IFF Q211EarningsPresentation

8/13/2019 IFF Q211EarningsPresentation

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Second Quarter 2011 ResultsSecond Quarter 2011 ResultsKevin BerrymanEVP & CFOKevin BerrymanEVP & CFO

August 9, 2011

Nicolas MirzayantzPresident, FragrancesNicolas MirzayantzPresident, FragrancesHernan VaismanPresident, FlavorsHernan VaismanPresident, FlavorsDoug ToughChairman & CEODoug ToughChairman & CEO

First Quarter 2011 Results 2

Cautionary StatementCautionary Statement

Statements made in this presentation that relate to our future performanceor future financial results or other future events (identified by such termsas expect, anticipate, believe, outlook, guidance, may orsimilar terms and variations thereof are forward-looking statements, whichinvolve uncertainties that could cause actual performance or results tomaterially differ. We undertake no obligation to update any of thesestatements. Listeners are cautioned not to place undue reliance on theseforward-looking statements. These statements should be taken inconjunction with our cautionary statement, the additional informationabout risk factors and other uncertainties set forth in the companysannual report on Form 10-K for the year ended December 31, 2010 and inour other periodic reports filed with the SEC, all of which are available on

our website under Investor Relations, at www.iff.com.We have disclosed certain non-GAAP measures within this presentation.Please see reconciliations to their respective measures prescribed byaccounting principles generally accepted in the U.S. included on ourwebsite at www.iff.com under Investor Relations.

Statements made in this presentation that relate to our future performanceor future financial results or other future events (identified by such termsas expect, anticipate, believe, outlook, guidance, may orsimilar terms and variations thereof are forward-looking statements, whichinvolve uncertainties that could cause actual performance or results tomaterially differ. We undertake no obligation to update any of thesestatements. Listeners are cautioned not to place undue reliance on theseforward-looking statements. These statements should be taken inconjunction with our cautionary statement, the additional informationabout risk factors and other uncertainties set forth in the companysannual report on Form 10-K for the year ended December 31, 2010 and inour other periodic reports filed with the SEC, all of which are available on

our website under Investor Relations, at www.iff.com.We have disclosed certain non-GAAP measures within this presentation.Please see reconciliations to their respective measures prescribed byaccounting principles generally accepted in the U.S. included on ourwebsite at www.iff.com under Investor Relations.


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Second Quarter 2011 Results 3

Doug Tough

Chairman & Chief Executive Officer

Doug Tough

Chairman & Chief Executive Officer


Q2 2011 Overview Q2 2011 Overview

Top-line Performance Driven by Portfolio & Geographic Diversification

Margins Pressured by Significant Increases in Input Costs

Strong Flavors Performance, Continued Cost Discipline & ForeignExchange Benefits Drove Double-Digit Operating Profit & EPS Growth

Top-line Performance Driven by Portfolio & Geographic Diversification

Margins Pressured by Significant Increases in Input Costs

Strong Flavors Performance, Continued Cost Discipline & ForeignExchange Benefits Drove Double-Digit Operating Profit & EPS Growth

LC Sales GrowthLC Sales Growth

+3%+3% +14%+14%

Adjusted EPS Growth*Adjusted EPS Growth*Adjusted Operating Margin*Adjusted Operating Margin*

17.0%17.0%

* Excludes Non-Recurring Items Please See Non-GAAP to GAAP Reconciliation in Q2 11 Press Release



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First Half 2011 Results In ContextFirst Half 2011 Results In Context

Local Currency Sales Growth: 6% 10% 6%

Flavors 10% 10% 7%

Fragrances 2% 11% 6%

Adjusted Operating Profit Growth*: 16% 24% 10%

Adjusted Operating Margin* : +130 bps +150 bps +40 bps

Adjusted EPS Growth*: 18% 27% 12%

Local Currency Sales Growth: 6% 10% 6%

Flavors 10% 10% 7%

Fragrances 2% 11% 6%

Adjusted Operating Profit Growth*: 16% 24% 10%

Adjusted Operating Margin* : +130 bps +150 bps +40 bps

Adjusted EPS Growth*: 18% 27% 12%

H1 2011H1 2011 3-Year

Avg.

3-Year

Avg.

2-Year

Avg.

2-Year

Avg.

* Excludes Non-Recurring Items Please See Non-GAAP to GAAP Reconciliation at IFF.com

* Excludes Non-Recurring Items Please See Non-GAAP to GAAP Reconciliation at IFF.com

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Hernan Vaisman

Group President, Flavors

Hernan Vaisman

Group President, Flavors

Second Quarter 2011 Results


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Flavor Segment PerformanceFlavor Segment Performance

Greater Asia:Confectionery & Savory grew double-digits

Greater Asia:Confectionery & Savory grew double-digits

Q2 Local CurrencySales PerformanceQ2 Local CurrencySales Performance

Latin America:Strong trends in Confectionery, Savory & Dairy continued

Latin America:Strong trends in Confectionery, Savory & Dairy continued

EAME:E. Europe, Africa & the Middle East provided greatest upside

EAME:E. Europe, Africa & the Middle East provided greatest upside

North America:H&W solutions drove high single-digit growth

North America:H&W solutions drove high single-digit growth


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Q2 Reported SalesQ2 Reported Sales

$304$304

Q2 10Q2 10

Local Currency Sales +8% Strong performance led by double-

digit growth in the emerging markets

Operating Margin (60) bps Profit +$6M Sales growth (pricing & volume) as

well as cost discipline offsetsignificant raw material pressure

Strong Momentum Continuing in Q3 11

Local Currency Sales +8% Strong performance led by double-

digit growth in the emerging markets

Operating Margin (60) bps Profit +$6M Sales growth (pricing & volume) as

well as cost discipline offsetsignificant raw material pressure

Strong Momentum Continuing in Q3 11

Flavor Business PerformanceFlavor Business Performance

Q2 11Q2 11

In MillionsIn Millions

Operating Margin21.2% 20.6%

Operating Margin21.2% 20.6%

$345$345



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Nicolas Mirzayantz

Group President, Fragrances

Nicolas Mirzayantz

Group President, Fragrances


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Fragrance Segment PerformanceFragrance Segment Performance

Fragrance Ingredients:Against difficult comparison, pricing was offset by lower volumes

Fragrance Ingredients:Against difficult comparison, pricing was offset by lower volumes

Q2 Local CurrencySales PerformanceQ2 Local CurrencySales Performance

Fine & Beauty Care:Results challenged by strongest year-ago comparison

Fine & Beauty Care:Results challenged by strongest year-ago comparison

Functional:New wins & pricing across all categories offset volume erosion

Functional:New wins & pricing across all categories offset volume erosion



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Local Currency Sales (2)% Emerging markets growth mitigated

developed markets softness

Adjusted Operating Margin* (180) bps& Adjusted Operating Profit $(5)M Double-digit raw material increases

more than offset pricing, restructuringbenefits & cost discipline

Challenging Comparables Expectedto Pressure Q3 Results

Local Currency Sales (2)% Emerging markets growth mitigated

developed markets softness

Adjusted Operating Margin* (180) bps& Adjusted Operating Profit $(5)M Double-digit raw material increases

more than offset pricing, restructuringbenefits & cost discipline

Challenging Comparables Expectedto Pressure Q3 Results

Fragrance Business PerformanceFragrance Business Performance

Q2 Reported SalesQ2 Reported Sales

$361$361

Q2 10Q2 10 Q2 11Q2 11


Operating Margin*18.6% 16.8%Operating Margin*

18.6% 16.8%

$370$370




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Kevin Berryman

EVP & Chief Financial Officer

Kevin Berryman

EVP & Chief Financial Officer



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Q2 2011 Financial ResultsQ2 2011 Financial Results

Reported Sales Increased 7%

Adjusted Operating Profit Up 11%*

Adjusted EPS Grew 14%*

Reported Sales Increased 7%

Adjusted Operating Profit Up 11%*

Adjusted EPS Grew 14%*




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Raw Material CostsRaw Material Costs

Significant Increases in InputCosts Across Both Businesses

Pricing Benefits Expectedto Build Throughout Q3

Discussions Underway WithCustomers RegardingAdditional Pricing Actions

Significant Increases in InputCosts Across Both Businesses

Pricing Benefits Expectedto Build Throughout Q3

Discussions Underway WithCustomers RegardingAdditional Pricing Actions

Input CostsInput Costs


Q1 11Q1 11 Q2 11Q2 11

12%12%

4%4%

Year-over-year changeYear-over-year change


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Adjusted RSA Cost* Adjusted RSA Cost*

Lower Incentive Comp &Continued Cost DisciplineDrove 360 Bps Decrease YoY

Continued BusinessReinvestment Throughout Q2

Lower Incentive Comp &Continued Cost DisciplineDrove 360 Bps Decrease YoY

Continued BusinessReinvestment Throughout Q2

Research, Selling & AdministrativeResearch, Selling & Administrative

Q2 10Q2 10 Q2 11Q2 11

$162$162

$175$175

Percentage of Sales26.3% 22.7%Percentage of Sales26.3% 22.7%




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Foreign ExchangeBeneficial to Q2 Results

At Current Rates, ForexShould Be Favorable in H2 11

Expect Hedges to ReduceVolatility Going Forward

Foreign ExchangeBeneficial to Q2 Results

At Current Rates, ForexShould Be Favorable in H2 11

Expect Hedges to ReduceVolatility Going Forward

Currency Currency

Q1A Q2A Q3E Q4E

2010 $1.39 $1.29 $1.27 $1.37

2011 $1.34 $1.43 $1.42 $1.42

Change (4)% 11% 12% 4%

Q1A Q2A Q3E Q4E

2010 $1.39 $1.29 $1.27 $1.37

2011 $1.34 $1.43 $1.42 $1.42

Change (4)% 11% 12% 4%

U.S. Dollars Per EuroU.S. Dollars Per Euro

* Euro Spot Rate As of August 8, 2011* Euro Spot Rate As of August 8, 2011



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1H 10 1H 11

Net Income $ 131 $ 160

Working Capital (26) (225)

D&A 40 37

Other (17) 30

Operating Cash Flow 128 2

Capital Expenditures (37) (46)

Dividends (40) (43)

1H 10 1H 11

Net Income $ 131 $ 160

Working Capital (26) (225)

D&A 40 37

Other (17) 30

Operating Cash Flow 128 2

Capital Expenditures (37) (46)

Dividends (40) (43)

Cash Flow Review Cash Flow Review

Operational Results Drove 22%Improvement in Net Income

Working Capital Pressured byPayables & Inventories

Capex On-Track to be5% of Sales in FY 11

Announced 15% DividendIncrease Payable Q4 11

Reduced OutstandingDebt by $100M

Operational Results Drove 22%Improvement in Net Income

Working Capital Pressured byPayables & Inventories

Capex On-Track to be5% of Sales in FY 11

Announced 15% DividendIncrease Payable Q4 11

Reduced OutstandingDebt by $100M


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Doug Tough

Chairman & CEO

Doug Tough

Chairman & CEO



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H2 2011 ContextH2 2011 Context

Balance of Year PerspectiveBalance of Year Perspective

H2 2011 ImplicationH2 2011 Implication

1) Comparing to 11% LC SalesGrowth Reported in H2 2010

2) Significant Raw MaterialPressure Expected to Continue

3) Strengthening of Euro vs. U.S. $

4) Continued Cost Discipline

1) Comparing to 11% LC SalesGrowth Reported in H2 2010

2) Significant Raw MaterialPressure Expected to Continue

3) Strengthening of Euro vs. U.S. $

4) Continued Cost Discipline

LC Sales Growth In lineWith Long-Term Targets

Greater Pricing Benefits

Cost Controls & Forex DrivingOperating Profit Growth

Below-the-line Leverage ShouldProvide Double-Digit EPS Growth

LC Sales Growth In lineWith Long-Term Targets

Greater Pricing Benefits

Cost Controls & Forex DrivingOperating Profit Growth

Below-the-line Leverage ShouldProvide Double-Digit EPS Growth

Expect FY 2011 Results to be In Line With Long-Term TargetsExpect FY 2011 Results to be In Line With Long-Term Targets

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ConclusionConclusion

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Pleased With Our Performance Through H1 2011,

In light of the Challenging Environment

Cautiously Optimistic In Our Outlook

Continue to Make Progress Against Strategic Plan

Pleased With Our Performance Through H1 2011,

In light of the Challenging Environment

Cautiously Optimistic In Our Outlook

Continue to Make Progress Against Strategic Plan



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Questions

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IFF Q211EarningsPresentation