Q4 2025 Earnings Call Transcript

At this time, I would like to welcome everyone to the International Flavors & Fragrances Inc. Fourth Quarter and Full Year 2025 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, if you would like to remove your name from the queue, please press 2. 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 Bender, Head of Investor Relations. You may begin. Thank you.

Good morning, good afternoon, and good evening, everyone. Welcome to International Flavors & Fragrances Inc.'s Fourth Quarter and Full Year 2025 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 business 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 risk factors contained in our 10-Ks and press release, both of which can be found on our website.

Today's presentation will include non-GAAP financial measures which exclude these 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. Also, please note that all sales and EBITDA growth numbers that we will be speaking to on the call are all on a comparable currency-neutral basis unless otherwise noted. With me on the call today is our CEO, Jon Erik Fyrwald, and our CFO, Michael Deveau.

We will begin with prepared remarks and then take questions at the end. With that, I would now like to turn the call over to Jon Erik Fyrwald. Thanks, Mike, and hello, everyone. Thanks for joining us today.

International Flavors & Fragrances Inc.'s fourth quarter and full year 2025 results reflect a continued focus on disciplined execution and improvements across the business to further strengthen our position in the market. I will start today's call by briefly summarizing the progress we continue to make in executing our strategic priorities, followed by a few highlights of how this translated to our 2025 financial results. I will then turn the call over to Michael Deveau, who will provide more details on fourth quarter segment performance and our outlook for 2026. Turning to Slide 6. In 2025, our team focused on strengthening our ability to drive profitable growth while also strengthening our balance sheet.

We continue to reinvest in a disciplined way across our high value core businesses increasing R&D, commercial capability, and manufacturing capacity, investments that will pay off for years to come. And we did this while we delivered the full year financial commitments we set out the 2025. And while there is a lot more to do, I am proud of how our global team continues to strengthen our ability to serve our customers with leading innovations and deliver productivity even in a challenging volatile economic environment. Our strength in balance sheet reflects our more disciplined capital allocation strategy, with our net debt to credit adjusted EBITDA down to 2.6. Our increased investments in innovation and commercial capabilities and CapEx and productivity initiatives are delivering today and making us stronger for the future.

We have also taken strategic action to sharpen our portfolio so we can focus on high value innovation-driven businesses. To recap, we completed the divestitures of Pharma Solutions, nitrocellulose, and René Laurent businesses and also announced an agreement to sell our soy crush concentrates and lecithin businesses to Bunge, which we expect to happen by April. Most recently, we officially launched the sale process for our Food Ingredients business. As we communicated in August, we began exploring strategic options for our Food Ingredients business as part of our portfolio optimization.

And following several months of extensive preparation by our team, we formally launched a disciplined and competitive sale process and as of two weeks ago, are officially in the market. And I am very pleased with the progress we have made and believe this is the right next step for both the Food Ingredients business and for our Taste, Scent, Health and Bioscience divisions. We are very encouraged by the depth and quality of interest from strategic and financial sponsors and are confident in our ability to execute this process thoughtfully and in the best interest of our shareholders. We will provide additional updates as appropriate.

We are confident that the strength of our people, strategy, and execution positions us to deliver on our priorities for 2026 and beyond. We have the right leadership team in place, an engaged and supportive board, and an incredibly talented team of International Flavors & Fragrances Inc. colleagues. Now while macroeconomic uncertainty will continue to persist through 2026, I am pleased how we are entering the year and have strong conviction in our ability to achieve consistent profitable growth and create long term value for our shareholders. Turning to Slide 7. We achieved solid sales growth in 2025 against this

strong 6% year ago comparable in a tough macroeconomic environment. Over the last two years, we delivered average sales growth of 4%. Our 2025 performance was led by Taste, which grew sales by 4% and grew EBITDA by 10%. In Health and Biosciences, sales improved 3% and the team delivered a 7% increase in EBITDA.

Scent sales grew 3%, against a strong year ago comparison of 12% and increased EBITDA by 2%. The double-digit sales growth in Fine Fragrance was partially offset by negative growth in Fragrance Ingredients, where we saw double-digit declines in the commodity ingredients sales. In Food Ingredients, the team has done a great job continuing to drive margin improvement. And while sales were down, partly due to soft demand and partly due to the strategic exit of low margin business, we achieved 10% EBITDA growth and 150 basis points of EBITDA margin expansion.

And on a consolidated basis, our overall profitability improved in 2025 as we delivered 7% EBITDA growth with 100 basis points of margin expansion, through volume and productivity gains as well as favorable net pricing. Now with that, I will pass the call over to Michael to offer a closer look at this quarter's consolidated results. Michael?

Thank you, Erik, and thanks, everyone, for joining. In the fourth quarter, International Flavors & Fragrances Inc. generated revenue of nearly $2,600,000,000 with growth in nearly all divisions. Performance was led by mid single digit growth in Health and Biosciences and Scent as well as low single digit growth in Taste.

Our sales grew 1% for the quarter,

against the 6% year ago comparable, and were up approximately 4% on a two-year average basis. EBITDA totaled $437,000,000 for the fourth quarter, a 7% increase, primarily

driven by volume growth and our ongoing productivity initiatives. Our EBITDA margin also increased by 90 basis points to 16.9%. On Slide 9, I will provide a closer look at our performance by

business segment. In Taste, sales increased 2% to $588,000,000 with growth in all regions, including high single digit growth in North America, driven by new wins. The segment also recorded a very strong quarter of profitability

with EBITDA of $94,000,000, a 17% increase.

Profitability gains driven primarily by favorable net pricing and cost discipline. Food Ingredient sales of $802,000,000 were down 4% as softness in Protein Solutions and Emulsifiers and Sweeteners offset growth in Systems and Inclusions.

It is worth noting that a part of our top line decline in the fourth quarter and on a full year basis for Food Ingredients was driven by a proactive exit of low margin business as well as lost sales due to sanctions in Russia in Emulsifiers. Profitability for Food Ingredients declined 11% in the quarter, to $82,000,000 stemming from the volume declines and unfavorable net pricing. Our Health and Biosciences segment achieved sales of $589,000,000, an increase of 5% with growth across nearly all businesses. The standouts in the quarter were Food Biosciences and Animal Nutrition, both growing double digits.

Home and Personal Care also continued to be strong, increasing high single digits. As we shared last quarter, Health, while improved sequentially from Q3, was down low single digits. Under new leadership, the team has started to execute their improvement plan. We continue to believe trends will improve over the course of 2026. From a profitability standpoint, Health and Biosciences delivered EBITDA of $155,000,000 the fourth quarter, an increase of 20% due to volume growth and productivity gains.

Lastly, our Scent segment delivered sales of $610,000,000, representing 4% growth. Performance in the fourth quarter was driven by continued strength in Fine Fragrance, which increased 10% and mid single digit growth in Consumer Fragrance. Fragrance Ingredients remained under pressure due to continued market softness and price competition on the commodity portion of our portfolio. EBITDA for this segment increased 1% to $106,000,000 as benefits from volume growth and productivity gains were partially offset by unfavorable net pricing specifically in Fragrance Ingredients.

Turning to Slide 10, cash flow from operations totaled $850,000,000 for the full year, and CapEx totaled $594,000,000 or approximately 5.5% of sales. Our free cash flow position for the full year totaled $256,000,000. Included in this number is approximately $300,000,000 of Reg G related charges primarily driven by our divestiture activities, which accelerated in the second half of the year due to the potential sale of Food Ingredients. Working capital also represented an outflow of approximately $166,000,000 reflected higher inventory levels in strategic areas along with changes in accounts receivable and accounts payable.

We made meaningful progress improving inventory in the second half of the year and as we look ahead, disciplined execution across all elements of working capital will be a key priority for us in 2026. Year to date, we returned $409,000,000 to our shareholders through dividends, and an additional $38,000,000 through share repurchases, as we started our repurchase program in the fourth quarter. As a reminder, at minimum, we expect to offset annual share dilution of approximately $80,000,000 to $100,000,000 per year. Our cash and cash equivalents finished at $590,000,000 and our gross debt at the end of the year was approximately $6,000,000,000, which is a decrease of nearly $3,000,000,000 compared to 2024. Our trailing twelve month credit adjusted EBITDA totaled $2,100,000,000. Our net debt to credit adjusted EBITDA ended 2025 at 2.6 times, improving from 3.8 times at the 2024. Before turning to our outlook for 2026, I would like to briefly reiterate a point Erik made earlier on Food Ingredients.

We believe pursuing a sale for the Food Ingredients business remains the right path forward. With our capital structure now strengthened, and improving operational performance, and margin expansion ahead for Food Ingredients, we are under no pressure to sell. The business has a strong operating plan. We are confident we can continue to create value whether a transaction occurs or not.

This potential sale is about capturing full value for our shareholders, doing what is right for both Food Ingredients and our broader portfolio. Throughout the process, we remain focused on long term shareholder value, and taking actions that make the most strategic sense. Now on Slide 11, I would like to share our outlook for 2026. We believe we are well positioned for the year ahead and we are cautiously optimistic that we can deliver growth, margin improvement and cash flow generation this year. As we navigate the volatile geopolitical landscape and uncertain market conditions, the strength of our pipeline, and the benefits of our reinvestment efforts give us confidence moving forward.

We believe our outlook reflects the balanced consideration of both current market conditions and the potential for unforeseen opportunities and challenges throughout the year, hence the ranges we are providing. Coming off a solid year we had in 2025, we expect to continue to drive financial performance across the company. For the full year 2026, we expect sales to be in the range of $10,500,000,000 to $10,800,000,000 representing comparable currency-neutral growth of 1% to 4%. We believe Taste, Health and Biosciences, and Scent will continue to drive our top line growth supported by new wins and our innovation pipeline.

We expect that growth will primarily be driven by year over year improvements in volume. From a profitability standpoint, we expect to deliver full year 2026 EBITDA between $2,050,000,000 and $2,150,000,000 representing comparable currency-neutral growth of 3% to 8%. It is important to note that we will also continue to selectively reinvest in the business, while maintaining a disciplined focus on near term profitability. We expect our productivity and efficiency gains will fully fund our ability to reinvest in innovation and commercial capabilities across our highest value businesses.

We believe these investments will continue to enhance performance, strengthen our competitive position and deliver attractive returns over time. For the full year, we expect FX will have approximately one percentage point positive impact to sales and a negligible impact on EBITDA. From a calendarization perspective, our year over year comparisons are strongest in the first half, particularly in Q1, where we have certain favorable one-time items from last year, including the contribution of divested businesses. As a result, we expect sales and EBITDA will be more muted in the first half of 2026. More specifically, we expect modest EBITDA growth in the first quarter versus our like-for-like first quarter 2025 base of approximately $55,000,000 adjusting for divestitures.

As we move through the year, comparisons will ease, and we expect performance to improve supported by our pipeline and ongoing productivity actions. We expect that this will drive improved leverage across the P&L and year over year growth should progressively improve each quarter. As I said earlier, operating cash flow will be a key priority for 2026. We expect overall cash generation will improve year over year excluding Reg G and one-time costs, which will most likely be higher than 2025, as we pursue a potential sale of Food Ingredients. Teams across the businesses are driving working capital improvements across inventory, payables, and receivables, and when combined with profitability growth, and lower incentive compensation payouts, we should see a meaningful cash flow improvement versus 2025. CapEx is expected to be around 6% of sales, and will be carefully managed, focused on highest return opportunities, including capacity expansion, network optimization, innovation to support long term growth.

To further embed disciplined cash management, we have introduced an incentive compensation metric for 2026 tied to operating cash flow conversion, defined as EBITDA minus CapEx minus the change in net working capital. We are also evaluating additional cash flow metrics for our long term incentive program to strengthen alignment on cash flow generation, particularly for 2027. With that, I would now like to turn the call back over to Erik.

Thanks, Michael. As we look ahead to 2026, I see considerable opportunities for us to continue strengthening International Flavors & Fragrances Inc. with even more competitive, innovative, and customer-focused businesses amid a continued challenging macro environment. Innovation is the key driver for us in 2026. Our investments in enzyme capacity, naturals, health, and new molecules powered by our biotechnology and AI capabilities, will increase our ability to compete and win with our customers across key business segments. We also remain focused on enhancing our competitiveness in our Health business by strengthening commercial execution through the steps we discussed before.

In Fragrance Ingredients, we continue to shift our portfolio toward higher growth and higher value-added specialties, by leveraging R&D, naturals, chemistry, and biotech for new molecule and delivery system development. At the same time, we are committed to continuing to drive significant productivity, furthering our digital transformation, and advancing our AI-enabled operational excellence to fund reinvestment and improve margins. And we will drive cash flow as a priority over the next eighteen months and are committed to a very large reduction in below-the-line or Reg G costs over that time period.

Lastly, we will continue the sale process for Food Ingredients

and we will ensure the right outcome for this terrific business and be able to achieve our end goal of having three high value and growth innovation-driven businesses with Taste

Scent,

and Health and Biosciences powered by nature and biotechnology. To close, I want to reiterate that the International Flavors & Fragrances Inc. businesses are strong and performing well. We are doing exactly what we said we would do, and we have a clear path forward that aligns and motivates our people to continuously improve our service to customers, and deliver for International Flavors & Fragrances Inc. The progress we have made in strengthening the foundation of our business, balance sheet and innovation and commercial pipelines, is significant and motivates us to do even more.

And while I am very proud of what our team has accomplished, there is more we will do as we will be laser focused in 2026 on driving profitable growth, cash flow improvement, and maximizing value creation over time. We are investing for the future, and we have a great team to execute for today.

Thank you,

we will now open the line for questions.

Thank you.

If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove your name from the queue, please press 2. Again, to ask a question, please press 1. We do ask that you please limit yourself to asking only one question. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. And the first question will go to the line of Kristen Owen with Oppenheimer.

Kristen, your line is open. Hi. Good morning. Thank you for the question.

So I wanted to ask about your assumptions around price and volume in 2026. And we are hearing from a lot of the CPGs this shift migrates toward a greater emphasis on volume. I am just trying to think about how that might upstream to you all. And just as a related question, can you remind us the incremental margin on volume versus price? Thank you.

Yes. Thank you, Kristen, for that question. I will take it.

First of all, our expected growth for 2026 is volume-driven.

And as you mentioned, CPG companies shift

shifting emphasis to more volume growth, that is a good thing for International Flavors & Fragrances Inc. and the industry as a whole. So we like seeing that trend as you mentioned. And then finally, incremental margins are roughly 30% to 35% on volumes depending on the business segment.

Thank you, Kristen. Our next question will go to the line of Nicola Tang with BNP Paribas. Nicola, your line is open. Hi, everyone.

I am sticking with a question on top. I was wondering if you could provide some color on your assumptions behind the top and bottom end of your 1% to 4% currency-neutral sales outlook. Expect all of your divisions to grow within that range? And also, I noted in Q4, that currency-neutral sales came in better than in the three core divisions.

And I was wondering if we should read this as a signal of improving underlying market trends or whether there were specific drivers to be aware of, I do not know, new wins or timing of orders?

Or anything like that?

Thanks. I will take this one. Nicola, thank you for the question. As I think about 2026, think we would say we are cautiously optimistic going forward, really driven by a strong pipeline, the reinvestment we made over the last eighteen months.

In addition, as Erik just said, a good thing for us as well. We are hearing customers talk more about volumes for 2026, which is positive. So when you think about our 1% to 4% guidance range, it assumes essentially the current market conditions that we see today and as we exited the fourth quarter. For us to achieve the higher end or the 4% range, I think we would need to see volumes at the end market improve more broadly, kind of return to what I would say is more normalized levels in terms of market growth.

And the opposite is probably true on the lower end of the guidance range or the 1%. To your point on Q4 2025, it was marginally better than we expected from a top line perspective, with good improvements in Taste, Scent, and H&B. This was primarily driven by new wins, which is a positive signal. But it is only one quarter.

So as I think about, again, 2026 overall, we do believe that the three businesses will grow in 2026 within the sales guidance range. To a lesser extent overall. But we also do expect Food Ingredients will also grow, maybe just a little bit. Fortunately, we have a very diverse business for balanced region, category, and customer exposure.

And that gives us our confidence that we are resilient and that we believe we can grow as we go into 2026.

Thank you, Nicola. Our next question will go to the line of Patrick Cunningham with Citigroup.

Patrick, your line is open. Hi. Good morning. Thank you. In Food Ingredients, could you comment on any early interest in the sale? Were there any inbounds prior to the formal process? And then any details on timing and deployment of proceeds would be greatly appreciated as well.

Sure. Thank you for the question, Patrick.

As I said on our last call, we

did have early interest from both strategics and private equity firms and all of those firms continue to show strong interest. And then two weeks ago, we officially launched the sale process and have had additional firms express interest. So I am very optimistic about the process. But as Michael said,

the Food Ingredients business is performing well, had double digit

EBITDA growth last year. Continue to see solid earnings growth for this year. So we will only sell the business if it creates value, but I am very optimistic we can make happen. Now as for proceeds, we will use them to buy back shares to offset as much dilution as possible and we will pay down debt to stay about where we are on debt to EBITDA ratio ensuring that we stay below the 3.0 target.

Thank you, Patrick. Our next question will go to the line of John Roberts with Mizuho. John, your line is open.

Thank you. Price was down in the Scent segment. Higher price fragrance outperformed—Fine Fragrance outperformed Consumer Fragrance. You are shifting the Scent Ingredients towards higher priced products. So I would have thought mix alone would have improved price. What is going on with price there?

No. Thanks, John. You know, you are correct that the Fine Fragrance business is our highest margin business, so that was a positive contribution to mix overall. Pricing, actually, in the quarter was flat year over year, and so, really, the margin pressure came on the input cost side where, as you know, there is a bit of a lag in terms of overall price.

This was primarily related to some of the index pricing agreements that we have, and so similar to previous years as we move forward, we expect to fully recover this over time. One of your points on just the Fragrance Ingredients business overall—that shift from more commodity to more captive or proprietary ingredients. We started that migration, but it will take some time. And so as we go through 2026, we will make continuous progress.

But I do want to just level set to make sure—something that will be a theme—as we go through 2026 and as we get through the second half, when we will start to see some stuff come online overall. But it is a process that will take somewhat of all of 2026 to make that migration overall.

Thank you, John. Our next question will go to the line of Kevin McCarthy with Vertical Research Partners. Kevin, your line is open.

Yes.

Thank you very much, and good morning. I thought your Health and Biosciences business

finished on a somewhat stronger note. Can you elaborate on what drove the margin uplift there of 160 basis points year over year as the

health business.

Starting to stabilize and come back at all and maybe you could comment on the margin outlook for 2026 in that segment, what kind of benefits you might from volume growth and productivity?

Sure. Thanks for the question, Kevin. First of all, our Health and Biosciences did deliver strong fourth quarter performance. And that was due to both strong volume growth and productivity that enhanced the margins.

What I would say is the team is very focused on strengthening our commercial and innovation capabilities and pipelines and delivering those pipelines. And I am very proud of the progress that they are making. More to do, but making progress. As Michael mentioned in the

beginning comments,

the health business still has some

decline—less decline than in the third quarter in the fourth quarter. We see that business flattening out in the first half of this year and then starting to grow in the second of this year. So outside of the health business, very robust growth. The health business is starting to turn, and we expect it to see positive results from that by the second half.

Thank you, Kevin. Our next question goes to the line of Josh Spector with UBS. Josh, your line is open.

Yeah. Hi. Good morning. I wanted to ask on free cash flow. I think previously, you thought for 2025, you would do a little bit less than $500,000,000. That came in a couple $100,000,000 short. You talked about some investments in inventory. So can you talk about why you did that? Is that structural then how do you think free cash flow evolves into 2026?

Thanks, Josh. Great question. Yes. We expect the free cash flow to be modestly lower than $500,000,000 for the full year.

Essentially, the difference of where we ended versus our commentary in the second and third quarter really relate to three things. One, we did see a little bit of an increase in, what I would say, one-time Reg G related cost. As we start to move forward with the Food Ingredients potential sale. We actually have seen some step up in costs associated with that potential transaction.

Number two, exactly what you said, working capital came in a bit higher than we expected. Part of this is driven by inventory. Now while the team had a really good effort and progress in terms of where we were in the first half of the year to the second half improving inventory, we are being strategic on some elements where we are taking advantage of supply and potential pricing to making sure we keep adequate inventory that as we grow our business into 2026, we are in the best possible position. And so that was a little bit of a build.

But in addition to that, we also had some payables that are really just timing issues. I think as we go through 2026, we will see that come back. Now overall with respect to AP, as I explained in our prepared remarks, you know, cash flow improvement for us in 2026 is a key priority. And while we do expect the Reg G cost will remain high, we are being very disciplined in terms of cash management now.

Point I made earlier on my prepared remarks. We even added the compensation metric in there to drive this. So for 2026, I do expect to see a meaningful improvement driven by profitability growth, working capital, lower interest expense, and a lower payout relative to what we had in 2025 with respect to incentive comp. Overall.

And so that meaningful progress will occur. I am going to refrain on giving a specific target at this point, only because I want to get a little bit more clarity on the Food Ingredients potential sale. I think once we have the visibility there, we will come back and we will give more formal guidance on a cash flow number. But I will tell you that what I can confidently say is that we are doing everything we can in our power to making sure we drive cash flow performance in 2026.

Yeah. Let me just add quickly that I am not as proud about the management of inventories. In the first half of the year, we let inventories get higher than we had targeted. Michael had us put a lot of emphasis in the fourth quarter on driving down inventories, which is never a good thing to do quickly at the end of the year.

But we did it and we have put in—Michael has driven with the business unit presidents a much better disciplined process to ensure that we manage inventories well throughout 2026 and for the future.

Thank you, Erik, and thank you, Josh, for your question. The question will go to the line of David Begleiter with Deutsche Bank. David, your line is open.

Thank you. Good morning.

Erik, just on the R&D effort, where do you stand on this journey to reinvigorate the R&D pipeline?

And your innovation efforts? And are there any metrics that you are tracking that

that you can share with us on this progress? Thank you. Thanks for the question, David, and it gets right to the heart of the key strategy of the company is to drive innovation. So as you remember, we invested about $100,000,000 in 2025 into our innovation capabilities and high growth high margin categories across the company.

And we have made a lot of progress across Scent, Health and Bioscience, and Taste innovation pipelines. And as I also mentioned earlier, we will start to see the benefits of that in 2026 and more into 2027. And I think we are really pleased with the progress that we are making. I think our customers are very pleased with it. I just came back from ACI, the American Cleaning Institute, where we engaged with many of our large CPG company customers and it was really great to have those engagements and hear about the progress that our teams are making.

And it was also a very big honor to get awards from two of the largest CPG companies for our innovation together with them. I think bodes well for the future. So making good progress, David, and you will see it more fruition in terms of real results starting in the second half of this year and then much more into 2027. Thanks.

Thank you, David. Our next question goes to the line of Ghansham Panjabi with Baird. Ghansham, your line is open.

Yeah. Thanks, operator. Good morning, everybody. Just going back to the Taste segment for the fourth quarter and the performance in North America specifically, I think you called out high single digit growth.

Can you just give us a bit more color as to what drove that? And then was that the component that drove margins the degree that it did just from favorable mix specific to North America? Thank you.

Thanks, Ghansham. This team is doing a really good job overall, in terms of their overall performance. Look at it from a regional perspective, all regions in Q4 grew. Contributions from both volume and price.

When we look at the drivers of growth, really, what stood out is North America. That is really driven by new wins. So team has been really, really focused on making sure they grow their pipeline and increase their win rate, and what you are starting to see materialize was the success that they had on some of those launches overall. In addition, Latin America was strong.

And then when I balance it out, I think about EMEA and Greater Asia. They grew up to a little bit of a lesser extent. And so when I think about the margin performance, the large and the largest contributor was really productivity. And so when you actually look across COGS and SG&A, team did an excellent job of really trying to drive that cost management and making sure we are driving productivity within the system of their business.

So that was a big success to the overall performance and profitability. In addition, they also did have some positive contribution from favorable net price to input cost. And so when you shape this up between volume growth, plus good productivity, and some favorability with respect to price to input cost, shaped up to a really nice quarter from a profitability perspective overall.

Thank you, Ghansham. Our next question will go to the line of Lisa De Neve with Morgan Stanley. Lisa, your line is open. Hi.

Thank you for taking my question. I had a little bit a question on what is IFF's view on the GLP-1 theme where we have seen a little bit of a resurgence of the theme post the oral dosage approvals. I mean, can you share about what you believe the GLP-1 uptake will mean for International Flavors & Fragrances Inc. solutions demand? And then more broadly, following on from that, across all your divisions, I mean, what would you consider to be, like, the key market trends that will drive your growth over the coming years?

Thank you.

Thank you for the question, Lisa, and being on the board of Eli Lilly, I have got a front row seat to the GLP-1 dynamic. And I am very proud of how our International Flavors & Fragrances Inc. team has responded to this both challenge and opportunity. What I would say is we are creating it into an opportunity. We have had an alliance across our business units putting together how our products can help our customers develop great products for GLP-1 consumers, and we have put together an innovation seminar that was very well received and have many projects with customers around products for GLP-1 users.

And as you can see in our Taste and our Food Biosciences performance, they are both growing very nicely, and some of that is due to the GLP-1

dynamic. And I will give you an example.

We have a large business today in yogurts.

We have

developed some new yogurt technology both in biosciences and in flavors.

And

by taking advantage of that, we have been able to grow nicely in the yogurt category helping our customers grow nicely and address the desire for GLP-1 patients to have really great tasting foods that are good for them. But it has also gone beyond that in the protein dynamic. And the ability for us to flavor products with high protein and help with the biosciences to enable those products has also been a positive. And then when you talk about ultra processed foods or reformulation, generally, reformulation, when customers reformulate, that is also a good thing for us.

So, yes, there will be some challenges with reduced caloric intake for a section of the population. We are leaning into it with innovation to make sure that it is not an overall negative for us, that it is a neutral or a positive.

Thank you, Lisa.

Our next question goes to the line of Fulvio Cazzol with Berenberg. Fulvio, your line is open.

Thank you, and thank you for taking my questions.

My question is on the cost inflation outlook for 2026. I was just wondering if you can give us a bit of a summary of what you expect both on the input costs, any tariff-related cost inflation, wage inflation and how you expect to mitigate that. Thank you.

Thanks, Fulvio. For 2026, we do expect some modest input cost inflation for our divisions. This really includes raw material and cost which includes the impact of tariffs, plus logistics, energy, and packaging costs. More broadly, as a very higher level macro statement, we are seeing inflation across kind of all those key elements.

The team today is collaborating with customers to mitigate this. And in the end, we will recover it through reformulation, productivity, and pricing over time as we go forward. And so when we think about our guidance for 2026, taking a step back, our 1% to 4% is really all driven by volume. We do expect pricing to be slightly down, which is primarily related to the commodity portion of our Fragrance Ingredients, which I mentioned earlier, on a different question, and some residual carryover pricing impact in Food Ingredients specifically.

But the team is really focused on making sure they think about our business going forward. We are working with customers that where there are inflationary pressures, we do offset that from a direct cost perspective. More generally, there is a general increase in terms of overall working costs—so merit increases, inflation. Now we have done a very good job at looking to productivity to make sure that we are fully offsetting that as part of our plan.

So that is embedded in our gross productivity plan to make that a net number more favorable as we progress through the year.

Thank you, Fulvio. Our next will go to the line of Laurence Alexander with Jefferies. Laurence, your line is open.

So good morning. Just want to circle back to the

the outlook, the lower end of the outlook

range—

what are you assuming for destocking risk this year compared to the last couple of years? And then I guess related to that, looks as if kind of the range is not yet seeing much benefit from kind of the shift in mix and innovation capabilities and Salesforce reinvigoration. Do you think you should see the bottom end of the range start materially improving?

So thanks for the question, Laurence. Of course, the 1% to 4%

does include Food Ingredients.

And while we expect Food Ingredients to return to positive growth on top line this year,

it will be modest. And as Michael mentioned, it is still a tough

macroeconomic environment, especially in the first half with difficult comparisons. But we expect the second half to be better as our innovation further kicks in and builds to 2027. And, hopefully, market dynamics. What I would say is we cannot predict geopolitics and market dynamics at the end of the year. So any potential destocking at a reasonable level to the end of the year is built into our guidance, and we expect to achieve somewhere in the range of 1% to 4%.

Of course, we are driving for as best as we can, but that is the range that we are confident we can deliver.

Thank you, Laurence. Our next question will go to the line of Salvator Tiano with Bank of America. Salvator, your line is open.

Thank you very much.

You know,

you mentioned a lot of things about, you know, essentially

product inflation being offset by productivity and etcetera. And generally mitigating a lot of the headwinds that you may face, say, on the cost side, I am just wondering, though, when we look at 2025 on your incremental margin—you have 2% organic growth and 7%, I guess, like-for-like EBITDA growth. This year, the guidance is calling for quite high organic growth, and the range is not—you know, the midpoint of EBITDA growth is much lower. So say 5% to 6%.

So based on all this, what is actually driving lower incremental margins this year versus 2025?

Sal, great question. Erik, I will take this one.

Yeah. This is, again, real specific on just the incremental margins. As we think about the guidance range, take step back. I always think that the quality of this business is that as you grow your business, you do have nice leverage within the P&L.

And so when I think about falling from sales to EBITDA, it is usually around two times. Alright? So if I grow four, I can get eight in terms of leverage within my P&L. Obviously, the higher we grow, we start moving towards the four, three, four, or five range over time, that is when we will see the best leverage within the P&L overall.

When you are at the lower end of that, then it becomes a game of how do we actually continue to drive productivity to making sure we are supplementing some of the lack of what I would say is volume fixed cost absorption overall. And so as we think about the range for next year, the 1% to 4%, obviously, if we are at the lower end of that range, really we need to think about stepping up the productivity even more so making sure we get that leverage to fit within the portfolio, and we do have opportunities to do that. Then as we get to the higher end of the range, then I think then we have a little bit more flexibility.

What is built into the guidance range very candidly are two things. One, it is a bit of reinvestment we are funding through productivity, overall, which normally some of that productivity could help support and drive bottom line. But we are being conscious, and we are being smart about how we want to continue to reinvest in the business as we make the migration towards 2026 and then into 2027. So that is a little bit of what I would say is the offset when you think about the flow through from the incremental margin piece. It is really the volume growth is critical.

Productivity is driving, supporting, depending on if you are at the lower end of the range or at the upper end of the range. And then the third point is really around how do we take a step back and just making sure the reinvestment is balanced to how our performance is overall. So those are the three levers that we are managing.

For 2025.

And then the one thing I would just add to that is that the reason one of the reasons for our

heavy focus on innovation is that as that innovation pipeline comes through, we do expect margin benefits from that. So that is a really important part of it as well.

Thank you, Salvator.

Our next question comes to the line of Lauren Lieberman with Barclays. Lauren, your line is open.

Great. Thanks. Hi, everyone. Thanks so much.

Wanted to talk a little bit about reformulation opportunities in particular and just what you are seeing in the marketplace in terms of customer demand specifically around reformulation to be more ingredient profile, health and wellness concerns, etcetera. And then also, how equipped your portfolio is today to meet those demands should they be there, and then how much that is also fitting into your innovation and R&D plan. Thanks.

Thanks for the question, Lauren. First of all, we are seeing continued

reformulation happening, but it has not picked up as much as some people have talked about—the importance of ultra processed foods and some of the dynamics that you are hearing about. But as it does or if it does, I think that is all positive upside to what we have been talking about. Because every time

customers reformulate,

whether it is for lower sugar, lower salt, lower fat, cleaner label,

whatever it is,

that is the opportunity for International Flavors & Fragrances Inc. So we welcome that and hope to see it increase from here. But as of now, it is out there. It is happening.

We are working with customers to create healthier products, great tasting products. More sustainable products—I think you will see some really sustainable products coming out with some of the CPG companies we have been working with. Outside of food, but also in food. So I think there is still a dynamic everywhere of wanting more innovation to bring consumers what they want, whether it is great tasting food or laundry products that clean the clothes really well with room temperature water and less water and less plastic and many of the dynamics that you hear about out there.

That

consumers

desire and CPG companies are trying to drive innovation to meet those desires to profitably grow their business, we are there to help.

Thank you, Lauren.

Our next question will go to the line of Michael Sison with Wells Fargo.

Michael, your line is open.

Hey. Good morning, guys. I guess with the sale of Food Ingredients pending, how do you sort of pivot the company to more of a growth mode? You know, historically, International Flavors & Fragrances Inc. has slightly underperformed to F&F peers, but if you think about the portfolio going forward, the Health and Biosciences and Scent and Taste, how do you get that growth rate to match the peer group or maybe even outperform the peer group?

Thanks for the question, Michael.

Very excited about the future of International Flavors & Fragrances Inc.

I think as we finalize our portfolio optimization, and focus all of our efforts on Scent, Taste, and Health and Biosciences—very R&D heavy, very

innovation

heavy.

Really attractive businesses.

That have a major impact on consumer goods, whether it is food or others, home and personal care, etcetera, and represent a small part of the cost but a big part of the superiority. And so as we focus all of our energy on that, and have finished the work on portfolio optimization, I think we will go from strong to stronger.

And I am absolutely convinced that

we have got the right team in place. That they are strengthening our capabilities. You can see it in our performance. We are doing what we say we are doing.

We see the commercial pipelines increasing. We see the innovation pipelines increasing. We see the quality of the projects with our customers improving. And that is why we are very confident in the future.

And also, the other element here that is really exciting is we have got a very healthy Health and Biosciences business with really strong capabilities in biotechnology. That is important for all the segments that we play in Health and Biosciences. It is also starting to impact beneficially technology in our Scent business and our Taste business. So I will just give you a couple of quick examples.

In 2025, we launched EnviroCAPS. It is a biodegradable encapsulation technology for our Scent business. It is commercial now. Several very big customers have been using it and say that it is working extremely well, and they are very pleased with it, and that is growing.

We have other Scent technologies that are using biotechnology that are now in the pipeline and are coming. We have a number of Taste products that we have developed with our biotechnology capabilities. And more in the pipeline. I will give you one example of one that is commercialized now.

It is called Super Carrot, where you take the residue of carrot production and you ferment it with our enzymes, and you create an umami flavor that is healthy and replaces umami flavorings with something that food companies and consumers really like. And so we will see more of that. So I just fundamentally believe as we get to be a focused high value, R&D, innovation-driven company, with a stable portfolio that we are investing in, you will see us accelerate our growth.

Thank you, Michael. Our next question will go to the line of Jeffrey John Zekauskas with JPMorgan. Jeffrey, your line is open.

Thanks very much. Your Food Ingredients

EBITDA and operating income

dropped off pretty sharply in the fourth quarter. And I think you said that the price trends are negative. So

given a slow volume growth environment, it is the case that operating income and EBITDA for that business next year is

higher or lower? And can you speak generally to the tax basis of that asset?

So I will start, and then Michael can add

the tax basis. The fourth quarter was not a great quarter for our Food Ingredients business. They did not deliver what they expected to deliver. There is a number of reasons for that.

All I can say is the first quarter looks like it is off to a solid start. Andy and his team, Andy Muller and his team, are highly confident that they can get back to top line growth. Although it will be low single digit, it will be top line growth. And continue significant earnings growth.

They have got the projects to do that. There is a lot of excitement with some launches that they have made recently. And some exciting areas. So what I would say there is that the fourth quarter was not what we expected, was not what they expected.

But the full year was still very solid with—although it was negative revenue growth—double digit EBITDA growth. And we expect to get back to positive revenue growth and continued strong EBITDA growth in 2026.

Thank you, Jeffrey. Our last question will go to the line of Chris Parkin—oh, go ahead.

Sorry, Megan.

Just I think, Jeffrey, you had a question on the tax base that if we had a potential deal for Food Ingredients. And we are still obviously, we are still working through that process. So we have got to kind of see we are landing, where we are heading from that perspective. Fortunately, we are in a good position with respect to tax attributes that could be leveraged to minimize some of the tax leakage that we have now.

And so the team is fully focused making sure the net cash number maximizes its value for shareholders. And so that is what the team is focused on overall. But more to come down as we progress from here.

Thank you. Our last question will go to line as Chris Parkinson with Wolfe Research. Chris, your line is open.

Great. Thank you so much. Just circling back as a corollary to a couple

questions on the H&B segment. You clearly had solid result across volumes in the biosciences segment as well as a better margin. When we take a step back and look at some of the health and probiotics, I think you are alluding to it before. You know, last year, we were talking a lot about, you know, obviously, market share, kind of investments in the business that were necessary overall for the intermediate to long term.

Is it safe to say that you are still investing in that business? And then you already mentioned the half-on-half trends, which I appreciate. But can you just talk about, you know, how much we should think about spending that business in the context of the productivity gains you are gaining? And then also, if you still believe you are going to gain share kind of, you know, the second half 2026, 2027, 2028. So any updates there in terms of moving parts would be particularly helpful.

Thank you.

Sure. Thanks for the question, Chris. First of all, overall Health and Biosciences business is doing very well. Leticia Goncalves has been in the job almost a year now, and she and the team are—they have got a great team with a great strategy and are executing it well.

Health is the only area that has not delivered strong growth in 2025. Interestingly, outside of North America, growth was solid. It was inside North America where the challenges were. There is a number of reasons for it. But what I can tell you is Leticia has brought in new leadership.

The team is strong. We believe in the business. We have got great capability. We have got a very attractive pipeline coming that I believe with the capability that we now have will start to deliver growth again in 2027. But I firmly believe in this business.

I just think it is a really important thing for the world and we have got the capability to succeed. We took our eye off the ball for a while in North America. We have got our eye back on the ball, and you will see the results come. Like, everywhere where we have seen, we have had challenges, we get the right leadership in place, the right teamwork, the right support.

And we get it on the right track, and that is going to happen in Health as well.

Thank you, Chris.

That will conclude our question and answer session. I will now turn it back over to you, Erik, for closing remarks.

Well, thank you all for joining today's call. We are working hard to unleash the great potential of this company. As we have talked a lot about, we have done a lot of portfolio optimization following the Frutarom and the DuPont Nutrition and Biosciences deal. We are getting closer to exactly where we want to be.

I think we will make really good progress on that in 2026. And then we will still deliver strong results in 2026, I believe, firmly. But we will be very, very well set up for 2027 and beyond as we move through this finalization of the portfolio optimization and really drive the innovation aggressively across Scent, Taste, and Health and Biosciences. We have got a terrific team. We have got a clear direction, and we are going to make it happen.

Thank you.

That concludes today's call. Thank you for your participation, and enjoy the rest of your day.