Q1 2025 International Flavors & Fragrances Inc Earnings Call

May 7, 2025

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The pit will be announced by their name and company in order to give all participants an opportunity to ask their questions. We request a limit of one question per person.

Michael Bender: I'd now like to introduce Michael Bender head of Investor Relations, Michael you may begin.

Speaker Change: Good morning, good afternoon, and good evening, everyone. Welcome to Iff's first quarter 2025 conference call yesterday afternoon, we issued a press release announcing our financial results a copy of the release can be found on our IR website at IR at <unk> Dot Com. Please note that this call is being recorded live and will be available for replay.

Speaker Change: During the call, we'll be making forward looking statements about the company's performance and business outlook. These statements are based on how we see things today and contain elements of uncertainty for additional information concerning the factors that can cause actual results to differ materially. Please refer to our cautionary statement and risk factors contained in our 10-K and press release, both of which can.

Speaker Change: To be found on our website.

Speaker Change: Today's presentation will include non-GAAP financial measures, which exclude those items that we believe affect comparability.

Speaker Change: A reconciliation of these non-GAAP financial measures to their respective GAAP measures is set forth in the press release that we issued yesterday.

Speaker Change: With me on the call today is our CEO, Eric <unk> and our CFO Michael Deveau, we will begin with prepared remarks, and then take questions at the end with that I would now like to turn the call over to Eric.

Eric: Thanks, Mike and Hello, everyone.

Eric: Look forward to discussing our first quarter financial results, which build on our strong performance in 2024, and demonstrate continued growth and progress toward our strategic goals.

Eric: Now despite the current uncertainty and challenges in the wider macroeconomic environment.

Eric: <unk> continues to deliver solid results as we focus on what we can control by delivering top notch innovation to our customers, while continuing to reinvest in the long term value creation opportunities for our business.

Eric: I'll begin by walking through the quarter as well as the steps we are taking to manage through the current macro environment and further drive long term profitable growth.

Speaker Change: I'll, then turn the call over to Mike Deveau, who will provide a more detailed look at our financial results and our current outlook for the rest of 2025.

Speaker Change: Then we'll open the call for questions.

Mike DeVeau: Now beginning with slide six.

Mike DeVeau: <unk> had a solid start to the year with our refreshed strategy and renewed commitment to operational discipline driving solid results across our businesses.

Mike DeVeau: As we've heard previously one element of our enhanced business led operating model with separating our former nurse segment into two segments of taste and food ingredients.

Mike DeVeau: Separating these businesses into focused units enables us to better track their progress.

Mike DeVeau: More quickly identify growth and margin opportunities and drive performance and accountability across our portfolio.

Mike DeVeau: With this in mind, we are pleased to have delivered strong broad based growth across four of our business segments in the first quarter, including taste pharma solutions.

Mike DeVeau: And health and Biosciences.

Mike DeVeau: Volume declined in food ingredients, primarily driven by weaker performance in protein solutions.

Mike DeVeau: Due to some pull forward of orders in the fourth quarter and limitations in our capacity that are now being addressed.

Mike DeVeau: Also it's worth noting that part of the topline weakness in food ingredients was attributed to planned lower <unk> sales as we purposely walked away from low margin business to focus on higher margin businesses within food ingredients.

Mike DeVeau: Furthermore, with most segments delivering growth and our ongoing productivity initiatives, we achieved 9% growth in comparable currency neutral adjusted operating EBITDA as this broad based improvement was led by strong performances in taste.

Mike DeVeau: And pharma solutions.

Mike DeVeau: And I'm excited to share that we also completed our previously announced divestiture of pharma solutions to Roquette two months ahead of our publicly announced schedule.

Mike DeVeau: This strategic action further strengthens our capital structure and enabled us to achieve our long term target of net debt to credit adjusted EBITDA ratio of below three times, we are incredibly grateful to the pharma solutions team, who kept the business running well during the divestiture and for their many contributions.

Mike DeVeau: <unk> <unk> over the years, and we wish them well.

Mike DeVeau: Now shifting gears for a moment to discuss the current market environment, while I am encouraged by the momentum we have carried into 2025 and all of that our global teams have done to strengthen our financial and operating foundation broader macroeconomic dynamics remain challenging and as we all know.

Mike DeVeau: Continue to evolve quickly.

Mike DeVeau: We've been through complex macro environments before and what we know from history is ISF is resilient in times like these as we focus on controlling what we can.

Mike DeVeau: Our customers and ultimately end consumers rely on the quality of our products and solutions the expertise of our talented teams and the trusted partnership for which we are known in our industry.

Those values and characteristics are in high demand during times of uncertainty and we are staying focused on execution as we collaborate with our customers to be even more productive as we drive growth.

Mike DeVeau: And right now we're working very closely with our customers to mitigate impacts of tariff actions and we continue to stay nimble and disciplined in response to macroeconomic uncertainty, which we expect will continue throughout the year.

Mike DeVeau: With this in mind and given what we see currently we are maintaining our full year guidance ranges at this time, which Mike will discuss in a bit more detail on the back half of the call with that I'll pass it over to Mike for a closer look at our results for the quarter.

Mike DeVeau: Mike.

Mike: Thank you Eric and thanks, everyone for joining us today as Eric said 2025 is off to a solid start with our global team continued to execute on our strategy.

Mike: In the first quarter <unk> generated roughly $2 8 million in sales, representing 3% comparable currency neutral growth.

Mike: This performance was led by volume growth across most of our businesses, including taste pharma solutions and health and Biosciences.

Mike: Adjusted operating EBITDA totaled $578 million for the quarter, a strong 9% increase on a comparable currency neutral basis, while our comparable currency neutral adjusted operating EBITDA margin increased more than 120 basis points to 23%.

Mike: This is the fourth consecutive quarter of margin expansion on a comparable currency neutral basis, a testament to iff's focus to improve margin and returns.

Mike: Turning now to slide eight I will provide a closer look to our performance by segment.

Mike: Given our recently completed divestiture I will begin with pharma solutions, which had another strong quarter of broad based growth.

Mike: Pharma solutions delivered $266 million in sales and 8% year over year increase on a comparable currency neutral basis. While also recording strong profitability growth with adjusted operating EBITDA of $54 million, a 19% increase versus last year.

Mike: These results were driven by broad based growth across all categories and margin expansion was primarily driven by our distribution model change as well as productivity.

Mike: As discussed last quarter, we've completed the transition to our end to end business led operating model and going forward. We'll report segment performance for taste and food ingredients separately.

Mike: We published an 8-K yesterday, which recast 2024 results as I mentioned last quarter.

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3% comparable currency neutral growth.

Mike: <unk> also adjusted our corporate cost allocations to align with our new organizational structure and updated operating model.

This performance was led by volume growth across most of our businesses, including taste pharma solutions and health and Biosciences.

Operator: Participants will be announced by their name and company.

Operator: In order to give all participants an opportunity to ask their questions, we request a limit of one question per person.

Mike: In taste sales were $627 million or 7% year over year increase on a comparable currency neutral basis, driven by another excellent quarter for flavors.

Adjusted operating EBITDA totaled $578 million for the quarter, a strong 9% increase on a comparable currency neutral basis, while our comparable currency neutral adjusted operating EBITDA margin increased more than 120 basis points to 23%.

Michael Bender: I would now like to introduce Michael Bender, Head of Investor Relations. Michael, you may begin. Thank you. Good morning, good afternoon, and good evening, everyone. Welcome to IFF's first quarter 2025 conference call. Yesterday afternoon, we issued a press release announcing our financial results. A copy of the release can be found on our IR website at ir.iff.com. Please note that this call is being recorded live and will be available for replay. During the call, we'll be making forward-looking statements about the company's performance and business outlook. These statements are based on how we see things today and contain elements of uncertainty.

Mike: Broad based volume growth across all regions.

Mike: The segment also recorded another very strong quarter of profitability.

This is the fourth consecutive quarter of margin expansion on a comparable currency neutral basis, a testament to iff's focus to improve margin and returns.

Mike: Comparable currency neutral adjusted operating EBITDA growth of 22%, primarily driven by volume growth favorable net pricing and continued productivity gains.

Turning now to slide eight I will provide a closer look to our performance by segment.

Mike: Food ingredients had.

Mike: <unk> had sales of 796, million% to 4% comparable currency neutral decrease from the prior year, primarily due to sales pressures in protein solutions that Eric spoke about earlier.

Given our recently completed divestiture I will begin with pharma solutions, which had another strong quarter of broad based growth.

Michael Bender: For additional information concerning the factors that can cause actual results to differ materially, please refer to our cautionary statement and risk factors contained in our 10-K and press release, both of which can be found on our website. Today's presentation will include non-GAAP financial measures, which exclude those items that we believe affect comparability. A reconciliation of these non-GAAP financial measures to their respective GAAP measures is set forth in the press release that we issued yesterday.

Pharma solutions delivered $266 million in sales and 8% year over year increase on a comparable currency neutral basis. While also recording strong profitability growth with adjusted operating EBITDA of $54 million, a 19% increase versus last year.

Mike: However, we are pleased with the segment's currency neutral adjusted operating EBITDA growth of 5% on a comparable basis as net favorable net pricing and productivity helped drive performance.

Mike: Our health <unk> Biosciences segment delivered another strong quarter of broad based growth with strong volume growth in health food Biosciences, and grain processing driving a 5% increase in comparable currency neutral sales as we continue to reinvest in Iff's core high growth segments like HEB, we're pleased.

These results were driven by broad based growth across all categories and margin expansion was primarily driven by our distribution model change as well as productivity.

Michael Bender: With me on the call today is our CEO, Eric Fyrwald, and our CFO, Michael DeVeau. We will begin with prepared remarks and then take questions at the end.

As discussed last quarter, we've completed the transition to our end to end business led operating model and going forward. We'll report segment performance for taste and food ingredients separately.

Eric Fyrwald: With that, I would now like to turn the call over to Eric. Thanks, Mike. And hello, everyone. I look forward to discussing our first quarter financial results, which build on our strong performance in 2024 and demonstrate continued growth and progress toward our strategic goal. Now, despite the current uncertainty and challenges in the wider macroeconomic environment, IFF continues to deliver solid results as we focus on what we can control by delivering top-notch innovation to our customers while continuing to reinvest in the long-term value creation opportunities for our business.

Mike: To report at volume and productivity gains more than offset our investment with segment delivered adjusted operating EBITDA.

We published an 8-K yesterday, which recast 2024 results as I mentioned last quarter.

Mike: $138 million, a 3% increase on a year over year comparable currency neutral basis.

<unk> also adjusted our corporate cost allocations to align with our new organizational structure and updated operating model.

Mike: Lastly, <unk> achieved another solid quarter, including double digit growth in fine fragrance and single digit growth in consumer fragrances net sales for the quarter totaled $614 million up 4% year over year on a comparable currency neutral basis.

In taste sales were $627 million, a 7% year over year increase on a comparable currency neutral basis, driven by another excellent quarter for flavors.

Mike: And we also achieved an adjusted operating EBITDA of $144 million up 4% on a comparable currency neutral basis as volume growth and productivity gains continue to drive performance.

Broad based volume growth across all regions.

Eric Fyrwald: I'll begin by walking through the quarter, as well as the steps we are taking to manage through the current macro environment and further drive long-term profitable growth.

The segment also recorded another very strong quarter of profitability.

Comparable currency neutral adjusted operating EBITDA growth of 22%, primarily driven by volume growth favorable net pricing and continued productivity gains.

Mike: Turning now to slide nine to discuss our cash flow and leverage position.

Michael Deveau: I'll then turn the call over to Mike DeVeau, who will provide a more detailed look at our financial results and our current outlook for the rest of 2025.

Mike: Cash flow from operations totaled $127 million year to date, and Capex was $179 million or roughly 6% of sales as we stepped up reinvestment as shared earlier. This year Q1 is typically our lowest free cash flow quarter of the year due to our annual bonus payout and seasonality.

Food ingredients had.

<unk> had sales of $796 million, a 4% comparable currency neutral decrease from the prior year, primarily due to sales pressures in protein solutions that Eric spoke about earlier.

Eric Fyrwald: Then we'll open the call for questions. Now, beginning with slide six, IFF had a solid start to the year with our refreshed strategy and renewed commitment to operational discipline, driving solid results across our business. As we've heard previously, one element of our enhanced business-led operating model was separating our former nourish segment into two segments of taste and food ingredients. Separating these businesses into focused units enables us to better track their progress. more quickly identify growth and margin opportunities and drive performance and accountability across our portfolio. With this in mind, we are pleased to have delivered strong, broad-based growth across four of our business segments in the first quarter, including taste, pharma solutions, scent, and health and bioscience.

However, we are pleased with the segment's currency neutral adjusted operating EBITDA growth of 5% on a comparable basis.

Mike: We also paid $102 million in dividends in the quarter and cash and cash equivalents totaled $650 million, including $37 million in assets held for sale.

That's net favorable net pricing and productivity helped drive performance.

Our health <unk> Biosciences segment delivered another strong quarter of broad based growth with strong volume growth in health, <unk> Biosciences, and grain processing driving a 5% increase in comparable currency neutral sales as we continue to reinvest in Iff's core high growth segments like HEB, we're pleased.

Mike: As of March 31, our gross debt was approximately $9 3 billion a decrease of more than 1 billion compared to the year ago period, our trailing 12 month credit adjusted EBITA totaled roughly $2 2 billion in line with last quarter, while our net debt to credit adjusted EBITDA remains large.

To report at volume and productivity gains more than offset our investments with segment delivered adjusted operating EBITDA.

Mike: Unchanged at three nine times.

Mike: With our successful divestiture of pharma solutions, we recently announced the commencement of a debt tender offer as part of our broader strategy to strengthen <unk> balance sheet and optimize our capital structure.

$138 million, a 3% increase on a year over year comparable currency neutral basis.

Eric Fyrwald: Volume decline in food ingredients, primarily driven by weaker performance in protein solutions, due to some pull forward of orders in the fourth quarter, and limitations in our capacity that are now being addressed. Also, it's worth noting that part of the top-line weakness in food ingredients was attributed to planned lower pectin sales as we purposefully walked away from low-margin business to focus on higher-margin businesses within food ingredients. Furthermore, with most segments delivering growth and our ongoing productivity initiatives, we achieved 9% growth in comparable currency neutral-adjusted operating EBITDA as this broad-based improvement was led by strong performances in taste and pharma solutions.

Lastly, <unk>.

<unk> had another solid quarter, including double digit growth in fine fragrance and single digit growth in consumer fragrances net sales for the quarter totaled $614 million up 4% year over year on a comparable currency neutral basis.

Mike: This allows us to deliver on our commitments and achieve our target net debt to credit adjusted EBITDA target of below three times.

Mike: Now on slide 10, I want to take a moment to address the evolving macroeconomic environment and the recent developments surrounding global tax.

And we also achieved an adjusted operating EBITDA of $144 million up 4% on a comparable currency neutral basis as volume growth and productivity gains continue to drive performance.

Mike: As you are aware the U S administration's new tariff measures, particularly those impacting China have introduced a renewed layer of complexity to global supply chains and cost structures.

Turning now to slide nine to discuss our cash flow and leverage position.

Mike: Our ISF global footprint with manufacturing and sourcing capabilities across many countries gives us the flexibility to adapt quickly.

Cash flow from operations totaled $127 million year to date, and Capex was $179 million or roughly 6% of sales as we stepped up reinvestment as shared earlier this year.

Mike: In past cycles of trade disruptions, including prior rounds of tariffs, we've demonstrated our ability to pivot operationally, while continuing to successfully serve our customers.

Q1 is typically our lowest free cash flow quarter of the year due to our annual bonus payout and seasonality.

Eric Fyrwald: And I'm excited to share that we also completed our previously announced divestiture of pharma solutions to Roquette two months ahead of our publicly announced schedule. This strategic action further strengthens our capital structure and enabled us to achieve our long-term target of net debt-to-credit-adjusted EBITDA ratio of below three times.

Mike: As part of our mitigation strategy, we've taken actions to adjust our purchasing and redistribute our production in ways that minimize our exposure by.

We also paid $102 million in dividends in the quarter and cash and cash equivalents totaled $650 million, including $37 million in assets held for sale.

Mike: By shifting procurement to alternative supply sources and balancing production across our global network, we have been able to offset a significant portion of inflationary pressure.

As of March 31, our gross debt was approximately $9 3 billion, a decrease of more than $1 billion compared to the year ago period.

Eric Fyrwald: We are incredibly grateful to the Pharma Solutions team who kept the business running well during the divestiture and for their many contributions to IFF over the years, and we wish them well.

Mike: In select cases, where cost impacts were unavoidable, we are implementing targeted price pricing surcharges to recover incremental cost.

Our trailing 12 month credit adjusted EBITDA totaled roughly $2 2 billion in line with last quarter, while our net debt to credit adjusted EBITDA remained largely unchanged at three nine times.

Eric Fyrwald: Now, shifting gears for a moment to discuss the current market environment. While I'm encouraged by the momentum we have carried into 2025, and all that our global teams have done to strengthen our financial and operating foundation, broader macroeconomic dynamics remain challenging, and as we all know, continue to evolve quickly. We've been through complex macro environments before, and what we know from history is IFF is resilient in times like these as we focus on controlling what we can. Our customers, and ultimately end consumers, rely on the quality of our products and solutions, the expertise of our talented teams, and the trusted partnership for which we are known in our industry.

Mike: We do recognize that sweeping changes in global trade policy could contribute to broader macroeconomic volatility, including the potential to keep certain regions into a recession.

With our successful divestiture, our pharma solutions, we recently announced the commencement of a debt tender offer as part of our broader strategy to strengthen <unk> balance sheet and optimize our capital structure.

Mike: This risk is not currently embedded in our guidance.

Mike: However, we are fortunate that the majority of Iff's portfolio is grounded in resilient essential end markets, particularly food beverage household and personal care.

This allows us to deliver on our commitment and achieved our target net debt to credit adjusted EBITDA target of below three times.

Now on slide 10, I want to take a moment to address the evolving macroeconomic environment and the recent developments surrounding global tariffs.

Mike: We view this environment not only as a challenge, but also as an opportunity.

Our ability to serve our customers globally with localized innovation positions us as a resilient partner, particularly for customers looking to derisk their own supply chain.

As you are aware the U S administration's new tariff measures, particularly those impacting China have introduced a renewed layer of complexity to global supply chains and cost structures.

Mike: Also amid the evolving environment, we want to reaffirm our commitment to Iff's long term strategy, we remain focused on strengthening our business through consistent reinvestment in core growth drivers R&D commercial digital and capacity.

Eric Fyrwald: Those values and characteristics are in high demand during times of uncertainty. And we are staying focused on execution as we collaborate with our customers to be even more productive as we drive growth. And right now, we're working very closely with our customers to mitigate impacts of tariff actions, and we continue to stay nimble and disciplined in response to macroeconomic uncertainty, which we expect will continue throughout the year. With this in mind, and given what we see currently, we are maintaining our full year guidance ranges at this time, which Mike will discuss in a bit more detail in the back half of the call.

Our ISF global footprint with manufacturing and sourcing capabilities across many countries gives us the flexibility to adapt quickly.

In past cycles of trade disruptions, including prior rounds of tariffs, we've demonstrated our ability to pivot operationally.

Mike: Even as we manage short term external pressures, we will not compromise our future. Instead, we are accelerating our efforts to drive structural productivity and operational efficiency.

I'll continue to successfully serve our customers.

As part of our mitigation strategy, we have taken actions to adjust our purchasing and redistribute our production in ways that minimize our exposure.

Mike: This approach enables us to both navigate today's challenges and continue investing ensuring we deliver on our profitability commitments, while positioning <unk> for long term success.

By shifting procurement to alternative supply sources and balancing production across our global network, we have been able to offset a significant portion of inflationary pressures.

Michael Deveau: With that, I'll pass it over to Mike for a closer look at our results for the quarter. Thank you, Eric. And thanks, everyone, for joining us today. As Eric said, 2025 is off to a solid start with our global team continue to execute on our strategy. In the first quarter, IFF generated roughly $2.8 billion in sales, representing 3% comparable currency neutral growth. This performance was led by volume growth across most of our businesses, including Taste, Forma Solutions, Scent, and Health & Bioscience. Adjusted operating EBITDA totaled $578 million for the quarter, a strong 9% increase on a comparable currency-neutral basis, while our comparable currency-neutral adjusted operating EBITDA margin increased more than 120 basis points to 20.3%.

Mike: From a financial planning perspective, we are maintaining our guidance ranges for the full year 2025 inclusive of the current tariff situation.

In select cases, where cost impacts were unavoidable, we are implementing targeted price pricing surcharges to recover incremental cost.

Mike: We expect sales to be in the range of $10 6 billion to $10 9 billion, representing currency neutral growth of between 1% to 4%. We are now expecting approximately 2% adverse impact on revenue from foreign exchange down from 4% previously and.

We do recognize that sweeping changes in global trade policy could contribute to broader macroeconomic volatility, including the potential to keep certain regions into a recession.

This risk is not currently embedded in our guidance.

Mike: And approximately 7% adverse impact due to divestitures versus 5% previously given the earlier close of the pharma solutions divestiture.

However, we are fortunate that the majority of <unk> portfolio is grounded in resilient essential end markets, particularly food beverage household and personal care.

Mike: From a bottomline perspective, we continue to expect that we will deliver a 2025 adjusted operating EBITDA range of between two to two <unk>, one 5 billion representing currency neutral growth between 5% and 10% we.

We view this environment not only as a challenge, but also as an opportunity.

Our ability to serve our customers globally with localized innovation positions us as a resilient partner, particularly for customers looking to derisk their own supply chain.

Michael Deveau: This is the fourth consecutive quarter of margin expansion on a comparable currency-neutral basis, a testament to IFF's focus to improve margin and return.

Mike: We are now expecting approximately 3% adverse impact to EBITDA from foreign exchange down from 6% previously and approximately 8% adverse impact due to divestitures versus 6% previously again due to the earlier close of pharma solutions.

Also amid the evolving environment, we want to reaffirm our commitment to Iff's long term strategy, we remain focused on strengthening our business through consistent reinvestment in core growth drivers R&D commercial digital and capacity.

Michael Deveau: Turning now to slide 8, I will provide a closer look to our performance by segment. Given our recently completed divestiture, I will begin with Pharma Solutions, which had another strong quarter of broad-based growth. Former Solutions delivered $266 million in sales, an 8% year-over-year increase on a comparable currency-neutral basis, while also recording strong profitability growth when adjusted operating EBITDA of $54 million, a 19% increase versus last year. These results were driven by broad-based growth across all categories and margin expansion was primarily driven by our distribution model change as well as productivity.

Eric: With that I will now turn it back to Eric for closing remarks.

Even as we manage short term external pressures, we will not compromise our future. Instead, we are accelerating our efforts to drive structural productivity and operational efficiency.

Speaker Change: Thanks, Mike.

Speaker Change: Solid results, we were able to deliver in the first quarter continued to reflect the strength of our execution and our investments in our people and our portfolio.

This approach enables us to both navigate today's challenges and continue investing ensuring we deliver on our profitability commitments, while positioning <unk> for long term success.

Speaker Change: With this growth we have been able to maintain our strong momentum from 2024.

Speaker Change: Complete key divestitures to strengthen our portfolio and meet our deleveraging targets.

From a financial planning perspective, we are maintaining our guidance ranges for the full year 2025 inclusive of the current tariff situation.

Speaker Change: But we still have a lot of work ahead of us and we are always focused on strengthening ISF. So we can help our customers win in any market environment.

Michael Deveau: As discussed last quarter, we have completed the transition to our end-to-end business-led operator model, and going forward, we'll report segment performance for taste and food ingredients separately.

We expect sales to be in the range of $10 6 billion to $10 9 billion, representing currency neutral growth of between 1% to 4%.

Speaker Change: Building, a strong company means continuing to reinvest in catalysts for our growth.

Michael Deveau: We published an 8K yesterday, which recasts 2024 results. As I mentioned last quarter, we also adjusted our corporate cost allocations to align with our new organizational structure and updated operating In taste, sales were $627 million, a 7% year-over-year increase on a comparable currency-neutral basis, driven by another excellent quarter for flavors, with broad-based volume growth across all regions. This segment also recorded another very strong quarter of profitability with comparable currency neutral adjusted operating EBITDA growth of 22 percent, primarily driven by volume growth, favorable net pricing, and continued productivity gain. Food ingredients had sales of $796 million, a 4% comparable currency neutral decrease from the prior year, primarily due to sales pressures in protein solutions that Eric spoke about earlier.

Speaker Change: Including research and development commercial capabilities and integral capital expenses.

We are now expecting approximately 2% adverse impact on revenue from foreign exchange down from 4% previously.

Speaker Change: That will bolster our foundation and enable us to achieve sustainable profitable long term growth for our shareholders.

And approximately 7% adverse impact due to divestitures versus 5% previously given the earlier close of the pharma solutions divestiture.

Speaker Change: And as we move forward, we will continue to focus on bringing innovative sustainable solutions to the market that meet customer needs.

From a bottom line perspective, we continue to expect that we will deliver a 2025 adjusted operating EBITDA range of between two to two <unk>, one 5 billion, representing currency neutral growth between 5% and 10%.

Speaker Change: And delivering value that makes us the clear partner of choice for customers around the world.

Speaker Change: I am confident we are well on our way.

Speaker Change: Thank you and I'll now open the floor for questions.

Speaker Change: Thank you at this time, we will now begin today's Q&A portion.

We are now expecting approximately 3% adverse impact to EBITDA from foreign exchange down from 6% previously and approximately 8% adverse impact due to divestitures versus 6% previously again due to the earlier close of pharma solutions.

Speaker Change: We'd like to ask a question. Please press star followed by one and then to remove your question. Please press star followed by two as a reminder, please limit yourself to one question well pause here briefly answer your questions are registered.

Speaker Change: The first question is from the line of Nicola Tang with BNP Carrabba's you May proceed.

Eric: With that I will now turn it back to Eric for closing remarks.

Michael Deveau: However, we are pleased with the segment's currency-neutral, adjusted operating EBITDA growth of 5% on a comparable basis, as favorable net pricing and productivity help drive performance. Our health and bioscience segment delivered another strong quarter of broad-based growth with strong volume growth in health, food biosciences, and grain processing, driving a 5% increase in comparable currency neutral sales. As we continue to reinvest in IFF's core high-growth segments like H&B, we are pleased to report that volume and productivity gains more than offset our re-investment, with segment delivery adjusted operating EBITDA of $138 million, a 3% increase on the year-over-year comparable currency neutral.

Eric: Thanks, Mike.

Nicola Tang: Hi, everyone. Thanks for taking my question.

Eric: Solid results, we were able to deliver in the first quarter continued to reflect the strength of our execution and our investments in our people and our portfolio.

Speaker Change: On the outlook you flagged that this doesn't include any potential recessionary pressures that could arise from the recent shifts any trade policy, but you also mentioned that ISS portfolio is grounded in resilient end markets.

Eric: With this growth we have been able to maintain our strong momentum from 2024.

Eric: Complete key divestitures to strengthen our portfolio and meet our deleveraging targets.

Speaker Change: Can you talk us through which areas of the portfolio could potentially be at risk and which parts can be more resilient in a recessionary scenario and do you see any signs of sequential slowdown or cushion from your customers.

Eric: But we still have a lot of work ahead of us and we are always focused on strengthening ISF. So we can help our customers win in any market environment.

Speaker Change: Yes.

Speaker Change: Yes. Thank you for the question Nicola This is Eric I'll take it.

Eric: Building, a strong company means continuing to reinvest in catalysts for our growth <unk>.

Speaker Change: First of all our order book, So far has stayed consistent with and in line with our guidance.

Eric: Including research and development commercial capabilities and integral capital expenses that will bolster our foundation and enable us to achieve sustainable profitable long term growth for our shareholders.

Speaker Change: But as you know and I think all of us feel that in the <unk>.

Speaker Change: <unk> industries that there is concern about all the uncertainty.

Michael Deveau: Lastly, Scent achieved another solid quarter, including double-digit growth in fine fragrance and single-digit growth in consumer fragrance. Net sales for the quarter totaled $614 million, up 4% year-over-year on a comparable currency-neutral basis. And we also achieved an adjusted operating EBITDA of $144 million, up 4% on a comparable currency neutral basis, as volume growth and productivity gains continue to drive profit.

Speaker Change: And just for an example, a major HBC company executive recently expressed caution.

Eric: And as we move forward, we'll continue to focus on bringing innovative sustainable solutions to the market that meet customer needs and delivering value that makes us the clear partner of choice for customers around the world.

Speaker Change: Saying that U S. Consumers are for example, reducing the number of times they do laundry each week.

Speaker Change: Now, having said that historically about 80% of our portfolio goes into what we consider essential products and about 20% into discretionary and so the bulk of our portfolio is very resilient, but some examples of the discretionary areas would be fine fragrances.

Eric: I'm confident we are well on our way.

Eric: And I'll now open the floor for questions.

Speaker Change: Thank you at this time, we will now begin today's Q&A portion if you would like to ask a question. Please press star followed by one and then to remove your question. Please press star followed by two as a reminder, please limit yourself to one question, we'll pause briefly answer your questions are registered.

Michael Deveau: Turning now to slide nine to discuss our cash flow and leverage position. Cash flow from operations totaled $127 million year-to-date, and CapEx was $179 million, or roughly 6% of sales, as we stepped up reinvestment, as shared earlier this year.

Speaker Change: Whereby the way we've seen continued strong order pattern.

Speaker Change: Consumer fragrances in the beauty and air care areas and in the health and the probiotics area, but so far the order pattern has been solid but we do have concerns as we head towards the back half of the year with all the uncertainty, but we hope that some of that uncertainty resolves itself and things continue as they.

Speaker Change: The first question is from the line of Nicola Tang with BNP.

Michael Deveau: Q1 is typically our lowest free cash flow quarter of the year due to our annual bonus payout and seasonality. We also paid $102 million in dividends in the quarter, and cash and cash equivalents totaled $650 million, including $37 million in assets held for sale. As of March 31st, our gross debt was approximately $9.3 billion, a decrease of more than $1 billion compared to the year ago period. Our trailing 12-month credit-adjusted EBITDA totaled roughly $2.2 billion in line with last quarter, while our net debt to credit-adjusted EBITDA remained largely unchanged at 3.9 times.

Speaker Change: You May proceed.

Speaker Change: Hi, everyone and thanks for taking the question.

Speaker Change: On the outlet you flagged that this doesn't include any potential recessionary pressures that could arise from the base.

Speaker Change: Our today.

Speaker Change: Chesney trade policy, but you also mentioned that ISS, what Fridays grounded and resilient end markets.

Speaker Change: Thank you.

Speaker Change: The next question is from the line.

Speaker Change: You talk us through which areas in the portfolio could potentially be at risk and which parts can be more resilient in a recessionary scenario and do you see any signs of sequential slowdown or cushion from your question is from Paul. Thanks.

Speaker Change: Of Josh Spector with UBS you.

Speaker Change: You May proceed.

Speaker Change: Yeah, Hi, good morning, I was wondering if you could expand upon your comments around tariffs curious if you'd be able to disclose what you take the gross impact today is on your costs and how much of that you think you can mitigate through some of the actions you talked about and if it's possible to help frame that in terms of 2012.

Speaker Change: Yes. Thank you for the question Nicola This is Eric I'll take it.

Speaker Change: First of all our order book, So far has stayed consistent with and in line with our guidance.

Michael Deveau: With our successful divestiture of pharma solutions, we recently announced the commencement of a debt tender offer as part of our broader strategy to strengthen ISF's balance sheet and optimize our capital strategy. This allows us to deliver on our commitment and achieve our target net debt-to-credit-adjusted EBITDA target of below $3,000.

Speaker Change: But as you know and I think all of us feel.

Speaker Change: Five impacts and potential run rate assumptions. Thank you.

Speaker Change: And across industries that there is concern about all the uncertainty.

Speaker Change: Yes, Thanks, Josh Eric I'll take this one Fortunately, we have a diverse and global operations with local procurement and manufacturing capabilities that has allowed us to migrate and mitigate some of the efforts that you see from a tariff perspective overall.

Speaker Change: And just for an example, a major HBC company executive recently expressed caution.

Speaker Change: Saying that U S. Consumers are for example, reducing the number of times they do longer each week.

Michael Deveau: Now on slide 10, I want to take a moment to address the evolving macroeconomic environment and the recent developments surrounding global tech. As you are aware, the U.S. administration's new tariff measures, particularly those impacting China, have introduced a renewed layer of complexity to global supply chains and cost structures. Our IFF global footprint with manufacturing and sourcing capabilities across many countries gives us the flexibilities to adapt quickly. In past cycles of trade disruptions, including prior rounds of tariffs, we've demonstrated our ability to pivot operationally while continuing to successfully serve our customers. As part of our mitigation strategy, we have taken actions to adjust our purchasing and redistribute our production in ways that minimize our exposure.

Speaker Change: Most of our tariff exposure is related to China, specifically importing from China to the U S and exported from the U S and China that is that is a far far bulk of it when we look at it on a gross basis, we have a little more than about $100 million of exposure for 2025, and maybe a little bit around double that for a run rate basis.

Speaker Change: Whereby the way we've seen continued strong order pattern.

Speaker Change: So it is it is quite large the reality is though the team has done a fantastic job in terms of the supply chain optimization, reducing exposure.

Speaker Change: Quite significantly to the areas, where we cannot cover from them from a supply chain standpoint, we are working and continue to work with our customers on pricing surcharge to fully compensate and we're targeting a full mitigation overtime.

Speaker Change: Yeah.

Speaker Change: They are today.

Speaker Change: Thank you.

Michael Deveau: By shifting procurement to alternative supply sources and balancing production across our global network, we've been able to offset a significant portion of inflationary pressure. In select cases where cost impacts were unavoidable, we are implementing targeted pricing surcharges to recover incremental costs.

Speaker Change: Next question is from the line of John Roberts with Mizuho you May proceed.

Speaker Change: Thank you.

Speaker Change: The next question is from the line.

John Roberts: Thank you I Havent looked at last night's AK, yet, but what were the year ago comps for flavors and food ingredients I'm trying to get at whether the two year stacks on growth for flavors and food ingredients are significantly different than the one year numbers you just reported the quarter.

Speaker Change: Of Josh Spector with UBS you May proceed.

Josh Spector: Yeah, Hi, good morning, I was wondering if you could expand upon your comments around tariffs curious if you'd be able to disclose what you think the gross impact today is on your costs and how much of that you think you can mitigate through some of the actions you talked about and if it's possible to help frame that in terms of 2025.

Michael Deveau: We do recognize that sweeping changes in global trade policy could contribute to broader macroeconomic volatility, including the potential to tip certain regions into a recession. This list is not currently embedded in our guidance. However, we are fortunate that the majority of IFF's portfolio is grounded in resilient, essential end markets, particularly food, beverage, household, and personal care. We view this environment not only as a challenge, but also as an opportunity. Our ability to serve our customers globally with localized innovation positions us as a resilient partner, particularly for customers looking to de-risk their own supply chain.

John Roberts: Yeah. Thanks, John I'll take this one as well in summary taste is performing very very well.

John Roberts: On a two year basis, it is a bit better than what we recorded in the first quarter of 2021, and so just to Dimensionalize. It grew 11% last year in Q1 of 24, 7%. This year. So on a two year basis, 9%. This is very strong across the board no matter. How you look at it so feel really good about the success and the performance the team is dry.

Speaker Change: Impacts and potential run rate assumptions. Thank you.

John Roberts: Going there in terms of food ingredients last year the decline for this year. They are declining for so on a two year basis, it's down for the only caveat that I'll make is that remember a lot of the performance was driven by price reductions. So this is not a volume number. This is this is an all in number and if you remember last year, we strategically lower prices to make sure we're.

Speaker Change: Importing from China to the U S and exporting from the U S and China that is that is a far apart bulk of it when we look at it on a gross basis, we have a little more than about $100 million of exposure for 2025, and maybe a little bit around double that for a run rate basis. So it is it is quite large the reality is though the team has done a fan.

Michael Deveau: Also, amid the evolving environment, we want to reaffirm our commitment to IFF's long-term strategy. We remain focused on strengthening our business through consistent reinvestment in core growth drivers, R&D, commercial, digital, and capacity. Even as we manage short-term external pressures, we will not compromise our future. Instead, we are accelerating our efforts to drive structural productivity and operational efficiency. This approach enables us to both navigate today's challenges and continue investing, ensuring we deliver on our profitability commitments while positioning IFF for long-term success.

John Roberts: Competitive in terms of overall market conditions, if you normalize for that and you look at our volume basis, it actually into two years actually stronger in Q1 overall in 2020.

Speaker Change: Tastic job in terms of the supply chain optimization, reducing exposure quite significantly to the areas, where we cannot cover from them from a supply chain standpoint, we are working and continue to work with our customers on pricing surcharge to fully compensate and we're targeting a full mitigation overtime.

John Roberts: Great.

John Roberts: Thank you.

Speaker Change: The next question is from the line of Kevin Mccarthy with vertical Research partners you May proceed.

Speaker Change: Thank you and good morning.

Kevin Mccarthy: Eric I'm curious about this 130 million Euro joint venture that you formed with Chimera called Alpha bio can.

Speaker Change: Thank you. The next question is from the line of John Roberts with Mizuho you May proceed.

Kevin Mccarthy: Can you just elaborate on the strategic rationale there long term opportunity structure of the venture and timing of that cash investment. Please.

Michael Deveau: From a financial planning perspective, we are maintaining our guidance ranges for the full year 2025, inclusive of the current tariff situation. We expect sales to be in the range of $10.6 billion to $10.9 billion, representing currency-neutral growth of between 1% to 4%. We are now expecting approximately 2% adverse impact on revenue from foreign exchange, down from 4% previously. an approximately 7% adverse impact due to divestitures versus 5% previously given the earlier close of the former solutions divestiture. From a bottom-line perspective, we continue to expect that we will deliver a 2025 Adjusted Operating EBITDA range of between $2 to $2.15 billion, representing currency-neutral growth between 5 and 10 percent.

Kevin Mccarthy: Yes.

Speaker Change: Great Great question and thank you Kevin first of all this alpha bio JV with <unk> is a 50 50 JV and it's around.

John Roberts: Yeah. Thanks, John I'll take this one as well in summary taste is performing very very well.

Speaker Change: Scaling our design enzymatic biomaterials <unk> technology, which is breakthrough technology and it's ready to go for example, we have just recently commercialized with a very strategic partner applications in fabric care that are high value and we will see nice growth there, but now with <unk>.

John Roberts: On a two year basis, it is a bit better than what we recorded in the first quarter of 2021, and so just to Dimensionalize that grew 11% last year in Q1 of 24, 7%. This year. So on a two year basis, 9%. This is very strong across the board no matter. How you look at it so feel really good about the success and the performance the team has done.

Speaker Change: Tomorrow, we are committed to building a plant we have already started in Finland, a $130 million euro plant and that Capex will be spread out over the next two years 50 50 divided between the two companies.

John Roberts: Living there in terms of food ingredients last year the declines for this year. They are declining for so on a two year basis, it's down for the only caveat that I would make is that remember a lot of the performance was driven by price reductions. So this is not a volume number. This is this is an all in number and if you remember last year, we strategically lower prices to make sure we're.

Speaker Change: And we expect it to start up by the end of 'twenty seven.

And it will be.

Michael Deveau: We are now expecting approximately 3% adverse impact to EBITDA from foreign exchange down from 6% previously and approximately 8% adverse impact due to divestitures versus 6% previously, again, due to the earlier close of pharma solutions.

Speaker Change: The servicing.

Speaker Change: For Amira, the water treatment market, which is a very attractive market and cardboard and paper packaging.

John Roberts: Competitive in terms of overall market conditions, if you normalize for that and you look at our volume basis, it actually into two years actually stronger in Q1 overall in 2020.

Speaker Change: For us we will take the technology into other industrial applications, which we are developing now and are very excited about.

John Roberts: Great.

Eric Fyrwald: With that, I will now turn it back to Eric for closing remarks. Thanks, Mike. The solid results we were able to deliver in the first quarter continue to reflect the strength of our execution and our investments in our people and our portfolio. With this growth, we have been able to maintain our strong momentum from 2024, complete key divestitures to strengthen our portfolio and meet our deleveraging target.

Speaker Change: The important thing here is that we're taking sugar feedstock and making high value biodegradable cost competitive polymers that we'll sell into our various end markets.

John Roberts: Thank you.

Speaker Change: The next question is from the line of Kevin Mccarthy with vertical Research partners you May proceed.

Speaker Change: Yes, Thank you and good morning.

Speaker Change: Eric I'm curious about this 130 million Euro joint venture that you formed with chimaera called Alpha bio can.

And have tremendous growth opportunity for the future and this plant startup world scale plant modern plant I think will be the first beginning of a long series of great applications that we can really grow this business.

Speaker Change: Can you just elaborate on the strategic rationale there long term opportunity structure of the venture and timing of that cash investment. Please.

Eric Fyrwald: But we still have a lot of work ahead of us. and we are always focused on strengthening IFF so we can help our customers win in any market environment. Building a strong company means continuing to reinvest in catalysts for our growth. including research and development, commercial capabilities, and integral capital expenses that will bolster our foundation and enable us to achieve sustainable, profitable, long-term growth for our shareholders. And as we move forward, we'll continue to focus on bringing innovative, sustainable solutions to the market that meet customer needs and delivering value that makes us the clear partner of choice for customers around the world.

Speaker Change: Okay.

Speaker Change: Great Great question and thank you Kevin first of all this alpha bio JV with Chimera owns a 50 50, JV and it's around <unk>.

Speaker Change: Thank you.

Ghansham Panjabi: The next question is from the line of Ghansham Panjabi with Baird you May proceed.

Speaker Change: Scaling our design enzymatic biomaterials, <unk> technology, which is breakthrough technology and it's ready to go.

Ghansham Panjabi: Hi, Good morning, I just wanted to go back to the comments on taste, the 7% core sales growth in <unk>, if you could give us a bit more color as to which specific end market verticals may have contributed towards that.

For example, we have just recently commercialized with a very strategic partner applications in fabric care that are high value and we will see nice growth there, but now with chimaera, we've committed to building a plant we have already started in Finland, a $130 million euro plant in that Capex.

Speaker Change: Slide seven you mentioned volume gains and then also.

Speaker Change: Did you see any impact in that segment or any other for that matter from a pre buy specific to head of tariffs et cetera.

Ghansham Panjabi: Great, Yes, I'll take this one ghansham. Thank you. Thank you for the question TS team overall has done a great job of growing their business.

Speaker Change: Be spread out over the next two years 50 50 divided between the two companies.

Eric Fyrwald: I'm confident we are well on our way.

Ghansham Panjabi: This is driven by the increased pipeline, where they proactively have target a lot of incremental growth potential and opportunities going forward, which puts which actually more impressive is actually when you look at the win rate. They are winning much more than their fair share and so between the combination of our strong win rate and an increased pipeline I think that's what's driving the majority of the <unk>.

Operator: Thank you, and I'll now open the floor for questions. Thank you. At this time, we will now begin today's Q&A.

Speaker Change: And we expect it to start up by the end of 'twenty seven.

Speaker Change: And it will be.

Speaker Change: The servicing.

Operator: If you would like to ask a question, please press star followed by one and then to remove your question, please press star followed by two. As a reminder, please limit yourself to one question. We'll pause here briefly as your questions are ready.

Speaker Change: Core amira, the water treatment market, which is a very attractive market and cardboard and paper packaging.

Speaker Change: For us we will take the technology into other industrial applications, which we are developing now and are very excited about.

Ghansham Panjabi: And there.

Ghansham Panjabi: To your point.

Ghansham Panjabi: The way I would look at as I look at it on a region perspective, and all the regions have broad based growth so they're executing at the local level and from a category perspective. It is broad based growth across most of the categories within within the business. Overall. So it is really it's a really good combination of what I'd say is a success story for us at this point in time.

Nicola Tang: The first question is from the mom of Nicola Tang with BNP. Parabas. Hi, everyone. Thanks for taking the question. On the outlook, you flagged that this doesn't include any potential recessionary pressures that could arise .

Speaker Change: The important thing here is that we're taking sugar feedstock.

Speaker Change: And making high value biodegradable cost competitive polymers that we'll sell into our various end markets.

Speaker Change: And have tremendous growth opportunity for the future and this plant startup world scale plant modern plant I think will be the first beginning of a long series of great applications that we can really grow this business.

Ghansham Panjabi: With respect to pre pre buy there could be a modest benefit but it's hard to tell at this point in time, but just a trend that received consistent in April and so it's very hard when you think about the pre buy overall, we'll know more as we progress through the balance of the quarter and I would just add quickly that in taste scent and health and biosciences.

Eric Fyrwald: Transcripts provided by Transcription Outsourcing, LLC. Can you talk us through which areas of the portfolio could potentially be at risk and which parts could be more resilient in a recessionary scenario? And do you see any signs of sequential slowdown or quadruple?

Speaker Change: Okay.

Ghansham Panjabi: The increased investment in R&D is strengthening our R&D pipeline, which is very important for the years of 2007 and beyond.

Speaker Change: Thank you.

Eric Fyrwald: Thank you for the question, Nicola. This is Eric. I'll take it. First of all, our order book so far has stayed consistent with and in line with our guidance. But as you know, and I think all of us feel that, and across industries, that there's concern about all the uncertainty. And just for an example, a major HPC company executive recently expressed caution saying that U.S. consumers are, for example, reducing the number of times they do laundry each week. Now, having said that, historically, about 80% of our portfolio goes into what we consider essential products. and about 20% into discretionary.

Speaker Change: The next question is from the line of Ghansham Panjabi with Baird you May proceed.

Speaker Change: Hi, Good morning, I, just want to go back to the comments on taste, the 7% core sales growth in <unk>, if you could give us a bit more color as to which.

Ghansham Panjabi: Thank you.

Speaker Change: The next question is from the line of Patrick Cunningham Citigroup you May proceed.

Speaker Change: The big end market verticals may have contributed towards that.

Speaker Change: Hi, Good morning, just don't include ingredients, what drove volumes lower in protein solutions.

Speaker Change: Slide seven you mentioned volume gains and then also.

Speaker Change: Did you see any impact in that segment or any other for that matter from a pre buy specific too.

Speaker Change: Should we think about the outlook, there and overall food ingredient volumes for the year and sort of progress towards that 15% margin target.

Speaker Change: Tariffs et cetera.

Speaker Change: Oh, great, Yes, I'll take this one gershon. Thank you. Thank you for the question. The team overall has done a great job of growing their business.

Speaker Change: So first of all thanks for the question Patrick the food ingredients turnaround is going very well.

Speaker Change: Much of this is driven by the increased pipeline, where they proactively have targeted a lot of incremental growth potential and opportunities going forward, which was actually more impressive is actually when you look at the win rate, they're winning much more than their fair share and so between the combination of our strong win rate and an increased pipeline I think that's what's driving the majority of the <unk>.

Speaker Change: Andy Mueller, who now runs the business knows the business extremely well with the NIPSCO before has come back to <unk>. If you will and is getting the team and us on the right track if you recall in 2023.

Eric Fyrwald: And so the bulk of our portfolio is very resilient, but some examples of the discretionary areas would be fine fragrances, where, by the way, we've seen continued strong order pattern, consumer fragrances in the beauty and air care areas, and in the health and the probiotics area. But so far, the order pattern has been solid, but we do have concerns as we head toward the back half of the year with all the uncertainty, but we hope that some of that uncertainty resolves itself and things continue as they are today. Thank you.

Speaker Change: EBITDA margin for this business was in the high single digits and.

Speaker Change: And there.

Speaker Change: To your point the way I would look at as I look at it on a region perspective, and all the regions have broad based growth so they're executing at the local level and from a category perspective. It is broad based growth across most of the categories within within the business. Overall. So it is really it's a really good combination of what I would say is a success story for us at this point in time.

Speaker Change: In 2024, it was 12% and then 25 first quarter, we got it to 13, 9%.

Speaker Change: So that's all headed in the right direction and we see that continuing.

Speaker Change: In the first quarter the volumes were down a bit.

Speaker Change: Overall for the year, we see them flattish to slightly down as we focus on selling the higher margin products and decrease our sales in the lower margin products and lower margin applications now.

Speaker Change: With respect to pre buy there could be a modest benefit but it's hard to tell at this point in time, because the trend that receives consistent in April and so it's very hard when you think about the pre buy overall, we'll know more as we progress through the balance of the quarter and I would just add quickly that in taste scent and health and biosciences.

Joshua Spector: The next question is from the line. of Josh Spector with UBS. You may...

Speaker Change: Now protein volumes were down to down due to weaker volume in some of the lower value areas of protein and in some of the higher value areas of protein. We had production issues that are now being resolved.

Michael Deveau: Yeah, hi, good morning. I was wondering if you could expand upon your comments around tariffs. Curious if you'd be able to disclose what you think the gross impact today is on your costs, and how much of that you think you can mitigate through some of the actions you talked about, and if it's possible to help frame that in terms of 2025 impacts and potential run rate assumptions. Thank you.

Speaker Change: The increased investment in R&D is strengthening our R&D pipeline, which is very important for the years of 27 and beyond.

Speaker Change: So we are confident in the higher value protein growth going forward and the overall performance of our food ingredients business continuing to improve as we.

Speaker Change: Thank you.

Speaker Change: The next question is from the line of Patrick Cunningham Citigroup you May proceed.

Michael Deveau: Yeah, thanks, Josh.

Speaker Change: Hi, Good morning, just don't include ingredients, what drove volumes lower in protein solutions or how should we think about the outlook there and overall food ingredient volumes for the year and sort of progress towards that 15% margin target.

Speaker Change: As as we've planned out and are developing and executing our strategy very well.

John Roberts: Eric, I'll take this one. You know, fortunately at IFF, we have a diverse and global operations with local procurement and manufacturing capabilities. That has allowed us to, you know, migrate and mitigate some of the efforts that you see from a tariff perspective overall. Most of our tariff exposure is related to China, specifically importing from China to the U.S. and exporting from the U.S. to China. That is the far bulk of it. When we look at it on a gross basis, we have a little more than about $100 million of exposure for 2025, and maybe a little bit around double that for a run rate basis.

Speaker Change: Thank you. The next question is from the line of Christian Owen with Oppenheimer. You May proceed.

Speaker Change: So first of all thanks for the question Patrick the food ingredients turnaround is going very well.

Christian Owen: Hi, Good morning. Thank you for the question Mike for you just with the pharmacy will now complete in jump started the delevering process that was largely as expected, but as we look forward from here and given some of these broader macro uncertainty and what's your philosophy on further delevering in terms of.

Speaker Change: Andy Mueller, who now runs the business knows the business extremely well was within this go before has come back to Iff's. If you will and is getting the team and us on the right track.

Michael Deveau: So it is quite large. The reality is, though, the team has done a fantastic job in terms of the supply chain optimization, reducing the exposure quite significantly.

Speaker Change: If you recall in 2023, our EBITDA margin for this business was in the high single digits.

Christian Owen: And balancing that redeployment of capital to grow EBITDA.

Christian Owen: And using cash to reduce debt. Thank you.

Speaker Change: In 2024, it was 12% and then 25 first quarter, we got it to 13, 9%.

Michael Deveau: For the areas where we cannot cover from a supply chain standpoint, we are working and continue to work with our customers on pricing surcharges to fully compensate and retargeting the full mitigation over time. Thank you.

Speaker Change: Thanks Kristen.

Speaker Change: In terms of the balance sheet or our capital structure I would say our focus right now is completing our debt tender.

Speaker Change: So that's all headed in the right direction and we see that continuing.

Speaker Change: Which will result in us getting to the leverage of below three times net debt to EBITDA.

Speaker Change: In the first quarter the volumes were down a bit.

Speaker Change: Not only does this meet our commitment. It also allows us more financial flexibility going forward and so as I discussed in some of the prepared remarks, our number one priority right now is reinvestment in capex to support our core businesses, we have really great core businesses with a lot of growth and margin projections going forward. So what can we do now the best to support that and that.

Kevin Mccarthy: The next question is from the line of John Roberts with Mizuho. You may Thank you.

Eric Fyrwald: I haven't looked at last night's AK yet, but what were the year-ago comps for flavors and food ingredients? I'm trying to get at whether the two-year stacks on growth for flavors and food ingredients are significantly different than the one-year numbers you just reported in the quarter. Yeah, thanks, John. I'll take this one as well. You know, in summary, taste is performing very, very well. It's actually on a two-year basis, it's a bit better than what we recorded in the first quarter of 2021. And so just to dimensionalize, they grew 11% last year in Q1 of 24, 7% this year.

Speaker Change: Now protein volumes were down to down due to weaker volume in some of our lower value areas of protein.

Speaker Change: The investment in Capex.

Speaker Change: From there we're going to look at some bolt on opportunities in terms of acquisitions are small in nature, but really to reinforce these core businesses in the areas of innovation and commercial capabilities.

Speaker Change: And in some of the higher value areas of protein we had production issues that are now being resolved.

Speaker Change: So we are confident in the higher value protein growth going forward and the overall performance of our food ingredients business continuing to improve as we.

Speaker Change: Then what I'd say is we're going to evaluate capital returned to shareholders through our dividend and also look at a potential share buyback program now that we get below three times net debt to EBITDA. So more to come on this aspect, but I just wanted to frame some initial conversations or thoughts as we as we go forward.

Speaker Change: As we've planned out and are developing and executing our strategy very well.

Eric Fyrwald: So on a two-year basis, 9%. This is very strong across the board, no matter how you look at it. So feel really good about the success and the performance the team is driving there.

Speaker Change: Thank you. The next question is from the line of Christian Owen with Oppenheimer. You May proceed.

Eric Fyrwald: In terms of food ingredients, last year, they declined four. This year, they're declining four. So on a two-year basis, it's down four. The only caveat that I will make is that, remember, a lot of the performance was driven by price reductions. So this is not a volume number, this is an all-in number. And if you remember last year, we strategically lowered prices to make sure we're competitive in terms of overall market conditions. If you normalize for that, and you look at a volume basis, the two-year is actually stronger in Q1 overall in 2025. Thank you.

Speaker Change: Thank you. The next question is from the line of Michael <unk> with Wells Fargo.

Michael: May proceed.

Christian Owen: Hi, good morning, Thanks for the question.

Christian Owen: Thanks for you just with the pharmacy will now complete in jump started the delevering process that was actually as expected, but as we look forward from here and given some of these broader macro uncertainty and what's your philosophy on further delevering in terms of balancing that redeployment of capital to grow EBITDA.

Michael: Hey, good morning, nice start to the year.

Michael: A quick follow up on food ingredients EBITDA margin first quarter were very good.

Michael: And you guys talked about.

Michael: Net pricing and productivity was noted for the year of increase how much did <unk> contribute to that and then.

Michael: It does seem like you are pretty close to your goal of mid teens is there more upside to that longer term.

Christian Owen: It is using cash to reduce debt. Thank you.

Kristen Owen: The next question is from the line of Kevin McCarthy with Vertical Research Partners. Thank you and good morning. Eric, I'm curious about this 130 million euro.

Christian Owen: Thanks Christian.

Mike: Yes, Thanks, Mike.

Speaker Change: In terms of the balance sheet or our capital structure I would say our focus right now is completing our debt tender, which will result in us getting to the leverage of below three times net debt to EBITDA.

Mike: The gain so far have been largely productivity combined with focusing on the higher margin products and applications and that's going very well and we see that continuing.

Speaker Change: Not only does this meet our commitment and also allows us more financial flexibility going forward and so as I discussed in some of the prepared remarks, our number one priority right now is reinvestment in capex to support our core businesses, we have really great core businesses with a lot of growth and margin projections going forward. So what can we do now the best to support that and that.

Eric Fyrwald: Adventure Elaborate on strategic rationale there, long-term opportunity. Great, great question. And thank you, Kevin. First of all, this alpha bio JV with chimera is a 5050 JV. And it's around Scaling our design enzymatic biomaterials, the DEB technology, which is breakthrough technology and it's ready to go. For example, we have just recently commercialized with a very strategic partner applications in fabric care that are high value and we'll see nice growth there. But now with Chimera, we've committed to building a plant, we've already started in Finland, 130 million euro plant and that CapEx will be spread out over the next two years, 50-50 divided between the two companies and we expect it to start up by the end of 27 and it will The servicing For Chimera, the water treatment market, which is a very attractive market, and cardboard and paper packaging.

Mike: Now we are committed to delivering the higher.

Mike: Improvements for this year on EBITDA margin and what I would say is through 2026th we're committed to getting above 15%.

Mike: Okay.

Speaker Change: The investment in Capex.

Mike: Thank you the next.

Speaker Change: Question is from the line of Salvator Tiano with Bofa you May proceed.

Speaker Change: Yes, good morning.

Mike: So.

Mike: Theres been a lot of discussion about artificial dyes.

Speaker Change: And then what I'd say is we're going to evaluate capital returned to shareholders through our dividend and also look at a potential share buyback program now that we get below three times net debt to EBITDA.

Mike: Can you discuss a little bit what's your color exposure and also deepen that we may see a structural shifts to module guys here.

Mike: Is there a scenario, where you would like to expand organically or even through acquisitions.

Speaker Change: So more to come on this aspect, but just wanted to frame some initial conversations where thoughts as we as we go forward.

Mike: Yes.

Mike: First of all colors are a small part of our portfolio, our taste business portfolio less than $50 million and we're all naturals. So banning artificial dyes is a positive for us.

Speaker Change: Thank you. The next question is from the line of Michael <unk> with Wells Fargo. You May proceed.

Michael: Hey, good morning, nice start to the air.

Mike: Don't see us, making major acquisition moves in this area I think there are other areas that are more attractive to us, but we will continue to grow this business, especially with this dynamic I think the broader advantage to us of this trend as the push for cleaner labels and we see that as a big opportunity across our food portfolio.

Speaker Change: A quick follow up on fruit ingredients EBITDA margin first quarter over or are very good.

And you guys talked about.

Speaker Change: Net pricing and productivity was noted for the year of increase how much did each contribute to that and then.

Eric Fyrwald: For us, we will take the technology into other industrial applications, which we're developing now and are very excited about. I think the important thing here is that we're taking sugar feedstock and making high value biodegradable, cost-competitive polymers that will sell into various end markets and have tremendous growth opportunity for the future.

Speaker Change: It does seem like you are pretty close to your goal.

Speaker Change: Mid teens is there more upside to that longer term.

Speaker Change: Thank you. The next one the next question is from the line of David <unk>.

Mike: Yes, Thanks, Mike.

Mike: <unk> gained so far have been largely productivity combined with focusing on the higher margin products and applications and that's going very well and we see that continuing now we are committed to delivering the higher <unk>.

Speaker Change: <unk> with Deutsche Bank you May proceed.

Eric: Thanks, Good morning, I'm, Eric given a 3% currency neutral growth in Q1.

Eric Fyrwald: And this plant startup, world-scale plant, modern plant, I think will be the first beginning of a long series of great applications that we can really grow this business. Thank you.

Speaker Change: What we need to happen for that to be at the low end of your full year range of 1% to 4%.

Mike: Improvements for this year on EBITDA margin and what I would say is through 2026th we're committed to getting above 15%.

Eric: On sales growth here also where youre seeing the greatest stress on the consumer right now thank you.

Speaker Change: Thanks, David I think that.

Speaker Change: Thank you. The next question is from the line of Salvator Tiano with Bofa you May proceed.

Ghansham Panjabi: The next question is from the line of Ghansham Panjabi with Baird. You may proceed. Hi, good morning. I just want to go back. Great. Yeah, I'll take this one, Ghansham. Thank you. Thank you for the question. You know, the taste team overall is doing a great job of growing their business. Much of this is driven by the increased pipeline, where they proactively have targeted a lot of incremental growth potentials and opportunities going forward. What's actually more impressive is actually when you look at the win rate, they're winning much more than their fair share. And so between the combination of a strong win rate and an increased pipeline, I think that's what's driving the majority of the growth in there.

Eric: Go to the low end of our currency neutral sales.

Eric: We would have to see a significant economic slowdown, which some people are talking about their concerns about but we're also hearing the actions are being taken to.

Salvator Tiano: Yes, good morning.

Salvator Tiano: So there's been a lot of discussion about artificial dyes. So can you discuss a little bit what's your color exposure and also deepen but we may see a structural shapes to module guys here.

Eric: Mitigate the uncertainty, but and so we're hoping for that all I will say is that so far our order pattern has given us full confidence that we'll be solidly in that range and we hope that continues and we're working really hard to do what we can control around bringing more innovation to our customers.

Speaker Change: The scenario, where you would like to expand organically or even through acquisitions.

Salvator Tiano: Yes.

Salvator Tiano: Of all colors are a small part of our taste portfolio, our taste business portfolio less than $50 million.

Eric: Around figuring out where in the world are applications products customers that we can go and grow with and our team is very energized and they are out there pushing hard for growth any growth.

Salvator Tiano: And we're all naturals, so banning artificial dyes is a positive for us I don't see us making major acquisition moves in this area. I think there are other areas that are more attractive to us, but we will continue to grow this business, especially with this dynamic.

Eric: Attractive profitably that we can get we're trying to attack to take so that in any economics.

Salvator Tiano: The broader advantage to us of this trend as the push for cleaner labels and we see that as a big opportunity across our food portfolio.

Eric: Scenario, we achieve.

Eric: Our guidance.

Eric Fyrwald: To your point, the way I would look at it is I look at it on a region perspective, and all the regions have broad-based growth. So they're executing at the local level, and from a category perspective, it is broad-based growth across most of the categories within the business overall. So it's a really good culmination of what I would say is a success story for IFF at this point in time. With respect to pre-buy, you know, there could be a modest benefit, but it's hard to tell at this point in time because the trend that we see is consistent in April.

Eric: Okay.

Thank you. The next question is from the line of Lauren Lieberman with Barclays. You May proceed.

Salvator Tiano: Okay.

Salvator Tiano: Thank you.

Speaker Change: The next one the next question is from the line of David <unk>.

Lauren Lieberman: Great. Thanks, so much.

I just wanted to follow up on the commentary on the order book nothing having changed so far because you pointed out Eric you've got the comment on a few of our laundry loads.

Speaker Change: <unk> with Deutsche Bank you May proceed.

Speaker Change: Thanks, Good morning, I'm, Eric given a 3% currency neutral growth in Q1, what would need to happen try that to be at the low end of your full year range of 1% to 4% on sales growth here.

Lauren Lieberman: From one of our CPG Ceos, but even more broadly than that.

Lauren Lieberman: And we're hearing through earnings season from your customer base.

Eric Fyrwald: And so it's very hard when you think about the pre-buy overall. We'll know more as we progress through the balance of the quarter.

Speaker Change: So where are you seeing the greatest stress on the consumer right now thank you.

Lauren Lieberman: Pretty cautious commentary both on.

Eric Fyrwald: And I would just add quickly that in taste, scent, and health and biosciences, the increased investment in R&D is strengthening our R&D pipeline, which is very important for the years of 27 and beyond. Thank you.

Lauren Lieberman: Recent trading conditions to seeing.

David: Thanks, David.

Lauren Lieberman: Significant inventory destocking across the U S. During the first quarter in some categories, particularly PD related that extending into the second quarter.

Speaker Change: Thank you.

Speaker Change: To go to the low end of our currency neutral sales.

Speaker Change: It would have to see a significant economic slowdown, which some people are talking about their concerns about but we're also hearing the actions are being taken to.

Lauren Lieberman: Actual consumer takeaway turning negative in some categories.

Patrick Cunningham: The next question is from the mom of Patrick Cunningham. Hi, good morning. Just on food ingredients, you know, what's your volumes lower in protein solutions?

Speaker Change: So I'm just a little bit concern frankly that you haven't seen that slow down yet on your side because I feel like it's inevitable. So I guess why not incorporate that into the outlook or is it just that areas outside the U S are that much more resilient, so theres really nothing to worry.

Speaker Change: To mitigate the uncertainty, but and so we're hoping for that all I'll say is that so far our order pattern has given us full confidence that we'll be solidly in that range and we hope that continues and we're working really hard to do what we can control around bringing more innovation to our customers.

Eric Fyrwald: And how should we think about the outlook there and overall food ingredient volumes for the year and sort of progress towards that 15% margin type? So first of all, thanks for the question, Patrick. The food ingredients turnaround is going very well. Andy Mueller, who now runs the business, knows the business extremely well, was with Denisco before, has come back to IFF, if you will, and is getting the team and us on the right track. If you recall, in 2023, our EBITDA margin for this business was in the high single digits. In 2024, it was 12%, and in 25 first quarter, we got it to 13.9%.

Lauren Lieberman: Total company consolidated level. Thanks.

Speaker Change: Around figuring out where in the world their applications products customers that we can go in and grow with us and our team is very energized and they are out there pushing hard for growth any growth.

Speaker Change: Thanks for the question Lauren and I wouldn't say there is nothing to worry about we worry plenty and we've got a lot of energy to go out and.

Lauren Lieberman: And do all we can to drive growth and drive productivity.

Speaker Change: Tractive profitably that we can get we're trying to attack to take so that in any economic.

Speaker Change: So we're on top of this we are energized by the challenges.

Speaker Change: I'd say as Mike alluded to there might have been some pre buying around tariffs that could be in some of our numbers and some of our orders.

Speaker Change: Scenario, we achieve.

Speaker Change: Our guidance.

Speaker Change: Okay.

Speaker Change: But I would also say that we've got a very diverse customer base, we've got a very diverse geographic base.

Speaker Change: Thank you. The next question is from the line of line Lieberman with Barclays. You May proceed.

Speaker Change: And we're going to work we are working hard to take advantage of that to make sure that wherever we can grow we will grow but as we've mentioned before we are concerned about what could happen economically, particularly in the United States, but also in other markets China. As you know is very slow. So we are concerned and we are doing.

Eric Fyrwald: So that's all headed in the right direction, and we see that continuing. In the first quarter, the volumes were down a bit. Overall, for the year, we see them flattish to slightly down as we focus on selling the higher margin products and decrease our sales in the lower margin products and lower margin applications. Now, protein volumes were down due to weaker volume in some of the lower-value areas of protein, and in some of the higher-value areas of protein, we had production issues that are now being resolved. So we're confident in the higher-value protein growth going forward, and the overall performance of our food ingredients business continuing to improve as we planned out and are developing and executing our strategy very well.

Lieberman: Great. Thanks, so much.

Speaker Change: I just wanted to follow up on the commentary on the order book nothing having changed so far because you pointed out Eric you've got the comment on fewer laundry loads.

Speaker Change: From one of our CPG Ceos, but even more broadly than that.

Speaker Change: And we're hearing through earnings season from your customer base.

All we can do.

Speaker Change: To drive what we can control, but as we look at what we think are reasonable scenarios.

Speaker Change: Pretty cautious commentary both on.

Speaker Change: We're continuing to hold our guidance.

Speaker Change: Recent trading conditions to seeing.

Speaker Change: Significant inventory destocking across the U S. During the first quarter in some categories, particularly PD related that extending into the second quarter.

Speaker Change: Thank you. The next question is from the line of Jeff Zekauskas with Jpmorgan. You May proceed proceed.

Speaker Change: Actual consumer takeaway turning negative in some categories.

Jeff Zekauskas: Thanks very much.

Speaker Change: So I'm just a little bit concern frankly that you haven't seen that slowdown yet on your side because I feel like it's inevitable.

Speaker Change: Yes.

Speaker Change: It is.

Speaker Change: As the food ingredients business more strategic than it used to be.

Speaker Change: So I guess why not incorporate that into the outlook or is it just that areas outside the U S are that much more resilient, so theres really nothing to worry about.

And that my impression is that this might be an asset that could be separated from ISI.

Kristen Owen: Thank you.

Speaker Change: How do you feel about that or how do you feel about the timing.

Lisa Denise: The next question is from the line of Kristen Owen with Open Hammer. Hi, good morning. Thank you for the question.

Speaker Change: Total company consolidated level. Thanks.

Mike: And then for Mike.

Speaker Change: Thanks for the question, Lauren and I, Wouldnt say theres nothing to worry about we worry plenty and we've got a lot of energy to go out and.

Mike: Can you talk about your cash flow expectations for the year and your Capex levels.

Michael Deveau: Mike, this one's for you. Just with the pharma sale now complete, you've jump-started the de-levering process. That was largely as expected.

Speaker Change: And do all we can to drive growth and drive productivity.

Speaker Change: Thanks, Jeff I'll take the first part of that to begin with and I will just say that we just separated our pharmacy business last week and we were heavily focused on that.

Michael Deveau: But as we look forward from here and given some of this broader macro uncertainty, what's your philosophy on further de-levering in terms of balancing that redeployment of capital to grow EBITDA versus using cash to reduce the debt? Thank you. Thanks, Kristen. Yeah, you know, in terms of the balance sheet or our capital structure, I would say our focus right now is completing our debt tender, which will result in us getting to the leverage of below three times Neta Tibita. Not only does this meet our commitment, it also allows us more financial flexibility going forward. And so as I discussed in some of the prepared remarks, our number one priority right now is reinvestment in CapEx to support our core businesses.

Speaker Change: So we're on top of this we are energized by the challenges.

Speaker Change: What I would say as Mike alluded to there might have been some pre buying around tariffs that could be in some of our numbers and some of our orders.

Mike: And getting that.

Mike: That done and also getting the cash in and getting our balance sheet strong.

Speaker Change: But I would also say that we've got a very diverse customer base, we've got a very diverse geographic base.

Mike: So now we are clearly looking at our food ingredients business we.

Mike: And we think we have great leadership in that business. We think we have a great team. We're on track with our transformation, we're going to continue to do that and we want to get the growth higher and make sure that we're doing the right things to get profitable growth higher.

Speaker Change: And we're going to work we are working hard to take advantage of that to make sure that wherever we can grow we will grow but as we've mentioned before we are concerned about what could happen economically and particularly in the United States, but also in other markets China as you know is very slow.

Mike: As we increase the EBITDA margin overall and I would say we're on track with the plan to do that.

Speaker Change: So we are concerned and we're doing all we can do to drive what we can control, but as we look at what we think are reasonable scenarios.

Michael Deveau: We have really great core businesses with a lot of growth and margin projections going forward. So what can we do now the best to support that? And that's the investment in CapEx. From there, you know, we're going to look at some bolt-on opportunities in terms of acquisitions, small in nature, but really to reinforce these core businesses in the areas of innovation and commercial capabilities. And then what I'd say is we're going to evaluate capital return to shareholders through our dividend and also look at a potential share buyback program now that we get below three times Neta Tibita.

Mike: As we do that yes, we will look at strategic options for pieces or all of our food.

Speaker Change: We're continuing to hold our guidance.

Mike: <unk> food ingredients business, which we've talked about before but right now we're focused on keeping that transformation going getting healthier and healthier and making sure that we collaborate across the company to get the most benefit we can out of serving customers with our full line of products and we like how.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Question is from the line of Jeff Zekauskas with J P. Morgan you May proceed proceed.

Speaker Change: Thanks very much.

Speaker Change: Okay.

Speaker Change: As the food ingredients business more strategic than it used to be.

Mike: The progress is being made and we'll have more to say I think in the.

Michael Deveau: So more to come on this aspect, but just wanted to frame some initial conversations or thoughts as we go forward. Thank you.

Mike: <unk>.

Speaker Change: And that my impression is that this might be an asset that could be separated from ISI.

Mike: Towards the later part of this year and into next year.

Mike: And maybe just Jeff on Capex and cash flow broadly similar to how we guided earlier this year capex about 6% of sales.

Speaker Change: How do you feel about that or how do you feel about the timing.

Michael Sison: The next question is from Ilan of Michael Sison with Wells Fargo. You may Hey, good morning, nice start to the year. A quick follow up on food ingredients, you know, you've been down margins first quarter were very good. And you guys talked about, you know, net pricing and productivity was noted for the year of increase, how much did each contribute to that? And then, you know, it does seem like you're pretty close to your goal of mid teens, is there more upside to that longer term?

Speaker Change: And then for Mike.

Mike: And we talked about some of those levels of Reinvestments and HEB.

Speaker Change: Can you talk about your cash flow expectations for the year.

Mike: Overall, so that's that's the biggest driver that's driving that up year over year in terms of free cash flow again, very very consistent it's probably around $500 million, which is what we talked about in February and that includes around $350 million of taxes related to the former pharma divestiture. So.

Speaker Change: And your Capex levels.

Speaker Change: Okay.

Speaker Change: Thanks, Jeff I'll take the first part of that to begin with I'll, just say that we just separated our pharmacy business last week, and we were heavily focused on that and getting that.

Mike: On a kind of a normalized basis, you are probably in that 8% to 850 range, which is pretty consistent to where it was in previous in previous years.

Speaker Change: <unk> done and also getting the cash in and getting our balance sheet strong.

Speaker Change: So now we are clearly looking at our food ingredients business.

Michael Deveau: Yeah, thanks, Mike. The gains so far have been largely productivity, combined with focusing on the higher margin products and applications. And that's going very well, and we see that continuing. Now, we are committed to delivering the higher improvements for this year on EBITDA margin. And what I would say is through 2026, we're committed to getting above 15%.

Speaker Change: And we think we have great leadership in that business. We think we have a great team. We're on track with our transformation, we're going to continue to do that we want to get the growth higher and make sure that we're doing the right things to get profitable growth higher.

Laurence Alexander: Thank you. The next question is from the line of Laurence Alexander with Jefferies. You May proceed.

Laurence Alexander: Good morning, Eric I was wondering if you could speak specifically to how you think about the inventory cycle and the bullwhip effect and how that might affect iaff because in.

As we increase the EBITDA margin overall and I would say we're on track with the plan to do that.

Eric: In the past I think on the.

Unknown Executive: For more information visit www.FEMA.gov Thank you.

Speaker Change: As we do that yes, we will look at strategic options for pieces or all of our.

Laurence Alexander: Supply chain lags have always been kind of a bit of a challenge.

Laurence Alexander: To adjust for it so what do you see as kind of coming down the pike as kind of inevitable that the company is already preparing for.

Speaker Change: Food ingredients business, which we've talked about before but right now we're focused on keeping that transformation going getting healthier and healthier and making sure that we collaborate across the company to get the most benefit we can out of serving customers with our full line of products and we like how.

Salvator Tiano: The next question is from Ilan of Salvator Tiano with B of A. You may Yes, good morning. So there's been a lot of discussion about artificial dyes. can you discuss a little bit what's your color exposure?

Laurence Alexander: And then does that mean.

Laurence Alexander: You mentioned overall demand issues, but I'm, just curious more specifically about the inventory cycle.

Laurence Alexander: Yes, Thank you Laurence I'll pass that over to Mike given his longer history with <unk> and the cycles that we've seen so Mike yes, yes, it's a great. It's a great.

Salvator Tiano: And also, given that we may see a structural shift to natural dyes here, is this an area where you would like to expand organically or even throughout? Yes, Sal. First of all, colors are a small part of our taste portfolio, our taste business portfolio, less than $50 million, and we're all naturals. So banning artificial dyes is a positive for us. I don't see us making major acquisition moves in this area. I think there are other areas that are more attractive to us, but we will continue to grow this business, especially with this dynamic.

Speaker Change: The progress is being made and we'll have more to say I think in the in the.

Mike: Strategic question I think some of the commentary here around our cautiousness is just around some of the delayed that you can see with customers that as they see end market weakness that didn't work back into the supply chain ultimately coming back to our industry I think what's different around this time and I have lived through a couple a couple of challenging times at Ipass <unk>.

Speaker Change: Towards the later part of this year and into next year.

Speaker Change: And maybe just Jeff on Capex and cash flow broadly similar to how we guided earlier this year capex about 6% of sales.

Speaker Change: And we talked about some of those levels of Reinvestments and HEB.

Speaker Change: Overall, so that's that's the biggest driver that's driving that up year over year in terms of free cash flow again, very very consistent it's probably around $500 million, which is what we talked about in February and that includes around $350 million.

Mike: My 17 year career here and with a little bit different is that we just recently came through a pretty significant destocking error, both in terms of magnitude and length and so when I think about inventories and you can look at some big global customers as a percentage of sales over relatives history period.

Salvator Tiano: I think the broader advantage to us of this trend is the push for cleaner labels, and we see that as a big opportunity across our food portfolio. Thank you.

Speaker Change: Taxes related to the former pharma divestiture. So on a kind of a normalized basis, you are probably in that 8% to $8 50 range, which is pretty consistent to where it was in previous in previous years.

Mike: Not big Big builds overall now it's hard to tell ultimately what the inventories levels are going to channel, whether a customer basis, but given that we just came out of a pretty significant destock. We actually don't believe that they are elevated to a point that we could see a meaningful downtick going forward all that being said a lot of that cautiousness that we're talking about today is as we think about.

David Begleiter: The next line, the next question is from the line of David Begleiter with Deutsche Bank.

Speaker Change: Thank you. The next question is from the line of Laurence Alexander with Jefferies. You May proceed.

Eric Fyrwald: Thank you, good morning. Eric, given the 3% currency neutral growth in Q1, what would need to happen for IFF to be at the low end of your four-year range of 1 to 4% on sales growth here? Also, where are you seeing the greatest stress on the consumer right now?

Laurence Alexander: Good morning, Eric I was wondering if you could speak specifically to how you think about the inventory cycle and the bullwhip effect and how that might affect iaff because.

Mike: The future specifically second half of this year, we want to make sure that we're prepared in any situation and that's why things like productivity up becomes so important to make sure we maintain and protect our profitability overall.

Speaker Change: In the past I think on the supply chain lags have always been kind of a bit of a challenge.

Eric Fyrwald: Thanks, David. I think that to go to the low end of our currency neutral sales, we would have to see a significant economic slowdown, which some people are talking about, they're concerned about, but we are also hearing that actions are being taken to mitigate the uncertainty. And so we're hoping for that. All I'll say is that so far, our order pattern has given us full confidence that we'll be solidly in that range. And we hope that continues. And we're working really hard to do what we can control around bringing more innovation to our customers, around figuring out where in the world there are applications, products, customers that we can go and grow with.

Speaker Change: To adjust for it so what do you see as kind of coming down the pike as kind of inevitable that the company is already preparing for.

Speaker Change: Thank you. The next question is from the line of Lisa de Neve with Morgan Stanley You May proceed.

Speaker Change: Hi, Thank you for taking my question can you. Please provide us with an update on 2025 implicit inflation levels, and where precisely you're potentially seeing any incremental raw material question can you detail, which ingredients that are and thats about what lower oil price environment May mean for you and then I have a very short follow.

Speaker Change: And then.

Speaker Change: You mentioned overall demand issues, but I'm, just curious more specifically about the inventory cycle.

Speaker Change: Yes, Thank you Laurence I'll pass that over to Mike given his longer history with Iff's in the cycles that we've seen so Mike yes, yes, it's a great. It's a great.

Speaker Change: Strategic question I think some of the commentary here around our cautiousness is just around some of the delayed that you can see with customers that as they see end market weakness and work back into the supply chain ultimately coming back to to our industry I think what's different around this time and have lived through a couple a couple of challenging times over my 17 years.

Speaker Change: To a previous question can you share with US I mean, you've announced this tender offer for certain notes what sort of net interest savings do you expect from that if that is completed thank you.

Speaker Change: Mature Lisa maybe I'll, maybe I'll start broadly consistent from an input cost guidance from where we started the year now there is a little bit of puts and takes I think you've seen a little bit more favorability on the food ingredient side.

Eric Fyrwald: And our team is very energized. And they're out there pushing hard for growth, any growth that is attractive profitably that we can get, we're trying to take so that in any economic scenario, we achieve our guidance.

Speaker Change: Your career here and with a little bit different is that we just recently came through a pretty significant destocking error, both in terms of magnitude and length and so when I think about inventories and you can look at some big global customers as a percentage of sales over relatives history period, there is not big.

Speaker Change: Meeting input cost less than we would've expected.

Speaker Change: And on the send side, we've actually seen a bit of an uptick so broadly we're about we're about even overall from a guidance perspective. The drivers of that really are some of the key.

Lauren Lieberman: Thank you.

Speaker Change: Feedstock ingredients that go into sense overall to your point that is Brent crude prices prices come down there could be a tailwind, but remember we have six months of inventory.

Eric Fyrwald: The next question is from the lawn of Lauren Lieberman with workplace. Great, thanks so much. I just wanted to follow up on the commentary on the order book, you know, nothing having changed so far, because if you pointed out, Eric, you've got the comment on fewer laundry loads from one of the CPG CEOs. But even, you know, more broadly than that, you know, we're hearing through earnings season from your customer base, you know, pretty cautious commentary, both on, you know, recent trading conditions, so seeing significant inventory de-stocking across the US during the first quarter in some categories, particularly beauty related, that extending into the second quarter, actual consumer takeaway turning negative in some categories.

Speaker Change: Big builds overall now it's hard to tell ultimately what the inventories levels are going to channel, whether a customer basis.

Speaker Change: Given that we just came out of a pretty significant destock, we actually don't believe that they are elevated to a point that we could see a meaningful downtick going forward all that being said a lot of that cautiousness that we're talking about today is as we think about the future specifically second half of this year, we want to make sure that we're prepared in any situation and that's why things like <unk>.

Speaker Change: There's a lot of volatility.

Speaker Change: So as we think about it it's more later half of this year and then into 2026. So we are really focused on making sure we're driving our business and driving margin consecutively over time. So I think that I think that addresses. Your first question. Your second question was on the debt tender in terms of overall interest rate the best.

Speaker Change: Productivity of becomes so important to make sure we maintain and protect our profitability overall.

Speaker Change: What I can I can address that is I think broadly speaking our interest our interest expense line item for the full year in terms of guidance would be around $225 million. So that is that as a step down because we've been running.

Speaker Change: Thank you. The next question is from the line of Lisa de Neve with Morgan Stanley You May proceed.

Speaker Change: Hi, Thank you for taking my question can you. Please provide us with an update on 2025 implicit inflation levels.

Speaker Change: Elevated rate, obviously with the debt tender overall, it will become more favorable here. So you'll see that as we as we progress through the balance of the year a bit of a step down overall interest expense.

Eric Fyrwald: So I'm just a little bit concerned, frankly, that you haven't seen that slowdown yet on your side, because I feel like it's inevitable. So I guess why not incorporate that into the outlook? Or is it just that areas outside the US are that much more resilient? So there's really nothing to worry about a, you know, total company consolidated level. Thanks.

Speaker Change: And we are precisely you're potentially seeing any incremental raw material question can you detail, which ingredients that are and as well, what's a lower oil price environment May mean for you and then I have a very short follow up to a previous question can you share with US I mean, you've announced this tender offer for certain notes what sort of net interest savings do you expect.

Chris Parkinson: Thank you. The next question is from the line of Chris Parkinson with Wolfe Research you May proceed.

Chris Parkinson: Great. Thank you so much for taking my question when you take a step back and just over the last few quarters could you talk a little bit more.

Speaker Change: From that if that is completed thank you.

Eric Fyrwald: Thanks for the question, Lauren. And I wouldn't say there's nothing to worry about. We worry plenty, and we've got a lot of energy to go out and do all we can to drive growth and drive productivity. So we're on top of this. We're energized by the challenges. What I would say is, as Mike alluded to, there might have been some pre-buying around tariffs. That could be in some of our numbers and some of our orders. But I would also say that we've got a very diverse customer base. We've got a very diverse geographic base. And we are working hard to take advantage of that to make sure that wherever we can grow, we will grow.

Speaker Change: The drug spend you've been seeing in sent an HEB.

Speaker Change: The progress you've made as well as your own assessment of your competitive position versus your primary European peers. Thank you so much.

Speaker Change: Meeting input cost less than we would've expected.

Speaker Change: The growth spend that we talked about last year has continued into this year, it's focused on R&D and commercial areas.

Speaker Change: It's making good progress as we alluded to before our commercial pipelines are strengthening that we will see that we will deliver into next year and our R&D pipelines are strengthening which will dilute which will deliver more into 27% and 28, but we're very pleased with.

Speaker Change: Feedstock ingredients that go into <unk> overall to your point that is Brent crude prices prices come down there could be a tailwind, but remember we have six months of inventory.

Speaker Change: There's a lot of volatility.

Eric Fyrwald: But as we've mentioned before, we are concerned about what could happen economically, particularly in the United States, but also in other markets. China, as you know, is very slow. So we are concerned, and we're doing all we can do to drive what we can control. But as we look at what we think are reasonable scenarios, we're continuing to hold our guidance. Thank you.

Speaker Change: The talent the level of talent that we've been able to attract and by the way. Some of you have heard that we were losing talent a few years ago. We regained some of the best health that we lost and we're getting really great talent and we're very pleased with not only the talent that we're bringing in but the projects that they're working on and the strength.

Speaker Change: What I can I can address that is I think broadly speaking our interest our interest expense line item for the full year in terms of guidance would be around $225 million.

Speaker Change: <unk>.

Speaker Change: Commercial in the R&D pipeline, so it's going well it's on track, we're not backing down from the amounts that we've talked about before despite the challenges that we're facing.

Jeff Zekauskas: The next question is from the line of Jeff Zekauskas with J.P. Morgan. You may proceed, proceed.

Speaker Change: So that is that as a step down because we've been running.

Speaker Change: More elevated rate, obviously with the debt tender overall, it will become more favorable here. So you'll see that as we as we progress through the balance of the year a bit of a step down overall in interest expense.

Speaker Change: With where we are doing is we're putting more energy into the productivity side. So that we can make sure that in any scenario that we can pay for for this innovation.

Eric Fyrwald: Thanks for The food ingredients business more strategic than it used to be. that my impression is that this might. from I. How do you feel about that, or how do you?

Speaker Change: And commercial capability, but we are we are absolutely committed to having long term strong profitable growing company.

Speaker Change: Thank you. The next question is from the line of Chris Parkinson with Wolfe Research you May proceed.

Chris Parkinson: Great. Thank you so much for taking my question when you take a step back and just over the last few quarters could you talk a little bit more about the growth spend you've been seeing in sent an HEB.

Michael Deveau: And then for Mike.

Speaker Change: Thank you there are currently no rest of your questions. At this time I would like to pass the call back over to Eric for any closing remarks.

Michael Deveau: Can you talk about your cash flow expectations for the year? your cat back. Thanks, Jeff.

Chris Parkinson: The progress you've made as well as your own assessment of your competitive position versus your primary European peers. Thank you so much.

Eric: Thank you for your interest in <unk> I, just want to say that I'm very proud of and I'm pleased with our team.

Michael Deveau: I'll take the first part of that to begin with. And I'll just say that we just separated our farmer's business last week, and we were heavily focused on that, in getting that done, and also getting the cash in and getting our balance sheet strong. So now we are clearly looking at our food ingredients business. We think we have great leadership in that business. We think we have a great team. We're on track with our transformation. We're going to continue to do that. We want to get the growth higher and make sure that we're doing the right things to get profitable growth higher as we increase the EBITDA margin overall.

Eric: We've tried very hard in the last year plus to B.

Chris Parkinson: The growth spend that we talked about last year has continued into this year, it's focused on R&D and commercial areas.

Eric: To be very clear on what our program is getting back to basics.

Eric: What our core businesses are and how we're investing in those businesses for long term profitable growth.

Chris Parkinson: It's making good progress as we alluded to before our commercial pipelines are strengthening that we will see that we will deliver into next year and our R&D pipelines are strengthening which will dilute which will deliver more into 27 and 28, but we're very pleased with.

Eric: We've tried to be clear on the steps that we're taking and I think that we are delivering on the things that we said that we're going to do and we plan to continue to make that happen and unleashed the full potential of iff's. So thank you very much.

Eric: Thank you all that will now conclude today's call. We appreciate your participation and we hope all of you.

Chris Parkinson: The talent and the level of talent that we've been able to attract and.

Chris Parkinson: And by the way on some of you've heard that we were losing talent a few years ago. We regained some of the best health that we lost and we're getting really great talent and we're very pleased with not only the talent that we're bringing in but the projects that they're working on and the strengthening of the <unk>.

Eric: Have a wonderful day and at this time you may now disconnect your lines.

Eric Fyrwald: And I would say we're on track with the plan to do that. As we do that, yes, we'll look at strategic options for pieces or all of our food ingredients business, which we talked about before. But right now, we're focused on keeping that transformation going, getting it healthier and healthier, and making sure that we collaborate across the company to get the most benefit we can out of serving customers with our full line of products. And we like how the progress is being made.

Chris Parkinson: Commercial in the R&D pipeline, so it's going well it's on track, we're not backing down from the amounts that we've talked about before despite the challenges that we're facing.

Chris Parkinson: With where we are doing is we're putting more energy into the productivity side. So that we can make sure that in any scenario that we can pay for for this innovation.

Eric Fyrwald: And we'll have more to say, I think, towards the later part of this year and into next year.

Chris Parkinson: And commercial capability, but we are we are absolutely committed to having long term strong profitable growing company.

Michael Deveau: And maybe just, Jeff, on CapEx and cash flow. Broadly similar to how we guided earlier this year, CapEx about 6% of sales. We talked about some of those levels of reinvestments in H&B overall, so that's the biggest driver that's driving that up year over year.

Speaker Change: Thank you there are currently no rest of your questions. At this time I would like to pass the call back over to Eric for any closing remarks.

Speaker Change: Thank you for your interest in <unk> I, just want to say that I'm very proud of and I'm pleased with our team.

Michael Deveau: In terms of free cash flow, again, very, very consistent. It's probably around $500 million, which is what we talked about in February, and that includes around $350 million of taxes related to the form of divestiture. So on a kind of a normalized basis, you're probably in that $8 to $8.50 range, which is pretty consistent to where it was in previous years.

Speaker Change: We've tried very hard in the last year plus to B.

Speaker Change: To be very clear on what our program is getting back to basics, what our core businesses are and how we're investing in those businesses for long term profitable growth.

Speaker Change: We've tried to be clear on the steps that we're taking and I think that we are delivering on the things that we said that we're going to do and we plan to continue to make that happen and unleash the full potential of iff's. So thank you very much.

Laurence Alexander: Thank you. The next question is from Alon of Laurence Alexander with Jeffreys. Good morning, Eric. I was wondering if you could speak specifically to how you think about the inventory cycle and the bullwhip effect, and how that might affect IFF, because In the past, I think of the Supply chain lags have always been kind of a bit of a challenge. Yeah, thank you, Lawrence.

Speaker Change: Thank you all that will now conclude today's call. We appreciate your participation and we hope all of you have a wonderful day and at this time you may now disconnect your lines.

Michael Deveau: I'll pass that over to Mike, given his longer history with IFF and the cycles that we've seen. So, Mike. Yeah, it's a great strategic question. I think some of the commentary here around our cautiousness is just around some of the delay that you can see with customers, and as they see end market weakness, they then work back into the supply chain, ultimately coming back to our industry. I think what's different around this time, and I've lived through a couple challenging times at IFF over my 17-year career here, and what's a little bit different is that we just recently came through a pretty significant destocking error, both in terms of magnitude and length.

Michael Deveau: And so, when I think about inventories, and you can look at some big global customers as a percentage of sales over a relative history period, there's not big, big builds overall. Now, it's hard to tell ultimately what the levels are in the channel as a customer basis, but given that we just came out of a pretty significant destock, we actually don't believe that they're elevated to a point that we could see a meaningful downtick going forward.

Michael Deveau: All that being said, a lot of that cautiousness that we're talking about today is as we think about the future, specifically second half of this year, we want to make sure that we're prepared in any situation, and that's why things like productivity have become so important to make sure we maintain and protect our profitability overall. Thank you.

Lisa Denise: The next question is from the one of Lisa Denise with Morgan Stanley. You may. Hi, thank you for taking my question. Can you please provide us with an update on 2025 input inflation levels and where precisely you are potentially seeing any incremental raw material inflation? Can you detail which ingredients that are? And as well, what a lower oil price environment may mean for you? And then I have a very short follow-up for a previous question. Can you share with us, I mean, you've announced this tender offer for certain notes, what sort of net interest savings do you expect from that if that is completed?

Michael Deveau: Thank you. Sure, Lisa. So maybe I'll start. Broadly consistent from an input cost guidance from where we started the year. Now, there's a little bit of puts and takes. I think you've seen a little bit more favorability on the food ingredient side, meaning info costs less than we would have expected. And on the scent side, we actually seen a bit of an uptick. So broadly, we're about even overall from a guidance perspective. The drivers of that really are some of the key feedstock ingredients that go into scents overall. To your point that as Brent fruit prices come down, there could be a tailwind.

Michael Deveau: But remember, we have six months of inventory. There's a lot of volatility. So as we think about it, it's more later off of this year and then into 2026. So we're really focusing on making sure we're driving our business and driving margin consecutively over time. So I think that addresses your first question. Your second question was on the debt tender in terms of overall interest rate. The best way I can address that is I think broadly speaking, our interest expense line item for the full year in terms of guidance would be around $225 million. So that is a step down because we've been running at a more elevated rate.

Michael Deveau: Obviously, with the debt tender overall, it will become more favorable here. So you'll see that as we progress through the balance of the year, a bit of a step down overall in interest expense.

Christopher Parkinson: Thank you. The next question is from the line of Chris Parkinson with Wolf Research. Great, thank you so much for taking my question.

Eric Fyrwald: When you take a step back just over the last few quarters, can you talk a little bit more about the growth spend you've been seeing in Scent and H&B, your progress you've made, as well as your own assessment of your competitive position versus your primary European peers? Thank you so much. The growth span that we talked about last year has continued into this year. It's focused on R&D and commercial areas. It's making good progress, as we alluded to before. Our commercial pipelines are strengthening, that we'll see, that we'll deliver into next year. And our R&D pipelines are strengthening, which will deliver more into 2027 and 2028.

Speaker Change: [music].

Eric Fyrwald: But we're very pleased with... with the level of talent that we've been able to attract. And by the way, some of you heard that we were losing talent a few years ago, where we regained some of the best talent that we lost, and we're getting really great talent. And we're very pleased with not only the talent that we're bringing in, but the projects that they're working on and the strengthening of the commercial and the R&D pipeline. So it's going well, it's on track. We're not backing down from the amounts that we talked about before. Despite the challenges that we're facing, what we are doing is we're putting more energy into the productivity side, so that we can make sure that in any scenario that we can pay for this innovation and commercial capability.

Eric Fyrwald: But we are absolutely committed to having long-term, strong, profitable, growing companies.

Operator: Thank you. There are currently no words to your questions at this time.

Eric Fyrwald: I would like to pass the call back over to Eric for any closing Now, thank you for your interest in IFF. I just want to say that I'm very proud of and pleased with our team. We've tried very hard in the last year plus to be very clear on what our program is, getting back to basics, what our core businesses are, and how we're investing in those businesses for long-term profitable growth. We've tried to be clear on the steps that we're taking, and I think that we're delivering on the things that we said that we're going to do, and we plan to continue to make that happen and unleash the full potential of IFF.

Operator: So, thank you very much. Thank you all.

Operator: That will now conclude today's call. We appreciate your participation.

Operator: We hope all of you have a wonderful day, and at this time, you may now disconnect.

Q1 2025 International Flavors & Fragrances Inc Earnings Call

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