International Flavors & Fragrances, Inc. · NYSE:IFF
International Flavors & Fragrances — Barclay Global Consumer Staples Conference 2018
41 slides from International Flavors & Fragrances's conference presentation, Sep 6, 2018
Slide 1: Barclay Global Consumer Staples Conference September 6, 2018
Barclay Global Consumer Staples Conference September 6, 2018
Slide 2: Cautionary Statement
Cautionary Statement This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding IFF’s or Frutarom’s expected future financial position,
Slide 3: Important Information & Where to Find It
Important Information & Where to Find It The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed
Slide 4: Agenda
1. IFF & Frutarom Introduction 2. Strategic Rationale & Value Creation 3. Integration Progress 4. 2018 Performance: IFF & Frutarom 5. Summary 6. Q&A Agenda 4
Slide 5: Leading Global Flavor & Fragrance Company
Leading Global Flavor & Fragrance Company Strong heritage as an innovation leader with global CPGs • Founded 1889, Listed on NYSE & in S&P 500 • Annual R&D spend ~8% of sales • Serving 3,000 customers in 162 countries • ~50% sales to the emerging markets Flavors Fragrance Cosmetic Actives Innovation
Slide 6: Rapidly Growing Flavor & Specialty Ingredient House
Rapidly Growing Flavor & Specialty Ingredient House Leading naturals portfolio servicing small & mid-sized customers 6 Suite of natural product offerings serving fast-growing small, mid-sized & private label customers • Founded 1933, Listed on TASE & in TASE 35 • Acquisitive organization focused on
Slide 7: IFF Strategic Vision
IFF Strategic Vision Roadmap for accelerated profitable growth 7 Vision 2020 Strengthen & Expand the Portfolio • Strengthen the F&F core • Stretch into adjacencies • Pursue partnerships & collaborations Become Customers’ Partner of Choice • Actively support our customers’ success • Achieve commercia
Slide 8: IFF & Frutarom Transaction
IFF & Frutarom Transaction Compelling combination • IFF & Frutarom combination creates a global leader in natural taste, scent and nutrition with expected 2018 pro-forma sales of $5.3 billion • Enriches portfolio for a stronger product offering, broadens access in attractive adjacencies & strengthen
Slide 9: Strong Strategic Alignment
STRATEGIC PRIORITY FRUTAROM IMPACT Drive enhancements in key R&D platforms: naturals, modulation, delivery, ingredients, active cosmetics and health & nutrition DRIVE DIFFERENTIATION Accelerate growth with regional & local customers, while strengthening IFF’s position with key large multinationals B
Slide 10: Stronger Product Offering
Beverage Dairy Sweet Savory Snack Pet Nutrition Mint / Menthol Tobacco Flavors Natural Extracts (Vanilla) / Botanicals Essential Oils Spice Blends/ Ground Spice & Herb Juice Based Compounds Dehydrated Veg/ Alliums Fruit & Veg Preps/ Pieces Fibers (Incl. Prebiotics) Acidulants Antioxidants Nutraceuti
Slide 11: More Comprehensive Offering
More Comprehensive Offering Uniquely positioned by combining innovation of both companies Fresh Herbs / Fruits Premium Spirits (Modulation) Aroma (Delivery) Syrup (Modulation) Fresh Citrus (Specialty Citrus) Natural Colors Antioxidants Natural Food Protection Mouthfeel (Natural Flavors) Natural / Bo
Slide 12: Small Customers Growing Fastest
CPG CUSTOMER DYNAMICS Small Customers Growing Fastest Small & private label own share of spend; Focused on clean label Note: 1 “Clean label” products are free of artificial flavors, colors, preservatives and sweeteners in all food and beverage categories, and free of hormones and antibiotics in appl
Slide 13: Strengthens Exposure To Fast-Growing Customers
IFF FRUTAROM IFF+FRUTAROM 13 Strengthens Exposure To Fast-Growing Customers Small & mid-sized customers growing at an accelerated rate ~50% ~50% ~70% ~30% ~60% ~40% Global Small & Mid-Sized + Global Small & Mid-Sized Global Small & Mid-Sized Flavors Flavors As of Dec 31, 2017
Slide 14: Broadens Access In Attractive Adjacencies
CORE1 ADJACENT CATEGORIES2 Broadens Access In Attractive Adjacencies Expanding into rapidly growing & profitable markets 14 2% 3% 3% 5% 6% 6% 6% 7% Fragrance Fragrance Ingredients Flavors Cosmetic Actives Savory Solutions Natural Colors Natural Food Protection Health Ingredients Estimated 2017 Marke
Slide 15: Creates A Global Leader In Taste, Scent & Nutrition
Creates A Global Leader In Taste, Scent & Nutrition Estimated 2018 total sales ($B) 15 5.3 3.7 1.6 $0 $2 $4 $6
Slide 16: Generates Significant Cost Synergies
~40% ~30% ~30% $145M Accelerate Rationalization & Harmonization Optimize Global Footprint Streamline Overhead Expenses Procurement Operations G&A Generates Significant Cost Synergies Unlocking incremental shareholder value CUMULATIVE SAVINGS EXPECTED TIMING ~25% ~70% ~100% $145M 2019 2020 2021 16
Slide 17: Rationalize Procurement
• Citrus Specialties • Antioxidants • Colors • Botanicals • Flavors • Vanilla Extracts • Modulators • Aroma Chemicals • Texturizers • Spices • Flavor Enhancers • Sweeteners • Extracts & Oils • Dairy Products • Colors • Yeasts • Functional Ingredients Rationalize Procurement Leveraging the best of bo
Slide 18: Optimize Global Footprint
UY PURCHA Optimize Global Footprint IFF & Frutarom global manufacturing sites Frutarom sites 18 * IFF sites A 1rr .. ...... * • fl * _A* .. * ~ ~‘1~
Slide 19: Accelerating Financial Performance
SING POWER 2015-2017A 2019-2021E 2015-2017A 2019-2021E Accelerating Financial Performance Average currency neutral growth targets for the 2019 to 2021 period 19 SALES EPS 5% -7% CAGR** 10%+ CAGR** 3% CAGR* 6% CAGR* * Currency Neutral Sales and Currency Neutral Adjusted EPS are Non-GAAP metrics; Orga
Slide 20: Capital Allocation Strategy
Capital Allocation Strategy Disciplined uses of cash 20 • Primary focus on debt repayment to maintain investment grade rating • Reinvest in business via capex for long-term future growth • Pursue value-enhancing M&A • Maintain current dividend status 1 2 3 4
Slide 21: Drive Debt Repayment
~3.7x <3.0x 2018E 2019E 2020E Drive Debt Repayment Achieving Net Debt to EBITDA* target to retain investment grade rating NET DEBT / EBITDA* FOCUS • Managing leverage to retain investment grade rating is critical focus • Committed to be <3.0x net debt to EBITDA* between 18-24 months • Management inc
Slide 22: Process Update
Process Update Tracking ahead of schedule • Frutarom shareholders approved transaction with IFF by a majority of ~95% • Comprehensive pre-close discussions on talent, R&D, adjacencies & business and functional integration • Committed to Tel Aviv Stock listing upon completion of transaction • Close e
Slide 23: Antitrust Process
COUNTRY FILED APPROVED United States Israel Turkey Mexico Ukraine South Africa Russia European Union 23 Antitrust Process On-track, with all applications submitted & approvals in 6 of 8 jurisdictions Pending Pending
Slide 24: Day 1 Go-To-Market Positioning
• Frutarom to remain a standalone unit; Maintain current go-to-market strategy Leverage global expertise across back-end functions to unlock value Drive cross-selling via sharing of vast technologies & categories expertise Selectively “lift & shift” as appropriate based on long-term strategy Day 1 G
Slide 25: IFF 1H 2018 Financial Review
IFF 1H 2018 Financial Review Strong performance across all financial metrics Currency neutral +5% adjusted operating profit growth* Currency neutral +10% adjusted EPS growth* Currency neutral +6% sales growth* 25 * Currency Neutral Sales, Currency Neutral Adjusted Operating Profit & Currency Neutral
Slide 26: Frutarom 1H 2018 Performance
$646M $786M 1H 2017 1H 2018 Frutarom 1H 2018 Performance Record revenues & profitability margin 26 FINANCIALS COMMENTARY 19.3% EBITDA 21.9% EBITDA +22% • Achieved record quarterly revenue, with constant currency growth on a proforma basis of 6.0% • Flavors sales improved 7% & Specialty Fine Ingredie
Slide 27: Summary
Summary IFF & Frutarom transaction – a compelling combination 27 ESTABLISHED LEADERSHIP • Leader in natural taste, scent & nutrition with expected 2018 pro-forma sales of $5.3B GROWTH ACCELERATION • Stronger product offering • Access to fast-growing small & mid-sized customers • Enter attractive adj
Slide 28: Q&A
INTERNATIONAL FLAVORS & FRAGRANCES Q&A
Slide 29: Appendix
INTERNATIONAL FLAVORS & FRAGRANCES Appendix
Slide 30: GAAP & Non-GAAP Financial Measures
GAAP & Non-GAAP Financial Measures We provide in this presentation certain non-GAAP financial measures, including (1) Currency Neutral Sales, (2) Adjusted Operating Profit and Currency Neutral Adjusted Operating Profit (3) Adjusted EPS and Currency Neutral Adjusted EPS, and (4) Compound Average Curr
Slide 31: IFF Reconciliation: Adjusted Operating Profit
IFF Reconciliation of GAAP & Non-GAAP Financial Measures Adjusted Operating Profit (Dollars in Millions) Year Ended December 31, 2006 2012 2017 Reported (GAAP) 329.2 486.6 581.4 Operational Improvement Initiatives (a) — 1.8 Acquisition Related Costs (b) — 20.4 Integration Related Costs (c) — 4.2 Leg
Slide 32: IFF Reconciliation of GAAP & Non-GAAP Financial Measures (cont'd)
IFF Reconciliation of GAAP & Non-GAAP Financial Measures (cont’d) (a) Represents accelerated depreciation and idle labor costs in Hangzhou, China. (b) Represents the amortization of inventory “step-up” included in Cost of goods sold and transaction costs related to the acquisitions of Fragrance Reso
Slide 33: IFF Reconciliation: Adjusted Operating Profit 6 Months
IFF Reconciliation of GAAP & Non-GAAP Financial Measures (cont’d) Adjusted Operating Profit 6 Months Ended June 30, (Dollars in Millions) 2018 2017 Reported Operating Profit (GAAP) 329.4 281.8 Operational Improvement Initiatives (a) 1.4 1.0 Acquisition Related Costs (b) (0.5) 15.1 Integration Relate
Slide 34: IFF Reconciliation: Adjusted Earnings Per Share
IFF Reconciliation of GAAP & Non-GAAP Financial Measures (cont’d) Adjusted Earnings Per Share 6 Months Ended June 30, (Dollars in Millions) 2018 2017 Reported EPS(GAAP) $2.87 $2.84 Operational Improvement Initiatives (a) 0.01 0.01 Acquisition Related Costs (b)—0.13 Integration Related Costs (c) 0.01
Slide 35: IFF Reconciliation of GAAP & Non-GAAP Financial Measures (cont'd)
IFF Reconciliation of GAAP & Non-GAAP Financial Measures (cont’d) (a)For 2018, represents accelerated depreciation related to a plant relocation in India. For 2017, represents accelerated depreciation and idle labor costs in Hangzhou, China. (b)For 2018, represents adjustments to the contingent cons
Slide 36: IFF Reconciliation: Currency Neutral Sales Growth
IFF Reconciliation of GAAP & Non-GAAP Financial Measures (cont’d) Currency Neutral Sales Growth for the Six Months Ended June 30, 2018 Total Reported Sales Growth 11% Currency Impact (5%) Currency Neutral Sales Growth 6% Currency Neutral Adj. Operating Profit Growth for the Six Months Ended June 30,
Slide 37: IFF Reconciliation: Currency Neutral Sales and EPS
IFF Reconciliation of GAAP & Non-GAAP Financial Measures (cont’d) * Does not foot due to rounding Currency Neutral Sales Year ended December 31, 2015 2016 2017 Reported Sales Growth 0% 3% 9% Acquisition Impact (2)% (2)% (5)% Reported Organic Sales Growth (2)% 1% 4% Currency Impact 5% 2% 0% Currency
Slide 38: Frutarom Reconciliation: Adjusted EBITDA
Frutarom Reconciliation of Non-GAAP Financial Measures (cont’d) Adjusted EBITDA Year ended December 31, (Dollars in Millions) 2006 2012 2017 Operating Profit 37.1 72.8 211.0 Non recurring expenses—1.5 7.9 Adjusted Operating Profit—74.3 218.9 Depreciation and Amortization 11.5 26.1 48.6 Adjusted EBIT
Slide 39: Frutarom Reconciliation: Adjusted EBITDA 6 Months
Frutarom Reconciliation of Non-GAAP Financial Measures (cont’d) Adjusted EBITDA 6 Months Ended June 30, (Dollars in Millions) 2018 Operating Profit 134.9 Non recurring expenses 1.7 Adjusted Operating Profit 136.6 Depreciation and Amortization 35.8 Adjusted EBITDA 172.4 Sales 786.1 Adjusted EBITDA Ma
Slide 40: Frutarom Reconciliation: Adjusted Core EBITDA
Frutarom Reconciliation of Non-GAAP Financial Measures (cont’d) Adjusted Core EBITDA 6 Months Ended June 30, (Dollars in Millions) 2018 2017 Core Operating Profit 134.6 99.7 Non recurring expenses 1.7 2.0 Adjusted Core Operating Profit 136.3 101.7 Depreciation and Amortization 35.3 21.8 Adjusted Cor
Slide 41: Frutarom Reconciliation: Currency Neutral Pro Forma Sales Growth
Frutarom Reconciliation of Non-GAAP Financial Measures (cont’d) Flavors Currency Neutral Pro Forma Sales Growth for the Six Months Ended June 30, 2018 Total Reported Sales Growth 22% Impact (15%) Currency Neutral Pro Forma Sales Growth 7% Specialty Fine Ingredients Currency Neutral Pro Forma Sales G
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