NYSE:IFF International Flavors & Fragrances Q4 2024 Earnings Report $75.90 +1.26 (+1.68%) Closing price 04/23/2025 03:59 PM EasternExtended Trading$74.28 -1.62 (-2.13%) As of 08:18 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast International Flavors & Fragrances EPS ResultsActual EPS$0.97Consensus EPS $0.83Beat/MissBeat by +$0.14One Year Ago EPSN/AInternational Flavors & Fragrances Revenue ResultsActual Revenue$2.77 billionExpected Revenue$2.67 billionBeat/MissBeat by +$100.19 millionYoY Revenue GrowthN/AInternational Flavors & Fragrances Announcement DetailsQuarterQ4 2024Date2/18/2025TimeAfter Market ClosesConference Call DateWednesday, February 19, 2025Conference Call Time9:00AM ETUpcoming EarningsInternational Flavors & Fragrances' Q1 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled on Wednesday, May 7, 2025 at 9:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by International Flavors & Fragrances Q4 2024 Earnings Call TranscriptProvided by QuartrFebruary 19, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Good morning. At this time, I would like to welcome everyone to the IFF Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. All participants will be in a listen only mode until the formal question and answer portion of the call. I would like now to introduce Michael Bender, Head of Investor Relations. You may begin, Michael. Michael BenderDirector of Investor Relations at International Flavors & Fragrances00:00:39Thank you. Good morning, good afternoon and good evening, everyone. Welcome to IFF's fourth quarter and full year twenty twenty four 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.iff.com. Michael BenderDirector of Investor Relations at International Flavors & Fragrances00:00:55Please 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. Michael BenderDirector of Investor Relations at International Flavors & Fragrances00:01:30A reconciliation of these non GAAP financial measures to the respective GAAP measures is set forth in the press release that we issued yesterday. With me on the call today is our CEO, Eric Fearwold and our CFO, Michael DeVoe. We will begin with prepared remarks and to take questions at the end. With that, I would now like to turn the call over to Eric. Erik FyrwaldCEO at International Flavors & Fragrances00:01:51Thanks, Mike, and hello, everyone. I'm excited to walk through our full year 2024 financial results and reflect on the progress we've made over the past year. I'll then turn the call over to Mike DeVoe, who will provide a more detailed look at our fourth quarter and our financial outlook for 2025. Then I'll come back to discuss our go forward priorities in 2025 to maintain our momentum and continue to drive long term profitable growth. We'll then open the call for questions. Erik FyrwaldCEO at International Flavors & Fragrances00:02:21Starting with Slide six, I'd like to recap the significant improvement and progress achieved by IFF over the past year supported by consistent execution across the businesses. One year ago, when I joined IFF, I found an exciting company that was not delivering on its full potential. With a new perspective on our priorities and a renewed focus on execution by our executive leadership team, we got back to basics in 2024. The renewed commitment to operational discipline by our global teams led to improved financial results, including strong growth in both revenue and profit. The transition to our end to end business led operating model, splitting Nourish into focused taste and food ingredients business units, and our new operating system have better connected us to customer end markets and increased our line of sight into customer dynamics. Erik FyrwaldCEO at International Flavors & Fragrances00:03:19These initiatives have driven greater accountability across the organization while enabling our global teams to be faster, more efficient and more responsive to the evolving needs of our customers. As part of our updated strategy, we have increased emphasis on biotechnology as an important differentiator and capability across our core business segments. This focus ensures that we are investing in the necessary resources to leverage this competitive advantage and serve our customers more effectively. Now alongside this effort, we also implemented a program to increase investments across research and development, commercial capabilities and CapEx focused on our high growth, high margin health and biosciences, taste and scent businesses to enhance our infrastructure and drive innovation at scale. We are also continuing to strengthen our talent with several key hires and internal promotions that solidify the next generation of IFF leadership. Erik FyrwaldCEO at International Flavors & Fragrances00:04:28I'm also pleased to share that our employee engagement levels improved significantly compared to 2023, demonstrating the success of our return to focus on bringing leading innovation to customers. Lastly, we announced the next phase in the evolution of our Board of Directors, appointing three new Board members with the backgrounds, expertise and proven track records to support management to fulfill our long term strategic vision and unlock greater value for our stakeholders. We are excited to welcome Cynthia Jamieson, Doctor. Mehmed Khan and Vincent Intriari to our Board. We also announced that Kevin O'Byrne will become our new Board Chair. Erik FyrwaldCEO at International Flavors & Fragrances00:05:12He will succeed our current Chair, Roger Ferguson, who decided not to stand for reelection at the twenty twenty five Annual Shareholder Meeting after fourteen years of distinguished service. I thank Roger for all his support and guidance and look forward to working with Kevin in his new role. Taken together, all these efforts focus on our people, customers, innovation and operational excellence form the foundation of our long term profitable growth approach. On Slide seven, we'll take a closer look at our financial results in 2024. In 2024, IFF delivered $11,500,000,000 in sales, representing 6% comparable currency neutral growth. Erik FyrwaldCEO at International Flavors & Fragrances00:05:57Our profitability also improved as IFF delivered over 2,200,000,000 in adjusted operating EBITDA, representing 16% comparable growth. Broad based volume improvement across our portfolio, strong execution by our commercial teams and the absence of destocking drove growth across all our businesses. At the beginning of 2024, we also adjusted our dividend policy to better support our deleveraging efforts and give us greater financial flexibility to invest in key growth areas across IFF. On the portfolio optimization front, we continue to progress toward completing the sale of Pharma Solutions, which we expect will occur in the first half of twenty twenty five. From a leverage standpoint, our net debt to credit adjusted EBITDA ended 2024 at 3.8 times, improving from 4.5 times at the end of twenty twenty three. Erik FyrwaldCEO at International Flavors & Fragrances00:06:58We continue to be committed to further deleveraging and the completed sale of Pharma Solutions will help achieve that goal. I'm very proud of our results and the growth we achieved in the past year and what has continued to be a dynamic market and geopolitical environment. Our businesses achieved solid financial performance and we've made very good progress delivering on our strategic and operational initiatives. While I'm pleased with the significant progress we've made over the last year, we still have a lot more work to do. In 2025, we plan to continue to strategically reinvest in R and D, commercial, capacity and technology as we aim to strengthen IFF and build a long term sustainable platform that will deliver strong value creation for all our stakeholders. Erik FyrwaldCEO at International Flavors & Fragrances00:07:50We are also focused on simplifying our business process and IT systems to improve efficiency and effectiveness. I want to also take a moment to thank our IFFers across the globe, whose passion and relentless focus have been the reason for the value we've created and the innovation we've achieved. And as I mentioned on the previous slide, developing and promoting strong internal talent is a priority. Mike DeVoe is the kind of leader we elevate and I would like to congratulate him on his appointment to IFF's Chief Financial Officer. Mike has been an integral part of IFF's global finance leadership over the last fifteen years. Erik FyrwaldCEO at International Flavors & Fragrances00:08:34He brings a deep understanding of the needs of our global finance operations and the value IFF delivers for the world's consumer product companies. I know Mike will continue to be an even more incredible asset to our team in this key role. I'll now pass it over to him to share a closer look at our fourth quarter results. Mike? Michael DeveauEVP & CFO at International Flavors & Fragrances00:08:57Thank you for the kind words, Eric, and hello, everyone. After more than fifteen years at IFF, it is an honor to join my first call as CFO, and I look forward to working closely with all of you in my new role. Moving to Slide eight, as Eric noted, our strong performance and execution through 2024 continued in the fourth quarter and drove solid results. IFF generated revenue of $2,700,000,000 in the fourth quarter, an increase of 6% on a comparable currency neutral basis, driven by broad based growth across all our businesses and led by mid single digit volume improvement. We continue to realize the benefits from our ongoing productivity initiatives, leading to the third consecutive quarter of margin expansion on a comparable basis. Michael DeveauEVP & CFO at International Flavors & Fragrances00:09:46Adjusted operating EBITDA totaled $471,000,000 in the quarter, a 5% increase on a comparable basis, and their comparable adjusted operating EBITDA margin expanded by roughly 30 basis points. This performance was led by volume growth and our ongoing productivity initiatives that were partly offset by increased incentive compensation expense and business reinvestment. On Slide nine, I'll provide a closer look at our performance by segment. In Nourish, sales were $1,400,000,000 a 4% increase year over year on a comparable currency neutral basis. Comparable adjusted operating EBITDA also increased by 4%. Michael DeveauEVP & CFO at International Flavors & Fragrances00:10:30This was led by the fourth consecutive quarter of double digit growth in flavors, a testament to that team's continued outperformance. In Functional Ingredients, mid single digit volume growth was mostly offset by our pricing actions. This was consistent with our previously announced price strategy for 2024. Double digit gains in home and personal care and grain processing alongside growth across nearly all our businesses resulted in another solid quarter for our Health and Biosciences segment. Sales came in at $553,000,000 a 6% year over year increase on a comparable currency neutral basis. Michael DeveauEVP & CFO at International Flavors & Fragrances00:11:11Comparable adjusted operating EBITDA decreased by 3% largely due to strong year ago comparable as well as business reinvestments that Eric mentioned earlier. In scent, broad based growth was led by double digit increase in fragrance ingredients and high single digit growth in fine fragrance. Net sales in the quarter totaled $579,000,000 up 7% year over year on a comparable currency neutral basis and we delivered adjusted operating EBITDA of $97,000,000 up 1% on a comparable basis as volume growth and productivity gains were partially offset by higher reinvestment. Finally, Pharma Solutions delivered another strong quarter achieving sales of $228,000,000 a 12% year over year increase on a comparable basis, while also recording excellent profitability growth of 81% to $47,000,000 Strong margin expansion was driven by volume and productivity gains in a favorable year ago comparable. Turning to Slide 10, cash flow from operations totaled $1,100,000,000 for the full year and CapEx totaled $463,000,000 or approximately 4% of sales. Michael DeveauEVP & CFO at International Flavors & Fragrances00:12:28Our free cash flow position for the full year totaled $6.00 $6,000,000 which is consistent to where we expected it to be at the beginning of the year. Year to date, we also distributed $514,000,000 in dividends to our shareholders. Our cash and cash equivalents finished at $471,000,000 at the end of the fourth quarter, including $2,000,000 in assets held for sale. Our gross debt at the year end was approximately $9,000,000,000 a decrease of more than $1,000,000,000 compared to the year ago period following the completion of our divestiture of the cosmetic ingredients business. Our trailing twelve month credit adjusted EBITDA totaled $2,200,000,000 in line with last quarter and our net debt to credit adjusted EBITDA improved to 3.8 times. Michael DeveauEVP & CFO at International Flavors & Fragrances00:13:19We remain committed to achieving our net debt to credit adjusted EBITDA target of below three times following the completion of our Pharma Solutions divestiture, which we expect to be complete in the first half of twenty twenty five. On Slide 11, I'd like to share our outlook for 2025. While the current operating environment remains dynamic, we are cautiously optimistic about the year ahead as we look to build on our recent momentum. Coming off the strong year we had in 2024, we believe our 2025 plan strikes the right balance as we're targeting strong year over year improvements on a currency neutral basis and investing for the future growth of our business. Please note that our full year guidance includes six months of Pharma Solutions with a divestiture assumed to close 06/30/2025. Michael DeveauEVP & CFO at International Flavors & Fragrances00:14:12For comparability purposes, we expect that divestitures will have approximately a five percentage point adverse impact to sales growth and approximately a six percentage point adverse impact to adjusted EBITDA growth in 2025. In the event that we can close the pharma transaction earlier, we will adjust our guidance accordingly and reflect the lower contribution of the business. For the full year 2025, we expect sales to be in the range of $10,600,000,000 to $10,900,000,000 representing comparable currency neutral growth of 1% to 4%. We believe that this will be driven by continued volume growth against a strong year ago comparable with increases across all our divisions led by H and B, Taste and Scent. It should be noted that we expect the 2025 operating environment to be more normalized relative to 2024, which did benefit from the absence of destocking. Michael DeveauEVP & CFO at International Flavors & Fragrances00:15:11Pricing is expected to be modestly favorable, inclusions of FX related pricing as raw material costs remain elevated and in some cases increasing year over year. On the bottom line, we expect to deliver full year 2025 adjusted operating EBITDA between $2,000,000,000 to $2,150,000,000 On a comparable currency neutral basis, this translates to 5% to 10% EBITDA growth, which will be driven by gross margin expansion as a result of volume leverage and strong COGS productivity. Following a year of strong margin expansion and double digit profitability growth in 2024, we will continue to reinvest in long term value creation opportunities while balancing our near term profitability objectives. What this means is that we will continue to drive strong productivity to mitigate general inflationary pressures and at the same time reinvest a large portion of our incentive compensation reset in R and D, innovation and commercial capabilities across our businesses, similar to the actions we've taken in the second half of twenty twenty four. We believe that by doing so, not only will we drive short term performance, we will further enhance our competitive positions and generate strong returns on these organic investments. Michael DeveauEVP & CFO at International Flavors & Fragrances00:16:36Based on foreign exchange rates, we expect foreign exchange will have approximately 4% full year adverse impact to sales growth and a 6% full year adverse impact to adjusted operating EBITDA growth. This is primarily driven by the strength of the euro where the current rate is down relative to the 109 average in 2024. In addition, there are several other emerging market currencies such as the Brazilian real and the Argentine peso, where we issued a modest devaluation versus the USD over the course of 2025. As previously communicated, we plan to increase our CapEx investments targeting approximately 6% of sales in 2025. Approximately half of this investment is maintenance CapEx, while the rest is split evenly between deferred investment catch up, specifically in food ingredients, growth investments such as capacity expansion in H and B, an India creative center and scent and a creative center in Mexico in both taste and scent as well as digital transformation specifically related to our SAP HANA upgrade. Michael DeveauEVP & CFO at International Flavors & Fragrances00:17:48We believe these investments will yield strong returns providing us with incremental growth and efficiency opportunities. As a reminder, we have resegmented the business into five divisions Taste, Food Ingredients, Scent, H and B and Pharma and have adjusted our corporate allocations starting in 2025. Prior to the first quarter of twenty twenty five earnings release, we plan to provide historical information for comparable purposes so that when we report first quarter earnings, you will have the appropriate baseline. Let me close by sharing that we are pleased with the strong progress and foundation we built in 2024. Our recent success gives us confidence in our outlook as we continue to execute our strategic and financial priorities. Michael DeveauEVP & CFO at International Flavors & Fragrances00:18:37With that, I'd like to turn the call back to Eric. Erik FyrwaldCEO at International Flavors & Fragrances00:18:41Thanks, Mike. Our outlook for the year reflects our confidence in our businesses and our ability to navigate macro uncertainties, while continuing to deliver for our customers. I want to turn to the priorities that will guide our strategy for 2025 and help us reach the goals we've outlined for the year. In 2025, our focus will continue to be on creating sustainable growth and returns on capital. We will continue to improve our businesses while also ensuring we have competitive cost, best in class support functions. Erik FyrwaldCEO at International Flavors & Fragrances00:19:16As we've discussed, this will require some investment. At the same time, we will continue to drive growth and returns by increasing our investment in R and D, value enhancing capital projects, and commercial actions to deliver profitable market share growth over time. We will also keep exploring ways for our teams to better innovate, providing greater visibility and transparency into our sales pipeline and formalizing our sales targets and expectations across teams. We will continue to deliver cost savings through productivity initiatives and improvements in execution and processes throughout our businesses as we strengthen our continuous improvement culture. In addition to completing our planned divestiture of Pharma Solutions in the first half of the year, we will continue our ongoing portfolio assessment including exploring appropriate opportunities to bolster our portfolio through value creating bolt on acquisitions. Erik FyrwaldCEO at International Flavors & Fragrances00:20:17But I can assure you, we will not do anything like another Frutarom. Importantly, we remain committed to consistently delivering solid financial results and meeting the goals we've outlined for 2025. Lastly, our people are the core of our success and we will continue to invest time in developing talent and strengthening employee engagement to drive greater innovation and productivity. This in turn will enable us to better serve our customers, enhancing customer satisfaction, which will help us capture new growth and market share over time. I am confident that these priorities with the collective efforts of our world class global teams will make it happen. Erik FyrwaldCEO at International Flavors & Fragrances00:21:05Now to close us out on Slide 13, our solid performance in 2024 speaks to the success of our reinvigorated strategy and our focus on operational execution. All of us at IFF are excited to build on this foundation to further strengthen the business and reinforce our market position in 2025. We are well on our way to unlocking our full potential and continuing to deliver innovative and sustainable solutions for our customers and communities all around the world. Thank you. And I'll now open up the call to your questions. Operator00:21:47Thank you all. At this time, we will now begin the question and answer you. The first question is from the line of Kiersten Owen with Oppenheimer. You may proceed. Kristen OwenExecutive Director & Senior Analyst at Oppenheimer & Co. Inc.00:22:13Hi, good morning. Thank you for taking the question. I wanted to ask if you can elaborate on the sources, wind versus underlying demand of your volume growth expected in 2025. Just for context, we're hearing from CAGNY many of the CPGs are saying that volume is getting harder to come by. So we're just trying to understand what's sustaining that volume growth expectation and any specific areas of relative strength that you Kristen OwenExecutive Director & Senior Analyst at Oppenheimer & Co. Inc.00:22:37would call out? Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:22:39Sure. Thanks, Kristen. This is Eric. I'll take this question. So first of all, we're saying that for 2025, our volumes will be 1% to 4% growth, which if you recall in 2026, we had 6% growth, which about half of it was destocking. Erik FyrwaldCEO at International Flavors & Fragrances00:22:57So a normalized growth rate is in the range of 3%. We believe that our volume increases will be mainly in health and biosciences, Bents and Taste. And we see now that we have strong commercial pipelines in each of those businesses and a high win rate. And that means that we're winning more than our fair share in many cases. And that's really important and that's the drive. Erik FyrwaldCEO at International Flavors & Fragrances00:23:22Food Ingredients will be much lower volume increases, but we still see some volume increase there. But I think it's really important to step back and see what we're doing over the next three years, what our focus is. And I'll start by saying, I think we made really good progress in 2024, getting back to basics, getting the fundamentals in place. But over the next three years, we must keep driving to get to growth rates while we narrow the margin gap versus our best in class competition in each business. And we're going to do that by continuing to invest in R and D, commercial capabilities and capacity, particularly in Health and Biosciences, Scent and Taste businesses. Erik FyrwaldCEO at International Flavors & Fragrances00:24:13Those are three great businesses with high margins and we want to keep making sure that we're fully investing to be fully competitive with best in class competition. In our Food Ingredients business, we are investing selectively in areas like technical service and upgrading some of our facilities that badly need it. But at the same time, we're driving an aggressive productivity program across our food ingredients business. And then even across the entire company, we're driving strong productivity programs across each business unit and across the corporate functions to make sure that we're fully cost competitive, but also fully effective. And then as we do all that, we're also leveraging our uniquely strong biotech capabilities into our scent and flavors businesses and continuing to drive the other health and biosciences application areas. Erik FyrwaldCEO at International Flavors & Fragrances00:25:18So we have a great plan for the next three years. We're going to keep investing. We're going to keep delivering year by year, but we're going to keep investing so that in three years, we are very strong versus our best in class competition. Operator00:25:38The next question is from the line of Josh Spector with UBS. You may proceed. Josh SpectorExecutive Director at UBS Group00:25:46Yes. Hi, good morning. I wanted to ask two things if I could. First, just on the EBITDA bridge for 2025. I mean, understanding the pharma divestment and FX are negatives. Josh SpectorExecutive Director at UBS Group00:25:57I guess, we thought that volume and the incentive comp resets could get you to about neutral. So there's obviously something else investments or price cost or otherwise, which is adding a negative variance to that bridge that we're not accounting for. So how do you build that bridge? And then secondly, just around seasonality and your expectations for 1Q versus the rest of the year EBITDA specifically? Thanks. Michael DeveauEVP & CFO at International Flavors & Fragrances00:26:21Great. Thanks, Josh. I'll take just one. In terms of the EBITDA bridge to the midpoint of our 2025 guidance, it's really around just two things. It's around volume growth and productivity. Michael DeveauEVP & CFO at International Flavors & Fragrances00:26:31So if you assume the midpoint of our guidance range, sales will grow 2.5% on a comparable base of 11,000,000,000 with an incremental margin of about 35%. That's yielding you around four to five points of EBITDA growth. The second piece of it is that we're really trying to target and drive productivity within the organization. And so you're getting another about 2% net productivity benefit, which is more than offsetting the inflationary piece. In terms of net pricing to infill costs, they're expected to be neutrality, so flat when you net them together. Michael DeveauEVP & CFO at International Flavors & Fragrances00:27:05And in terms of the incentive compensation reset, we have about $100,000,000 of a reset and we're fully or essentially offsetting that by reinvestment in the business. And so there's about a $30,000,000 carryover for 2024 and a $70,000,000 incremental investment in 2025. So we net the two together and that's to zero. In terms of the EBITDA cadence, again, if you take the midpoint, the first half of the year will be stronger in an absolute dollar basis because we're assuming that the pharma transaction will be completed at the end of Q2. Also just remember that Q2 is usually our seasonably strongest quarter. Michael DeveauEVP & CFO at International Flavors & Fragrances00:27:46So on an absolute dollar basis, EBITDA will be the highest in Q2 of twenty twenty five. Operator00:27:57Thank you. The next question is from the line of Nicola Tang with BNP Paribas. You may proceed. Nicola TangResearch Analyst at BNP Paribas00:28:07Hi, everyone. Thanks for taking the question. Nicola TangResearch Analyst at BNP Paribas00:28:09I wanted to dig a little bit more into your comments around volume or I guess the currency neutral 1% to 4% expectation for the year. Would you be able to talk a little bit more about what you expect across the core divisions? Thanks. Erik FyrwaldCEO at International Flavors & Fragrances00:28:26Yes. Thank you, Nicola. So first of all, it's going to be primarily volume driven with modest pricing with some gives and takes in pricing across businesses and across geographies. But primarily, the volume growth will be driven by Health and Biosciences, Scent and Taste. Food Ingredients volume will be much more moderate with a focus on increasing margins in that business. Operator00:29:01The next question is from the line of Emily Fusco with Deutsche Bank. You may proceed. Emily FuscoEquity Research Associate at Deutsche Bank00:29:10Hi, this is Emily Fusco on for Dave Begleiter with Deutsche Bank. I wanted to ask, what are your expectations for input inflation this year? And how should we expect net pricing to develop through the year? Thank you. Michael DeveauEVP & CFO at International Flavors & Fragrances00:29:25Thanks again for the question, Emily. Maybe just to start by saying that import cost from an IFRS standpoint remain at historical levels, historically high levels. In some parts of our business, we are seeing continued modest inflation, specifically in taste and scent, and this is really driven by natural ingredients. In food ingredients, there is a bit of deflation that the team is working with customers on. And on an H and B perspective, it's generally flat. Michael DeveauEVP & CFO at International Flavors & Fragrances00:29:55And so net to net on a consolidated basis, we expect our input cost baskets to be flat to up slightly. In all instances, we will continue to work and collaborate with our customers to make sure we have the opportunities to mitigate. This includes reformulations, but also price discussions as well. In terms of pricing contribution over the course of 2025, we expect pricing to be relatively consistent over each of the four quarters as we go forward. Operator00:30:30The next question is from the line of Patrick Cunningham with Citigroup. You may proceed. Eric ZhangAssistant Vice President at Citigroup00:30:39Hi, good morning. This is Eric Zhang on for Patrick. You mentioned last quarter about getting functional ingredients to 15% plus margins in the coming years. Are you on track for this margin expansion given the pricing actions? And what are the cost and productivity initiatives, savings underpinning this growth? Eric ZhangAssistant Vice President at Citigroup00:30:55Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:30:57Thanks, Eric. We are on track towards this target and we made very good progress. If you recall in 2023, we talked about high single digit EBITDA margins in Food Ingredients. In 2024, we achieved solid low double digits margins EBITDA margins. And I would say under the new leadership of Andy Mueller with a strong team, we are confident in our plans to get to the mid teens in the next few years. Erik FyrwaldCEO at International Flavors & Fragrances00:31:28And we're doing that with a combination of better serving customers, so growing our business with attractive margins and driving aggressive productivity plans. Both are making progress. Andy has a strong background in this business and is helping the team to further strengthen those plans and the execution of those plans. So we are on track. Operator00:31:58Thank you. The next question is from the line of Lisa D. Leves with Morgan Stanley. You may proceed. Lisa De NeveAnalyst at Morgan Stanley00:32:07Hi. Thank you for taking my question. I have a question for free Lisa De NeveAnalyst at Morgan Stanley00:32:11cash Lisa De NeveAnalyst at Morgan Stanley00:32:11flow. Can you please give some details and granularity on how you expect free cash flow to play out for this year, especially concerning the networking capital movements and CapEx spend that's required? And also more in the light of the limited leveraging we've seen in the second half of this year, which clearly will improve First Pharma, but just the underlying movements would be helpful. And a small second question I'm just going to slide in. I mean, you've now been with the company as a CEO for over a year. Lisa De NeveAnalyst at Morgan Stanley00:32:38I mean, is there any intention to set new midterm targets given you keep referring in your presentation towards the next three years were driving improvement? So are you willing to set any financial targets against that? Thank you. Michael DeveauEVP & CFO at International Flavors & Fragrances00:32:53Thank you, Lisa. Maybe Eric, I'll start on the first one. Erik FyrwaldCEO at International Flavors & Fragrances00:32:56Yes. Michael DeveauEVP & CFO at International Flavors & Fragrances00:32:56Yes, perfect. I'll start on free cash Michael DeveauEVP & CFO at International Flavors & Fragrances00:32:58flow and then I'll pass it back Michael DeveauEVP & CFO at International Flavors & Fragrances00:32:59to you. In terms of the full year for 2025, we expect free cash flow to be about $500,000,000 Note that this does include a significant impact of taxes related to the pharma divestiture. So that's about $350,000,000 is our estimate at this point in time. If you adjust for that, our free cash flow will be about $850,000,000 which is kind of consistent to the last couple of years, but more importantly, an improvement versus where we finished 2024. In terms of networking capital, we are targeting a slight inflow versus an outflow in 2024. Michael DeveauEVP & CFO at International Flavors & Fragrances00:33:34And this is really driven by the work that we're doing around payables and selective strategic inventory reductions. As we stated on the call, we expect CapEx to be about 6% of sales, and this is really around increasing investments to catch up on some deferred spend. Eric mentioned it moments ago, specifically in food ingredients. Also to make some growth investments, And so capacity expansion, new technologies in H and B, some commercial facing operations for taste and scent. And then lastly, really start to drive the migration of our digital transformation. Michael DeveauEVP & CFO at International Flavors & Fragrances00:34:10And So those are the biggest drivers from a CapEx piece of it going forward. And so maybe Eric, I'll turn it over to you for the second part of the question. Erik FyrwaldCEO at International Flavors & Fragrances00:34:18Yes. So in terms of long term targets, we'll come back later in the year with more clarity on that. But let me just say that I feel like we are a very strengthened company now versus a year ago. We've got absolute clarity on our organization model, our end to end business model. We've separated Nourish into taste and food ingredients, two very different businesses with different strategies. Erik FyrwaldCEO at International Flavors & Fragrances00:34:46We've got a strong team, a clear flat five year plan, a clear investment plan with both growth investment and driving productivity. So I am confident that we have the right direction. Now we need to execute very well. And I think we did that in 2024. Now we need to do it in 2025. Erik FyrwaldCEO at International Flavors & Fragrances00:35:08And you'll hear more later in the year about our longer term aspirations. Operator00:35:16Thank you. The next question is from the line of Steve Byrne with Bank of America. You may proceed. Steve ByrneResearch Analyst at Bank of America Securities00:35:26Yes. Thank you. I'm curious, how would you characterize the potential impact on your businesses or perhaps some regulatory approvals from RFK, now run-in HHS and the staph cuts at FDA, any near term impacts from that? And then Eric, you mentioned new investments in biotechnology and R and D. I assume that that could include the use of gene editing for natural product expression levels, etcetera. Steve ByrneResearch Analyst at Bank of America Securities00:36:00Do you think RFK could block this? Erik FyrwaldCEO at International Flavors & Fragrances00:36:04So first of all, thank you, Steve. We don't see any of our products as targets. In fact, what we do see is that many of our customers may reformulate products to have cleaner labels, which by the way plays into our strengths. And we've been making very good progress with customers that are working on cleaner labels, which has been a great growth opportunity for us already, and we see that as a continued opportunity going forward. Erik FyrwaldCEO at International Flavors & Fragrances00:36:33In terms of biotech R and D, I think there's lots of opportunities in many areas and you'll be hearing more about that at CAGNY. We're going to talk specifically about our biotech platform and we see that as having opportunities in scent, taste, but also in the current areas that we're playing in and other areas with our DEB design enzymatic biomaterials, which plays right into the heart of what the world wants, consumers want, our customers want, the world wants in biodegradable materials that are sustainable and sustainably grown, sustainably produced. So I see this as a bit of uncertainty about what will happen when, but in the general direction, I see it as significantly more opportunity than risk. Operator00:37:34Thank you. The next question is from the line of John Roberts with Mizuho. You may proceed. John RobertsManaging Director at Mizuho Financial Group00:37:42Thanks and first congrats Michael. Back to raw materials, how much of IFF's raw material spend is potentially exposed to tariffs here? And should we only be thinking about imported materials into The U. S? Or do you worry about something reciprocal, so that it's more than just a U. John RobertsManaging Director at Mizuho Financial Group00:38:00S. Issue? Michael DeveauEVP & CFO at International Flavors & Fragrances00:38:03Hey, thanks, John. Appreciate that very much. In terms of the tariff situation, it's ever evolving. It changes on a constant basis. When we assess the various situations or potential situations, we do not expect to have a material impact from any tariff change. Michael DeveauEVP & CFO at International Flavors & Fragrances00:38:21As you know, John, we have an expansive and global supply chain, which provides us with a lot of flexibility to adapt. So should things change, we're working with our customers to make sure we mitigate that to the fullest. We lived through this a couple of years ago in this administration's first term. And so similar to that approach we've taken now is that we're going to work with our customers on mitigation strategies and including price surcharges as appropriate, but that will become a secondary methodology to it. The focus is really seeing what we can do on supply chain to mitigate a lot of our exposure. Michael DeveauEVP & CFO at International Flavors & Fragrances00:38:54Again, immaterial nature, more to come as things develop and we'll keep you updated there. Operator00:39:06The next question is from the line of Mike Sison with Wells Fargo. You may proceed. Michael SisonManaging Director at Wells Fargo Securities00:39:13Hey, good morning. Nice end of the year and congrats to you, Mike. Eric, with the year under year about, I understand you might want to wait a little bit, but where do you think IFS EBITDA should get over time? It's expected to be a pretty big number when you bought NNB, but with divestitures, maybe framework where it could be? And then and just maybe stepping back a little bit with NNB, do you think this is a good business for ISS longer term? Michael SisonManaging Director at Wells Fargo Securities00:39:47What are the risks? Because certainly it had a little bit it certainly had a tough time on the get go, but what are the risks to the business? And maybe just talk about where what parts of the business now fit really well with or have good synergies with the legacy IFF? Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:40:07Sure. Thanks, Mike, for the question. I see with our current portfolio over time us getting to the low 20s EBITDA margin with food ingredients being the most challenged and health and biosciences being the highest and scent and taste being very solid. And as I look at it, we I came to the company a year ago, there was a lot of complexity, a lot of performance challenges, a lot of companies had been brought together. So there was a lot to clean up and a lot to get the executive team together and clarify for the organization. Erik FyrwaldCEO at International Flavors & Fragrances00:40:44I think we've made very good progress. I think we've got a very solid H and B Health and Biosciences team and business, very strong scent and taste teams and businesses with very good very strong, very competitive capabilities. And so we just need to continue to strengthen those and move them along in the next three years. And I think they'll compete very favorably within that period with the leading benchmarks. Food Ingredients is still a turnaround situation. Erik FyrwaldCEO at International Flavors & Fragrances00:41:23Low single digit EBITDA margins in 2023, low double digit EBITDA margins in 2024. Andy Mueller and his team are absolutely focused on continuing that turnaround and getting those margins up significantly this year as another point of progress, and I'm confident in that team to make that happen. So I think that our focus right now is delivering 2025, but doing it in a way that we make smart investments that have good returns and get us increasingly competitive and deliver what we say we're going to deliver. And I think we're on good track to make that happen. Michael SisonManaging Director at Wells Fargo Securities00:42:13Thank you. Operator00:42:13Thank you. The next question is from the line of Kevin McCarthy with Vertical Research Partners. You may proceed. Matthew HettwerEquity Research Associate at Vertical Research Partners00:42:23Hi. This is Matt Hetler on for Kevin McCarthy. Can you help us to understand why the FX headwind to EBITDA is 2% higher than the impact on sales? How do your margins on international business compare to U. S. Matthew HettwerEquity Research Associate at Vertical Research Partners00:42:36Domestic margins? Michael DeveauEVP & CFO at International Flavors & Fragrances00:42:39Hey, Matt. I'll take this one. Thank you for the question. In terms of the incremental impact on EBITDA relative to sales, entirely driven by our purchases. Our sales are based in local currency, while larger portion of our input costs are denominated in euro, U. Michael DeveauEVP & CFO at International Flavors & Fragrances00:42:55S. Dollar. And so essentially that's what's driving the kind of multiplier effect between sales piece of it and the EBITDA contribution. I think your second question was around margin structure globally internationally versus domestic operations. It's actually pretty agnostic and pretty constant. Michael DeveauEVP & CFO at International Flavors & Fragrances00:43:15The real differential comes when you compare the category exposures. And so just let me give you an example. In EV, you have the strongest margin profile just given the exposure to fine fragrance, while in India, you have a lower margin profile just because the portfolio is geared towards savory as an example. So really when you look at it on a kind of a like for like basis adjusting for the portfolio, you're pretty agnostic from the margin aspect of it. It really comes down to the category percentages within each one of the regions. Operator00:43:51Thank you. The next question is from the line of Mark Ostrin from Stifel. You may proceed. Mark AstrachanManaging Director at Stifel Financial Corp00:44:00Yes, thanks. Good morning, everybody. Two questions for me. One, just could you talk about the growth rates between local, regional and private label customers compared to multinationals and maybe just give rough split of the business as it seems the former group seems to be growing faster and taking share away from the latter. And then Eric, you had talked about prioritizing best in class margins compared to sales growth. Mark AstrachanManaging Director at Stifel Financial Corp00:44:25You're obviously accelerating investment, I guess, with flexibility in early 'twenty five in terms of the wrap around reinvestment. Maybe talk a bit about how you manage the two and if you want to sit there and try to think about prioritizing one versus the other, how quickly can you get to the margins versus how quickly can you get to run rate sales growth that grows at least in line consistently with peers? Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:44:48Mike, you want to start and then I'll take the second half. Michael DeveauEVP & CFO at International Flavors & Fragrances00:44:51Sure. Thanks, Mark, for the question. When you look at the portfolio, the way I would categorize it is you basically have one third global customers, one third kind of mid sized and one third small and mobile customers, including some of the private label aspects. And so when you look at the dynamics across there on a global perspective, the growth is a little bit more muted than you see at some of the kind of regional, local, including private label customers. And so for us, a big part of the focus on the I'll give you an example on the taste strategy is really to prioritize private label and smaller customers as we go forward. Michael DeveauEVP & CFO at International Flavors & Fragrances00:45:28And so that dynamic, that growth that you referenced, Mark, is true. The good thing is that there's still a lot of growth opportunities at the big global customers that's much more geared towards new innovation and what we can do to help them have winning products or consumer preferred products in the market. Erik FyrwaldCEO at International Flavors & Fragrances00:45:47So on the second half of your question yes, on the second half of the question, we want to continue to work towards best in class margins and growth rates. So what I would say is track us on how we're doing to have growth rates in line with the best in class and gross margins that are improving and EBITDA margins that may improve a little bit slower because of our investments, our aggressive investments in research particularly, but also in commercial investments in health and biosciences, taste and scent. Let me just give you an example. In 2024, we had nice margin improvements, but we could have delivered even more EBITDA and higher EBITDA margins if we wouldn't have made additional investments beyond what we had planned, particularly in research and commercial capabilities. So what we're going to do is continue to make progress, but probably not as fast a progress on EBITDA as we could if we weren't making these additional investments. Erik FyrwaldCEO at International Flavors & Fragrances00:46:58But the investments that we're making, we are absolutely sure that in the next three years, we'll have a very attractive payout and will strengthen us against our best in class competitors. And we're absolutely committed to becoming leaders in innovation across these businesses, health and biosciences, taste and scent, while we continue to turn around the food ingredients business. Operator00:47:32Thank you. The next question is from the line of Kate Grafstein with Barclays. You may proceed. Kate GrafsteinVP - Equity Research at Barclays00:47:40Thanks. Just a couple of questions on the scent business. I was wondering why fragrance ingredients growth was so strong this quarter up double digit, and how we should be thinking about growth for 2025 if there's some pricing pressure on the business? And then on fine fragrances, you were wondering what your expectation is for growth next year and if you're expecting any growth in fine to normalize? Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:48:06Mike, do you want to start? Michael DeveauEVP & CFO at International Flavors & Fragrances00:48:07Yes, I'll start on this one and then pass it over to you for more comments. Look, the team has done a fantastic job in the fragrance ingredients business. They really looked at their portfolio. When you look at that portfolio, there's really high value ingredients and I would say more general kind of industry led ingredients. And so what they did, they bifurcate that and they've targeted the market to go after some of the high value ingredients. Michael DeveauEVP & CFO at International Flavors & Fragrances00:48:32And so what we've seen over the course of this year in 2024, my apologies, in 2024, performance has been strong as you noted, Katie. And for the quarter, we actually finished kind of in that mid teens range. So very, very good. And that's really about being proactive and making sure they have adequate capacity to ship product for that and they've had some good success there in 2024. In 2025, I think you'll see the growth start to subside a bit. Michael DeveauEVP & CFO at International Flavors & Fragrances00:49:01Obviously, that is a business that's going to be driven by the end market consumption. And so as you go forward from here, I think the team has some good volume growth, but they will have some reductions in overall price because of some of the deflationary environment that they see in the fragrance ingredients market overall. But they're working through that. I think their long term strategy is very, very strong. And I think it still can be a growth driver as we go forward. Michael DeveauEVP & CFO at International Flavors & Fragrances00:49:27It's just managing the next couple of quarters in terms of overall growth. So that's Fragrance Ingredients. On the fine fragrance side, the business is performing very, very well. And so, I think it finished the quarter at high single digit growth rates. On a two year basis, it's kind of in the mid single digit basis, kind of factoring the year ago comparable and so very, very strong. Michael DeveauEVP & CFO at International Flavors & Fragrances00:49:52Based on the access to business and new win potential that they have, they expect growth to continue into 2025 and be one of the areas that will lead the sense in terms of overall growth. And that's really around the strategy they have in some of the emerging markets like The Middle East and Africa and winning some of the core big businesses and brands that are in Europe and North America. I think the only thing I would add Erik FyrwaldCEO at International Flavors & Fragrances00:50:20is that I think overall the dynamics for the scent business are favorable and for the scent industry. The both the consumer goods companies are putting more emphasis on scent as a driver of superiority for their products, whether it's shampoo, body wash, laundry detergent, etcetera, all their products, scent is a critical element of superiority in a low part of the cost product cost. So I think that's going to continue and consumers love to have great scents in their products. I think on the fine fragrance, the digital media and the desire to have better experiences through the day, not just an evening event for a woman when she's going out, but people of all ages of both sexes increasingly wanting fine fragrances to enhance their day, whether it's an energizing scent that makes you feel more energy, whether it's a relaxing scent, whether it's a romantic scent, these emotional drivers that are being expounded upon are being talked about by people like Charlotte Tilbury on digital media are helping to expand the market for scent fine fragrances all around the world. So I see the general direction of growth for the scent industry continuing to be very positive and we're taking advantage of that. Operator00:52:06Thank you. The next question is from the line of Silke Kuit from JPMorgan. You may proceed. Silke KueckAnalyst at JPMorgan Chase00:52:15Hi, good morning. I have another peeling back the onion question. In Nourish, you have your legacy flavor or what you call taste business and maybe that's like $2,500,000,000 in size. And then there's the functional ingredients business, which is that's like $3,300,000,000 in size. So if your functional ingredients business, which is the smaller one grows slowly, maybe grows 1%, Like your taste business really has to grow something like 5% to get to the midpoint of your organic growth, which is 2.5. Silke KueckAnalyst at JPMorgan Chase00:52:52Is that the way to think about it? You have like just much higher growth in taste, maybe like close to the mid single digits and very slow growth in function fragrances? And I have a similar question for the health and bioscience business, which I think maybe splits that to enzymes and maybe 45% into probiotics. Is it a similar dynamic where you think your enzymatic business is going to grow more like mid single digits and probiotics at a very Silke KueckAnalyst at JPMorgan Chase00:53:25low end? Erik FyrwaldCEO at International Flavors & Fragrances00:53:27Mike, why don't you start and I'll add, if anything. Michael DeveauEVP & CFO at International Flavors & Fragrances00:53:30Yes, I'll start that. So first maybe let me just start with the flavors or taste business. So it is you're absolutely right. The way I think about $6,000,000,000 2 point 5 billion dollars is going to be taste side, $3,500,000,000 food ingredient side. The flavors or taste side of the business has been running very, very strong. Michael DeveauEVP & CFO at International Flavors & Fragrances00:53:51And so their performance over the course of the year, if you see, it's basically at four quarters of very strong double digit growth. As you go into 2025, I think the taste business growth will more normalize relative to, but I'd say, historical averages just because the comp is strong. And so that is going to be a big piece of the equation in terms of growth for the total company. Food ingredients will be a little bit more muted as some of volume gains are going to be offset by a little bit of price reductions that are associated with the deflation. And so to your point, you have to grow disproportionately faster on the taste side. Michael DeveauEVP & CFO at International Flavors & Fragrances00:54:30The one x factor caveat is that in the rest of the business, we expect growth. And so that's making it up and is actually taking us into what I'd say a better trajectory in 2025 overall and offsetting some of the food ingredient softness that we have year over year in terms of total top line growth. In H and B, with respect to enzymes versus probiotics in the subcategory levels, I think broadly speaking, all the businesses are targeting kind of modest growth year over year. The health business, the one area on the probiotic side that has been a little bit of a pain point to be very frank over the last couple of years is expecting to recover a bit as we go into 2025 as well. So that will help us that will help us both from a top line perspective, but it's also accretive from a margin aspect as well. Michael DeveauEVP & CFO at International Flavors & Fragrances00:55:20So, Barrett, back to you. Operator00:55:28Thank you. The next question is from the line of Laurence Alexander with Jefferies. You may proceed. Dan RizzoSenior Vice President at Jefferies Financial Group00:55:35Hi, this is Dan Rizzo on for Laurence. Thanks for fitting me in. Just to kind of revisit tariffs from the tariff issues, but just from a little bit of a term perspective, I was just wondering what your customers are saying their near term MTechs might be on order patterns and how you should think about where margins and ROIC should be in three to five years? Michael DeveauEVP & CFO at International Flavors & Fragrances00:55:55Can you repeat that second part of the question? I'm not sure I heard the second part. Dan RizzoSenior Vice President at Jefferies Financial Group00:55:57The second one is just how do you think where margins in ROIC should be in three to five years? Michael DeveauEVP & CFO at International Flavors & Fragrances00:56:06Yes, perfect. Michael DeveauEVP & CFO at International Flavors & Fragrances00:56:07Eric, do you want to from a customer standpoint, I know you engage a lot from customers. Have you wanted to follow-up with it? Erik FyrwaldCEO at International Flavors & Fragrances00:56:14What I would say is, if you listen to the customers' calls, they're very conservative about volume growth. I think it's not it's separate from tariff issues, but tariff issues make people concerned about the economy. With the uncertainty today, I think that uncertainty will hopefully get cleared up in the not too distant future and we'll get back to a more normalized growth. But I think what our customers what we're hearing from our customers, which is really important, is that they expect volumes to be soft and therefore they want to grow with innovation. And that's increasing the opportunity for us to work with them to deliver that innovation that excites consumers that drives their products. Erik FyrwaldCEO at International Flavors & Fragrances00:57:03And by the way drives value in their products as well. So I think that's very positive, but anything to add to that specifically on tariffs, Mike? Michael DeveauEVP & CFO at International Flavors & Fragrances00:57:14No, I think that's good, covered well. I think the second point, just on the margin ROIC evolution of IFA for the next three years, I think Eric addressed it before. The simple answer is higher on both. I think for us, we're making a concentrated effort to really own return on invested invested capital as we go into 2025. And so we're making a big investment in terms of both carryover and reinvestment incrementally this year. Michael DeveauEVP & CFO at International Flavors & Fragrances00:57:42But the reality is as we go forward, we are being diligent on how we're thinking about return on every dollar we put in the business. This is both OpEx and a CapEx basis. And so the team trajectory, we don't have a formal target yet and will come back later in the year as Eric alluded to it. But over time, we would expect improvements in terms of, again, the margin piece of it, but also return of invested capital. Operator00:58:12The next question is from the line of Artem Chubarov with Redburn. You may proceed. Artem ChubarovEquity Research Analyst at Redburn Atlantic00:58:20Good morning. Thanks for taking my question. I've got a follow-up on the health and biotides and fish. Would you remind us of the current sales breakdown by businesses across that just would be helpful? And then looking ahead, do you see the future for some of those subgrade processing or utilization or could they potentially be considered for a review in the future? Artem ChubarovEquity Research Analyst at Redburn Atlantic00:58:47Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:58:49I'll start and then Mike, please add anything. First of all, our Health and Biosciences business is on very solid ground today. It's been growing nicely in 2024. We grew, I would say, consistent with the leading benchmark and had strong solid growth across businesses. The slowest growth, but still growing was the Health business. Erik FyrwaldCEO at International Flavors & Fragrances00:59:13As Mike alluded to, we expect that to start to increase again as we put more innovation into that business part of the business. But overall, the dynamics are solid in all the different areas, all the different application areas. We have this new area and designed enzymatic biomaterials that we're excited about. We've started to get our first commercializations there. That's going to add to the growth. Erik FyrwaldCEO at International Flavors & Fragrances00:59:38And we've got a lot of emphasis now on how do we turbocharge our scent and our taste business with our biotech capabilities. And we've got resources focused on that, that'll take some time to get through, but it's on a solid start. And I'm very, very optimistic about health and biosciences in the near term, but even more so in the three to five year timeframe. Operator01:00:10Thank you. Artem ChubarovEquity Research Analyst at Redburn Atlantic01:00:10Thank you. Operator01:00:11At this time, we will now take the last question from Christopher Parkinson from Wolfe Research. You may proceed. Harris FeinVP - Equity Research at Wolfe Research, LLC01:00:21Great. Thanks. This is Harris Fine on for Chris. Thanks for taking my question. So there have been a lot of active asset sales divestitures within Food and Nutrition over the past year. Harris FeinVP - Equity Research at Wolfe Research, LLC01:00:32I guess when you look at what's happened, what does that price discovery mean to you in terms of maybe whether you could prune a little bit more from your portfolio? And you also mentioned potential for small bolt ons, I guess what are the implications for your M Harris FeinVP - Equity Research at Wolfe Research, LLC01:00:46and A pipeline? Thank you. Erik FyrwaldCEO at International Flavors & Fragrances01:00:49Yes. So first of all, on our Food Ingredients business, Andy Mueller is here. He knows the business in-depth. He spent many years with Danisco, actually before that with IFF. He knows the industry very well. Erik FyrwaldCEO at International Flavors & Fragrances01:01:02He's working with his team to turn around the total business and there are some pieces of it that may likely not fit long term. So we're working on that, working through that. But we're looking at bolt on acquisitions, as I refer to, that's specifically in health and biosciences, more related to technologies to further enhancing our technology breadth, sense and taste, which is more to enhance our geographic footprint. But we will only do bolt ons that make absolute sense, that have good returns and that really fill strategic voids. But I think what the most important is to understand that we're focused on really driving the businesses that we have today and getting the pharmaceuticals solution sale finished and continuing to execute really well this year. Erik FyrwaldCEO at International Flavors & Fragrances01:01:59And I'll just finish. My closing remark is that I believe I joined the company excited about IFF and even more excited today. I believe we are much stronger than we were a year ago and I believe we will be much stronger a year from now, thanks to our 22,000 colleagues around the world that are now, I believe, much more focused on serving customers with leading innovation, while we also drive productivity. And I would suggest if you know IFF employees, talk to IFF employees, talk to our customers, ask them about it. We've got positive momentum and we're going to continue to build on that positive momentum and we're going to deliver what we say we're going to deliver in 2025, but we're going to do it in a way that further strengthens us for 2026 and beyond. Erik FyrwaldCEO at International Flavors & Fragrances01:02:48And in the three year period, I think you'll find us very competitive with the leading competitive benchmarks. Thank you. Operator01:03:00Thank you all. At this time, this will now conclude today's IAF Q4 and FY twenty twenty four earnings conference call. We appreciate your participation. We hope you all have a wonderful day and you may now disconnect your line.Read moreParticipantsExecutivesMichael BenderDirector of Investor RelationsErik FyrwaldCEOMichael DeveauEVP & CFOAnalystsKristen OwenExecutive Director & Senior Analyst at Oppenheimer & Co. Inc.Josh SpectorExecutive Director at UBS GroupNicola TangResearch Analyst at BNP ParibasEmily FuscoEquity Research Associate at Deutsche BankEric ZhangAssistant Vice President at CitigroupLisa De NeveAnalyst at Morgan StanleySteve ByrneResearch Analyst at Bank of America SecuritiesJohn RobertsManaging Director at Mizuho Financial GroupMichael SisonManaging Director at Wells Fargo SecuritiesMatthew HettwerEquity Research Associate at Vertical Research PartnersMark AstrachanManaging Director at Stifel Financial CorpKate GrafsteinVP - Equity Research at BarclaysSilke KueckAnalyst at JPMorgan ChaseDan RizzoSenior Vice President at Jefferies Financial GroupArtem ChubarovEquity Research Analyst at Redburn AtlanticHarris FeinVP - Equity Research at Wolfe Research, LLCPowered by Conference Call Audio Live Call not available Earnings Conference CallInternational Flavors & Fragrances Q4 202400:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) International Flavors & Fragrances Earnings HeadlinesInternational Flavors and Fragrances holds groundbreaking ceremony for expansion projectApril 24 at 1:46 AM | msn.comIFF price target lowered to $89 from $104 at OppenheimerApril 23 at 10:30 AM | markets.businessinsider.comTrump Orders 'National Digital Asset Stockpile'‘Digital Asset Reserve’ for THIS Coin??? Get all the details before this story gains even more tractionApril 24, 2025 | Crypto 101 Media (Ad)What You Need To Know Ahead of International Flavors & Fragrances' Earnings ReleaseApril 23 at 10:30 AM | msn.comInternational Flavors & Fragrances Inc. (NYSE:IFF) Given Average Rating of "Moderate Buy" by AnalystsApril 23 at 2:21 AM | americanbankingnews.comIFF Pharma Solutions to Showcase Plant-Based Dietary Supplement Ingredients and Technical Expertise at Vitafoods™ Europe 2025April 22 at 2:00 AM | businesswire.comSee More International Flavors & Fragrances Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like International Flavors & Fragrances? Sign up for Earnings360's daily newsletter to receive timely earnings updates on International Flavors & Fragrances and other key companies, straight to your email. Email Address About International Flavors & FragrancesInternational Flavors & Fragrances (NYSE:IFF), Inc. engages in the manufacture and supply of flavors and fragrances used in the food, beverage, personal care, and household products industries. It operates through the following segments: Nourish, Health & Biosciences, Scent and Pharma Solutions. The Nourish segment consists of legacy Taste segment combined with N&B's Food & Beverage division and the food protection business of N&B's Health & Biosciences division. The Health & Biosciences business consists of a biotechnology-driven portfolio of enzymes, food cultures, probiotics and specialty ingredients for food, home and personal care, and health and wellness applications. The Scent business creates fragrance compounds, fragrance ingredients and cosmetic ingredients that are integral elements in the world’s finest perfumes and best-known household and personal care products. The Pharma Solutions business produces a vast portfolio including cellulosics and seaweed-based pharma excipients, used to improve the functionality and delivery of active pharmaceutical ingredients, including controlled or modified drug release formulations, and enabling. 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PresentationSkip to Participants Operator00:00:00Good morning. At this time, I would like to welcome everyone to the IFF Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. All participants will be in a listen only mode until the formal question and answer portion of the call. I would like now to introduce Michael Bender, Head of Investor Relations. You may begin, Michael. Michael BenderDirector of Investor Relations at International Flavors & Fragrances00:00:39Thank you. Good morning, good afternoon and good evening, everyone. Welcome to IFF's fourth quarter and full year twenty twenty four 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.iff.com. Michael BenderDirector of Investor Relations at International Flavors & Fragrances00:00:55Please 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. Michael BenderDirector of Investor Relations at International Flavors & Fragrances00:01:30A reconciliation of these non GAAP financial measures to the respective GAAP measures is set forth in the press release that we issued yesterday. With me on the call today is our CEO, Eric Fearwold and our CFO, Michael DeVoe. We will begin with prepared remarks and to take questions at the end. With that, I would now like to turn the call over to Eric. Erik FyrwaldCEO at International Flavors & Fragrances00:01:51Thanks, Mike, and hello, everyone. I'm excited to walk through our full year 2024 financial results and reflect on the progress we've made over the past year. I'll then turn the call over to Mike DeVoe, who will provide a more detailed look at our fourth quarter and our financial outlook for 2025. Then I'll come back to discuss our go forward priorities in 2025 to maintain our momentum and continue to drive long term profitable growth. We'll then open the call for questions. Erik FyrwaldCEO at International Flavors & Fragrances00:02:21Starting with Slide six, I'd like to recap the significant improvement and progress achieved by IFF over the past year supported by consistent execution across the businesses. One year ago, when I joined IFF, I found an exciting company that was not delivering on its full potential. With a new perspective on our priorities and a renewed focus on execution by our executive leadership team, we got back to basics in 2024. The renewed commitment to operational discipline by our global teams led to improved financial results, including strong growth in both revenue and profit. The transition to our end to end business led operating model, splitting Nourish into focused taste and food ingredients business units, and our new operating system have better connected us to customer end markets and increased our line of sight into customer dynamics. Erik FyrwaldCEO at International Flavors & Fragrances00:03:19These initiatives have driven greater accountability across the organization while enabling our global teams to be faster, more efficient and more responsive to the evolving needs of our customers. As part of our updated strategy, we have increased emphasis on biotechnology as an important differentiator and capability across our core business segments. This focus ensures that we are investing in the necessary resources to leverage this competitive advantage and serve our customers more effectively. Now alongside this effort, we also implemented a program to increase investments across research and development, commercial capabilities and CapEx focused on our high growth, high margin health and biosciences, taste and scent businesses to enhance our infrastructure and drive innovation at scale. We are also continuing to strengthen our talent with several key hires and internal promotions that solidify the next generation of IFF leadership. Erik FyrwaldCEO at International Flavors & Fragrances00:04:28I'm also pleased to share that our employee engagement levels improved significantly compared to 2023, demonstrating the success of our return to focus on bringing leading innovation to customers. Lastly, we announced the next phase in the evolution of our Board of Directors, appointing three new Board members with the backgrounds, expertise and proven track records to support management to fulfill our long term strategic vision and unlock greater value for our stakeholders. We are excited to welcome Cynthia Jamieson, Doctor. Mehmed Khan and Vincent Intriari to our Board. We also announced that Kevin O'Byrne will become our new Board Chair. Erik FyrwaldCEO at International Flavors & Fragrances00:05:12He will succeed our current Chair, Roger Ferguson, who decided not to stand for reelection at the twenty twenty five Annual Shareholder Meeting after fourteen years of distinguished service. I thank Roger for all his support and guidance and look forward to working with Kevin in his new role. Taken together, all these efforts focus on our people, customers, innovation and operational excellence form the foundation of our long term profitable growth approach. On Slide seven, we'll take a closer look at our financial results in 2024. In 2024, IFF delivered $11,500,000,000 in sales, representing 6% comparable currency neutral growth. Erik FyrwaldCEO at International Flavors & Fragrances00:05:57Our profitability also improved as IFF delivered over 2,200,000,000 in adjusted operating EBITDA, representing 16% comparable growth. Broad based volume improvement across our portfolio, strong execution by our commercial teams and the absence of destocking drove growth across all our businesses. At the beginning of 2024, we also adjusted our dividend policy to better support our deleveraging efforts and give us greater financial flexibility to invest in key growth areas across IFF. On the portfolio optimization front, we continue to progress toward completing the sale of Pharma Solutions, which we expect will occur in the first half of twenty twenty five. From a leverage standpoint, our net debt to credit adjusted EBITDA ended 2024 at 3.8 times, improving from 4.5 times at the end of twenty twenty three. Erik FyrwaldCEO at International Flavors & Fragrances00:06:58We continue to be committed to further deleveraging and the completed sale of Pharma Solutions will help achieve that goal. I'm very proud of our results and the growth we achieved in the past year and what has continued to be a dynamic market and geopolitical environment. Our businesses achieved solid financial performance and we've made very good progress delivering on our strategic and operational initiatives. While I'm pleased with the significant progress we've made over the last year, we still have a lot more work to do. In 2025, we plan to continue to strategically reinvest in R and D, commercial, capacity and technology as we aim to strengthen IFF and build a long term sustainable platform that will deliver strong value creation for all our stakeholders. Erik FyrwaldCEO at International Flavors & Fragrances00:07:50We are also focused on simplifying our business process and IT systems to improve efficiency and effectiveness. I want to also take a moment to thank our IFFers across the globe, whose passion and relentless focus have been the reason for the value we've created and the innovation we've achieved. And as I mentioned on the previous slide, developing and promoting strong internal talent is a priority. Mike DeVoe is the kind of leader we elevate and I would like to congratulate him on his appointment to IFF's Chief Financial Officer. Mike has been an integral part of IFF's global finance leadership over the last fifteen years. Erik FyrwaldCEO at International Flavors & Fragrances00:08:34He brings a deep understanding of the needs of our global finance operations and the value IFF delivers for the world's consumer product companies. I know Mike will continue to be an even more incredible asset to our team in this key role. I'll now pass it over to him to share a closer look at our fourth quarter results. Mike? Michael DeveauEVP & CFO at International Flavors & Fragrances00:08:57Thank you for the kind words, Eric, and hello, everyone. After more than fifteen years at IFF, it is an honor to join my first call as CFO, and I look forward to working closely with all of you in my new role. Moving to Slide eight, as Eric noted, our strong performance and execution through 2024 continued in the fourth quarter and drove solid results. IFF generated revenue of $2,700,000,000 in the fourth quarter, an increase of 6% on a comparable currency neutral basis, driven by broad based growth across all our businesses and led by mid single digit volume improvement. We continue to realize the benefits from our ongoing productivity initiatives, leading to the third consecutive quarter of margin expansion on a comparable basis. Michael DeveauEVP & CFO at International Flavors & Fragrances00:09:46Adjusted operating EBITDA totaled $471,000,000 in the quarter, a 5% increase on a comparable basis, and their comparable adjusted operating EBITDA margin expanded by roughly 30 basis points. This performance was led by volume growth and our ongoing productivity initiatives that were partly offset by increased incentive compensation expense and business reinvestment. On Slide nine, I'll provide a closer look at our performance by segment. In Nourish, sales were $1,400,000,000 a 4% increase year over year on a comparable currency neutral basis. Comparable adjusted operating EBITDA also increased by 4%. Michael DeveauEVP & CFO at International Flavors & Fragrances00:10:30This was led by the fourth consecutive quarter of double digit growth in flavors, a testament to that team's continued outperformance. In Functional Ingredients, mid single digit volume growth was mostly offset by our pricing actions. This was consistent with our previously announced price strategy for 2024. Double digit gains in home and personal care and grain processing alongside growth across nearly all our businesses resulted in another solid quarter for our Health and Biosciences segment. Sales came in at $553,000,000 a 6% year over year increase on a comparable currency neutral basis. Michael DeveauEVP & CFO at International Flavors & Fragrances00:11:11Comparable adjusted operating EBITDA decreased by 3% largely due to strong year ago comparable as well as business reinvestments that Eric mentioned earlier. In scent, broad based growth was led by double digit increase in fragrance ingredients and high single digit growth in fine fragrance. Net sales in the quarter totaled $579,000,000 up 7% year over year on a comparable currency neutral basis and we delivered adjusted operating EBITDA of $97,000,000 up 1% on a comparable basis as volume growth and productivity gains were partially offset by higher reinvestment. Finally, Pharma Solutions delivered another strong quarter achieving sales of $228,000,000 a 12% year over year increase on a comparable basis, while also recording excellent profitability growth of 81% to $47,000,000 Strong margin expansion was driven by volume and productivity gains in a favorable year ago comparable. Turning to Slide 10, cash flow from operations totaled $1,100,000,000 for the full year and CapEx totaled $463,000,000 or approximately 4% of sales. Michael DeveauEVP & CFO at International Flavors & Fragrances00:12:28Our free cash flow position for the full year totaled $6.00 $6,000,000 which is consistent to where we expected it to be at the beginning of the year. Year to date, we also distributed $514,000,000 in dividends to our shareholders. Our cash and cash equivalents finished at $471,000,000 at the end of the fourth quarter, including $2,000,000 in assets held for sale. Our gross debt at the year end was approximately $9,000,000,000 a decrease of more than $1,000,000,000 compared to the year ago period following the completion of our divestiture of the cosmetic ingredients business. Our trailing twelve month credit adjusted EBITDA totaled $2,200,000,000 in line with last quarter and our net debt to credit adjusted EBITDA improved to 3.8 times. Michael DeveauEVP & CFO at International Flavors & Fragrances00:13:19We remain committed to achieving our net debt to credit adjusted EBITDA target of below three times following the completion of our Pharma Solutions divestiture, which we expect to be complete in the first half of twenty twenty five. On Slide 11, I'd like to share our outlook for 2025. While the current operating environment remains dynamic, we are cautiously optimistic about the year ahead as we look to build on our recent momentum. Coming off the strong year we had in 2024, we believe our 2025 plan strikes the right balance as we're targeting strong year over year improvements on a currency neutral basis and investing for the future growth of our business. Please note that our full year guidance includes six months of Pharma Solutions with a divestiture assumed to close 06/30/2025. Michael DeveauEVP & CFO at International Flavors & Fragrances00:14:12For comparability purposes, we expect that divestitures will have approximately a five percentage point adverse impact to sales growth and approximately a six percentage point adverse impact to adjusted EBITDA growth in 2025. In the event that we can close the pharma transaction earlier, we will adjust our guidance accordingly and reflect the lower contribution of the business. For the full year 2025, we expect sales to be in the range of $10,600,000,000 to $10,900,000,000 representing comparable currency neutral growth of 1% to 4%. We believe that this will be driven by continued volume growth against a strong year ago comparable with increases across all our divisions led by H and B, Taste and Scent. It should be noted that we expect the 2025 operating environment to be more normalized relative to 2024, which did benefit from the absence of destocking. Michael DeveauEVP & CFO at International Flavors & Fragrances00:15:11Pricing is expected to be modestly favorable, inclusions of FX related pricing as raw material costs remain elevated and in some cases increasing year over year. On the bottom line, we expect to deliver full year 2025 adjusted operating EBITDA between $2,000,000,000 to $2,150,000,000 On a comparable currency neutral basis, this translates to 5% to 10% EBITDA growth, which will be driven by gross margin expansion as a result of volume leverage and strong COGS productivity. Following a year of strong margin expansion and double digit profitability growth in 2024, we will continue to reinvest in long term value creation opportunities while balancing our near term profitability objectives. What this means is that we will continue to drive strong productivity to mitigate general inflationary pressures and at the same time reinvest a large portion of our incentive compensation reset in R and D, innovation and commercial capabilities across our businesses, similar to the actions we've taken in the second half of twenty twenty four. We believe that by doing so, not only will we drive short term performance, we will further enhance our competitive positions and generate strong returns on these organic investments. Michael DeveauEVP & CFO at International Flavors & Fragrances00:16:36Based on foreign exchange rates, we expect foreign exchange will have approximately 4% full year adverse impact to sales growth and a 6% full year adverse impact to adjusted operating EBITDA growth. This is primarily driven by the strength of the euro where the current rate is down relative to the 109 average in 2024. In addition, there are several other emerging market currencies such as the Brazilian real and the Argentine peso, where we issued a modest devaluation versus the USD over the course of 2025. As previously communicated, we plan to increase our CapEx investments targeting approximately 6% of sales in 2025. Approximately half of this investment is maintenance CapEx, while the rest is split evenly between deferred investment catch up, specifically in food ingredients, growth investments such as capacity expansion in H and B, an India creative center and scent and a creative center in Mexico in both taste and scent as well as digital transformation specifically related to our SAP HANA upgrade. Michael DeveauEVP & CFO at International Flavors & Fragrances00:17:48We believe these investments will yield strong returns providing us with incremental growth and efficiency opportunities. As a reminder, we have resegmented the business into five divisions Taste, Food Ingredients, Scent, H and B and Pharma and have adjusted our corporate allocations starting in 2025. Prior to the first quarter of twenty twenty five earnings release, we plan to provide historical information for comparable purposes so that when we report first quarter earnings, you will have the appropriate baseline. Let me close by sharing that we are pleased with the strong progress and foundation we built in 2024. Our recent success gives us confidence in our outlook as we continue to execute our strategic and financial priorities. Michael DeveauEVP & CFO at International Flavors & Fragrances00:18:37With that, I'd like to turn the call back to Eric. Erik FyrwaldCEO at International Flavors & Fragrances00:18:41Thanks, Mike. Our outlook for the year reflects our confidence in our businesses and our ability to navigate macro uncertainties, while continuing to deliver for our customers. I want to turn to the priorities that will guide our strategy for 2025 and help us reach the goals we've outlined for the year. In 2025, our focus will continue to be on creating sustainable growth and returns on capital. We will continue to improve our businesses while also ensuring we have competitive cost, best in class support functions. Erik FyrwaldCEO at International Flavors & Fragrances00:19:16As we've discussed, this will require some investment. At the same time, we will continue to drive growth and returns by increasing our investment in R and D, value enhancing capital projects, and commercial actions to deliver profitable market share growth over time. We will also keep exploring ways for our teams to better innovate, providing greater visibility and transparency into our sales pipeline and formalizing our sales targets and expectations across teams. We will continue to deliver cost savings through productivity initiatives and improvements in execution and processes throughout our businesses as we strengthen our continuous improvement culture. In addition to completing our planned divestiture of Pharma Solutions in the first half of the year, we will continue our ongoing portfolio assessment including exploring appropriate opportunities to bolster our portfolio through value creating bolt on acquisitions. Erik FyrwaldCEO at International Flavors & Fragrances00:20:17But I can assure you, we will not do anything like another Frutarom. Importantly, we remain committed to consistently delivering solid financial results and meeting the goals we've outlined for 2025. Lastly, our people are the core of our success and we will continue to invest time in developing talent and strengthening employee engagement to drive greater innovation and productivity. This in turn will enable us to better serve our customers, enhancing customer satisfaction, which will help us capture new growth and market share over time. I am confident that these priorities with the collective efforts of our world class global teams will make it happen. Erik FyrwaldCEO at International Flavors & Fragrances00:21:05Now to close us out on Slide 13, our solid performance in 2024 speaks to the success of our reinvigorated strategy and our focus on operational execution. All of us at IFF are excited to build on this foundation to further strengthen the business and reinforce our market position in 2025. We are well on our way to unlocking our full potential and continuing to deliver innovative and sustainable solutions for our customers and communities all around the world. Thank you. And I'll now open up the call to your questions. Operator00:21:47Thank you all. At this time, we will now begin the question and answer you. The first question is from the line of Kiersten Owen with Oppenheimer. You may proceed. Kristen OwenExecutive Director & Senior Analyst at Oppenheimer & Co. Inc.00:22:13Hi, good morning. Thank you for taking the question. I wanted to ask if you can elaborate on the sources, wind versus underlying demand of your volume growth expected in 2025. Just for context, we're hearing from CAGNY many of the CPGs are saying that volume is getting harder to come by. So we're just trying to understand what's sustaining that volume growth expectation and any specific areas of relative strength that you Kristen OwenExecutive Director & Senior Analyst at Oppenheimer & Co. Inc.00:22:37would call out? Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:22:39Sure. Thanks, Kristen. This is Eric. I'll take this question. So first of all, we're saying that for 2025, our volumes will be 1% to 4% growth, which if you recall in 2026, we had 6% growth, which about half of it was destocking. Erik FyrwaldCEO at International Flavors & Fragrances00:22:57So a normalized growth rate is in the range of 3%. We believe that our volume increases will be mainly in health and biosciences, Bents and Taste. And we see now that we have strong commercial pipelines in each of those businesses and a high win rate. And that means that we're winning more than our fair share in many cases. And that's really important and that's the drive. Erik FyrwaldCEO at International Flavors & Fragrances00:23:22Food Ingredients will be much lower volume increases, but we still see some volume increase there. But I think it's really important to step back and see what we're doing over the next three years, what our focus is. And I'll start by saying, I think we made really good progress in 2024, getting back to basics, getting the fundamentals in place. But over the next three years, we must keep driving to get to growth rates while we narrow the margin gap versus our best in class competition in each business. And we're going to do that by continuing to invest in R and D, commercial capabilities and capacity, particularly in Health and Biosciences, Scent and Taste businesses. Erik FyrwaldCEO at International Flavors & Fragrances00:24:13Those are three great businesses with high margins and we want to keep making sure that we're fully investing to be fully competitive with best in class competition. In our Food Ingredients business, we are investing selectively in areas like technical service and upgrading some of our facilities that badly need it. But at the same time, we're driving an aggressive productivity program across our food ingredients business. And then even across the entire company, we're driving strong productivity programs across each business unit and across the corporate functions to make sure that we're fully cost competitive, but also fully effective. And then as we do all that, we're also leveraging our uniquely strong biotech capabilities into our scent and flavors businesses and continuing to drive the other health and biosciences application areas. Erik FyrwaldCEO at International Flavors & Fragrances00:25:18So we have a great plan for the next three years. We're going to keep investing. We're going to keep delivering year by year, but we're going to keep investing so that in three years, we are very strong versus our best in class competition. Operator00:25:38The next question is from the line of Josh Spector with UBS. You may proceed. Josh SpectorExecutive Director at UBS Group00:25:46Yes. Hi, good morning. I wanted to ask two things if I could. First, just on the EBITDA bridge for 2025. I mean, understanding the pharma divestment and FX are negatives. Josh SpectorExecutive Director at UBS Group00:25:57I guess, we thought that volume and the incentive comp resets could get you to about neutral. So there's obviously something else investments or price cost or otherwise, which is adding a negative variance to that bridge that we're not accounting for. So how do you build that bridge? And then secondly, just around seasonality and your expectations for 1Q versus the rest of the year EBITDA specifically? Thanks. Michael DeveauEVP & CFO at International Flavors & Fragrances00:26:21Great. Thanks, Josh. I'll take just one. In terms of the EBITDA bridge to the midpoint of our 2025 guidance, it's really around just two things. It's around volume growth and productivity. Michael DeveauEVP & CFO at International Flavors & Fragrances00:26:31So if you assume the midpoint of our guidance range, sales will grow 2.5% on a comparable base of 11,000,000,000 with an incremental margin of about 35%. That's yielding you around four to five points of EBITDA growth. The second piece of it is that we're really trying to target and drive productivity within the organization. And so you're getting another about 2% net productivity benefit, which is more than offsetting the inflationary piece. In terms of net pricing to infill costs, they're expected to be neutrality, so flat when you net them together. Michael DeveauEVP & CFO at International Flavors & Fragrances00:27:05And in terms of the incentive compensation reset, we have about $100,000,000 of a reset and we're fully or essentially offsetting that by reinvestment in the business. And so there's about a $30,000,000 carryover for 2024 and a $70,000,000 incremental investment in 2025. So we net the two together and that's to zero. In terms of the EBITDA cadence, again, if you take the midpoint, the first half of the year will be stronger in an absolute dollar basis because we're assuming that the pharma transaction will be completed at the end of Q2. Also just remember that Q2 is usually our seasonably strongest quarter. Michael DeveauEVP & CFO at International Flavors & Fragrances00:27:46So on an absolute dollar basis, EBITDA will be the highest in Q2 of twenty twenty five. Operator00:27:57Thank you. The next question is from the line of Nicola Tang with BNP Paribas. You may proceed. Nicola TangResearch Analyst at BNP Paribas00:28:07Hi, everyone. Thanks for taking the question. Nicola TangResearch Analyst at BNP Paribas00:28:09I wanted to dig a little bit more into your comments around volume or I guess the currency neutral 1% to 4% expectation for the year. Would you be able to talk a little bit more about what you expect across the core divisions? Thanks. Erik FyrwaldCEO at International Flavors & Fragrances00:28:26Yes. Thank you, Nicola. So first of all, it's going to be primarily volume driven with modest pricing with some gives and takes in pricing across businesses and across geographies. But primarily, the volume growth will be driven by Health and Biosciences, Scent and Taste. Food Ingredients volume will be much more moderate with a focus on increasing margins in that business. Operator00:29:01The next question is from the line of Emily Fusco with Deutsche Bank. You may proceed. Emily FuscoEquity Research Associate at Deutsche Bank00:29:10Hi, this is Emily Fusco on for Dave Begleiter with Deutsche Bank. I wanted to ask, what are your expectations for input inflation this year? And how should we expect net pricing to develop through the year? Thank you. Michael DeveauEVP & CFO at International Flavors & Fragrances00:29:25Thanks again for the question, Emily. Maybe just to start by saying that import cost from an IFRS standpoint remain at historical levels, historically high levels. In some parts of our business, we are seeing continued modest inflation, specifically in taste and scent, and this is really driven by natural ingredients. In food ingredients, there is a bit of deflation that the team is working with customers on. And on an H and B perspective, it's generally flat. Michael DeveauEVP & CFO at International Flavors & Fragrances00:29:55And so net to net on a consolidated basis, we expect our input cost baskets to be flat to up slightly. In all instances, we will continue to work and collaborate with our customers to make sure we have the opportunities to mitigate. This includes reformulations, but also price discussions as well. In terms of pricing contribution over the course of 2025, we expect pricing to be relatively consistent over each of the four quarters as we go forward. Operator00:30:30The next question is from the line of Patrick Cunningham with Citigroup. You may proceed. Eric ZhangAssistant Vice President at Citigroup00:30:39Hi, good morning. This is Eric Zhang on for Patrick. You mentioned last quarter about getting functional ingredients to 15% plus margins in the coming years. Are you on track for this margin expansion given the pricing actions? And what are the cost and productivity initiatives, savings underpinning this growth? Eric ZhangAssistant Vice President at Citigroup00:30:55Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:30:57Thanks, Eric. We are on track towards this target and we made very good progress. If you recall in 2023, we talked about high single digit EBITDA margins in Food Ingredients. In 2024, we achieved solid low double digits margins EBITDA margins. And I would say under the new leadership of Andy Mueller with a strong team, we are confident in our plans to get to the mid teens in the next few years. Erik FyrwaldCEO at International Flavors & Fragrances00:31:28And we're doing that with a combination of better serving customers, so growing our business with attractive margins and driving aggressive productivity plans. Both are making progress. Andy has a strong background in this business and is helping the team to further strengthen those plans and the execution of those plans. So we are on track. Operator00:31:58Thank you. The next question is from the line of Lisa D. Leves with Morgan Stanley. You may proceed. Lisa De NeveAnalyst at Morgan Stanley00:32:07Hi. Thank you for taking my question. I have a question for free Lisa De NeveAnalyst at Morgan Stanley00:32:11cash Lisa De NeveAnalyst at Morgan Stanley00:32:11flow. Can you please give some details and granularity on how you expect free cash flow to play out for this year, especially concerning the networking capital movements and CapEx spend that's required? And also more in the light of the limited leveraging we've seen in the second half of this year, which clearly will improve First Pharma, but just the underlying movements would be helpful. And a small second question I'm just going to slide in. I mean, you've now been with the company as a CEO for over a year. Lisa De NeveAnalyst at Morgan Stanley00:32:38I mean, is there any intention to set new midterm targets given you keep referring in your presentation towards the next three years were driving improvement? So are you willing to set any financial targets against that? Thank you. Michael DeveauEVP & CFO at International Flavors & Fragrances00:32:53Thank you, Lisa. Maybe Eric, I'll start on the first one. Erik FyrwaldCEO at International Flavors & Fragrances00:32:56Yes. Michael DeveauEVP & CFO at International Flavors & Fragrances00:32:56Yes, perfect. I'll start on free cash Michael DeveauEVP & CFO at International Flavors & Fragrances00:32:58flow and then I'll pass it back Michael DeveauEVP & CFO at International Flavors & Fragrances00:32:59to you. In terms of the full year for 2025, we expect free cash flow to be about $500,000,000 Note that this does include a significant impact of taxes related to the pharma divestiture. So that's about $350,000,000 is our estimate at this point in time. If you adjust for that, our free cash flow will be about $850,000,000 which is kind of consistent to the last couple of years, but more importantly, an improvement versus where we finished 2024. In terms of networking capital, we are targeting a slight inflow versus an outflow in 2024. Michael DeveauEVP & CFO at International Flavors & Fragrances00:33:34And this is really driven by the work that we're doing around payables and selective strategic inventory reductions. As we stated on the call, we expect CapEx to be about 6% of sales, and this is really around increasing investments to catch up on some deferred spend. Eric mentioned it moments ago, specifically in food ingredients. Also to make some growth investments, And so capacity expansion, new technologies in H and B, some commercial facing operations for taste and scent. And then lastly, really start to drive the migration of our digital transformation. Michael DeveauEVP & CFO at International Flavors & Fragrances00:34:10And So those are the biggest drivers from a CapEx piece of it going forward. And so maybe Eric, I'll turn it over to you for the second part of the question. Erik FyrwaldCEO at International Flavors & Fragrances00:34:18Yes. So in terms of long term targets, we'll come back later in the year with more clarity on that. But let me just say that I feel like we are a very strengthened company now versus a year ago. We've got absolute clarity on our organization model, our end to end business model. We've separated Nourish into taste and food ingredients, two very different businesses with different strategies. Erik FyrwaldCEO at International Flavors & Fragrances00:34:46We've got a strong team, a clear flat five year plan, a clear investment plan with both growth investment and driving productivity. So I am confident that we have the right direction. Now we need to execute very well. And I think we did that in 2024. Now we need to do it in 2025. Erik FyrwaldCEO at International Flavors & Fragrances00:35:08And you'll hear more later in the year about our longer term aspirations. Operator00:35:16Thank you. The next question is from the line of Steve Byrne with Bank of America. You may proceed. Steve ByrneResearch Analyst at Bank of America Securities00:35:26Yes. Thank you. I'm curious, how would you characterize the potential impact on your businesses or perhaps some regulatory approvals from RFK, now run-in HHS and the staph cuts at FDA, any near term impacts from that? And then Eric, you mentioned new investments in biotechnology and R and D. I assume that that could include the use of gene editing for natural product expression levels, etcetera. Steve ByrneResearch Analyst at Bank of America Securities00:36:00Do you think RFK could block this? Erik FyrwaldCEO at International Flavors & Fragrances00:36:04So first of all, thank you, Steve. We don't see any of our products as targets. In fact, what we do see is that many of our customers may reformulate products to have cleaner labels, which by the way plays into our strengths. And we've been making very good progress with customers that are working on cleaner labels, which has been a great growth opportunity for us already, and we see that as a continued opportunity going forward. Erik FyrwaldCEO at International Flavors & Fragrances00:36:33In terms of biotech R and D, I think there's lots of opportunities in many areas and you'll be hearing more about that at CAGNY. We're going to talk specifically about our biotech platform and we see that as having opportunities in scent, taste, but also in the current areas that we're playing in and other areas with our DEB design enzymatic biomaterials, which plays right into the heart of what the world wants, consumers want, our customers want, the world wants in biodegradable materials that are sustainable and sustainably grown, sustainably produced. So I see this as a bit of uncertainty about what will happen when, but in the general direction, I see it as significantly more opportunity than risk. Operator00:37:34Thank you. The next question is from the line of John Roberts with Mizuho. You may proceed. John RobertsManaging Director at Mizuho Financial Group00:37:42Thanks and first congrats Michael. Back to raw materials, how much of IFF's raw material spend is potentially exposed to tariffs here? And should we only be thinking about imported materials into The U. S? Or do you worry about something reciprocal, so that it's more than just a U. John RobertsManaging Director at Mizuho Financial Group00:38:00S. Issue? Michael DeveauEVP & CFO at International Flavors & Fragrances00:38:03Hey, thanks, John. Appreciate that very much. In terms of the tariff situation, it's ever evolving. It changes on a constant basis. When we assess the various situations or potential situations, we do not expect to have a material impact from any tariff change. Michael DeveauEVP & CFO at International Flavors & Fragrances00:38:21As you know, John, we have an expansive and global supply chain, which provides us with a lot of flexibility to adapt. So should things change, we're working with our customers to make sure we mitigate that to the fullest. We lived through this a couple of years ago in this administration's first term. And so similar to that approach we've taken now is that we're going to work with our customers on mitigation strategies and including price surcharges as appropriate, but that will become a secondary methodology to it. The focus is really seeing what we can do on supply chain to mitigate a lot of our exposure. Michael DeveauEVP & CFO at International Flavors & Fragrances00:38:54Again, immaterial nature, more to come as things develop and we'll keep you updated there. Operator00:39:06The next question is from the line of Mike Sison with Wells Fargo. You may proceed. Michael SisonManaging Director at Wells Fargo Securities00:39:13Hey, good morning. Nice end of the year and congrats to you, Mike. Eric, with the year under year about, I understand you might want to wait a little bit, but where do you think IFS EBITDA should get over time? It's expected to be a pretty big number when you bought NNB, but with divestitures, maybe framework where it could be? And then and just maybe stepping back a little bit with NNB, do you think this is a good business for ISS longer term? Michael SisonManaging Director at Wells Fargo Securities00:39:47What are the risks? Because certainly it had a little bit it certainly had a tough time on the get go, but what are the risks to the business? And maybe just talk about where what parts of the business now fit really well with or have good synergies with the legacy IFF? Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:40:07Sure. Thanks, Mike, for the question. I see with our current portfolio over time us getting to the low 20s EBITDA margin with food ingredients being the most challenged and health and biosciences being the highest and scent and taste being very solid. And as I look at it, we I came to the company a year ago, there was a lot of complexity, a lot of performance challenges, a lot of companies had been brought together. So there was a lot to clean up and a lot to get the executive team together and clarify for the organization. Erik FyrwaldCEO at International Flavors & Fragrances00:40:44I think we've made very good progress. I think we've got a very solid H and B Health and Biosciences team and business, very strong scent and taste teams and businesses with very good very strong, very competitive capabilities. And so we just need to continue to strengthen those and move them along in the next three years. And I think they'll compete very favorably within that period with the leading benchmarks. Food Ingredients is still a turnaround situation. Erik FyrwaldCEO at International Flavors & Fragrances00:41:23Low single digit EBITDA margins in 2023, low double digit EBITDA margins in 2024. Andy Mueller and his team are absolutely focused on continuing that turnaround and getting those margins up significantly this year as another point of progress, and I'm confident in that team to make that happen. So I think that our focus right now is delivering 2025, but doing it in a way that we make smart investments that have good returns and get us increasingly competitive and deliver what we say we're going to deliver. And I think we're on good track to make that happen. Michael SisonManaging Director at Wells Fargo Securities00:42:13Thank you. Operator00:42:13Thank you. The next question is from the line of Kevin McCarthy with Vertical Research Partners. You may proceed. Matthew HettwerEquity Research Associate at Vertical Research Partners00:42:23Hi. This is Matt Hetler on for Kevin McCarthy. Can you help us to understand why the FX headwind to EBITDA is 2% higher than the impact on sales? How do your margins on international business compare to U. S. Matthew HettwerEquity Research Associate at Vertical Research Partners00:42:36Domestic margins? Michael DeveauEVP & CFO at International Flavors & Fragrances00:42:39Hey, Matt. I'll take this one. Thank you for the question. In terms of the incremental impact on EBITDA relative to sales, entirely driven by our purchases. Our sales are based in local currency, while larger portion of our input costs are denominated in euro, U. Michael DeveauEVP & CFO at International Flavors & Fragrances00:42:55S. Dollar. And so essentially that's what's driving the kind of multiplier effect between sales piece of it and the EBITDA contribution. I think your second question was around margin structure globally internationally versus domestic operations. It's actually pretty agnostic and pretty constant. Michael DeveauEVP & CFO at International Flavors & Fragrances00:43:15The real differential comes when you compare the category exposures. And so just let me give you an example. In EV, you have the strongest margin profile just given the exposure to fine fragrance, while in India, you have a lower margin profile just because the portfolio is geared towards savory as an example. So really when you look at it on a kind of a like for like basis adjusting for the portfolio, you're pretty agnostic from the margin aspect of it. It really comes down to the category percentages within each one of the regions. Operator00:43:51Thank you. The next question is from the line of Mark Ostrin from Stifel. You may proceed. Mark AstrachanManaging Director at Stifel Financial Corp00:44:00Yes, thanks. Good morning, everybody. Two questions for me. One, just could you talk about the growth rates between local, regional and private label customers compared to multinationals and maybe just give rough split of the business as it seems the former group seems to be growing faster and taking share away from the latter. And then Eric, you had talked about prioritizing best in class margins compared to sales growth. Mark AstrachanManaging Director at Stifel Financial Corp00:44:25You're obviously accelerating investment, I guess, with flexibility in early 'twenty five in terms of the wrap around reinvestment. Maybe talk a bit about how you manage the two and if you want to sit there and try to think about prioritizing one versus the other, how quickly can you get to the margins versus how quickly can you get to run rate sales growth that grows at least in line consistently with peers? Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:44:48Mike, you want to start and then I'll take the second half. Michael DeveauEVP & CFO at International Flavors & Fragrances00:44:51Sure. Thanks, Mark, for the question. When you look at the portfolio, the way I would categorize it is you basically have one third global customers, one third kind of mid sized and one third small and mobile customers, including some of the private label aspects. And so when you look at the dynamics across there on a global perspective, the growth is a little bit more muted than you see at some of the kind of regional, local, including private label customers. And so for us, a big part of the focus on the I'll give you an example on the taste strategy is really to prioritize private label and smaller customers as we go forward. Michael DeveauEVP & CFO at International Flavors & Fragrances00:45:28And so that dynamic, that growth that you referenced, Mark, is true. The good thing is that there's still a lot of growth opportunities at the big global customers that's much more geared towards new innovation and what we can do to help them have winning products or consumer preferred products in the market. Erik FyrwaldCEO at International Flavors & Fragrances00:45:47So on the second half of your question yes, on the second half of the question, we want to continue to work towards best in class margins and growth rates. So what I would say is track us on how we're doing to have growth rates in line with the best in class and gross margins that are improving and EBITDA margins that may improve a little bit slower because of our investments, our aggressive investments in research particularly, but also in commercial investments in health and biosciences, taste and scent. Let me just give you an example. In 2024, we had nice margin improvements, but we could have delivered even more EBITDA and higher EBITDA margins if we wouldn't have made additional investments beyond what we had planned, particularly in research and commercial capabilities. So what we're going to do is continue to make progress, but probably not as fast a progress on EBITDA as we could if we weren't making these additional investments. Erik FyrwaldCEO at International Flavors & Fragrances00:46:58But the investments that we're making, we are absolutely sure that in the next three years, we'll have a very attractive payout and will strengthen us against our best in class competitors. And we're absolutely committed to becoming leaders in innovation across these businesses, health and biosciences, taste and scent, while we continue to turn around the food ingredients business. Operator00:47:32Thank you. The next question is from the line of Kate Grafstein with Barclays. You may proceed. Kate GrafsteinVP - Equity Research at Barclays00:47:40Thanks. Just a couple of questions on the scent business. I was wondering why fragrance ingredients growth was so strong this quarter up double digit, and how we should be thinking about growth for 2025 if there's some pricing pressure on the business? And then on fine fragrances, you were wondering what your expectation is for growth next year and if you're expecting any growth in fine to normalize? Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:48:06Mike, do you want to start? Michael DeveauEVP & CFO at International Flavors & Fragrances00:48:07Yes, I'll start on this one and then pass it over to you for more comments. Look, the team has done a fantastic job in the fragrance ingredients business. They really looked at their portfolio. When you look at that portfolio, there's really high value ingredients and I would say more general kind of industry led ingredients. And so what they did, they bifurcate that and they've targeted the market to go after some of the high value ingredients. Michael DeveauEVP & CFO at International Flavors & Fragrances00:48:32And so what we've seen over the course of this year in 2024, my apologies, in 2024, performance has been strong as you noted, Katie. And for the quarter, we actually finished kind of in that mid teens range. So very, very good. And that's really about being proactive and making sure they have adequate capacity to ship product for that and they've had some good success there in 2024. In 2025, I think you'll see the growth start to subside a bit. Michael DeveauEVP & CFO at International Flavors & Fragrances00:49:01Obviously, that is a business that's going to be driven by the end market consumption. And so as you go forward from here, I think the team has some good volume growth, but they will have some reductions in overall price because of some of the deflationary environment that they see in the fragrance ingredients market overall. But they're working through that. I think their long term strategy is very, very strong. And I think it still can be a growth driver as we go forward. Michael DeveauEVP & CFO at International Flavors & Fragrances00:49:27It's just managing the next couple of quarters in terms of overall growth. So that's Fragrance Ingredients. On the fine fragrance side, the business is performing very, very well. And so, I think it finished the quarter at high single digit growth rates. On a two year basis, it's kind of in the mid single digit basis, kind of factoring the year ago comparable and so very, very strong. Michael DeveauEVP & CFO at International Flavors & Fragrances00:49:52Based on the access to business and new win potential that they have, they expect growth to continue into 2025 and be one of the areas that will lead the sense in terms of overall growth. And that's really around the strategy they have in some of the emerging markets like The Middle East and Africa and winning some of the core big businesses and brands that are in Europe and North America. I think the only thing I would add Erik FyrwaldCEO at International Flavors & Fragrances00:50:20is that I think overall the dynamics for the scent business are favorable and for the scent industry. The both the consumer goods companies are putting more emphasis on scent as a driver of superiority for their products, whether it's shampoo, body wash, laundry detergent, etcetera, all their products, scent is a critical element of superiority in a low part of the cost product cost. So I think that's going to continue and consumers love to have great scents in their products. I think on the fine fragrance, the digital media and the desire to have better experiences through the day, not just an evening event for a woman when she's going out, but people of all ages of both sexes increasingly wanting fine fragrances to enhance their day, whether it's an energizing scent that makes you feel more energy, whether it's a relaxing scent, whether it's a romantic scent, these emotional drivers that are being expounded upon are being talked about by people like Charlotte Tilbury on digital media are helping to expand the market for scent fine fragrances all around the world. So I see the general direction of growth for the scent industry continuing to be very positive and we're taking advantage of that. Operator00:52:06Thank you. The next question is from the line of Silke Kuit from JPMorgan. You may proceed. Silke KueckAnalyst at JPMorgan Chase00:52:15Hi, good morning. I have another peeling back the onion question. In Nourish, you have your legacy flavor or what you call taste business and maybe that's like $2,500,000,000 in size. And then there's the functional ingredients business, which is that's like $3,300,000,000 in size. So if your functional ingredients business, which is the smaller one grows slowly, maybe grows 1%, Like your taste business really has to grow something like 5% to get to the midpoint of your organic growth, which is 2.5. Silke KueckAnalyst at JPMorgan Chase00:52:52Is that the way to think about it? You have like just much higher growth in taste, maybe like close to the mid single digits and very slow growth in function fragrances? And I have a similar question for the health and bioscience business, which I think maybe splits that to enzymes and maybe 45% into probiotics. Is it a similar dynamic where you think your enzymatic business is going to grow more like mid single digits and probiotics at a very Silke KueckAnalyst at JPMorgan Chase00:53:25low end? Erik FyrwaldCEO at International Flavors & Fragrances00:53:27Mike, why don't you start and I'll add, if anything. Michael DeveauEVP & CFO at International Flavors & Fragrances00:53:30Yes, I'll start that. So first maybe let me just start with the flavors or taste business. So it is you're absolutely right. The way I think about $6,000,000,000 2 point 5 billion dollars is going to be taste side, $3,500,000,000 food ingredient side. The flavors or taste side of the business has been running very, very strong. Michael DeveauEVP & CFO at International Flavors & Fragrances00:53:51And so their performance over the course of the year, if you see, it's basically at four quarters of very strong double digit growth. As you go into 2025, I think the taste business growth will more normalize relative to, but I'd say, historical averages just because the comp is strong. And so that is going to be a big piece of the equation in terms of growth for the total company. Food ingredients will be a little bit more muted as some of volume gains are going to be offset by a little bit of price reductions that are associated with the deflation. And so to your point, you have to grow disproportionately faster on the taste side. Michael DeveauEVP & CFO at International Flavors & Fragrances00:54:30The one x factor caveat is that in the rest of the business, we expect growth. And so that's making it up and is actually taking us into what I'd say a better trajectory in 2025 overall and offsetting some of the food ingredient softness that we have year over year in terms of total top line growth. In H and B, with respect to enzymes versus probiotics in the subcategory levels, I think broadly speaking, all the businesses are targeting kind of modest growth year over year. The health business, the one area on the probiotic side that has been a little bit of a pain point to be very frank over the last couple of years is expecting to recover a bit as we go into 2025 as well. So that will help us that will help us both from a top line perspective, but it's also accretive from a margin aspect as well. Michael DeveauEVP & CFO at International Flavors & Fragrances00:55:20So, Barrett, back to you. Operator00:55:28Thank you. The next question is from the line of Laurence Alexander with Jefferies. You may proceed. Dan RizzoSenior Vice President at Jefferies Financial Group00:55:35Hi, this is Dan Rizzo on for Laurence. Thanks for fitting me in. Just to kind of revisit tariffs from the tariff issues, but just from a little bit of a term perspective, I was just wondering what your customers are saying their near term MTechs might be on order patterns and how you should think about where margins and ROIC should be in three to five years? Michael DeveauEVP & CFO at International Flavors & Fragrances00:55:55Can you repeat that second part of the question? I'm not sure I heard the second part. Dan RizzoSenior Vice President at Jefferies Financial Group00:55:57The second one is just how do you think where margins in ROIC should be in three to five years? Michael DeveauEVP & CFO at International Flavors & Fragrances00:56:06Yes, perfect. Michael DeveauEVP & CFO at International Flavors & Fragrances00:56:07Eric, do you want to from a customer standpoint, I know you engage a lot from customers. Have you wanted to follow-up with it? Erik FyrwaldCEO at International Flavors & Fragrances00:56:14What I would say is, if you listen to the customers' calls, they're very conservative about volume growth. I think it's not it's separate from tariff issues, but tariff issues make people concerned about the economy. With the uncertainty today, I think that uncertainty will hopefully get cleared up in the not too distant future and we'll get back to a more normalized growth. But I think what our customers what we're hearing from our customers, which is really important, is that they expect volumes to be soft and therefore they want to grow with innovation. And that's increasing the opportunity for us to work with them to deliver that innovation that excites consumers that drives their products. Erik FyrwaldCEO at International Flavors & Fragrances00:57:03And by the way drives value in their products as well. So I think that's very positive, but anything to add to that specifically on tariffs, Mike? Michael DeveauEVP & CFO at International Flavors & Fragrances00:57:14No, I think that's good, covered well. I think the second point, just on the margin ROIC evolution of IFA for the next three years, I think Eric addressed it before. The simple answer is higher on both. I think for us, we're making a concentrated effort to really own return on invested invested capital as we go into 2025. And so we're making a big investment in terms of both carryover and reinvestment incrementally this year. Michael DeveauEVP & CFO at International Flavors & Fragrances00:57:42But the reality is as we go forward, we are being diligent on how we're thinking about return on every dollar we put in the business. This is both OpEx and a CapEx basis. And so the team trajectory, we don't have a formal target yet and will come back later in the year as Eric alluded to it. But over time, we would expect improvements in terms of, again, the margin piece of it, but also return of invested capital. Operator00:58:12The next question is from the line of Artem Chubarov with Redburn. You may proceed. Artem ChubarovEquity Research Analyst at Redburn Atlantic00:58:20Good morning. Thanks for taking my question. I've got a follow-up on the health and biotides and fish. Would you remind us of the current sales breakdown by businesses across that just would be helpful? And then looking ahead, do you see the future for some of those subgrade processing or utilization or could they potentially be considered for a review in the future? Artem ChubarovEquity Research Analyst at Redburn Atlantic00:58:47Thank you. Erik FyrwaldCEO at International Flavors & Fragrances00:58:49I'll start and then Mike, please add anything. First of all, our Health and Biosciences business is on very solid ground today. It's been growing nicely in 2024. We grew, I would say, consistent with the leading benchmark and had strong solid growth across businesses. The slowest growth, but still growing was the Health business. Erik FyrwaldCEO at International Flavors & Fragrances00:59:13As Mike alluded to, we expect that to start to increase again as we put more innovation into that business part of the business. But overall, the dynamics are solid in all the different areas, all the different application areas. We have this new area and designed enzymatic biomaterials that we're excited about. We've started to get our first commercializations there. That's going to add to the growth. Erik FyrwaldCEO at International Flavors & Fragrances00:59:38And we've got a lot of emphasis now on how do we turbocharge our scent and our taste business with our biotech capabilities. And we've got resources focused on that, that'll take some time to get through, but it's on a solid start. And I'm very, very optimistic about health and biosciences in the near term, but even more so in the three to five year timeframe. Operator01:00:10Thank you. Artem ChubarovEquity Research Analyst at Redburn Atlantic01:00:10Thank you. Operator01:00:11At this time, we will now take the last question from Christopher Parkinson from Wolfe Research. You may proceed. Harris FeinVP - Equity Research at Wolfe Research, LLC01:00:21Great. Thanks. This is Harris Fine on for Chris. Thanks for taking my question. So there have been a lot of active asset sales divestitures within Food and Nutrition over the past year. Harris FeinVP - Equity Research at Wolfe Research, LLC01:00:32I guess when you look at what's happened, what does that price discovery mean to you in terms of maybe whether you could prune a little bit more from your portfolio? And you also mentioned potential for small bolt ons, I guess what are the implications for your M Harris FeinVP - Equity Research at Wolfe Research, LLC01:00:46and A pipeline? Thank you. Erik FyrwaldCEO at International Flavors & Fragrances01:00:49Yes. So first of all, on our Food Ingredients business, Andy Mueller is here. He knows the business in-depth. He spent many years with Danisco, actually before that with IFF. He knows the industry very well. Erik FyrwaldCEO at International Flavors & Fragrances01:01:02He's working with his team to turn around the total business and there are some pieces of it that may likely not fit long term. So we're working on that, working through that. But we're looking at bolt on acquisitions, as I refer to, that's specifically in health and biosciences, more related to technologies to further enhancing our technology breadth, sense and taste, which is more to enhance our geographic footprint. But we will only do bolt ons that make absolute sense, that have good returns and that really fill strategic voids. But I think what the most important is to understand that we're focused on really driving the businesses that we have today and getting the pharmaceuticals solution sale finished and continuing to execute really well this year. Erik FyrwaldCEO at International Flavors & Fragrances01:01:59And I'll just finish. My closing remark is that I believe I joined the company excited about IFF and even more excited today. I believe we are much stronger than we were a year ago and I believe we will be much stronger a year from now, thanks to our 22,000 colleagues around the world that are now, I believe, much more focused on serving customers with leading innovation, while we also drive productivity. And I would suggest if you know IFF employees, talk to IFF employees, talk to our customers, ask them about it. We've got positive momentum and we're going to continue to build on that positive momentum and we're going to deliver what we say we're going to deliver in 2025, but we're going to do it in a way that further strengthens us for 2026 and beyond. Erik FyrwaldCEO at International Flavors & Fragrances01:02:48And in the three year period, I think you'll find us very competitive with the leading competitive benchmarks. Thank you. Operator01:03:00Thank you all. At this time, this will now conclude today's IAF Q4 and FY twenty twenty four earnings conference call. We appreciate your participation. We hope you all have a wonderful day and you may now disconnect your line.Read moreParticipantsExecutivesMichael BenderDirector of Investor RelationsErik FyrwaldCEOMichael DeveauEVP & CFOAnalystsKristen OwenExecutive Director & Senior Analyst at Oppenheimer & Co. Inc.Josh SpectorExecutive Director at UBS GroupNicola TangResearch Analyst at BNP ParibasEmily FuscoEquity Research Associate at Deutsche BankEric ZhangAssistant Vice President at CitigroupLisa De NeveAnalyst at Morgan StanleySteve ByrneResearch Analyst at Bank of America SecuritiesJohn RobertsManaging Director at Mizuho Financial GroupMichael SisonManaging Director at Wells Fargo SecuritiesMatthew HettwerEquity Research Associate at Vertical Research PartnersMark AstrachanManaging Director at Stifel Financial CorpKate GrafsteinVP - Equity Research at BarclaysSilke KueckAnalyst at JPMorgan ChaseDan RizzoSenior Vice President at Jefferies Financial GroupArtem ChubarovEquity Research Analyst at Redburn AtlanticHarris FeinVP - Equity Research at Wolfe Research, LLCPowered by