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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
Second Quarter 2011 Results 4
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
* Excludes Non-Recurring Items Please See Non-GAAP to GAAP Reconciliation in Q2 11 Press Release
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Second Quarter 2011 Results 5
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
6
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
Second Quarter 2011 Results
8
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
Second Quarter 2011 Results
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Nicolas Mirzayantz
Group President, Fragrances
Nicolas Mirzayantz
Group President, Fragrances
Second Quarter 2011 Results
10
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
Second Quarter 2011 Results
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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
In MillionsIn Millions
Operating Margin*18.6% 16.8%Operating Margin*
18.6% 16.8%
$370$370
* Excludes Non-Recurring Items Please See Non-GAAP to GAAP Reconciliation in Q2 11 Press Release
* Excludes Non-Recurring Items Please See Non-GAAP to GAAP Reconciliation in Q2 11 Press Release
Second Quarter 2011 Results
12
Kevin Berryman
EVP & Chief Financial Officer
Kevin Berryman
EVP & Chief Financial Officer
Second Quarter 2011 Results
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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%*
* Excludes Non-Recurring Items Please See Non-GAAP to GAAP Reconciliation in Q2 11 Press Release
* Excludes Non-Recurring Items Please See Non-GAAP to GAAP Reconciliation in Q2 11 Press Release
Second Quarter 2011 Results
14
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
Second Quarter 2011 Results
Q1 11Q1 11 Q2 11Q2 11
12%12%
4%4%
Year-over-year changeYear-over-year change
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In MillionsIn Millions
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%
Second Quarter 2011 Results
* Excludes Non-Recurring Items Please See Non-GAAP to GAAP Reconciliation in Q2 11 Press Release
* Excludes Non-Recurring Items Please See Non-GAAP to GAAP Reconciliation in Q2 11 Press Release
16
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
Second Quarter 2011 Results
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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
Second Quarter 2011 Results
18
Doug Tough
Chairman & CEO
Doug Tough
Chairman & CEO
Second Quarter 2011 Results
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Second Quarter 2011 Results 19
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
20
ConclusionConclusion
20
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
Second Quarter 2011 Results
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Questions