Q2 2025 International Flavors & Fragrances Inc Earnings Call

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

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 also please note that all the sales and adjusted operating EBITDA growth numbers that we will be speaking to on the call.

Are all on a comparable currency neutral basis, unless otherwise noted.

With me on the call today is our CEO, Eric firewall 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.

Thanks, Mike and good morning, everyone. Thanks for joining us today, our second quarter results reflect continued progress with growth improved profitability and divestitures that have strengthened our financial position and our net debt to EBITDA is now down to two five times.

This progress shows that the steps, we are taking including creating and bringing leading innovation to customers and driving operational excellence is paying off.

I'll start with an executive summary of some accomplishments so far this year and then I'll turn the call over to Mike Deveau, who will provide a more detailed look at our financial results for the second quarter and our current outlook for the rest of 2025.

Then we will open it up for your questions.

On this next slide I'd like to summarize our recent results and the progress we're making towards building a more competitive growth oriented.

We achieved solid growth and profitability in the first half of 2025 with 3% sales growth and 7% adjusted operating EBITDA growth.

Im also very pleased that during the quarter, we completed the divestitures of our pharma solutions and nitrocellulose businesses.

Successfully completed our debt tender offering.

These actions enabled us to reduce our leverage to two five times.

Head of our target of less than three times further solidifying our financial position.

This is the first time <unk> has been below three times net debt to credit adjusted EBITDA since 2018.

And yesterday, we also announced the divestiture of our soy crush concentrates and lecithin business to bundling.

These products better fit with buggy and it's another step in our focus on products with differentiated innovation that enhances margins.

And this will get us closer to our mid teens EBITDA margin goals for our food ingredients business.

And as we streamline our fruit ingredients portfolio. It also strengthens our ability to continue evaluating strategic alternatives for this business.

We also announced a new $500 million share repurchase authorization to return capital to our shareholders. This board authorization shows the confidence we have in the future of Iff's and marks an important step toward a balanced and disciplined capital allocation strategy, which prioritizes both business in <unk>.

<unk> to drive sustained growth and return of capital to shareholders.

Looking ahead, we remain on track to deliver our full year 2025 guidance that we outlined earlier this year, despite an increasingly challenging operating environment and the time. It is taking for the increased investments in R&D and in health and Biosciences capacity that we started to action through <unk>.

Last year this show up in increased sales.

We continue to focus on the factors within our control and as we said on the first quarter earnings call.

Prepared for a more difficult second half, particularly.

Particularly given the strong prior year comparison in the third quarter of last year.

And while we expect to be at the lower end of our 1% to 4% currency neutral sales growth in 2025.

We are confident in our ability to navigate evolving conditions respond swiftly to emerging challenges and opportunities and maintained disciplined execution throughout the remainder of the year.

We have strengthening commercial and R&D pipelines that I am confident will begin to show more impact in 2026 and build for full benefit in 2027.

Before I pass it over to Mike I want to take a moment to thank our <unk> all around the world for driving our progress so far this year.

They've started to build positive momentum, including developing leading innovations that will show increasing value in the coming years.

And they are doing this while strengthening our productivity muscle to enable us to continue to invest in growth despite increasing market challenges.

With that I'll pass the call over to Mike to take a closer look at our consolidated results for the quarter.

Mike.

Thank you Eric and good morning, everyone ISF delivered second quarter sales of just greater than 275, billion% to 3% increase year over year.

We achieved sales growth across all our businesses, primarily driven by volume gains, including mid single digit growth in taste and health <unk> Biosciences.

In the second quarter, we delivered adjusted operating EBITDA of $552 million, a solid 6% increase with our adjusted operating EBITDA margin, increasing 50 basis points year over year.

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

I will begin with pharma solutions, which had a strong loan delivering sales of $103 million or 21% year over year increase while also recording 5% growth and profitability.

As Eric mentioned, we successfully completed the divestiture of pharma solutions on May one and this will be the last time, we report figures for that segment.

In taste.

<unk> were $631 million, a 6% increase driven by another strong quarter of commercial performance.

Growth was strongest in Latin America, and the Europe Africa, and Middle East region.

This segment also recorded another quarter of profitability growth with adjusted operating EBITDA totaling $125 million, a 3% increase from the prior year.

Profitability gains were driven primarily by volume growth and favorable net pricing.

In the first half taste finished with 6% sales growth and 12% adjusted operating EBITA.

Food ingredients had sales of $850 million, a 1% increase from the prior year, driven by growth and inclusions and Emulsifiers and textures.

The segment also delivered an excellent quarter of profitability, where adjusted operating EBITDA grew 21% with volume favorable net pricing and productivity driving margin expansion.

It is worth noting that we continue to execute our operational improvement plan to strengthen margins within our food ingredients business, we significantly improve profitability. In this segment this quarter with 170 basis point improvement in adjusted operating EBITA margin, finishing at 14, 6% we will.

To drive improvement in food ingredients as we move through 2025 and enter 2026.

Our health <unk> Biosciences segment grew 4% in the quarter as broad based growth was led by strong gains in health <unk> Biosciences and animal nutrition. We also delivered adjusted operating EBITDA of $151 million, a 3% increase as volume growth and productivity gains more than offset reinvestment.

Lastly, <unk> also achieved sales growth with net sales of $603 million up 1% year over year against a strong double digit year ago comparison.

Driven by double digit growth in fine fragrance and low single digit growth in consumer fragrances.

Fragrance ingredients was down as growth in specialty ingredients was more than offset by declines in commodities as a result of low cost competition.

To counteract this and to build long term competitive advantage, we are investing in new molecule development two over indexed towards specialty ingredients.

In the quarter.

<unk> delivered $130 million and adjusted operating EBITDA as profitability was impacted primarily by unfavorable net pricing due to a timing lag.

Turning now to slide nine cash flow from operations totaled $368 million year to date, while capex was $274 million or roughly 5% of sales.

Our free cash flow position in Q2 totaled $94 million, a second sequential increase of more than $140 million from last quarter. We.

We paid $204 million in dividends through the end of the second quarter, and our cash and cash equivalents totaled $816 million.

As of June 30, our gross debt was approximately $6 2 billion, a decrease of more than $3 billion compared to the year ago period, our trailing 12 months credit adjusted EBITDA totaled approximately $2 2 billion.

I'm happy to report that we reached our net debt to credit adjusted EBITDA target in the second quarter, where we finished at two five times.

Now that our leverage is within our target range I would like to take a moment to talk about our focus on free cash flow generation and walk you through our revised capital allocation strategy.

At ISF, we're committed to increasing our free cash flow conversion. This business is very cash generative and we are aware of the responsibility to invest our free cash flow carefully on our shareholders' behalf.

We view every investment decision through a lens of return on invested capital. This means we are focused on prioritizing capital deployment, where can generate the highest long term returns for our shareholders.

First we prioritize reinvestment in the highest return areas of our portfolio.

Our capex has been carefully directed towards businesses and initiatives that offer strong value creation potential, particularly in innovation capacity expansion productivity and utilization.

Second we have made meaningful progress in strengthening our balance sheet, maintaining this new level of financial flexibility is a priority as it enables us to navigate through macro economic uncertainty, while preserving the capacity to reinvest in the business and return capital to shareholders.

Third we remain committed to delivering consistent returns to shareholders. Our dividend continues to be a central component of our investment proposition.

We are focused on maintaining and overtime growing our dividend as we grow earnings.

Fourth today, we have launched our dilution plus share repurchase program.

At minimum this program is designed to offset annual dilution from equity compensation, which equates to approximately $75 million to $100 million per year.

We also retain the flexibility to increase our repurchases as we increase our free cash flow generation and when ISF shares are trading below intrinsic value.

We plan to begin our share repurchase program in the fourth quarter of 2020.

Finally, we continued to evaluate highly selective value accretive bolt on acquisitions and strategic partnerships.

We are very mindful of our challenged track record in this area and we are committed to being very disciplined going forward.

These opportunities must meet clear financial and strategic criteria, including alignment of our core capabilities potential expand our addressable markets and have a clear path to synergies.

In summary, as we increase our free cash flow generation.

We will execute a balanced and disciplined capital allocation strategy, one that enables us to reinvest in the business returning capital to shareholders and maintain financial flexibility and strength above all we will be very disciplined with our decision is guided by a clear focus on generating long term returns.

Now turning to slide 11, I'd like to walk you through our outlook for the remainder of 2025.

As we've discussed in previous quarters, the macroeconomic environment continues to be dynamic and at times challenging.

From a volume trade policies to weakening consumer demands we are seeing a broader set of external pressures that said, we want to underscore that we remain confident in our ability to execute through this environment and importantly remain on track to deliver our 2025 guidance, we set out earlier this year.

With solid first half of the year behind US we are reiterating our full year 2025 guidance. We continue to expect sales to be in the range of $10 6 billion to $10 9 billion.

While the dollar ranges remain consistent with our prior outlook. It is worth noting that this now reflects modestly softer volume expectations that has been partially offset by favorable movements in currency as Eric shared this translates into the lower end of our 1% to 4% currency neutral growth sales guidance range.

On the bottom line, we continue to target adjusted operating EBITDA of two to two 5 billion, reflecting currency neutral growth of 5% to 10%.

As we look ahead to the second half, we expect growth will moderate, particularly in Q3 due to a very strong year over year comparison.

In the third quarter of 2024, we show double digit growth across several key segments, where taste was up 15% <unk> was up 12% and <unk> was up 10%, creating a high bar for comparison.

In particular, our health business had an exceptionally strong Q3 last year and this combined with ongoing softness in both North America, and Chinese markets will present, some headwinds in the upcoming quarters.

And while the business will be challenged we have made solid progress improving our innovation pipeline.

And we will continue to reinvest in R&D and commercial to ensure we grow our business at or above market recognizing that it will take some time.

Additionally, beginning in the third quarter pharma solutions will be fully excluded from our results. Following the completion of the divestiture on May one.

As a reminder, Q2 included one month contribution from pharma business. So we expect to see a step down in absolute EBITDA levels in Q3, reflecting the full absence of this business.

With that I would now like to turn the call back over to Eric for closing remarks.

Thanks, Mike.

We're just a little more than halfway through the year and I am proud of what our team has already achieved serving customers strengthening our innovation pipeline for the coming years and strengthening our productivity efforts and.

And we have done this while successfully selling and separating pharma and nitrocellulose to fix our balance sheet.

We know that market conditions are getting tougher in the second half comparisons are difficult given our high growth in the second half of 2024.

We're clear on our strategy are getting stronger at commercial innovation production and productivity execution, and we will get through this as we build strength for 2026 and beyond.

Thank you and I'll now open up the call for your questions.

We will now begin today's Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad.

Any reason you would like to that question. Please press star although that team.

Again to ask a question press star one.

As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking a question.

Also remember to limit one of your questions per person.

We will also briefly by your questions are what you stated.

The first question is from the line of Patrick Cunningham with Citi You may begin.

Hi, good morning on the divestiture to Bungie can you walk through the strategic rationale any dis synergies that you see and help us size the business from a margin perspective.

Thanks for the question Patrick This is Eric.

First of all what we sold was our soy are what we're selling as our soy crush our soy protein concentrate and less certain products. They are very commoditized and I would say much better run by bogey than were being run by us.

We're low single digit EBITDA margins for us.

And they were distracting from our very differentiated isolated soy protein business, which now we can focus on driving the application development the innovation in that business.

Because we no longer have to worry about the commodities.

So overall, that's going to improve our margins.

And the food ingredients business significantly and allow us to focus where we need to focus.

We will now begin today's Q&A session. If you would like to ask a question, please press star. Followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2.

Again, to ask a question, press star 1.

The next question is from the line of David <unk> with Deutsche Bank, you may begin.

As a reminder, if you are using a speaker-phone please remember to pick up your headset before asking a question.

Also remember to limit 1 of your questions per person.

Thank you good morning.

While positively while your question are registered.

Eric just a food ingredients.

When do you expect to complete our evaluation of strategic alternatives.

The first question is from the line of Patrick Cunningham with the city, you may begin.

And if there if you do decide to pursue a sale of this business is there any portion of that could be retained going forward.

And lastly, do you still expect that there would be strong interest in this interest in this asset amongst strategics and private equity.

Hi, good morning. You know, on the divestiture to bangy, can you walk through the Strategic, rationale, you know, any dis synergies that you see? And and help us size the business from a margin perspective,

Thanks for that question, David very important to us and let me just start by saying I think we're making very good progress here as you know, we separated nourish and to taste and food ingredients, which I believe has significantly strengthened us in both taste and food ingredients. They are very different businesses that was.

Thanks for the question. Patrick, this is Eric. Um, first of all, what we sold was our soy, or what we're selling, is our soy Crush, our soy, protein, concentrate, and lesser than products. They are very commoditized and I would say much better run by Bungie than would we're, we're being run by us.

Step one step two us we brought in a world class food ingredients leader and Andy Miller.

Uh, they were low single-digit. Ibaa margins for us.

And he's got that that transformation with his team growing very very strongly and consistently improving our EBITDA margins and then the next really important step was divested divesting. These commodities that can't consistently achieve our margin targets and allow us to focus on the areas to cam.

And they were distracting from our very differentiated.

Isolated soy protein business, which, now we can focus on driving the application development, The Innovation, and that business. Um, because we we no longer have to worry about the commodities.

So overall, that's going to improve our margins.

And now with those three pieces done, it's giving us the chance to really dig into what are the strategic options and I expect that we'll be able to update you on where we stand with the fourth fourth quarter earnings call. Early next year and I believe we will have absolute clarity in 2026.

And the food ingredients business has significantly allowed us to focus on where we need to focus.

the next question is from the lawn of David belger with Deutsche Bank, you may

But.

I'll just finish by saying that.

Thank you. Good morning. I'm Eric, just out of food ingredients.

There has already been strong proactive interest by both private equity and strategics and coming that we can now really start to engage with as we consider our options.

when do you expect to complete your evaluation of strategical Target is

And if there if you do decide to pursue a sale, this business is any portion that could be retained, going forward.

The next question is from the line of Ghansham Panjabi Baird you may begin.

Unless you do still expect that, there would be would be strong interest in this interest in this asset amongst strategic and private Equity. Thank you.

Thank you operator, good morning, everybody.

I guess, just stepping back a little bit on the second quarter could you just give us more color on how the quarter unfolded from a monthly cadence standpoint, and also what your embedded volume assumptions are for the back half of the year by segment you called out.

<unk> can you be a little bit more specific as it relates to what specific challenges you. Thank you.

Thanks for that question David. Um very important to us and let me just start by saying I think we're making very good progress here. As you know, we separated nourish and to taste and food ingredients which I believe has significantly. Strengthened Us in both taste and in food ingredients, they're very different businesses. That was Step 1. Step 2 was we brought in a world-class food ingredients leader and Andy Muller.

Yes, Thanks, Great question.

All of the operating environment in Q2 was consistent with what we expected coming into the quarter and so despite some of the volatility we see in the world All business is actually delivered growth when.

When you look at it on a volume perspective, all the businesses, we're actually moving into positive territory and compared to strong year ago comparison on a two year basis. They actually had all all had mid single digit growth on a two year average basis. So.

The health of the business is relatively strong from a Q2 standpoint in a more challenging operating environments. We feel good about that as we look ahead, we are more cautious in the second half outlook.

And he's got that that transformation with his team going very, very strongly, consistently improving, our ibadan margins. And then the next really important step was dive divesting. These Commodities that can't consistently achieve. Our margin targets and allow us to focus on on the areas that can and now with those 3 pieces done, it's giving us the chance to really dig into what what are the Strategic options.

It's because we're comparing and I said it in my prepared remarks that we're comparing to strong comps in Q3. It was a plus nine last year.

And I expect that, we'll be able to update you on where we stand with the fourth fourth quarter earnings call early next year and I believe we'll have absolute Clarity in 2026.

But what I and I'll just finish by saying that.

Year over year, so that's a tough comp but then in addition, we are seeing some weakening trends in HIV.

Or would you actually expect to see some negative growth in Q3, specifically driven by health and Eric talked about it previously and I mentioned in my in my prepared remarks as well we are taking actions to address this via reinvestment and capacity investments and are confident that over time, we will accelerate growth back to market trends are robust.

There's already been strong proactive interest by both private equity and strategics incoming that we can now really start to engage with as we consider our options.

The next question is from the line of gosham. Punjabi the beard American.

Okay.

The next question is from the line of Josh Spector with UBS you may begin.

Okay.

Yeah, Hi, good morning, I was wondering if you had to pick specifically talk about the outlook for <unk> in <unk> and <unk>, you've clearly seen divergent trends between growth in end markets between fine fragrance to consumer versus the ingredients, which looks like it was more of a drag. So wondering if you see that dragon ingredients continue into the back half.

Thank you, operator. Good morning everybody. Um I guess you know just stepping back a little bit on the second quarter. Could you just give us more color on how the quarter unfolded from a monthly Cadence standpoint and also what your assumptions are for the back half of the Year by segment. You know, you called out challenges, can you be a little bit more specific as it relates to, what specific challenges? You refer to, thank you.

Or if that's more contained within the second quarter and then similarly your views around growth for some of the stronger areas you've seen in that segment. Thank you.

Yes, Thanks, Josh maybe I'll take this one again.

In the scent business overall, and we expect to continue to see good strong performance in fine fragrance through the balance of the year. So the team is doing a really exceptional job of driving their performance a lot of it is driven by new wins and commercial performance and continued to be successful there. So that's.

That's a great story.

In addition on the consumer fragrance.

Impairing two stronger year ago comparisons kind of all year. So on a two year basis. It looks good but on a headline number it's actually trending more low single digits and so theres been a lot of work being done to kind of recoup and to make sure that we're driving that performance going forward and so as we go into the second half of the year, we'll probably be in that low single digit kind of range in terms of overall growth.

Good about that. As we look ahead, we are more cautious in the second half Outlook part is because we're comparing and I said it in my, uh, prepared remarks that we're comparing to strong comps in Q3 it was a plus-9 last year, uh, year-over-year. So that's, that's a tough comp. But then, in addition, we are seeing some weakening Trends in H&D, um, where we do actually expect to see some negative growth in Q3 specifically driven by health,

Your specific question on on fragrance ingredients I think that is a pressure point in the quarter, specifically in Q2 and will be for the back half of the year and so four four fragrance ingredients in the back half of the year, we expect it to be down at similar levels that we had in Q2, which was pretty meaningful and there is a story that's happening there that the more can.

And now Eric, uh, talked about a previously and I and I mentioned in my, in my career remarks as well, we are taking it actions to address this, uh, via reinvestment and capacity, Investments, and incident that over time, we will accelerate growth back to market trends or above.

The next question is, from Nan of Josh Spectre with the UBS. You may begin.

<unk> elements of our portfolio are under the most pressure and part of that is absence of really what I'd say strong innovation absence of a specialty portfolio, which is a little bit different than kind of where we've been historically ISS and so really the focus now as we go forward is how do we make reinvestments to bring molecules to market to making sure we are driving that competitor.

The difference and so as we go through the second half of the year that commodity portion will be pressured the specialty ingredients portion, while small and growing and will continue to focus as we move into 2026.

Yeah. Hi, good morning. Um, I was wondering if you could specifically talk about the outlook for sent in 3 q and 4 q. You know, you've clearly seen Divergent Trends between growth and a markets between fine fragrance and consumer versus the ingredients, which look like it was more of a drag so wondering if you see that Dragon ingredients continue into the back half. And, or if that's more contained within second quarter and then, similarly, your views around growth for some of the stronger areas you've seen in that segment. Thank you.

Okay.

Next question is from the line of Christian <unk> with Oppenheimer you may begin.

Hi, good morning, and thank you for the question.

Just kind of zoom out a bit Eric.

Touching on the last year, plus it feels to us as a company has hit the inflection point in terms of the balance sheet and moving to the portfolio effort.

Perhaps less obvious are some of the changes that you've made.

Lord since we're just taking a two to three year outlook help us understand what the board refresh helps to accomplish as you move into this next phase. Thank you.

Well. Thank you Kristen so first of all what we want to do our goal is to get <unk> on the right track to be a world class leader in innovation for scent taste and health <unk> Biosciences and to do that we need the right leadership executive leadership and the right Board.

Yeah, thanks Joshua. Maybe I'll take this 1 again. Um, you know, in in the same business overall we expect to continue to see good strong performance in fine, fragrance to the balance of the year. So the team is doing a really exceptional job uh driving their performance, a lot of it is driven by new winds and Commercial performance and they continue to be successful there. So uh, that's a that's a great story. Uh, in addition, on the consumer fragrance, you know, they're comparing to Stronger year ago, comparisons kind of all year. Uh, so on a 2 year basis, it looks good. But on a headline number, it's actually trending. More low single digits. And so this has been a lot of work being done to kind of recruit and to make sure that we're driving that performance going forward. And so, as we go into the second half of the year, we'll probably be in that most single digit kind of range in terms of overall growth. Um, your specific question on on fragrance ingredients, I think that that is the pressure point in the quarter, specifically in Q2 and will be for the back half of the year. And so for, uh, for fragrance ingredients in the back, and after the year, we expect it to be down at similar levels that we had in Q2, which was pretty, pretty meaningful now.

What I would say is we have both now at full strength and the leadership team. We've recently added as you know the tissue <unk> to run health and Biosciences, a terrific leader has biotech chemistry background, that's ideal for health and biosciences, leading that forward on.

On the board front I would say we're also now at full strength.

There's a story that's happening there that the more commodity uh, elements of our portfolio are under the most pressure. And part of that is uh, absence of really what? I'd say, strong Innovation uh absence of a specialty portfolio, which is a little bit different than kind of where we've been historically at ISS. And so, really the focus. Now, as we go forward is, how do we make reinvestments to bring molecules to Market to making sure we're driving that competitive difference. And so as we go through the second half of the year that commodity portion will be pressured, uh, this

Kevin O'brien became our chairman who has been a terrific partner to me and the management team and the rest of the board to work with great retail experience.

Specialty ingredients portion while small and growing uh, will continue to be the focus as as we move into 2026.

We've also added Mehmood Khan.

Next question is from the line of Christian Owen with Opie and Hammer. You may begin

Ideal World Class R&D leader with great experience not only in health, but also in food R&D and home and personal care and he is already tremendously, helping our R&D teams to make sure that we're driving the right pipelines in the right way.

We also brought in Jesus Mantas, who is a digital AI systems expert and as you know we've got complicated systems and we've got an heat to drive AI and so he's already helping our teams in those areas which is tremendous.

Hi, good morning, and thank you for the question. Um, just want to zoom out a bit Eric um, you know, reflecting on the last year. Plus it feels as though the company has hit this inflection point in terms of the balance sheet. You know, you're moving through the portfolio efforts. Um but perhaps less obvious are are some of the changes that you've made to the board. So if we're just taking a a 2 to 3 year outlook, help us understand what the board refreshed helps if to accomplish As you move into this next phase. Thank you.

We've recently brought and Cindy Jamison Who's got terrific CFO experience with a number of companies, helping Mike and his team make sure that we're doing the right things to have a streamlined very efficient and effective finance team.

Gina drove Soc joined us with great Procter and Gamble background, great CEO experience and as you know we have Don will it be on our board from Clorox with great home and personal care experience. So we now have a board that has world class governance capability, but also market experience and innovation.

Well, thank you Kristen. So first of all, what we want to do our goal is to get if on the right track to be a world-class leader and Innovation percent taste and health and biosciences and to do that. We need the right leadership, the executive leadership and the right board.

and what I would say is, we have both now at full strength,

Experience to help us drive the company forward, So I feel really good about our executive team and our board.

And the leadership team we recently added as, you know, Leticia kavez to run health and biosciences, a terrific leader has biotech chemistry background, that's ideal for health and biosciences leading that forward.

Okay.

The next question is from the line of John Roberts with Mizuho you may begin.

On the board front, I would say we're also now at full strength. We Kevin, oh burn, became our chairman, who's been a terrific partner to me, and, and the management team and the rest of the board to work with

Great retail experience.

Thank you health <unk> Biosciences is pretty diversified I think you called out animal feed and food at the stronger end and it sounds like health is going to be at the lower end, maybe could you give us some quantification for how high the good businesses are performing and how low some of the declines are that you are expecting.

Uh, We've also added mehmood Khan.

An ideal world-class R&D leader, with great experience. Not only in health.

In the right way.

Sure Jon So first of all food Biosciences, and home and personal care are performing very well.

And I see them continuing to perform well.

Just for example on our home and personal care. In addition to the strength we have in enzymes and really good capabilities. There. We also commercialized our first application with DB or design enzymatic biomaterials with a leading home and personal care company CPG company, and we see lots of opportunity there, but it was nice.

We also brought in Jesus mantas, who is a digital AI systems expert and as you know we've got complicated systems and and we've got a need to drive Ai. And so he's already helping our teams in, in those areas which is tremendous.

Uh, We've recently brought in Cindy Jameson who's got terrific CFO experience with a number of companies, helping Mike and his team, make sure that we're doing the right things to have a a streamlined, very effective and affective Finance team.

After many many years of development to see the first application commercialized.

Very good strength in both of those our animal nutrition business, we're very strong there what I would say is the markets slowing down a bit but.

But we continue to perform well versus the market.

The real challenging area is health.

And we're hearing from our customers that in the second half Theyre seeing slowdown.

Gina drosos joined us with great, Procter and Gamble background, great CEO experience. And as you know, we have Don Willoughby on our board from Clorox with great home and personal care experience. So we now have a board that has world class governance capability. But also market experience and Innovation experience to help us drive the company forward. So I feel really good about our executive team and our board.

And so what we're doing there is as we talked about last year continuing to invest more aggressively in.

Of John Roberts.

And really excited about our R&D pipeline.

That will start to play out in 'twenty, six and come to full strength in 'twenty seven.

Asia is also strengthening our commercial capabilities and health. So we will see a slow second half in our health business very important business, but we'll see it start to come back in 2006, and I would say get to full strength in 'twenty seven.

Um, thank you, uh, health and bioscience is pretty Diversified. I I think you called out animal feed and food at the stronger end and it sounds like health is going to be at the lower end. Maybe could you give us some quantification for how high the good businesses are performing and how low? Some of the declines are that you're expecting.

Okay.

The next question is from the line of Lisa de Neve.

You may begin.

Sure, John. So, first of all, food biosciences, and home and personal care are performing very well.

Hi, Thank you for taking my question I have one question I have one small follow up on the previous question actually So my first question is can you outline what drove to strengthen in the second quarter for the particular and and also how you see the midterm prospects for this sub segment, especially in the light.

Potential regulatory changes on the U S administration.

My first question I know small follow up if I recall.

<unk> be helpful.

This was.

Actually negative in the fourth quarter of last year. So can you just remind me how it traded last year, because I'm a bit confused why it would be negative in the second half, especially the fourth quarter. When it was already weak in the fourth quarter of last year. Thank you.

And and and I I see them continuing to perform well um just for example in our home and personal care. In addition to the strength we have in enzymes, a really good capabilities. There we also commercialized, our first application with deeb, our design enzymatic, bio materials with a leading home and personal care company, cpg company, and we see lots of opportunities there. But it was nice, you know, after many, many years of development to see the first application commercialized. So, so very good strength in both of those are animal nutrition business. We're very strong there. What I would say is is the markets slowing down a bit, um, but we continue to perform well versus the market.

Um, the the real challenging area is health

I'll start with a taste question <unk> is delivering solid growth and I'm very glad that we separated nourish into taste and food ingredients because it enables you Raj our tastes leader and his team to really focus on what it takes to continue to win and taste.

And we're hearing from our customers that in the second half. They're they're seeing slowdowns.

and so, what we're doing there is, as we talked about last year, continuing to invest more aggressively and, and, and, and really excited about our R&D pipeline,

And what I would say is we've now have seven quarters in a row of performing with or ahead of the market and taste and I see us continuing to perform strongly versus the market now the market is slowing down in the second half and taste. So we will have lower growth rates, but it will still be significant growth.

That will start to play out in 26, and come to full strength in 27. Uh, Leticia is also strengthening our commercial capabilities and health. So we we will see a slow second half in our health business, very important business but we'll see it. Start to come back in 26 and I would say get the full strength in 27.

Particularly getting slower in in the.

The next question is from the line of Lisa Denise.

The U S.

From Morgan spending, you may begin.

And then.

Asia, China, and southeast Asia, but still solid growth and we've got a building commercial pipeline.

And we've got strengthen our R&D pipeline, so very pleased with where we are in taste, yes, maybe just Lisa on the.

<unk> business in the second half of the year I think the comparable when I look at the business was plus 12 in Q3 and I think it was plus six in Q4. So the comp is still it's still pretty meaningful when you double click on the health side. It was a little bit softer in Q4 last year, but right now I think what we're saying is reflecting some weakness in Q3.

Specifically and really because of the year ago comparison, I think he was mid teens in terms of growth and so part of it really is a comp issue as we get into Q4, it will be less less challenged and then as we go into 2026, it's a bottler.

Um hi I think you for taking my question. Um I have 1 question, I want small follow-up on on the previous question actually. Um so my first question is, do you outline what what drove the strength in in the second quarter for taste in particular and and also how you see the midterm growth prospects for this sub segments, especially in the light of potential regulatory changes under the US Administration. Um, that's my first question and not a small follow up. If I recall your hmb, um, Health business was uh, soft to actually negative in the fourth quarter of last year. So he just remind me how it traded last year because I have a bit confused with why it would be negative in the second half, especially the fourth quarter when it was already weak in the fourth quarter of last year. Thank you.

Okay.

The next question is from the line of stop Macquarie Tiano with Bofa you may begin.

Yeah, I I'll start with the taste. Question, taste is delivering solid growth and I'm very glad that we separated nourish into taste and food ingredients because it enables uvra, our our taste leader and his team to really focus on what it takes to continue to win and taste.

Yes, thank you very much.

So.

Although we haven't really seen much actual regulatory change coming from the department of health and human services and <unk>.

We have multiple discussions for classroom. So what are you hearing from your customers regarding their response to any potential changes including meets to reformulate.

And what I would say is is we've now have 7 quarters in a row of performing with or ahead of the market and, and taste and, and I see us continuing to to perform strongly versus the market. Now, the market is slowing down in the second half and taste. So we will have lower growth rates but it will still be significant growth.

Thank you Sal what we're hearing is I would say an even stronger.

Desire for cleaner labor cleaner cleaner labels for innovation to help reduce sugar salt fat increased protein all the things that we are good at and we're seeing the continued healthy re formulation to do those things and I would say.

Particularly getting slower in in us and in Asia, China, and, and Southeast Asia, but still solid growth. And and we've got a building commercial pipeline,

The Maha movement in the U S is helping that but we're also seeing that around the world in Latin America I've spent some time in Latin America in the last couple of months and you've got this this labeling where products are being label that they have high sugar high salt or high fat.

And the desire to help reformulate to get rid of those labels is very strong and that's opening up opportunities for us and we've had very good growth in Latin America. So I think that it's a global trend certainly.

With where where we are in taste. Yeah, maybe just Lisa on the um, H&B business on the second half of the year. I think the comparable when I look at the business was plus 12 in Q3, and I think it was plus 6 in Q4. Uh, so the comp is is still is still pretty meaningful. When you double click on the help side, it was a little bit softer in Q4 last year. Uh, but right now, I think what we're saying is, we're flagging some weakness in Q3 specifically. Uh, and really because of the year ago comparison, I think it was mid teens in terms of growth and so part of it really is a comp issue. As we get into Q4, it will be less uh less challenged uh and then as we go on to 2026 it's a full player.

A little bit more push in the U S. Now.

It's very good for <unk>.

Okay.

The next question is from the line of sore. Tiana would be a, you may begin.

The next question is from the line of Alliance Alexander with Jefferies. You may begin.

So good morning, so just to follow up on one of the earlier questions can you give a bit more granularity about what's happening sequentially and.

End market trends in taste and scent.

Your confidence on the end markets into 2026.

Um, yes, thank you very much. Um, so you know, although we haven't really seen much axle regulatory change coming from the Department of Health and Human Services. In RK Junior. There's certainly a lot of discussions with regards to more. So what are you hearing from your customers regarding the response to any potential changes including Meats to reformulate?

And to the extent that you have.

Investments in.

Innovation.

Those would be showing up and contributing to those two businesses in 2026.

You alluded in your comments, you sort of tailwind for health.

Yes, so thanks, Laurence so in taste.

We do see a slowdown in particular in the U S. China and parts of Asia Latin America continued strong Europe continues strong.

What I would say there is we've got visibility in the second half to that happening and that's what we're hearing from customers.

We're pushing hard to bring more innovation and our commercial pipeline is strengthening our win rate is strong.

Thank you s. What we're hearing is, and I would say an even stronger. Um, desire for cleaner, laborers, cleaner cleaner labels for Innovation to help reduce sugar salt fat, increased proteins. All the things that we are good at and and we're seeing the the the continued healthy, reformulation to do those things. And I would say the Maha movement in in the US is helping that, but we're also seeing that around the world and in Latin America. I've spent some time in Latin America in the last couple of months, and you've got this, these labeling where products are being labeled. If they have high sugar, high salt or high fat,

But we're also pushing harder in developing markets that leadership has spent more time in India and parts of Asia, and obviously, we're pushing hard in.

And the desire to help reformulate, to get rid of those labels, is very strong, and that's opening up opportunities for us. We've had very good growth in Latin America.

so I think that it's, it's a, it's a global Trend, certainly

Latin America continued and in the Middle East, we're seeing opportunities there, but no doubt there'll be slowdown in the second half.

A little bit more push in in in the US now uh and it's very good for IFS.

Continued growth, but a slowdown and we're hoping that that reverses in 'twenty six but we're not waiting for that we're pushing hard on our innovation pipeline, both our commercial and R&D capabilities.

The next question is from the line of Lawrence Alexander with Jefferies. You may begin.

To ensure that we still see solid growth in 2026.

And scent.

As Mike alluded to the fine fragrance business is doing well and continues to has been delivering double digit growth.

Good morning. To follow up on one of the earlier questions, can you provide more granularity about what's happening sequentially in end market trends in taste and scent? What is your confidence level regarding the end markets into 2026?

and to the extent that you have,

Investments in Pro in, um, innovation.

We've seen recent wins that give us confidence into the second half and into 'twenty six.

We've got a very strong team there Sabrina and her team supported by our very strong.

Will those be showing up in contributing to those two businesses in 2026? You alluded to, in your comment to, sort of Tailwind for Health.

I would say are enthusiastic very energized and are out making stuff happen.

Yeah. So thanks Lawrence. So and taste

And consumer fragrance as Mike alluded to there we had low single digit growth in the first half we see continued low single digit in the second half driven by market conditions, but also I would say that we got a little distracted and consumer fragrance last year and the year before.

Uh we do see a Slowdown in in particular in the US China and and parts of Asia Latin America. Continues strong Europe, continues strong.

We've got the right leadership in place, we've got our commercial pipeline strengthening and I've got strong confidence that we will see accelerated growth in 2026 and consumer fragrance.

Um, what I would say there is is, is we've got visibility in the second half to that happening and that's what we're hearing from customers. Um, we're we're pushing hard to bring more Innovation to and our commercial pipeline is our win rate is is is strong.

Fragrance ingredients again, as Mike alluded to negative growth first half continued negative growth in the second half.

As we put more emphasis on the specialties and grow specialties in naturals that we sell outside of.

Um, but we're also pushing harder in in developing markets. The leadership has spent more time in India and parts of Asia. And obviously, we're we're pushing hard in in in um, Latin America continued and and in, in the Middle East, we're seeing opportunities there, but no doubt they'll be slowed down in in the second half, um, continued growth. But a Slowdown and we're hoping that that reverses in 26.

Our company to others.

We see that growing but we see the commodities continuing to be depressed both on volume and price.

But we're not waiting for that. We're pushing hard on our Innovation pipeline, both our commercial and and and the R&D capabilities

That's a little less than half of that business.

So that will be challenged we see that flattening out in 'twenty six and returning to growth in 2007, as we get more capability more capacity and capability and molecules in the specialty area and deemphasize the commodities.

To ensure that we still see solid growth in 2026.

And since um as Mike alluded to the Fine fragrance, business is doing well.

And continues to have been delivering double-digit growth.

Okay.

I think we we've seen recent wins that. Give us confidence into the second half and into 26.

Our next question is from the line of Kevin Mccarthy. The ERP you may begin.

Okay.

Thank you and good morning, Sarah.

Um, we've got a very strong team there. Sabria and her team, supported by Hannah, are very strong and what I would say are very enthusiastic, very energized, and are out making stuff happen.

At a high level you delivered some earnings upside in the first half.

Yet left the annual ranges unchanged.

Uh, and consumer fragrance, as Mike alluded to there, we had low single-digit growth in the first half. We see continued low single digits in the second half.

And now expect some growth to maybe moderate in the back half. So just wondering if you could parse that out I hear you on the the health trend in the comparison issue. There just curious on the balance of the portfolio.

Uh, but also, I would say that we got a little distracted in consumer fragrance last year and the year before.

Uh, we've got the right leadership in place. We've got our commercial pipeline strengthening, and I've got.

If you net out the trends do you think its any any better or worse than you would have previously expected and I'd like to get a feel for whether or not you think there is an element of conservatism embedded in the current guide, particularly with currency, having trended more favorably in recent months.

strong confidence that we'll see accelerated growth in 2026 in in consumer fragrance.

In fragrance ingredients.

Again as Mike alluded to negative growth. First, half continued, negative growth, the second half

I think that our guidance is appropriate I do not feel like it's overly conservative at all.

Um, as we put more emphasis on the Specialties and growth Specialties and Naturals that we sell outside of of our company to, to others.

I think there are two elements facing challenges facing us one is market challenges the.

The other is thinks that we're continue to clean up fix get on the right track I feel really good about what we've done in taste I feel really good about what we're doing in health <unk> Biosciences, and the food Sciences bio.

Biosciences, and the HBC and a number of areas other areas fine fragrances consumer fragrances, the things that we're doing across many of the businesses.

Um, we see that growing but we see the Commodities continuing to be depressed both on volume and price. Um, that's a little less than half of that business. Um, so that would be challenged. We we see that flattening out in 26 and returning to growth in 27 as we get more cap capability more capacity and capability and and molecules in the specialty area and have deemphasized. The commodities

Food ingredients transformation is going great. The areas that we have challenged right now our health that's a combination of the market, but also our internal not being where we need to be both on the on the innovation pipeline, which I said is coming it's strengthening and it'll start to land.

The next question is from the line of Kevin McCarthy with the vrp. You may begin.

Thank you, and and good morning. Um, so I work at a high level, you delivered, some earnings upside in the first half.

Next year and in 2027.

We'll be strong, but we're also needing to strengthen our commercial capabilities in health. We're the leaders in this area and we need to drive growth even when the markets are challenged so thats one area to other areas fragrance ingredients.

We clearly had a great year last year, when commodities and specialties were growing like crazy and the prices were strong. This year. The commodities volume has slowed the prices are weak and we're deemphasizing the commodities recognizing that's not where we bring our strength over time. So we'll.

Yet left the annual ranges unchanged. And, uh, now expect some growth to maybe moderate in in the back half. So, just wondering if you could parse that out, I I hear you on the uh, the health Trend and the comparison issue there, just curious on the balance of the portfolio. Uh if if you net out the trends do you think it's any, any better or worse than you would have previously expected. And and I'd like to get a feel for whether or not you think there's an element of conservativism embedded in the current guide, particularly with currency having trended uh more favorably in recent months.

Decrease the commodity piece of our portfolio and will strengthen the specialty piece. So we're on it we've got the right team focused and it will flatten out in 2006 and it will start to grow again in 2007, but those are our two biggest areas of drag that are dragging below what the market is doing.

I I, I think that our guidance is appropriate. I do not feel like it's overly conservative at all. Um, I think there are 2 elements facing challenges facing US 1 is Market challenges.

In the second half.

Okay.

The next question is from the line of Michael Sison with Wells Fargo you may begin.

The other is things that we continue to clean up fix get on the right track. I feel really good about what we've done in taste. I feel really good about what we're doing in health and biosciences in in in the food Sciences, the food biosciences, and the HPC and in a number of other areas, find fragrances consumer fragrances the things that we're doing.

Hey, good morning, guys nice quarter.

If you take out.

From your first half EBITDA.

Across many of the businesses. Um, food ingredients transformation is going great. The areas that we have challenged right now are Health. That's a combination of

It's somewhere around <unk> 50.

And your outlook for the second half implies mid nine hundreds at the midpoint. It's about down 10% sequentially is that does that sort of a normal sequential decline or does that represent.

Incremental falling in consumer demand and how does that compare on a pro forma basis or is that all the data for second half 'twenty, four and a like to like basis.

The market but also our internal not being where we need to be both on the on the Innovation pipeline which I said is is coming. It's getting and and it'll start to land next year and in 2027, we'll we'll we'll we'll be strong but we're also needing to strengthen our commercial capabilities in health, where the leaders in this area and and, and we we need to drive growth even when the markets are challenged

Yeah, Hey, Mike. Thanks. Thanks for the question, Yes, I don't have the numbers on a like for like basis readily available. So happy to happy to circle back I think when you look at the reported numbers last year, you'll see that there is a step down second half to first half part of that is the seasonality of the business. If you remember Q.

<unk> is the lowest margin quarter, we have and so last year I think there was about 17%, which if you think of kind of where we are the <unk> now.

See that step down so that's a big a big portion of that.

Really depends on where you anchor in in terms of the guidance range. If you look at it at the midpoint of the range is a small step down part of it again is the seasonality of it part of it is everything we talked to are up around a little bit softening in terms of volume performance relative to where we were in the first half.

So that's 1 area that other areas fragrance ingredients. Um, we clearly had a great year last year when Commodities and Specialties were growing like crazy, and the prices were strong this year. The Commodities, the volume is slowed, the prices are weak. And, and, and we're deemphasized recognizing, that's not where we bring our strength over time. So we, we'll, we'll, we'll, we'll, we'll, we'll, we'll, we'll, we'll decrease the the commodity piece of our portfolio, and we'll strengthen the specialty piece. So we're on it. We've got the right team focused and, and it'll flatten out in 26 and it'll start to grow again in 27, but those are our 2, biggest areas of drag that are dragging below. What the market is doing in the second half.

Okay.

Our next question is from the line Nicola Tang with BNP.

And that question is from the line of Michael Susan with Wells Fargo. You may begin.

You may begin.

Hey, good morning guys, nice quarter. Um

Hi, everyone.

Our question is a bit of a follow up on an earlier one around food ingredients.

Could you talk how how integrated the activities.

The ingredients.

Do you expect any stranded costs from the bhangi deal and I was just wondering if you see any scope for peanuts elsewhere beyond say ingredients.

Thanks, Nicola first of all.

You know, if you take out from a from your first half even uh um, it's somewhere around 10:50. Your outlook for the second half implies bid 900s at the midpoint. It's about um, you know, 10% sequentially. Is that is that sort of a normal sequential decline or does that represent or incremental flowing in consumer demand? And how does that compare on a ProForm basis? Because I don't recall getting the data for a second half 24 and I like to like basis.

The.

Biggest change was separating nourish into taste and food ingredients and that took most of last year. We finished it at the beginning of this year and then we've moved forward with food ingredients.

And Andy and his team have been working and will continue to work now even more to stand up the food ingredients as a standalone business, which gives us more strategic flexibility there that's working the answer on the.

<unk> sale, there's some stranded costs with we're already working to deal with those.

Of the numbers on a like for like basis, readily available. So happy to happy to Circle back. I think when you look at the reported numbers last year, you'll see that there is a step down, second half to first half part of. That is the seasonality of the business. If you remember a Q4, is the lowest margin quarter? We have and so last year I think that was about 17% which if you think the kind of where we are in the 20s now uh you can see that step down so that that's that's a big, a big portion of that. Uh, it really depends on

And if we are to separate food ingredients.

There will be stranded cost and we're already working on how do we Ah.

Address those now versus waiting until later because it'll be a good thing to do whether we separated or not so.

Where you anchor in, in terms of the guidance range. If you look at it, at the midpoint of the range, it's a small step down. Part of it again, as the seasonality of it; part of it is everything we talked about around a little bit soft in terms of volume and performance, relative to where we were in the first half.

So we're working hard on productivity and that's part of it of what what type of costs can you afford and should be allocated to our food ingredients business and those that the food ingredients business don't want how do we get those out of the system.

Our next question is from Ahmad Nicole Bain with the BNP for office. We may begin.

What I would say is on the pharmaceutical business that we sold.

We waited longer than we should have so we learned from that to deal with stranded costs upfront rather than after the fact.

Okay.

Okay.

Okay.

Hi everyone. Um uh question is a bit of a follow up on an earlier? 1 around food ingredients. Um, could you talk how, how integrated are the activities within food ingredients overall? Um, and do you expect any stranded cost from the Bungie deal? And I was just wondering, is you? Uh, see any scope for portfolio? Clean up, elsewhere, Beyond food ingredients. Thanks

The next question is from the line.

And then with migraine.

Thanks, Nicole. First of all, um, the the

Yeah.

Great. Thanks.

So I wanted to see if you could talk a little bit about what youre seeing at a market level from kind of a global multinational customers versus local and regional in.

The biggest change was separating Nourished into taste and food ingredients, and that took most of last year. We finished it at the beginning of this year, and then we've moved forward with food ingredients.

Any sort of difference in performance and even in that level of optimism or lack thereof, or maybe I should say and as we look towards the balance of year amortization from a consumer standpoint.

Thanks, Laurence I would say that the global companies are putting more emphasis on innovation, which is good. So we've got lots of innovation projects.

And Andy and his team have been working and will continue to work. Now even more to stand up, the food ingredients as a standalone business which gives us more strategic flexibility there. That's working. The answer on the um the Bungie sale. There's some stranded costs. We're already working to to deal with those

What I would say is that if theyre getting challenged particularly in the developing markets, whether it's indonesia, or Malaysia, or Thailand, or the middle east by local players and smaller companies are coming up with some great innovations I think.

uh, and if we are to separate food ingredients, um, there will be stranded costs and we're already working on, how do we

Address those Now versus waiting until later because it'll be a good thing to do whether we separate it or not.

Athletic Greens as an example, or or fair life. As an example, now owned by Coke is driving great growth with their core power products.

And so we're seeing opportunity with both what I would say is we are well positioned with the global players and we're and we're well distributed between global players midsized players and small players, but we are putting more emphasis on mid and small sized players and developing high growth markets.

So we're working hard on productivity, and that's part of it. What type of costs can you afford and should be allocated to a food ingredients business, and those that the food ingredients business doesn't want? How do we get those out of the system?

what I would say is on on the pharmaceutical business that we sold,

We waited longer than we should have. So, we learned from that to deal with the stranded costs upfront rather than after the fact.

And we hope to see better and better results from that were doing it but.

What I would say is some of our competitors are better positioned than some of our businesses and the developing markets with smaller customers and thats an opportunity for us and we're working on it.

The next question is from the line of Lauren Lieberman with workplace. You may begin.

Yes.

Okay.

Our next question is from the line of Jim Hawkins The J P. Morgan you may begin.

Okay.

Thanks very much.

In your commentary you say that your currencies will be negative year over year.

Great, thanks. Um, so I wanted to see if you could talk a little bit about what you're seeing at a market level, from kind of global multinational customers versus local and regional. Any sort of difference in performance and even in their level of optimism, or lack thereof, maybe I should say, as we look towards the balance of the year and what they're seeing from the consumer standpoint. Thanks.

The euro is.

Flat for the first half and maybe eight or 9% stronger for the second.

The Brazilian Reais, maybe 10% stronger even the Chinese renminbi.

Thanks Lauren. I would say that the the global companies are putting more emphasis on Innovation which is good. And so we've got lots of of innovation projects

A little bit stronger than it was last year or so.

Was there a large hedging program that.

Justin.

Current.

Environment.

Secondly.

In food ingredients food ingredients.

More capital intensive part.

Um, what I would say is that, uh, they're getting challenged particularly in the developing markets. Whether it's Indonesia or Malaysia or Thailand, or the Middle East by local players and smaller companies are coming up with some great Innovations. I think, um, you know, athletic greens is an example or or, uh, Fair life as an example. Now, owned by Coke is, is is, is, is driving great growth with their Core Power Products.

ISF relative to the other businesses.

Um, and so we're seeing opportunity with both.

And in rough terms, how much food ingredients do you think you might eventually retain.

$1 billion in sales something more or something.

Okay.

Okay.

Yes, I'll take the first one Jeff Great question on FX, obviously, its a big movement, we start out the year. The Euro was about 105 range and kind of ramp to where it is as you know very very well from cover in Iff's. It has a big exposure for us it's outside the USD is our largest exposure. So that has been a tailwind. The reality is when you look at it.

What I would say is we are well positioned with the global players and and we're well distributed between Global players, mid-size players and small players, but we are putting more emphasis on on Mid and small sized players in developing high growth markets and we hope to to to see better and better results from that we're doing it. But uh, what I would say is some of our competitors are better positioned and some of our businesses in the developing markets with smaller customers and that's an opportunity for us and we're working on it.

On a comparable year over year basis, there are some emerging market currencies that are a headwind and so you highlighted two but theres other ones that are.

Our next question is from the line of Jeff, the caucus, the JP Market. You may begin.

Uh, thanks very much.

That are negating some of the benefits that you would think and so on a topline perspective I think we said, it's about 1% of a drag on a full year perspective, you see that through the first half and that will actually flip to be a little bit more positive in the second half of the year. So to your point it is getting better from here at this point in time, but really the offset is going to be it's going to be the emerging market currencies.

Um, the Euro is, you know, flat for the first half and maybe it's 8% or 9% stronger for the second.

There is no hedging program in place today. So there is nothing to flag from that perspective, it's truly to fully fungible aspect of it year to year Delta in FX. So that's maybe part one Eric you want to put it out.

The Brazilian REI is maybe 10% stronger, even the Chinese rimi is a little bit stronger than it was last year. So was there a large hedging program that, um, just didn't fit the current?

So food ingredients.

Uh, environment.

It is more capital intensive than the other businesses.

secondly, um,

Although health and Biosciences has capital needs.

in food ingredients is food ingredients.

What I would say is the.

The biggest capital exposure, we had was the businesses that we just sold the bunge, which they know how to.

A more capital-intensive part of ISF relative to the other businesses.

Handle the capital in those commodity business is better than we do so I think that was a helpful move.

And there are some plants that we need to upgrade and do some things to that.

And in rough terms, how much of food ingredients do you think you might eventually retain? The billion dollars in sales, something more, something less?

We we have to proceed with.

But as I look at the food ingredients business is still very different than taste scent and health and biosciences.

There are leverage points, there our collaboration opportunities between food ingredients, and taste and health and Biosciences, which we do today and.

Yeah, I'll take the first 1 Jeff great question on FX, obviously it's a it's a big Movement. We started out the year the Euro was in that 105 range and kind of ramped to where it is as you know, very, very well from cover and iff it is a big exposure for us. It's outside the USD it, is our largest exposure. So that has been a Tailwind

Foreseeing any strategic change we will continue to have collaboration between food ingredients wherever it ends up and those businesses within <unk>.

But I don't see carving up food ingredients significantly from where it is today I think as an entity. It makes sense I think.

It's an opportunity for a strategic player to add or a private equity firm.

To enhance the business by investing more in it it's a great substrate.

At other products to enhance the business. So I think there's lots of options there, but I don't see it as being carved up significantly I see it as a as a standalone business that we have various options with.

Uh, the reality is, when you look at it, they want a comparable year-over-year basis. There are some Emerging Market currencies that are a headwind. Uh, and so you highlighted it too, but there's other ones that are, uh, that are negating some of the benefits that you would think. And so on the top line perspective, I think we said it's about 1% of a dragon, a full year perspective, you see that through the first half that will actually flip to be a little bit more positive. The second half of the year. So, to your point, it's getting better uh, from here at this point in time. But really, the offsets going to be uh, it's going to be the Emerging Market currencies. Uh, there's no hedging program in place today. So there's nothing to flag from that perspective. It's truly the fully fundable aspect of 30 year Delta in ethics. So that's maybe part 1. Eric part 2. You want to take? Sure, sure, sure. So food ingredients.

But whatever we do I see theres still going to be collaboration between our taste business health and biosciences and food ingredients.

Is more Capital intensive than the other businesses um although health and biosciences has Capital needs. Um what I would say is

Okay.

Yeah.

Our next question is from the line of Chris Parkinson with Wolfe Research you may begin.

Great. Thank you so much for taking my question could you just hit a little bit more on probiotics markets. It seems like there's been some inconsistency is not only in the market, but also geographic and also some of your peer commentary so be particularly helpful. If we could just get your stance on where you are today and where you think the market is generally.

The biggest Capital exposure. We had was the businesses that we just sold the Bungie which, you know, they know how to to to to to handle the capital in those commodity businesses better than we do. So I think that was a helpful move um and there's some plants that we need to upgrade and and and do some things too, that that we have, you know, we have to proceed with.

Um, but as I look at the food ingredients business, it is still very different than taste, scent, and health and biosciences.

Heading into 2026, thank you so much.

Thanks, Chris first of all I think it's a great business to be in.

There are leverage points, there are collaboration opportunities between food ingredients, and and taste, and health, and biosciences. Which we we we do today and and I foresee in any strategic change.

And we've got a great position today, we've been the historical builders of the market.

Uh, we would continue to have collaboration between food ingredients, wherever it ends up, and those businesses within if...

It's an important area of health for humans there are.

Some opportunities in pets, and we're well positioned.

What I think we have had lost the edge in was we had stopped really pushing hard on R&D innovation.

For the future to keep getting better probiotic strains and going in adjacent areas.

We started doing that early last year, increasing that R&D spend and increasing the focus.

<unk> Com has joined US and has a great knowledge base of the health markets and is helping guide that in direct that research with our team with Casper enrollment and his team and so.

Um, but I don't see carving up food ingredients significantly from where it is. Today, I think it's an entity that makes sense. I think, um, it's it's it's, it's an opportunity for a, a strategic player to add or, or a private Equity Firm to to, to enhance the business by investing more in it. Uh, it it's a, it's a great substrate to add other products to and enhance the, the business. So I think there's lots of options there, but I don't see it as being carved up significantly. I see it as as a as a standalone business that we have various options with.

With that we've been able to strengthen our pipeline that again starts to come out in 'twenty six and goes to full strength in 'twenty seven.

But whatever we do, I see there's there's still going to be collaboration between our taste Business Health, and biosciences, and food ingredients.

We also as we have done that.

Our next question is from the line of Chris Parkinson, with wolf research, you may begin.

Have not pushed hard enough. We've got great customers that are doing really great things, but we haven't pushed hard enough at expanding on what we do with our current customers and driving for new customers and Thats, where <unk> come in and is working with the team to strengthen our commercial capabilities. So.

So overall the market is growing I think it is going to continue to grow I think that it's a great area.

Great, thank you so much for taking my question. Um, could you just hit on a little bit more on probiotics markets? Um, it seems like there's been some inconsistencies, not only in the market, but also Geographic and also, some of your peer commentary. So be particularly helpful if we could just get your stance on, where, you know, where you are today. Uh, and where you think the market is generally heading, uh, into 2026. Thank you so much.

In a world of <unk> for example, there's even more opportunities that I see that we see and we're going to access those we've got a tough second half challenge ahead of us with our current customers and their situation.

Thanks Chris. For first of all, I think it's a great business to be in.

We're going to make sure that we do the right things to strengthen for 'twenty, six 'twenty, seven and beyond and I see in this business.

And we've got a great position today. We've been historical Builders of the market, um, it's a, it's an important area of Health for humans. Uh, there's some opportunities in pets and, and we're well positioned.

Early tremendous opportunities if we get some of these really exciting pipeline.

<unk> out there with the right <unk>.

Customers driving the the growth opportunities.

Yeah.

There are no further questions registered at this time I would.

I'd now like to pass the call back over to Eric <unk> for any closing remarks.

Okay.

Thank you so I've now been at <unk> for a year and a half and while I am pleased with our progress on results I am really not satisfied and as we've been very clear we see the second half is even more challenging.

We started doing that early last year, increasing that R&D, spend and increasing the focus. Uh, Mamou Khan has joined us and is a great knowledge base of of the health markets and is helping guide that and direct that research uh, with our team with Casper Roman and his team. And and so we we with that, we've been able to strengthen our pipeline that again starts to to, to come out in 26 and and goes to full strength in 27.

Uh, we have done that.

But I can tell you I'm more convinced than ever that we are taking the right actions to address our challenges, which we've talked about and health for example in fragrance ingredients.

But I also believe that we are doing the right things across our businesses, we keep strengthening our innovation and commercial pipelines and taste fine fragrance and consumer fragrance and our enzyme businesses, while also strengthening our productivity muscle.

We haven't pushed hard enough. We've got great customers that are doing really great things, but we haven't pushed hard enough at expanding what we do with our current customers and driving for new customers. That's where Leticia has come in and is working with the team to strengthen our commercial capabilities.

And we are absolutely focused on delivering what we committed to deliver in the second half of 'twenty five.

While we also make sure that we're strengthening for 'twenty six.

And I really see us starting to too.

Continue to improve in 'twenty six as we also figure out what we're what we're doing with food ingredients and then in 'twenty seven is the investments that we started to make last year in capex.

So, overall, the market is growing, I can I think it's going to continue to grow. I think that it's a, it's a great area, uh, in a world of glp1, for example, there's even more opportunities that I see that we see and, uh, we're going to access those. We've got a tough second half, um, challenge ahead of us, uh, with our current customers and and their situation. But we're going to make sure that we do the right things to to to strengthen for 26 and 27 and Beyond. And I see in this business, really, tremendous opportunities. If we get some of these uh really exciting pipeline.

And enzymes as well as our R&D engines and across the businesses will really start to start to impact in 'twenty, six but will really come to full strength in 'twenty seven.

Products out there with the right customers, driving the the growth opportunities.

There are no further questions. Register at this time.

That's what I see us really starting to perform but between now and then we're going to be clear on what our goals are what our expectations are and we're going to do all we can to do what we say and keep strengthening iff's for the future. So thank you very much for your interest and we appreciate and we will now close the call.

I would like to pass the call back over to Eric for any closing remarks.

Thank you. So I've now been at iff for a year and a half and while I'm pleased with our progress on results, I'm really not satisfied. And as we've been very clear, we see the second half is even more challenging.

Thank you that concludes today's conference call. We appreciate your participation.

Everyone have an amazing day and you may now disconnect your lines.

But I can tell you, I'm more convinced than ever that we are taking the right actions to address our challenges which we've talked about in health for example, and fragrance ingredients. Um, but I also believe that we are doing the right things across our businesses

We keep strengthening our innovation and commercial pipelines.

And taste to find fragrance and consumer fragrance, and our enzyme businesses.

While also strengthening our productivity muscle.

And we are absolutely focused on delivering what we committed to deliver in the second half of 25.

While we also make sure that we're 26.

and I really see us starting to to, to

Continue to improve in 26. As we also figure out what we're, what we're doing with food ingredients and then in 27 as the Investments, that we started to make last year in capex,

And enzymes, as well as our R&D engines in across the businesses. Will really start to start the impact in 26, but will really come to full strength in 27. Uh, that's when I see a really starting to perform, but between now and then we're going to be clear on on what our goals are what what our expectations are and we're going to do all we can to do what we say and keep strengthening if for the future. So thank you very much for your interest and we appreciate and we'll now close the call.

Thank you. That concludes today's conference call. We appreciate your participation. We hope everyone has an amazing day, and you may now disconnect your line.