The paragraph is an introduction to the International Flavors & Fragrances Inc. (IFF) fourth quarter and full year 2024 earnings conference call. The operator outlines the structure of the call, allowing participants to listen and ask questions with a one-question limit. Michael Bender, Head of Investor Relations, welcomes the participants and mentions the issuance of a press release detailing IFF's financial results, available on the company's website. He notes that the call is recorded and will feature forward-looking statements with associated risks, directing listeners to specific resources for more information. The presentation will include non-GAAP financial measures, and a reconciliation is available in the press release. CEO Erik Fyrwald and CFO Michael DeVeau will provide prepared remarks, and the call will include a Q&A session. Erik begins his segment following Michael's introduction.

The paragraph discusses International Flavors & Fragrances Inc.'s progress and improved financial results in 2024 under new leadership. Key initiatives included a renewed operational focus, the transition to a business-led operating model, and a strategic emphasis on biotechnology. These changes have enhanced accountability, efficiency, and responsiveness to customer needs, resulting in strong revenue and profit growth. The company is preparing for continued success in 2025 by maintaining this momentum and focusing on long-term growth.

The paragraph outlines several strategic initiatives by International Flavors & Fragrances Inc. to enhance growth and innovation. The company is increasing investments in R&D, commercial capabilities, and infrastructure development in its high-growth areas like health and biosciences. They have made key leadership appointments and promoted internal talent to strengthen leadership and improve employee engagement. The company announced changes in its board of directors, including the addition of new members and a new chair, Kevin O'Byrne, succeeding Roger Ferguson in 2025. These initiatives aim to focus on people, customers, and operational excellence, underpinning the company's long-term growth strategy. Financially, in 2024, the company achieved $11.5 billion in sales, with a 6% growth and improved profitability with $2.2 billion in adjusted operating EBITDA, representing 16% growth.

The paragraph discusses International Flavors & Fragrances Inc.'s achievements and future plans. The company saw growth across its businesses, driven by volume improvement, effective commercial execution, and the lack of destocking. In early 2024, they adjusted their dividend policy to aid deleveraging and invest in key growth areas. The planned sale of Pharma Solutions is expected to aid financial health by mid-2025. The company's net debt to EBITDA improved from 4.5 in 2023 to 3.8 in 2024. The company aims to continue deleveraging, reinvesting in R&D, enhancing technology, and streamlining business processes to improve efficiency and create long-term value. Employees are credited for their contribution to success, and the promotion of internal talent remains a priority.

The paragraph announces Mike DeVeau's appointment as Chief Financial Officer of International Flavors & Fragrances Inc. (IFF), highlighting his extensive experience within the company and his understanding of its global finance operations. As the new CFO, Mike DeVeau presents the company's strong fourth-quarter financial results, reporting a revenue increase to $2.7 billion, driven by broad growth and mid-single-digit volume improvements. The company also saw a 5% increase in adjusted operating EBITDA and margin expansion due to ongoing productivity initiatives, despite facing increased incentive compensation expenses and business reinvestment. Mike emphasizes continued strong performance across all business segments.

In the Nourish segment, sales increased by 4% to $1.4 billion, with a similar increase in EBITDA, driven by strong growth in Flavors. Functional ingredients saw mid-single-digit volume growth, mainly counterbalanced by pricing strategies. Health and Biosciences sales grew 6% to $553 million, though EBITDA fell by 3% due to tough comparisons and reinvestments. The Scent segment experienced broad-based growth, with a 7% rise in net sales to $579 million and a slight EBITDA increase. Pharma Solutions posted strong results, with sales up 12% to $228 million and substantial profitability growth of 81% to $47 million, driven by gains in volume and productivity. Overall annual cash flow from operations was $1.1 billion, with CapEx of $463 million and free cash flow at $606 million, aligning with expectations.

The company reported distributing $514 million in dividends to shareholders this year and ended the fourth quarter with $471 million in cash and cash equivalents. Gross debt decreased by over $1 billion to approximately $9 billion due to the divestiture of the cosmetic ingredients business. The company's credit-adjusted EBITDA for the past twelve months was $2.2 billion, maintaining last quarter's level, and net debt to credit-adjusted EBITDA improved to 3.8 times. The company aims to reduce this to below 3 times by mid-2025 after divesting its Pharma Solutions segment. Despite a dynamic operating environment, the company is optimistic about 2025, targeting growth while factoring in the impact of divestitures, which are projected to reduce sales and adjusted EBITDA growth by around five to six percentage points, respectively. Sales for 2025 are expected to range from $10.6 billion to $10.9 billion, reflecting 1% to 4% currency-neutral growth. If the Pharma transaction closes earlier than anticipated, the company will revise its guidance accordingly.

The company anticipates continued volume growth across its divisions, particularly in HNB, Taste, and Scent, despite a challenging comparison to the previous year. It expects a more normalized operating environment in 2025 compared to 2024, which benefited from reduced destocking. Modest price increases, including those related to foreign exchange, are expected as raw material costs remain high. The company aims to achieve a full-year 2025 adjusted operating EBITDA between $2 billion and $2.15 billion, translating to 5% to 10% growth, driven by improved gross margins through volume leverage and cost productivity. Following strong growth in 2024, it plans to reinvest in long-term opportunities while maintaining profitability, offsetting inflationary pressures with strong productivity and investing in R&D and commercial capabilities. A 4% adverse impact on sales growth and a 6% impact on EBITDA growth are expected due to foreign exchange rates, particularly the euro's strength compared to 2024.

The paragraph outlines the company's strategic investments and plans for 2025, including an expected modest devaluation of emerging market currencies like the Brazilian real and Argentine peso against the USD. The company intends to increase its capital expenditures to approximately 6% of sales, with half allocated to maintenance and the rest to investment in growth areas such as food ingredients, capacity expansion, and creative centers in India and Mexico. It also emphasizes digital transformation with a focus on upgrading SAP HANA. The company has reorganized into five segments: Taste, Food Ingredients, Scent, HNB, and Pharma, and will adjust corporate allocations accordingly, providing historical data for clarity. The leadership expresses confidence in achieving strategic and financial goals despite macroeconomic challenges and highlights a commitment to enhancing business efficiency and customer satisfaction.

The paragraph outlines International Flavors & Fragrances Inc.'s strategy for growth and increased returns through investments in R&D, capital projects, and commercial actions aimed at gaining market share. The company emphasizes innovation, transparency in sales processes, cost savings through improved productivity, and portfolio optimization, including divestiture and potential acquisitions. They clarify they will not repeat a past acquisition like Frutarom. The commitment to financial goals for 2025 and investing in employee development to enhance innovation and customer satisfaction is highlighted. The paragraph concludes by noting their solid 2024 performance and excitement to strengthen their market position in 2025.

In the paragraph, Erik Fyrwald addresses a question from Kristen Owen regarding expected volume growth for 2025, highlighting a projection of 1% to 4% growth. He explains that this follows a significant 26% growth in 2026, half of which was due to destocking. Fyrwald mentions that the growth is expected primarily in the health and biosciences, scent, and taste sectors, thanks to strong commercial pipelines and a high win rate, meaning they are securing more business than competition in these areas. The food ingredients sector is expected to see lower volume growth. He emphasizes the importance of their strategic focus over the next three years to sustain this growth.

The paragraph discusses the company's strategy for achieving growth over the next three years by focusing on fundamentals and narrowing the margin gap with top competitors. The plan includes continued investment in research and development, commercial capabilities, and capacity, especially within the health and biosciences, scent, and taste sectors, which have high margins. In the food ingredients business, the company is selectively investing in technical services and facility upgrades while implementing aggressive productivity programs company-wide to remain cost-competitive and effective. Additionally, the company plans to leverage its strong biotech capabilities to enhance its scent and flavor divisions. The overall goal is to strengthen the company's position relative to its best-in-class competition. Josh Spector from UBS then asks about the EBITDA bridge for 2025, noting the negative impacts of the pharma divestment and foreign exchange, while suggesting that volume increases and incentive compensation resets might offset these to a neutral position.

In the paragraph, Michael DeVeau discusses the factors contributing to the company's EBITDA growth to reach the midpoint of its 2025 guidance. The growth is primarily driven by volume growth and productivity enhancements, with expected sales growth of 2.5% on an $11 billion base and incremental margins of 35%. Productivity gains are expected to add another 2% from inflation adjustments, while net pricing and input costs are projected to be neutral. The company plans to offset a $100 million incentive compensation reset through reinvestment, with $30 million carrying over to 2024 and a $70 million increase in 2025. The EBITDA will be strongest in the first half of the year, especially in Q2, due to the anticipated completion of a pharma transaction and typically high seasonal strength.

The paragraph discusses the expectations for volume growth and input inflation for International Flavors & Fragrances Inc. Erik Fyrwald indicates that the company anticipates volume-driven growth, primarily from health and biosciences, scent, and taste sectors, with modest pricing changes. Volume growth in food ingredients is expected to be moderate, focusing on margin improvement. Michael DeVeau addresses input inflation, noting historically high import costs, with some inflation in taste and scent due to natural ingredients, while health and biosciences remain flat. Overall input costs are expected to be flat to slightly up. The company plans to mitigate costs through reformulations and pricing discussions with customers, predicting consistent pricing throughout 2025.

In the article's 15th paragraph, Eric Zang asks about the progress and strategies for margin expansion in functional ingredients. Erik Fyrwald responds, stating they are on track to achieve mid-teens EBITA margins in the coming years, having made progress with low double-digit margins in 2024. Under new leadership from Andy Mueller, the company is confident in further growth through customer service and productivity plans. Lisa De Neve then asks about the expected free cash flow for the year, particularly regarding net working capital and CapEx, while also seeking any new midterm targets given the CEO's tenure.

In the paragraph, Michael DeVeau and Erik Fyrwald discuss financial targets and plans for the future. They project a 2025 free cash flow of about $500 million, impacted significantly by taxes from a pharma divestiture, but adjusting for taxes, it would be approximately $850 million. This shows improvement since 2020 and is consistent with recent years. They aim for a slight inflow in networking capital by focusing on payables and inventory management. CapEx is expected to reach 6% of sales, targeting investments in food ingredients, capacity expansion, new technologies, commercial operations, and digital transformation. Erik mentions that more clarity on long-term targets will be provided later, highlighting strengthened organizational and business models and the strategic separation of Nourish into distinct businesses.

The article paragraph discusses the company's strong team, clear five-year plan, and investment strategies aimed at growth and productivity. It expresses confidence in their direction and emphasizes the need for effective execution in 2025, following success in 2024. In a Q&A segment, Steve Byrne from Bank of America inquires about the potential impacts of RFK running HHS and FDA staff cuts on the company, and its R&D investments, including gene editing. Erik Fyrwald responds by stating they don't see their products as targets but view reformulation for cleaner labels as a growth opportunity. They perceive numerous R&D opportunities in biotech, particularly in scent, taste, and biodegradable materials, which align with consumer and customer desires.

The paragraph is from a conference call regarding International Flavors & Fragrances Inc. (IFF). John Roberts from Mizuho asks about the potential impact of tariffs on IFF's raw material costs. Michael DeVeau responds by stating that while the tariff situation is constantly changing, IFF does not anticipate a significant material impact due to its global and flexible supply chain. He mentions that the company is working with customers on mitigation strategies, such as potential price surcharges, but focuses primarily on adapting its supply chain to minimize exposure. The objective is to keep any impact immaterial and to update stakeholders as the situation evolves.

The paragraph is a discussion about the future prospects and challenges for International Flavors & Fragrances Inc. (IFF), particularly after acquiring NNB. Erik Fyrwald addresses the potential for the company to achieve low 20s EBITDA, noting that the health and biosciences segment is currently the strongest, while food ingredients remain challenging. He acknowledges the complexity and performance issues faced upon joining the company but believes significant progress has been made. Fyrwald highlights strong teams in health and biosciences, and in scent and taste, with a focus on continued improvement. The food ingredients segment is positioned for a turnaround with goals to improve its low single-digit EBITDA margins in 2023 to low double-digits in 2024, led by Andy Mueller's team.

The paragraph involves a discussion during a conference call where Matt Hettwer from Vertical Research Partners asks about the foreign exchange (FX) impact on EBITDA being two percent higher than its impact on sales. Michael DeVeau explains that this discrepancy is due to purchase costs being largely in euros and US dollars, whereas sales are in local currency. This cost structure creates a multiplier effect on EBITDA compared to sales. Regarding margin comparisons between international and US domestic operations, DeVeau clarifies that, overall, margins are consistent globally. However, variations arise depending on product category exposures; for example, Europe has higher margins due to its focus on fine fragrance, while India has lower margins due to savory product exposure. Mark Astrachan from Stifel is then prompted to ask the next question.

The paragraph discusses the growth dynamics between different customer segments, highlighting the faster growth rates of local, regional, and private label customers compared to multinational companies. The company's portfolio is roughly divided into one-third global customers, one-third midsized, and one-third small global customers, including private labels. The focus is on prioritizing private label and smaller customers for future growth, while still seeking opportunities with larger global customers through innovation. Erik Fyrwald emphasizes the company's goal of achieving best-in-class margins while balancing investment and growth strategies.

The paragraph discusses the company's strategic focus on growth and margin improvement, emphasizing their commitment to aggressive investments in research and commercial capabilities, particularly in health and biosciences, taste, and scent sectors. While these investments may slow short-term EBITDA progress, the company is confident in their long-term benefits, aiming to strengthen their competitive position and innovation leadership. They acknowledge potential for higher margins without these investments but prioritize future payoff. A subsequent Q&A transition shifts to discussing the scent business, addressing strong fragrance ingredient growth, pricing pressures, and expectations for growth in fine fragrances.

The paragraph discusses the company's strategic focus on high-value ingredients and industry-led experience, resulting in strong performance in 2024. They successfully targeted high-value ingredients, leading to mid-teens growth for the quarter. However, in 2025, growth is expected to slow due to market consumption and a deflationary environment in the fragrance ingredients market. Despite this, the long-term strategy remains strong, with fine fragrance performing well, achieving high single-digit growth. The company expects continued growth, particularly in emerging markets like the Middle East and Africa, and aims to win core businesses and brands in Europe and North America.

In the paragraph, Erik Fyrwald discusses the favorable dynamics for the scent industry, emphasizing that consumer goods companies are increasingly prioritizing the role of scent in enhancing the appeal of their products. He notes that scents are a critical component of product superiority while constituting a relatively small portion of the overall product cost. He also highlights the growing trend of individuals seeking fine fragrances for everyday experiences, beyond traditional uses, driven partly by digital media influencers. He is optimistic about continued growth in the scent industry. Following this, a question from Ghansham Panjabi is presented regarding the growth expectations within the Nourish sector, specifically addressing the disparity in growth between the legacy flavor business and the functional ingredients segment.

The paragraph discusses the growth dynamics of a company's taste and health and biosciences (HNB) business segments. Michael DeVeau explains that the taste business, which has been experiencing strong double-digit growth, is expected to normalize by 2025 due to strong previous performances. The food ingredients segment may see slower growth because volume gains are offset by price reductions linked to deflation. In the HNB segment, enzyme and probiotic businesses are anticipated to experience modest year-over-year growth. Overall, the company expects growth in the taste side to compensate for any softness in the food ingredients segment, leading to a better growth trajectory in 2025.

The paragraph discusses the current challenges and future outlook for the health business, particularly in the probiotics sector, which has faced difficulties in recent years. It is expected to improve by 2025, positively impacting both revenue and margins. During a call, Dan Rizzo from Jefferies inquires about the impact of tariffs on customer order patterns and future margins and ROI. Erik Fyrwald responds by indicating that while customers are cautious about volume growth due to economic uncertainty, they're focusing on innovation to stimulate consumer interest and enhance product value. This focus on innovation provides opportunities for collaboration and potential growth.

The paragraph discusses a business's focus on improving return on invested capital (ROIC) and mentions that a concentrated effort is being made towards this goal as they approach 2025. Michael DeVeau emphasizes the importance of diligence in investment decisions affecting both operating and capital expenditures. Although there is no formal target yet, improvements in margins and ROIC are expected over time. In response to a question from Artem Chubarov, Erik Fyrwald explains that the health and biosciences business is performing well and has shown strong growth in 2024, particularly due to increased innovation. While health was the slowest-growing segment, overall business dynamics are solid across different areas.

The paragraph highlights the company's recent developments and future plans. They are optimistic about the growth potential in enzymatic biomaterials and are focusing on enhancing their scent and taste business through biotech capabilities. Harris Fine asks about the impact of recent asset sales in Food and Nutrition on potential portfolio adjustments and mergers and acquisitions (M&A). Erik Fyrwald responds by saying that they are evaluating parts of their food ingredients business that may not fit long-term and are considering small acquisitions to enhance their technology and geographic footprint. These acquisitions will be strategically chosen to ensure good returns and fill strategic gaps.

The speaker emphasizes the company's focus on enhancing current business operations and completing the pharmaceutical solution sale successfully. They express excitement about the progress and future potential of International Flavors & Fragrances Inc., attributing their success to the dedication of their employees and increased customer focus. The company aims to build on positive momentum and meet their 2025 goals in a way that positions them well for 2026 and beyond, ensuring competitiveness. The operator then concludes the Q4 and FY 2024 earnings conference call.

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