International Flavors & Fragrances, Inc.

At this time, I would like to welcome everyone to the IFS first quarter 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 one on your telephone keypad. If you would like to remove your name from the queue, please press star two. 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 first quarter 2024 conference call. Yesterday afternoon, we issued 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. During the call, we will be making forward-looking statements about the company's performance and outlook. 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, please refer to our cautionary statement and risk factors contained in our 10-K and 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 set forth in the press release that we issued yesterday. With me on the call today is our CEO, Eric Fehrwald, and our Executive Vice President, CFO, and Business Transformation Officer, Glenn Richter. We will begin with prepared remarks and then take any questions you have at the end. With that, I would now like to turn the call over to Eric.

Well, thank you, Mike, and hello, everyone. I'm excited to join you all today to discuss our solid performance in the first quarter and what we are seeing across the business so far this year. Today, we'll focus on our financial results, our outlook for the balance of the year, and our increased confidence and our reiterated guidance, where we now see us trending toward the upper end. Now, before moving forward, I want to acknowledge Glenn. who today is announcing his plan to retire at the end of 2024 after three successful years with the company. During his tenure, Glenn has driven multiple actions to improve our balance sheet and position the company for financial success. We've benefited from his experience and commitment to transformation and his ongoing leadership to position IFF to drive long-term profitable market share growth. He has also been very helpful to me already as I've come on to the IFF team. Now with this announcement, we have started a succession plan to evaluate internal and external candidates to succeed Glenn. The Board and I are grateful for all Glenn has helped IFF accomplish and look forward to his continued leadership as we identify a successor and ensure a smooth transition. Now, turning to slide six, we are off to a good start at IFF. We achieved volume growth for the first time since the first quarter of 2022, as volumes grew mid-single digit in the first quarter of 2024, with strong contributions from SENT, Nourish, and Health and Biosciences. We are also encouraged by the double-digit comparable adjusted EBITDA growth as we not only benefited from volume growth, but also from productivity gains across our businesses. At the same time, we made important progress focusing our portfolio with closing the divestiture of the cosmetics ingredients business and the announced sale of our pharma solutions business. We expect to complete the pharma transaction in the first half of 2025. The proceeds from these divestitures will help further strengthen our capital structure, address our deleveraging goal of three times net debt to credit adjusted EBITDA, and refocus us on high growth areas of our business. With our solid performance in the first quarter and our expectations for the remainder of the year, we are cautiously optimistic about the remainder of 2024 and now expect full year 2024 results, to trend toward the higher end of our previously announced guidance ranges. It's still early in the year and there is a lot more work to be done, but we are focused on building on our momentum to energize our team and return to sustainable, profitable growth. Turning to slide seven. Let me take a step back for a moment and share what I've learned during my first 90 days here at IFF. I've spent time getting to know our teams all over the world and meeting with many of our customers. And I'm grateful for the productive discussions. And what I've found is that IFF has lots of top talent and incredible innovation capabilities, but we're not yet realizing our full potential. With a new leadership perspective on our priorities and a renewed focus on execution by our executive leadership team, we are getting back to basics. And I'm optimistic about what we will do from here. First, we are strengthening our balance sheet and capital structure to create the flexibility we need to achieve our long-term goals. My assessment is we have not consistently delivered on our financial commitments largely due to a need for more strategic and organization operating model clarity to enable us to better execute against our goals. I think we are now getting the clarity we need and have taken some decisive steps in the first quarter to help us start to realize more of our potential. We recently right-sized our quarterly dividend to align with the market in our long-term cash flow generation and have made divestiture moves, including cosmetics and pharma solutions, to focus our portfolio and drive debt reduction. We also recently announced and are implementing our refocused IFF operating model, which is now business-led supported by Lean Functions. This includes the appointment of Ana Paula Mendonca, who has dedicated her career to the advancement of fragrance at IFF as the president of Scent. This enables Simon Harriot to focus his full attention on driving profitable growth in our health and biosciences business unit. We will also put more focus on our flavors and functional ingredients units within our Nourish division. With this operating model change, we have also changed the reporting structure of several of our functions, including R&D, operations, finance, and HR, to go directly into our business unit presidents, so they have the full end-to-end responsibility and accountability for business execution. Their goals will include delivering growth above market with a margin structure that gets us in line with or better than leading peers. Now to make this work, we have also established an operating system, which is a simple set of management processes that collectively define how IFF makes decisions and creates value, provides a framework for standardized processes, responsibilities, and metrics and defines the tools to help managers drive continuous improvement. We believe this will create greater visibility to track performance, so we drive execution to deliver results in the current period in ways that strengthen us for the coming years. We are also introducing an operating philosophy based on four main pillars. Number one, customer focus to drive profitable market share growth. Number two, innovation powerhouse to create sustainable new products and other innovations customers value and do this faster. Number three, operational excellence to lead a relentless focus on safety, quality, continuous improvement, and competitive cost structures. And four, people. people who are engaged across the organization. We expect that our business-empowered model and operating system will enhance collaboration to profitably win with customers, and by doing so, deliver strong financial performance over time. And while it's still early, I am pleased and encouraged by the energy and commitment of our teams all around the world. With that, I'll now pass it over to Glenn to dive deeper into our results for the first quarter. Glenn.