International Flavors & Fragrances, Inc. · NYSE:IFF
International Flavors & Fragrances — Investor Day (June 2013)
44 slides from International Flavors & Fragrances's investor day presentation, Jun 5, 2013
Slide 1: Investor Day 2013: Operations
Exhibit 99.1 Investor Day 2013 Operations Francisco Fortanet SVP, Operations June 5, 2013
Slide 2: Operations Strategy
Operations Strategy Reliable Service and Quality #1 Priority is Customer Satisfaction Reduce Cost and Optimize Cash Flow Productivity and Quality Agenda driven by Continuous Improvement
Slide 3: Manufacturing Footprint Strategy
Manufacturing Footprint Strategy Support growth of the business in all regions; focus on emerging markets Reduce cost in all geographies; with emphasis in mature markets 29 Manufacturing Sites
Slide 4: Manufacturing Footprint Strategy: Leverage Geographic Reach
Manufacturing Footprint Strategy: Leverage Geographic Reach Capex as % of Sales 5% 4% 3% 2% 4.4% 4-5% 3.1% ~3% 1% 0% 2003 - 2009 2010 - 2012 2013 - 2015 2016 - 2018 Singapore 2012 China 2013 Turkey 2015
Slide 5: Manufacturing Footprint Strategy: Maximize Our Portfolio
Manufacturing Footprint Strategy: Maximize Our Portfolio Revenue in the Mature Markets is Now < 50% of the Global Compounds Business, while Labor Cost is ~ 75% Europe – From 10 to 7 plants*, including Sweden USA – From 7 to 4 plants*, including Augusta Oceania – from 2 to 1 plants Move activities to
Slide 6: Capital Deployment Benchmarks
Capital Deployment Benchmarks Fixed Asset Turnover 4.5 X 3.5 x IFF Peers* Best-in-class efficiency versus peers Highest published ROIC relative to industry Source: Stifel Nicolaus Analyst Report - FY 2012 * Peers include Givaudan, Symrise, China F&F, Frutarom, Sensient, T. Hasegawa and Takasago
Slide 7: Productivity and Quality: The Cornerstone of Our Operations Strategy
Productivity and Quality: The Cornerstone of Our Operations Strategy Innovation in Operations = Finding a Better Way People Tools Processes
Slide 8: Productivity = Shareholder Value
Productivity = Shareholder Value % Growth (CAGR) 2008 to 2012 7.0% 6.0% 5.8% 5.0% 4.0% 3.7% 3.0% 2.0% 1.0% 0.0% Sales Mfg. Cost
Slide 9: Quality = Customer Trust
Quality = Customer Trust Over 60% Reduction in External Defect Rate % External Defect Rate 0.27 0.22 0.17 0.12 0.07 0.02 2006 2007 2008 2009 2010 2011 2012 2013
Slide 10: Global Procurement Strategy
Global Procurement Strategy Our Approach… People Processes and Systems ~70% of COGS is Raw Materials Sourcing Strategies
Slide 11: IFF's Sustainability Strategy
IFF’s Sustainability Strategy Our Products: Creating Innovative Customer Solutions Our Impact: Strengthening Eco-Efficiency & Community Relationships Our Sources: Sourcing Responsibly Our People: Engaging & Inspiring Our Employees
Slide 12: Sustainability Performance 2010-2012
Sustainability Performance 2010-2012 Eco-efficiency -11.4 % Scope 1 & 2 carbon emissions -9.1 % Energy use -27.4 % Water use -29.2 % Hazardous waste Right Direction!
Slide 13: Summary
Summary Our #1 job is to satisfy our customers Productivity and quality are the cornerstone of the operations strategy Our best asset is our people We are delivering results – strong manufacturing leverage, excellent reduction in waste and highest published industry ROIC Well-Positioned to Capture F
Slide 14: Investor Day 2013: Operations
Investor Day 2013 Operations
Slide 15: Investor Day 2013: Innovation, The Foundation of our Success
Investor Day 2013 Innovation The Foundation of our Success Kevin Berryman EVP & CFO June 5, 2013
Slide 16: Execution on Strategic Growth Pillars
Execution on Strategic Growth Pillars Leverage Geographic Reach Strengthen Innovation Platform Maximize Portfolio
Slide 17: Accelerating Top-Line Growth
Accelerating Top-Line Growth 8% 9% Based on Local Currency Sales Growth 6% 7% 3% 4% 5% IFF Long-term Targets 1% 2% 0% 2004-2006 2007-2009 2010-2012
Slide 18: Emerging Market Presence is Building
Emerging Market Presence is Building 60% Nearly 50% of Sales to Emerging Markets 56% FY 54% FY 53% FY 51% Q1 55% 45% 50% 40% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 44% FY 46% FY 47% FY 49% Q1 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 Developed Emerging
Slide 19: Emerging Market Presence is Building
Emerging Market Presence is Building 55% Over 50% of Flavor and Fragrance Compound Sales to Emerging Markets 53% FY 52% FY 50% FY 48% Q1 50% 45% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 47% FY 48% FY 50% FY 52% Q1 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 Developed Emerging
Slide 20: Gross Margin Impact (2011-2012) of Input Cost Pressure
Gross Margin Impact (2011-2012) of Input Cost Pressure
Slide 21: Gross Margin Enhancement
Gross Margin Enhancement Gross Margin (FY 2010-2012 - %) Gross Margin (Q1 2010-2013 - %) 41.7 2.7 2.7 41.7 3.3 42.9 41.3 1.7 FY 2010 Net Price and Input Costs Strategic Initiatives FY 2012 Q1 2010 Net Price and Input Costs Strategic Initiatives Adj. Q1 2013
Slide 22: Maximize Portfolio – Improved EP
Maximize Portfolio – Improved EP 94% of Portfolio is now EP neutral or Positive 2010 Portfolio Value Breakdown 2012 Portfolio Value Breakdown % Capital Employed % Capital Employed 15% 15% 6% 65% 20% 79% EP Positive EP Break-even EP Negative EP Positive EP Break-even EP Negative
Slide 23: Adjusted Operating Profit Growth
Adjusted Operating Profit Growth 12% 8% 10% IFF Long-term Targets 4% 6% g 2% 7-9% 0% 2004-2006 2007-2009 2010-2012 2013-2015
Slide 24: Adjusted Effective Tax Rate
Adjusted Effective Tax Rate 32% Below the Line Leverage 30% 28% 26% <26.5% 24% 2004 - 2006 2007 - 2009 2010 - 2012 2013 - 2015 2013 – 2015 = Company Estimates
Slide 25: Adjusted EPS Growth (3-Year CAGR)
Adjusted EPS Growth (3-Year CAGR) 4% 16% 10% 12% 14% IFF Long-term Targets 6% 8% 2% 4% 10+% 0% 2004-2006 2007-2009 2010-2012 2013-2015
Slide 26: Increased Working Capital Efficiency
Increased Working Capital Efficiency % 35% Core Working Capital as a % of Net Sales 32% 33% 34% 30% 31% 28% 29% <31% 27% 2008 2009 2010 2011 2012 2013 - 2015 2013 – 2015 = Company Estimates
Slide 27: Adjusted Return on Invested Capital
Adjusted Return on Invested Capital 20% 3-Year Average 15% 14% 16% 18% 10% 18+% 5% 0% 2004 - 2006 2007 - 2009 2010 - 2012 2013 - 2015 2013 – 2015 = Company Estimates
Slide 28: Adjusted Operating Cash Flow
Adjusted Operating Cash Flow 1,200 In $ Millions 3-Year Cumulative 1,000 $1B + 2004 - 2006 2007 - 2009 2010 - 2012 2013 - 2015 2013 – 2015 = Company Estimates
Slide 29: Uses of Cash
Uses of Cash Allocation based on principles of Financial Flexibility Capital Expenditures Financial Acquisition/ Flexibility Development Opportunities Cash Returned to shareholders
Slide 30: Capital Expenditures
Capital Expenditures 5% Increased Investment in Capacity and Technology in Emerging Markets 4% 4.4% 4-5% 2% 3% 3.4% ~3% 1% % 0% 2003 - 2009 2010 - 2012 2013 - 2015 2016 - 2018 2013 – 2018 = Company Estimates
Slide 31: Cash Returned to Shareholders
Cash Returned to Shareholders • Strong Track Record of Returning Cash to Shareholders Annual Cash Dividend Declared $1.30 • Increased dividend 9 times in 10 years $ 0.88 $0.96 $1.00 $1.04 $1.16 • Historical dividend payout $0.60 $0.63 ratio of 30-35% $0.69 $0.73 $0.77 • Authorized $250 million share
Slide 32: M&A Activity
M&A Activity • Routinely evaluate M&A opportunities Augment our Organic Growth Strategy – F&F companies participating in attractive markets – F&F companies operating in geographies where we are under- represented – F&F companies with differentiated technology • Evaluate consistent with principles of
Slide 33: Reconfirming Our Long-Term Financial Targets
Reconfirming Our Long-Term Financial Targets Local Currency Sales Growth Adjusted Operating Profit Growth Adjusted EPS Growth 4- 6% 7- 9% 10+%
Slide 34: Total Shareholder Return
Total Shareholder Return 60% Five-Year Total Shareholder Return* (December 31, 2007 – December 31, 2012) • Returns greatly exceeds that of the S&P Index Group 40% 50% and Peer • Performance driven by both share price 20% 30% appreciation and payout of dividends 10% 0% IFF S&P 500 Index Peer Group *I
Slide 35: Summary
Summary Geographically Diversified Company with Steady Growth Partnered with Leading Global Consumer Companies Strong Innovation Platforms – Focused on Consumer Strong Financial Performance and Cash Flow Abilityto Deliver Strong Returns Longer-Term
Slide 36: Investor Day 2013: Innovation, The Foundation of our Success
Investor Day 2013 Innovation The Foundation of our Success
Slide 37: Investor Day 2013: Closing Remarks
Investor Day 2013 Closing Remarks Doug Tough Chairman of the Board & Chief Executive Officersw June 5, 2013
Slide 38: Innovation - Foundation for Our Success
Innovation - Foundation for Our Success Allocate resources to seize growth opportunities in emerging markets Align R&D Spend with Opportunities – in terms of category growth and EP profile Use EP principles to develop a stronger portfolio to deliver a higher ROIC Invest behind advantaged businesses
Slide 39: Strategy Recap
Strategy Recap Leverage Geographic Reach Growth rates in emerging markets are 2-3x developed markets New manufacturing capacity being added Increase regional coverage via labs & commercial offices Strengthen Innovation Platform R&D pipeline has significantly strengthened Research programs are well a
Slide 40: Strategic Priorities Going Forward: Leverage Geographic Reach
Strategic Priorities Going Forward Leverage Geographic Reach Increasing investments in emerging markets to support growth $50 investment in Turkey to serve customers in Africa, Eastern Europe and Middle East and Central Asia Leverage Singapore liquid Fragrances & Flavors plant, and ensure Southeast
Slide 41: Strategic Priorities Going Forward: Strengthen Innovation Platform
Strategic Priorities Going Forward Strengthen Innovation Platform Build strong molecule pipeline Continue to develop High-impact molecules Extend encapsulation to other categories Leverage expertise in Natural Ingredients Leverage Flavors modulation tool-box Enhance Delivery Systems in Flavors and F
Slide 42: Strategic Priorities Going Forward: Maximize Portfolio
Strategic Priorities Going Forward Maximize Portfolio Improve Economic Profile of business Realize remaining $25 million operating profit opportunity Focus on innovation, profitability and return on investment Apply a disciplined approach to investing Leverage strong margin profile and cash flow gen
Slide 43: Summary
Summary Strategic Priorities Invest in Innovation Grow Footprint in Emerging Markets and Improve Coverage Improve Value of Portfolio by Prioritizing Higher Margin Businesses Drive Greater Efficiency to Gain Operational Leverage Long-Term Financial Expectations Local currency sales growth of 4% to 6%
Slide 44: Investor Day 2013: Innovation, The Foundation of Our Success
Investor Day 2013 Innovation The Foundation of Our Success
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