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INTERNATIONAL FLAVORS & FRAGRANCES INC (IFF)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $2.84B, modestly above S&P Global consensus ($2.82B*), and adjusted EPS ex amortization was $1.20 vs. consensus $1.14*, while GAAP EPS was $(3.98) driven by a $1.15B goodwill impairment in Food Ingredients .
  • Adjusted operating EBITDA was $578M (20.3% margin), marking the fourth consecutive quarter of margin expansion on a comparable currency-neutral basis .
  • Full-year 2025 guidance ranges were maintained (sales $10.6–$10.9B; adjusted operating EBITDA $2.0–$2.15B), with FX headwind reduced and divestiture headwind increased following the early close of Pharma Solutions on May 1 .
  • Capital structure catalysts: completed Pharma Solutions sale, launched ~$2.0B notes tenders, and declared a $0.40 quarterly dividend; management reiterated deleveraging below 3x net debt/credit-adjusted EBITDA via tender proceeds .

What Went Well and What Went Wrong

What Went Well

  • Taste delivered broad-based growth: sales $627M (+7% comparable currency-neutral) and adjusted EBITDA +22% with margin at 20.9% .
  • Scent achieved +4% comparable currency-neutral sales with double-digit Fine Fragrance growth; segment EBITDA rose +4% on a comparable basis .
  • Management executed portfolio actions ahead of schedule: “We successfully completed the divestiture of our Pharma Solutions business two months ahead of schedule,” noted CEO Erik Fyrwald .
  • CFO emphasized resilient margin trajectory: “Comparable currency-neutral adjusted operating EBITDA margin increased more than 120 bps to 20.3%… fourth consecutive quarter of margin expansion” .

What Went Wrong

  • Food Ingredients sales declined 4% on a comparable currency-neutral basis, primarily on weaker Protein Solutions demand; segment reported sales fell 7% YoY .
  • GAAP loss (EPS $(3.98)) due to $1.15B goodwill impairment in Food Ingredients related to the segment separation .
  • Free cash flow was negative $(52)M in Q1 (seasonally soft quarter with bonus payouts and higher reinvestment); CapEx stepped up to $179M (~6% of sales) .
  • Macro/tariff uncertainty persists; management cited ~$100M gross tariff exposure for 2025 (possibly double on a run-rate basis) requiring mitigation and surcharges .

Financial Results

Consolidated comparisons (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$2.93 $2.77 $2.84
Adjusted Operating EBITDA ($USD Millions)$568 $471 $578
Adjusted Operating EBITDA Margin (%)19.4% 17.0% 20.3%
Adjusted EPS ex Amortization ($)$1.04 $0.97 $1.20
GAAP EPS ($)$0.23 $(0.18) $(3.98)

Q1 2025 vs S&P Global consensus

MetricConsensusActualSurprise
Revenue ($USD Billions)$2.82*$2.84 +$0.02B (beat)
Primary EPS ($)$1.14*$1.20 (ex amortization) +$0.06 (beat)
EBITDA ($USD Millions)$561*$503*−$58M (miss; definitional differences vs adjusted op EBITDA)

Values marked with * are retrieved from S&P Global.

Segment breakdown – Q1 2025

SegmentSales ($MM)YoY (Reported)YoY (Comparable Currency Neutral)Adj. EBITDA ($MM)YoY (Adj. EBITDA Comparable)Adj. EBITDA Margin (%)
Taste$627 +1% +7% $131 +22% 20.9%
Food Ingredients$796 −7% −4% $111 +5% 13.9%
Health & Biosciences$540 +2% +5% $138 +3% 25.6%
Scent$614 −5% +4% $144 +4% 23.5%
Pharma Solutions$266 +6% +8% $54 +19% 20.3%

KPIs

KPIQ4 2024Q1 2025
Cash from Operations ($MM)$1,070 FY; $471 quarter-end cash $127; cash, cash equivalents and restricted cash $650
Free Cash Flow ($MM)$607 FY $(52)
CapEx ($MM)$463 FY $179
Net Debt / Credit Adjusted EBITDA (x)3.8x (Dec 31, 2024) 3.9x (Mar 31, 2025)
Dividend per share ($)—$0.40 (declared for Q2 2025)

Guidance Changes

MetricPeriodPrevious Guidance (Feb 18)Current Guidance (May 6)Change
Sales ($B)FY 2025$10.6–$10.9 $10.6–$10.9 Maintained
Adjusted Operating EBITDA ($B)FY 2025$2.00–$2.15 $2.00–$2.15 Maintained
Comparable currency-neutral sales growth (%)FY 20251%–4% 1%–4% Maintained
Comparable currency-neutral adjusted EBITDA growth (%)FY 20255%–10% 5%–10% Maintained
FX impact (sales growth)FY 2025~4% adverse ~2% adverse Improved (lower headwind)
FX impact (adj. EBITDA growth)FY 2025~6% adverse ~3% adverse Improved (lower headwind)
Divestiture impact (sales growth)FY 2025~5% adverse; assumes 6 months Pharma ~7% adverse; 4 months Pharma after early close Increased headwind
Divestiture impact (adj. EBITDA growth)FY 2025~6% adverse ~8% adverse Increased headwind

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Margin expansionQ3: consolidated adj. EBITDA margin 19.4% with broad volume recovery ; Q4: 17.0%, continued expansion YoY .20.3% and fourth consecutive quarter of comparable margin expansion .Improving sequentially; sustained productivity gains.
Tariffs / supply chainQ4: “do not expect material impact,” flexible global supply chain .~$100M gross exposure 2025; mitigating via sourcing shifts and pricing surcharges .Heightened headwind; active mitigation.
Macro cautionQ3: recovery off prior-year lows ; Q4: cautious optimism for 2025 .Resilient order book but caution into 2H; China slow; potential recession risk not embedded in guide .Neutral-to-cautious tone.
Food Ingredients turnaroundQ4: targeting mid-teens margins over coming years .Q1 margin 13.9%; path to >15% through 2026 .On track; mix/pricing/productivity driving.
R&D/technologyQ4: increased reinvestment in R&D and commercial capabilities .AlphaBio JV (€130M plant) for DEB biomaterials; strengthening pipelines in Taste/Scent/H&B .Accelerating strategic innovation.
Capital allocationQ4: reinvestment, bolt-ons considered post deleveraging .Early Pharma close; debt tenders; focus on CapEx then bolt-ons; evaluate buybacks/dividends post <3x leverage .Deleveraging then optionality increases.

Management Commentary

  • CEO: “IFF delivered solid first quarter results, driven by disciplined execution and broad-based growth across most of our business… We also successfully completed the divestiture of our Pharma Solutions business two months ahead of schedule” .
  • CFO: “Adjusted operating EBITDA totaled $578 million… comparable currency-neutral adjusted operating EBITDA margin increased more than 120 basis points to 20.3%. This is the fourth consecutive quarter of margin expansion” .
  • CEO on macro: “We are maintaining our full-year financial guidance ranges but recognize that the uncertain environment has potential for more challenges” .
  • CFO on tariffs: “On a gross basis, we have a little more than about $100 million of exposure for 2025… we’re targeting the full mitigation over time” .

Q&A Highlights

  • Macro resilience vs risk: Portfolio ~80% essential categories; order book consistent, but management cautious on U.S. consumer and China softness into 2H .
  • Tariff exposure and mitigation: ~$100M gross 2025 exposure (run-rate ~2x); mitigation via procurement shifts, production redistribution, and surcharges .
  • Food Ingredients trajectory: EBITDA margin at 13.9% in Q1; targeting >15% by 2026 through productivity and higher-margin mix; protein solution volume issues being resolved .
  • Capital structure: prioritizing CapEx for core businesses, small bolt-ons, and potential buybacks/dividends after achieving <3x leverage; interest expense guidance ~$225M for FY25 .
  • Innovation pipeline: AlphaBio JV and DEB biomaterials scaling; R&D pipelines strengthening to drive growth beyond 2027 .

Estimates Context

  • Q1 2025 delivered a small top-line and EPS beat versus S&P Global consensus, while EBITDA (SPGI definition) was below consensus; Street may raise EPS/Revenue modestly but keep EBITDA cautious given definitional differences and tariff/macros.
  • Near-term modeling should reflect maintained FY25 ranges, lower FX headwind, earlier Pharma divestiture (4 months vs 6 months), stepped-up CapEx, and productivity offsets to inflation.

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Quality of beat: Revenue and adjusted EPS ex amortization beat Street; underlying margin execution remains strong, supporting confidence in FY25 ranges despite macro/tariffs .
  • Portfolio actions as catalysts: Early Pharma close and large note tenders materially advance deleveraging and could open buybacks optionality after <3x leverage .
  • Watch Food Ingredients: Margin progression to mid-teens is on track; monitor protein solutions recovery and mix/pricing to sustain margin gains .
  • Tariff risk manageable but non-trivial: Gross exposure ~$100M in 2025; mitigation execution and customer surcharges are key to protecting margins .
  • Innovation visibility rising: DEB biomaterials JV and stronger R&D/commercial pipelines in Taste/Scent/H&B underpin medium-term growth into 2027+ .
  • Near-term trading: Stock sensitivity likely tied to tariff headlines and macro data; confirming margin expansion and cash generation in Q2 (seasonally strongest) is an upside catalyst .
  • Model updates: Reduce FX headwinds, reflect 4 months Pharma contribution, maintain FY25 sales/EBITDA ranges; incorporate CapEx ~6% of sales and interest expense ~$225M .