INTERNATIONAL FLAVORS & FRAGRANCES INC (IFF)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 revenue of $2.694B and EPS ex amortization of $1.05 modestly beat S&P Global consensus ($2.6347B and $1.02, respectively); adjusted operating EBITDA rose 7% on a comparable, currency-neutral basis with 130 bps margin expansion to 19.3% on disciplined productivity and pricing . Consensus values marked with an asterisk; see Estimates Context for source and disclaimer.
• The company reaffirmed FY25 sales ($10.6–$10.9B) and adjusted operating EBITDA ($2.0–$2.15B) guidance; expects to finish at the low end of 1%–4% comparable currency-neutral sales growth and near the mid-point of 5%–10% EBITDA growth; FX: ~1% sales and ~3% EBITDA headwind; divestitures: ~7% sales and ~8% EBITDA headwind .
• Segment performance was mixed: Scent +5% comparable currency-neutral sales with Fine Fragrance +20%, Taste +2%, H&B flat (North America health softness), and Food Ingredients -3% with strong 24% EBITDA growth on productivity and portfolio pruning .
• Management emphasized productivity-driven margin gains, balance sheet strength (net debt/credit-adjusted EBITDA 2.5x), and active capital return (Q4 buyback program commenced, targeting at least dilution offset) while remaining prudent on Q4 top-line given a softer macro/volume backdrop .

What Went Well and What Went Wrong

• What Went Well

  • Margin execution: “Profitability in the quarter improved high-single digits year-over-year, with margin expansion driven predominantly by productivity,” CEO said; consolidated adjusted operating EBITDA margin was 19.3% (+130 bps) .
  • Scent outperformance: Scent grew 5% on a comparable, currency-neutral basis, with Fine Fragrance +20% YoY; volume drove 6% growth in Scent adjusted operating EBITDA to $135M .
  • Food Ingredients margin recovery: Despite -3% comparable currency-neutral sales, segment adjusted operating EBITDA rose 24% to $106M, margin 12.8%, on productivity and pruning lower-margin business .

• What Went Wrong

  • Macro/volume headwinds: Management is “a little bit more prudent on our top-line projection” for Q4 due to soft end-market volumes in Food & Beverage and HPC, and selective inventory normalization in North America .
  • H&B North America softness: H&B sales flat YoY with North America health weakness; management expects improvement in 2026 and fuller recovery in 2027 .
  • Non-GAAP reconciling items and portfolio noise: Q3 included a $108M loss on assets held for sale (soy crush/concentrates/leci thin) impacting GAAP EPS; company also noted revisions to prior period tax accounting in its 10-Q (immaterial historically) .

Financial Results

Key metrics (oldest → newest):

Segment breakdown – Q3 2025:

Operating and balance sheet KPIs:

Narrative context: Reported sales declined 8% YoY due to portfolio changes; on a comparable basis, currency-neutral sales were flat against a strong +9% comp, with adjusted EBITDA +7% from productivity and pricing .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Profitability in the quarter improved high-single digits year-over-year, with margin expansion driven predominantly by productivity. By maintaining a disciplined focus on operational excellence, we are driving sustained profitability while investing in IFF for long-term success.” – CEO .
• “We believe that this is the right call to maintain our full-year guidance, even with a wider range implied for the fourth quarter.” – CFO .
• “Our scent and taste businesses both continued to deliver solid growth… Fine Fragrance growth remained strong – growing 20% vs prior year.” – CFO .
• “In health and biosciences… I absolutely expect to see improvements, particularly in the second half of 2026… and then a full recovery… in 2027.” – CEO .
• “In terms of the share buyback program… our plan is to target offsetting dilution (~$80M annualized)… assume ~$20M in Q4.” – CFO .

Q&A Highlights

• Q4 prudence: Management lowered Q4 top-line expectations vs Q3 (despite slightly easier comps) due to soft volumes in Food & Beverage/HPC and selective NA inventory normalization; core problem areas (Fragrance Ingredients and H&B North America) are ~5% of sales and under active remediation .
• H&B North America recovery: New leadership and increased investment in innovation/commercial capability; improvement expected to start in 2026 with fuller recovery in 2027 .
• Food Ingredients strategic path: Margin trajectory from ~9% (2023) to mid-teens is on track; strong interest from PE/strategics; update expected with Q4 call; continued pruning of lower-margin businesses .
• Free cash flow: FY25 now expected modestly below ~$500M on higher inventories and one-time costs, partially offset by lower CapEx; working capital improvement targeted in Q4 and 2026 .
• Capital allocation: Q4 buyback commenced (dilution-plus framework); pending Bunge divestiture net proceeds expected ~$90M .

Estimates Context

Q3 2025 results vs S&P Global consensus:

• Both revenue and EPS ex amortization (Primary EPS) were modest beats. Company reaffirmed FY25 guidance, signaling a prudent Q4 setup likely to keep Street FY revenue at the low end of growth range and EBITDA near mid-point absent macro acceleration .
• FY 2025 consensus was not available via the tool during this query window.

Values retrieved from S&P Global*.

Key Takeaways for Investors

• Small beat, strong margin control: Q3 delivered modest top-line and EPS ex amortization beats with 130 bps margin expansion on productivity; near-term debate shifts to Q4 prudence and 2026 acceleration .
• Guidance intact with cautious Q4: FY25 sales/EBITDA ranges maintained; mgmt targets low end of sales growth and mid-point of EBITDA growth, citing softer volumes and NA inventory management .
• Scent remains the growth engine: Fine Fragrance +20% is outsized; shift toward higher-value specialties in Fragrance Ingredients continues; watch sustainability of high-end demand and specialty pipeline .
• Food Ingredients margin repair: -3% sales but +24% EBITDA; continued portfolio pruning and productivity support mid-teen EBITDA trajectory; strategic alternatives progressing (update expected with Q4) .
• H&B North America is the swing factor: Near-term drag; recovery expected from H2’26; incremental investments and capacity adds underway .
• Balance sheet and capital return: Leverage at 2.5x; quarterly dividend declared; buyback under way to at least offset dilution—provides some downside support .
• Risks: Macro/volume softness, NA inventory dynamics, FX headwinds (~1% sales/~3% EBITDA), ongoing regulatory/legal costs, and portfolio transaction timing .

Management and document citations:

• Q3 2025 8-K/press release, including segment performance, non-GAAP reconciliations, guidance and FX/divestiture impacts .
• Q3 2025 earnings call transcript for outlook, FCF, buyback, and qualitative drivers .
• Q2 2025 8-K for prior guidance baseline, share repurchase authorization, leverage, and segment color .
• Q1 2025 8-K and call for early-year guidance, tariff exposure, and reinvestment posture .
• Other Q4 2025 press releases (dividend; BASF collaboration; green hydrogen facility) as strategic/backdrop items .