Glenn Robert Richter
Executive Vice President & Chief Fianncial Officer at International Flavors & Fragrances
Thank you, Frank. Good morning, and good afternoon to everyone. Let's start on Slide 11 with sales performance of each of IFF's four businesses. Together, Nourish, Health & Biosciences, Scent and Pharma Solutions achieved $3.2 billion in sales revenue in Q1, representing comparable currency-neutral sales growth of 13%. Of note, all our sub businesses posted year-over-year comparable currency-neutral growth in the first quarter.
Nourish delivered the most substantial growth with significant broad-based strengths in our Flavors, Ingredients and Food Design businesses. Health & Biosciences similarly achieved strong sales growth, having managed headwinds in the Health business. The Scent division carried its strong momentum from last year through the first quarter with strong results in Fine Fragrance, Consumer Fragrance and Ingredients. Lastly, Pharma Solutions also achieved currency-neutral sales growth driven by the division's continued strength in its industrial business and resume demand for Pharma. In terms of sales growth contribution, pricing increased approximately 8% and volume grew approximately 5%.
Turning to Slide 12. Let's walk through our profitability in the quarter. First quarter adjusted operating EBITDA totaled $702 million, representing 9% comparable currency-neutral adjusted operating EBITDA growth versus the first quarter of 2021. Our adjusted EBITDA margin in the first quarter was 21.8% and on an inflation-adjusted basis would have been approximately 175 basis points higher or approximately 23.5%. Margins did come in better than we expected in the first quarter due to stronger-than-anticipated volume growth, better cost management as well as the fact that a significant amount of our higher inflationary costs remains in inventories and did not impact the P&L to the degree originally anticipated.
However, this is largely timing-related and will change as we progress throughout the year. Included in our results is a charge of approximately $20 million related to expected credit loss on receivables from customers located in Russia and Ukraine. While the macroeconomic environment remains incredibly dynamic with continuing inflationary pressures at the moment, we are pleased with the actions taken by our teams to manage through these challenges. We took a very proactive approach and quickly instituted broad-based pricing actions across our portfolio in response to these pressures.
Consequently, the actions we have taken have resulted in a full dollar cost recovery of total inflation cost in the first quarter. Unfortunately, since our February earnings call, we have seen additional increases in raw material, logistics and energy costs and are diligently working with our customers on incremental pricing actions. One important note to call out is that we are seeing the strong cost increases flowing to inventory, which is due to our inventory days means that the higher cost will eventually impact the P&L as we progress through the balance of the year.
Now on Slide 13, I would like to highlight the underlying dynamics in first quarter performance of each of our business segments. In the first quarter, Nourish's strong comparable currency-neutral sales growth of 16% was led by double-digit growth in Food Designs and Ingredients. The segment's comparable currency-neutral adjusted operating EBITDA growth was also strong at 14%, primarily driven by the division's pricing actions, volume growth and productivity gains. In Health & Biosciences, double-digit growth in Health, Microbial Control and Grain Processing and high single-digit growth in Animal Nutrition and Cultures & Food Enzymes drove comparable currency-neutral sales growth of 10% for the first quarter.
Similar to Nourish, the segment's comparable currency-neutral adjusted operating EBITDA growth of 8% was led by pricing, volume growth and productivity that helped offset mix challenges. In Scent, Fine Fragrance continued its strong rebound with double-digit growth and Cosmetic Actives and Fragrance Ingredients continue to perform above expectations. As for Consumer Fragrance, the business experienced modest growth in the first quarter. Overall percent on a 6% comparable currency-neutral sales growth, comparable currency-neutral adjusted operating EBITDA declined 2% as inflationary pressures outpaced pricing for the quarter. As a reminder, in Scent, there is a delay in pricing recovery about 18 months before you fully recover inflation via price increases.
Finally, in Pharma Solutions, we saw double-digit growth in both Pharma and Industrial to deliver 10% comparable currency-neutral sales growth for the quarter. Volume growth and productivity gains helped drive 10% comparable currency-neutral adjusted operating EBITDA. Now on Slide 14, I would like to address our cash flow and leverage positions. In the first quarter, increased working capital requirements, in part due to seasonality and in part due to increased values of inventory and accounts receivable driven by inflation as well as higher capital expenditures negatively impacted our cash flow results for the quarter.
In the first quarter, capex totaled $132 million, representing approximately 4.1% of sales. As a reminder, we anticipate our '22 capex to be approximately 5% of sales due to '21 capex carryover and increased investments in capacity expansion in key technologies which will help support growth while also lowering logistics costs. From a leverage perspective, we are on plan and are continuing to make progress toward achieving our deleveraging target. Q1 ended net debt to credit adjusted EBITDA ratio was 4.2 times. Gross debt for the quarter totaled $11.7 billion and we finished the first quarter with cash and cash equivalents of $662 million.
Despite the global financial pressures, we remain on track to achieve our deleveraging target of 3 times or lower by year three post close, which will be supported by our Fruit Preparation divestiture, sale of our Microbial Control business and other noncore business divestitures. Slide 15 provides our revised business outlook for 2022. We are adjusting our expected full year '22 revenue up to $12.6 billion to $13 billion from $12.3 billion to $12.7 billion. This reflects the effects of additional anticipated pricing actions not incorporated in our original guidance primarily due to the additional inflationary pressures.
This revision also reflects the expected completion of our Microbial Controls divestiture on July one, one month later than originally planned and the acquisition of Health Wright Products completed in April. In addition, our outlook takes into account a weaker euro to dollar currency outlook for the balance of the year. We continue to expect adjusted operating EBITDA in the range of $2.5 billion to $2.6 billion as we continue to target full cost recovery of additional inflationary pressures via price increases.
On a comparable currency-neutral basis, this translates into sales growth of approximately 9% to 12% versus 6% to 9% previously for the full year, and comparable currency-neutral adjusted operating EBITDA growth of approximately 4% to 8%, which is unchanged. It should be noted that while we have increased our sales expectations for the full year due to incremental pricing, we have reduced our volume expectations given a more challenging environment including lost revenues as a result of the Russia-Ukraine war, continued global supply chain issues and anticipated softer consumer demand as a result of higher energy prices and general inflation negatively impacting consumer spending.
One data point is that in early Q2, we have already seen volumes soften and for the full year, we are now targeting low single-digit volume growth and high single-digit pricing contributions. Also based on current market foreign exchange rates, we expect that foreign exchange will negatively impact sales in 2022 by approximately four percentage points versus two percentage points previously and adjusted operating EBITDA growth by approximately five percentage points versus 4% previously.
These changes now reflect current market exchange rates, particularly the euro, where we are assuming that it remains at EUR1.06 to the $1 for the balance of the year or a blended full year rate of approximately EUR1.08 to the $1. We are also confirming our '22 capex spend will be approximately 5% of sales. In terms of the second quarter, we continue to believe that sales growth will be driven by price increases with volumes contributing much less they did in the first quarter. From an adjusted EBITDA perspective, we expect to be in the range of $640 million to $650 million pressured by unfavorable impacts of currency as well as higher inflationary costs flowing from inventories to the income statement.
As I wrap up, I want to revisit the four key areas of focus we touched upon in February to update you on our progress. As a reminder, our four key priorities for 2022 are maintaining strong sales momentum, executing broad-based pricing actions, capturing synergies and productivity, and accelerating our noncore business divestitures. Overall, we feel good about our progress across all four areas in Q1 and are confident in our ability to deliver on these commitments this year.
In terms of supporting strong sales momentum, we are increasing our capacity across constrained portions of our portfolio enhancing our supply chain efficiencies, most notably in our H&B, Pharma Solutions and Ingredients business to ensure that we maintain our volume growth in line with or above the industry. Relative to executing broad-based pricing actions, in an effort to react more quickly to today's evolving environment and better prepare for tomorrow's challenges, we have significantly enhanced our processes, implemented new pricing tools and established core pricing teams to oversee each of our business units.
Our focus has been centered around minimizing the amount of time loss between inflation signals and customer pricing actions to ensure that we quickly adjust priorities to protect profitability. With these changes, we successfully implemented our first round of pricing actions and we covered the total cost of inflation in Q1 '22. Given additional noninflationary pressures and a lot of uncertainty regarding the future path of inflation, this remains our highest priority. Accelerating our productivity and expense synergy efforts also remains a key priority and increasingly important in a more challenging macroeconomic environment.
To this end, we were able to deliver over $30 million of operational efficiencies and deal-related synergies in the first quarter, above our expectations. As a result, we expect to exceed our original $100 million full year cost reduction target, which is net of reinvestments. This higher level of productivity is helping offset lower full year volume expectations. As we look to accelerate our long-term productivity opportunities, we have sharpened our focus on three large areas of productivity: procurement efficiencies, notably in indirect spend; end-to-end operations efficiencies inclusive of digital enablement, yield and mix enhancements and logistics efficiencies; and expanding the scale and efficiency of IFF's global shared service platform.
Importantly, we will remain prudent in protecting key topline investments, including R&D, customer sales and service and technology. We plan on providing more details of these initiatives at our Q2 earnings call. Finally, we made further headway in accelerating our noncore divestitures. We are on track to successfully complete the sale of our Microbial Control business by July one.
We are also targeting additional portfolio optimization and noncore business divestiture opportunities to delever our balance sheet and invest greater resources toward our higher return businesses. We are making very good progress in early noncore business marketing efforts and have already received strong interest from prospective buyers. Should these transactions go through, we anticipate that they will, in aggregate, be accretive to our go-forward growth rate and margin profile. With that, I'd like to pass the call back to Frank.
