International Flavors & Fragrances, Inc.

Good day, ladies and gentlemen. At this time, I would like to welcome everyone to the IFF Third Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode until the formal question and answer portion of the call. To ask a question at that time, please press star and 1 on your touchtone phone. If you would like to remove your name from the queue, please press the pound key. Participants will be announced by their name and company. In order to give all participants an opportunity to ask their questions, we request a limit of one question per person. I would now like to introduce Michael DeVoe, Head of Investor Relations. You may begin.

Thank you. Good morning, good afternoon, and good evening, everyone. Welcome to IFF's third quarter 2020 conference call. Yesterday evening, we distributed a press release announcing our financial results. A copy of the release can be found on our IR website at ir.iff.com. Please note that this call is being recorded live and will be available for replay. If that you please take a moment to review our forward-looking statements. During the call, we will be making forward-looking statements about the company's performance, particularly with regard to our outlook for the fourth quarter and full year 2020. These statements are based on how we see things today and contain elements of uncertainty. For additional information concerning the factors that can cause actual results to differ materially from our forward-looking statements, please refer to our cautionary statement and risk factors stated in our yesterday's press release. Today's presentation will include non-GAAP financial measures, which exclude those items that we believe affect comparability. A reconciliation of these non-GAAP financial measures to their respective GAAP measures is available on our website as well. With me on the call today is our Chairman and CEO, Andreas Fibig, and our Executive Vice President and CFO, Rustem Zilla. We'll begin with prepared remarks and then take any questions that you may have. With that, I would now like to introduce Andreas. Thank you, Mike.

Good morning, good afternoon, everyone. Before we dive into our third quarter performance, I would like to once again take a moment to thank all of our frontline workers and dedicated colleagues around the world who have worked tirelessly throughout the course of this year to continue fueling our global supply chain and meeting our customers' needs. But every business is built to weather pandemics. But over the last few months, we have continued to show that our business is well-equipped to navigate the most unpredictable of storms. I can't thank each and every one of our passionate employees enough of their continued hard work, dedication, and focus throughout this difficult year. On today's call, I will start, as usually, by reviewing IFF's recent third quarter performance and summarizing the trends that we are experiencing across the business. before providing a more in-depth review of our year-to-date performance. Rustem will then provide a more detailed look at our third quarter financials. I will then provide an outlook on the road ahead for our business and provide an update on our merger with Groupon NMB and the integration planning efforts that are well underway. Despite the COVID-related headwinds, we saw a strong sequential improvement across all key financial metrics in Q3. We achieved 1% currency-neutral sales growth in the third quarter, a 500 pips improvement relative to our second quarter 2020 results. Outside of fine fragrance and food service, IFF's portfolio remains resilient with growth of 3% in the quarter on a currency-neutral basis and 4% year-to-date. Nearly every category, including fine fragrance and food service, is growing, led by a third consecutive quarter of double-digit currency-neutral growth in consumer fragrance. We continue to experience challenges in fine fragrance and food service, which so improved relatively in Q2 sales, declined 40% this quarter on a currency-neutral basis. These segments continue to be the most affected among our portfolio by pandemic-driven trends in retail and away-from-home channels. On our second quarter earnings call, we presented this monthly chart to provide increased transparency during the uncertain period. At the time, July finished with about 2% growth. In the subsequent months of August and September, we saw a modest deceleration in sales performance, whereas July actually largely due to weakness in fine fragrance and food service. Now let's turn to slide seven, where I would like to review our year-to-date performance 2020 basis. Our flavors category excluding food service is resilient. growing low single digits. Outside of food service, all categories are growing. Inclusions led the segment with impressive double-digit growth, followed by mid-single-digit growth in natural product solutions and savory solutions. Again, all excluding food service. From a regional perspective, growth was led by a double-digit improvement in North America and greater Asia, where new wind performance is strong. In IMI, results were challenged, which is in an area where we are focused on improving as we move forward. I want to take a moment to formally welcome our new TASTE division leader, Cassie Fortman. On October 1st, Cassie officially took over leadership of our TASTE division. She's an outstanding executive with experience across our industry and joined IFF early in 2020 as part of our succession planning for IFF as well as post our combination with NNB. In her short term with IFF, Cassie has already brought tremendous expertise and insights to our team leading IFF integration of taste with NMV food and beverage platform. With a proven track record of delivering growth and innovation at global food and beverage ingredients organizations, I'm confident Kessie will do an exceptional job leading our taste business now and the taste food and beverage division following transaction close. I also want to thank Matthias Haney, who has retired from IFF after 30 years in our industry. He had a long and successful career, and during his tenure with IFF, he has advanced our position as a leader within the taste industry. I wish him the very best for his next chapter. Overall, IFF's scent division continues to perform very well. I'm proud to share that we have achieved double-digit sales growth in consumer fragrance, this double-digit growth in fabric, care, home care, air care, and personal wash. Our new core list customers, where we recently gained access, core to our 2021 strategy, are growing more than 50% this year, and the third quarter provided a double-digit contribution to consumer fragrance growth. Particularly, I want to note that our entire consumer fragrance team have worked diligently through the pandemic to differentiate our offerings, win new business, and achieve strong market share gains. In our fragrance ingredients business, demand is strong, yet the pandemic created a raw material headwind in Q2 as we prioritized the use of our fragrance ingredients to support our fragrance compounds business, foregoing external sales. As restrictions have eased, the business improved sequentially, but on a year-to-year basis remains down slightly. The areas most impacted by COVID-19 have been food service and fine fragrances. On a year-to-date base, food service and fine fragrances are down almost 20% as COVID-related actions impacted consumer behavior as well as retail channels have been temporarily closed and travel retail is down. As I stated earlier, we are encouraged that the fine fragrance and food service improved in Q3 relative to Q2 sales on a currency-neutral basis, yet remain cautious about trends given the increase in COVID-19 infections more recently. Excluding fine fragments, tent has achieved strong currency-neutral goals, rate of plus 8% year-to-date, while taste has improved 2% on a currency-neutral basis, excluding food service. With that, I would like to pass it over to Rustin to provide more details on the third quarter.