International Flavors & Fragrances(IFF) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Second Quarter 2025 Consolidated Summary The company reported Q2 2025 sales of $2.8 billion and adjusted operating EBITDA of $552 million Second Quarter 2025 Consolidated Financials | Metric | Reported (GAAP) | Adjusted (Non-GAAP) | | :--- | :--- | :--- | | Sales | $2.8 B | - | | Income Before Taxes | $534 M | - | | EPS | $2.38 | - | | Operating EBITDA | - | $552 M | | Operating EBITDA Margin | - | 20.0% | | EPS ex Amortization | - | $1.15 | First Six Months 2025 Consolidated Summary For the first six months of 2025, IFF recorded sales of $5.6 billion and adjusted operating EBITDA of $1.1 billion First Six Months 2025 Consolidated Financials | Metric | Reported (GAAP) | Adjusted (Non-GAAP) | | :--- | :--- | :--- | | Sales | $5.6 B | - | | Income Before Taxes | $(460) M | - | | EPS | $(1.59) | - | | Operating EBITDA | - | $1.1 B | | Operating EBITDA Margin | - | 20.2% | | EPS ex Amortization | - | $2.35 | Management Commentary Management highlighted progress in strengthening the business through top-line growth, improved profitability, and strategic divestitures - Achieved top-line growth and improved profitability in Q2 2025, driven by disciplined execution and productivity[4] - Successfully closed divestitures of Pharma Solutions and Nitrocellulose, and completed debt tender offering, reducing leverage to 2.5x, ahead of target[4] - Announced a new $500 million share repurchase authorization, reflecting confidence in long-term value and a balanced capital allocation strategy[5] - Entered a definitive agreement to divest soy crush, concentrates, and lecithin business to Bunge, furthering portfolio evolution towards value-added offerings[4] Second Quarter 2025 Financial Results Consolidated Performance Q2 2025 saw a 4% YoY decrease in reported net sales but a 3% increase in comparable currency neutral sales Q2 2025 Consolidated Sales & EBITDA Growth (YoY) | Metric | Reported Growth | Comparable Currency Neutral Growth | | :--- | :--- | :--- | | Net Sales | (4)% | 3% | | Adjusted Operating EBITDA | (6)% | 6% | Q2 2025 Consolidated Key Financials | Metric | Value | | :--- | :--- | | Reported Net Sales | $2.76 billion | | Income before taxes (reported) | $534 million | | Adjusted operating EBITDA | $552 million | | Reported EPS | $2.38 | | Adjusted EPS ex amortization | $1.15 | | Cash flows from operations (first six months) | $368 million | | Free cash flow (first six months) | $94 million | | Net debt to credit adjusted EBITDA | 2.5x | Segment Performance Segment performance varied in Q2 2025, with Taste and Health & Biosciences showing mid-single-digit comparable sales growth Q2 2025 Segment Growth vs. Prior Year (Comparable Currency Neutral) | Segment | Sales Growth | Operating EBITDA Growth | | :--- | :--- | :--- | | Taste | 6% | 3% | | Food Ingredients | 1% | 21% | | Health & Biosciences | 4% | 3% | | Scent | 1% | (2)% | | Pharma Solutions | 21% | 5% | | Consolidated | 3% | 6% | Taste Segment The Taste segment reported a 6% increase in comparable currency neutral sales to $631 million in Q2 2025 Q2 2025 Taste Segment Performance | Metric | Value | | :--- | :--- | | Reported Sales | $631 million | | Comparable Currency Neutral Sales Growth | 6% | | Adjusted Operating EBITDA | $125 million | | Adjusted Operating EBITDA Margin | 19.8% | | Comparable Currency Neutral Adjusted Operating EBITDA Growth | 3% | Food Ingredients Segment The Food Ingredients segment saw a significant 21% increase in comparable currency neutral adjusted operating EBITDA Q2 2025 Food Ingredients Segment Performance | Metric | Value | | :--- | :--- | | Reported Sales | $850 million | | Comparable Currency Neutral Sales Growth | 1% | | Adjusted Operating EBITDA | $124 million | | Adjusted Operating EBITDA Margin | 14.6% | | Comparable Currency Neutral Adjusted Operating EBITDA Growth | 21% | Health & Biosciences Segment The Health & Biosciences segment reported a 4% increase in comparable currency neutral sales, driven by solid performances across all businesses Q2 2025 Health & Biosciences Segment Performance | Metric | Value | | :--- | :--- | | Reported Sales | $577 million | | Comparable Currency Neutral Sales Growth | 4% | | Adjusted Operating EBITDA | $151 million | | Adjusted Operating EBITDA Margin | 26.2% | | Comparable Currency Neutral Adjusted Operating EBITDA Growth | 3% | Scent Segment The Scent segment's comparable currency neutral adjusted operating EBITDA decreased by 2% due to unfavorable net pricing Q2 2025 Scent Segment Performance | Metric | Value | | :--- | :--- | | Reported Sales | $603 million | | Comparable Currency Neutral Sales Growth | 1% | | Adjusted Operating EBITDA | $130 million | | Adjusted Operating EBITDA Margin | 21.6% | | Comparable Currency Neutral Adjusted Operating EBITDA Growth | (2)% | Pharma Solutions Segment The divested Pharma Solutions segment showed strong comparable currency neutral sales growth of 21% Q2 2025 Pharma Solutions Segment Performance | Metric | Value | | :--- | :--- | | Reported Sales | $103 million | | Comparable Currency Neutral Sales Growth | 21% | | Adjusted Operating EBITDA | $22 million | | Adjusted Operating EBITDA Margin | 21.4% | | Comparable Currency Neutral Adjusted Operating EBITDA Growth | 5% | Strategic Initiatives & Capital Allocation Share Repurchase Authorization The Board of Directors authorized a new $500 million share repurchase program with no specified term or termination date - Board of Directors authorized a new $500 million share repurchase program[11] - The program has no specified term or termination date and allows for repurchases in privately negotiated transactions, open market transactions (including Rule 10b5-1 plans), and block trades[11] - Funding for repurchases will come from available cash and cash provided by operating activities[11] Divestitures and Portfolio Optimization IFF is actively reshaping its portfolio through divestitures to focus on more value-added offerings - Successfully closed the divestitures of Pharma Solutions and Nitrocellulose[4] - Evaluating strategic alternatives for the Food Ingredients segment to evolve towards more value-added offerings and enhance margins[4] Sale of Soy Crush, Concentrates & Lecithin Business IFF signed a definitive agreement to sell its soy crush, concentrates, and lecithin business to Bunge - Entered a definitive agreement to divest soy crush, concentrates, and lecithin business to Bunge[12] - The divested business generated approximately $240 million in revenue in 2024 and employs around 250 people globally[12] - Transaction is expected to close by year-end 2025[12] Financial Guidance Full Year 2025 Outlook IFF reaffirms its full-year 2025 financial guidance despite an expected challenging second half Full Year 2025 Financial Guidance | Metric | Range | | :--- | :--- | | Sales | $10.6 billion to $10.9 billion | | Adjusted Operating EBITDA | $2 billion to $2.15 billion | | Comparable Currency Neutral Sales Growth | 1% to 4% | | Comparable Currency Neutral Adjusted Operating EBITDA Growth | 5% to 10% | - Guidance is reiterated despite expectations of more challenging market conditions in the second half of the year[14] Factors Impacting Guidance Foreign exchange and the Pharma Solutions divestiture are expected to have adverse impacts on 2025 growth Expected Adverse Impacts on 2025 Guidance | Factor | Sales Growth Impact | Adjusted Operating EBITDA Growth Impact | | :--- | :--- | :--- | | Foreign Exchange | ~1% (vs. 2% previously) | ~3% | | Pharma Solutions Divestiture | ~7% | ~8% | Financial Statements (GAAP) Consolidated Statements of Income (Loss) Q2 2025 net income increased significantly YoY, while the first six months resulted in a net loss Consolidated Statements of Income (Loss) - Key Figures | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | % Change (Q2) | YTD 2025 (Millions) | YTD 2024 (Millions) | % Change (YTD) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,764 | $2,889 | (4)% | $5,607 | $5,788 | (3)% | | Gross profit | $1,030 | $1,068 | (4)% | $2,065 | $2,092 | (1)% | | Operating profit (loss) | $198 | $191 | 4% | $(705) | $390 | (281)% | | Income (loss) before income taxes | $534 | $183 | 192% | $(460) | $298 | (254)% | | Net income (loss) attributable to IFF shareholders | $612 | $170 | 260% | $(406) | $230 | (277)% | | Net income (loss) per share - diluted | $2.38 | $0.66 | - | $(1.59) | $0.90 | - | Condensed Consolidated Balance Sheets Total assets decreased to $26.1 billion as of June 30, 2025, primarily due to reductions in goodwill and current assets Condensed Consolidated Balance Sheets - Key Figures | Metric (Millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $816 | $469 | | Total current assets | $5,928 | $7,993 | | Goodwill and other intangibles, net | $14,713 | $15,525 | | Total assets | $26,121 | $28,667 | | Short-term borrowings | $500 | $1,413 | | Total current liabilities | $3,183 | $4,333 | | Long-term debt | $5,684 | $7,564 | | Total Shareholders' equity including Non-controlling interests | $14,436 | $13,911 | | Total liabilities and shareholders' equity | $26,121 | $28,667 | Consolidated Statements of Cash Flows Net cash from operating activities increased, while investing activities generated a significant inflow from business disposals Consolidated Statements of Cash Flows - Key Figures (Six Months Ended June 30) | Metric (Millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) | $(405) | $233 | | Net cash provided by operating activities | $368 | $336 | | Net cash provided by investing activities | $2,541 | $664 | | Net cash used in financing activities | $(2,654) | $(1,023) | | Net change in cash, cash equivalents and restricted cash | $345 | $(61) | | Cash, cash equivalents and restricted cash at end of period | $816 | $674 | - Net proceeds from business disposals significantly contributed to investing activities cash flow, totaling $2,707 million in 2025[41] - Principal payments of debt were a major use of cash in financing activities, amounting to $(2,413) million in 2025[41] Non-GAAP Financial Measures & Reconciliations Use of Non-GAAP Financial Measures IFF utilizes several non-GAAP measures to offer additional insight into underlying operating results and comparable performance - Non-GAAP measures include comparable currency neutral sales, adjusted operating EBITDA and margin, adjusted EPS ex amortization, free cash flow, and net debt to credit adjusted EBITDA[27] - Currency neutral metrics eliminate foreign exchange effects by translating current year sales at prior year exchange rates[28] - Adjusted operating EBITDA and adjusted EPS ex Amortization exclude non-recurring or unusual items such as restructuring charges, impairment of goodwill, gains/losses on business disposals, divestiture and integration costs, and regulatory costs[29][30] - Free Cash Flow is defined as operating cash flow less capital expenditures, and Net debt to credit adjusted EBITDA is a leverage ratio used in credit agreements[31] GAAP to Non-GAAP Reconciliations This section provides detailed reconciliations between GAAP and non-GAAP measures to present a clearer view of core operational performance - Reconciliations are provided for Q2 and YTD periods, covering gross profit, selling and administrative expenses, net income (loss), and EPS[50][52][57][67] - Adjustments typically include restructuring and other charges, impairment of goodwill, gains/losses on business disposals, divestiture and integration costs, strategic initiatives costs, regulatory costs, and gain on debt extinguishment[58][68] Gross Profit Reconciliation Reported GAAP gross profit of $1,030 million for Q2 2025 remained unchanged for the adjusted non-GAAP figure Q2 Gross Profit Reconciliation (Millions) | (DOLLARS IN MILLIONS) | 2025 | 2024 | | :--- | :--- | :--- | | Reported (GAAP) | $1,030 | $1,068 | | Adjusted (Non-GAAP) | $1,030 | $1,068 | Selling and Administrative Expenses Reconciliation Q2 2025 reported GAAP selling and administrative expenses were adjusted down from $483 million to $395 million (Non-GAAP) Q2 Selling and Administrative Expenses Reconciliation (Millions) | (DOLLARS IN MILLIONS) | 2025 | 2024 | | :--- | :--- | :--- | | Reported (GAAP) | $483 | $493 | | Divestiture and Integration Costs | $(26) | $(59) | | Strategic Initiatives Costs | $(6) | $(12) | | Regulatory Costs | $(53) | $(19) | | Entity Realignment Costs | $(3) | $0 | | Other | $0 | $(2) | | Adjusted (Non-GAAP) | $395 | $401 | Net Income (Loss) and EPS Reconciliation (Q2) Q2 2025 reported GAAP net income was $612 million, while adjusted non-GAAP net income was $185 million Q2 Net Income (Loss) and EPS Reconciliation (Millions, except per share) | Metric | Reported (GAAP) 2025 | Adjusted (Non-GAAP) 2025 | Reported (GAAP) 2024 | Adjusted (Non-GAAP) 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to IFF (m) | $612 | $185 | $170 | $183 | | Diluted EPS | $2.38 | $0.72 | $0.66 | $0.71 | | Adjusted (Non-GAAP) EPS ex. Amortization | - | $1.15 | - | $1.16 | - Key adjustments for Q2 2025 included a $488 million gain on debt extinguishment and $81 million in losses on business disposals[58] Net Income (Loss) and EPS Reconciliation (YTD) For the first six months of 2025, the reported GAAP net loss of $(406) million was adjusted to a non-GAAP net income of $383 million YTD Net Income (Loss) and EPS Reconciliation (Millions, except per share) | Metric | Reported (GAAP) 2025 | Adjusted (Non-GAAP) 2025 | Reported (GAAP) 2024 | Adjusted (Non-GAAP) 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to IFF (m) | $(406) | $383 | $230 | $345 | | Diluted EPS | $(1.59) | $1.49 | $0.90 | $1.34 | | Adjusted (Non-GAAP) EPS ex. Amortization | - | $2.35 | - | $2.29 | - Significant adjustments for YTD 2025 included a $1,153 million impairment of goodwill and a $488 million gain on debt extinguishment[68] Reportable Segment Performance Reconciliation (Q2) Consolidated adjusted operating EBITDA was $552 million in Q2 2025, with segment margins ranging from 14.6% to 26.2% Q2 Segment Adjusted Operating EBITDA (Millions) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Taste | $125 | $127 | | Food Ingredients | $124 | $109 | | Health & Biosciences | $151 | $151 | | Scent | $130 | $143 | | Pharma Solutions | $22 | $58 | | Total Adjusted Operating EBITDA | $552 | $588 | Q2 Segment Adjusted Operating EBITDA Margin | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Taste | 19.8% | 20.8% | | Food Ingredients | 14.6% | 12.9% | | Health & Biosciences | 26.2% | 27.2% | | Scent | 21.6% | 23.7% | | Pharma Solutions | 21.4% | 21.2% | | Consolidated | 20.0% | 20.4% | Reportable Segment Performance Reconciliation (YTD) For the first six months of 2025, consolidated adjusted operating EBITDA was $1,130 million YTD Segment Adjusted Operating EBITDA (Millions) | Segment | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Taste | $256 | $244 | | Food Ingredients | $235 | $217 | | Health & Biosciences | $289 | $289 | | Scent | $274 | $311 | | Pharma Solutions | $76 | $105 | | Total Adjusted Operating EBITDA | $1,130 | $1,166 | YTD Segment Adjusted Operating EBITDA Margin | Segment | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Taste | 20.3% | 19.9% | | Food Ingredients | 14.3% | 12.7% | | Health & Biosciences | 25.9% | 26.6% | | Scent | 22.5% | 24.9% | | Pharma Solutions | 20.6% | 20.1% | | Consolidated | 20.2% | 20.1% | Comparable Reportable Segment Performance Reconciliation (Q2) Q2 2025 comparable consolidated net sales were $2,764 million, and comparable adjusted operating EBITDA was $552 million Q2 Comparable Segment Net Sales (Millions) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Taste | $631 | $603 | | Food Ingredients | $850 | $847 | | Health & Biosciences | $577 | $556 | | Scent | $603 | $603 | | Pharma Solutions | $103 | $87 | | Consolidated | $2,764 | $2,696 | Q2 Comparable Segment Adjusted Operating EBITDA (Millions) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Taste | $125 | $123 | | Food Ingredients | $124 | $107 | | Health & Biosciences | $151 | $149 | | Scent | $130 | $141 | | Pharma Solutions | $22 | $22 | | Total | $552 | $542 | - Corporate costs previously attributed to Pharma Solutions were reallocated across Taste, Food Ingredients, Health & Biosciences, and Scent segments following divestitures[84] Comparable Reportable Segment Performance Reconciliation (YTD) For the first six months of 2025, comparable consolidated net sales were $5,607 million, and comparable adjusted operating EBITDA was $1,130 million YTD Comparable Segment Net Sales (Millions) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Taste | $1,258 | $1,218 | | Food Ingredients | $1,646 | $1,703 | | Health & Biosciences | $1,117 | $1,085 | | Scent | $1,217 | $1,221 | | Pharma Solutions | $369 | $337 | | Consolidated | $5,607 | $5,564 | YTD Comparable Segment Adjusted Operating EBITDA (Millions) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Taste | $256 | $238 | | Food Ingredients | $235 | $215 | | Health & Biosciences | $289 | $287 | | Scent | $274 | $295 | | Pharma Solutions | $76 | $69 | | Total | $1,130 | $1,104 | Comparable Foreign Exchange Impact Reconciliation (Q2) Q2 2025 comparable currency neutral sales grew 3%, while comparable currency neutral adjusted operating EBITDA grew 6% Q2 Consolidated Sales & Adjusted Operating EBITDA Growth (YoY) | Metric | % Change - Reported | % Change - Comparable | % Change - Currency Neutral | | :--- | :--- | :--- | :--- | | Sales | (4)% | 3% | 3% | | Adjusted Operating EBITDA | (6)% | 2% | 6% | - Currency impact positively affected consolidated adjusted operating EBITDA growth by 4% in Q2[86] Comparable Foreign Exchange Impact Reconciliation (YTD) For the first six months of 2025, comparable currency neutral sales grew 3%, while comparable currency neutral adjusted operating EBITDA grew 7% YTD Consolidated Sales & Adjusted Operating EBITDA Growth (YoY) | Metric | % Change - Reported | % Change - Comparable | % Change - Currency Neutral | | :--- | :--- | :--- | :--- | | Sales | (3)% | 1% | 3% | | Adjusted Operating EBITDA | (3)% | 2% | 7% | - Currency impact positively affected consolidated adjusted operating EBITDA growth by 5% YTD[89] Debt Covenants IFF provides reconciliations for debt covenant calculations, including Credit Adjusted EBITDA and Net Debt Reconciliation of Credit Adjusted EBITDA to Net Loss Credit Adjusted EBITDA for the twelve months ended June 30, 2025, was $2,184 million Credit Adjusted EBITDA (Trailing Twelve Months Ended June 30, 2025) | (DOLLARS IN MILLIONS) | 2025 | | :--- | :--- | | Net loss | $(393) | | Interest expense | $275 | | Income taxes | $(89) | | Depreciation and amortization | $969 | | Specified items | $1,039 | | Non-cash items | $383 | | Credit Adjusted EBITDA | $2,184 | - Specified items include restructuring, goodwill impairment, divestiture and integration costs, strategic initiatives, regulatory costs, gain on debt extinguishment, and entity realignment costs[75] - Non-cash items include losses/gains on sale of assets, business disposals, assets held for sale, pension termination losses, and stock-based compensation[76] Net Debt to Total Debt As of June 30, 2025, IFF's net debt stood at $5,397 million Net Debt Calculation (June 30, 2025) | (DOLLARS IN MILLIONS) | Value | | :--- | :--- | | Total debt | $6,213 | | Cash and cash equivalents | $816 | | Net debt | $5,397 | - Total debt includes short-term debt, long-term debt, short-term finance lease obligations, and long-term finance lease obligations[78] Additional Information Audio Webcast A live webcast to discuss Q2 2025 results was held on August 6, 2025, with a recording available on the company's website - Live webcast for Q2 2025 results held on August 6, 2025, at 9:00 a.m. ET[20] - Webcast and presentation available on ir.iff.com, with a recorded version accessible for one year[20] Cautionary Statement Regarding Forward-Looking Statements The report includes forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially - Statements not historical facts are forward-looking, based on management's current assumptions, estimates, and expectations[21] - Forward-looking statements involve significant risks, uncertainties, and other factors that could cause actual results to differ materially[22] - Key risks include substantial indebtedness, ability to execute strategic transformation, regulatory and economic trends, supply chain disruptions, inflation, and ability to manage working capital[23] - The company does not undertake to update or revise forward-looking statements as more information becomes available[26] Company Description IFF is an industry leader in food, beverage, scent, health, and biosciences, combining science and creativity to develop essential solutions - IFF is an industry leader in food, beverage, scent, health, and biosciences[35] - The company uses science and creativity to create essential solutions, partnering with customers to deliver scents, tastes, experiences, ingredients, and solutions[35]