International Flavors & Fragrances Q3 Earnings Call Highlights

Key Points

• IFF raised the lower ends of its 2026 outlook, now forecasting $7.5 billion–$7.6 billion in sales and $1.55 billion–$1.6 billion in adjusted operating EBITDA after third-quarter revenue grew about 5% and EBITDA rose 6%.
• Taste and Scent each posted 6% sales growth, while Health & Biosciences grew 1%. IFF expects fourth-quarter margin pressure from softer health volumes, higher input costs, and seasonal factors.
• The company remains on track to close its approximately $4.3 billion Food Ingredients sale by the end of the first half of 2027. Free cash flow rose to $371 million in the first nine months, and IFF reported net debt to adjusted EBITDA of 2.75 times.

International Flavors & Fragrances NYSE: IFF raised the lower ends of its 2026 sales and earnings guidance after third-quarter growth across all three continuing business segments, though executives warned that a weak health market and higher costs would weigh on fourth-quarter profitability.

The company generated revenue of just under $2 billion in the third quarter, up approximately 5% on a comparable currency-neutral basis. Adjusted operating EBITDA rose 6% to $403 million, while the corresponding margin expanded 20 basis points to 20.8%, Chief Financial Officer Michael DeVeau said.

Chief Executive Officer Erik Fyrwald attributed the company’s year-to-date progress to volume growth and productivity. He said the revised outlook also incorporates near-term profitability softness, particularly in Health & Biosciences.

IFF generally discussed sales and EBITDA growth on a comparable currency-neutral basis. Its results and guidance reflect continuing operations following the announced Food Ingredients divestiture, while cash flow, capital spending and leverage figures include discontinued operations.

Taste and Scent Lead Quarterly Growth

Taste sales increased 6% to $687 million, with growth across all regions. Greater Asia led with a double-digit increase, followed by high-single-digit growth in Latin America. Segment EBITDA rose 7% to $128 million, driven by volume.

Scent sales also grew 6%, reaching $689 million, while EBITDA increased 10% to $139 million. Consumer Fragrances posted high-single-digit growth, and Fine Fragrance and Fragrance Ingredients each grew by mid-single digits.

Fyrwald said Fine Fragrance benefited from new business wins in Europe and North America, while demand in the Middle East had stabilized with some signs of growth. He cautioned, however, that geopolitical instability made the region’s outlook uncertain.

Health & Biosciences sales rose 1% to $566 million, as mid-single-digit growth in Food Biosciences and Grain Processing more than offset a decline in health. The segment’s EBITDA increased 2% to $139 million.

Fyrwald said consumers in the U.S. and Europe had reduced spending on dietary supplements amid economic pressure. IFF is responding by strengthening its commercial capabilities, diversifying its customer base and expanding its innovation pipeline, he said.

Outlook Reflects Cost Pressures

IFF now expects full-year sales of $7.5 billion to $7.6 billion and adjusted operating EBITDA of $1.55 billion to $1.6 billion. DeVeau said fourth-quarter sales growth was expected to be around 3%, plus or minus, and that the company did not see material customer inventory management at the time of the call.

Fourth-quarter profit margins are expected to decline sequentially, partly because of seasonal factors and partly because of higher costs and investments, particularly in Health & Biosciences. DeVeau identified softer volume in the higher-margin health business, unfavorable pricing relative to input costs, and the timing of research and commercial investments as the main pressures on that segment.

Across IFF’s continuing operations, the largest cost increases are tied to oil derivatives, energy and logistics, DeVeau said. Asked about a peer’s expectation for 3% raw-material inflation in 2027, he said it was early to comment but that the figure was consistent with current trends.

IFF is discussing pricing with customers and working on productivity to recover higher costs. DeVeau said the gap between pricing and input costs is expected to be greatest in the first quarter of 2027 before improving through the year.

Divestiture and Capital Allocation

IFF remains on track to close its approximately $4.3 billion sale of Food Ingredients to CVC Capital Partners by the end of the first half of 2027, Fyrwald said. The company has also completed the sale of its Soy Crush, Concentrates and Lecithin business and expects other agreed divestitures to close by year-end.

DeVeau said IFF is working to eliminate about two-thirds of the approximately $100 million in stranded costs associated with the Food Ingredients separation within 12 months of closing. Actions include renegotiating third-party contracts, using shared services and technology, and adjusting the organization’s structure.

For the first nine months of 2026, free cash flow was $371 million, an increase of $245 million from a year earlier. IFF also completed a $500 million accelerated share repurchase, buying approximately 5.8 million shares, and does not plan additional repurchases in the fourth quarter, DeVeau said.

Net debt to credit-adjusted EBITDA stood at 2.75 times at the end of the third quarter. DeVeau said the increase reflected short-term debt used to fund the accelerated repurchase, which IFF expects to repay with proceeds from the Food Ingredients sale.

About International Flavors & Fragrances (NYSE:IFF)

International Flavors & Fragrances Inc NYSE: IFF develops ingredients and solutions used by manufacturers in food and beverages, fragrances, personal care, home care, health and wellness, and other consumer products. Its offerings include flavors, fragrance compounds, enzymes, cultures, probiotics, and specialty food ingredients.

The company works with customers to create and improve products, including by enhancing taste and scent, supporting product performance, and developing ingredients for nutrition and wellness applications.

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