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    IFF
    Earnings call· Jun 2026(Q2 FY26)

    INTERNATIONAL FLAVORS & FRAGRANCES Q2 FY26 earnings call IFF

    Aug 5, 2026 Source

    Executive summary

    International Flavors & Fragrances Inc. Q2 FY26 — Strong Volume Growth and Portfolio Transformation

    IFF delivered strong second-quarter results, driven by broad-based volume growth and productivity gains, while advancing its portfolio transformation through the divestiture of Food Ingredients. The company is focused on streamlining operations, reducing stranded costs, and strengthening its balance sheet through debt reduction and a significant share repurchase program. Management expressed confidence in navigating market uncertainties and achieving full-year targets for its higher-growth, higher-margin core businesses.

    Highlights

    5

    • Continuing operations sales grew 6% in Q2 FY26, with growth across all businesses.

    • Adjusted operating EBITDA for continuing operations increased 6% to $408 million in Q2 FY26.

    • Free cash flow for H1 FY26 totaled $378 million, representing a gain of $284 million year-over-year.

    • Announced divestiture of Food Ingredients business for $4.3 billion (10x EV to EBITDA).

    • Authorized a $2.5 billion share repurchase program, with $500 million expected in H2 FY26.

    Concerns

    4

    • Stranded costs of approximately $100 million from the Food Ingredients divestiture are temporarily pressuring business unit margins.

    • Net working capital headwinds of a couple of hundred million dollars are expected in H2 FY26 due to the Food Ingredients divestiture separation.

    • Middle East conflict impacted Fine Fragrance growth, though it finished slightly positive against expectations of a mid-single-digit decline.

    • Input costs (energy and logistics) are expected to increase modestly in H2 FY26, with some pricing lag in Scent.

    Guidance & targets

    10
    CategoryTargetConfidence
    Full-year 2026 Sales (Continuing Operations)
    $7.4 billion to $7.6 billion
    high materiality
    High
    Full-year 2026 Adjusted Operating EBITDA (Continuing Operations)
    $1.53 billion to $1.6 billion
    high materiality
    High
    Full-year 2026 Sales Growth FX Impact (Continuing Operations)
    1 percentage point positive impact
    medium materiality
    High
    Full-year 2026 EBITDA Growth FX Impact (Continuing Operations)
    2% positive impact
    medium materiality
    High
    Net Debt to Credit Adjusted EBITDA Leverage
    2.0x and 2.5x
    high materiality
    High
    Share Repurchase Program Completion
    Completion by end of 2027
    high materiality
    High
    Stranded Cost Elimination
    2/3 eliminated within 12 months, remaining within second full year
    high materiality
    High
    Free Cash Flow (Total Company)
    Higher than 2025
    medium materiality
    Medium
    Free Cash Flow Conversion (Remainco)
    Mid- to high teens as a percentage of sales
    medium materiality
    High
    Capital Expenditure as % of Sales
    5% to 6%
    medium materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Taste
    Growth achieved in all regions, led by double-digit performance in Asia. Driven by strong new win performance and volume growth on existing business. Profitability increased due to volume growth and favorable net pricing.
    EBITDA growth: 6%
    		$688 million4%—$124 million EBITDA
    Health & Biosciences
    Growth in all businesses, with notable increases in grain processing, food biosciences, and animal nutrition. EBITDA increased primarily due to volume leverage.
    EBITDA growth: 6%
    		$601 million5%—$150 million EBITDA
    Scent
    Performance driven by strong growth in Fragrance Ingredients and Consumer Fragrances. Fine Fragrance grew low single digits despite the impact of the Middle East conflict. Profitability driven by volume growth and productivity gains.
    Fragrance Ingredients growth: double-digitConsumer Fragrances growth: high single-digitFine Fragrance growth: low single-digitEBITDA growth: 5%
    		$665 million8%—$134 million EBITDA

    Operational metrics

    23
    Sales Growth (Continuing Operations)
    4%
    H1 FY26

    Sales growth for continuing operations in the first half of the year.

    EBITDA Growth (Continuing Operations)
    8%
    H1 FY26

    EBITDA growth for continuing operations in the first half of the year.

    Stranded Costs
    $100 million
    Annual

    Corporate and functional expenses previously allocated to the Food Ingredients business, expected to remain with IFF post-close.

    Botanical Extracts Divestiture Proceeds
    $75 million10x multiple
    Q4 FY26 expected close

    Proceeds from the divestiture of nonstrategic botanical extracts, vitamins, minerals, and food enhancement products.

    Debt Reduction Target
    greater than $1 billion
    Post Food Ingredients divestiture

    Amount of proceeds from Food Ingredients divestiture allocated to debt reduction.

    Share Repurchase Program Authorization
    $2.5 billioninclusive of $400 million remaining under prior authorization
    Authorized

    Total authorized amount for the new share repurchase program.

    Share Repurchases (H2 FY26)
    $500 million
    H2 FY26

    Expected amount of share repurchases to be executed in the second half of 2026, ahead of the Food Ingredients transaction close.

    Cash and Cash Equivalents
    $569 million
    Q2 FY26 end

    Cash balance at the end of the second quarter.

    Gross Debt
    $5.7 billiongreater than $3 billion decrease YoY
    Q2 FY26 end

    Total gross debt at the end of the second quarter.

    Trailing 12-Month Credit Adjusted EBITDA
    just over $2 billion
    LTM Q2 FY26

    Trailing 12-month credit adjusted EBITDA.

    Net Debt to Credit Adjusted EBITDA
    2.5x
    H1 FY26 end

    Leverage ratio at the end of the first half of 2026.

    Sales (Total Company)
    $2.8 billion
    Q2 FY26

    Reference point for Q2 results on a combined basis, including both continuing and discontinued operations.

    EBITDA (Total Company)
    $548 million
    Q2 FY26

    Reference point for Q2 results on a combined basis, including both continuing and discontinued operations.

    CapEx as % of Sales
    5%
    YTD Q2 FY26

    Year-to-date capital expenditure as a percentage of sales.

    Shareholder Returns (H1 FY26)
    $204 million
    H1 FY26

    Amount returned to shareholders through dividends.

    Share Repurchases (H1 FY26)
    $71 million
    H1 FY26

    Amount of share repurchases executed under the dilution program.

    R&D Spend as % of Sales
    9%up from 7% previously
    Current

    Current R&D spend as a percentage of sales for the continuing operations businesses.

    SG&A as % of Sales
    17% to 18%
    Current

    Current SG&A as a percentage of sales for the continuing operations businesses, expected to decrease as stranded costs are addressed.

    Underlying EBITDA Growth
    even stronger
    Q2 FY26

    Underlying EBITDA growth would have been stronger without specific one-off items.

    Incentive Compensation Accruals
    —
    Q2 FY26

    Higher accruals tied to strong H1 performance acted as a headwind to reported EBITDA growth.

    U.S. Tariff Refunds
    —
    Q2 FY26

    Netted against customer pass-throughs, providing a benefit to EBITDA.

    Food Ingredients Business Growth
    3%
    Q2 FY26

    Growth rate for the Food Ingredients business before divestiture.

    Input Cost Inflation
    increase modestly
    H2 FY26

    Expectation for raw material, energy, and logistics costs in the second half of the year.

    Industry KPIs

    2
    MetricValueDetails
    Volume vs price splitall volume
    Productivity cost savings program$100 millionUSD

    Deals & partnerships

    2
    CVC Capital PartnersDivestiture of Food Ingredients business$4.3 billion

    Transaction is progressing well, defining step in portfolio transformation and simplification. IFF will retain 10% ownership to participate in continued value creation and enable collaborations.

    UndisclosedDivestiture of nonstrategic botanical extracts, vitamins, minerals, and food enhancement products$75 million

    Primarily included in Health & Biosciences and Taste segments, much of this business was related to IFF's previous Frutarom acquisition. Further simplifies and upscales the remaining portfolio.

    Risks & headwinds

    6
    Stranded costs from Food Ingredients divestitureTemporarily impacting business unit margins post-close

    $100 million in corporate and functional expenses

    Mitigation: Remediation plan in place to eliminate 2/3 of costs within 12 months and the remainder within the second full year post-transaction close.

    Net working capital headwinds due to divestiture separationSecond half of 2026

    Couple of hundred million dollars

    Mitigation: Team remains focused on driving strong free cash flow generation in remaining businesses; these headwinds are transaction-related.

    Market uncertainty and volatilityOngoing

    Reflected in full-year guidance range

    Mitigation: Focus on controlling what can be controlled: advancing commercial and innovation efforts, enhancing productivity and cash flow generation.

    Middle East conflict impact on Fine FragranceQ2 FY26, softer Q3 expected

    Impacted growth, though finished slightly positive against expectations of mid-single-digit decline

    Mitigation: Team managed uncertainty and volatility; expecting recovery in Q4.

    Input cost inflation (energy and logistics)Second half of 2026

    Modest increase expected

    Mitigation: Working with customers on surcharges and implementing appropriately, driving productivity projects to offset.

    Pricing lag in Scent segmentH2 FY26 and into early 2027

    Modest benefit from pricing in H2 FY26, more significant catch-up in 2027

    Mitigation: Working with customers to offset costs; team is reacting with speed to ensure recovery.

    What to watch in Q3 FY26

    5

    Stranded Cost Elimination Progress

    Next quarter / within 12 months
    Current$100M in stranded costs, plan to eliminate 2/3 in 12 months
    TargetProgress towards 2/3 elimination within 12 months post-Food Ingredients close

    Why it matters

    Successful elimination of stranded costs is crucial for enhancing profitability and EBITDA margin expansion of the remaining IFF portfolio.

    We expect to eliminate about 2/3 of these costs within the first 12 months following the transaction close and the remaining within the second full year post transaction close.

    Q&A highlights

    6

    Is the Food Ingredients divestiture the last major deal, or are there other parts of the portfolio IFF is looking to trim?

    IFF is now where it wants to be with its portfolio, with no significant divestitures left. The focus is now on scaling organically and through bolt-on acquisitions for the three core businesses (Scent, Taste, Health & Biosciences).

    “So we are exactly where we want to be with our portfolio with no significant divestitures left to do. Now it's all about scaling organically and through bolt-ons, these 3 terrific businesses.”

    asked by Abigail Eberts · answered by Jon Erik Fyrwald

    2 min read6 chapters

    Detailed Narrative

    01

    Portfolio Transformation and Divestitures

    IFF is undergoing a significant portfolio transformation, highlighted by the announced divestiture of its Food Ingredients business to CVC for approximately $4.3 billion. This transaction is expected to close by the end of Q2 2027, sharpening IFF's focus on its higher-growth, higher-margin Taste, Scent, and Health & Biosciences segments. Additionally, the company agreed to divest nonstrategic botanical extracts, vitamins, minerals, and food enhancement products for about $75 million, further simplifying its portfolio.

    02

    Capital Allocation Strategy

    Proceeds from the Food Ingredients divestiture will be used to strengthen the balance sheet, with over $1 billion allocated to debt reduction, targeting a net debt to EBITDA ratio of 2.0x-2.5x by the end of 2027. The Board also authorized a $2.5 billion share repurchase program, replacing the prior dilution program, with $500 million expected to be executed in the second half of 2026, ahead of the transaction close. The remaining $2 billion is targeted for completion by the end of 2027.

    03

    Stranded Cost Remediation

    The divestiture of Food Ingredients leaves approximately $100 million in stranded corporate and functional expenses. IFF has a remediation plan in place to eliminate these costs, expecting to remove about two-thirds within the first 12 months post-transaction close and the remainder within the second full year. This initiative is crucial for enhancing the profitability and earnings power of the remaining IFF portfolio and is expected to support strong EBITDA margin expansion.

    04

    Strong Q2 Performance and Outlook

    IFF reported strong Q2 FY26 results for continuing operations, with sales up 6% to just under $2 billion and adjusted operating EBITDA up 6% to $408 million. This performance was driven by broad-based volume growth across all segments and continued productivity gains. The company raised its full-year 2026 guidance for continuing operations, now expecting sales growth of 2% to 4% and EBITDA growth of 4% to 8%, reflecting confidence despite ongoing market volatility🌐.

    05

    Cash Flow and Working Capital Management

    Free cash flow for the first half of 2026 significantly improved, totaling $378 million, up $284 million year-over-year, primarily due to effective inventory management and disciplined accounts receivable and payable controls. While the Food Ingredients divestiture is expected to create a couple of hundred million dollars in net working capital headwinds in the second half of 2026, the company still anticipates full-year free cash flow to be higher than in 2025. Long-term, the Remainco businesses are expected to achieve mid- to high teens free cash flow as a percentage of sales.

    06

    R&D and Innovation Focus

    IFF has significantly increased its R&D capabilities and spend, with current R&D at approximately 9% of sales for the Remainco businesses, up from 7% previously. This investment is critical for driving innovation, particularly in areas like fine and consumer fragrances, and developing new molecules and delivery systems. The company emphasizes its commitment to leading innovation to compete effectively globally, including in the Chinese market, and to address evolving consumer trends like GLP-1 and clean label products.

    AI-generated summary of the company’s earnings call. Not investment advice.