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INTERNATIONAL FLAVORS & FRAGRANCES INC (IFF)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 was operationally solid: adjusted EPS ex amortization of $1.15 beat S&P Global consensus ($1.12) and revenue of $2.764B topped consensus ($2.701B), while GAAP EPS was $2.38 driven by a debt extinguishment gain and portfolio actions *
  • Currency-neutral sales grew 3% and currency-neutral adjusted operating EBITDA rose 6% YoY; consolidated adjusted operating EBITDA margin was 20.0% (down 40 bps reported, up ~50 bps on a comparable basis) .
  • Management reaffirmed FY2025 guidance (sales $10.6–$10.9B; adjusted operating EBITDA $2.0–$2.15B), lowered FX headwind on sales to ~1% (from ~2%), maintained ~3% headwind on EBITDA, and flagged a tougher H2 backdrop; a new $500M share repurchase authorization and a definitive agreement to sell the soy crush, concentrates & lecithin business to Bunge are incremental portfolio catalysts .
  • Leverage improved to 2.5x net debt/credit-adjusted EBITDA, supported by divestitures and debt tender; board declared a $0.40/share Q3 dividend .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue and adjusted EPS ex amortization beat consensus; management highlighted “top-line growth and improved profitability, driven by disciplined execution and a strong focus on productivity” *.
    • Segment execution: Taste (+6% comparable CN sales) and Food Ingredients (+21% comparable CN adjusted EBITDA) showed solid currency-neutral trends and margin progress (FI margin 14.6% vs 12.9% YoY) .
    • Balance sheet actions reduced leverage to 2.5x and enabled a $500M buyback; portfolio reshaping advanced via definitive agreement to divest soy crush/concentrates/lecithin (2024 revenue ~$240M) .

  • What Went Wrong

    • Reported revenue declined 4% YoY due to divestiture impacts; consolidated reported adjusted operating EBITDA fell 6% YoY (despite +6% on comparable basis) .
    • Scent adjusted operating EBITDA declined (-9% reported; -2% comparable CN), with management citing “unfavorable net pricing” in the quarter, and Fine Fragrance/Consumer Fragrance growth partly offset by Fragrance Ingredients declines .
    • H2 caution: management signaled “growth to moderate in the second half” and that 2025 currency-neutral sales growth may be at the lower end of the 1–4% range, reflecting tougher comps and market headwinds in Health and Fragrance Ingredients *.

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$2.889 $2.843 $2.764
GAAP Diluted EPS ($)$0.66 $(3.98) $2.38
Adjusted EPS ex Amortization ($)$1.16 $1.20 $1.15
Adjusted Operating EBITDA ($USD Millions)$588 $578 $552
Adjusted Operating EBITDA Margin (%)20.4% 20.3% 20.0%

Segment performance (Net Sales and Adjusted Operating EBITDA):

SegmentNet Sales ($MM) Q2 2024Net Sales ($MM) Q2 2025Adj Op EBITDA ($MM) Q2 2024Adj Op EBITDA ($MM) Q2 2025Margin (%) Q2 2024Margin (%) Q2 2025
Taste$610 $631 $127 $125 20.8% 19.8%
Food Ingredients$847 $850 $109 $124 12.9% 14.6%
Health & Biosciences$556 $577 $151 $151 27.2% 26.2%
Scent$603 $603 $143 $130 23.7% 21.6%
Pharma Solutions$273 $103 $58 $22 21.2% 21.4%
Total$2,889 $2,764 $588 $552 20.4% 20.0%

KPIs and balance sheet highlights:

KPIQ2 2025
Cash from Operations YTD ($MM)$368
Free Cash Flow YTD ($MM)$94
Net Debt / Credit Adjusted EBITDA (x)2.5x
Total Debt ($MM)$6,213
Cash & Equivalents ($MM)$816
Dividend (Q3 2025)$0.40/share
Share Repurchase Authorization$500MM (no term)

Consensus vs. Actual (S&P Global):

MetricQ2 2025 ConsensusQ2 2025 Actual
EPS ($)1.1217*1.15
Revenue ($USD Billions)2.7015*2.764
EBITDA ($USD Millions)545.4*552 (Adjusted Operating EBITDA)

*Values retrieved from S&P Global.

Notes: Company reports “Adjusted Operating EBITDA”; S&P Global “EBITDA” definitions may differ (non-GAAP taxonomy vs company presentation).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales (Total)FY 2025$10.6–$10.9B (Q1 2025) $10.6–$10.9B Maintained
Adjusted Operating EBITDAFY 2025$2.0–$2.15B (Q1 2025) $2.0–$2.15B Maintained
Comparable CN Sales GrowthFY 20251%–4% (Q1 2025) 1%–4% Maintained
Comparable CN Adj Op EBITDA GrowthFY 20255%–10% (Q1 2025) 5%–10% Maintained
FX Impact (Sales Growth)FY 2025~2% adverse (Q1 2025) ~1% adverse Lower FX headwind
FX Impact (Adj EBITDA Growth)FY 2025~3% adverse (Q1 2025) ~3% adverse Unchanged
Divestiture Impact (Sales Growth)FY 2025~7% adverse (Q1 2025) ~7% adverse Unchanged vs Q1
Divestiture Impact (Adj EBITDA Growth)FY 2025~8% adverse (Q1 2025) ~8% adverse Unchanged vs Q1
Pharma Solutions ContributionFY 2025Four months (divestiture closed May 1) Four months Unchanged
Share Repurchase AuthorizationFY 2025N/A$500MM program announced New
Interest Expense (planning)FY 2025~$225MM (CFO commentary Q1) N/A in Q2 PRInformational (call)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Tariffs & MacroMitigation via supply-chain flexibility; ~$100MM 2025 tariff exposure, targeting full mitigation through sourcing and surcharges (Q1) . Caution on consumer softness and inventory cycles (Q1) .Reaffirms guidance but expects softer H2; likely lower end of 1–4% CN sales growth due to tough comps and headwinds .Cautious tone intensifies; preparing for softer H2.
R&D & Biotech (DEB platform)Increased R&D and commercial investments; DEB JV plant CapEx (~€130M, 50/50 JV) with 2027 startup (Q1) .“Strengthening commercial and R&D pipelines” with impact in 2026 and full benefit in 2027 .Long-term innovation ramp on track.
Supply Chain & PricingProactive sourcing shifts; targeted pricing surcharges; FX headwinds detailed (Q4/Q1) .FX adverse impact to sales lowered to ~1%; EBITDA headwind ~3% unchanged .FX burden easing on sales.
Food Ingredients Margin PathMargin improved (12% in Q4 2024); target >15% by 2026 (Q1) .Q2 margin 14.6%; comparable EBITDA +21% on productivity and pricing .Progressing toward mid-teens.
Scent (Fine Fragrance, Ingredients)Fine Fragrance strong; Ingredients up in 2024; pricing normalization ahead (Q4) .Scent EBITDA down on “unfavorable net pricing”; mix steady with offsets .Normalization/pressure in Ingredients pricing.
Portfolio ActionsPharma Solutions divested (May 1); strategic alternatives for Food Ingredients (Q1) .Definitive agreement to sell soy crush/concentrates/lecithin; new $500MM buyback .Continued portfolio optimization and capital return.
Regulatory/LegalOngoing fragrance investigations and provisions (Q4/Q1) .Regulatory costs continued in Q2 adjustments .Persistent legal cost drag in non-GAAP bridge.

Management Commentary

  • “Our teams delivered top-line growth and improved profitability, driven by disciplined execution and a strong focus on productivity… reducing leverage to 2.5x, ahead of our target and reinforcing our financial position” — CEO Erik Fyrwald .
  • “We announced the expected divestiture of our soy crush, concentrates, and lecithin business… aligns with our margin enhancement strategy and supports our continued evaluation of strategic alternatives for this business” — CEO Erik Fyrwald .
  • “We remain on track to deliver our 2025 commitments… expect growth to moderate in the second half… confident in our ability to deliver profitable growth for the full year” — CEO Erik Fyrwald .

Q&A Highlights

  • Tariff exposure and mitigation: Management quantified ~$100MM 2025 tariff exposure (gross) with mitigation via supply chain optimization and targeted surcharges; aiming for full mitigation over time .
  • Food Ingredients trajectory: Margin improvement primarily productivity-driven and mix shift to higher-margin products; committed to >15% EBITDA margin by 2026 .
  • Capital allocation: Post-deleveraging to <3x, priorities are reinvestment in core businesses, selective bolt-ons, and evaluating buybacks/dividends (Q1 call); buyback now authorized .
  • Inventory cycle and macro tone: After past destocking, inventories aren’t elevated; cautious H2 stance with productivity focus to protect profitability .
  • Segment dynamics: Taste winning share across regions/categories; Scent’s Fragrance Ingredients strength in 2024 normalizing with price pressure into 2025 .

Estimates Context

  • EPS: Adjusted EPS ex amortization of $1.15 beat S&P Global consensus $1.1217; 12 estimates tracked. Revenue: $2.764B beat $2.701B consensus; 10 estimates tracked. EBITDA: Company’s adjusted operating EBITDA of $552M vs S&P Global EBITDA consensus $545.4M; note definitional differences, and S&P Global’s “actual” EBITDA recorded $506.3M for Q2 2025, reflecting taxonomy variance *.
  • Post-quarter, management reaffirmed guidance but indicated likely lower end of 1–4% CN sales growth due to H2 headwinds; models should reflect segment mix (Taste/FI strength) and Scent pricing normalization .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: The $500MM buyback and portfolio divestiture (soy crush/concentrates/lecithin) are supportive catalysts amid H2 macro caution; expect incrementally favorable FX impact on sales vs prior guidance .
  • Execution: Currency-neutral growth and margin progress in Taste and Food Ingredients underpin resilience; watch Scent’s pricing normalization and Health’s headwinds into H2 .
  • Guidance: Reaffirmed FY ranges with lowered FX sales headwind; internal tone suggests landing at low end of 1–4% CN sales growth—protecting EBITDA via productivity .
  • Balance sheet: Leverage at 2.5x (credit-adjusted basis) provides capital allocation flexibility; dividend maintained ($0.40/share for Q3) .
  • Modeling: Align EPS comparisons to company’s “Adjusted EPS ex amortization” (the consensus anchor); incorporate divestiture impacts (Pharma Solutions four months) and segment margin trajectories (FI toward mid-teens by 2026) .
  • Risk watch: Regulatory/legal costs tied to fragrance investigations remain a non-GAAP adjustment; Scent pricing pressures and Health moderation could weigh on H2 .
  • Medium term: Innovation investments (DEB/enzymes, R&D pipelines) are expected to show more tangible revenue/margin impact in 2026–2027; valuation should consider improving structural margins and portfolio simplification .