International Flavors & Fragrances(US:IFF)2021-11-09 18:32Financial Data and Key Metrics Changes - For the first nine months of 2021, the company achieved $8.6 billion in sales, representing a 10% growth with a 7% increase on a currency-neutral basis [9][10] - The adjusted operating EBITDA margin was 22%, with combined EBITDA growth of 5% [10] - Free cash flow reached $884 million, approximately 10% of trailing nine months sales, driven by strong cash generation [10][43] Business Line Data and Key Metrics Changes - The Nourish division achieved 9% currency-neutral sales growth, with broad-based strength across flavors, ingredients, and food design businesses [17] - The Scent division delivered 8% currency-neutral growth, led by double-digit growth in fine fragrance and strong performance in consumer fragrance [17] - Health & Biosciences saw strong demand in key areas but faced margin challenges due to higher logistics costs, resulting in a 12% decrease in operating EBITDA [37][40] - Pharma Solutions remained flat for the year, impacted by supply chain challenges [18][40] Market Data and Key Metrics Changes - North America achieved 7% growth across all business divisions, with Nourish and Scent leading the performance [13] - Asia experienced a 7% increase in sales, driven by double-digit growth in India and low single-digit growth in China [14] - Latin America was the strongest performing region with 12% growth, primarily from Nourish and Scent divisions [14] - EMEA region saw 7% sales growth, with double-digit increases in the third quarter [15] Company Strategy and Development Direction - The company is focused on portfolio optimization and has completed the divestiture of its food preparation business, with plans to divest the Microbial Control business by Q2 2022 [11][12] - The management emphasized the importance of executing pricing actions to combat inflationary pressures and improve gross margins [34][47] - The company aims to achieve a deleveraging target of less than 3 times net debt to EBITDA within 20 to 36 months post-transaction close [44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged significant inflationary pressures affecting raw material, logistics, and energy costs, which have impacted margins [10][46] - The company expects continued strong sales momentum and is optimistic about returning the Pharma Solutions division to profitability [22][40] - The outlook for 2021 has been revised to target $11.55 billion in total revenue, reflecting strong demand despite ongoing macro supply chain challenges [47][49] Other Important Information - The company has achieved approximately $40 million in cost synergies, nearing its 2021 target of $45 million [25] - Management is confident in the long-term potential of the combined company following the merger with DuPont's N&B business [30] Q&A Session Summary Question: What do you think of IFF's long-term targets? - Management is pleased with the tracking of topline growth against long-term targets and feels comfortable with the deleveraging target [55] Question: Can you discuss margin contraction and guidance cuts? - The primary hit to margins has been from material costs, with inflation rates higher than initially anticipated [64] Question: How do you see inflation for '22 and pricing implementation? - The company is in early phases of planning for '22, expecting to implement pricing actions early in the year, but timing of recovery is uncertain [73] Question: Can you provide insights on synergy realization in '22? - Cost synergies are on track to exceed targets, while sales synergies are also progressing well [77] Question: Is there potential for portfolio optimization? - The company is working on optimizing its portfolio and expects to provide more transparency early next year [86]