International Flavors & Fragrances, Inc. · NYSE:IFF
International Flavors & Fragrances — Q1 2020 Earnings Presentation
32 slides from International Flavors & Fragrances's earnings presentation, May 12, 2020
Slide 1: Q1 2020 Earnings Conference Call
Q1 2020 EARNINGS CONFERENCE CALL May 12, 2020
Slide 2: Cautionary Statement
C A U T I O N A RY S TAT E M E N T 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 expected future financial position,
Slide 3: Cautionary Statement: Use of Non-GAAP Financial Measures
C A U T I O N A RY S TAT E M E N T Use of Non-GAAP Financial Measures We provide in this presentation non-GAAP financial measures, including: (i) currency neutral sales; (ii) adjusted operating profit ex amortization; (iii) currency neutral adjusted operating profit ex amortization; (iv) adjusted op
Slide 4: Conference Call Participants
C O N F E R E N C E C A L L PA R T I C I PA N T S Andreas Fibig Rustom Jilla Chairman & CEO EVP & CFO 4
Slide 5: Agenda
AGENDA 1. Executive Highlights 2. COVID-19 Situation 3. Financial Review 4. IFF & Dupont N&B Combination 5. Q&A 5
Slide 6: Executive Highlights
EXECUTIVE HIGHLIGHTS Q1 2020 key accomplishments • Strong start to the year, with mid-single digit sales & double-digit adjusted EPS ex amortization growth – both on currency neutral basis • Realized solid Frutarom acquisition-related revenue & cost synergies • Advanced Nutrition & Biosciences integ
Slide 7: Q1 2020 Financial Summary
Q 1 2 0 2 0 F I N A N C I A L S U M M A RY Delivered strong improvements across key financial metrics $1.3B $271M $1.62 SALES ADJ. OPERATING PROFIT EX AMORT* ADJ. EPS EX AMORT* • Currency neutral sales grew 6% with broad-based growth in both Taste & Scent • Currency neutral adjusted operating margin
Slide 8: COVID-19: Portfolio Analysis
C O V I D - 1 9 : P O R T F O L I O A N A LY S I S Diverse & defensive business supporting essential consumer products industries C H AR AC T E R I S T I C S PORTFOLIO COMPOSITION • Global: selling products in ~200 countries globally ~15% of sales Fine Fragrance, • Diverse: broad-based exposure acro
Slide 9: COVID-19: Impact Assessment
C O V I D - 1 9 : I M PA C T A S S E S S M E N T Team is successfully navigating a volatile & unpredictable environment 1 • Proactively addressing raw material challenges Procurement • Cost modestly higher due to supply constraint 2 • Lead times increased given new policies & regulations Logistics •
Slide 10: COVID-19: Actions
COVID-19: ACTIONS Taking steps to ensure continued success 1 Disciplined Cost Management: Limiting non-essential expenses & targeting incremental productivity initiatives to protect margin profile 2 Capital Expenditure Reduction: Prioritizing projects with shortest payback periods & delaying those t
Slide 11: COVID-19: Social Responsibility
COVID-19: SOCIAL RESPONSIBILITY Supporting our people, customers & communities around the world C O M M U N I T Y O U T R E AC H COMMENTARY • Local teams collectively produced >65 tons of hand sanitizer to date to be distributed to first responders • Partnered to develop “smell strips” that help ide
Slide 12: Q1 2020 Financial Performance
Q1 2020 FINANCIAL PERFORMANCE Achieved robust leverage from sales to EPS on a currency neutral basis C U R R E N C Y N E U T R AL S AL E S G R O W T H * COMMENTARY 13% • Broad-based sales growth in Scent & Taste and across all regions 9% • Margin expansion and strong increase in profit driven by vol
Slide 13: Scent Results
S C E N T R E S U LT S Q1 2020 performance review C U R R E N C Y N E U T R AL S AL E S G R O W T H * SEGMENT PROFIT Q1 2020: +7% Segment Profit • Growth in all regions and nearly all categories $105M • Double-digit increase in Consumer Fragrance led by robust growth in Fabric, Home & Hair Care 20.4
Slide 14: Taste Results
TA S T E R E S U LT S Q1 2020 performance review C U R R E N C Y N E U T R AL S AL E S G R O W T H * SEGMENT PROFIT Q1 2020: +5% Segment Profit • Achieved increases in all regions, with mid to high- $137M** single digit growth in LATAM, Greater Asia & EAME • Growth was primarily driven by mid-teen g
Slide 15: Cash Flow Dynamics
CASH FLOW DYNAMICS Q1 2020 performance review Q 1 2 0 2 0 C AS H F L O W C O M M E N TARY Operating Cash Flow $81 $(166) • Impacted by higher working capital as a result of strong sales & 2019 calendar shift • Cash conversion cycle in Q1 2020 was $127 consistent with 2019’s first quarter Capital Exp
Slide 16: COVID-19: Business Management Levers
COVID-19: BUSINESS MANAGEMENT LEVERS Targeting reductions in operational & capital expenses COST STRUCTURE W O R K I N G C AP I TAL C AP E X % of 2019 net sales % of 2019 net sales % of 2019 net sales Operating ~15% Profit Expansion Receivables 17% ~1.5% Variable ~55% Costs Inventory Maintenance ~3.
Slide 17: COVID-19: Insight into Debt Profile
C O V I D - 1 9 : I N S I G H T I N TO D E B T P R O F I L E Phased debt maturity schedule, with strong & ample liquidity DEBT MATURITY SCHEDULE (USD) C O M M E N TARY • Committed to maintaining investment grade rating $877M $800M • T12M Net Debt to EBITDA in Q1 2020 was 3.3x $641M $548M $500M • Deb
Slide 18: Insight into Q2 Dynamics
I N S I G H T I N TO Q 2 2 0 2 0 D Y N A M I C S COVID-19 presenting both opportunities & challenges CONTINUED S U P P LY M AR K E T STRENGTH C H AL L E N G E PRESSURE Taste Ex Consumer Fragrance Food Fine Fragrances / Food Service Fragrances Ingredients Service Cosmetic Actives 18
Slide 19: Looking Ahead
LOOKING AHEAD Global conditions remain volatile & unpredictable • Fortunate that majority of portfolio is essential for food, beverage, home & personal care products, with positive impact from COVID-19 • Remainder of our portfolio (Fine Fragrances, Cosmetic Actives, Fragrance Ingredients & Food Serv
Slide 20: IFF and DuPont N&B Combination
I F F A N D D U P O N T N & B C O M B I N AT I O N Creating a new global leader for innovative integrated solutions BROADENS EXPANDS R&D DIFFERENTIATED CATEGORY EXPOSURE CAPABILITIES & EXPERTISE INTEGRATED SOLUTIONS • Expands breadth of capabilities • Best-in-class R&D and • Stronger & broadest inno
Slide 21: Integration Planning
I N T E G R AT I O N P L A N N I N G Strong progress in pre-integration phase; On-track with execution timeline Q4 FIRST HALF SECOND HALF Q1 POST 2019 2020 2020 2021 CLOSE Purpose, Integration Revenue Cleared U.S. Initial Vision, IFF Permanent $7.3B Cash Agreement Management Anticipated & Cost Regul
Slide 22: Our Purpose: Applying Science and Creativity for a Better World
We need OUR PURPOSE: both the rigor of scientific A P P LY I N G S C I E N C E expertise, and the imagination of new A N D C R E AT I V I T Y possibilities, to FOR A BETTER create the best results. WORLD It’s the ”why” that will drive everything we do. It’s not just that we’re talented scientists an
Slide 23: Our Vision: Be the Partner for Essential Solutions
Unmatched innovation and leading-edge insight mean we’re already anticipating OUR VISION: what will be essential to B E T H E PA R T N E R tomorrow’s FOR ESSENTIAL consumers. SOLUTIONS It’s our strategy We’re more than a supplier. Yes, we supply the ingredients, for future success. compounds, and so
Slide 24: Structuring for Accelerated Growth
S T R U C T U R I N G F O R A C C E L E R AT E D G R O W T H Establishment of four divisions focused on end-market demand TA S T E , F O O D H E A LT H & PHARMA SCENT & BEVERAGE BIOSCIENCES SOLUTIONS • Flavors • Scent • Probiotics, Infant Nutrition, • Pharma Excipients • Savory Solutions • Ingredien
Slide 25: Supporting Business Objectives
SUPPORTING BUSINESS OBJECTIVES Global centralized functions, focused on best-in-class expertise I N T E G R AT E D COMMERCIAL RESEARCH & GLOBAL FINANCE SOLUTIONS EXCELLENCE DEVELOPMENT O P E R AT I O N S • Creating new • Collaborating for best • Defining what’s next • Driving best-in-class • Preserv
Slide 26: Executive Committee
EXECUTIVE COMMITTEE Highly qualified & diverse leaders with deep knowledge and expertise CHAIRM AN & CEO PH AR M A SO L U T I O N S SCENT HEALTH & BIOSCIENCES T AST E, F O O D & B EVER AG E Andreas Angela Nicolas Simon Matthias Amy Fibig Strzelecki Mirzayantz Herriott Haeni Byrick LEG AL O PERAT IO
Slide 27: Board of Directors Designees
B O A R D O F D I R E C TO R S D E S I G N E E S Beginning to assemble a world-class board Ed Matthias Carol Anthony Breen Heinzel (John) Davidson Lead Director Independent Director Independent Director Breen is Executive Chairman and CEO of DuPont de Dr. Heinzel is President, DuPont Nutrition & Dav
Slide 28: Integration Planning
I N T E G R AT I O N P L A N N I N G Strong progress in pre-integration phase; On-track with execution timeline Q4 FIRST HALF SECOND HALF Q1 POST 2019 2020 2020 2021 CLOSE Purpose, Integration Revenue Cleared U.S. Initial Vision, IFF Permanent $7.3B Cash Agreement Management Anticipated & Cost Regul
Slide 29: Summary
S U M M A RY Strong start to the year, with strong top and bottom-line results Realized Frutarom acquisition-related revenue & cost synergies & made significant advancements in N&B integration planning Unveiled future combined company purpose, vision, operating model & leadership team to ensure day
Slide 30: Appendix
APPENDIX 30
Slide 31: 2019 Financials for New Reporting Segments
2019 FINANCIALS FOR NEW REPORTING SEGMENTS** Q1 Q2 Q3 Q4 FY Dollars in millions 2019 2019 2019 2019 2019 Taste Sales 805 811 782 802 3201 Taste Segment Profit 131 131 121 99 482 as % of sales 16.3% 16.1% 15.5% 12.3% 15.1% Scent Sales 493 480 485 482 1940 Scent Segment Profit 90 94 88 77 349 as % of
Slide 32: IFF
iF F
International Flavors & Fragrances — Q1 2020 Earnings Presentation on 6ix