International Flavors & Fragrances Inc.
CEO : Mr. Franklin K. Clyburn Jr.
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | -6.2% YoY | -35.8% | -97.1% | 2023-02-09 |
Frank Clyburn says,
Strategic Transformation
- Unveiled the next phase of strategic transformation in December 2022
- Focus on jump-starting even stronger growth, cost reduction, and productivity initiatives
- Targeting sales growth of 4% to 6% and adjusted operating EBITDA growth of 8% to 10% on a comparable currency-neutral basis over 2024, 2025 and 2026
Financial Performance
- Delivered $12.4 billion in sales, a 9% growth over the previous year
- Recovered more than $1 billion in revenue through strategic price increases in 2022
- Delivered nearly $150 million in productivity benefits in 2022, driving profitability in the challenging operating environment
Business Segments
- Nourish achieved currency-neutral sales growth of 11% compared to the previous year, led by double-digit growth in food designs and ingredients
- Health and Bioscience delivered 4% currency-neutral sales growth in 2022, primarily driven by strong performance across all segments, particularly culture and food enzymes and animal nutrition
- Scent delivered strong 8% currency-neutral growth, led by double-digit growth in Fine Fragrance and strong single-digit increase in Ingredients and Consumer segments
Portfolio Optimization
- Successfully completed the sale of Microbial Control business and announced the sale of Savory Solutions business
- Transactions will contribute more than $2 billion in gross proceeds to strengthen the capital structure
Board Changes
- Plans to reduce the size of the board from 14 to a target of no more than 10 IFF directors and one icon capital designee director by the 2023 Annual Shareholder Meeting
- Composition of the Board prioritizing the inclusion of senior executives with relevant skills, leadership experience, and business expertise
Glenn Richter says,
Q4 2022 Financial Highlights
- IFF generated $2.8 billion in sales revenue, up 4% YoY on a currency-neutral basis
- Adjusted operating EBITDA for Q4 was $441 million, down 5% YoY on a currency-neutral basis
- Q4 EPS ex-amortization was 12% lower due to lower adjusted operating profit
- Currency headwinds had a significant impact on sales and adjusted operating EBITDA
Segment Performance
- Nourish, Scent, and Pharma Solutions saw growth in the quarter, while Health and Bioscience experienced a decline
- Comparable currency-neutral adjusted operating EBITDA decreased by 11% across Nourish and Health & Bioscience due to lower volumes
- Scent division delivered 6% YoY sales growth and 25% growth in comparable currency-neutral adjusted operating EBITDA due to a favorable product mix, pricing, and productivity gains
Free Cash Flow and Deleveraging Targets
- Free cash flow for the full year was a negative $159 million due to growth in working capital and costs related to integration and transaction-related items
- Initiated actions across the business and supply chain teams to rapidly reduce inventories to drive cash flow
- Committed to achieving deleveraging target of 3x net debt-to-credit adjusted EBITDA by 2024
2023 Outlook
- Expect revenue to be approximately $12.5 billion and adjusted operating EBITDA to be approximately $2.34 billion, representing comparable currency-neutral sales growth of approximately 6% and comparable currency-neutral adjusted operating EBITDA flat versus prior year
- Expect negative manufacturing absorption to impact adjusted EBITDA growth by several percentage points expressed in YoY growth terms
- Plan to drive significant productivity by accelerating previous launch programs and undertake additional actions to cut costs across the organization
Key Areas of Focus for 2023
- Accelerating sales growth through sharpening sales execution discipline, pricing actions, targeted growth investments, and increasing focus on revenue synergies
- Focusing on enhancing customer service levels and supply chain efficiencies through more granular customer service and inventory goals and redesigned sales, inventory, and operations planning process
- Accelerating expansion of productivity efforts, cost savings, and debt reduction
Q & A sessions,
Challenging Q1 expected due to volume decline and inflation
- Q4 2022 saw high-single-digit volume decline, accelerating in December
- Q1 2023 expected to have similar challenging trends as Q4 2022
- First half of 2023 to face challenges from inflation and other pressures
- Overall, 2023 expected to have flattish volume year-over-year, but with 6% overall sales growth
- Focus on reducing inventory to improve cash flow will impact EBITDA profit growth
- Accelerating productivity program and S&OP process to control cost
Portfolio performance and changes
- Scent business comparable to peers with some instances of gaining share
- Health and Biosciences seeing good performance in food and culture enzymes, but challenges in health segment due to shift in market demand and destocking
- Ingredients business facing volume challenges, with price trade-offs made to preserve margin and some share loss in Protein Solutions
- Portfolio overall seen as the right one, with a focus on executing against it
- 20% of portfolio being evaluated from an ROIC lens, but Protein Solutions and Food Designs ex Savory seen as important parts of the portfolio
Customer trends
- Seeing some trade down with regards to quantities and private label, but not significant trade-offs overall
- Customers expecting continued challenging first half of the year from a volume perspective and increasing prices
No bad stock 