The operator welcomes everyone to the IFF First Quarter Earnings Conference Call and introduces Michael DeVeau, Head of Investor Relations. DeVeau discusses the company's financial results, forward-looking statements, and non-GAAP financial measures. CEO Erik Fyrwald joins the call to discuss the company's solid performance in the first quarter and their outlook for the rest of the year. They have increased confidence in their reiterated guidance and see themselves trending towards the upper end.

The article acknowledges the retirement of Glenn, who has been instrumental in improving the company's balance sheet and positioning it for financial success. A succession plan has been started to find his replacement. In the first quarter of 2024, the company saw volume growth for the first time in a while and also achieved double digit EBITDA growth. The company has also made progress in divesting non-core businesses and expects to complete the sale of its Pharma Solutions business in the first half of 2025. The proceeds from these divestitures will help strengthen the company's capital structure and focus on high growth areas.

The company had a strong first quarter and expects the rest of the year to be even better. The new CEO has been focused on getting to know the company and its potential, and has identified areas for improvement. They are working on strengthening their financials and have made changes to their dividend and portfolio to drive debt reduction. They have also implemented a new operating model to better execute their goals.

The company has made changes to its operating model, including appointing a new president for the Scent division and restructuring the reporting structure for various functions. They have also established an operating system and philosophy focused on customer growth, innovation, operational excellence, and engaged employees. These changes aim to drive profitable growth and create value for the company.

In the first quarter, IFF saw a 5% increase in sales on a comparable currency neutral basis, with mid-single digit volume growth and modestly positive pricing. They also reported strong profitability, with a 20% increase in adjusted operating EBITDA and a 310 basis point improvement in margins. The company is encouraged by the momentum across their business and excited to continue building on these positive early signals throughout the year and beyond.

Overall, the company saw a 3% increase in sales on a comparable currency-neutral basis, with strong growth in flavors and functional ingredients. The health and bioscience segment also had a strong quarter, with a 6% increase in sales and a 21% increase in operating EBITDA. Scent had a 16% growth in sales and a 55% increase in operating EBITDA. However, the pharma solutions segment saw lower volumes due to continued destocking trends.

In the first quarter, Pharma Solutions reduced reliance on distributors and shifted to a more direct approach, which is expected to improve customer relationships and margins. The company also divested the business and is confident it will succeed with Roquette. Cash flow from operations was $99 million and CapEx was $118 million, resulting in negative free cash flow of $19 million. The company reduced its gross debt by almost $1 billion and has a net debt to credit adjusted EBITDA ratio of 4.4 times. The proceeds from the sale of LMC were received in April and not reflected in the quarterly results.

The company is confident in achieving their net debt to credit adjusted EBITDA target following the announced Pharma Solutions transaction. They expect to complete the transaction in the first half of 2025. The company remains cautiously optimistic about their outlook for 2024 and expects results to trend towards the higher end of their previously announced guidance ranges. They have seen improvements in volumes and pricing in the first quarter and have increased their full year guidance. For the second quarter, they expect improved volumes and an adjusted operating EBITDA of $500 million to $525 million. The CEO concludes with closing remarks.

The speaker shares that their first 90 days on team IFF have been energizing and they see a lot of potential. They have great talent and capabilities across their global teams, and their solid first quarter results show positive momentum. However, there is still a lot of work to do as the market remains competitive. The speaker is committed to bringing products and innovation that differentiate them from their peers and drive sustainable growth. They have been on a listening tour since joining and have heard from employees and customers, leading them to believe that there was uncertainty about the organization structure and operating models due to multiple companies coming together.

The executive leadership team has successfully clarified the company's structure and operational model, focusing on four pillars to drive performance. They have engaged with employees globally and have seen an increase in energy and enthusiasm. The team's goal is to support their teams, win with customers, drive innovation, and increase productivity through smart measures. The team is committed to unleashing the full potential of the company's people worldwide.

The company plans to focus on its remaining four business units after divesting Pharma Solutions. They will work to strengthen these businesses and drive profitable growth through innovation and productivity. A strategy review is also underway to ensure each business has the necessary investments and portfolio to succeed in the future. The company is confident in its cash flow target and trade receivables increased in the quarter.

The company is focused on developing the right strategy and capabilities in each business, collaborating effectively, and bringing leading innovation to win with customers. They are trending favorably for their full year outlook for free cash flow and adjusted earnings. The first quarter saw strong volume, but the company is cautious due to soft market conditions in the US and EU.

The company has seen a decrease in destocking outside of the Pharma Solutions division. The focus is now on growth through innovation and winning business with customers. The company is still cautious about the second half of the year due to a lack of consumer demand. The first half of the year showed a 4-5% increase in volumes, while the second half is expected to only show a 1-2% increase. The company needs to see a stronger consumer environment before being more confident in higher volume growth.

Eric Zhang from Citi asks about the company's expectations for price cost for the full year. Glenn Richter, responding to the question, states that they are expecting a small net positive for the full year, with more of a bias towards the first quarter. He also mentions that their pricing actions, which were mainly give backs, were focused on the functional ingredient space.

The company is performing well and meeting expectations for the year. The improved performance is partly due to pricing actions and there are no plans for additional pricing in the near future. The inflationary environment for the rest of the year is stable, with some slight fluctuations in commodities, energy, and logistics. The functional ingredients business is seeing a turnaround and the company is putting more focus on it. The CEO is pleased with the progress and believes it will be a sustained improvement.

The company is focused on improving execution and has a strategy refresh planned for all product families and systems. They are aiming for a strong improvement in 2024 and beyond, with a focus on strengthening for 2025 and beyond. The team is making progress and taking actions with customers and on productivity. The company expects to reach full recovery by 2025, with service elements already back to normal and effective pricing actions. The final piece to achieving the desired margin structure will be a review of manufacturing and procurement operations, to be implemented later this year or early next year. A question was asked about the progress and the company's response highlighted their positive outlook and plans for improvement.

The speaker is asking the new CEO, Erik Fyrwald, about volume trends by region in the first quarter and if there are any notable areas of strength or weakness. Fyrwald responds that there has been greater strength in Asia and LATAM, with softer performance in North America and EMEA. He also mentions that they are not expecting the high volume levels in scent to continue, and that Pharma is expected to improve. The speaker then asks about the company's approach to promoting from within for C-suite positions, and if there is a need to develop a deeper bench for smoother transitions in the future.

Erik Fyrwald, CEO of IFF, emphasizes the importance of developing and promoting internal talent within the company. He also discusses the recent executive leadership change and the outperformance of the scent division in the first quarter, possibly due to share gains.

The remaining businesses at IFF have a lot of potential for success due to their strong innovation capabilities and talented employees. The leadership team is focused on unleashing this potential by making clear decisions and promoting collaboration across businesses. The scent unit in particular has been successful in delivering innovation to customers and has highly regarded perfumers. Overall, there is a lot of enthusiasm within the company for its current and future prospects.

The speaker discusses the importance of bringing together a team of perfumers and other experts to co-create successful fragrances and consumer products. They mention the critical role of scent in the success of these products and attribute their strong performance to their team's expertise. They also mention their expectation for continued success under new leadership. In response to a question about productivity gains, they confirm a $200 million target for the year and note that they have made progress in driving cost savings through various initiatives.

The company is taking a zero paced approach to their ingredients platform and is focused on leveraging their global shared services and indirect spend. They anticipate delivering strong productivity numbers in the future. The company plans to use the net proceeds of $2.4 billion from the Pharma division to manage their liabilities, which include maturities of $2.4 billion in 2025 and 2026. The finance and HR departments now directly feed into the divisions and their compensation structure and key KPIs are still being decided.

In the paragraph, the speaker discusses their approach to balancing interest cost savings and notional debt repayment in order to optimize their debt structure. They also mention that there will be changes to how functions are reported and incentivized, with a focus on business unit performance. However, the 2024 plan will not be affected by these changes, and there will still be corporate functional leadership to ensure best practices across business units.

The company's business units will work together to drive performance and enhance collaboration, with each unit being incentivized to improve their own performance and that of the other units. The strong scent volumes in the first quarter may have contributed to the high EBITDA growth, but it is expected to normalize throughout the year. There was some volume shift from Q1 to Q2, but it was minimal and there is no evidence of restocking in the marketplace. Scent volumes were particularly strong in the consumer segment.

The company's nourish performance in the quarter was strong, despite weak food industry volumes. The CEO and CFO addressed an update on the organization structure, stating that it will not be moving forward with the previously planned model. The new structure will be market-based, with health and biosciences split into four units.

The executive leadership team believes that keeping the innovation and R&D engine within the business and manufacturing process is important for success. They will have a global key account leader for large accounts, but experts from the business units will also work directly with these accounts. The original focus was on revenue synergy through cross-selling between flavors and ingredients, but the focus has now shifted towards optimizing each business individually.

The company is seeing positive results from focusing on ingredients and flavors separately, with strong volume growth in both segments. There is a sense of cautious optimism about the future, as the company is seeing good results compared to its peers. There are also positive inventory dynamics downstream, with customers potentially shifting their innovation strategies and needing to reset inventory levels, which could be a net tailwind for the company.

Erik Fyrwald discusses the importance of innovation for customers and the need for end-to-end business units to deliver it quickly. He also addresses a question about the company's second quarter revenue forecast and explains that there were timing and mix dynamics in the fourth quarter that impacted the cost of goods sold and revenues.

The speaker discusses the decline in revenue from Q1 to Q2, attributing a quarter of it to the absence of LMC in the mix. They also mention seasonality and a decrease in revenue compared to the previous year. They anticipate a 5-6% volume growth in the second quarter, with April being a strong month. The speaker also mentions the pending retirement of a team member and expresses excitement for the potential of the company and its employees.

This summary was generated with AI and may contain some inaccuracies.