The paragraph is an introduction to the IFF Third Quarter Earnings Conference Call, presented by Michael DeVeau, the Head of Investor Relations. It announces the release of their financial results and provides information about the call format, including forward-looking statements and non-GAAP financial measures. Michael introduces key speakers, CEO Erik Fyrwald and CFO Glenn Richter, who will discuss IFF's third-quarter performance and confidence in increasing the company's full-year 2024 guidance. Erik then takes over to begin discussing their results.

In the second paragraph of the article, the speaker discusses IFF's solid third-quarter results, highlighting significant volume growth across all business units and a noteworthy increase in adjusted operating EBITDA. The improved market conditions and actions to strengthen the business and enhance productivity contributed to this performance. As a result of the strong third-quarter results, IFF is adjusting its full-year 2024 financial guidance, projecting higher net sales of $11.3 billion to $11.4 billion and targeting the high-end of its EBITDA range of $2.1 billion to $2.17 billion.

The paragraph discusses the company's progress in its portfolio optimization and plans to complete the divestiture of its Pharma Solutions business by mid-2025. Despite challenging market conditions, the company has achieved significant growth, with a 7% increase in currency-neutral sales driven by strong performances in Scent and Health & Biosciences, and a 19% rise in adjusted operating EBITDA. The adoption of a new business-led operating model and strategy has improved financial performance and accountability. The company is also focusing on key markets and high-growth areas, having recently opened a creative center in Shanghai and planning more in Mexico City and India to enhance regional expertise and customer service.

The paragraph discusses improvements and achievements at IFF, highlighting enhanced employee engagement over the past 10 months as part of a revised strategy centered around empowering the global team. The company recently celebrated its 135-year legacy and 60th anniversary on the New York Stock Exchange. Glenn Richter reports a successful quarter with revenue slightly over $2.9 billion, marking a 9% increase on a currency-neutral basis. Growth was noted across all business units, contributing to a 16% rise in comparable adjusted operating EBITDA and a margin expansion to 19.4%. Adjusted EPS excluding amortization rose to $1.04, a 17% increase from the previous year, despite some foreign exchange impacts. Nourish sales grew by 7%, with an 18% rise in adjusted operating EBITDA.

The paragraph discusses the company's financial performance across various segments. Flavors experienced consistent double-digit growth, while Functional Ingredients saw high single-digit volume growth balanced by pricing strategies, leading to margin and EBITDA improvement. Health & Bioscience posted a 12% increase in sales and a 15% rise in EBITDA due to strong volume growth and productivity. The Scent segment reported double-digit growth in Fragrance leading to a 10% increase in net sales and a 7% rise in EBITDA. Pharma Solutions returned to growth with an 8% increase in sales and a 32% surge in EBITDA, driven by Industrial and Core Pharma growth. The company also reported a significant increase in cash flow from operations and free cash flow, with substantial dividend distributions to shareholders.

At the end of the third quarter, the company's cash and cash equivalents totaled $569 million, with $2 million in assets held for sale. Gross debt was approximately $9.1 billion, and the net debt to credit adjusted EBITDA ratio improved to 3.9 times from 4.5 times at the end of 2023. The trailing 12-month EBITDA was around $2.2 billion. The company aims to reduce the net debt to credit adjusted EBITDA ratio to below 3 times after divesting Pharma Solutions by the first half of 2025 to optimize its portfolio and strengthen its capital structure. For the full-year 2024, the company updated its financial guidance, expecting net sales between $11.3 billion and $11.4 billion and volume growth of 5% to 6%, higher than previous estimates. However, pricing is expected to be flat instead of the previously forecasted 1% growth, due to less favorable FX-related pricing in emerging markets.

The company maintains its fourth-quarter outlook despite Q3 performance, considering macro trends, customer inventory adjustments, and tougher year-over-year comparisons. They expect to achieve full-year '24 adjusted operating EBITDA at the high end of the previously stated $2.1 to $2.17 billion range, aided by productivity improvements, higher annual incentive compensation due to strong performance, and business reinvestments focused on long-term growth. Foreign exchange is projected to have a 3% adverse impact on sales growth, assuming a EUR/USD exchange rate of 1.12. Erik Fyrwald expresses pride in the team's accomplishments and dedication, acknowledging the need for continued work to build a stronger, more resilient IFF.

In the paragraph, Glenn reaffirms the company's commitment to reinvesting in its highest return businesses for sustainable, long-term growth. While focusing on meeting 2024 financial goals, the company is also encouraging global teams to fully leverage their potential with customers. The session then moves to a Q&A, where Josh Spector from UBS asks about the assumptions behind the company's fourth-quarter guidance, noting it seems lower than expected. Erik Fyrwald responds, indicating the quarter began as anticipated, but they remain cautious about potential inventory adjustments by customers at year-end, which has been a pattern in recent years.

The paragraph features a discussion during a Q&A session where Glenn Richter addresses a question from Nicola about the decline in margins for Nourish despite strong top-line performance. He explains that typically, the highest margins for Nourish occur in Q2 due to a positive mix during the summer season, and margins tend to contract between Q2 and Q3 due to mix normalization and increased investments in the business. Moving into Q4, he anticipates a further margin decline of 50 to 90 basis points due to lower volumes from seasonal changes. Additionally, Erik Fyrwald responds to Ghansham Panjabi's question about 2025 projections, indicating that it's too early to provide specifics but noting a positive $100 million reset in incentive compensation expected for that year.

The paragraph discusses the company's focus on customer satisfaction, innovation, and productivity, highlighting the positive performance of their teams. John Roberts from Mizuho asks about the separation of the Functional Ingredients and Flavors businesses, and about volume strength in recent quarters. Glenn Richter confirms that the separation is on track, with organizational changes already in place, and reporting will start in the first quarter of next year. Erik Fyrwald adds that two Presidents for the new divisions, Taste and Food Ingredients, have been appointed internally. Richter also mentions that the company's third-quarter volume performance was broadly positive across various sectors, with particular strength in Flavors, Scent, and Health & Beauty divisions.

The paragraph features a conversation during a financial call. Erik Fyrwald discusses the company's focus on improving margins and return on invested capital (ROIC) by enhancing customer focus, innovation, and productivity. The company is prioritizing capital allocation towards higher margin and return sectors, such as Scent, Flavors (now called Taste), and Health & Biosciences. There's also a strong emphasis on improving Functional Ingredients. Additionally, Patrick Cunningham from Citi inquires about any updates to the adjusted free cash flow guidance, previously set at $600 million for the year.

In the paragraph, Glenn Richter discusses financial and business updates during a call. He mentions that despite higher earnings, the company's full-year free cash flow forecast remains unchanged due to increased working capital from higher sales. Kristen Owen asks about the Functional Ingredients sector, to which Glenn responds that while there's not a long order book for the next year, the business is performing well due to efforts over the past two years to address issues. He notes that they are in a strong position to maintain momentum, especially with high service levels.

The paragraph outlines several strategic initiatives undertaken by a company to enhance competitiveness and financial performance. They have reinvested in deflation to lower prices, revitalized their sales pipeline to win back customers and acquire new business, which has resulted in mid-single-digit volume growth and improved margins. Additionally, they are beginning a major restructuring of their global supply chain to optimize costs and support growth, aiming to increase EBITDA margins to over 15% in the future. This collective effort has been positively received, indicating the company is on track to achieve its financial goals.

The paragraph discusses the positive effects of embedding R&D within business units, resulting in enhanced focus and alignment with customer needs. This has energized the R&D team and improved system efficiency, exemplified by the Scent team's strategic pipeline development in naturals, synthetic chemistry, and biotech molecules. While significant project impacts are anticipated in 2026 and beyond, the current energy and alignment are already benefiting 2025 sales and customer engagement. The following discussion includes a question from Salvator Tiano regarding the company's strong organic growth despite slower end-market growth, to which Glenn Richter attributes the outperformance partly to the rebound from previous destocking effects across the industry.

The article discusses the recent growth in the Fine Fragrance category, which has expanded since the COVID-19 pandemic due to new brand launches, social media influence, and the significance of digital channels. The use of Fine Fragrance has evolved beyond being reserved for special occasions. The company claims it is gaining market share by investing in new geographies, hiring perfumers, and establishing creative centers. The company is committed to growth not only in the Scent business but also in other high-growth, high-margin areas within IFF. The subsequent question from the operator involves discussing the company's expectations regarding price and cost dynamics and managing international trade scenarios, specifically tariffs. Glenn Richter responds that the price cost dynamic is generally flat.

The paragraph discusses the current and future economic environment, highlighting stability in prices with some sectors experiencing deflation while others may see increases. There is uncertainty regarding tariffs, particularly concerning relations with China, which could potentially benefit the business due to its global presence. The team is now more focused on these tariff issues, which may influence future strategies. The conversation then shifts to a Q&A, where Mike Sison from Wells Fargo notes that despite positive growth, the company's fourth-quarter EBITDA is expected to decline year-over-year if it hits the high-end of its outlook. He inquires if this is due to conservatism in forecasting and asks for insights into customer trends for 2025, mentioning a common industry sentiment that the first half may not outperform the second half.

In the paragraph, Glenn Richter and Erik Fyrwald discuss their company's year-over-year financial performance and expectations for the future. Richter explains that the company's reported figures are generally stable compared to last year, largely due to an increase in incentive compensation. He emphasizes that productivity offsets inflation and investment impacts. Fyrwald addresses their outlook for 2025, noting a lack of strong optimism from customers but highlights efforts to focus on customer relationships and innovation. Fyrwald mentions that, despite customer concerns about market slowdowns, the company is fostering growth through innovation and strengthening its market position by engaging with customers worldwide.

The speaker describes their experience visiting around 40% of their customer base, highlighting the positive energy and engagement of their teams as they collaborate with customers, including traveling to India and Indonesia. They are excited about the company's double-digit growth in sectors like Scent, Flavors, Health & Biosciences, and Food Ingredients, especially in high-growth markets. The speaker believes their innovative efforts will help them grow beyond market standards despite tough market conditions. Mark Astrachan from Stifel then asks if recent sales growth is partly due to restocking and whether there is more growth from local, regional, and private label companies compared to large multi-nationals. Erik Fyrwald responds by emphasizing the importance of both types of customers to the company.

The paragraph discusses the growth strategies and opportunities of a company, focusing on its engagement with both multinational and regional/local clients. The company is enhancing its innovation and establishing creative centers to support global and local businesses. There is recognition of varying growth rates across different geographies and segments, but the company aims to grow in all customer segments. Following this, Lauren Lieberman from Barclays inquires about the company’s reinvestment plans for the upcoming year, particularly regarding R&D and capabilities, given the current year’s financial flexibility and preparation for a substantial pipeline in 2026. Glenn Richter begins to respond to Lauren's question.

In the paragraph, Erik Fyrwald discusses the financial impact and strategic plans for growth, including a $20 million investment in the latter half of the current year and the first half of the next, aimed at expanding the company's technical sales, perfumery, flavors, and R&D personnel. This investment is part of a strategy to drive innovation, enabling sales growth and further investment in innovation. Fyrwald emphasizes a cycle of innovation leading to sales growth and productivity improvements, enhancing margins and return on invested capital (ROIC). The goal is to sustain this approach into 2024 and beyond. Subsequently, Jeff Zekauskas from J.P. Morgan asks about the company's volume performance and the profitability of its Functional Ingredients segment, to which Glenn Richter begins a response.

The paragraph discusses the company's performance, particularly in October and throughout the year. It notes a mid-single-digit increase in October, following the pattern of previous quarters where the end of the quarter proves challenging. The Functional Ingredients segment expects a 5% to 6% volume increase, though prices have remained relatively stable due to prior deflation in commodities, which allowed for targeted reinvestment with customers. This strategy has improved the company's topline and gross margins, aligning with the Flavors segment's year-over-year growth. The company's EBITDA margin rose from about 8-9% last year to over 12% this year, with goals to achieve mid-teens in the next two years. The response indicates financial improvements and efficient reinvestment strategies. The paragraph ends with the operator passing the call to Lisa De Neve from Morgan Stanley, who asks about regional growth differences and performance in China and India. Glenn Richter begins to address her question, indicating a forthcoming discussion on regional performance.

The businesses overall have performed well, with Pharma initially lagging due to late-cycle destocking but recovering strongly in the year's second half. China shows some growth improvement but remains inconsistent, while India demonstrates strong growth, prompting increased investments. Erik Fyrwald emphasizes aggressive investments in creative centers in growth markets like India. In response to Chris Parkinson from Wolfe Research, Glenn Richter reports that all segments within H&B performed well in the quarter. Probiotics, particularly affected by past softness due to China, showed a strong recovery in the third quarter, significantly impacting the business. The question-and-answer session concludes.

In the closing remarks of the conference call, Erik Fyrwald expressed gratitude to participants for their interest and questions regarding IFF. He shared his enthusiasm about the company's prospects after being a part of it for 10 months, praising the team, customer relationships, and innovation efforts. He emphasized the company's focus on successfully delivering the fourth quarter with an eye on strengthening future performance. The operator then concluded the call, thanking participants for their involvement.

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