IFF Q2 2025 presentation: 3% currency-neutral growth amid portfolio reshaping

International Flavors & Fragrances Inc (NYSE:IFF) reported its second-quarter 2025 results on August 6, showing currency-neutral sales growth of 3% despite a 4% decline in reported revenue. The company also announced significant portfolio changes and a new share repurchase program while maintaining its full-year outlook.

Quarterly Performance Highlights

IFF reported Q2 2025 revenue of $2.76 billion, representing a 4% decrease from $2.89 billion in the same period last year. However, on a comparable currency-neutral basis, sales increased by 3%, reflecting broad-based growth across all business segments.

Adjusted operating EBITDA was $552 million, down 6% year-over-year but up 6% on a comparable currency-neutral basis. The adjusted operating EBITDA margin was 20.0%, a 40 basis point decrease from 20.4% in Q2 2024, though it improved by 50 basis points on a comparable currency-neutral basis.

As shown in the following consolidated results table:

Performance varied across IFF’s business segments. The Taste segment led with 6% comparable currency-neutral growth to $631 million, driven by strong performance in Flavors across all regions. Health & Biosciences delivered 4% growth to $577 million, with positive contributions from all businesses, particularly Health, Food Biosciences, and Animal Nutrition.

The Food Ingredients segment, which is undergoing a turnaround, posted 1% growth to $850 million, with notable improvement in profitability. Its adjusted EBITDA margin improved by 170 basis points year-over-year to 14.6%, driven by volume growth, favorable pricing, and productivity gains.

The Scent segment grew 1% to $603 million, with double-digit growth in Fine Fragrance offset by challenges in Consumer Fragrances. The segment’s profitability was impacted by unfavorable pricing due to timing lags.

The detailed segment performance is illustrated below:

Strategic Initiatives and Capital Allocation

IFF has taken significant steps to streamline its portfolio and strengthen its balance sheet. The company completed the divestitures of its Pharma Solutions and Nitrocellulose businesses during the quarter. Additionally, IFF announced the divestiture of its Soy Crush, Concentrates, and Lecithin businesses, aligning with its margin enhancement strategy.

The company is also evaluating strategic alternatives for its entire Food Ingredients business, signaling a potential major portfolio shift.

On the capital allocation front, IFF announced a $500 million share repurchase authorization, while maintaining its commitment to dividends, which totaled $204 million in payments during the quarter. The company achieved its leverage target ahead of plan, with net debt to credit adjusted EBITDA reaching 2.5x.

The following slide outlines IFF’s capital allocation strategy:

Cash flow from operations totaled $368 million for the quarter, while capital expenditures year-to-date were $274 million, representing approximately 5% of sales. This resulted in free cash flow of $94 million.

The company’s cash flow and leverage metrics are detailed here:

Forward-Looking Statements

Despite describing the operating environment as "more challenging," IFF maintained its full-year 2025 guidance. The company expects revenue to be between $10.6 billion and $10.9 billion, representing comparable currency-neutral growth of 1% to 4%, with a foreign exchange impact of approximately -1% and a divestiture impact of approximately -7%.

Adjusted operating EBITDA is projected to be between $2.0 billion and $2.15 billion, representing comparable currency-neutral growth of 5% to 10%, with foreign exchange and divestiture impacts of approximately -3% and -8%, respectively.

Management noted that growth is expected to moderate in the second half of 2025 due to strong prior-year comparisons, particularly in Q3 where Taste grew 15%, Health & Biosciences grew 12%, and Scent grew 10% in the prior year.

The company’s full-year outlook is presented below:

Market Context and Outlook

IFF’s stock was trading at $73 in premarket activity, up 3.37% from the previous close of $70.62, suggesting a positive market reaction to the results and strategic announcements. This marks a recovery from the post-Q1 earnings decline when the stock fell 5.86% to $74.56 after missing revenue expectations despite beating on EPS.

The Q2 results show consistency with Q1 2025 performance, which also delivered 3% comparable currency-neutral growth. However, the company faces ongoing challenges from foreign exchange headwinds and a competitive operating environment.

CEO Erik Fyrwald emphasized the company’s progress in executing its strategic priorities: "We delivered solid first-half results, with steady top-line growth and improved profitability, reflecting continued focus and execution. We’ve taken steps to streamline our portfolio and strengthen our balance sheet, achieving our leverage target ahead of plan."

Looking ahead, IFF remains focused on operational excellence, cost discipline, and strategic priorities to position the business for sustained growth. The company expressed confidence that its strategy, execution capabilities, and financial foundation will create long-term value for shareholders.

The following summary slide captures IFF’s key achievements and focus areas:

Full presentation:

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