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Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

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This year’s Fortune 500 marks the 67th running of the list.

This year's Fortune 500 marks the 66th running of the list.

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This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

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This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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International Flavors &amp; Fragrances (IFF) is a chemicals manufacturer that creates flavors, fragrances, and specialty ingredients used in food, beverages, personal care, and pharmaceuticals. Tracing its roots back to 1889, when Josef Polak and Leopold Schwarz created Polak &amp; Schwarz, a producer of fruit flavors and oil essences, IFF now does business in 65 countries. Since breaking its Nourish group into two parts, the company operates through five segments: taste, food ingredients, health &amp; biosciences, scent, and pharma solutions.

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International Flavors & Fragrances (IFF): Company Profile, Stock Price, News, Rankings

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International Flavors & Fragrances

international flavors & fragrances

At this time, I would like to welcome everyone to the IFF Second Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode until the formal question and answer portion of the call. To ask a question at that time, please press star, one on your telephone keypad. If you would like to remove your name from the queue, please press 2. Participants will be announced by their name and company in order to give all participants an opportunity to ask their questions.

We will request a limit of one question per person. I would now like to introduce Michael Bender, Head of Investor Relations. Michael, you may begin.

Thank you. Good morning, good afternoon, and good evening, everyone. Welcome to IFF's second quarter twenty twenty five conference call. Yesterday afternoon, we issued a press release announcing our financial results. A copy of the release can be found on our IR website at ir.iff.com.

Please note that this call is being recorded live and will be available for replay. During the call, we'll be making forward looking statements about the company's performance and business outlook. These statements are based on how we see things today and contain elements of uncertainty. For additional information concerning the factors that can cause actual results to differ materially, please refer to our cautionary statement and risk factors contained in our 10 ks and press release, both of which can be found on our website. Today's presentation will include non GAAP financial measures, which exclude those items that we believe affect comparability.

A reconciliation of these non GAAP financial measures to their respective GAAP measures is set forth in the press release. Also, please note that all the sales and adjusted operating EBITDA growth numbers that we will be speaking to on the call are all on a comparable currency neutral basis unless otherwise noted. With me on the call today is our CEO, Eric Fearwald and our CFO, Michael DeVoe. We will begin with prepared remarks and then take questions at the end. With that, I would now like to turn the call over to Eric.

Thanks, Mike, and good morning, everyone. Thanks for joining us today. Our second quarter results reflect continued progress with growth, improved profitability, and divestitures that have strengthened our financial position, and our net debt to EBITDA is now down to 2.5 times. This progress shows that the steps we are taking, including creating and bringing leading innovation to customers and driving operational excellence, is paying off. I will start with an executive summary of some accomplishments so far this year, and then I'll turn the call over to Mike DeVoe, who will provide a more detailed look at our financial results for the second quarter and our current outlook for the rest of 2025.

Then we'll open it up for your questions. On this next slide, I'd like to summarize our recent results and the progress we are making towards building a more competitive, growth oriented IFF. We achieved solid growth and profitability in the 2025, with 3% sales growth and 7% adjusted operating EBITDA growth. I'm also very pleased that during the quarter, we completed the divestitures of our Pharma Solutions and Nitrocellulose businesses and successfully completed our debt tender offering. These actions enabled us to reduce our leverage to 2.5 times, ahead of our target of less than three times, further solidifying our financial position.

This is the first time IFF has been below three point zero times net debt to credit adjusted EBITDA since 2018. And yesterday, we also announced the divestiture of our soy crush concentrates and lecithin business to Bunge. These products better fit with Bunge, and it's another step in our focus on products with differentiated innovation that enhances margins. And this will get us closer to our mid teens EBITDA margin goal for our food ingredients business. And as we streamline our food ingredients portfolio, it also strengthens our ability to continue evaluating strategic alternatives for this business.

We also announced a new $500,000,000 share repurchase authorization to return capital to our shareholders. This board authorization shows the confidence we have in the future of IFF, and marks an important step toward a balanced and disciplined capital allocation strategy, which prioritizes both business reinvestment to drive sustained growth and return of capital to shareholders. Looking ahead, we remain on track to deliver our full year 2025 guidance that we outlined earlier this year, despite an increasingly challenging operating environment and the time it is taking for the increased investments in R and D and in health and biosciences capacity that we started to action through last year to show up in increased sales. We continue to focus on the factors within our control, and as we said on the first quarter earnings call, have prepared for a more difficult second half, particularly given the strong prior year comparison in the third quarter of last year. And while we expect to be at the lower end of our 1% to 4% currency neutral sales growth in 2025, we are confident in our ability to navigate evolving conditions, respond swiftly to emerging challenges and opportunities, and maintain disciplined execution throughout the remainder of the year.

We have strengthening commercial and R and D pipelines that I am confident will begin to show more impact in 2026 and build for full benefit in 2027. Before I pass it over to Mike, I want to take a moment to thank our IFFers all around the world for driving our progress so far this year. They've started to build positive momentum, including developing leading innovations that will show increasing value in the coming years. And they are doing this while strengthening our productivity muscle to enable us to continue to invest in growth despite increasing market challenges. With that, I'll pass the call over to Mike to take a closer look at our consolidated results for the quarter. Mike?

Thank you, Eric, and good morning, everyone. IFF delivered second quarter sales of just greater than $2,750,000,000 a 3% increase year over year. We achieved sales growth across all our businesses, primarily driven by volume gains, including mid single digit growth in Taste and Health and Biosciences. In the second quarter, we delivered adjusted operating EBITDA of $552,000,000 a solid 6% increase, with our adjusted operating EBITDA margin increasing 50 basis points year over year. Turning now to slide eight, I will provide a closer look at our performance by segment.

I will begin with Pharma Solutions, which had a strong month, delivering sales of $103,000,000 a 21% year over year increase while also recording 5% growth in profitability. As Eric mentioned, we successfully completed the divestiture of Pharma Solutions on May 1, and this will be the last time we report figures for that segment. In taste, sales were six thirty one million dollars a 6% increase, driven by another strong quarter of commercial performance. Growth was strongest in Latin America and the Europe, Africa, and Middle East region. The segment also recorded another quarter of profitability growth with adjusted operating EBITDA totaling $125,000,000 a 3% increase from the prior year.

Profitability gains were driven primarily by volume growth and favorable net pricing. In the first half, Taste finished with 6% sales growth and 12% adjusted operating EBITDA growth. Food Ingredients had sales of $850,000,000 a one percent increase from the prior year, driven by growth in inclusions and emulsifiers and textures. The segment also delivered an excellent quarter of profitability, where adjusted operating EBITDA grew 21% with volume, favorable net pricing, and productivity driving margin expansion. It is worth noting that we continue to execute our operational improvement plan to strengthen margins within our food ingredients business.

We significantly improved profitability in this segment this quarter with 170 basis point improvement in adjusted operating EBITDA margin, finishing at 14.6%. We will continue to drive improvement in food ingredients as we move through 2025 and into 2026. Our Health and Biosciences segment grew 4% in the quarter as broad based growth was led by strong gains in health, food biosciences and animal nutrition. We also delivered adjusted operating EBITDA of 151,000,000 a 3% increase as volume growth and productivity gains more than offset reinvestment. Lastly, scents also achieved sales growth with net sales of $6.00 $3,000,000 up 1% year over year against a strong double digit year ago comparison, driven by double digit growth in fine fragrance and low single digit growth in consumer fragrances.

Fragrance ingredients was down as growth in specialty ingredients was more than offset by declines in commodities as a result of low cost competition. To counteract this and to build long term competitive advantage, we are investing in new molecule development to over index towards specialty ingredients. In the quarter, Scent delivered $130,000,000 in adjusted operating EBITDA as profitability was impacted primarily by unfavorable net pricing due to a timing lag. Turning now to Slide nine. Cash flow from operations totaled $368,000,000 year to date, while CapEx was $274,000,000 or roughly 5% of sales.

Our free cash flow position in Q2 totaled $94,000,000 a sequential increase of more than $140,000,000 from last quarter. We paid two zero four million dollars in dividends through the end of the second quarter, and our cash and cash equivalents totaled $816,000,000 As of June 30, our gross debt was approximately $6,200,000,000 a decrease of more than $3,000,000,000 compared to the year ago period. Our trailing twelve month credit adjusted EBITDA totaled approximately $2,200,000,000 I'm happy to report that we reached our net debt to credit adjusted EBITDA target in the second quarter where we finished at 2.5 times. Now that our leverage is within our target range, I would like to take a moment to talk about our focus on free cash flow generation and walk you through our revised capital allocation strategy. At IFF, we are committed to increasing our free cash flow conversion.

This business is very cash generative, and we are aware of the responsibility to invest our free cash flow carefully on our shareholders' behalf. We view every investment decision through a lens of return on invested capital. This means we are focused on prioritizing capital deployment where it can generate the highest long term returns for our shareholders. First, we prioritize reinvestment in the highest return areas of our portfolio. Our CapEx is being carefully directed towards businesses and initiatives that offer strong value creation potential, particularly in innovation, capacity expansion, productivity, and digitalization.

Second, we have made meaningful progress in strengthening our balance sheet. Maintaining this new level of financial flexibility is a priority as it enables us to navigate through macroeconomic uncertainty while preserving the capacity to reinvest in the business and return capital to shareholders. Third, we remain committed to delivering consistent returns to shareholders. Our dividend continues to be a central component of our investment proposition. We are focused on maintaining and, over time, growing our dividend as we grow earnings.

Fourth, today we've launched our dilution plus share repurchase program. At minimum, this program is designed to offset annual dilution from equity compensation, which equates to approximately 75,000,000 to $100,000,000 per year. We also retain the flexibility to increase our repurchases as we increase our free cash flow generation and when IFF shares are trading below intrinsic value. We plan to begin our share repurchase program in the 2025. Finally, we continue to evaluate highly selective, value accretive bolt on acquisitions and strategic partnerships.

We are very mindful of our challenged track record in this area, and we are committed to being very disciplined going forward. These opportunities must meet clear financial and strategic criteria, including alignment of our core capabilities, potential to expand our addressable markets, and have a clear path to synergies. In summary, as we increase our free cash flow generation, we will execute a balanced and disciplined capital allocation strategy, one that enables us to reinvest in the business, return capital to shareholders, and maintain financial flexibility and strength. Above all, we will be very disciplined with our decisions guided by a clear focus on generating long term returns. Now turning to slide 11, I'd like to walk you through our outlook for the remainder of 2025.

As we've discussed in previous quarters, the macroeconomic environment continues to be dynamic and at times challenging. From evolving trade policies to weakening consumer demands, we are seeing a broader set of external pressures. That said, we want to underscore that we remain confident in our ability to execute through this environment and importantly, remain on track to deliver our 2025 guidance we set out earlier this year. With solid first half of the year behind us, we are reiterating our full year 2025 guidance. We continue to expect sales to be in the range of $10,600,000,000 to $10,900,000,000 While the dollar ranges remain consistent with our prior outlook, it is worth noting that this now reflects modestly softer volume expectations that has been partially offset by favorable movements in currency.

As Eric shared, this translates into the lower end of our 1% to 4% currency neutral growth sales guidance range. On the bottom line, we continue to target adjusted operating EBITDA $2,000,000,000 to $2,150,000,000 reflecting currency neutral growth of 5% to 10%. As we look ahead to the second half, we expect growth will moderate, particularly in Q3, due to a very strong year over year comparison. In the 2024, we saw double digit growth across several key segments, where taste was up 15%, H and B was up 12%, and scent was up 10%, creating a high bar for comparison. In particular, our health business had an exceptionally strong Q3 last year, and this, combined with ongoing softness in both North America and Chinese markets, will present some headwinds in the upcoming quarters.

And while the business will be challenged, we have made solid progress improving our innovation pipeline, and we'll continue to reinvest in R and D and commercial to ensure we grow our business at or above market, recognizing that it will take some time. Additionally, beginning the third quarter, Pharma Solutions will be fully excluded from our results following the completion of the divestiture on May 1. As a reminder, Q2 included one month contribution from Pharma business, so we expect to see a step down in absolute EBITDA levels in Q3, reflecting the full absence of this business. With that, I'd now like to turn the call back over to Eric for closing remarks.

Thanks, Mike. We're just a little more than halfway through the year, and I am proud of what our IFF team has already achieved, serving customers, strengthening our innovation pipeline for the coming years, and strengthening our productivity efforts. And we have done this while successfully selling and separating pharma and nitrocellulose to fix our balance sheet. We know that market conditions are getting tougher and that the second half comparisons are difficult given our high growth in the 2024, but we are clear on our strategy, are getting stronger at commercial, innovation, production, and productivity execution, and we'll get through this as we build strength for 2026 and beyond. Thank you, and I'll now open up the call for your questions.

We will now begin today's Q and A session. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star, one. As a reminder, if you are using a speakerphone, please remember to pick up your headset before asking a question. Also remember to limit one of your questions per person.

We'll pause there briefly while your questions are registered. The first question is from the line of Patrick Cunningham with Citi. You may begin.

Hi, good morning. On the divestiture to Bunge, can you walk through the strategic rationale? Any dis synergies that you see and help us size the business from a margin perspective?

Thanks for the question, Patrick. This is Eric. First of all, what we sold was our soy or what we're selling is our soy crush, our soy protein concentrate, and lecithin products. They are very commoditized, and I would say much better run by Bunge than were being run by us. They were low single digit EBITDA margins for us, and they were distracting from our very differentiated isolated soy protein business, which now we can focus on driving the application development, the innovation in that business, because we no longer have to worry about the commodities.

So overall, that's going to improve our margins in the food ingredients business significantly, and allow us to focus where we need to focus.

The next question is from the line of David Belgeiter with Deutsche Bank. You may begin.

Thank you. Good morning. Eric, just on food ingredients, when do you expect to complete your evaluation of strategic alternatives? And if there if you do decide to pursue a sale of this business, is there any portion that could be retained going forward? And lastly, do you still expect that there would be strong interest in this interest in this asset amongst strategics and private equity? Thank you.

Thanks for that question, David. Very important to us. And let me just start by saying, I think we're making very good progress here. As you know, we separated Nourish into Taste and Food Ingredients, which I believe has significantly strengthened us in both Taste and in Food Ingredients. They're very different businesses.

That was step one. Step two was we brought in a world class food ingredients leader, Andy Muller. And he's got that transformation with his team going very, very strongly, consistently improving our EBITDA margins. And then the next really important step was divesting these commodities that can't consistently achieve our margin targets and allow us to focus on the areas that can. And now with those three pieces done, it's giving us the chance to really dig into what are the strategic options.

And I expect that we'll be able to update you on where we stand with the fourth quarter earnings call early next year. And I believe we'll have absolute clarity in 2026. But what I'll and I'll just finish by saying that there's already been strong proactive interest by both private equity and strategics incoming that we can now really start to engage with as we consider our options.

The next question is from the line of Ghosham Panjabi with Baird. You may begin.

Thank you, operator. Good morning, everybody. I guess, just stepping back a little bit on the second quarter, could you just give us more color on how the quarter unfolded from a monthly cadence standpoint? And also what your embedded volume assumptions are for the back half of the year by segment? You called out challenges. Can you be a little bit more specific as it relates to what specific challenges you're referring to?

Thanks. It's a great question. Overall, the operating environment in Q2 was consistent with what we expected coming into the quarter. And so despite some of the volatility we see in the world, all businesses actually delivered growth. When you look at it on a volume perspective, all the businesses were actually moving into positive territory.

And compared to strong year ago comparison on a two year basis, they actually had all had mid single digit growth on a two year average basis. So the health of the business is relatively strong from a Q2 standpoint in a more challenging operating environment. So we feel good about that. As we look ahead, we are more cautious in the second half outlook. Part is because we're comparing, and I said it in my prepared remarks, that we're comparing to strong comps in Q3.

It was a plus nine percent last year, year over year. So that's a tough comp. But then in addition, we are seeing some weakening trends in H and B, where we do actually expect to see some negative growth in Q3, specifically driven by Health. And now Eric talked about it previously, and I mentioned in my prepared remarks as well, we are taking actions to address this via reinvestment and capacity investments and are confident that over time, we will accelerate growth back to market trends or above.

The next question is from the line of Josh Spector with UBS. You may begin.

Yes, hi. Good morning. I was wondering if you could specifically talk about the outlook for scent in 3Q and 4Q. You've clearly seen divergent trends between growth in end markets between Fine Fragrance and Consumer versus the ingredients, which looked like it was more of a drag. So wondering if you see that drag in ingredients continue into the back half or if that's more contained within second quarter.

And then similarly, your views around growth for some of the stronger areas you've seen in that segment. Thank you.

Yes. Thanks, Josh. So maybe I'll take this one again. In the scent business overall, we expect to continue to see good and strong performance in Fine Fragrance through the balance of the year. So the team is doing a really exceptional job driving their performance.

A lot of it is driven by new wins and commercial performance, and they continue to be successful there. So that's a great story. In addition, on the Consumer Fragrance, they're comparing to stronger year ago comparisons kind of all year. So on a two year basis, it looks good. But on a headline number, it's actually trending more low single digits.

So there's been a lot of work being done to kind of recoup and to make sure that we're driving that performance going forward. And so as we go into the second half of the year, we'll probably be in that low single digit kind of range in terms of overall growth. Your specific question on Fragrance Ingredients, I think that is the pressure point in the quarter, specifically in Q2 and will be for the back half of the year. And so for Fragrance Ingredients in the back half of the year, we expect it to be down at similar levels that we had in Q2, which was pretty meaningful. Now there's a story that's happening there that the more commodity elements of our portfolio are under the most pressure.

And part of that is absence of really, what I'd say, strong innovation, absence of a specialty portfolio, which is a little bit different than kind of where we've been historically at IFF. And so really, the focus now as we go forward is how do we make reinvestments to bring molecules to market to making sure we're driving that competitive difference. And so as we go through the second half of the year, that commodity portion will be pressured. The specialty ingredients portion, while small and growing, will continue to be the focus as we move into 2026.

Next question is from the line of Christian Owen with Oppenheimer. You may begin. Hi, good morning and thank you for the question.

I just want to zoom out a bit. Eric, reflecting on the last year plus, it feels as if the company has hit this inflection point in terms of the balance sheet. You're moving through the portfolio efforts, but perhaps less obvious are some of the changes that you've made to the board. So, if we're just taking a two to three year outlook, help us understand what the board refresh helps IFF to accomplish as you move into this next phase. Thank you.

Well, thank you, Kristen. So first of all, what we want to do, our goal is to get IFF on the right track to be a world class leader in innovation for scent, taste, and health and biosciences. And to do that, we need the right leadership, executive leadership, and the right board. And what I would say is we have both now at full strength. And the leadership team, we recently added, as you know, Leticia Conchalves to run health and biosciences, a terrific leader, has a biotech chemistry background that's ideal for health and biosciences leading that forward.

On the board front, I would say we're also now at full strength. Kevin O'Byrne became our chairman, who's been a terrific partner to me and the management team and the rest of the board to work with. Great retail experience. We've also added Mehmood Khan, an ideal world class R and D leader with great experience, not only in health, but also in food R and D and home and personal care. And he's already tremendously helping our R and D teams to make sure that we're driving the right pipelines in the right way.

We also brought in Jesus Montas, who's a digital AI systems expert. And as you know, we've got complicated systems and we've got a need to drive AI. And so he's already helping our teams in those areas, which is tremendous. We've recently brought in Cindy Jamieson, who's got terrific CFO experience with a number of companies, helping Mike and his team make sure that we're doing the right things to have a streamlined, very efficient and effective finance team. Gina Drosos joined us with great Procter and Gamble background, great CEO experience. And as you know, we have Don Willoughby on our Board from Clorox with great home and personal care experience. So we now have a Board that has world class governance capability, but also market experience and innovation experience to help us drive the company forward. So I feel really good about our executive team and our Board.

The next question is from the line of John Roberts with Mizuho. You may begin.

Thank you. Health and biosciences is pretty diversified. Think you called out animal feed and food at the stronger end, and it sounds like health is going to be at the lower end. Maybe could you give us some quantification for how high the good businesses are performing and how low some of the declines are that you're expecting?

Sure, John. So first of all, food biosciences and home and personal care are performing very well. And I see them continuing to perform well. Just for example, in our home and personal care, in addition to the strength we have in enzymes, really good capabilities there, we also commercialized our first application with DEB, our design enzymatic biomaterials, with a leading home and personal care company, CPG company. And we see lots of opportunity there, but it's nice after many, many years of development to see the first application commercialized.

So very good strength in both of those. Our animal nutrition business, we're very strong there. What I would say is the market's slowing down a bit, but we continue to perform well versus the market. The real challenging area is health. And we're hearing from our customers that in the second half, they're seeing slowdown.

And so what we're doing there is, as we talked about last year, continuing to invest more aggressively and really excited about our R and D pipeline that will start to play out in 2026 and come to full strength in 2027. Leticia is also strengthening our commercial capabilities in health. So we will see a slow second half in our health business, very important business. But we'll see it start to come back in 2026, and I would say get to full strength in 2027.

The next question is from the line of Lisa Denis with Morgan Stanley. You may begin.

Hi, thank you for taking my question. I have one question, want small follow-up on the previous question actually. So my first question is, can you outline what drove the strength in the second quarter for Taste in particular? And also how you see the midterm growth prospects for the sub segments, especially in the light of potential regulatory changes under The U. S.

Administration? That's my first question. And then a small follow-up. If I recall, your HMB Health business was soft to actually negative in the fourth quarter of last year. So could you just remind me how it traded last year?

Because I'm a bit confused of why it would be negative in the second half, especially the fourth quarter when it was already weak in the fourth quarter of last year. Thank you.

I'll start with the taste question. Taste is delivering solid growth. And I'm very glad that we separated nourish into taste and food ingredients because it enables you, Raj, our taste leader and his team to really focus on what it takes to continue to win in taste. And what I would say is we now have seven quarters in a row of performing with or ahead of the market in taste. And I see us continuing to perform strongly versus the market.

Now the market is slowing down in the second half in taste, so we will have lower growth rates, but it will still be significant growth, particularly getting slower in The US and in Asia, China and Southeast Asia. But still solid growth, we've got a building commercial pipeline, and we've got strength in our R and D pipeline. So very pleased with where we are in taste.

Yeah. Maybe just, Lisa, on the, H and B business on the second half of the year, I think the comparable, when I look at the business, was plus 12 in Q3, and I think it was plus six in Q4. So the comp is still pretty meaningful. When you double click on the Health side, it was a little bit softer in Q4 last year. But right now, I think what we're saying is we're flagging some weakness in Q3 specifically.

And really because of the year ago comparison, I think it was mid teens in terms of growth. And so part of it really is a comp issue. As we get into Q4, it will be less challenged. And then as we go into 2026, it's a full player.

The next question is from the line of Sabikor Tiana with BofA. You may begin.

Yes, thank you very much. Although we haven't really seen much actual regulatory change coming from the Department of Health and Human Services and RK Jr, there's certainly a lot of discussions, requests, rumors. So what are you hearing from your customers regarding response to any potential changes, including needs to reformulate?

Thank you, Sal. What we're hearing is, I would say, an even stronger desire for cleaner laborers, cleaner labels, for innovation to help reduce sugar, salt, fat, increase protein, all the things that we are good at. And we're seeing the continued healthy reformulation to do those things. And I would say the MAHA movement in The U. S.

Is helping that, but we're also seeing that around the world. In Latin America, I've spent some time in Latin America in the last couple of months, And you've got this labeling where products are being labeled if they have high sugar, high salt or high fat. And the desire to help reformulate to get rid of those labels is very strong, and that's opening up opportunities And we've had very good growth in Latin America. So I think that it's a global trend, certainly a little bit more push in The US now, and it's very good for IFF.

The next question is from the line of Laurence Alexander with Jefferies. You may begin.

So good morning. So just to follow-up on one of the earlier questions, can you give a bit more granularity about what's happening sequentially in end market trends in taste and scent, your confidence on the end markets into 2026? And to the extent that you have investments in innovation, will those be showing up and contributing to those two businesses in 2026? You alluded in your comment to sort of tailwinds for health.

Yeah, so thanks, Lawrence. So in taste, we do see a slowdown in particularly in The U. S, China and parts of Asia. Latin America continues strong. Europe continues strong.

What I would say there is we've got visibility in the second half to that happening, and that's what we're hearing from customers. We're pushing hard to bring more innovation and our commercial pipeline is strengthening. Our win rate is strong. But we're also pushing harder in developing markets. The leadership has spent more time in India and parts of Asia.

And obviously, we're pushing hard in Latin America continued. And in The Middle East, we're seeing opportunities there. But no doubt there'll be a slowdown in the second half, continued growth, but a slowdown. And we're hoping that, that reverses in 2026, but we're not waiting for that. We're pushing hard on our innovation pipeline, both our commercial and the R and D capabilities, to ensure that we still see solid growth in 2026.

In scent, as Mike alluded to, the fine fragrance business is doing well and continues to has been delivering double digit growth. I think we've seen recent wins that give us confidence into the second half and into 2026. We've got a very strong team there. Sabrina and her team, supported by Anna, are very strong and what I would say are very enthusiastic, very energized and are out making stuff happen. In Consumer Fragrance, as Mike alluded to there, we had low single digit growth in the first half.

We see continued low single digit in the second half, driven by market conditions. But also, I would say we got a little distracted in Consumer Fragrance, last year and the year before. We've got the right leadership in place. We've got our commercial pipeline strengthening, and I've got strong confidence that we'll see accelerated growth in 2026 in Consumer Fragrance. In Fragrance Ingredients, again, as Mike alluded to, negative growth first half, continued negative growth in the second half.

As we put more emphasis on the specialties and grow specialties and naturals that we sell outside of our company to others, we see that growing, but we see the commodities continuing to be depressed both on volume and price. That's a little less than half of that business. So that will be challenged. We see that flattening out in 2026 and returning to growth in 2027 as we get more capability, more capacity and capability and molecules in the specialty area and have deemphasized the commodities.

The next question is from the line of Kevin McCarthy with the BRP. You may begin.

Yes, thank you and good morning. So, Eric, a high level, you delivered some earnings upside in the first half, yet left the annual ranges unchanged and now expect some growth to maybe moderate in the back half. So, just wondering if you could parse that out. I hear you on the health trend and the comparison issue there. Just curious on the balance of the portfolio, if you net out the trends, do you think it's any better or worse than you would have previously expected?

And I'd like to get a feel for whether or not you think there's an element of conservatism embedded in the current guide, particularly with currency having trended more favorably in recent months.

I think that our guidance is appropriate. I do not feel like it's overly conservative at all. I think there are two elements facing challenges facing us. One is market challenges. The other is things that we continue to clean up, fix, get on the right track.

I feel really good about what we've done in taste. I feel really good about what we're doing in health and biosciences, in the food sciences, the food biosciences, in the HPC and a number of other areas, fine fragrances, consumer fragrances, the things that we're doing across many of the businesses. Food ingredients transformation is going great. The areas that we have challenged right now are health. That's a combination of the market, but also our internal not being where we need to be, both on the innovation pipeline, which I said is coming, it's strengthening, and it'll start to land next year.

And in 2027, we'll be strong. But we're also needing to strengthen our commercial capabilities in health. We're the leaders in this area, and we need to drive growth even when the markets are challenged. So that's one area. The other area is fragrance ingredients.

We clearly had a great year last year when commodities and specialties were growing like crazy and the prices were strong. This year, the commodities the volume has slowed, the prices are weak, and we're deemphasizing the commodities, recognizing that's not where we bring our strength over time. So we'll decrease the commodity piece of our portfolio, and we'll strengthen the specialty piece. So we're on it. We've got the right team focused, and it'll flatten out in '26, and it'll start to grow again in '27.

But those are our two biggest areas of drag that are dragging below what the market is doing in the second half.

The next question is from the line of Michael Sison with Wells Fargo. You may begin.

Hey, good morning, guys. Nice quarter. If you take out Pharma from your first half EBITDA, it's somewhere around $1,050,000,000 dollars Your outlook for the second half implies mid-900s at the midpoint. It's about down 10% sequentially. Is that sort of a normal sequential decline?

Or does that represent more incremental slowing in consumer demand? And how does that compare on a pro form a basis as I don't recall getting the data for second half 'twenty four on a like to like basis?

Mike, thanks for the question. Yes, I don't have the numbers on a like for like basis readily available, so happy to circle back. I think when you look at the reported numbers last year, you'll see that there is a step down second half to first half. Part of that is the seasonality of the business. If you remember, Q4 is the lowest margin quarter we have.

And so last year, think that was about 17%, which if you think to kind of where we are in the 20s now, you could see that step down. So that's a big portion of that. It really depends on where you anchor in, in terms of the guidance range. If you look at it at the midpoint of the range, it's a small step down. Part of it, again, is the seasonality of it.

Part of it is everything we talked about around a little bit softening in terms of volume performance relative to where we were in the first half.

Our next question is from the line of Nicole Botang with BNP Paribas. You may begin.

Hi, everyone. Question is a bit of a follow-up on an earlier one around food ingredients. Could you talk how integrated are the activities within Food Ingredients overall?

And do you expect any stranded costs from the Bunge deal? And I was wondering if you see any scope for portfolio cleanup elsewhere beyond food ingredients. Thanks.

Thanks, Nicola. First of all, the biggest change was separating nourish into taste and food ingredients. And that took most of last year. We finished it at the beginning of this year, and then we've moved forward with food ingredients. And Andy and his team have been working, and will continue to work now even more, to stand up the food ingredients as a standalone business, which gives us more strategic flexibility there.

That's working. The answer on the bungee sale, there are some stranded costs. We're already working to deal with those. And if we are to separate food ingredients, there will be stranded costs. And we're already working on how do we address those now versus waiting until later, because it'll be a good thing to do whether we separate it or not.

So we're working hard on productivity, and that's part of it, of what type of costs can you afford and should be allocated to a food ingredients business, and those that the food ingredients business don't want, how do we get those out of the system? What I would say is on the pharmaceutical business that we sold, we waited longer than we should have, so we learned from that to deal with the stranded costs upfront rather than after the fact.

The next question is from the line of Lauren Lieberman with Barclays. You may begin.

Great, thanks. So I wanted to see if you could talk a little bit about what you're seeing at a market level from kind of global multinational customers versus local and regional. Any sort of difference in performance and even in their level of optimism or lack thereof, maybe I should say, as we look towards the balance of the year and what they're seeing from a consumer standpoint? Thanks.

Thanks, Lauren. I would say that the global companies are putting more emphasis on innovation, which is good. So we've got lots of innovation projects. What I would say is that, they're getting challenged, in the developing markets, whether it's Indonesia or Malaysia or Thailand or The Middle East by local players. And smaller companies are coming up with some great innovations.

International Flavors & Fragrances Q2 2025 Earnings Call Transcript | Fortune

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International Flavors & Fragrances (IFF) Q2 2025 Earnings Call Transcript

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