The paragraph is an introduction to IFF's First Quarter 2025 Earnings Conference Call. The operator introduces Michael Bender, Head of Investor Relations, who welcomes participants and provides an overview of the call. He mentions that a press release with financial results was issued the previous day, and both the release and further details are available on IFF's website. The call is being recorded and will feature forward-looking statements and non-GAAP financial measures. Bender introduces the CEO, Erik Fyrwald, who will discuss the company's first-quarter financial results and strategic progress.

The paragraph discusses IFF's strong performance despite challenges in the macroeconomic environment, emphasizing their focus on innovation, operational discipline, and long-term value creation. The company has restructured its Nourish segment into two distinct units, Taste and Food Ingredients, to better track progress and identify growth opportunities. In the first quarter, they achieved broad-based growth across four segments: Taste, Pharma Solutions, Scent, and Health & Biosciences. However, there was a decline in Food Ingredients due to previous order pull-forwards and capacity limitations, as well as a strategic decision to move away from low-margin pectin sales.

The paragraph highlights IFF's achievements in achieving 9% growth in comparable currency neutral adjusted operating EBITDA, driven by strong performances in Taste and Pharma Solutions. The company successfully completed the divestiture of Pharma Solutions to Roquette ahead of schedule, improving its capital structure and reaching a desired net debt to credit adjusted EBITDA ratio. Despite positive momentum going into 2025, IFF acknowledges ongoing macroeconomic challenges but emphasizes its resilience and commitment to quality, expertise, and customer collaboration. The company focuses on mitigating tariff impacts and remaining adaptable and disciplined in an uncertain market environment.

The paragraph outlines IFF's financial performance in the first quarter of 2025, highlighting a solid start with $2.8 billion in sales, reflecting a 3% growth on a comparable currency neutral basis, driven by most business segments including Taste, Pharma Solutions, Scent, and Health & Biosciences. The adjusted operating EBITDA saw a 9% increase, improving the margin to 20.3%, marking the fourth consecutive quarter of margin expansion. Pharma Solutions, in particular, experienced robust growth with $266 million in sales, an 8% increase year-over-year, and a 19% increase in adjusted operating EBITDA, thanks to a distribution model change and enhanced productivity. Future reporting will separate Taste and Food Ingredients segment performances.

The company published an 8-K recasting 2024 results and adjusted corporate cost allocations to fit a new structure and model. In the Taste segment, sales increased by 7% year-over-year, with strong profitability driven by growth in flavors, favorable pricing, and productivity gains. Food Ingredients sales decreased by 4% due to pressures in protein solutions, but adjusted operating EBITDA grew by 5% thanks to favorable pricing and productivity. The Health & Bioscience segment saw a 5% increase in sales due to volume growth, achieving a 3% rise in adjusted operating EBITDA, which offset reinvestment costs. The Scent segment experienced solid sales growth, with a 4% increase in net sales and adjusted operating EBITDA, driven by gains in fragrances, volume growth, and productivity enhancements.

The paragraph discusses IFF's financial performance and strategic measures taken in response to the evolving macroeconomic environment. Year-to-date, the company has generated $127 million in cash flow from operations, with capital expenditures at $179 million and $102 million paid in dividends. Gross debt decreased by over $1 billion, while cash and cash equivalents totaled $650 million. IFF aims to achieve a net debt to EBITDA ratio below 3 times. Additionally, the company is adjusting its operations to mitigate the effects of new U.S. tariffs, particularly on China, by leveraging its global manufacturing and sourcing capabilities.

The paragraph discusses IFF's strategy to mitigate inflationary pressures by diversifying supply sources and maintaining production balance. In cases where costs are unavoidable, targeted pricing surcharges are applied. Despite potential risks from global trade policy changes, IFF remains resilient due to its focus on essential markets and being a reliable partner for customers seeking to secure their supply chains. The company is committed to its long-term strategy, emphasizing reinvestment in growth areas and operational efficiency while maintaining profitability and guidance projections for 2025, with expected sales between $10.6 billion and $10.9 billion.

In the paragraph, the company discusses its financial outlook, expecting a reduced adverse impact on revenue and EBITDA from foreign exchange and divestitures compared to previous estimates. They aim for 2025 adjusted operating EBITDA between $2 billion to $2.15 billion, representing currency-neutral growth of 5% to 10%. Erik Fyrwald highlights the company's strong performance, key divestitures, and focus on growth through research, development, and capital expenses. The company strives to deliver innovative, sustainable solutions and maintain strong momentum for long-term, profitable growth. The Q&A session follows Erik's remarks.

In the paragraph, Nicola Tang from BNP Paribas asks about the potential impact of recessionary pressures on IFF's portfolio due to recent trade policy shifts. Erik Fyrwald responds by noting that their order book remains stable and aligns with their guidance, but expresses concern over general economic uncertainty. He highlights that 80% of IFF's portfolio is based in essential products, which are more resilient, while 20% is in discretionary areas like fine fragrances and consumer beauty products. Although they have observed strong order patterns in discretionary areas so far, there are concerns about the latter half of the year. Erik hopes for a resolution to the uncertainty. The operator then introduces the next question from Josh Spector with UBS, who asks about tariffs.

The paragraph features a discussion led by Michael DeVeau from IFF, addressing questions about the impact of tariffs on their costs, particularly related to trade between the U.S. and China. IFF's gross tariff exposure is estimated at over $100 million for 2025, potentially doubling on a run rate basis. However, the company has been actively optimizing its supply chain and negotiating price adjustments with customers to mitigate these impacts, aiming for full mitigation over time. Additionally, in response to a question about performance metrics, DeVeau mentions that the company's Taste segment is performing well, with better two-year growth figures compared to those from early 2021.

The paragraph discusses the performance of a company in different sectors over recent years, highlighting an 11% growth in one area followed by a 7% growth, resulting in a 9% growth over two years. Despite a decline in Food Ingredients by 4% each of the past two years, adjustments for strategic price reductions reveal stronger volume performance overall. A subsequent topic discussed is a €130 million joint venture called Alpha Bio with Kemira, focused on enzymatic biomaterials technology. The 50/50 joint venture involves building a plant in Finland, with construction costs divided equally between the companies and the plant expected to start operations by the end of 2027.

The paragraph discusses the role of Kemira in servicing the water treatment market, as well as the cardboard and paper packaging sectors, highlighting the attractiveness and growth potential of these markets. Kemira will utilize sugar as a feedstock to create high-value, biodegradable, and cost-competitive polymers for various end markets. The startup of a new world-scale plant is expected to mark the beginning of significant business growth. Following this, a Q&A session includes a question from Ghansham Panjabi regarding the 7% core sales growth in the Taste segment for the first quarter. Erik Fyrwald responds, crediting the growth to an increased pipeline and a high win rate, with all regions experiencing broad-based growth due to effective local-level execution.

The article discusses IFF's broad-based growth across most business categories while noting the uncertainty of pre-buy benefits. Michael DeVeau highlights the importance of increased R&D investment in the Taste, Scent, and Health and Biosciences sectors for future development. Patrick Cunningham from Citigroup inquires about the decline in protein solutions volumes and the outlook for food ingredient volumes. Erik Fyrwald responds that the Food Ingredients turnaround is progressing well under Andy Muller, with improvements in EBITDA margin. Although first-quarter volumes were slightly down, they expect them to be flat to slightly down for the year as they prioritize higher-margin products over lower-margin ones. Protein volumes declined due to weaker sales in lower-value areas.

The paragraph discusses the company's financial strategy following the completion of a pharma sale, which has started the deleveraging process. Michael DeVeau highlights the company's focus on reducing its net debt-to-EBITDA ratio to below three times, enhancing financial flexibility. The priority is to reinvest in capital expenditures (CapEx) to support growth in core businesses. Additionally, the company considers small acquisitions to bolster innovation and commercial capabilities. They also plan to evaluate returning capital to shareholders through dividends and potential share buybacks after achieving their leverage target.

The paragraph covers a Q&A session with Erik Fyrwald regarding the company's Food Ingredients division. Michael Sison from Wells Fargo inquires about the contributions of net pricing and productivity to the first quarter's strong EBITDA margins, noting progress toward mid-teens margin goals. Erik Fyrwald attributes the gains to productivity and focusing on higher-margin products, with an aim to exceed 15% EBITDA margin by 2026. Salvator Tiano from BofA asks about the company's exposure to artificial dyes in light of a shift to natural dyes. Fyrwald responds that colors are a smaller part of their portfolio, entirely natural, and a ban on artificial dyes benefits them. While not planning major acquisitions in this area, they see opportunities in cleaner labeling across their food portfolio.

In this paragraph, David Begleiter from Deutsche Bank asks Erik Fyrwald about what might cause IFF's sales growth to be at the low end of its projected 1% to 4% range. Erik mentions that a significant economic slowdown could lead to lower growth but expresses confidence in reaching their growth targets due to strong order patterns and efforts to innovate and expand their customer base. Lauren Lieberman from Barclays follows up, noting that despite Erik's optimism, there's cautious commentary from consumer packaged goods (CPG) companies regarding economic conditions, particularly regarding fewer laundry loads and significant inventory destocking in the U.S.

In the paragraph, Erik Fyrwald addresses concerns about potential economic slowdowns, particularly in beauty-related categories, and discusses the company's strategic outlook. He acknowledges that the company is aware of economic challenges, particularly in the U.S. and China, and is proactively working to drive growth and productivity. Fyrwald highlights the company's diverse customer and geographic base as a strength in navigating these challenges. Despite concerns, the company is maintaining its guidance based on reasonable scenarios. Additionally, an unidentified analyst from JPMorgan asks about the strategic importance of the Food Ingredients business and its potential separation from IFF.

In the paragraph, Erik Fyrwald and Michael DeVeau discuss their company's financial expectations and strategic focus. Erik mentions that they recently separated their farmers business and are strengthening their balance sheet, with a renewed focus on transforming their Food Ingredients business to increase growth and profitability. They are considering strategic options for this business but are currently focused on improving it. Michael provides details on CapEx and cash flow, noting that CapEx will be about 6% of sales, with significant reinvestments in their H&B sector. The free cash flow is projected to be around $500 million, including $350 million in taxes from a previous pharma divestiture.

In the paragraph, an analyst named Lawrence Alexander from Jefferies asks about the impact of the inventory cycle and the bullwhip effect on IFF, particularly concerning supply chain lags. Erik Fyrwald defers the question to Michael DeVeau, who explains that while IFF remains cautious due to potential end market weaknesses affecting supply chains, they recently experienced a significant period of destocking. As a result, DeVeau believes that current inventory levels are not excessively high, making a substantial downturn less likely in the near future.

In the exchange, Erik Fyrwald responds to Lisa De Neve's questions about input inflation levels and interest savings from a debt tender offer. He explains that, while some input costs like food ingredients have been more favorable than expected, scent ingredients have seen an uptick. They remain broadly aligned with their initial guidance overall. Fyrwald notes that falling oil prices could be beneficial, but due to inventory and volatility, any effects are expected later in the year and into 2026. Regarding the debt tender offer, he indicates that they are focused on driving business margins and managing interest rates effectively, although specifics on net interest savings are not provided.

The paragraph discusses the company's financial outlook and strategic initiatives. The interest expense for the year is projected to be around $225 million, reflecting a reduction due to improved debt conditions. Erik Fyrwald addresses growth spending focused on R&D and commercial developments, stating that progress has been made in strengthening both commercial and R&D pipelines. These developments are expected to yield results next year and beyond. Fyrwald is pleased with the level of talent attracted to the company and the projects they are handling. Despite challenges, the company remains committed to its investment levels in these areas.

In the paragraph, the speaker emphasizes the company's focus on boosting productivity to fund innovation and commercial capabilities, ensuring the company's long-term profitability and growth. Erik Fyrwald expresses pride in the team's efforts, highlighting their commitment to returning to core business basics and investing in long-term growth. He asserts that the company is executing its plans and is optimistic about the future potential of IFF. The call concludes with the operator thanking participants for joining.

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