative consumer brands that will benefit all of IFF's stakeholders as the company executes its strategic and operating priorities.
We also recently announced the appointment of Barry Bruno <unk> Board of directors as an independent director various a welcome addition to our board as she has significant experience leading innovative consumer brands that will benefit all of <unk> stakeholders as the company executes its strategic and.
<unk> priorities.
Speaker 4: It barely joins a board, eight of which are new to the IFF board, within the past year when FRANK begins next week. That consists of proven executives with deep experience leading global organizations, overseeing transformative merger integrations and executing business strategies across a diverse set of industries module.
Barry joins our board eight of which are new to the ISS board within the past year. When Frank begins next week that consists a proven executive with deep experience leading global organizations.
Seeing transformative merger integrations shooting.
<unk> business strategies across a diverse set of industries.
Speaker 4: On today's call, I will begin with providing an overview of IFAS's full year 2021 performance and discussing the progress we have made so far on our integration.
On today's call I will begin with providing an overview of <unk> full year 2021 performance and discussing the progress we have made so far on our integration.
Speaker 4: I will then turn the call over to Glenn who will provide a detailed look at our fourth quarter financial results.
I will then turn the call over to Glenn who will provide a detailed look at our fourth quarter financial results before.
Speaker 4: Before we conclude today's call with a question and answer session, then we'll also speak to our outlook for 2022.
Before we conclude today's call with a question and answer session and then we'll also speak to our outlook for 2022.
Speaker 4: I'd like to begin on slide six by reflecting our strong performance for the full year 2021. IFS financial results in 2021 reflect the strengths and durability of our expanded portfolio and the exceptional dedication of our teams.
I'd like to begin on slide six are reflecting a strong performance for the full year 2021, I address financial results in 2021 reflect the strength and durability of our expanded portfolio and the exceptional dedication of all of the teams within the challenges of today's global operating environment. We.
Speaker 4: Within the challenges of today's global operating environment, we delivered strong sales calls across our business divisions, including meaningful recoveries in the segments most affected by the pandemic.
Delivered strong sales growth across all business divisions, including meaningful recoveries in the segment's most affected by the pandemic.
Speaker 4: For the full year 2021, IFF delivered 11.7 billion in sales, representing 10% growth or 8% on a currency neutral basis, consistent of very strong volume growth and modest pricing contributions.
For the full year 2021, that's delivered $11 7 billion in sales, representing 10% growth or 8% on a currency neutral basis consistent of very strong volume growth and modest pricing contributions.
Speaker 4: Like so many companies now, persistent inflation and global supply chain challenges pressured our profitability margin. Yet we achieved 3% growth in our combined adjusted operating EBITDA.
Like so many companies now persistent inflation and global supply chain challenges pressured our profitability margin, yet we achieved 3% growth in our combined adjusted operating EBITDA.
Speaker 4: Glenn will cover these topics in greater depth, but I want to note here that we are taking significant actions to best position the business and that evolving macroeconomic environment including significant pricing action.
Glenn will cover these topics in greater depth, but I want to note here that we are taking significant actions to best position the business, Amit evolving macroeconomic environment, including significant pricing actions.
Speaker 4: I've continues to operate with a very strong financial foundation, having delivered 1.04 billion in free cash flow or approximately 9% of our sales driven by robust cash generation.
<unk> continues to operate with a very strong financial foundation, having delivered $1 4 billion in free cash flow or approximately 9% of our sales driven by robust cash generation.
Speaker 4: Given our strong financial position, we continue to make significant progress towards meeting our deleveraging target, having already reduced net debt to credit adjusted EBITDA to 4.1 times.
Given our strong financial position, we continue to make significant progress towards meeting our deleveraging target having already reduced net debt to credit adjusted EBITDA to four one times.
Speaker 4: We also delivered meaningful synergies in connection with our integration initiatives. Importantly, we have outperformed our cost synergy targets for year one, post close of the NMB merger, and our ongoing focus on execution positions as well to further drive synergy realisation and productivity improvements.
We also delivered meaningful synergies in connection with our integration initiatives and importantly, we have outperformed our cost synergy targets for year, one post close of the NMB merger and our ongoing focus on execution positions us well to further drive synergy realization and productivity improvements.
Speaker 4: In 2021, we also made significant strides to optimize our portfolio, including the successful divestiture of our food preparation business and the announced sale of our microbial control business, which we expect will be completed in the second quarter of 2022.
In 2021, we also made significant strides to optimize our portfolio, including the successful divestiture of all food preparation business and the announced sale of our microbial control business, which we expect will be completed in the second quarter of 2022.
Speaker 4: Once our microgrid control sale is complete, the combination of all of these two transactions will generate approximately 1.4 billion in gross proceeds.
Once all my corporate controller sale is complete the combination of all of these two transactions will generate approximately $1 4 billion in gross proceeds.
Speaker 4: Growing IFS to more rapidly deliver the balance sheet. As we continue to progress with our integration objectives, Frank and team will explore additional opportunities to optimize our portfolio, driving greater focus on the core parts of the business and enhancing shareholder values through rapid e-leveraging.
Growing ipass to more rapidly delever the balance sheet as we continue to progress with our integration objectives, Frank and team will explore additional opportunities to optimize our portfolio driving greater focus on the core parts of the business and enhancing shareholder value through rapid deleveraging.
Speaker 4: For IFF, 2021 was filled with exciting achievements and meaningful change that continue to propel us forward and solidify the importance of our business within the global supply chain. Our business is delivering strong growth as an indispensable partner to our customers. And while we are operating in a challenging environment, our leadership team is taking the right action to position our business for the future.
<unk> 2021 was filled with exciting achievements and meaningful change that continue to propel us forward and solidify the importance of our business within the global supply chain. Our business is delivering strong growth as an indispensable partner to our customers and while we are operating in a challenging.
Environment, our leadership team is taking the right actions to position our business for the future. We are delivering on our commitment to boldly reinvent deliver consistent execution and transform our ability to reach and partner with more customers around the world.
Speaker 4: We are delivering on our commitment to boldly reinvent, deliver consistent execution and transform our ability to reach and partner with more customers around the world.
Speaker 4: 2021 was a foundational year and one that I have no doubt that the company will build on as it accelerates into the future.
2021 was a foundational year and one that I have no doubt that the company will build on as it accelerates into the future.
Speaker 4: Now turning to slide seven, I would like to walk through the regional sales dynamics underpinning our results for the full year 2021. I'm pleased to share that we saw strong growth in all four of our key operating regions.
Now turning to slide seven I would like to walk through the regional sales dynamics underpinning our results for the full year 2021.
I'm pleased to share that we saw strong growth in all four of our key operating regions.
Speaker 4: In North America, we achieved 8% growth across nearly all segments, led by high single-digit growth in health and bioscience. In Asia, sales increased by 9%, led by continued double-digit growth in India and China. Newer, send and pharma solutions all performed particularly well in Asia, with strong growth in momentum throughout 2021.
In North America, we achieved 8% growth across nearly all segments led by high single digit growth in health <unk> Bioscience and Asia sales increased by 9% led by continued double digit growth in India, and China Newish send in pharma solutions, all performed particularly well in Asia with strong growth and momentum.
For all of 2021.
<unk> has achieved 11% growth in Latin America region with double digit growth across nearly all countries. Our north division delivered strong double digit growth was held some bioscience incentive businesses growing in the high single digits.
Speaker 4: I've achieved 11% growth in Latin America region with double digit growth across nearly all countries. Our newest division delivered strong double digit growth with health and bioscience and 10 businesses growing in the highest single digit.
Speaker 4: Our EME region also delivered strong sales results with 9% sales growth driven by the double digit growth in fine pregnant business. EME was also bolstered by strengths in our unrushed business which saw significant growth led by food service.
Our EMEA region also delivered strong sales results with 9% sales growth driven by the double digit growth in fine fragrance business.
<unk> was also bolstered by strengths in our newest business, which saw significant growth led by foodservice.
Speaker 4: Moving now to slide 8, I would like to discuss our sales performance across IFF business segments that contributed to our overall strong growth for the year.
Moving now to slide eight I would like to discuss our sales performance across business segments that contributed to our overall strong growth for the year.
Speaker 4: For the full year, Nürshchichif currency noodle sales growth of 9% was broad-based strengths in our flavors, ingredients and food design businesses.
For the full year normally achieved currency neutral sales growth of 9% was broad based strength in our flavors ingredients and food design businesses.
Speaker 4: Health and Bioscience delivered 6% current to nuclear growth in 2021, primarily driven by strong performance and home and personal care, animal nutrition and culture and food enzymes.
Health <unk> Biosciences delivered 6% currency neutral growth in 2021, primarily driven by strong performance in home and personal care and animal nutrition and culture and food enzymes.
Speaker 4: SIN also delivered strong 8% currency neutral growth led by fine fragrance, consumer fragrance and ingredients.
<unk> also delivered strong 8% currency neutral growth led by fine fragrance consumer fragrance and ingredients.
Speaker 4: Pharma Solutions achieves 2% currency neutral goals driven by demand in our industrial business, while we continue to see headlines related to ongoing limited material availability and logistical constraints.
Pharma solutions achieved 2% currency neutral growth driven by demand in our industrial business.
While we continue to see headwinds related to ongoing limited material availability and logistical constraints.
Speaker 4: Now onto slide nine. I would like to focus on the underlying dynamics driving segment performance. For Nourish, consistent strong performance included double digit growth in ingredients. While our margins were impacted by higher costs of raw materials, EBITDA increased 8% from strong volume growth, pricing actions, and a continued focus on cost management.
Now onto slide nine I would like to focus on the underlying dynamics driving segment performance for north consistent strong performance included double digit growth in ingredients, while our margins were impacted by higher cost of raw materials EBITA increased 8% from strong volume growth pricing actions.
And a continued focus on cost management.
Speaker 4: In health and bio-science, strong roles in home and personal care, grain processing and cultures, and food enzymes were key drivers.
And health and Bioscience strong growth in home and personal care grain processing and cultures and food enzymes were key drivers.
Speaker 4: Higher costs for raw materials and logistics remain the challenge, with an adjusted operating EBITDA margin of 26.8% in the segment.
Higher costs for raw materials, and logistics remains a challenge, which is adjusted operating EBITDA margin of 26, 8% in the segment.
Our sand division benefited by particular strong rebound from last year in fine Fragrances. In addition to continued solid performance in consumer fragrances and double digit growth in cosmetic actives.
Speaker 4: Our center vision benefited by particular response we've borne from last year in fine fragrances, in addition to continued solid performance in consumer fragrances and double-digit growth in cosmetic actives.
Speaker 4: Adjusted operating EBITDA grew 11% as margin expanded 30 bps led by volume growth, favorable mix and higher productivity.
Adjusted operating EBITDA grew 11% as margin expanded 30 bps led by volume growth favorable mix and higher productivity.
Speaker 4: And finally, in former solutions, we saw significant customer demand and double digit growth in the segment's industrial business. Global supply chain issues, however, remained an overhang for 2021 margin performance.
And finally in pharma solutions, we saw significant customer demand and double digit growth in the segments industrial business global.
Light chain issues, however remain an overhang for 2021 margin performance.
Speaker 4: Moving now to slide 10, I'm very pleased to share that our full year sales results exceeded pre-COVID levels, which is particularly encouraging for the year ahead. As previously outlined, sales growth was consistent across our business segments, reflecting the strengths and resilience of our expanded portfolio and IFS position as an essential partner for customers in critical industries around the world.
Moving now to slide 10, I am very pleased to share that our full year sales results exceeded pre COVID-19 levels, which is particularly encouraging for the year ahead.
As previously outlined sales growth was consistent across all our business segments, reflecting the strengths and Brazilians of our expanded portfolio in iff's position as an essential partner for customers in critical industries around the world.
Speaker 4: It is clear that IFF continues to deliver enhanced value to our customers as a result of our merger with NMB and the work we are doing to strategically integrate our businesses and focus on execution. Simply put, we are a stronger business today and our customers recognize the unique value we bring as a trusted innovation partner.
It is clear that <unk>.
Continues to deliver enhanced value to our customers as a result of our merger with NMB and the work we're doing to strategically integrate our businesses and focus on execution simply put we are strong our business today and our customers recognize the unique value we bring as a trusted innovation partner.
Speaker 4: Let's move to slide 11. I would like to reiterate our strong progress to deliver synergies in connection with the chemotherapy combination.
Let's move to slide 11, I would like to reiterate our strong progress to deliver synergies in connection with the NMB combination.
Speaker 4: In 2021, we exceeded our year one target of 45 million to deliver approximately 60 million in cost savings. This includes approximately 20 million in savings in the fourth quarter.
In 2021, we exceeded our year, one target of $45 million to deliver approximately $60 million in cost savings. This includes approximately $20 million in savings in the fourth quarter.
Speaker 4: Revenue synergies also were a modest contribution to top-line performance with a projected pipeline continuing to develop.
Revenue synergies also were a modest contribution to top line performance was a projected pipeline continuing to develop.
Speaker 4: Execution and operating discipline remain the top priority for our leadership team, and I'm pleased to see results that reflect this commitment. With that, I'd like to turn the call over to Glenn.
Execution and operating discipline remain the top priority for our leadership team and I am pleased to see results that reflect this commitment with that I'd.
I'd like to turn the call over to Glenn.
Speaker 5: Thank you, Andreas, and welcome everyone. Thank you again for being with us today. As Andreas highlighted, 2021 was a strong year for sales growth, including a strong fourth quarter finish.
Thank you Andreas and welcome everyone. Thank you again for being with US today as Andreas highlighted 2021 was a strong year for sales growth, including a strong fourth quarter finish looking more closely at our consolidated fourth quarter results.
Speaker 5: Looking more closely at our consolidated fourth quarter results, IFF generated greater than $3 billion in sales.
Generate greater than $3 billion in sales, representing a 10% year over year increase on a currency neutral basis, our third consecutive quarter of double digit growth, primarily driven by double digit growth in our health and Biosciences division as well as high single digit growth across our nourish.
Speaker 5: representing a 10% year-over-year increase on a currency-neutral basis, our third consecutive quarter of double-digit growth.
Speaker 5: primarily driven by double digit growth in our Health and Biosciences Division, as well as high single digit growth across our Nourish, Scent, and Pharma Division.
SaaS and pharma divisions.
Speaker 5: As with our full year results, our fourth quarter margin performance continued to face inflationary pressures, much like our entire industry, which offset positive volume growth, solid price increases, and the benefits of synergies and productivity.
As with our full year results, our fourth quarter margin performance continue to face inflationary pressures.
Like our entire industry, which offset positive volume growth solid price increases and the benefits of synergies and productivity.
Speaker 5: Early in the fourth quarter, we recognized a significant escalation in inflationary pressures, and as a result, we quickly mobilized to prepare to implement significant pricing actions across all businesses to protect overall profitability. I'll discuss these actions as well as our efforts to accelerate productivity and operational excellence when I discuss our 2022 outlook.
Early in the fourth quarter, we recognized a significant escalation in inflationary pressures.
And as a result, we quickly mobilized to prepare to implement significant pricing actions across all businesses to protect overall profitability.
I will discuss these actions as well as our efforts to accelerate productivity and operational excellence when I discuss our 2022 outlook.
Speaker 5: On the next several slides, I will briefly dive deeper into the fourth quarter financials of each of our four business segments.
On the next several slides I will briefly dive deeper into the fourth quarter financials of each of our four business segments.
Speaker 5: Turning to slide 13, I'll begin with our Nourish segment, which experienced both a solid quarter and overall performance in 2021. In the fourth quarter, Nourish achieved 9% year-over-year sales growth on a currency-neutral basis, driven by strong volume growth and price increases. Our flavors business in particular realized strong growth with increased sales across all regions.
Turning to slide 13, I'll begin with our nursery segment, which experienced both a solid quarter and overall performance in 2021.
In the fourth quarter nourish achieved 9% year over year sales growth on a currency neutral basis, driven by strong volume growth and price increases our flavors business in particular realized strong growth with increased sales across all regions.
Speaker 5: Ingredients grew by strong double digits due to increasing customer demand, and both food design and food service also drove growth for Nourish in the fourth quarter.
<unk> grew by strong double digits due to increasing customer demand in both food design and foodservice also drove growth for nourish in the fourth quarter adjust.
Speaker 5: adjusted operating EBITDA declined slightly due to inflationary pressure.
Adjusted operating EBITDA declined slightly due to inflationary pressures pressure on profitability occurred despite strong volume growth increased productivity and strategic price increases in this segment.
Speaker 5: Pressure on profitability occurred despite strong volume growth, increased productivity, and strategic price increases in the segment.
Speaker 5: On slide 14, our health and biosciences division delivered 4th quarter year over year sales growth of 13% on a currency neutral basis. Led by double digit growth in health, microbial control, animal nutrition, and grain processing.
On slide 14, our health and Biosciences Division delivered fourth quarter year over year sales growth of 13% on a currency neutral basis led by double digit growth in health microbial control animal nutrition and grain processing. Additionally.
Speaker 5: Additionally, cultures and food enzymes and home and personal care each grew at a high rate of 100 percent increase.
Additionally, cultures, and food enzymes and home and personal care each grew at a high single digits against strong year over year comparisons.
Speaker 5: Our adjusted operating EBITDA increased to 4% due to volume growth and higher productivity, while margins face pressure due to inflation and higher logistics costs.
Our adjusted operating EBITDA increased 4% due to volume growth and higher productivity, while margins faced pressured due to inflation and higher logistics costs.
Speaker 5: Turning now to slide 15, our SENT division continued to perform well and achieved strong growth in the fourth quarter, delivering 6% year-over-year growth or 7% growth on a currency neutral base.
Turning now to slide 15, our scent division continued to perform well and achieved strong growth in the fourth quarter, delivering 6% year over year growth or 7% growth on a currency neutral basis.
Speaker 5: This performance was supported by a continued rebound in fine fragrances, which saw double-digit growth driven by new winds and increased volume.
This performance was supported by a continued rebound in fine fragrances, which saw double digit growth driven by new wins and increase volume.
Speaker 5: Our consumer fragrances category delivered single digit growth against a strong high single digit year ago comparison.
Our consumer fragrances category delivered single digit growth against a strong high single digit year ago comparison.
Speaker 5: The ingredients business continues to contribute to the success of the overall segment with double digit growth in fragrant ingredients.
The ingredients business continues to contribute to the success of the overall segment with double digit growth in fragrance ingredients.
Speaker 5: Despite solid volume growth and favorable mix in the business, sense adjusted operating EBITDA growth was affected by higher costs of raw materials, which we continue to take action to mitigate.
Despite solid volume growth and favorable mix in the business.
Adjusted operating EBITDA growth was affected by higher cost of raw materials, which we continue to take action to mitigate.
Speaker 5: On slide 16, our pharma solutions segment delivered year-over-year currency and mutual sales growth of 9% from 2020 as a result of volume strength and price increases. Both our core pharma and industrial categories contribute to our strong performance in the quarter.
On slide 16, our pharma solutions segment delivered year over year currency neutral sales growth of 9% from 2020 as a result of volume strength in price increases both our core pharma and industrial categories contributed to our strong performance in the quarter.
Speaker 5: For pharma solutions, adjusted operating EBITDA and margin was also impacted by higher raw material and energy costs.
For pharma solutions adjusted operating EBITDA and margin was also impacted by higher raw material and energy costs.
Speaker 5: We recognize the challenges the segment is experiencing through the current market environment and macro supply chain constraints, and are optimistic that as a global situation recovers, we will recognize the full potential of farmers solutions.
We recognize the challenges this segment is experiencing through the current market environment and macro supply chain constraints.
We're optimistic that as a global situation recovers, we will recognize the full potential of pharma solutions.
Speaker 5: Now on slide 17, I would like to review our cash flow position in progress in delevering.
Now on slide 17, I would like to review, our cash flow position and progress in deleveraging for.
Speaker 5: For the full year 2021, we delivered strong cash flow of over $1 billion and are on track to meet our deleveraging goal.
For the full year 2021, we delivered strong cash flow of over $1 billion.
And are on track to meet our deleveraging goals.
Speaker 5: 2021 CapEx was $393 million, or approximately 3.4% of sales, as we made strategic investments in the most attractive segments of our portfolio. Overall, our capital expenditures were lower than originally planned, in part through the slower implementation of projects due to some vendor delays and a continuation of the COVID environment.
'twenty, one capex was $393 million or approximately three 4% of sales as we made strategic investments in the most attractive segments of our portfolio.
For all our capital expenditures were lower than originally planned in part due to slower implementation of projects.
Some vendor delays and a continuation of the Covid environment.
Speaker 5: We also paid out $667 million in dividends to our shareholders in 2021.
We also paid out $667 million in dividends to our shareholders in 2021.
Speaker 5: From a leverage perspective, we continue to make substantial progress toward achieving our feed leveraging target, finishing 2021 with 4.1 net debt to credit adjusted EBITDA ratio. IFF reduced gross debt by 124 million to 11.4 billion versus Q3. And we finished 2021 with cash and cash equivalents of 716 million.
From a leverage perspective, we continue to make substantial progress toward achieving our deleveraging target finished.
Finishing 2021 with $4, one net debt to credit adjusted EBITDA ratio.
That reduced gross debt by 144 million to $11 4 billion versus Q3.
And we finished 2021 with cash and cash equivalents of $716 million.
Speaker 5: We remain confident that ISF is on track to achieve our deleveraging target of 3 times net debt to credit adjusted EBITDA by year 3 post close.
We remain confident that <unk> is on track to achieve our deleveraging target of three times net debt to credit adjusted EBITDA by year three post close.
Speaker 5: further supported by additional divestitures that I will touch on in a moment.
Further supported by additional divestitures I will touch on intermodal.
Speaker 5: Turning to slide 18, I'd like to provide commentary on our business outlook for 2022.
Turning to slide 18, I'd like to provide commentary on our business outlook for 2022.
Speaker 5: For fiscal year 2022, we expect revenue between $12.3 and $12.7 billion, with adjusted operating EBITDA in the range of $2.5 to $2.6 billion.
For fiscal year 2022 we expect revenue between 12.3 and $12 7 billion with adjusted operating EBITDA in the range of two five to $2 6 billion.
Speaker 5: We also are forecasting foreign exchange rates will be a headwind in 2022. Approximately 2 percentage point headwind to our revenue. And a 4 percentage point headwind to the justice operating heat adopt in 2022.
We also are forecasting foreign exchange rates will be a headwind in 2022.
Approximately two percentage point headwind to our revenue and.
And a four percentage point headwind to adjusted operating EBITDA in 2002.
Speaker 5: As you are all well aware, we continue to operate in a complex market environment with ongoing uncertainties from pandemics, global political tensions, and supply chain challenges.
As you are all well aware, we continue to operate in a complex market environment with ongoing uncertainties from pandemic global political tensions and supply chain challenges.
Speaker 5: IFF and our industry at large have been impacted by these issues. And we expect and have planned for that these challenges will remain into 2022. As I shared on our third protocol, we expect inflationary pressures to be significant in 2022 as we see large cost increases in raw materials, energy and logistics.
<unk> in our industry at large have been impacted by these issues.
We expect and have planned for that these challenges will remain into 2022.
As I shared on our third quarter call, we expect inflationary pressures to be significant in 2022, as we see large cost increases in raw materials energy and logistics.
Speaker 5: As a result, we are taking significant pricing actions to fully offset our dollar cost exposure, which we expect will result in strong sales and profit growth, but will depress margin.
As a result, we are taking significant pricing actions to fully offset our dollar cost exposure, which we expect will result in strong sales and profit growth, but will depress margin.
Speaker 5: Longer term, we remain confident in our ability to recover margins to pre-inflation levels as we are focused on improving returns to generate strong value creation for our shareholders.
Longer term, we remain confident in our ability to recover margins to pre installation levels. As we are focused on improving returns to generate strong value creation for our shareholders.
Speaker 5: We also remain gently focused on driving cost reductions through synergies and increased productivity efforts throughout our business.
We also remain intently focused on driving cost reductions through synergies and increase productivity efforts throughout our business.
Speaker 5: In addition, we are increasing CapEx in 2022 to approximately 5% of sales.
In addition, we are increasing capex in 2022 to approximately 5% of sales.
Speaker 5: as a result of 21 CapEx carryover and increased investments in capacity expansion in key technologies, which will help support growth while also lowering logistics costs.
As a result of 'twenty, one capex carryover and increased investments in capacity expansion and key technologies, which will help support growth while also lowering logistics costs.
Speaker 5: Finally, we will also be increasing inventory by approximately 300 million to more appropriate levels to ensure we can continue to serve our customers well.
Finally, we will also be increasing inventory by approximately 300 million to more appropriate levels to ensure we can continue to serve our customers well.
Speaker 5: Now moving to slide 19, I would like to focus more specifically on the cost inflation trends that we saw in 21 and now forecast to see in 22.
Now moving to slide 19, I would like to focus more specifically on the cost inflation trends that we saw in 'twenty, one and now forecast to see in 'twenty two.
Speaker 5: Heading into 2022, we expect certain costs, including raw materials, energy and logistics will continue to rise much as they did in 2021.
Heading into 2022, we expect certain cost, including raw materials energy and logistics will continue to rise much as they did in 'twenty one.
Speaker 5: Overall, we expect 22 cost increases to be double digits. Call it approximately 6
Overall, we expect 'twenty to cost increases to be double digits call. It approximately 10%.
Speaker 5: We are seeing most of these increases related to inflation in raw materials, with double-digit increases in hydrochlorides, oils, cellulose, pulp, turpentine, aroma chemicals, petrochemicals, fragrance specialty chemicals, savory ingredients, agriculture, grains, and sweeter.
We are seeing most of these increases related to inflation and raw materials with double digit increases in hydrocolloids oils cellulose pulp turbine team aroma chemicals, petrochemicals fragrant specialty chemicals savory ingredients specialty chemicals Agra.
Culture grains and sweeteners.
Speaker 5: The inflationary pressures manifest themselves differently between the legacy N and B and IFF businesses. Most of the higher energy and logistics costs in 2022 are related to legacy N and B.
Inflationary pressures manifest themselves differently between the legacy NMD and <unk> businesses.
Most of the higher energy and logistics costs in 'twenty two are related to legacy Mb.
Speaker 5: With added capacity coming online later this year, we hope to start to mitigate some of the logistics headlines we have been facing due to an imbalance in supply and demand.
With added capacity coming online later this year, we hope to start to mitigate some of the logistics headwinds we have been facing due to an imbalance in supply and demand.
Speaker 5: If you look at Legacy IFF portfolio, we are seeing high single-digit raw material inflation similar to our flavor and fragrance peers.
If you look at legacy <unk> portfolio, we are seeing high single digit raw material inflation similar to our flavor and fragrance peers.
Speaker 5: Recognizing these challenges, we have been aggressively pursuing broad-based pricing actions and accelerating energy and productivity efforts.
Recognizing these challenges we have been aggressively pursuing broad based pricing actions and accelerating synergy and productivity efforts.
Speaker 5: Turning to slide 20, I will provide a bit more insight into our sales guidance for 2022.
Turning to slide 20, I'll provide a bit more insight into our sales guidance for 2022.
Speaker 5: our 12.3 to 12.7 billion sales expectation represents continued momentum on top of our strong 2021 results. To getting more current news, thank you Acti covered the others and O chai
Our 12 three to $12 7 billion sales expectation represents continued momentum on top of our strong 2021 results.
To get any more comparable revenue base.
Speaker 5: you must add back approximately 500 million of sales related to N&B in January of 2021 as N&B results were not part of ISS until February 1st of 2021.
Must add back approximately 500 million of sales related to LMB in January of 2021.
<unk> results were not part of ISS until February 1st at 2021.
Speaker 5: Our sales guidance also accounts for the removal of June to December 21 revenue results following the anticipated completed sale of our Pro Build Control business, as well as the first nine months of 21 sales for the Fruit Prepped as Essager, which we closed in October of last year.
Our sales guidance also accounts for the removal of June to December 'twenty. One revenue results. Following the anticipated completed sale of our microbial control business as well as the first nine months of 'twenty, one sales for the fruit prep divestiture, which we closed in <unk>.
Over the last year.
Speaker 5: That gets you to our comparable 21 revenue base of $11.85 billion as indicated on the slide.
That gets you to our comparable 21 revenue base of $11 85 billion as indicated on the slide.
Speaker 5: As I said earlier, we are significantly increasing our prices in order to fully offset the dollar cost exposure of our inflation for 2022. With that in mind, we anticipate pricing to be a significantly larger contributor to the top line in 2022.
As I said earlier, we are significantly increasing our prices in order to fully offset the dollar cost exposure of our inflation for 2022.
With that in mind, we anticipate pricing to be significantly larger contributor to the top line in 'twenty two.
Speaker 5: This pricing impact, plus more modest volume growth following a strong 21, will be central to our overall sales performance in 22, where we expect to grow approximately 6 to 9% year over year on a comparable currency neutral basis.
This pricing impact plus more modest volume growth. Following a strong 41 will be central to our overall sales performance in 'twenty, two we expect to grow approximately 6% to 9% year over year on a comparable currency neutral basis.
Speaker 5: Now, in terms of our guidance on the adjusted operating EBITDA front, we also have to make adjustments for comparability.
Now in terms of our guidance on the adjusted operating EBITDA front, we also have to make adjustments for comparability.
Speaker 5: If you add that EBITDA related to N&B January results and subtract the EBITDA related to 7 months of EBITDA as a result of the anticipated divestiture of a microbe control business, as well as the EBITDA related to the fruit prep business for the first 9 months of 21, you get to a comparable 21 days of approximately $2.5 billion.
If you add back to EBITDA related to MB Jarrod results and subtract the EBITDA related to seven months of EBITDA as a result of the anticipated divestiture of them appropriate control business.
As well as the EBITDA related to the fruit prep business for the first nine months of 'twenty one.
Two of comparable 'twenty, one base of approximately $2 5 billion.
Speaker 5: As mentioned, implementing broad-based pricing actions to offset deflationary pressures is critical to our warranty plan. Over the last three plus months, each of our business has executed pricing actions across essentially our entire customer base.
As mentioned implementing broad based pricing actions to offset inflationary pressures as critical to our 'twenty plan.
Over the last three plus months.
Each of our business has executed pricing actions across essentially our entire customer base.
Speaker 5: As a result, we anticipate to completely offset projected 22 installation pressures with pricing action.
As a result, we anticipate to completely offset projected 22 inflationary pressures with pricing actions.
Speaker 5: The majority of these actions will be implemented in the 1st and 2nd quarter.
The majority of these actions will be implemented in the first and second quarter.
Speaker 5: I would also note that we anticipate that 2023 will benefit from an additional 200 million of net pricing benefit Due to the full annualization of our pricing actions, which will be equal to 100% capture of the combined 2021 and 2022 inflation impact on our business.
Also note that we anticipate that 2023 will benefit from an additional 200 million of net pricing benefit due to the full annualized nation of our pricing actions, which will be equal to a 100% capture of the combined 2021 and two.
2022 inflation impact on our business.
Speaker 5: Importantly, we also continue to closely monitor the global supply chain environment and will be prepared to execute additional price actions as appropriate.
Importantly, we also continue to closely monitor the global supply chain environment, we'll be prepared to execute additional price actions as appropriate.
Speaker 5: By adding anticipated volume leverage plus synergies in productivity, we expect comparable EBITDA growth in 2022 to be strong, up approximately 4 to 8 percent.
By adding anticipated volume leverage plus synergies and productivity, we expect comparable EBITDA growth in 2002 to be strong up approximately 4% to 8%.
Speaker 5: It should be noted that the synergy and productivity contribution here is a net number. We're in the combination of benefits of synergy and productivity, net of cost of living increases, and reinvestments in the business.
It should be noted that the synergy and productivity contribution here is a net number where it is a combination of the benefits of synergy and productivity.
Net of cost of living increases and investments in the business.
Speaker 5: Our guidance implies that our adjusted operating EBITDA margin will be down modestly versus 21, principally due to our net dollar cost recovery, which equates to approximately 100 basis points.
Our guidance implies that our adjusted operating EBITDA margin will be down modestly versus 'twenty, one principally due to our net dollar cost recovery, which equates to approximately 100 basis points.
Speaker 5: Over the course of 21 and 22, we will see more than $1 billion of total inflation.
Over the course of 'twenty, one 'twenty, two we will see more than $1 billion of total inflation.
Speaker 5: And while we are working rapidly to cover the price increases, it has impacted margins significantly. To give you a perspective of the magnitude, our margin for full year 22 on an inflation adjusted basis would be approximately 300 basis points higher or approximately 23.5%.
While we are working rapidly to cover the price increases it has impacted margins significantly.
Give you a perspective of the magnitude.
Our margin for full year 'twenty two on an inflation adjusted basis will be approximately 300 basis points higher or approximately 23, 5%.
Speaker 5: In terms of margin cadence throughout 2022, we expect the first half to be down year over year, with expansion coming in the second half. While sales are expected to be strong in the first quarter, year over year adjusted operating even-dob margin performance will be the most challenged of the year, down over 300 basis points versus our reported first quarter 2021 margin, with each quarter after that improving.
In terms of margin cadence throughout 'twenty, two we expect the first half to be down year over year with expansion coming in the second half.
While sales are expected to be strong in the first quarter.
Year over year, adjusted operating EBITDA margin performance will be the most challenged over the year.
Over 300 basis points versus our reported first quarter 2021 margin with each quarter after that improving.
Speaker 5: Much of this will be driven by price to total inflation, where we expect to turn positive starting the third quarter.
Much of this will be driven by price and total inflation, where we expect it to turn positive starting the third quarter.
Speaker 5: As I conclude, I want to highlight our 4 key areas of focus for 22 and provide further color into our detailed execution plans for each.
As I conclude I want to highlight our four key areas of focus for 'twenty, two and provide further color into our detailed execution plans for each.
Speaker 5: First, we are committed to building on our strong 21 sales in the method. Our 6 to 9% targeted 22 currency neutral sales growth anticipates that we will continue to maintain volume growth consistent with overall industry growth rates.
First we are committed to building on our strong 21 sales momentum.
Our 6% to 9% targeted 20 to currency neutral sales growth anticipates that we will continue to maintain volume growth consistent with overall industry growth rates.
Speaker 5: We believe that our exceptional R&D pipeline and scaled global commercial teams, including targeted 22 investments, will allow us to continue to deliver superior customer solutions and support strong growth.
We believe that our exceptional R&D pipeline and scaled global commercial teams, including targeted 22 investments will allow us to continue to deliver superior customer solutions and support strong growth.
Speaker 5: In addition, as I mentioned previously, we are making substantial investments to increase capacity across constrained portions of our portfolio and enhancing supply chain efficiency.
In addition, as I mentioned previously we are making substantial investments to increase capacity across constrained portions of our portfolio.
And enhancing supply chain efficiencies.
Speaker 5: Lastly, we will be sharpening our focus on our revenue synergy opportunities. As we are behind our original plan pace. As much of last year was focused on addressing near term supply chain issues.
Lastly, we will be sharpening our focus on our revenue synergy opportunities as we are behind our original planned pace as much of last year was focused on addressing near term supply chain issues.
Speaker 5: That said, we are confident that the breadth and depth of our platform will allow us to build meaningful revenue synergies over time.
That said, we are confident that the breadth and depth of our platform will allow us to build meaningful revenue synergies over time.
Speaker 5: Second, as previously outlined, we are intently focused on broad-based pricing actions to offset inflation.
Second as previously outlined we are intently focused on broad based pricing actions to offset inflation.
Speaker 5: And importantly, as the macro environment evolves, we are prepared to quickly execute additional pricing actions throughout the year as needed.
And importantly, as the macro environment evolves, we are prepared to quickly execute additional pricing actions throughout the year as needed.
Speaker 5: To enhance our ability to react more quickly to the dynamic environment, over the last several months, we have undertaken a comprehensive end-to-end review of our procurement process.
To enhance our ability to react more quickly to the dynamic environment over the last several months, we've undertaken a comprehensive end to end review of our procurement processes.
Speaker 5: implemented new pricing tools, and established core pricing teams for each one of our businesses.
Implemented new pricing tools and established core pricing teams for each one of our businesses are.
Speaker 5: Our focus has been to compress the time between inflation signals and customer pricing actions, ensuring we optimize product segment and customer specific pricing actions and closely monitor the level and pace of pricing realization.
Our focus has been to compress the time between inflation signals and customer pricing actions.
During we optimized product segment and customer specific pricing actions and closely monitor the level and pace of pricing realization.
Speaker 5: Going forward, we are focused on further enhancing our procurement processes and pricing programs.
Going forward, we are focused on further enhancing our procurement processes and pricing programs.
Speaker 5: Third, we are determined to accelerate our synergy realization and more broadly our productivity efforts in 2022. For your reference included in our 22 guidance, we are targeting approximately 200 million of cost reductions from synergies. Yield enhancements and reformulations, logistics efficiencies and other operational improvements.
Third we are determined to accelerate our synergy realization and more broadly our productivity efforts in 2022 for.
For your reference included in our 'twenty two guidance, we are targeting approximately $200 million of cost reductions from synergies.
Yield enhancements and we formulations logistics efficiencies and other operational improvements net.
Speaker 5: net of wage inflationary pressures and targeted investments to help drive top line growth, we are targeting net cost efficiencies of approximately $100 million dollars for the year.
Net of wage inflationary pressures and targeted investments to help drive top line growth. We are targeting net cost efficiencies of approximately a $100 million for the year.
Speaker 5: While we feel this is good progress, we also recognize that there is more work to do.
While we feel this is good progress. We also recognize that there is more work to do.
Speaker 5: Consequently, in addition to the end to end review of procurement, we are undertaking a comprehensive review of our global manufacturing and logistics platform. Constructing a plan to accelerate the scope and scale of our global shared service capabilities. And developing a detailed technology and digital integrated roadmap.
Consequently in addition to the end to end review of procurement, we are undertaking a comprehensive review of our global manufacturing and logistics platform.
Constructing a plan to accelerate the scope and scale of our global shared service capabilities and developing a detailed technology and digital integrated roadmap.
Speaker 5: all with the goal of driving meaningful efficiencies while also ensuring we provide superior customer solutions and service.
All with the goal of driving meaningful efficiencies, while also ensuring we provide superior customer solutions and service.
Speaker 5: Fourth, we are actively working to accelerate our non-forested estuators. As we have discussed, we are on track to successfully complete the sale of our microbial control business, which will enhance the efficiency and profitability of our portfolio. We're also targeting additional portfolio optimization to further deliver our balance sheet and focus on core growth opportunities.
Fourth we are actively working to accelerate our noncore divestitures.
As we have discussed we are on track to successfully complete the sale of <unk>, our OBL control business, which will enhance the efficiency and profitability of our portfolio.
We're also targeting additional portfolio optimization to further delever, our balance sheet and focus on core growth opportunities.
Speaker 5: Over the coming quarters, we will proceed with marketing a handful of non-strategic businesses, call it 3 or 4, where we believe that over the next 18 months, we can generate expected proceeds of approximately $1.5 to $1.7 billion.
Over the coming quarters, we will proceed with marketing a handful of non strategic businesses call. It three or four where we believe that over the next 18 months, we can generate expected proceeds of approximately one five to $1 7 billion.
Speaker 5: Similar to our fruit prep and the pro-wheel control businesses, these are non-strategic and the transactions will be treated to our go forward growth rate and margin growth up.
Similar to our fruit prep and the appropriate control businesses. These are non strategic and the transactions will be accretive to our go forward growth rate and margin profile.
Speaker 5: With this action plan, together with our current sales momentum and strength of our leading portfolio, I am confident that IFF will deliver strong results in 2022. With that, I would like to turn the call back to Andre.
This action plan together with our current sales momentum and strength of our leading portfolio I am confident that <unk> will deliver strong results in 2022 with that I would like to turn the call back to Andreas. Thank you Glen Iff's transformation has been deeply personal to me and I know that this company is stronger today.
Speaker 4: Thank you Glenn. ISAF's transformation has been deeply personal to me and I know that this company is stronger today than it has ever been. I'm proud of the solid year we had in 2021 with significant year-over-year sales and profit growth as well as steady progress towards our integration with NNB.
Ben It's Ed.
Ever been I am proud of our solid year, we had in 2021 with significant year over year sales and profit growth as well as steady progress towards our integration with NMB.
Speaker 4: So all my time at IFF, I've been consistently impressed by the thousands of employees who have dedicated their time and talent to make our company the category defining leader it is today. I want to thank them for their contributions over this year and the time I have led the company and also for their passion about IFF and the commitment to our customers.
So all my time at <unk> I've been consistently impressed by the Sullivans of employees, who have dedicated their time and talent to make our company. The category defining leader. It is today I want to thank them for their contributions over this year at the time I have left the company and also for their passion to both ISS and the commitment to our <unk>.
Customers.
Speaker 4: The path ahead for the company and its new leadership team is clear. I'm confident that IFF enters its next chapter with the right team, a best-in-class portfolio, innovative spirit, significant financial flexibility, and a unified sense of purpose to drive long-term growth and benefit our shareholders, employees, customers, and communities. With that, I would now like to open the call for questions. Thank you.
The path ahead for the company and its new leadership team is clear I am confident that <unk> enters its next chapter with the right team our best in class portfolio of innovative spurred significant financial flexibility and the unified sense of purpose to drive long term growth and benefit our shareholders employees customers and <unk>.
<unk> was that I would now like to open the call for questions. Thank you.
Speaker 1: At this time, if you would like to ask a question, please press the star and one on your touch tone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and one if you would like to ask a question. And we will take our first question from Gunther Zuckman with Bernstein. Your line is now open.
At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone you may remove yourself from the queue at any time by pressing the pound key once again start Antoine if you would like to ask a question and we will take our first question from Gunther Zechman with Bernstein. Your line is now open.
Speaker 4: Hi, good morning, everyone. Hi, Andreas. Hi, Glenn. Thanks for taking my question. Can I start with two? The first one is on the top line guidance for the year. Can you just outline to us what's required to get to the higher or the lower end of the range respectively, please? And the second one is you're pushing through quite a lot of price increases already ahead of
Hi, Good morning, everyone, Hi, Andreas Hi, Glenn Thanks for taking my questions can I start with.
The first one is on the top line guidance for the year can you just.
Outline to us what's required to get to the high.
Or the lower end of the range, respectively place and the second one is you're pushing through quite a lot of price increases already.
<unk>.
Speaker 6: some of your key peers in F&F. What's the volume elasticity that you expect to have already seen on the price increases and what you hear from your customers in that regard?
Some of your key peers in F&I.
What's the volume elasticity that do you expect you will have already seen on the price increases and what you hear from your customers in that regard to space.
Speaker 5: Your two questions are highly related because relative to the top line, we'd say the variable that's likely to be the bigger indicator of the range is really going to be more volume than price. If anything, frankly, we feel very good about what we've implemented from price. What's changing right now is the Sam grey adjustment which is probably the best example
Yes.
Morning, Gunther. Thanks for the question. Your two questions are highly related because relative to the topline we'd say the variable that's likely to be the bigger indicator of the range is rather than more volumes than price if anything frankly, we feel very good about what we've implemented some price.
Speaker 5: What's coming through if there's additional inflationary pressures, we may in fact push additional pricing. The volume to some extent, I think it's the bigger question mark for us. We had a 2 to 3% assumption. Relatives of volumes that's probably a point lower than historically the market from a standpoint.
And what's coming through if theres additional inflationary pressures, we may in fact push additional pricing, but volumes to some extent I think is the bigger question Mark for us.
Had a 2% 3% assumption relative to volumes, that's probably a point lower than historically the market from our standpoint.
Speaker 5: And that will probably drive the difference in terms of the top line. To your second question, we actually have not seen much elasticity, i.e., as you know yourself, sort of picking up on what consumer product companies have been releasing recently, the volume generally have been sticking in the market. We have one month, by the way, the month of...
And that will probably drive the difference in terms of the top line to the your second question, we actually have not seen much elasticity I E.
Yourself sort of picking up on the consumer product companies that have been releasing recently.
Volumes generally had been sticking in the market, we have one month by the way the month of of <unk>.
Speaker 5: January results generally volumes are sort of holding in there for 2, 4. so we're not seeing sort of a drop yet. That being said, when we put the plan together recognizing this is going to be a very abnormal year given the sheer degree of pricing, we thought it prudent to plan accordingly and we actually expect
January results generally volumes are sort of holding in there for Q4, so we're not seeing sort of a drop yet that being said when we put the plan together recognizing this is going to be a very abnormal year given the sheer degree of pricing we thought it prudent to plan accordingly, and we actually expect and what we've seen from <unk>.
Speaker 5: And what we've seen from an awful lot of our competitors is everybody is basically implementing the same range of pricing in the market.
A lot of our competitors is everybody is basically implementing the same same range of pricing in the market.
Okay.
Speaker 1: And we will take our next question from Mark as trackman with the full your line is now open.
And we will take our next question from Mark S. Trackman.
With Stifel. Your line is now open.
Speaker 7: Yeah, thanks and morning everyone. I wanted to follow up sort of related to the last question. So in the 22 guidance, I guess, put top line and adjusted EBITDA expectations is really strongly predicated on this pricing. So how do you think about this in kind of broader, longer term strokes? If you go back years ago competitors or
Yes. Thanks.
Morning, everyone.
Wanted to follow up sort of related to the last question. So 'twenty two guidance.
Top line and adjusted EBITDA expectations.
It really strongly predicated on this pricing so.
How do you how do you think about this and kind of broader longer term stroke. If you go back years ago.
Competitors.
Speaker 7: have ebbed and flowed in terms of the ability to take price and how quickly they took price and how much they took price. So how do you think about how your competitors react? Because if you go back through those earnings calls, nobody's really talking about specifics that you just laid out specifics. So how do you think about, or what's embedded in what your competitors are going to do from a pricing standpoint? And how quickly can you adapt if your competitors don't directly follow how much you're taking it?
Ebbed and flowed in terms of the ability to take price and how quickly they took price and how much they took price. So how do you think about.
How your competitors react because if you go back through those earnings calls Nobody's really talking about specifics that you just laid out specifics. So how do you think about.
Or what's embedded in what your competitors are going to do from a pricing standpoint, and how quickly can you adapt your competitors don't directly follow how much youre taking at this point.
Speaker 7: And just a related point, how do we think about it beyond 22 in terms of how much pricing is given that versus what you're taking this year?
And just a related point, how do we think about it beyond 'twenty two in terms of how much pricing given that versus what you are taking any share.
Speaker 5: Sure. Great question, Mark. You know, the reality is we're well into midstream on pricing actions. We signaled in our third quarter call with heavy inflation on the horizon. We reacted very quickly. So we spent the latter part of the fourth quarter and then sort of every working day this year of executing broad-based pricing across the entire customer base.
Sure.
Question Mark.
The reality is we're well into midstream on pricing actions, we signaled in our third quarter call with heavy inflation on the horizon. We reacted very quickly. So we spent the latter part of the fourth quarter and then sort of every working day this year of executing broad based pricing across the entire customer base.
Speaker 5: That actually has been quite effective. Based on the read of that, i.e. we've implemented most of that pricing already, which will kick in.
That actually has been quite effective say based on the.
The read of that I E. We've implemented most of that pricing already which will kick in over largely over the first and second quarter. It appears to be sticking.
Speaker 5: over largely over the first and second quarter it appears in sticking. We also know from observing our competitors is they're under similar inflationary pressures. We're all sort of seeing the same thing and there's they're also are passing pricing through so we feel like we're sort of neck-to-neck in terms of what we're doing in the market. We are being surgical. There are certain categories that are slightly more.
So no from observing our competitors as Theyre under similar inflationary pressures were also seeing the same thing and they also are passing pricing through so we feel like we're sort of neck to neck in terms of what we're doing in the market. We are being surgical there are certain categories that are slightly more elastic or price competitive.
Speaker 5: Elastic or price competitive, if you will, and are being thoughtful about sort of where we price and there are other areas that typically.
If you will and are being thoughtful about sort of where we price and there are other areas that typically are less a classic for host of reasons and sort of making sure that we sort of priced appropriately in those segments.
Speaker 5: are less of a classic for a host of reasons and sort of making sure that these are priced appropriately in those segments.
Speaker 5: But we do believe that actually more than believe we've seen it a lot of our pricing is in fact now and being implemented over the coming months. And we have not seen as I mentioned a big significant change in terms of volumes. And the amount of customers that we've lost has been relatively small correctly related to our pricing actions. Uh, relative to the longer term, as we mentioned on the script.
But we do believe that actually more than believe what we've seen in a lot of our pricing is in fact, now and being implemented over the coming months.
We have not seen as I mentioned, a big significant change in terms of volumes and the amount of customers that we have losses in relatively small directly related to our pricing.
Actions the.
Relative to the longer term as we mentioned on the script.
Speaker 5: We had about $400 million of inflation last year. We were anticipating about $600 million, so all in a billion dollars between the two years. We implemented $200 million last year, and we're planning on matching the $600 this year, so we're still at $200 million short.
We ended up $400 million of inflation last year, but we anticipate a 600 million. So an all in $1 billion between the two years, we implemented $200 million last year and we're planning on matching the 600. This year. So we're still $200 million short, we do fully anticipate to capture that additional $200 million as we move into.
Speaker 5: We do fully anticipate to capture that additional 200 million as we move into 2023. And very importantly, the market continues to ebb and flow, although we haven't seen a lot of movement on raw materials recently. There's been some ups and downs, but we are prepared to react. And if there are additional stationary pressures, we're positioned to go to the market very rapidly.
2023, and very importantly that market continues to ebb and flow, although we haven't seen a lot of movement on raw materials recently, there's been some ups and downs, but we are prepared to react and if there are additional inflationary pressures.
Positioned to grow the market very rapidly.
Speaker 1: And we'll take our next question from Mike Sison with Wells Fargo. Your line is now open.
And we will take our next question from Mike <unk> with Wells Fargo. Your line is now open.
Speaker 8: Hey, good morning. Good end of the year and Andreas has been great working with you. I guess my question is, when you think about, you know, when the...
Hey, good morning, good end of the year and address.
Great working with you.
I guess my question is.
When you think about.
When the deal was put together.
Speaker 8: You seem to be on track to hit your top line growth goals through 2023. If you're going to do 2.5 to 2.6 this year, it does seem like you're going to be on track to hit your top line growth goals through 2023.
Your you seem to be on track to hit your topline growth goes through 2023.
If you're going to do two five to $2 six of share it does seem like.
Speaker 8: sort of a tall order to get to over 3 billion by 2023. So just curious, do you think the absolute EBITDA goal in 23 is still doable or maybe it's delayed a year? And I know if you get to 200 million in pricing next year, that helps a lot. So just curious, you can sort of walk us through what happens in 23 relative to your original goals for the deal.
Yes, sort of a tall order to get to over $3 billion by.
By 2023, so just curious do you think the absolute EBITDA goal in 'twenty three is still doable or maybe it's delayed a year and I know if you get to $200 million in pricing next year that helps a lot. So just curious.
You can sort of walk us through.
What happens in 'twenty three relative to your original goals for the deal.
Speaker 5: I think it is the question in some sense, how we think about our longer term goals. Obviously Frank joins us next week and we will be working very aggressively over the coming months.
Thank you I think.
It is a it is the question some sense, how do we think about our longer term goals. Obviously, Frank joins US next week and we will be working very aggressively over the coming months to review our longer term targets that being said I would say two things.
Speaker 5: to review our longer term targets. That being said, I would say two things. Certainly going from 2526 to call it 3233 is a big number for next year.
Lean going from 2526 to call. It <unk> is a big number for next year as you pointed out I think we have a clear line of sight to $200 million of incremental pricing at least another $100 million of synergy productivity I actually hope for more quite frankly, but we have $100 million left on the expense synergy side.
Speaker 5: As you pointed out, I think we have a clear line of sight to 200 million of incremental pricing, at least another 100 million of synergy productivity. I actually would hope for more, quite frankly, that we have 100 million left on the expense synergy side.
Speaker 5: That gets us directionally to 285 to 29 range from a standpoint. So we're beginning to close the gap, but there's still a gap there. And we have work to figure that out. I think on a qualitative basis, I am optimistic. This last year because of the operating environment has been very challenging.
Gets us directionally to Q2.
Eight five to nine range with standpoint, so we're beginning to close the gap, but theres still a gap there and we have work to figure that out I think on a qualitative basis I am optimistic this last year because of the operating environment has been very challenging and like anybody would have anticipated the level of inflation than what we had to deal with on top of that the global <unk>.
Speaker 5: Again, we would have anticipated the level of inflation and what we had to deal with.
Speaker 5: On top of that, the global supply chain issues, but we do feel a combination of the strength of the platform in terms of revenue opportunities for growth.
Fly chain issues, but we do feel a combination of the strength of the platform in terms of revenue opportunities for growth and in addition, the more time I spend here the more I am convinced that there are meaningful opportunities to enhance our overall performance in terms of productivity and operating margin. So I think until Frank.
Speaker 5: And in addition, the more time I spend here, the more I'm convinced that there are meaningful opportunities to enhance our overall performance.
Speaker 5: In terms of productivity and operating margin, so I can tell Frank is a rise and sort of go through that.
Rides and sort of go through that very detailed process. We can't provide a number but there is a clear lines of call. It $2 89 next year based on pricing and productivity and I think we have additional opportunities on top of that.
Speaker 5: very detailed process. We can't provide a number, but there's a clear line to call it 2829 next year based on pricing and productivity and I think we have additional opportunities on top of that.
Speaker 1: And we'll take our next question from John Roberts with UBS. Your line is now open.
And we will take our next question from John Roberts with UBS. Your line is now open.
Speaker 9: Thank you and best wishes Andreas, you're guiding to a 4% headwind from currency to EBITDA in 2022 and that's more than the 2% impact on sales. This is our 1st time going through an FX headwind with the new portfolio. So maybe help us with how much your costs are in dollars relative to the revenues in foreign currencies. You said the Euro continues to be the key currency but has the overall basket of important currencies changed with the new portfolio?
Thank you and best wishes in dress.
You are guiding to a 4% headwind from currency to EBITDA in 2022, and that's more than the 2% impact on sales. This is our first time going through an FX headwind with the new portfolio. So maybe help us with how much your costs are in dollars relative to the revenues in foreign currencies and you cited the euro continues to be the key currency.
Has the overall basket of important currencies change with the new portfolio.
The basket has changed actually with the combination of NMB, it's actually slightly more U S based.
Speaker 5: The basket has changed actually with the combination of NMB it's actually slightly more US based.
Speaker 5: than is non-US based. Roughly around 50% of our revenues are US dollar denominated, about 25% are Euro, and then they arrange currencies for the residual. From an earnings perspective, It's more than time.
That is non U S based.
Right around 50% of our revenues are U S. Dollar denominated about 25% are euro and then a range of currencies for the residual from <unk>.
And earnings perspective, while the year is 25% in revenues, it's about 20% in terms of our earnings from a cash flow standpoint, because we have a higher cost base that European denominated. So it is a significant portion that's the one that's what we're focused on from a from a risk standpoint, but as you know the euro dropped from circa 118.
Speaker 5: while the euro is 25% in revenues, it's about 20% in terms of our earnings from the cashflow standpoint because we have a higher cost base.
Speaker 5: that you're being denominated. So it is a significant portion. It's what we focused on from a risk standpoint. As you know, the euro dropped from.
Speaker 5: Circle 118 on average last year it's been in the 1, 13, 114 range we were planning a 113. so that's how we sort of think about the year.
On average last year, it's been a sort of a $1 13, $1 14 range. We were planning a $1 13, so thats, how we sort of think about the year.
Thank you.
Speaker 1: And we will take our next question from Adam Samuelson with Goldman Sachs. Your line is now open.
And we will take our next question from Adam Samuelson with Goldman Sachs. Your line is now open.
Speaker 5: Hi, thank you. Good morning everyone. I was hoping to maybe dig in a little more just on the cost energy capture and the assumptions that are embedded in the 20 in the 22 guidance.
Hi, Thanks, good morning, everyone.
Was hoping to maybe dig in a little more just on the cost synergy capture.
And the assumptions that are embedded in the 'twenty into 'twenty two guidance.
Speaker 5: Just where kind of what and what's left to capture post.
We're kind of what's left to capture post 'twenty, two and I guess, the corollary to that and this is kind of address a little bit in some of the other conversations but as we think about where we are exiting 2022 with some of the pricing carryover.
Speaker 7: and guess the corollary to that, and this is kind of addressed a little bit in some of the other conversations, but as we think about where we are exiting 2022 with some of the pricing carryover.
Speaker 10: just relative to the original and it'd be merger plan kind of.
Just relative to the original and it would be merger plan kind of.
Speaker 10: the margin EBITDA potential in 23andBL.
The margin EBITDA potential.
In 'twenty three and beyond.
Speaker 5: Yeah sure Adam, thanks for the question. Relative to the synergies we identified, as a reminder we did 60 million 21.
Yes sure Adam Thanks, Thanks for the question relative to the synergies we identified as a reminder, we did $16 21.
Speaker 5: Our commitment was to get to 180 this year and to ramp up to 300. We're actually going to be short of that. We're actually posting another 90 million this year. I would note that our total productivity basket is 200 million. So we're thinking more broadly than just synergies. Frankly, an year past the deal, it's important that we just figure out how to cut costs across the enterprise as opposed to just focus on the narrow combination area.
Our commitment was to get to 180, this year and to ramp up to 300, we're actually going to be short of that we're actually posting another $90 million. This year I would note that our total productivity bass ticket was 200 million. So we're thinking more broadly than just synergies frankly, a year past the deal. It's important that we just figure out how to cut costs across the.
The enterprise as opposed to just focus on these narrow combination areas now of that shortfall. If you will this year. It's all in the procurement arena, just given what's going on to global supply chain wasn't realistic to sort of count on the synergy and tax of 60, plus plus plus.
Speaker 5: Now, of that short quality will this year, it's all in the procurement arena just given what's going on global supply chain wasn't realistic to sort of count on the synergy impact. So 60 plus plus plus the 90 gets us basically to the 150. And as I mentioned, I'm fully confident we're going to get the residual 150 synergies to other areas and we'll continue to focus on productivity above that.
The 90 gets us basically to the 150 and as I mentioned and fully confident we're going to get the residual $1 50 and synergies to other areas and will continue to focus on productivity above that so if you think about that.
Speaker 5: So if you think about the carryover of next year between pricing of 200 million and then another 150, that's how you get to the 2.8 to the 2.9 from sort of a carryover standpoint into 23.
The carryover for next year between pricing of $200 million and then another 150, that's how you get to the $2 eight to the two nine from sort of a carryover standpoint into 'twenty three.
Speaker 1: And we will take our next question from Jeffrey Zecalas with JP Morgan. Your line is now open.
And we will take our next question from Jeffrey Zekauskas with Jpmorgan. Your line is now open.
Speaker 10: Thanks very much. You generated 1.4 billion.
Thanks very much.
You generated $1 4 billion in <unk>.
Speaker 7: cash flow on an EBITDA base of 2.4 billion or a little less than...
Cash flow on an EBITDA base of $2 4 billion or a little less than 60%.
Speaker 10: Is that the ratio that you expect for 2022? That is your operating cash flow will be about 1.5? Or do you think you can make improvements in this ratio? What should be the normal ratio of operating cash flow?
Is that the ratio that you expect for.
2022 that is your operating cash flow will be about 1.5.
Or.
Do you think you can make improvements in this ratio what should be the normal ratio.
Operating cash flow to EBIT.
Speaker 5: Yeah, it's a great question. We have some more work to do to figure out sort of where we're going to be longer term relative to the cash generation. We're going to be actually making slightly higher investments in two areas this year. I think net of these investments will be sort of about equal on a cash flow basis. One is we're going to be adding inventories, building, I should say, inventories of about 300 million dollars.
Yeah. It's a great question, we have some more work to do to figure out sort of where we're going to be longer term relative to the cash generation, we're going to be at.
Actually making slightly higher investments in two areas. This year I think net of these investments will be sort of about equal on a cash flow basis. One is we're going to be adding inventories building I should say inventories are about $300 million.
Speaker 5: As a reminder, when the deal was closed a year ago, we were at artificially low inventory levels about 111 days. Historically, the combined entity was in the 125 range.
Reminder, when the deal was closed a year ago, we were at artificially low inventory levels about 111 days historically, the combined entity within the 125 range. We built some of that back at the end of the year.
Speaker 5: We built some of that back at the end of the year, but we're still sort of short of where we need to be. The second thing is our CapEx spending will increase this year as well, relative to last year.
We're still sort of short of where we need to be the second thing is our capex spending will increase this year as well relative to last year. Those increases are twofold. We ended the year less than 400 million.
Speaker 5: Those increases are 2 fold. We ended the year less than 400M. Some of the capex we were unable to implement last year. That was a byproduct of suppliers basically being delayed in terms of supplying steel.
Some of the Capex, we were unable to implement last year that was a byproduct of suppliers are basically being delayed in terms of supplying steel and.
Speaker 5: And other products, and in addition, just re, operating code environments for the speed at which we were implement the slow as well. So we're ramping up, we're also ramping up simply to address some capacity constraints supply chain which will actually achieve.
In other products and in addition, just to the operating Covid environment. So the speed at which we were able to implement the slowed as well. So we're ramping up and we're also ramping up simply to address some capacity constrained supply chain, which will actually achieve help us achieve higher demand levels as well as lower costs on the logistics side. So net net there is about a combination of five <unk>.
Speaker 5: Help us achieve higher demand levels as well as lower costs on the logistics side. So net net there is about a combination of 500 million increase between inventories and higher capex year over year. But the overall cash flow from the business would be felt relatively neutral after that's done. Longer term as I mentioned previously, we really have some work to do to think about our longer term goals relative to the cash generation of the enterprise.
Million increase between inventories and higher capex year over year, but the overall cash flow from the business to be relatively neutral. After that's done longer term as I mentioned previously we really have some work to do to think about our longer term sort of goals relative to the cash generation of the enterprise.
Speaker 1: We will take our next question from Lauren Lieberman with Barclays. Your line is now open.
And so we will take our next question from Lauren Lieberman with Barclays. Your line is now open.
Speaker 11: Great, thanks. So I know you commented on there being in that, you know, residual 200 million benefit on pricing when we get into 2023. But I did think it was worth just referencing the fact that some of your competitors talk about it taking 18 to 24 months for inflation to be covered with pricing. So I'm just curious.
Great. Thanks.
So I know you commented on there being in that residual 200 million.
Benefit on pricing as we get into 2023, but I did think it was worth just referencing the fact that some of your competitors talk about it taking 18 to 24 months for inflation to be covered with pricing. So I'm just curious.
Speaker 11: why that would be such a shorter timeframe for you. So that's kind of point one. And point two is just I think
That would be such a shorter timeframe for you so thats kind of 0.1.
And 0.2 is just I think the.
Speaker 11: N&B businesses, there are components of them, my understanding, they're a little bit more commodity-esque in nature where switching costs would be low for your customers.
<unk> business is there are components of that my understanding there are a little bit more commodity esque in nature, where footprint costs would be low for your customers versus more sudden theres certainly plenty of very value add and that's not true at all.
Speaker 11: versus more, you know, and there's certainly plenty that's very value added and that's not true at all. But just any thoughts or the degree you have visibility on elasticity for those portions of the portfolio. I don't know how, you know, what the, you know, data was like at N and B and so on, if there's visibility and some history on that piece of business as well that's informing your elasticity thoughts for this year. Thanks.
But just any thoughts or the degree you have visibility on elasticity for those portions of the portfolio.
Don't know how with the.
Data was like it and then B and so on if there's visibility into some history on that that piece of business as well as informing your elasticity thoughts for this year. Thanks.
Speaker 5: Thanks for the question. In general.
Perfect. Thanks, Thanks for the question in general.
Speaker 5: As I mentioned, we haven't seen much volume drop off relative to our pricing action. So there are certain categories that are slightly more competitive, but in the environment where demand is still relatively high, we've been able to push through pricing. So nowhere have we seen great pockets of softness.
As I mentioned, we haven't seen much volume drop off relative to our pricing actions. So.
There are certain categories that are slightly more competitive but in the environment, where demand is still relatively high we have been able to push through pricing. So nowhere have we seen sort of great pockets of sort of softness across any of the businesses. Thats 0.1, 0.2, there is a lag and that's why they are the $200 million will kick in late this year.
Speaker 5: Across any of the businesses, that's 0.1 point to there is a lag and that's why there are the 200M will kick in late this year and roll into next year from an overlap standpoint. And there's 2 reasons for that. There's contractual relationships that despite actually misenvironment and easier to open up.
And roll into next year from an overlap standpoint, and there's two reasons for that there is contractual relationships.
<unk> actually in this environment and easier to open up renegotiations for the level of inflation and it takes time to renegotiate and put it in place. So just a timing element and then some of the contracts are more industry base are tied to certain indexes that certified as well. So recall, we had $400 million last year. So we're basically implementing all of that and then we have another 600 million to catch.
Speaker 5: We negotiations for the level inflation and it takes time to renegotiate and put it in place. So just a timing element. And then some of the contracts are working in DC base or certain indexes that sort of find as well. So. Recall we had 400 million last year so we're basically implementing all that and we have another 600 million to catch up. So about a billion dollars.
So that $1 billion, we will catch up $800 million of it within literally by.
Speaker 5: We will catch up $800 million of it within literally sort of
Speaker 5: by quarters and then we will kick into the residual into 23 which is right in that same window for the 18 months. I'm thinking that's sort of the one limitation.
By quarters, and then we will take into the residual into 'twenty, three which is right in that same window sort of 18 months thinking about sort of full implementation.
Speaker 8: And we'll take our next question from David B. Leiter with Deutsche Bank. Your line is now open. Thank you. Good morning. Going back to the volume guidance this year of 2-3%,
And we will take our next question from David Begleiter with Deutsche Bank. Your line is now open.
Thank you good morning going.
Going back to the volume guidance this year of 2% to 3%.
Speaker 12: It seems a little bit low, given you are gaining share. You might have some beginnings of initial.
It seems a little bit low given you are gaining share you might have some beginnings of initial revenue synergies.
Speaker 12: Is there anything limiting that Vine growth assumption for this year that you can point out?
Is there anything limiting that.
Growth assumption for this year, they can point out.
Thank you.
Speaker 5: I think we have been appropriately prudent in our planning process, given the sheer level.
I think we have.
Ben.
Really prudent in our planning process, given the sheer level of pricing that we have in the plan, we didnt want to sort of push the envelope. If you will from a volume standpoint, as I mentioned previously it's going to depend upon the consumer.
Speaker 5: A pricing that we have in the plan, we didn't want to sort of sort of push the envelope if you will from a volume standpoint, as I mentioned previously, it's going to depend upon the consumer.
Speaker 5: You know, certainly in the very, very early days of the year, that seems to be holding up, but we have a lot of year ahead of us as well. From a capacity standpoint, as we've mentioned in the past, we are making very meaningful investments, a combination of CapEx as well as inventory to allow us to address some of the legacy issues we had last year. Those issues were principally in legacy and the businesses that will feel better about having the capacity to meet demand as it continues, but it's largely a function of just being prudent.
Certainly in the very very early days of the year that seems to be holding up but we have a lot of year ahead of us as well from a capacity standpoint, as we've mentioned in the past we are making very meaningful investments a combination of capex as well as inventory to allow us to address some of the legacy issues you had last year those issues were.
Principally in legacy <unk> businesses feel better about having the capacity to meet demands. If it continues but it's largely a function of just being prudent in this sort of a very very.
Speaker 5: In this sort of a very, very unprecedented market for planning standpoint.
Unprecedented market from a planning standpoint.
Speaker 1: And we will take our next question from Gangsham Panjabi with Barry, your line is now open.
And we will take our next question from Ghansham Panjabi with Baird. Your line is now open.
Speaker 9: Thanks, good morning everybody. Congrats again, Andreas. I guess maybe a follow up to the last question in terms of your characterization of channel inventories if you can. I'm looking at two subcategories on slide nine, ingredients and fine fragrances. Obviously had a very, very big year. Are you assuming some sort of meaner version as the year unfolds just from a demand standpoint as channel inventories comp against.
Okay. Thanks, Good morning, everybody. Congrats again, Andreas I guess, maybe a follow up to the last question in terms of.
Your characterization of channel inventories if you can.
Looking at two.
Subcategories on slide nine ingredients and fine fragrances, obviously had a very very big year are you, assuming some sort of mean reversion as the year unfolds just from a demand standpoint as channel inventories comp against.
Speaker 9: you know, pretty healthy comps from 2021. And then also, I'm sorry if I missed this, but did you break out the sequencing of inflation in terms of what you're assuming the inflation trajectory as the year unfolds? I know you made comments.
Pretty healthy comps from.
From 2021, and then also I'm sorry, if I missed this but did you breakout the sequencing of the inflation in terms of what Youre assuming.
Inflation trajectory as the year unfolds I know you made comments on <unk>.
Yes, let me I'll answer. The second question is really just to give you some perspective on margin sort of the margin change year over year progression through the year. So that reflects sort of a combination of new flagship inflation and the pricing actions interestingly enough.
Speaker 5: Yeah, I'll answer the second question really just to give you some perspective on margin, you know, sort of the margin change year over year progression through the year. So that reflects sort of the combination of inflation and the pricing action. Interestingly enough...
Speaker 5: Because we've been in 2 years of coded, it's difficult to look at any of the businesses on a given quarter and it's better to look on 2 years or normalize basis. And when you do that.
Because we've been in two years of Covid, it's difficult to look at any of the businesses on a given quarter and it's better to look on two year sort of a normalized basis and when you do that actually.
Speaker 5: Actually, the range relative to the currency neutral results in our businesses actually tightens up quite a bit and they come very close together. So. As it relates to this year, from our planning standpoint, we don't have big differences planned per se across our different business units.
The range relative to the currency neutral results in our businesses is actually tightened up quite a bit and become very close together. So as it relates to this year from a planning standpoint, we don't have big differences plan per se across our different business units other than much more tighter distribution in volume in part because we have.
Speaker 5: They're a much more tighter distribution in volume, in part because we have a 2 to 3 percent volume in general, and in part because we think we're in a more normalized environment and some of the capacity issues are also being effectively addressed. So we don't expect to have a...
2% to 3% volume in general and in part because we think we're an opinion more normalized environment in some of the capacity issues are also being effectively address so we don't expect to have a.
Speaker 5: a wide range of differences between the businesses as it relates to volumes. From a progression on the pricing actions and inflation.
A wide range of impact a lightweight range of differences between the businesses as it relates to volumes from a progression on the pricing actions and inflation and how we're offsetting that we do expect that the first half principally in the first quarter will be the most challenged we expect that the first quarter is likely to have margin down year over.
Speaker 5: and how we're all setting that, we do expect that the first half, principally the first quarter, will be the most challenging.
Speaker 5: We expect that the 1st quarter is likely to have margin down year over year, a little over 300 basis points. We expect that that will soften to around 150 ish in the 2nd quarter. And then in the back, half of the year will basically be up to get to the full year. The full year guidance is sort of direction down basis points year over year. From a combination, so that that basically is a reflection of how we see the sort of the pricing, the pricing kicking in relative to the inflation.
Year, a little over 300 basis points.
We expect that that will soften to around 150 ish in the second quarter and then in the back half of the year will basically be up to get to the full year to full year guidance and sort of directionally down 80 basis points year over year from a combination. So that basically is a reflection of how we see the sort of the.
Pricing the pricing kicking in relative to the installation.
And we will take our next question from Chris Parkinson with Mizuho Securities. Your line is now open.
Speaker 1: And we'll take our next question from Chris Parkinson with Missio Securities. Your line is now open.
Speaker 5: Great, thank you so much. So, when I look across your portfolio, pretty solid results in Nourish, Senn, etc. When you kind of take a step back and look at the portfolio right here, right now, could you just comment on two things? The first, just where you feel incrementally more positive on the potential for revenue synergies, and then also just any further color on smaller portfolio pruning. Thank you so much.
Great. Thank you so much so when you look across your portfolio had pretty solid results and nourish.
Et cetera.
You kind of take a step back and look at the portfolio.
Right here right now can you just comment on two things. The first just where you feel incrementally more positive on the potential for revenue synergies and then also just any further color on.
Smaller portfolio pruning. Thank you so much.
Speaker 5: Yeah, good question. So maybe Andres can add a little bit more on the revenue synergy. Right? We feel very good about the longer term prospects on revenue synergies. We admit that we're behind. We basically are not on the original plan relative to the timing or the pace of the revenue synergies. That, in our view, is simply a function of how we spent last year. The last year because of the nature of supply chain issues, inflation issues.
Yeah. Good question, so maybe Andres and add a little bit more on the revenue synergies, we feel very good about the longer term prospects on revenue synergies. We admit that we are behind we basically are not on the original plan relative to the timing and the pace of the revenue synergies that and our view is simply a function of how we spent the last year.
Last year because of the nature of supply chain issues of inflation issues.
Speaker 5: We ended up dedicating resources more to the here and now from the standpoint. It's actually also allowed us for our commercial teams, our R&D teams.
Ended up.
Dedicating resources more to the here and now from the standpoint, it's actually also allowed us for our commercial teams our R&D teams to basically spend more time working together as a byproduct of that we do feel like there is a very very strong pipeline.
Speaker 5: to basically spend more time working together. And it's a byproduct of that. We do feel like there's a very, very strong pipeline of opportunities going forward. So, I'm very
Of opportunities going forward so.
Andres.
Speaker 4: You will see basically the majority of the opportunities within our Norwich division.
You will see basically the.
The majority of the opportunities.
In our North Division.
Speaker 4: because by the nature of the products and the customer, it just goes very nicely together. If you just take all the plant-based protein products, we basically can offer almost a total solution, in many cases, even a total solution to our customers. So that's one example. The other example is, and we had just one of the big customer meetings on the American Cleaning Institute Congress this month.
Because by the nature of the products and the customer is just goes very nicely together. If you just take all the the plant based protein products, where we basically can can offer almost the total solution on in many many cases, even a total solution to our customers. As one example, the other example is and we're just one of the big.
Customer meetings on the American cleaning Institute Congress. This this months, where you see that the enzyme business.
Speaker 4: where you see that the enzyme business for household care products and the fragrance business are going hand in hand. So these are certainly the biggest opportunities for us going forward. And then something which we should not underestimate is that we have opportunities on the R&D side as well. And I'll give you just one very concrete example. Everybody is looking now.
<unk> care products and the fragrance business are growing going hand in hand. So these are certainly the biggest opportunities for us growing going forward and then something which we should not underestimate. This that we have opportunities on the R&D side as well and I'll give you just one very concrete example, everybody is looking now.
Speaker 4: for these capsules where you put the fragrance into the detergent and to produce a green capsule. And now with our enhanced capabilities, we have many more programs running to come up with really good solutions. They're already in generation two and three, and that is a synergy by themselves, as well in the R&D area, which probably takes a little bit more time. And then probably, then you should comment on the portfolio. Yeah, great question on portfolio. As I mentioned in my comments, I think we've done a very, very good job of being thoughtful about new town core businesses.
Yes.
The catch tools, where you put the fragrance detergent and to produce a green capsule and now with our enhanced capabilities. We have many more programs running to come up with some really good solutions that are already in generation two and three.
It's a synergy by themselves as well on the R&D.
Area, which probably takes a little bit more time, and therefore, you should comment on the corporate portfolio. Yeah. Great question on portfolio as I mentioned in my comments I think we've done a very very good job of being thoughtful about these noncore businesses noncore. Those basically are sort of dilutive to our topline and bottomline and just simply strategically you don't have it.
Speaker 5: non-core, those that basically are sort of deluges to our top line and bottom line and just simply strategically don't have a great fit. As you know, we have sold food prep. We will be closing in the second quarter on microbial control. That's basically 1.4 billion gross.
Great. Thank.
As you know we have sold through perhaps we will be closing in the second quarter on microbial control. That's basically $1 4 billion gross we have three or four other businesses that are being teed up we will be going to market in the coming months quarters, we fully anticipate to have them executed Aida transactions close.
Speaker 5: We have 3 or 4 other businesses that are being teamed up. We will be going to market in the coming months quarters.
Speaker 5: We fully anticipate to have them executed, i.e. the transactions close and the cash can be handled in 18 months.
And the cash in hand within 18 months, we think that range is one five to $1 7 billion relative to the three to four entities and very importantly, our goal is to use those proceeds to get us to the three times or lower leverage ratios. So that actually has been working very well we have a dedicated set of teams that do nothing but sort of folk.
Speaker 5: We think that range is 1.5 to 1.7 billion relative to the 3 to 4 entities. And very importantly, our goal is to use those proceeds to get us to the 3 times or lower of laboratory issues. So that actually has been working very well. We have a dedicated set of teams that do nothing but sort of focus on that to get that done. The markets have been good relative to interest in certain properties, so we're very encouraged by that.
On that to get that done the markets have been good relative to interest in certain properties. So we're very encouraged by that.
Speaker 1: And we have no further questions on the line at this time. I will turn the program back over to Audrey Smith for any additional or closing remarks.
And we have no further questions on the line at this time I will turn the program back over to Andre Fitbit for any additional or closing remarks.
Speaker 4: Thank you very much for the participation and the good questions and taking consideration that's my last IFF meeting here. Thank you for all the good and constructive work and have a good day. Thank you.
Yes. Thank you very much for the participation and good questions and take into consideration that's my last.
Yes.
Yes. Thank you for all the good reconstructive work and have a good day. Thank you.
Okay.
Speaker 1: This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful day.
This does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful wonderful day.
Speaker 2: I the I.
Okay.
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Speaker 2: I.
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Speaker 1: At this time, I would like to welcome everyone to the IFF fourth quarter and full year 2021 earnings conference call. Our participants will be in a listen only mode until the formal question and answer portion of the call.
At this time I would like to welcome everyone to the I S S fourth quarter and full year 2021 earnings conference call.
Participants will be in a listen only mode until the formal question and answer portion of the call.
Speaker 1: To ask a question at that time, please press the star 1 on your telephone keypad. If you would like to remove your name from the queue, please press the pound key. Participants will be announced by their name and company. In order to give all participants an opportunity to ask their question, please press the star 1 on your telephone keypad.
To ask a question at that time. Please press the star one on your telephone keypad, if he would like to remove your name from the queue. Please press the pound key participants will be announced by their name and company in order to give all participants an opportunity to ask their questions.
Speaker 1: We request a limit of one question per person. I would now like to introduce Michael Devaux, head of investor relations. You may begin.
We request a limit of one question per person I would now like to introduce Michael Deveau head of Investor Relations you may begin.
Speaker 3: Thank you. Good morning, good afternoon, and good evening, everyone. Welcome to IFF's fourth quarter and full year 2021 conference call.
Thank you good morning, good afternoon, and good evening, everyone welcome to Iff's fourth quarter and full year 2021 conference call.
Speaker 3: Yesterday, we issued a press release announcing our fourth quarter and full year 2021 financial results and outlook for 2020.
Yesterday, we issued a press release announcing our fourth quarter and full year 2021 financial results and outlook for 2022.
Speaker 3: A copy of the release can be found on our IR website at ir.ifs.com.
A copy of the release can be found on our IR website at IR Dot Dot com.
Speaker 3: Please note that this call is being recorded live and will be available for replay. I ask that you please take a moment to listen to the recording.
Please note that this call is being recorded live and will be available for replay.
I ask that you. Please take a moment to review our forward looking statements.
Speaker 3: During the call, we were making forward-looking statements about the company's performance and outlook based on the current state of the business.
During the call we are making forward looking statements about the company's performance and outlook based on the current state of the business.
Speaker 3: These statements contain elements of uncertainty, which we have laid out on slide two under the cautionary.
These statements contain elements of uncertainty, which we have laid out on slide two under the cautionary statement.
Speaker 3: For additional information concerning the factors that can cause actual results to differ materially from our forward-looking statements, please refer to our cautionary statement and risk factors stated in our press.
For additional information concerning the factors that could cause actual results to differ materially from our forward looking statements. Please refer to our cautionary statement and risk factors contained in our press release.
Speaker 3: Today's presentation will include non-GAAP financial measures, which exclude those items that we believe affect comparability.
Today's presentation will include non-GAAP financial measures, which exclude those items that we believe affect comparability.
Speaker 3: A reconciliation of these non-GAAP financial measures to their respective GAAP measures is available on our website.
A reconciliation of these non-GAAP financial measures to their respective GAAP measures is available on our website.
Speaker 3: Please note that we will be using combined historical results for the fourth quarter to find this three months of legacy IFF results and three months of NMB results and for the full year defined as 12 months of legacy IFF January to December and 11 months of NMB February to December in the both 2020 and 2021 periods to allow comparability in light of the merger completion on February 1st, 2021.
Please note that we will be using combined historical results for the fourth quarter defined as three months of legacy ISF results and three months of MMP results and for the full year defined as 12 months of legacy Iff's January to December at 11 months of NMB February to December for both 2020.
2021 periods to allow comparability in light of the merger completion on February one 2021.
Speaker 3: With me on the call today is our Chairman and CEO , Andreas Fibig, and our Executive Vice President and CFO , Glenn Richter. We will begin today's call with our prepared remarks and then take any questions you have at the end. I would now like to turn the call over to Andreas.
With me on the call today is our chairman and CEO , Andreas <unk>, and our executive Vice President and CFO Glen vector, we will begin today's call with our prepared remarks, and then take any questions. You have at the end I would now like to turn the call over to Andreas.
Speaker 4: Thank you, Mike, and hello everyone. Thank you for joining us today. Before we dive into our results for the fourth quarter and full year 2021, I think it's important to acknowledge that this has been a transformational year for IFS.
Thank you, Mike and Hello, everyone. Thank you for joining us today before we dive into our results for the fourth quarter and full year 2021, I think it's important to acknowledge that this has been a transformational year for <unk>.
Speaker 4: We continue to make tremendous progress amid the global, the complex global operating environment. With a world-class team and an unmatched portfolio, IFF has become a global leader in high-value ingredients and solutions for the global food, beverage, home and personal care, and health and wellness markets.
We continue to make tremendous progress amidst the global the complex global operating environment with a world class team and an unmatched portfolio ICF has become a global leader in high value ingredients and solutions for the global food beverage home and personal care and health and wellness markets.
Speaker 4: IFF is a significantly larger, stronger and more diversified organization than when we began our transformation several years ago. The enhanced scale gained through our combination with NMB makes us an even more powerful, innovative and trusted partner to all our customers.
<unk> is a significantly larger stronger more diversified organization than when we began our transformation several years ago.
Scale gains through our combination with NMB makes us an even more powerful innovator and trusted partner to our customers.
On a personal level I must also reflect on what has been a tremendous and highly satisfying journey leading ISS.
Speaker 4: On a personal level, I must also reflect on what has been a tremendous and highly satisfying journey leading IFF. Together we have taken a number of strategic actions that have transformed IFF into the category defining leader it is today. And I'm also incredibly optimistic about IFF's future. The company's leadership team going forward has the right expertise to lead IFF's next chapter of growth and excellence in execution.
Further we have taken a number of strategic actions that have transformed <unk> into a category defining leader it is today.
I am also incredibly optimistic about <unk> future. The company's leadership team going forward has the right expertise to lead <unk> next chapter of growth and excellent in execution.
Speaker 4: I and the entire IFF team are pleased that Frank Clyburn will join IFF as our Chief Executive Officer effective February 14th.
I and the entire <unk> team are pleased that Frank client Bryan will join <unk> as our Chief Executive Officer effective February <unk>.
Speaker 4: Frank brings extensive experience leading complex global businesses and overseeing large-scale integrations. He is a proven operator and will enhance the team's focus on execution to benefit our customers, teams and shareholders. It has been a privilege to lead such a talented global team and I know that with the recent appointment of both Frank and Glenn, IFF will be in good hands.
Frank brings extensive experience leading complex global businesses and overseeing large scale integrations is approved them operate that will enhance the team's focus on execution to benefit our customers teams and shareholders.
It has been a privilege to lead such a talented global team and I know that was the recent appointment of both Frank and then either we'll be in good hands.
Speaker 4: We also recently announced the appointment of Barry Bruno to IFF's Board of Directors as an independent director. Barry is a welcome addition to our board as he has significant experience leading innovative consumer brands that will benefit all of IFF's stakeholders as the company executes its strategic and operating priorities.
We also recently announced the appointment of Barry Bruno <unk> Board of directors as an independent director various a welcome addition to our board as she has significant experience leading innovative consumer brands that will benefit all of <unk> stakeholders as the company executes its strategic and.
<unk> priorities.
Speaker 4: The Prairie joins a board, eight of which are new to the IFF board, within the past year when FRANK begins next week. That consists of proven executives with deep experience leading global organizations, overseeing transformative merger integrations and executing business strategies across a diverse set of industries.
Barry joins our board eight of which are new to the board within the past year. When Frank begins next week that consists a proven executive with deep experience, leading global organizations overseeing transformative merger integrations.
Tubing business strategies across a diverse set of industries.
Speaker 4: On today's call, I will begin with providing an overview of IFAS's full year 2021 performance and discussing the progress we have made so far on our integration.
On today's call I will begin with providing an overview of <unk> full year 2021 performance and discussing the progress we have made so far on our integration.
Speaker 4: I will then turn the call over to Glenn who will provide a detailed look at our fourth quarter financial results.
I will then turn the call over to Glenn who will provide a detailed look at our fourth quarter financial results.
Speaker 4: Before we conclude today's call with a question and answer session, Ben will also speak to our outlook for 2022.
Before we conclude today's call with a question and answer session. Then will also speak to our outlook for 2022.
Speaker 4: I'd like to begin on slide six by reflecting on our strong performance for the full year 2021. IFS financial results in 2021 reflect the strength and durability of our expanded portfolio and the exceptional dedication of our teams. Within the challenges of today's global operating environment, we delivered strong sales growth across our business divisions, including meaningful recoveries in the segments most affected by the pandemic.
I'd like to begin on slide six are reflecting a strong performance for the full year 2021, I address financial results in 2021 reflect the strength and durability of our expanded portfolio and the exceptional dedication of all of the teams.
Within the challenges of today's global operating environment, we delivered strong sales growth across all business divisions, including meaningful recoveries in the segment's most affected by the pandemic.
Speaker 4: For the full year 2021, IFF delivered 11.7 billion in sales, representing 10% growth or 8% on a currency neutral basis, consistent of very strong volume growth and modest pricing contribution.
For the full year 2021, IVF delivered $11 7 billion in sales, representing 10% growth or 8% on a currency neutral basis consistent of very strong volume growth at modest pricing contributions.
Speaker 4: Like so many companies now, persistent inflation and global supply chain challenges pressured our profitability margin. Yet, we achieved 3% growth in our combined adjusted operating EBITDA.
Like so many companies now persistent inflation and global supply chain challenges pressured our profitability margin, yet we achieved 3% growth in our combined adjusted operating EBITDA.
Speaker 4: Glenn will cover these topics in greater depth, but I want to note here that we are taking significant actions to best position the business and that evolving macroeconomic environment including significant pricing action.
Glenn will cover these topics in greater depth, but I want to note here that we are taking significant actions to best position the business ahmet evolving macroeconomic environment, including significant pricing actions.
Either continues to operate with a very strong financial foundation, having delivered $1 4 billion in free cash flow or approximately 9% of all our sales driven by robust cash generation.
Speaker 4: IFAK continues to operate with a very strong financial foundation, having delivered $1.04 billion in free cash flow, or approximately 9% of our sales, driven by robust cash generation.
Speaker 4: Given our strong financial position, we continue to make significant progress towards meeting our deleveraging target, having already reduced net debt to credit adjusted EBITDA to 4.1 times.
Given our strong financial position, we continue to make significant progress towards meeting our deleveraging target having already reduced net debt to credit adjusted EBITDA to four one times.
Speaker 4: We also delivered meaningful synergies in connection with our integration initiatives. Importantly, we have outperformed our cost synergy targets for year one, post close of the NMB merger, and our ongoing focus on execution positions as well to further drive synergy realization and productivity improvements.
We also delivered meaningful synergies in connection with our integration initiatives and importantly, we have outperformed our cost synergy targets for year, one post close of the NMB merger and our ongoing focus on execution positions us well to further drive synergy realization and productivity improvements.
Speaker 4: In 2021, we also made significant strides to optimize our portfolio, including the successful divestiture of our food preparation business and the announced sale of our microbial control business, which we expect will be completed in the second quarter of 2022.
In 2021, we also made significant strides to optimize our portfolio, including the successful divestiture of our food preparation business and the announced sale of all microbial control business, which we expect will be completed in the second quarter of 2022.
Speaker 4: Once our microgrid control sale is complete, the combination of all of these two transactions will generate approximately $1.4 billion in gross proceeds.
Once all my corporate controller sale is complete the combination of all of these two transactions will generate approximately $1 4 billion in gross proceeds.
Speaker 4: Growing IFS to more rapidly deliver the balance sheet. As we continue to progress with our integration objectives, Frank and team will explore additional opportunities to optimize our portfolio, driving greater focus on the core parts of the business and enhancing shareholder value through rapid e-leveraging.
Growing ipass to more rapidly de lever the balance sheet as we continue to progress with our integration objectives, Frank and team will explore additional opportunities to optimize our portfolio driving greater focus on the core parts of the business and enhancing shareholder value through rapid deleveraging.
Speaker 4: For IFF, 2021 was filled with exciting achievements and meaningful change that continue to propel us forward and solidify the importance of our business within the global supply chain. Our business is delivering strong growth as an indispensable partner to our customers. And while we are operating in a challenging environment, our leadership team is taking the right action to position our business for the future.
<unk> 2021 was filled with exciting achievements at meaningful change that continue to propel us forward and solidify the importance of our business within the global supply chain. Our business is delivering strong growth as an indispensable partner to our customers and while we are operating in a challenge.
<unk> environment, our leadership team is taking the right actions to position our business for the future.
Speaker 4: We are delivering on our commitment to boldly reinvent, deliver consistent execution and transform our ability to reach and partner with more customers around the world.
We are delivering on our commitment to boldly reinvent deliver consistent execution and transform our ability to reach and partner with more customers around the world.
Speaker 4: 2021 was a foundational year and one that I have no doubt that the company will build on as it accelerates into the future.
2021 was a foundational year and one that I have no doubt that the company will build on as it accelerates into the future.
Now turning to slide seven I would like to walk through the regional sales dynamics underpinning our results for the full year 2021.
Speaker 4: Now turning to slide seven, I would like to walk through the regional sales dynamics underpinning our results for the full year 2021. I'm pleased to share that we saw strong growth in all four of our key operating regions.
I'm pleased to share that we saw strong growth in all four of our key operating regions.
Speaker 4: In North America, we achieved 8% growth across nearly all segments, led by high single-digit growth in health and bioscience. In Asia, sales increased by 9%, led by continued double-digit growth in India and China. Newer, send and former solutions all performed particularly well in Asia, with strong growth in momentum throughout 2021.
In North America, we achieved 8% growth across nearly all segments led by high single digit growth in health <unk> Bioscience and Asia sales increased by 9% led by continued double digit growth in India, and China Newish sand in pharma solutions, all performed particularly well in Asia with strong growth and momentum.
Throughout 2021.
Speaker 4: IFS achieved 11% growth in Latin America region with double digit growth across nearly all countries. Our newest division delivered strong double digit growth with health and bioscience and 10 businesses growing in the highest single digit.
Iff's achieved 11% growth in Latin America region with double digit growth across nearly all countries. Our north division delivered strong double digit growth withheld some bioscience incentive businesses growing in the high single digits.
Speaker 4: Our EME region also delivered strong sales results with 9% sales growth driven by the double digit growth in fine pregnant business. EME was also bolstered by strength in our nourished business with saw significant growth led by food service.
Our EMEA region also delivered strong sales results with 9% sales growth driven by the double digit growth in fine fragrance business. EMEA was also bolstered by strength in our annuity business, which saw significant growth led by foodservice.
Moving now to slide eight I would like to discuss our sales performance across business segments that contributed to our overall strong growth for the year.
Speaker 4: Moving now to slide 8, I would like to discuss our sales performance across IFF business segments that contributed to our overall strong growth for the year.
Speaker 4: For the full year, Nürburg was broad-based strengths in our flavors, ingredients and food design businesses.
For the full year normally achieved currency neutral sales growth of 9% was broad based strength in our flavors ingredients and food design businesses.
Health and Bioscience delivered 6% currency neutral growth in 2021, primarily driven by strong performance in home and personal care animal attrition and culture and food enzymes.
Speaker 4: Health and Bioscience delivered 6% current to nuclear growth in 2021, primarily driven by strong performance and home and personal care, animal nutrition and culture and food enzymes.
Speaker 4: Scent also delivers strong 8% currency neutral growth led by fine fragrance, consumer fragrance and ingredients.
<unk> also delivered strong 8% currency neutral growth led by client fragrance consumer fragrance and ingredients.
Speaker 4: Pharma Solutions achieves 2% currency in nuclear growth driven by demand in our industrial business, while we continue to see headwinds related to ongoing limited material availability and logistical constraints.
Pharma solutions achieved 2% currency neutral growth driven by demand in our industrial business.
While we continue to see headwinds related to ongoing limited material availability and logistical constraints.
Speaker 4: Now onto slide 9. I would like to focus on the underlying dynamics driving segment performance. For Nourish, consistent strong performance included double digit growth in ingredients. While our margins were impacted by higher costs of raw materials, EBITDA increased 8% from strong volume growth, pricing actions, and a continued focus on cost management.
Now onto slide nine I would like to focus on the underlying dynamics driving segment performance for north consistent strong performance included double digit growth in ingredients, while our margins were impacted by higher cost of raw materials EBITA increased 8% from strong volume growth pricing actions.
And a continued focus on cost management.
Speaker 4: In health and bioscience, strong roles in home and personal care, grain processing and cultures, and food enzymes were key drivers.
In health <unk> Biosciences strong growth in home and personal care grain processing and cultures and food enzymes were key drivers.
Speaker 4: Higher cost for raw materials and logistics remains a challenge, with an adjusted operating EBITDA margin of 26.8% in this segment.
Higher costs for raw materials, and logistics remains a challenge, which is adjusted operating EBITDA margin of 26, 8% in this segment.
Our sand division benefited by particular strong rebound from last year in fine Fragrances. In addition to continued solid performance in consumer fragrances and double digit growth in cosmetic actives.
Speaker 4: Our center vision benefited by a particularly strong rebound from last year in fine fragrances, in addition to continued solid performance in consumer fragrances and double-digit growth in cosmetic actives.
Speaker 4: Adjusted operating EBITDA grew 11% as margin expanded 30 bps led by volume growth, favorable mix and higher productivity.
Adjusted operating EBITDA grew 11% as margin expanded 30 bps led by volume growth favorable mix and higher productivity.
Speaker 4: And finally, in former solutions, we saw significant customer demand and double digit growth in the segment's industrial business. Global supply chain issues, however, remained an overhang for 2021 margin performance.
And finally in pharma solutions, we saw significant customer demand and double digit growth in the segments industrial business global supply chain issues. However remain an overhang for 2021 margin performance.
Speaker 4: Moving now to slide 10. I'm very pleased to share that our full year sales results exceeded pre-COVID levels, which is particularly encouraging for the year ahead. As previously outlined, SalesGores was consistent across our business segments, reflecting the strengths and resilience of our expanded portfolio and IFS position as an essential partner for customers in critical industries around the world.
Moving now to slide 10, I am very pleased to share that our full year <unk> results exceeded pre COVID-19 levels, which is particularly encouraging for the year ahead as.
As previously outlined sales growth was consistent across all our business segments, reflecting the strength and resilience of our expanded portfolio in iff's position as an essential partner for customers in critical industries around the world.
Speaker 4: It is clear that IFF continues to deliver enhanced value to our customers as a result of our merger with NMB and the work we are doing to strategically integrate our businesses and focus on execution. Simply put, we are a stronger business today and our customers recognize the unique value we bring as a trusted innovation partner.
It is clear that <unk>.
<unk> to deliver enhanced value to our customers as a result of our merger with NMB and the work we're doing to strategically integrate our businesses and focus on execution simply put we are strong our business today and our customers recognize the unique value we bring as a trusted.
<unk> partner.
Speaker 4: Let's move to slide 11. I would like to reiterate our strong progress to deliver synergies in connection with the canopy combination.
Let's move to slide 11, I will.
I'd like to reiterate our strong progress to deliver synergies in connection with the NMB combination.
Speaker 4: In 2021, we exceeded our year one target of 45 million to deliver approximately 60 million in cost savings. This includes approximately 20 million in savings in the fourth quarter.
In 2021, we exceeded our year, one target of $45 million to deliver approximately $60 million in cost savings. This includes approximately $20 million in savings in the fourth quarter.
Speaker 4: Revenue synergies also were a modest contribution to top-line performance with a projected pipeline continuing to develop.
Revenue synergies also were a modest contribution to topline performance was a projected pipeline continuing to develop.
Speaker 4: Execution and operating discipline remain the top priority for our leadership team, and I'm pleased to see results that reflect this commitment. With that, I'd like to turn the call over to Glenn.
Execution and operating discipline remain the top priority for our leadership team and I am pleased to see results that reflect this commitment with that I'll now.
Like to turn the call over to Glenn.
Speaker 5: Thank you, Andreas and welcome everyone. Thank you again for being with us today. As Andreas highlighted, 2021 was a strong year for sales growth, including a strong fourth quarter finish.
Andreas and welcome everyone. Thank you again for being with US today as Andreas highlighted 2021 was a strong year for sales growth, including a strong fourth quarter finish.
Speaker 5: Looking more closely at our consolidated 4th quarter results, IFF generated greater than 3 billion dollars in sales. Representing a 10% year over year increase on a currency neutral basis. Our 3rd consecutive quarter of double digit growth. Primarily driven by double digit growth in our health and biosciences division as well as high single digit growth across our Nourish, Scent and Pharma division.
More closely at our consolidated fourth quarter results that generate greater than $3 billion in sales, representing a 10% year over year increase on a currency neutral basis, our third consecutive quarter of double digit growth, primarily driven by double digit growth in our health and Biosciences Division.
As well as high single digit growth across ordinary.
And pharma divisions.
Speaker 5: As with our full year results, our fourth quarter margin performance continued to face inflationary pressures, much like our entire industry, which offset positive volume growth, solid price increases, and the benefits of synergies and productivity.
As with our full year results, our fourth quarter margin performance continue to face inflationary pressures much like our entire industry, which offset positive volume growth solid price increases and the benefits of synergies and productivity.
Speaker 5: Early in the fourth quarter, we recognized a significant escalation in inflationary pressures, and as a result, we quickly mobilized to prepare to implement significant pricing actions across all businesses to protect overall profitability. I'll discuss these actions as well as our efforts to accelerate productivity and operational excellence when I discuss our 2022 outlook.
Early in the fourth quarter, we recognized a significant escalation in inflationary pressures and as a result, we quickly mobilized to prepare to implement significant pricing actions across all businesses to protect overall profitability ill.
I will discuss these actions as well as our efforts to accelerate productivity and operational excellence when I discuss our 2022 outlook.
Speaker 5: On the next several slides, I will briefly dive deeper into the fourth quarter financials of each of our four business days.
Over the next several slides I will briefly dive deeper into the fourth quarter financials of each of our four business segments.
Speaker 5: Turning to slide 13, I'll begin with our Nourish segment, which experienced both a solid quarter and overall performance in 2021. In the fourth quarter, Nourish achieved 9% year-over-year sales growth on a currency-neutral basis, driven by strong volume growth and price increases. Our flavors business in particular realized strong growth with increased sales across all regions.
Turning to slide 13, I'll begin with ordinary segment, which experienced both a solid quarter and overall performance in 2021.
In the fourth quarter nourish achieved 9% year over year sales growth on a currency neutral basis, driven by strong volume growth and price increases our flavors business in particular realized strong growth with increased sales across all regions.
Speaker 5: Ingredients grew by strong double digits due to increasing customer demand. And both food design and food service also drove growth for Nourish in the fourth quarter.
<unk> grew by strong double digits due to increasing customer demand in both food design and foodservice also drove growth for nourish in the fourth quarter.
Speaker 5: adjusted operating EBITDA declined slightly due to inflationary pressure.
Adjusted operating EBITDA declined slightly due to inflationary pressures pressure on profitability occurred despite strong volume growth increased productivity and strategic price increases in this segment.
Speaker 5: Pressure on profitability occurred to provide strong volume growth, increased productivity, and strategic price increases in the segment.
Speaker 5: On slide 14, our Health and Biosciences Division delivered 4th quarter year-over-year sales growth of 13% on a currency-neutral basis, led by double-digit growth in health, microbial control, animal nutrition, and grain processing.
On slide 14, our health and Biosciences Division delivered fourth quarter year over year sales growth of 13% on a currency neutral basis led by double digit growth in health microbial control animal nutrition and grain processing. Additionally.
Speaker 5: Additionally, cultures and food enzymes and home and personal care each grew at a high speed.
Additionally, cultures, and food enzymes and home and personal care each grew at a high single digits against strong year over year comparisons.
Speaker 5: Our adjusted operating EBITDA increased 4% due to volume growth and higher productivity, while margins face pressure due to inflation and higher logistics costs.
Our adjusted operating EBITDA increased 4% due to volume growth and higher productivity, while margins face pressure due to inflation and higher logistics costs.
Speaker 5: Turning now to slide 15, our set division continued to perform well and achieved strong growth in the fourth quarter, delivering 6% year-over-year growth or 7% growth on a currency neutral basis.
Turning now to slide 15, our sense Division continued to perform well and achieved strong growth in the fourth quarter, delivering 6% year over year growth.
<unk>, 7% growth on a currency neutral basis.
Speaker 5: This performance was supported by a continued rebound in fine fragrances, which saw double-digit growth driven by new winds and increased volume.
This performance was supported by a continued rebound in fine fragrances, which saw double digit growth driven by new wins and increase volume.
Speaker 5: Our consumer fragrances category delivered single digit growth against a strong high single digit year ago comparison.
Our consumer fragrances category delivered single digit growth against a strong high single digit year ago comparison.
Speaker 5: The ingredients business continues to contribute to the success of the overall segment with double digit growth in fragrant ingredients.
The ingredients business continues to contribute to the success of the overall segment with double digit growth in fragrance ingredients.
Speaker 5: Despite solid volume growth and favorable mix in the business, sense adjusted operating EBITDA growth was affected by higher costs of raw materials, which we continue to take action to mitigate.
Despite solid volume growth and favorable mix in the business.
Adjusted operating EBITDA growth was affected by higher cost of raw materials, which we continue to take action to mitigate.
Speaker 5: On slide 16, our pharma solutions segment delivered year-over-year currency and mutual sales growth of 9% from 2020 as a result of volume strength and price increases. Both our core pharma and industrial categories contribute to our strong performance in the quarter.
On slide 16, our performance solutions segment delivered year over year currency neutral sales growth of 9% from 2020 as a result of volume strength in price increases both our core pharma and industrial categories contributed to our strong performance in the quarter.
Speaker 5: For pharma solutions, adjusted operating e-vig
For pharma solutions adjusted operating EBITDA and margin was also impacted by higher raw material and energy costs.
Speaker 5: We recognize the challenges the segment is experiencing through the current market environment and macro supply chain constraints, and are optimistic that as a global situation recovers, we will recognize the full potential of pharma solutions.
Recognize the challenges. This segment is experiencing through the current market environment and macro supply chain constraints and are optimistic that as a global situation recovers, we will recognize the full potential of pharma solutions.
Speaker 5: Now on slide 17, I would like to review our cash flow position in progress in deleverage.
Now on slide 17, I would like to review our cash flow position.
Progress in deleveraging.
Speaker 5: For the full year 2021, we delivered strong cash flow of over $1 billion and are on track to meet our deleveraging goal.
For the full year 2021, we delivered strong cash flow of over $1 billion and are on track to meet our deleveraging goals.
Speaker 5: 2021 CapEx was $393 million, or approximately 3.4% of sales, as we made strategic investments in the most attractive segments of our portfolio.
'twenty, one capex was $393 million or approximately three 4% of sales as we made strategic investments in the most attractive segments of our portfolio.
Speaker 5: Overall, our capital expenditures were lower than originally planned, in part through the slower implementation of projects, due to some vendor delays and a continuation of the COVID environment.
Overall, our capital expenditures were lower than originally planned in part due to slower implementation of projects due to some vendor delays and a continuation of the COVID-19 environment.
Speaker 5: We also paid out $667 million in dividends to our shareholders in 2021.
We also paid out $667 million in dividends to our shareholders in 2021.
Speaker 5: From a leverage perspective, we continue to make substantial progress toward achieving our feed leveraging target, finishing 2021 with 4.1 net debt to credit adjusted EBITDA ratio. IFF reduced gross debt by 124 million to 11.4 billion versus Q3, and we finished 2021 with cash and cash equivalents of 716 million.
From a leverage perspective, we continue to make substantial progress toward achieving our deleveraging target.
Finishing 2021 with four one net debt to credit adjusted EBITDA ratio.
That reduced gross debt by 144 million to $11 4 billion versus Q3, and we finished 2021 with cash and cash equivalents of $716 million.
Speaker 5: We remain confident that ISF is on track to achieve our deleveraging target of 3 times net debt to credit adjusted EBITDA by year 3 post close.
We remain confident that <unk> is on track to achieve our deleveraging target of three times net debt to credit adjusted EBITDA by year three post close.
Speaker 5: further supported by additional divestitures that I will touch on in a moment.
Further supported by additional divestitures I will touch on intermodal.
Speaker 5: Turning to slide 18, I'd like to provide commentary on our business outlook for 2022.
Turning to slide 18, I'd like to provide commentary on our business outlook for 'twenty to 'twenty two.
Speaker 5: For fiscal year 2022, we expect revenue between 12.3 and 12.7 billion. With adjusted operating EBITDA in the range of 2.5 to 2.6 billion.
For fiscal year 2022 we expect revenue between $12, three and $12 7 billion.
With adjusted operating EBITDA in the range of two five to $2 6 billion.
Speaker 5: We also are forecasting foreign exchange rates will be a headwind in 2022, approximately 2 percentage point headwind to our revenue and a 4 percentage point headwind to the Justice Operating Endodont in 2022.
We also are forecasting foreign exchange rates will be a headwind in 2022.
Approximately two percentage point headwind to our revenue.
And a four percentage point headwind to adjusted operating EBITDA in 2002.
Speaker 5: As you are all well aware, we continue to operate in a complex market environment with ongoing uncertainties from pandemic, global political tensions and supply chain challenges.
As you are all well aware, we continue to operate in a complex market environment with ongoing uncertainties from pandemic.
Global political tensions and supply chain challenges.
Speaker 5: IFF and our industry at large have been impacted by these issues. And we expect and have planned for that these challenges will remain into 2022.
In our industry at large have been impacted by these issues and we expect and have planned for that these challenges will remain into 2022.
Speaker 5: As I shared on our third protocol, we expect inflationary pressures to be significant in 2022 as we see large cost increases in raw materials, energy, and logistics.
As I shared on our third quarter call, we expect inflationary pressures to be significant in 2022, as we see large cost increases in raw materials energy and logistics as a result, we are taking significant pricing actions to fully offset our dollar cost exposure, which we expect will.
Speaker 5: As a result, we are taking significant pricing actions to fully offset our dollar cost exposure, which we expect will result in strong sales and profit growth, but will depress margin.
And strong sales and profit growth, but will depress margin.
Speaker 5: Longer term, we remain confident in our ability to recover margins to pre-inflation levels as we are focused on improving returns to generate strong value creation for our shareholders.
Longer term, we remain confident in our ability to recover margins to pre installation levels. As we are focused on improving returns to generate strong value creation for our shareholders.
Speaker 5: We also remain gently focused on driving cost reductions through synergies and increased productivity efforts throughout our business.
We also remain intently focused on driving cost reductions through synergies and increase productivity efforts throughout our business.
Speaker 5: In addition, we are increasing CapEx in 2022 to approximately 5% of sales.
In addition, we are increasing capex in 2022 to approximately 5% of sales.
Speaker 5: as a result of 21 CapEx carryover and increased investments in capacity expansion in key technologies, which will help support growth while also lowering logistics costs.
As a result of 'twenty, one capex carryover and increased investments in capacity expansion and key technologies, which will help support growth while also lowering logistics costs.
Speaker 5: Finally, we will also be increasing inventory by approximately 300 million to more appropriate levels to ensure we can continue to serve our customers well.
Finally, we will also be increasing inventory by approximately 300 million to more appropriate levels to ensure we can continue to serve our customers well.
Speaker 5: Now moving to slide 19, I would like to focus more specifically on the cost inflation trends that we saw in slide 21 and now forecast to see in slide 22.
Now moving to slide 19, I would like to focus more specifically on the cost inflation trends that we saw in 'twenty, one and now forecast to see in 2002.
Speaker 5: Heading into 2022, we expect certain costs, including raw materials, energy and logistics will continue to rise much as they did in 2021.
Heading into 2022, we expect certain cost, including raw materials energy and logistics, we will continue to rise much as again in 'twenty one.
Speaker 5: Overall, we expect 22 cost increases to be double digits. Call it approximately.
Overall, we expect 'twenty to cost increases to be double digits call. It approximately 10%.
Speaker 5: We are seeing most of these increases related to inflation in raw materials. With double digit increases in hydrochlorides, oils, cellulose, pulp, turpentine, aroma chemicals, petrochemicals, fragrance specialty chemicals, savory ingredients, specialty chemicals, agriculture, grains, and sweeter.
We are seeing most of these increases related to inflation and raw materials with double digit increases in hydrocolloids oils cellulose pulp serpentine aroma chemicals, petrochemicals fragrant specialty chemicals savory ingredients specialty chemicals.
Culture cranes can sweeteners.
Speaker 5: The inflationary pressures manifest themselves differently between the legacy N&B and IFF businesses. Most of the higher energy and logistics costs in 2022 are related to legacy N&B.
The inflationary pressures manifest themselves differently between the legacy NMD and <unk> businesses.
Most of the higher energy and logistics costs and <unk> two are related to legacy Mb.
Speaker 5: With added capacity coming online later this year, we hope to start to mitigate some of the logistics headlines we have been facing due to an imbalance in supply and demand.
With added capacity coming online later this year, we hope to start to mitigate some of the logistics headwinds we have been facing due to an imbalance in supply and demand.
Speaker 5: If you look at Legacy IFF portfolio, we are seeing high single-digit raw material inflation similar to our flavor and fragrance Pierce.
If you look at legacy <unk> portfolio, we are seeing high single digit raw material inflation similar to our flavor and fragrance peers.
Speaker 5: Recognizing these challenges, we have been aggressively pursuing broad-based pricing actions and accelerating energy and productivity efforts.
Recognizing these challenges we have been aggressively pursuing broad based pricing actions and accelerating <unk>.
Energy and productivity efforts.
Speaker 5: Turning to slide 20, I will provide a bit more insight into our sales guidance for 2022.
Turning to slide 20, I'll provide a bit more insight into our sales guidance for 2022.
Speaker 5: our 12.3 to 12.7 billion sales expectation represents continued momentum on top of our strong 2021 results. To get more copies of this, you can click on the link at the top of the video.
Our 12 three to $12 7 billion sales expectation represents continued momentum on top of our strong 2021 results.
So getting more comparable revenue base.
Speaker 5: you must add back approximately 500 million of sales related to N&B in January of 2021 as N&B results were not part of the ISS until February 1st of 2021.
You must add back approximately $500 million of sales related to <unk> in January of 2021 as <unk> results are not part of <unk> until February 1st of 2021.
Speaker 5: Our sales guidance also accounts for the removal of June to December 21 revenue results following the anticipated completed sale of our microbial control business, as well as the first 9 months of 21 sales for the fruit prep divestiture, which we closed in October of last year.
Our sales guidance also accounts for the removal of June to December 'twenty. One revenue results. Following the anticipated completed sale of our microbial control business as well as the first nine months of 'twenty, one sales for the fruit, perhaps divestiture, which we closed in.
Tober of last year.
Speaker 5: That gets you to our comparable 21 revenue base of $11.85 billion as indicated on the slide.
That gets you to our comparable 21 revenue base of $11 85 billion as indicated on the slide.
Speaker 5: As I said earlier, we are significantly increasing our prices in order to fully offset the dollar cost exposure of our inflation for 2022. With that in mind, we anticipate pricing to be a significantly larger contributor to the top line in 2022.
As I said earlier, we are significantly increasing our prices in order to fully offset the dollar cost exposure of our inflation for 2022.
With that in mind, we anticipate pricing to be significantly larger contributor to the top line in 'twenty two.
Speaker 5: This pricing impact, plus more modest volume growth following a strong 21, will be central to our overall sales performance in 22, where we expect to grow approximately 6 to 9% year over year on a comparable currency neutral basis.
This pricing impact plus more modest volume growth. Following a strong 41 will be central to our overall sales performance in 'twenty two.
We expect to grow approximately 6% to 9% year over year on a comparable currency neutral basis.
Speaker 5: Now in terms of our guidance on the adjusted operating EBITDA front, we also have to make adjustments for comparability.
Now in terms of our guidance on the adjusted operating EBITDA front, we also have to make adjustments for comparability.
Speaker 5: If you add that EBITDA related to N&B January results and subtract the EBITDA related to 7 months of EBITDA as a result of the anticipated divestiture of a Merkola Patrol business, as well as the EBITDA related to the fruit prep business for the first 9 months of 21, you get to a comparable 21 days of approximately $2.5 billion.
If you add back to EBITDA related to <unk> results and subtract the EBITDA related to seven months of EBITDA as a result of the anticipated divesture of them appropriate control business.
As well as the EBITDA related to the fruit prep business for the first nine months of 'twenty one.
Get to a comparable 'twenty, one base of approximately $2 5 billion.
Speaker 5: As mentioned, implementing broad-based pricing actions to offset deflationary pressures is critical to our warranty plan. Over the last three plus months, each of our business has exited pricing actions across essentially our entire customer base.
As mentioned implementing broad based pricing actions to offset deflationary pressures is critical to our 'twenty plan.
The last three plus months each of our business has executed pricing actions across essentially our entire customer base as.
Speaker 5: As a result, we anticipate to completely offset projected 22 installation pressures with pricing actions.
As a result, we anticipate to completely offset projected 22 inflationary pressures with pricing actions.
Speaker 5: The majority of these actions will be implemented in the 1st and 2nd quarter.
The majority of these actions will be implemented in the first and second quarter.
Speaker 5: I would also note that we anticipate that 2023 will benefit from an additional 200 million of net pricing benefit Due to the full annualization of our pricing actions, which will be equal to 100% capture of the combined 2021 and 2022 inflation impact on our business.
I would also note that we anticipate that 2023 will benefit from an additional $200 million of net pricing benefit due to the full annualized nation of our pricing actions, which will be equal to a 100% capture of the combined 2021.
And 2022 inflation impact on our business.
Speaker 5: Importantly, we also continue to closely monitor the global supply chain environment and will be prepared to execute additional price actions as appropriate.
Accordingly, we also continue to closely monitor the global supply chain environment.
We'll be prepared to execute additional price actions as appropriate.
Speaker 5: By adding anticipated volume leverage plus synergies and productivity, we expect comparable EBITDA growth in 2022 to be strong, up approximately 4 to 8 percent.
By adding anticipated volume leverage plus synergies and productivity, we expect comparable EBITDA growth in 'twenty two to be strong up approximately 4% to 8%.
Speaker 5: It should be noted that the synergy and productivity contribution here is a net number. We're in the combination of benefits of synergy and productivity, net of cost of living increases, and reinvestments in the business.
It should be noted that the synergy and productivity contribution here is a net number where it is a combination of the benefits of synergy and productivity.
Net of cost of living increases and investments in the business.
Speaker 5: Our guidance implies that our adjusted operating EBITDA margin will be down modestly versus 21, principally due to our net dollar cost recovery, which equates to approximately 100 basis points.
Our guidance implies that our adjusted operating EBITDA margin will be down modestly versus 'twenty, one principally due to our net dollar cost recovery, which equates to approximately 100 basis points.
Speaker 5: Over the course of 21 and 22, we will see more than $1 billion of total inflation.
Over the course of 'twenty, one 'twenty, two we will see more than $1 billion of total ablation and.
Speaker 5: And while we are working rapidly to cover the price increases, it has impacted margins significantly. To give you a perspective of the magnitude, our margin for full year 22 on an inflation adjusted basis would be approximately 300 basis points higher or approximately 23.5%.
And while we are working rapidly to cover via price increases it has impacted margins significantly.
To give you a perspective of the magnitude or margin for full year 'twenty two on an inflation adjusted basis will be approximately 300 basis points higher or approximately 23, 5%.
Speaker 5: In terms of margin cadence throughout 2022, we expect the first half to be down year over year, with expansion coming in the second half. While sales are expected to be strong in the first quarter, year over year adjusted operating even-dob margin performance will be the most challenged of the year, down over 300 basis points versus our reported first quarter 2021 margin, with each quarter after that concluding.
In terms of margin cadence throughout 'twenty, two we expect the first half to be down year over year with expansion coming in the second half.
While sales are expected to be strong in the first quarter.
Year over year, adjusted operating EBITDA margin performance will be the most challenged over the year down over 300 basis points versus our reported first quarter 2021 margin with each quarter after that improving.
Speaker 5: Much of this will be driven by price to total inflation, where we expect to turn positive starting the third quarter.
Much of this will be driven by price and total inflation, where we expect to turn positive starting the third quarter.
Speaker 5: As I conclude, I want to highlight our 4 key areas of focus for 22 and provide further color into our detailed execution plans for each.
As I conclude I want to highlight our four key areas of focus for 'twenty, two and provide further color into our detailed execution plans for each.
Speaker 5: First, we are committed to building on our strong 21 sales in the Midwest.
First we are committed to building on our strong 21 sales in the metal.
Speaker 5: Our 6 to 9% target of 22 currency neutral sales growth anticipates that we will continue to maintain volume growth consistent with overall industry growth rates.
6% to 9% targeted 20 to currency neutral sales growth anticipates that we will continue to maintain volume growth consistent with overall industry growth rates.
Speaker 5: We believe that our exceptional R&D pipeline and scaled global commercial teams, including targeted 22 investments, will allow us to continue to deliver superior customer solutions and support strong growth.
We believe that our exceptional R&D pipeline and scaled global commercial teams, including targeted 22 investments will allow us to continue to deliver superior customer solutions and support strong growth.
Speaker 5: In addition, as I mentioned previously, we are making substantial investments to increase capacity across constrained portions of our portfolio and enhancing supply chain efficiency.
In addition, as I mentioned previously we are making substantial investments to increase capacity across constraining portions of our portfolio.
And enhancing supply chain efficiencies.
Speaker 5: Lastly, we will be sharpening our focus on our revenue synergy opportunities. As we are behind our original plan pace. As much of last year was focused on addressing near term supply chain issues.
Lastly, we will be sharpening our focus on our revenue synergy opportunities as we are behind our original planned pace as much of last year was focused on addressing near term supply chain issues.
Speaker 5: That said, we are confident that the breadth and depth of our platform will allow us to build meaningful revenue synergies over time.
That said, we are confident that the breadth and depth of our platform will allow us to build meaningful revenue synergies over time.
Speaker 5: Second, as previously outlined, we are intently focused on broad-based pricing actions to offset inflation.
Second as previously outlined we are intently focused on broad based pricing actions to offset inflation.
Speaker 5: And importantly, as the macro environment evolves, we are prepared to quickly execute additional pricing actions throughout the year as needed.
And importantly, as the macro environment evolves, we are prepared to quickly execute additional pricing actions throughout the year as needed.
Speaker 5: To enhance our ability to react more quickly to the dynamic environment, over the last several months, we have undertaken a comprehensive end-to-end review of our procurement process.
To enhance our ability to react more quickly to the dynamic environment over the last several months, we have undertaken a comprehensive end to end review of our procurement processes implemented new pricing tools and established core pricing teams for each one of our businesses are.
Speaker 5: implemented new pricing tools, and established core pricing teams for each one of our businesses.
Speaker 5: Our focus has been to compress the time between inflation signals and customer pricing actions, ensuring we optimize product segment and customer specific pricing actions and closely monitor the level and pace of pricing realization.
Our focus has been to compress the time between installation signals and customer pricing actions.
During the optimized product segment and customer specific pricing actions and closely monitor the level and pace of pricing realization.
Speaker 5: Going forward, we are focused on further enhancing our procurement processes and pricing programs.
Going forward, we are focused on further enhancing our procurement processes and pricing programs.
Speaker 5: Third, we are determined to accelerate our synergy utilization and more broadly our productivity efforts in 2022. For your reference included in our 22 guidance, we are targeting approximately 200 million of cost reductions from synergies. Yield enhancements and reformulations, logistics efficiencies and other operational improvements.
Third we are determined to accelerate our synergy realization and more broadly our productivity efforts in 2022 for.
For your reference included in our <unk> guidance, we are targeting approximately $200 million of cost reductions from synergies.
Yield enhancements and we formulations.
Adjusted Sufficiency and other operational improvements net.
Speaker 5: net of wage inflationary pressures and targeted investments to help drive top line growth, we are targeting net cost efficiencies of approximately $100 million for the year.
Net of wage inflationary pressures and targeted investments to help drive top line growth, we are targeting net cost efficiencies of approximately $100 million for the year.
Speaker 5: While we feel this is good progress, we also recognize that there is more work to do. Consequently, in addition to the end to end review of procurement, we are undertaking a comprehensive review of our global manufacturing and logistics platform, constructing a plan to accelerate the scope and scale of our global shared service capabilities, and developing a detailed technology and digital integrated roadmap.
While we feel this is good progress. We also recognize that there is more work to do.
<unk> currently in addition to the end to end review of procurement. We are undertaking a comprehensive review of our global manufacturing and logistics platform constructing a plan to accelerate the scope and scale of our global shared service capabilities and developing a detailed technology and digital integrated roadmap.
Speaker 5: all with the goal of driving meaningful efficiencies while also ensuring we provide superior customer solutions and service.
All with the goal of driving meaningful efficiencies, while also ensuring we provide superior customer solutions and service.
Speaker 5: Fourth, we are actively working to accelerate our non-force divestitures. As we have discussed, we are on track to successfully complete the sale of our microbial control business, which will enhance the efficiency and profitability of our portfolio. We're also targeting additional portfolio optimization to further deliver our balance sheet and focus on core growth opportunities.
Fourth we are actively working to accelerate our noncore divestitures.
As we have discussed we are on track to successfully complete the sale of our <unk> control business, which will enhance the efficiency and profitability of our portfolio.
We're also targeting additional portfolio optimization to further delever, our balance sheet and focus on core growth opportunities.
Speaker 5: Over the coming quarters, we will proceed with marketing a handful of non-strategic businesses, call it 3 or 4, where we believe that over the next 18 months, we can generate expected proceeds of approximately $1.5 to $1.7 billion.
Over the coming quarters, we will proceed with marketing a handful of non strategic businesses.
Three or four where we believe that over the next 18 months, we can generate expected proceeds of approximately one five to $1 7 billion.
Speaker 5: Similar to our fruit prep and the pro-wheel control businesses, these are non-strategic and the transactions will be treated to our go forward growth rate and margin profile.
Similar to our fruit prep and appropriate control businesses. These are non strategic and the transactions will be accretive to our go forward growth rate and margin profile.
Speaker 5: With this action plan, together with our current sales momentum and strength of our leading portfolio, I am confident that IFF will deliver strong results in 2022. With that, I would like to turn the ball back to Andre.
With this action plan together with our current sales momentum and strength of our leading portfolio I am confident that <unk> will deliver strong results in 2022 with that I would like to turn the call back to Andreas Thank you Glenn.
Speaker 4: Thank you Glenn. ISAF's transformation has been deeply personal to me and I know that this company is stronger today than it has ever been. I'm proud of the solid year we had in 2021 with significant year-over-year sales and profit growth as well as steady progress towards our integration with NNB.
Transformation is being deeply personal to me and I know that this company is stronger today than it's ever been I am proud of a solid year, we hit in 2021 with significant year over year sales and profit growth as well as steady progress towards our integration with NMB.
Speaker 4: So all my time at IFF, I've been consistently impressed by the thousands of employees who have dedicated their time and talent to make our company the category defining leader it is today. I want to thank them for their contributions over this year and the time I have led the company and also for their passion about IFF and the commitment to our customers.
So my time at <unk> I've been consistently impressed by the Sullivans of employees, who have dedicated their time and talent to make our company. The category refunds leader. It is today I want to thank them for their contributions over this year and the <unk>.
I have led the company and also for their passion to both ISS and the commitment to our customers.
Speaker 4: The path ahead for the company and its new leadership team is clear. I'm confident that IFF enters its next chapter with the right team, a best-in-class portfolio, innovative spirit, significant financial flexibility, and a unified sense of purpose to drive long-term growth and benefit our shareholders, employees, customers, and communities. With that, I would now like to open the call for questions. Thank you.
The path ahead for the company and its new leadership team is clear I am confident that <unk> enters its next chapter with the right team our best in class portfolio of innovative spirit significant financial flexibility and the unified sense of purpose to drive long term growth and benefit our shareholders employees customers and <unk>.
<unk> was that I would now like to open the call for questions. Thank you.
Speaker 1: At this time, if you would like to ask a question, please press the star and one on your touch tone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and one if you would like to ask a question. And we will take our first question from Gunther Zuckman with Bernstein. Your line is now open.
At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone you may remove yourself from the queue at any time by pressing the pound key once again that is star one if you would like to ask a question and we will take our first question from Gunther Zechman with Bernstein. Your line is now open.
Speaker 6: Hi, good morning, everyone. Hi, Andreas. Hi, Glenn. Thanks for taking my question. Can I start with two? The first one is on the top line guidance for the year. Can you just outline to us what's required to get to the higher or the lower end of the range respectively, please? And the second one is you're pushing through quite a lot of price increases already ahead of
Hi, Good morning, everyone, Hi, Andreas Hi, Glenn Thanks for taking my questions can I start with the first one is on the top line guidance for the year can you just outline to us what is required to get to the higher or the lower end of the range, respectively place and the second one.
You're pushing through quite a lot of price increases already.
Okay.
Speaker 6: some of your key peers in F&F. What's the volume elasticity that you expect or have already seen on the price increases and what do you hear from your customers in that regard?
Some of your key PSN FNF.
What's the volume elasticity that do you expect you will have already seen on the price increases and what you hear from your customers in that regard.
Speaker 5: Yeah, good morning, Gunther. Thanks for the question. Your two questions are highly related because relative to the top line, we'd say the variable that's likely to be the bigger indicator of the range is really going to be more volume than price. If anything, frankly, we feel very good about what we've implemented from price.
Yes, good morning, Gunther. Thanks for the question. Your two questions are highly related because relative to the topline we'd say the variable that's likely to be the bigger indicator of the range is really going to be more volume than price. If anything frankly, we feel very good about what we've implemented some price whats coming through it.
Speaker 5: What's coming through if there's additional inflationary pressures, we may in fact push additional pricing. The volume to some extent, I think is the bigger question mark for us. We had a 2 to 3% assumption. Relative to volumes, that's probably a point lower than historically the market from a standpoint.
Additional inflationary pressures, we may in fact push additional pricing, but volumes to some extent I think is the bigger question Mark for US we had a 2% 3% assumption relative to volumes, that's probably a point lower than historically the market from our standpoint.
Speaker 5: And that will probably drive the difference in terms of the top line. To your second question, we actually have not seen much elasticity, i.e., as you know yourself, sort of picking up on what consumer product companies have been releasing recently, the volumes generally have been sticking in the market. We have one month, by the way, the month of
And that will probably drive the difference in terms of the top line to the your second question, we actually have not seen much elasticity I E.
Yourself sort of picking up on the consumer product companies I've been releasing recently with volumes generally had been sticking in the market. We have one month by the way that the month of Jan.
Speaker 5: January results generally volumes are sort of holding in there for 2, 4. so we're not seeing sort of a drop yet. That being said, when we put the plan together, recognizing this is going to be a very abnormal year given the sheer degree of pricing, we thought it prudent to plan accordingly and we actually expect.
January results generally volumes are sort of holding in there for Q4, so we're not seeing sort of a drop yet that being said when we put the plan together recognizing this is going to be a very abnormal year given the sheer degree of pricing we thought it prudent to plan accordingly, and we actually expect.
Speaker 5: And what we've seen from an awful lot of our competitors is everybody is basically implementing the same range of pricing in the market.
What we've seen from an awful lot of our competitors is everybody is basically implementing the same range of pricing in the market.
Okay.
Speaker 1: And we will take our next question from Mark S. Trackman with CIFIL. Your line is now open.
And we will take our next question from Mark S. Trackman.
With Stifel. Your line is now open.
Yes. Thanks.
Speaker 7: Yeah, thanks and morning everyone. I wanted to follow up sort of related to the last question. So in the 22 guidance, I guess, put top line and adjusted EBITDA expectations is really strongly predicated on this pricing. So how do you think about this in kind of broader, longer term strokes? If you go back years ago competitors or
Morning, everyone.
Wanted to follow up sort of related to the last question. So the 'twenty two guidance top line and adjusted EBITDA expectations is really strongly predicated on this pricing so yes.
How do you how do you think about this and kind of broader longer term stroke. If you go back years ago.
Competitors.
Hi.
Speaker 7: have ebbed and flowed in terms of the ability to take price and how quickly they took price and how much they took price. So how do you think about how your competitors react? Because if you go back through those earnings calls, nobody's really talking about specifics that you just laid out specific. So how do you think about, or what's embedded in what your competitors are going to do from a pricing standpoint? And how quickly can you adapt if your competitors don't directly follow how much you're taking it?
Ebbed and flowed in terms of the ability to take price and how quickly they set price and how much they took price.
So how do you think about.
How your competitors react because if you go back through those earnings calls Nobody's really talking about specifics that you just laid out specifics. So how do you think about.
Or what's embedded in what your competitors are going to do from a pricing standpoint, and how quickly can you adapt.
Your competitors don't directly follow how much youre, taking at this point.
Speaker 7: And just a related point, how do we think about it beyond 22 in terms of how much pricing is given that versus what you're taking this year?
Just a related point, how do we think about it beyond 'twenty two in terms of how much pricing.
Given that versus what you are taking share.
Sure Great question Mark.
Speaker 5: Sure. Great question, Mark. You know, the reality is we're well into midstream on pricing actions. We signaled in our third quarter call with heavy inflation on the horizon. We reacted very quickly. So we spent the latter part of the fourth quarter and then sort of every working day this year of executing broad-based pricing across the entire customer base.
The reality is we're well into midstream on pricing actions, we signaled in our third quarter call with heavy inflation on the horizon. We reacted very quickly. So we spent the latter part of the fourth quarter and then sort of every working day this year of executing broad based pricing across the entire customer base.
Speaker 5: That actually has been quite effective. Based on the read of that, i.e. we've implemented most of that pricing already, which will kick in.
That actually has been quite effective say based on the.
<unk> of that I E. We've implemented most of that pricing already which will kick in.
Speaker 5: over largely over the first and second quarter it appears in sticking. We also know from observing our competitors is they're under similar inflationary pressures. We're all sort of seeing the same thing and there's they're also are passing pricing through so we feel like we're sort of neck-to-neck in terms of what we're doing in the market. We are being surgical. There are certain categories that are slightly more.
Over largely over the first and second quarter. It appears to be sticking. We also know from observing our competitors as theyre under similar inflationary pressures, we're all sort of seeing the same thing and they also are passing pricing through so we feel like we're sort of neck to neck in terms of what we're doing in the market we are being surgical there.
Certain categories that are slightly more.
Speaker 5: Elastic or price competitive, if you will, and are being thoughtful about sort of where we price and there are other areas that typically.
Elastic or price competitive if you will and are being thoughtful about sort of where we price and there are other areas that typically are less than classic for host of reasons and sort of making sure that we sort of priced appropriately in those segments.
Speaker 5: are less of a classic for a host of reasons and sort of making sure that we sort of price appropriately in those segments.
Speaker 5: But we do believe that actually more than believe we've seen it a lot of our pricing is in fact now and being implemented over the coming months. And we have not seen as I mentioned a big significant change in terms of volumes. And the amount of customers that we've lost has been relatively small, directly related to our pricing actions. The relative to the longer term, as we mentioned on the script.
But we do believe that actually more than believe that we've seen it because you've got a lot of our pricing is in fact, now and being implemented over the coming months.
We have not seen as I mentioned, a big significant change in terms of volumes and the amount of customers that we have losses in relatively small directly related to our pricing.
Actions with.
Relative to the longer term as we mentioned on the script.
Speaker 5: We had about $400 million of inflation last year. We were anticipating about $600 million, so all in a billion dollars between the two years. We implemented $200 million last year, and we were planning on matching the $600 this year, so we're still at $200 million short.
We ended up $400 million of inflation last year, we anticipate a $600 million all in $1 billion between the two years, we implemented $200 million last year and we're planning on matching the 600. This year. So we're still $200 million short, we do fully anticipate to capture that additional $200 million as we move into.
Speaker 5: We do fully anticipate to capture that additional 200 million as we move into 2023. And very importantly, the market continues to ebb and flow, although we haven't seen a lot of movement on raw materials recently. There's been some ups and downs, but we are prepared to react. And if there are additional stationary pressures, we're positioned to go to the market very rapidly.
2023, and very importantly that market continues to ebb and flow, although we haven't seen a lot of movement on raw materials recently, there's been some ups and downs, but we are prepared to react and if there are additional inflationary pressures.
Positioned to grow the market very rapidly.
Speaker 1: And we'll take our next question from Mike Cissan with Wells Fargo. Your line is now open.
And we will take our next question from Mike <unk> with Wells Fargo. Your line is now open.
Hey, good morning, good end of the year and address.
Speaker 8: Hey, good morning. Good end of the year and Andreas has been great working with you. I guess my question is, when you think about, you know, when the...
Great working with you.
I guess my question is.
When you think about.
When the deal was put together.
Speaker 8: You seem to be on track to hit your top line growth goals through 2023. If you're going to do 25 to 26 this year, it does seem like
You seem to be on track to hit your topline growth goes through 2023.
If you are going to do two five to $2 six this year it does seem like.
Speaker 8: sort of a tall order to get to over 3 billion by 2023. So just curious, do you think the absolute EBITDA goal in 23 is still doable or maybe it's delayed a year? And I know if you get the 200 million in pricing next year, that helps a lot. So just curious, you can sort of walk us through what happens in 23 relative to your original goals for the deal.
Yes, sort of a tall order to get to over $3 billion by.
By 2023, so just curious do you think the absolute EBITDA goal in 'twenty. Three is still doable are maybe delayed a year and I know if you get to $200 million in pricing next year that helps a lot. So just curious.
You can sort of walk us through.
What happens in 'twenty three relative to your original goals for the deal.
Speaker 5: I think it is the question in some sense, how we think about our longer term goals. Obviously Frank joins us next week and we will be working very aggressively over the coming months.
Thank you I think.
It is it is the question some sense, how do we think about our longer term goals. Obviously, Frank joins US next week and we will be working very aggressively over the coming months to review our longer term targets that being said I would say two things.
Speaker 5: to review our longer-term targets. That being said, I would say two things. Certainly going from 2526 to call it 3233 is a big number for next year.
And going from 2526 to call. It <unk> is a big number for next year as you pointed out I think we have a clear line of sight to $200 million of incremental pricing at least another $100 million of synergy productivity I actually hope for more quite frankly, but we have $100 million left on the expense synergy side that gets us.
Speaker 5: As you pointed out, I think we have a clear line of sight to 200 million of incremental pricing, at least another 100 million of synergy productivity. I actually would hope for more, quite frankly, that we have 100 million left on the expense synergy side.
Speaker 5: That gets us directionally to 285 to 29 range from a standpoint. So we're beginning to close the gap, but there's still a gap there. And we have work to figure that out. I think on a qualitative basis, I am optimistic. This last year because of the operating environment has been very challenging.
<unk>.
Five to nine range with standpoint, so we're beginning to close the gap, but there's still a gap there and we have work to figure that out I think on a qualitative basis I am optimistic this last year because of the operating environment has been very challenging I think anybody would have anticipated the level of inflation than what we had to deal with on top of that the global.
Speaker 5: Again, we would have anticipated the level of inflation and what we had to deal with.
Speaker 5: On top of that, the global supply chain issues, but we do feel a combination of the strength of the platform in terms of revenue opportunities for growth.
<unk> chain issues, but we do feel a combination of the strength of the platform in terms of revenue opportunities for growth and in addition, the more time I spend near the more I'm convinced that there are meaningful opportunities to enhance our overall performance in terms of productivity and operating margin. So until Frank has arrived.
Speaker 5: And in addition, the more time I spend here, the more I'm convinced that there are meaningful opportunities to enhance our overall performance.
Speaker 5: in terms of productivity and operating margins. So I think until Frank, you know, is arrives and sort of goes through that.
I'll go through that very detailed process, we can't provide a number but there is a clear lines of call. It $2 89 next year based on pricing and productivity and I think we have additional opportunities on top of that.
Speaker 5: very detailed process. We can't provide a number, but there's a clear line. Just call it two eight to nine next year based on pricing and productivity. And I think we have additional opportunities on top of that.
Speaker 1: And we'll take our next question from John Roberts with UBS. Your line is now open.
And we will take our next question from John Roberts with UBS. Your line is now open.
Speaker 9: Thank you and best wishes Andreas. You're guiding to a 4% headwind from currency to EBITDA in 2022, and that's more than the 2% impact on sales. This is our 1st time going through an FX headwind with the new portfolio. So maybe help us with how much your costs are in dollars relative to the revenues in foreign currencies. And you said the Euro continues to be the key currency, but has the overall basket of important currencies changed with the new portfolio?
Thank you and best wishes in dress.
You are guiding to a 4% headwind from currency to EBITDA in 2022, and that's more than the 2% impact on sales. This is our first time going through an FX headwind with the new portfolio. So maybe help us with how much of your costs are in dollars relative to the revenues in foreign currencies and you cited the euro continues to be the key currency.
Has the overall basket of important currencies change with the new portfolio.
Speaker 5: The basket has changed actually with the combination of NMB it's actually slightly more US based.
The basket has change actually with the combination of NMB, it's actually slightly more U S based.
Speaker 5: than is non-US based. Roughly around 50% of our revenues are US dollar denominated, about 25% are Euro, and then a range of currencies for the residual. From an earnings perspective,
That is non U S based.
Right around 50% of our revenues are U S. Dollar denominated about 25% are euro and then a range of currencies. So the residual from an earnings perspective.
Perspective, while the year is 25% in revenues, it's about 20% in terms of our earnings from a cash flow standpoint, because we have a higher cost base that European denominated. So it is a significant portion that's the one that's what we're focused on from a from a risk standpoint, but as you know the euro dropped from circa 118 on average last year.
Speaker 5: while the Euro is 25% in revenue, it's about 20% in terms of our earnings from the cashflow standpoint because we have a higher cost base.
Speaker 5: that you're being denominated. So it is a significant portion. It's what we focused on from a risk standpoint. As you know, the Euro dropped from
Speaker 5: Circle 118 on average last year it's been in the civil 113 114 range we were planning a 113. so that's how we sort of think about the year.
And then what sort of a $1 13, $1 14 range, we were planning a $1 13, so thats, how we sort of think about the year.
Thank you.
Speaker 1: And we will take our next question from Adam Samuelson with Goldman Sachs. Your line is now open.
And we will take our next question from Adam Samuelson with Goldman Sachs. Your line is now open.
Hi, Thanks, good morning, everyone.
Speaker 7: Hi, thank you. Good morning everyone. I was hoping to maybe dig in a little more just on the cost energy capture and the assumptions that are embedded in the 20 in the 22 guidance.
Hoping to maybe dig in a little bit more just on the cost.
Cost synergy.
Capture.
And the assumptions that are embedded in the 'twenty into 'twenty two guidance.
Speaker 4: just where kind of what and what's left to capture post.
Just.
Kind of what's left to capture post 'twenty, two and I guess, the corollary to that and this was kind of addressed a little bit in some of the other conversations but as we think about where we are exiting 2022 with some of the pricing carryover.
Speaker 7: and I guess the corollary to that, and this is kind of addressed a little bit in some of the other conversations, but as we think about where we are exiting 2022 with some of the pricing carryover.
Speaker 4: just relative to the original and it'd be merger plan kind of.
Just relative to the original and that would be merger plan and kind of.
Speaker 7: the margin EBITDA potential in 23andBL.
The margin EBITDA potential.
In 'twenty three and beyond.
Speaker 5: Yes, sure, Adam. Thanks for the question. Relative to the synergies we identified, a reminder we did 60 million 21.
Yes sure Adam Thanks, Thanks for the question relative to the synergies we identified as a reminder, we get 60 million 21, our commitment was to get the 180. This year and then to ramp up to 300, we're actually going to be short of that we're actually posting another $90 million. This year I would note.
Speaker 5: Our commitment was to get to 180 this year and to ramp up to 300. We're actually going to be short of that. We're actually posting another 90 million this year. I would note that our total productivity basket is 200 million. So we're thinking more broadly than just synergies. Frankly, an year past the deal, it's important that we just figure out how to cut costs across the enterprise as opposed to just focus on the narrow combination area.
Our total productivity bass ticket was 200 million. So we're thinking more broadly than just synergies frankly, an ear past the deal. It's important that we just figure out how to cut costs across the enterprise as opposed to just focus on these narrow combination areas now of that shortfall. If you will this year. It's all in the procurement of ramp just given what's going on globally.
Speaker 5: Now, of that short quality will this year, it's all in the procurement arena, just given what's going on with the supply chain, wasn't realistic to sort of count on the synergy impact. So 60 plus plus plus 90 gets us basically to the 150. And as I mentioned, I'm fully confident we're going to get the residual 150 synergies through other areas and we'll continue to focus on productivity above that.
Supply chain wasn't realistic to sort of count on the synergy and tax of 60, plus plus plus.
The 90 gets us basically to the 150 and as I mentioned and fully confident we're going to get the residual $1 50 and synergies to other areas and we will continue to focus on productivity above that so if you think about that.
Speaker 5: So if you think about the carryover of next year between pricing of $200 million and then another $150 million, that's how you get to the 2.8 to the 2.9 from sort of a carryover standpoint into 23.
The carryover for next year between pricing of $200 million and then another 150, that's how you get to the $2 eight to the two nine from sort of a carryover standpoint into 'twenty three.
Speaker 1: And we will take our next question from Jeffrey Zecalas with JP Morgan. Your line is so open.
And so we will take our next question from Jeffrey Zekauskas with Jpmorgan. Your line is now open.
Speaker 10: Thanks very much. You generated 1.4 billion.
Thanks very much.
You generated $1 4 billion.
Speaker 10: cash flow on an EBITDA base of 2.4 billion or a little less than...
Cash flow on an EBITDA base of $2 4 billion or a little less than 60%.
Speaker 10: Is that the ratio that you expect for 2022? That is your operating cash flow will be about 1.5? Or do you think you can make improvements in this ratio? What should be the normal ratio of operating cash flow?
Is that the ratio that you expect for.
2022 that is your operating cash flow will be about 1.5.
Or.
Do you think you can make improvements in this ratio what should be the normal ratio.
Operating cash flow to EBIT.
Speaker 5: Yeah, it's a great question. We have some more work to do to figure out sort of where we're going to be longer term relative to the cash generation. We're going to be actually making slightly higher investments in two areas this year. I think net of these investments will be sort of about equal on a cash flow basis. One is we're going to be adding inventories, building I should say inventories of about $300 million.
Yes, it's a great question, we have some more work to do to figure out sort of where we're going to be longer term relative to the cash generation, we're going to be actually making slightly higher investments in two areas. This year I think net of these investments will be sort of about equal on a cash flow basis.
One is we're going to be adding inventories building I should say inventories are about $300 million.
Speaker 5: As a reminder, when the deal was closed a year ago, we were at artificially low inventory levels about 111 days. Historically, the combined entity was in the 125 range.
As a reminder, when the deal was closed a year ago, we were at artificially low inventory levels about 111 days historically, the combined entity within the 125 range. We built some of that back at the end of the year.
Speaker 5: We built some of that back at the end of the year, but we're still sort of short of where we need to be. The second thing is our CapEx spending will increase this year as well, relative to last year.
We're still sort of short of where we need to be the second thing is our capex spending will increase this year is worth well relative to last year. Those increases are twofold, we ended the year less than $400 million.
Speaker 5: Those increases are 2 fold. We ended the year less than 400M. Some of the capex we were unable to implement last year. That was a byproduct of suppliers basically being delayed in terms of supplying steel.
Some of the Capex, we were unable to implement last year that was a byproduct of suppliers basically being delayed in terms of supplying steel and.
Speaker 5: And other products, and in addition, just re, operating code environments for the speed at which we were implement the slow as well. So we're ramping up, we're also ramping up simply to address some capacity constraints supply chain which will actually achieve.
In other products and in addition, just to the operating covenant environment. So the speed at which we're able to implement the slowed as well. So we're ramping up and we're also ramping up simply to address some capacity constrained supply chain, which will actually achieve help us achieve higher demand levels as well as lower costs on the logistics side. So net net there is about a combination of five <unk>.
Speaker 5: Help us achieve higher demand levels as well as lower costs on the logistics side. So net net there is about a combination of 500 million increase between inventories and higher capex year over year. But the overall cash flow from the business would be relatively neutral after that's done. Longer term as I mentioned previously, we really have some work to do to think about our longer term goals relative to the cash generation of the enterprise.
Million increase between inventories and higher capex year over year, but the overall cash flow from the business will be felt relatively neutral. After that's done longer term as I mentioned previously we really have some work to do to think about our longer term sort of goals relative to the cash generation of the enterprise.
Speaker 1: And we will take our next question from Lauren Lieberman with Barclays. Your line is now open.
And so we will take our next question from Lauren Lieberman with Barclays. Your line is now open.
Speaker 11: Great, thanks. So I know you commented on there being a residual 200 million benefit on pricing when we get into 2023. But I did think it was worth just referencing the fact that some of your competitors talk about it taking 18 to 24 months for inflation to be covered with pricing. So I'm just curious.
Great. Thanks.
So I know you commented on there being in the residual $200 million.
Benefit on pricing as we get into 2023, but I did think it was worth just referencing the fact that some of your competitors talk about it taking 18 to 24 months for inflation to be covered with pricing. So I'm just curious.
Speaker 11: why that would be such a shorter timeframe for you. So that's kind of point one. And point two is just I think
That would be such a shorter timeframe for you so thats kind of 0.1.
0.2 is just I think the.
Speaker 11: N&B businesses, there are components of them, my understanding, they're a little bit more commodity-esque in nature where switching costs would be low for your customers.
<unk> business is there are components of that my understanding there are a little bit more commodity esque in nature, where switching costs would be low for your customers versus more sudden theres certainly plenty of very value add and that's not true at all.
Speaker 11: versus more, you know, and there's certainly plenty that's very value added and that's not true at all. But just any thoughts or the degree you have visibility on elasticity for those portions of the portfolio. I don't know how, you know, what the, you know, data was like at N and B and so on, if there's visibility and some history on that piece of business as well that's informing your elasticity thoughts for this year. Thanks.
But just any thoughts or the degree you have visibility on elasticity for those portions of the portfolio.
Don't know how with the.
Data was like it and then be in Tijuana, if there's visibility from history on that that piece of business as well as informing your elasticity thoughts for this year. Thanks.
Speaker 5: Thanks for the question. It sounds great to me, but it gets to your sm urge, in general.
Okay. Thanks, Thanks for the question in general.
Speaker 5: As I mentioned, we haven't seen much volume drop off relative to our pricing action. So there are certain categories that are slightly more competitive, but in the environment where demand is still relatively high, we've been able to push through pricing. So nowhere have we seen great pockets of softness.
As I mentioned, we haven't seen much volume drop off relative to our pricing actions. So there.
There are certain categories that are slightly more competitive but in the environment, where demand is still relatively high we have been able to push through pricing. So nowhere have we seen sort of great pockets of softness across any of the businesses. Thats 0.1, 0.2, there is a lag and that's why they are the $200 million will kick in late this year.
Speaker 5: Across any of the businesses, that's 0.1 point to there is a lag and that's why there would be 200M will kick in late this year and roll into next year from an overlap standpoint. And there's 2 reasons for that. There's contractual relationships that despite actually misenvironment and easier to open up.
And roll into next year from an overlap standpoint, and there's two reasons for that there is contractual relationships.
<unk> actually in this environment and easier to open up <unk>.
Speaker 5: renegotiations to the level of inflation, it takes time to renegotiate and put it in place, so just a timing element. And then some of the contracts are more industry based or tied to certain indexes that sort of bind as well. So, recall we had $400 million last year, so we're basically implementing all that and then we have another $600 million to catch up, so that's a billion dollars.
Negotiations to the level of inflation and it takes time to renegotiate and put it in place. So just a timing element and then some of the contracts are more industry base are tied to certain indexes that sort of line as well. So recall, we had $400 million last year. So we're basically implementing all of that and then there are another 600 million to catch up so that $1 billion, we will catch up.
Speaker 5: We will catch up $800 million of it within nearly sort of...
$800 million of it within literally so.
By quarters, and then we will kick into the residual.
<unk> to 'twenty, three which is right in that same window sort of 18 months thinking about sort of their full implementation.
Speaker 12: And we'll take our next question from David B. Lighter with Deutsche Bank. Your line is now open. Thank you. Good morning. Going back to the volume guidance this year of 2-3%,
And we will take our next question from David Begleiter with Deutsche Bank. Your line is now open.
Thank you good morning.
Going back to the volume guidance this year of 2% to 3%.
Speaker 12: It seems a little bit low given you are gaining share. You might have some beginnings of initial.
It seems a little bit low given you are gaining share you might have some beginnings of initial revenue synergies.
Speaker 12: Is there anything limiting that Vine growth assumption for this year that you can point out?
Is there anything limiting that the volume growth assumption for this year they can point out.
Thank you.
Speaker 5: I think we have been appropriately prudent in our planning process, given the sheer level.
I think we have.
Then appropriately prudent in our planning process given the sheer level of pricing that we have in the plan, we didnt want to sort of push the envelope. If you will from a volume standpoint, as I mentioned previously it's going to depend upon the consumer.
Speaker 5: pricing that we have in the plan. We didn't want to sort of push the envelope, if you will, from a volume standpoint. As I mentioned previously, it's going to depend upon the consumer.
Speaker 5: You know, certainly in the very, very early days of the year, that seems to be holding up, but we have a lot of year ahead of us as well. From a capacity standpoint, as we've mentioned in the past, we are making very meaningful investments, a combination of CapEx as well as inventory, to allow us to address some of the legacy issues we had last year. Those issues were principally in legacy and in businesses that will feel better about having the capacity to meet the demand as it continues. But it's largely a function of just being prudent and consistent with our communities, and I think you'd be one of the ones thatTV gets to, that doesn't necessarily have a lot of expertise in disc e Thu.
Certainly in the very very early days of the year that seems to be holding up but we have a lot of year ahead of us as well from a capacity standpoint, as we've mentioned in the past we are making very meaningful investments a combination of capex as well as inventory to allow us to address some of the legacy issues. We had last year those issues were.
Principally in the legacy <unk> businesses that will feel better about having the capacity to meet demand. If it continues but it's largely a function of just being prudent in this sort of a very very unprecedented market from a planning standpoint.
Speaker 5: In this sort of a very, very unprecedented market for planning standpoint.
And we will take our next question from Ghansham Panjabi with Baird. Your line is now open.
Speaker 1: And we will take our next question from Gangsham Panjabi with, there is your line is now open.
Speaker 9: Thanks, good morning everybody. Congrats again, Andreas. I guess maybe a follow up to the last question in terms of your characterization of channel inventories if you can. I'm looking at two subcategories on slide nine, ingredients and fine fragrances. Obviously had a very, very big year. Are you assuming some sort of meaner version as the year unfolds just from a demand standpoint as channel inventories comp against.
Okay. Thanks, good morning, everybody Congrats again Andreas.
I guess, maybe a follow up to the last question in terms of.
Your characterization of channel inventories if you can.
Im looking at too.
Subcategories on slide nine ingredients and fine fragrance has obviously had a very very big year are you, assuming some sort of mean reversion as the year unfolds just from a demand standpoint as channel inventories comp against.
Speaker 9: you know, pretty healthy comps from 2021. And then also, I'm sorry if I missed this, but did you break out the sequencing of inflation in terms of what you're assuming the inflation trajectory as the year unfolds? I know you made comments.
Pretty healthy comps from.
From 2021, and then also I'm sorry, if I missed this but did you breakout the sequencing of the inflation in terms of what Youre assuming.
Inflation trajectory as the year unfolds I know you've made comments on <unk>.
Speaker 5: Yeah, I'll answer the second question really just to give you some perspective on margin, you know, sort of the margin change year over year progression through the year. So that reflects sort of the combination of inflation and the pricing action. Interestingly enough...
Yes, let me I'll answer. The second question is really just to give you some perspective on margin sort of the margin change year over year progression through the year. So that reflects sort of a combination of new flagship inflation and the pricing actions interestingly enough.
Speaker 5: Because we've been in 2 years of coded, it's difficult to look at any of the businesses on a given quarter and it's better to look on 2 years or normalize basis. And when you do that.
Because we've been in two years of Covid, it's difficult to look at any of the businesses on a given quarter and it's better to look on two year sort of normalized basis, and when you do that actually the.
Speaker 5: Actually, the range relative to the currency neutral results in our businesses actually tightened up quite a bit and they come very close together. So as it relates to this year, from our planning standpoint, we don't have big differences planned per se across our different business units.
The range relative to the currency neutral results in our businesses is actually tightened up quite a bit and they come very close together. So as it relates to this year from a planning standpoint, we don't have big differences plan per se across our different business units.
Speaker 5: They're a much more tighter distribution in volume, in part because we have a 2 to 3 percent volume in general, and in part because we think we're in a more normalized environment and some of the capacity issues are also being effectively addressed. So we don't expect to have a...
And much more tighter distribution in volume in part because we have a 2% to 3% volume in general and in part because we think we're an opinion more normalized environment in some of the capacity issues are also being effectively address so we don't expect to have a.
Speaker 5: a wide range of differences between the businesses as it relates to volumes. From a progression on the pricing actions and inflation.
A wide range of impact a wide wide range of differences between the businesses as it relates to volumes from a progression on the pricing actions and inflation and how we're offsetting that we do expect that the first half principally in the first quarter will be the most challenged we expect that the first quarter is likely to have margin down year.
Speaker 5: And how we're all saying that we do expect that the 1st half principally the 1st quarter will be the most challenge.
Speaker 5: We expect that the first quarter is likely to have margin down year-over-year a little over 300 basis points.
Year, a little over 300 basis points.
Speaker 5: We expect that that will soften to around 150 ish in the 2nd quarter. And then in the back, half of the year will basically be up to get to the full year. The full year guidance is sort of direction down basis points year over year. From a combination. So that's that basically is a reflection of how we see the sort of the pricing, the pricing kicking in relative to the inflation.
We expect that that will soften to around 150 ish in the second quarter and then in the back half of the year will basically be up to get to the full year to full year guidance is sort of directionally down 80 basis points year over year from a combination so that basically is a reflection of how we see the survey.
Pricing the pricing kicking in relative to the inflation.
Speaker 1: And we'll take our next question from Chris Parkinson with Missio Securities. Your line is now open.
And we will take our next question from Chris Parkinson with Mizuho Securities. Your line is now open.
Great. Thank you so much so when I look across your portfolio had pretty solid results and nourish.
Speaker 5: Great, thank you so much. So, when I look across your portfolio, pretty solid results in Nourish, SIN, etc. When you kind of take a step back and look at the portfolio right here, right now, could you just comment on two things? The first, just where you feel incrementally more positive on the potential for revenue synergies, and then also just any further color on smaller portfolio pruning. Thank you so much.
Et cetera, when you kind of take a step back and look at the portfolio.
Right here right now can you just comment on two things. The first just where you feel incrementally more positive on the potential for revenue synergies and then also just any further color on <unk>.
Smaller portfolio pruning. Thank you so much.
Speaker 5: Yeah, good question. So maybe Andres can add a little bit more on the revenue synergy, right? We feel very good about the longer term prospects on revenue synergies. We admit that we're behind. We basically are not on the original plan relative to the timing or the pace of the revenue synergies. That, in our view, is simply a function of how we spent last year. The last year because of the nature of supply chain issues, inflation issues.
Yeah. Good question, so maybe Andreas and add a little bit more on the revenue synergies, we feel very good about the longer term prospects on revenue synergies. We admit that we are behind we basically are not on the original plan relative to the timing and the pace of the revenue synergies that and our view is simply a function of how we've spent the last year.
Last year because of the nature of supply chain issues inflation issues, we ended up dedicating resources more to the here and now from the standpoint, it's actually also allowed us for our commercial teams R&D teams to basically spend more time working together is the byproduct of that we do feel like there is a very very strong pipeline.
Speaker 5: We ended up dedicating resources more to the here and now from the standpoint. It's actually also allowed us for our commercial teams, our R&D teams.
Speaker 5: To basically spend more time working together and it's a byproduct of that. We do feel like there's a very, very strong pipeline of opportunities going forward. So I'm very.
Of opportunities going forward so.
Grace.
Speaker 4: You will see basically the majority of the opportunities was in our Nourish division.
You will see basically the.
The majority of the opportunities within our <unk> Division.
Speaker 4: because by the nature of the products and the customer, it just goes very nicely together. If you just take all the plant-based protein products, we basically can offer almost a total solution, in many cases, even a total solution to our customers. So that's one example. The other example is, and we had just one of the big customer meetings on the American Cleaning Institute Congress this month.
Of course by the nature of the products and the customer is just goes very nicely together. If you just take all the the plant based protein products, where we basically can offer almost the total solution on in many many cases, even though total solution to our customers. As one example, the other example is and we're just one of the big cut.
The meetings on the American cleaning Institute Congress. This this months, where you see that the enzyme business for household care products and the fragrance business are going going hand in hand. So these are certainly the biggest opportunities for us growing going forward and then something which we should not underestimate this that we have.
Speaker 4: where you see that the enzyme business for household care products and the fragrance business are going hand in hand. So these are certainly the biggest opportunities for us going forward. And then something which we should not underestimate is that we have opportunities on the R&D side as well. And I'll give you just one very concrete example. Everybody is looking now.
Communities on the R&D side, as well and I'll give you just one very concrete example, everybody is looking now for these.
Speaker 4: for these capsules where you put the fragrance into the detergent.
But kept steels, where you put the fragrance detergent and to produce a green capsule and now with our enhanced capabilities with many more programs running to come up with some really good solutions, there already and generation two and three and it's a synergy by themselves as well on the R&D.
Speaker 4: and to produce a green capsule. And now with our enhanced capabilities, we have many more programs running to come up with some really good solutions. They're already in generation two and three, and that is a synergy by themselves as well on the R&D area, which probably takes a little bit more time. And then Paul, again, you should comment on the portfolio. Yeah, great question, Paul. As I mentioned in my comments, I think we've done a very, very good job of being thoughtful that we can uncool businesses.
Our area, which probably takes a little bit more time and then before we begin you should comment on the port for the portfolio. Yes. It's a great question our portfolio as I mentioned in my comments I think we've done a very very good job of being thoughtful about these noncore businesses noncore. Those basically are sort of dilutive to our topline and bottomline and just simply strategically you don't.
Speaker 5: Non core those that basically are sort of the leaders are top line and bottom line and just simply strategically don't have a great fit. As you know, we have sold through prep. We will be closing the second quarter on microbial control. That's basically 1.4 billion gross.
Have a great fit as you know we have sold through perhaps we will be closing in the second quarter on microbial control, that's basically $1 $4 billion gross.
Speaker 5: We have three or four other businesses that are being teed up. We will be going to market in the coming months quarters.
We have three or four other businesses that are being teed up we will be going to market in the coming months quarters, we fully anticipate to have been executed transactions close and the cash in hand within 18 months. We think that range is one five to $1 7 billion relative to the three to four entities and very.
Speaker 5: We fully anticipate to have them executed, i.e. the transactions closed and the cash is in hand within 18 months.
Speaker 5: We think that range is 1.5 to 1.7 billion relative to the 3 to 4 entities. And very importantly, our goal is to use those proceeds to get us to the 3 times or lower of laboratory issues. So that actually has been working very well. We've got a dedicated set of teams that do nothing but sort of focus on that to get that done. The markets have been good relative to interest in certain properties, so we're very encouraged by that.
Importantly, our goal is to use those proceeds to get us to the three times or lower leverage ratios. So that actually has been working very well we have a dedicated set of teams that do nothing but sort of focus on that to get that done the markets have been good relative to interest in certain properties. So we're very encouraged by that.
Speaker 1: And we have no further questions on the line at this time. I will turn the program back over to Audrey Smith for any additional or closing remarks.
And we have no further questions on the line at this time I will turn the program back over to Andre Fitbit for any additional or closing remarks.
Speaker 4: Thank you very much for the participation and the good questions and taking consideration that's my last IFF meeting here. Thank you for all the good and constructive work and have a good day. Thank you.
Yes. Thank you very much for the participation and the good questions and take into consideration Thats My last <unk>.
Yes. Thank you for all the good reconstructive work and have a good day. Thank you.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
Speaker 1: This does conclude today's program. Thank you for your participation. You may disconnect at any time.