International Flavors & Fragrances(US:IFF)2025-02-28 21:08Financial Performance - In 2024, total sales were $11.484 billion, remaining flat compared to $11.479 billion in 2023, but increased by 3% on a currency neutral basis [240]. - Gross profit in 2024 increased by $443 million, or 12%, to $4.124 billion, representing 35.9% of sales, compared to 32.1% in 2023 [242]. - Total net sales for 2024 were $11.484 billion, a slight increase from $11.479 billion in 2023, with a comparable portfolio excluding divestitures showing a growth of approximately $244 million [246]. - Segment Adjusted Operating EBITDA increased to $2.205 billion in 2024, up from $1.980 billion in 2023, with a total margin of 19.2% compared to 17.2% in the previous year [267]. Sales by Segment - The Nourish segment experienced a 3% decline in sales, while the Health & Biosciences segment saw a 6% increase in reported sales [245]. - Nourish segment sales decreased by $189 million, or 3%, to $5.871 billion in 2024, while currency neutral sales increased by 4% driven by volume increases across all business units [247]. - Health & Biosciences segment sales increased by $131 million, or 6%, to $2.212 billion in 2024, with an 8% increase on a currency neutral basis due to volume and price increases [248]. - Scent segment sales rose by $47 million, or 2%, to $2.440 billion in 2024, with a 7% increase on a currency neutral basis driven by price and volume increases [249]. - Pharma Solutions segment sales increased by $16 million, or 2%, to $961 million in 2024, maintaining a 2% increase on a currency neutral basis [251]. Expenses - Research and development (R&D) expenses increased by 6% to $671 million in 2024, representing 5.8% of sales [244]. - Selling and Administrative (S&A) expenses rose by $208 million to $1.995 billion, representing 17.4% of sales in 2024, up from 15.6% in 2023 [254]. - Cost of sales decreased by $438 million to $7.360 billion, representing 64.1% of sales in 2024, down from 67.9% in 2023 [252]. Impairment Charges - The company recorded an impairment charge of $64 million for the Pharma Solutions segment in 2024, significantly lower than the $2.623 billion impairment in the Nourish segment in 2023 [230][231]. - The Company recorded a non-cash goodwill impairment charge of $64 million for the Pharma Solutions disposal group during the quarter ended June 30, 2024 [316]. - A goodwill impairment charge of $2.623 billion was recorded for the Nourish reporting unit for the year ended December 31, 2023 [319]. - The Company anticipates a material impairment charge in the range of $1.0 billion to $1.5 billion in the first quarter of fiscal 2025 due to the restructuring of the Nourish segment into two operating segments: Taste and Food Ingredients [321]. Taxation - The effective tax rate for 2024 was 11.2%, compared to a negative rate of 1.8% in 2023 [244]. - The effective tax rate increased to 11.2% in 2024 from (1.8)% in 2023, primarily due to an increase in pre-tax income and changes in the mix of earnings [262]. Cash Flows - Cash flows from operating activities in 2024 were $1.070 billion, or 9.3% of sales, down from $1.439 billion, or 12.5% of sales in 2023 [276]. - Cash flows from investing activities decreased to $326 million in 2024 from $574 million in 2023, primarily due to lower net proceeds from business divestitures [277]. - Cash flows used in financing activities were $1.606 billion in 2024, a decrease from $1.851 billion in 2023, mainly due to lower dividends paid [279]. - Dividends paid totaled $514 million in 2024, down from $826 million in 2023, with cash dividend declared per share at $1.60 compared to $3.24 in 2023 [280]. Debt and Capital Management - As of December 31, 2024, the net debt to credit adjusted EBITDA ratio was 3.84 to 1.0, below the covenant limit [287]. - Total debt as of December 31, 2024, was approximately $9.005 billion, with net debt at $8.534 billion [290]. - The company had $8.478 billion in senior unsecured notes outstanding, with effective interest rates ranging from 1.22% to 5.12% [291]. - The company had no outstanding borrowings under its $2 billion Revolving Credit Facility as of December 31, 2024, with available capacity of $922 million [286]. - The company anticipates capital spending in 2025 to be approximately 6% of sales [278]. - The company plans to prioritize capital investment in its businesses to support strategic long-term plans while maintaining its investment grade rating [281]. Foreign Currency and Risk Management - The company actively monitors foreign currency exposures and employs various techniques, including hedging activities, to mitigate the impact of exchange rate fluctuations [335]. - As of December 31, 2024, the estimated fair value of foreign currency forward contracts would change by approximately $475 million with a hypothetical 10% change in applicable exchange rates [337]. - The aggregate fair value of cross currency swaps was $90 million as of December 31, 2024, with an estimated change of approximately $143 million based on a hypothetical 10% change in the value of the U.S. dollar against the Euro [338]. - The fair value of EUR fixed rate debt was $813 million as of December 31, 2024, with an estimated change of approximately $90 million based on a hypothetical 10% change in foreign exchange rates [339]. - The fair value of USD fixed rate debt was $6.338 billion as of December 31, 2024, with an estimated change of approximately $634 million based on a hypothetical 10% change in interest rates [339]. - The total amount of outstanding debt subject to interest rate fluctuations was $413 million as of December 31, 2024, with an estimated annual interest expense change of approximately $4 million based on a hypothetical 1% change in interest rates [340]. - The company has established a centralized reporting system to evaluate the effects of changes in interest rates and currency exchange rates [336]. - The company enters into foreign currency forward contracts to manage exchange rate risk related to foreign currency denominated monetary assets and liabilities [337]. - The company does not generally use commodity financial instruments to hedge commodity prices, except for soy and natural gas [341]. - The company utilizes statistical analyses of cash flows and sensitivity analysis as part of its risk management procedures [336].