International Flavors & Fragrances Inc. (NYSE: IFF) reported financial results for the fourth quarter and full year ended December 31, 2022.

Fourth Quarter 2022 Consolidated Summary:

Full Year 2022 Consolidated Summary:

Management Commentary

“IFF delivered solid financial results in 2022 in what continues to be a challenging operating environment,” said IFF CEO Frank Clyburn. “Throughout the year our team successfully executed on what we could control – pricing, productivity and portfolio optimization – to generate strong sales growth, enhance profitability and reduce our debt. At the same time, we introduced a refreshed growth-focused strategy, that deepens our commitment to customers, prioritizes our highest-return businesses, and expands productivity to drive long-term profitable growth. We are confident that these are the right strategies to navigate near-term challenges – as we balance growth, profitability and cash flow generation – and deliver long-term value creation for our shareholders.”

Fourth Quarter 2022 Consolidated Financial Results

• Reported net sales for the fourth quarter were $2.84 billion, a decrease of 6% compared to the prior year period. On a comparable basis², currency neutral sales increased 4% versus the prior year period, led by a double-digit increase in Pharma and mid-single digit growth in Scent & Nourish.
• Loss before taxes on a reported basis for the fourth quarter was $5 million. Adjusted operating EBITDA for the fourth quarter was $441 million. On a combined basis², currency neutral adjusted operating EBITDA decreased 5% as strong pricing actions and productivity gains were more than offset by lower volumes.
• Reported earnings per share (EPS) for the fourth quarter was $0.01. Adjusted EPS excluding amortization was $0.97 per diluted share.

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¹ Schedules at the end of this release contain reconciliations of reported GAAP to Non-GAAP metrics. See Use of Non-GAAP Financial Measures for explanations of our Non-GAAP metrics

² Comparable results for full year 2022 is defined as 12 months (January thru December) of legacy IFF and N&B results in both the 2021 and 2022 periods, and excludes the impact of divestitures and acquisitions. Comparable results for the fourth quarter excludes the impact of divestitures and acquisitions.

Fourth Quarter 2022 Segment Summary: Growth vs. Prior Year

Nourish Segment

• On a reported basis, sales were $1.58 billion. On a comparable basis², currency neutral sales improved 4%, with strong growth in Food Design and Ingredients.

• Nourish adjusted operating EBITDA was $195 million and adjusted operating EBITDA margin was 12.4% in the fourth quarter. On a comparable basis², currency neutral adjusted operating EBITDA declined 11% as strong price increases and productivity gains were offset by lower volumes.

Health & Biosciences Segment

• On a reported basis, sales were $501 million. On a comparable basis², currency neutral sales declined 3% compared against strong double-digit growth in the prior year period. Performance was driven by strong growth in Animal Nutrition, Cultures and Food Enzymes that was more than offset by market-driven weakness in Health and Grain Processing.

• Health & Biosciences adjusted operating EBITDA was $121 million and adjusted operating EBITDA margin was 24.2% in the fourth quarter. On a comparable basis², currency neutral adjusted operating EBITDA declined 11% as price increases and productivity gains were more than offset by lower volumes.

Scent Segment

• On a reported basis, sales were $545 million. On a comparable basis², currency neutral sales improved 6% led by strong double-digit growth in Fine Fragrances and a mid single-digit improvement in Consumer Fragrance.

• Scent adjusted operating EBITDA was $95 million and adjusted operating EBITDA margin was 17.4% in the fourth quarter. On a comparable basis², currency neutral adjusted operating EBITDA grew 25% led by favorable mix, pricing and productivity gains.

Pharma Solutions Segment

• On a reported basis, sales were $221 million. On a comparable basis², currency neutral sales improved 15% led by strong double-digit growth in Core Pharma.

• Pharma Solutions adjusted operating EBITDA was $30 million and adjusted operating EBITDA margin was 13.6% in the fourth quarter. On a comparable basis², currency neutral adjusted operating EBITDA declined 10% as price increases and productivity gains were more than offset by lower volumes.

Full Year 2022 Consolidated Financial Results

• Reported net sales for the full year were $12.44 billion, an increase of 7% compared to the prior year period. On a comparable basis², currency neutral sales increased 9%, with growth achieved across all divisions, led by double-digit increases in Nourish and Pharma.

• Loss before taxes on a reported basis for the full year was $1.63 billion. Adjusted operating EBITDA for the full year was $2.46 billion. On a comparable basis², currency neutral adjusted operating EBITDA increased 4%, as strong pricing and continued cost discipline more than offset inflationary pressures and lower volumes.

• Reported (loss) earnings per share (EPS) for the full year was $(7.21). Adjusted EPS excluding amortization was $5.55 per diluted share.

• Cash flow from operations for the full year was $345 million, and free cash flow defined as cash flow from operations less capital expenditures totaled $(159) million. Net debt to credit adjusted EBITDA at the end of the fourth quarter was 4.1x.

Full Year 2022 Segment Summary: Growth vs. Prior Year

Nourish Segment

• On a reported basis, sales were $6.83 billion. On a comparable basis², currency neutral sales improved 11% led by double-digit growth in Food Design and Ingredients and a mid single-digit increase in Flavors.

• Nourish adjusted operating EBITDA was $1.18 billion and adjusted operating EBITDA margin was 17.2% for the full year. On a comparable basis², currency neutral adjusted operating EBITDA grew 5% led by strong price increases and productivity gains.

Health & Biosciences Segment

• On a reported basis, sales were $2.34 billion. On a comparable basis², currency neutral sales improved 4% with growth in nearly all segments led by high single-digit increases in Cultures & Food Enzymes and Animal Nutrition.

• Health & Biosciences adjusted operating EBITDA was $634 million and adjusted operating EBITDA margin was 27.1% for the full year. On a comparable basis², currency neutral adjusted operating EBITDA declined 1% as price increases and productivity gains were more than offset by lower volumes.

Scent Segment

• On a reported basis, sales were $2.30 billion. On a comparable basis², currency neutral sales improved 8% driven by strong double-digit growth in Fine Fragrances, a high single-digit increase in Fragrance Ingredients and a mid single-digit performance in Consumer Fragrances.

• Scent adjusted operating EBITDA was $423 million and adjusted operating EBITDA margin was 18.4% for the full year. On a comparable basis², currency neutral adjusted operating EBITDA grew 1% as strong volume growth, favorable mix and productivity were offset due to the time lag between full price realization relative to inflationary pressures.

Pharma Solutions Segment

• On a reported basis, sales were $971 million. On a comparable basis², currency neutral sales improved 15% led by double-digit growth in Core Pharma.

• Pharma Solutions adjusted operating EBITDA was $222 million and adjusted operating EBITDA margin was 22.9% for the full year. On a comparable basis², currency neutral adjusted operating EBITDA grew 25% led by volume growth, price increases and productivity gains.

2023 Financial Guidance

The Company expects full year 2023 sales to be approximately $12.5 billion, with an expected full year 2023 adjusted operating EBITDA of approximately $2.34 billion. The Company's full year guidance excludes approximately $350 million in sales and approximately $50 million in adjusted operating EBITDA for the anticipated Savory Solutions divestiture, which is expected to close in the second quarter of 2023.

Comparable currency neutral sales growth for 2023 is expected to be approximately 6%. On a comparable basis, full year 2022 sales were approximately $11.875 billion, excluding approximately $565 million of sales related to the impact of divestitures and acquisitions in current and prior year periods.

Comparable currency neutral adjusted operating EBITDA growth for 2023 is expected to be approximately flat versus prior year. On a comparable basis, full year 2022 adjusted operating EBITDA was approximately $2.37 billion, excluding approximately $85 million of adjusted operating EBITDA related to the impact of divestitures and acquisitions in current and prior year periods.

Based on current market foreign exchange rates, the Company expects that foreign exchange will have zero impact to sales growth and approximately a 1% adverse impact to adjusted operating EBITDA growth in 2023.

The Company cannot reconcile its expected Adjusted Operating EBITDA without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company's control and/or cannot be reasonably predicted at this time. These items include but are not limited to gains (losses) on sale of fixed assets, shareholder activism related costs, business divestiture costs including the anticipated Savory Solutions, employee separation costs, N&B inventory step-up costs, N&B transaction related costs, integration related costs and the impact of the merger with N&B.

A copy of the Company’s Annual Report on Form 10-K will be available on its website at www.iff.com or at www.sec.gov by March 1, 2023.

Audio Webcast

A live webcast to discuss the Company’s fourth quarter and full year 2022 financial results will be held on February 9, 2023, at 9:00 a.m. ET. The webcast and accompanying slide presentation may be accessed on the Company's IR website at ir.iff.com. For those unable to listen to the live webcast, a recorded version will be made available on the Company's website approximately one hour after the event and will remain available on IFF’s website for one year.

Cautionary Statement Under The Private Securities Litigation Reform Act of 1995

Statements in this press release, which are not historical facts or information, are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s current assumptions, estimates and expectations including those concerning the impacts of COVID-19 and our plans to respond to its implications; the expected impact of global supply chain challenges; expectations regarding sales and profit for the fiscal year 2023, including the impact of foreign exchange, pricing actions, raw materials, energy and sourcing, logistics and manufacturing costs; expectations of the impact of inflationary pressures and the pricing actions to offset exposure to such impacts; the impact of high input costs, including commodities, raw materials, transportation and energy; our ability to drive cost discipline measures and the ability to recover margin to pre-inflation levels; expectations regarding the implementation of our refreshed growth-focused strategy; the expected divestiture of Savory Solutions and the progress of our portfolio optimization strategy, through non-core business divestitures and acquisitions, such as the Health Wright Products acquisition; our combination with N&B, including the expected benefits and synergies of the N&B Transaction and future opportunities for the combined company; the success of our integration efforts and ability to deliver on our synergy commitments as well as future opportunities for the combined company; the success of our optimization of our portfolio; the impact of global economic uncertainty or recessionary pressures on demand for consumer products; the growth potential of the markets in which we operate, including the emerging markets; expected capital expenditures; the expected costs and benefits of our ongoing optimization of our manufacturing operations, including the expected number of closings; expected cash flow and availability of capital resources to fund our operations and meet our debt service requirements; our ability to drive reductions in expenses; our strategic investments in capacity and increasing inventory to drive improved profitability; our ability to innovate and execute on specific consumer trends and demands; our ability to enhance our innovation efforts and drive cost efficiencies; and our ability to continue to generate value for, and return cash to, our shareholders.

These forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements. Certain of such forward-looking information may be identified by such terms as “expect”, “anticipate”, “believe”, “intend”, “outlook”, “may”, “estimate”, “should”, “predict” and similar terms or variations thereof. Such forward-looking statements are based on a series of expectations, assumptions, estimates and projections about the Company, are not guarantees of future results or performance, and involve significant risks, uncertainties and other factors, including assumptions and projections, for all forward periods. Our actual results may differ materially from any future results expressed or implied by such forward-looking statements.

Such risks, uncertainties and other factors include, among others, the following: (1) inflationary trends, including in the price of our input costs, such as raw materials, transportation and energy; (2) supply chain disruptions, geopolitical developments, including the Russia-Ukraine conflict, or climate-change related events (including severe weather events) that may affect our suppliers or procurement of raw materials; (3) disruption in the development, manufacture, distribution or sale of our products from COVID-19 and other public health crises; (4) risks related to the integration of the N&B business, including whether we will realize and benefits anticipated from the merger in the expected time frame; (5) our ability to successfully establish and manage acquisitions, collaborations, joint ventures or partnerships, or the failure to close strategic transactions or divestments; (6) our ability to successfully market to our expanded and diverse customer base; (7) our substantial amount of indebtedness and its impact on our liquidity and ability to return capital to its shareholders; (8) our ability to effectively compete in our market and develop and introduce new products that meet customers’ needs; (9) our ability to retain key employees; (10) changes in demand from large multi-national customers due to increased competition and our ability to maintain “core list” status with customers; (11) our ability to successfully develop innovative and cost-effective products that allow customers to achieve their own profitability expectations; (12) disruption in the development, manufacture, distribution or sale of our products from natural disasters, public health crises, international conflicts, terrorist acts, labor strikes, political crisis, accidents and similar events; (13) the impact of a significant data breach or other disruption in our information technology systems, and our ability to comply with data protection laws in the U.S. and abroad; (14) volatility and increases in the price of raw materials, energy and transportation; (15) our ability to comply with, and the costs associated with compliance with, regulatory requirements and industry standards, including regarding product safety, quality, efficacy and environmental impact; (16) our ability to meet increasing customer, consumer, shareholder and regulatory focus on sustainability; (17) defect, quality issues (including product recalls), inadequate disclosure or misuse with respect to the products and capabilities; (18) our ability to react in a timely and cost-effective manner to changes in consumer preferences and demands, including increased awareness of health and wellness; (19) our ability to benefit from our investments and expansion in emerging markets; (20) the impact of currency fluctuations or devaluations in the principal foreign markets in which we operate; (21) economic, regulatory and political risks associated with our international operations; (22) the impact of global economic uncertainty on demand for consumer products; (23) our ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws; (24) our ability to successfully manage our working capital and inventory balances; (25) the impact of the failure to comply with U.S. or foreign anti-corruption and anti-bribery laws and regulations, including the U.S. Foreign Corrupt Practices Act; (26) any impairment on our tangible and intangible long lived assets, including goodwill associated with the N&B merger and the acquisition of Frutarom; (27) our ability to protect our intellectual property rights; (28) the impact of the outcome of legal claims, regulatory investigations and litigation; (29) changes in market conditions or governmental regulations relating to our pension and postretirement obligations; (30) the impact of changes in federal, state, local and international tax legislation or policies, including the Tax Cuts and Jobs Act, with respect to transfer pricing and state aid, and adverse results of tax audits, assessments, or disputes; (31) the impact of the United Kingdom’s departure from the European Union; (32) the impact of the phase out of the London Interbank Offered Rate (LIBOR) on interest expense; and (33) risks associated with our CEO transition, including the impact on employee hiring and retention.

The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the Company (such as in our other filings with the SEC or in company press releases) for other factors that may cause actual results to differ materially from those projected by the Company. Please refer to Part I. Item 1A., Risk Factors, of the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2022 for additional information regarding factors that could affect our results of operations, financial condition and liquidity.

We intend our forward-looking statements to speak only as of the time of such statements and do not undertake or plan to update or revise them as more information becomes available or to reflect changes in expectations, assumptions or results. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this press release or included in our other periodic reports filed with the SEC could materially and adversely impact our operations and our future financial results. Any public statements or disclosures made by us following this press release that modify or impact any of the forward-looking statements contained in or accompanying this press release will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this press release.

Use of Non-GAAP Financial Measures

We provide in this press release non GAAP financial measures, including: (i) comparable currency neutral sales; (ii) adjusted operating EBITDA and comparable currency neutral adjusted operating EBITDA; (iii) adjusted operating EBITDA margin; (iv) adjusted EPS ex amortization; (v) free cash flow; and (vi) net debt to credit adjusted EBITDA.

Our non-GAAP financial measures are defined below.

Currency Neutral metrics eliminate the effects that result from translating non-U.S. currencies to U.S. dollars. We calculate currency neutral numbers by translating current year invoiced sale amounts at the exchange rates used for the corresponding prior year period. We use currency neutral results in our analysis of subsidiary or segment performance. We also use currency neutral numbers when analyzing our performance against our competitors.

Adjusted operating EBITDA and adjusted operating EBITDA margin exclude depreciation and amortization expense, interest expense, other (expense) income, net, and certain non-recurring or unusual items such as acquisition related costs, restructuring and other charges, gains on sale of fixed assets, impairment of goodwill, impairment of long-lived assets, shareholder activism related costs, business divestiture costs, employee separation costs, strategic initiative costs, Global Shared Services implementation costs, Frutarom acquisition related costs, N&B inventory step-up costs, N&B transaction related costs and integration related costs.

Adjusted EPS ex Amortization excludes the impact of non-operational items including, acquisition related costs, restructuring and other charges, losses (gains) on sale of fixed assets, impairment of goodwill, impairment of long-lived assets, shareholder activism related costs, business divestiture costs, gains on business disposal, employee separation costs, strategic initiative costs, Global Shared Services implementation costs, Frutarom acquisition related costs, integration related costs, redemption value adjustment to EPS and non-cash items including the amortization of acquisition related intangible assets.

Free Cash Flow is operating cash flow (i.e. cash flow from operations) less capital expenditures.

Net debt to credit adjusted EBITDA is the leverage ratio used in our credit agreements and defined as net debt (which is debt for borrowed money less cash and cash equivalents) divided by the trailing 12-month credit adjusted EBITDA. Credit adjusted EBITDA is defined as income (loss) before income taxes, depreciation and amortization expense, interest expense, specified items and non-cash items.

Comparable results for full year 2022 is defined as 12 months (January thru December) of legacy IFF and N&B results in both the 2021 and 2022 periods, and excludes the impact of divestitures and acquisitions. Comparable results for the fourth quarter excludes the impact of divestitures and acquisitions. These non-GAAP measures are intended to provide additional information regarding our underlying operating results and comparable year over year performance. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. In discussing our historical and expected future results and financial condition, we believe it is meaningful for investors to be made aware of and to be assisted in a better understanding of, on a period to period comparable basis, financial amounts both including and excluding these identified items, as well as the impact of exchange rate fluctuations. These non-GAAP measures should not be considered in isolation or as substitutes for analysis of the Company’s results under GAAP and may not be comparable to other companies’ calculation of such metrics.

The Company cannot reconcile its expected Adjusted Operating EBITDA under "Financial Guidance" without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company's control and/or cannot be reasonably predicted at this time. These items include but are not limited to gains (losses) on sale of fixed assets, shareholder activism related costs, business divestiture costs (including the anticipated Savory Solutions divestiture), employee separation costs, N&B inventory step-up costs, N&B transaction related costs, integration related costs and the impact of the merger with N&B.

Welcome to IFF

At IFF (NYSE: IFF), an industry leader in food, beverage, scent, health and biosciences, science and creativity meet to create essential solutions for a better world – from global icons to unexpected innovations and experiences. With the beauty of art and the precision of science, we are an international collective of thinkers who partners with customers to bring scents, tastes, experiences, ingredients and solutions for products the world craves. Together, we will do more good for people and planet. Learn more at iff.com, Twitter, Facebook, Instagram, and LinkedIn.

The following table reconciles cash, cash equivalents and restricted cash between the Company's statement of cash flows for the periods ended December 31, 2022 and December 31, 2021 to the amounts reported in the Company's balance sheet:

International Flavors & Fragrances Inc.

GAAP to Non-GAAP Reconciliation

(Unaudited)

The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.

International Flavors & Fragrances Inc.

GAAP to Non-GAAP Reconciliation

(Amounts in millions)

(Unaudited)

The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.

International Flavors & Fragrances Inc.

GAAP to Non-GAAP Reconciliation

(Unaudited)

The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.

International Flavors & Fragrances Inc.

GAAP to Non-GAAP Reconciliation

(Amounts in millions)

(Unaudited)

The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.