IFF (NYSE: IFF) today announced the next phase of its strategic
transformation by previewing its refreshed strategic plan and new
operating model, developed through an extensive assessment with the
Company’s senior leadership, customers, investors and key
partners.
At its Investor Day on Dec. 7, 2022, IFF management will provide
additional commentary on the following financial and strategic
initiatives:
- Growth-Focused Strategy: IFF shared a new
strategic framework, positioning the Company to Do What Matters
Most, driving sustained profitable growth, deepening its commitment
to customers, and embedding Environmental, Social and Governance
(ESG+) priorities across the entire enterprise.
- Enhanced Cost & Productivity Initiatives: IFF
communicated an additional $100 million in run-rate savings to
support reinvestment and grow earnings. The Company expects to
realize net annualized savings of approximately $350 to $400
million during the 2023-2025 period.
- Redesigned Operating Model: IFF outlined plans to create
a simplified operating structure more closely aligned to end
markets and customer demand.
- Financial Guidance: IFF introduced its preliminary
financial outlook for 2023, where it expects to achieve mid-single
digit adjusted operating EBITDA growth on a currency-neutral basis
and outlined its long-term financial objectives. The Company
expects – on average – to grow sales by 4% to 6% and adjusted
operating EBITDA by 8% to 10%, on a comparable currency neutral
basis over the 2024, 2025 and 2026 period. In addition, the Company
expects to reach <3x Net Debt / Credit Adjusted EBITDA in 2024
through operational improvements and non-core divestitures, at
which time the Company intends to reactivate its share repurchase
program.
- Portfolio Optimization: IFF restated its commitment to
continued portfolio optimization initiatives.
- Governance and Leadership: IFF Board of Directors
introduced a plan to evolve its Board in line with best-in-class
governance standards. IFF also announced several updates to the
Company’s Executive Committee.
The transformed IFF will be a premier partner to its customers,
delivering unmatched innovation, service and quality with an
industry-leading product portfolio. The Company will be guided by a
customer-centric approach with a commitment to growth, greater
productivity and disciplined execution. IFF’s broad portfolio,
diverse platform and leading capabilities provide compelling
cross-selling opportunities to achieve greater sales growth, and
incremental cost-reduction initiatives position the Company to
deliver long-term profitable growth.
“IFF has built an incredible foundation as a trusted partner
with world-class talent, a robust R&D pipeline and broad
portfolio that delivers for our diverse customers around the
world,” said IFF CEO and Director Frank Clyburn. “Now, having
completed several transformative milestones, we are acting with
urgency to capitalize on strengths and address opportunities
through a more growth-centric strategy. Our refreshed strategic
framework and new operating model will increase customer centricity
and better align with end-market needs. This next phase is designed
to ensure we are innovative, efficient and disciplined as we
strengthen our competitive position and achieve long-term financial
success. To do so effectively, we are enhancing our productivity to
reduce our cost base, reinvesting in our highest-value businesses,
embedding ESG+ in all we do, and enhancing our culture to maximize
value creation for our customers, employees and shareholders.”
“These strategic actions represent an exciting opportunity to
strengthen IFF’s focus on customers and better align with today’s
marketplace, positioning IFF to accelerate its growth potential,”
said Dale Morrison, chair of IFF’s Board of Directors. “Our Board
is aligned with the vision Frank and the management team have
developed through a comprehensive review. We are pleased to begin
the process to evolve IFF’s Board, including ensuring we have the
right composition of experience and skillsets, so we can best
support and oversee the Company through its next phase of growth
and value creation.”
Evolving IFF’s Board of
Directors:
IFF Board of Directors plans to evolve its Board in line with
best-in-class corporate governance standards, ensuring the Company
has the optimal support and oversight to advance its growth and
transformation strategy. The Board intends to reduce the size of
its Board from its current size of 14 directors to a target size of
approximately ten directors by the May 2023 Annual Shareholder
Meeting.
The IFF Board also intends to evolve the composition of its
Board by adding outside senior executives with specific management,
strategy and operations expertise relevant to IFF’s current
profile, and to progress toward best-in-class governance standards.
IFF today announced the appointment of Mark Costa, Chairman and CEO
of Eastman, to the Company’s Board of Directors, effective Jan. 1,
2023. Costa brings several decades of leadership experience in the
specialty materials industry and oversaw a successful
transformation and sustained growth at Eastman.
Morrison continued, “I am pleased to welcome Mark to the Board.
His experience leading a global organization through a period of
strategic transformation, growth-focused execution and sustainable
innovation will benefit IFF’s customers, shareholders and teams
around the world.”
Growth-Focused Strategy to Do What
Matters Most:
IFF’s new strategic framework will position the Company to Do
What Matters Most and drive sustained profitable growth,
concentrating on customer excellence, incremental cost reductions,
consistent execution and disciplined investments to advance the
opportunities with greatest potential returns. The strategy deeply
embeds ESG+ priorities across IFF’s entire enterprise,
strengthening the Company’s commitment to positively impact its
environmental footprint and communities in which it operates. With
this refreshed strategic framework, IFF will be positioned to meet
customer demand and fulfill its purpose of applying science and
creativity for a better world.
IFF’s strategic framework will be guided by the following
objectives and key pillars:
- Be the Premier Partner: IFF renews
its commitment to be a premier partner to its customers. By
upgrading key commercial capabilities, enhancing service levels,
and expanding its geographic coverage, IFF will be better able to
address evolving customer demands, creating the products and
technologies designed to lead consumer megatrends. IFF’s deep focus
on customer partnerships will enable the Company to extend its
collaboration with high-value customers, accelerate development in
high-growth geographic markets, and capture market share through
incremental revenue opportunities by leveraging its world-class
product portfolio to cross-sell and develop integrated
solutions.
- Build Our Future: IFF aims to
drive profitable growth and gain market share by strategically
prioritizing resource allocation to reinvest in the highest-value
businesses and focus on the areas where IFF is positioned to win.
The Company will efficiently manage assets to maximize performance
in core businesses and intends to optimize its portfolio by
divesting non-core assets as appropriate. IFF’s R&D
capabilities will be concentrated on enhancing its strong product
pipeline to meet and anticipate customer needs and desires. This
includes transformative projects powered by AI and robotics,
high-value customer collaborations and innovative projects that
demonstrate the breadth of IFF’s integrated capabilities, all
calibrated with an emphasis on sustainability.
- Become One IFF: Building on the
Company’s strong foundation, IFF is creating a more unified and
integrated organization, bolstered by a winning culture of
accountability and collaboration. IFF is strengthening talent,
enhancing its digital analytics and data capabilities, and
transforming its ability to share insights and services across the
enterprise. IFF is optimizing its operating model into a
customer-centric and market-backed approach aligned around core end
markets. This new model will power IFF to become more efficient and
deliver the full breadth of the IFF portfolio to customers with
greater speed and agility.
New Operating Model Aligned to End
Markets and Customer Demand:
IFF previewed its vision for its new operating model to
transform the Company into “One IFF”. The Company will transition
its current divisional structure to align businesses to three core
end markets: Food and Beverage, Home and Personal Care, and Health.
This transition will transform IFF’s operating model into a more
customer-centric and market-backed approach, consistent with IFF’s
goal to become the premier partner for its customers for all
solutions within their respective business areas. The new
simplified operating structure will enhance execution and
streamline customer delivery. IFF expects its new operating model
to be fully in effect by the end of 2023.
IFF has also established a Center for Commercial Excellence,
reporting to CEO Frank Clyburn. This group will focus on enhancing
IFF’s sales capability, including global key account planning and
accelerating incremental sales opportunities through a more
holistic approach to customers by leveraging IFF’s full product
portfolio. In addition, IFF will centralize global marketing,
commercial analytics and leverage digital capabilities within the
Commercial Excellence team.
Updates to Executive Leadership
Team:
The Company will maintain its existing four division structure
until its new operating model is fully in effect by the end of
2023. After 34+ years at IFF, Nicolas Mirzayantz, currently
president of IFF’s Nourish division, will be leaving the Company
effective Dec. 31, 2022. Upon Mirzayantz’s departure, IFF CEO Frank
Clyburn will lead IFF’s Nourish division until a replacement is
named. All other divisional leadership will continue in their
current positions.
Ana Paula Mendonça, currently IFF president, Fragrance
Ingredients, has been named senior vice president, Commercial
Excellence, where she will lead the Company’s new Center for
Commercial Excellence and oversee the sales excellence program,
global marketing and commercial analytics, leveraging digital
capabilities. With this appointment, Mendonça becomes a member of
IFF’s Executive Committee and will be based in the Company’s New
York City headquarters.
Michael DeVeau, currently IFF senior vice president and chief
investor relations and chief communications officer, has been
appointed senior vice president, corporate finance and investor
relations and will lead the Company’s corporate and divisional
financial planning and analysis team, as well as corporate
strategy, M&A and investor relations. With this transition,
Deborah Borg, executive vice president, chief human resources and
diversity & inclusion officer, will assume leadership of IFF’s
corporate communications.
With the recent additions of Ana Mendoca, Deborah Borg, and Ralf
Finzel, executive vice president and global operations officer, who
was announced in Oct. 2022, IFF continues to transform its
Executive Committee, augmenting institutional knowledge with
experienced, diverse and talented senior leaders from adjacent
industries.
Financial Outlook:
The Company has announced preliminary financial guidance for
2023, where it expects to achieve mid-single digit adjusted
operating EBITDA growth, on a comparable currency-neutral basis, as
it continues to take necessary pricing action to offset inflation,
drives productivity and delivers cost reductions. At the same time,
the Company will make commercial, R&D and capacity investments
critical for long-term success.
IFF today outlined long-term financial objectives, where the
Company believes that it can deliver industry-leading sales and
adjusted operating EBITDA growth. The Company expects – on average
– to grow sales by 4% to 6% and adjusted operating EBITDA by 8% to
10%, on a comparable currency neutral basis over the 2024, 2025 and
2026 period. In addition, the Company expects to reach <3x Net
Debt / Credit Adjusted EBITDA in 2024 through operational
improvements and non-core divestitures, at which time the Company
intends to reactivate its share repurchase program. The Company
also maintains its commitment to return cash to shareholders
through its competitive and growing dividend.
IFF has accelerated and expanded enterprise-wide productivity
initiatives to drive additional cost reductions in administrative
expenses implementing a restructuring program to improve efficiency
across the organization. The Company is targeting approximately
$100 million in annualized savings through headcount reduction.
With these additional savings, the Company now expects to realize
net annualized savings of $350 to $400 million during the 2023-2025
period.
Portfolio Optimization:
IFF reconfirmed its plan to continue to optimize its portfolio
through non-core divestitures, subject to tax and other
requirements stemming from its N&B merger, to improve the
Company’s capital structure and allow for greater investment in
high-return businesses. The Company expects to announce three
non-core divestitures by the end of the first quarter of 2023, with
expected proceeds of approximately $1.2 billion to be used for debt
reduction.
IFF is continuing to assess its portfolio to identify additional
portfolio optimization and divestiture opportunities.
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; our ability to manage supply chain including improving
our service levels and increasing capacity and investment;
expectations regarding future sales and profit, including the
impact of strategic initiatives, 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;
the progress of our portfolio optimization strategy and increase of
our productivity, through non-core business divestitures and
acquisitions; 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 impact of global economic uncertainty 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 and portfolio,
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 invest in research
and development and digitalization strategies; our ability to
innovate and execute on specific consumer trends and demands; our
ability to execute on our environmental, sustainability and
governance goals; our ability to strengthen our talent and culture;
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
“target”, “aspire”, “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 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) our ability to achieve the cost
savings expected in the time expected or at all; (5) risks related
to the integration of the N&B business, including whether we
will realize the benefits anticipated from the merger in the
expected time frame; (6) our ability to successfully establish and
manage acquisitions, collaborations, joint ventures or
partnerships, or the failure to close strategic transactions or
divestments; (7) our ability to successfully market to our expanded
and diverse customer base; (8) our substantial amount of
indebtedness and its impact on our liquidity and ability to return
capital to its shareholders; (9) our ability to effectively compete
in our market and develop and introduce new products that meet
customers’ needs; (10) our ability to retain key employees; (11)
changes in demand from large multinational customers due to
increased competition and our ability to maintain “core list”
status with customers; (12) our ability to successfully develop
innovative and cost effective products that allow customers to
achieve their own profitability expectations; (13) 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; (14) 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; (15) volatility and increases in the price of raw
materials, energy and transportation; (16) 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; (17) our
ability to meet increasing customer, consumer, shareholder and
regulatory focus on sustainability; (18) defect, quality issues
(including product recalls), inadequate disclosure or misuse with
respect to the products and capabilities; (19) 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; (20) our ability to benefit from our investments and
expansion in emerging markets; (21) the impact of currency
fluctuations or devaluations in the principal foreign markets in
which we operate; (22) economic, regulatory and political risks
associated with our international operations; (23) the impact of
global economic uncertainty on demand for consumer products; (24)
our ability to comply with, and the costs associated with
compliance with, U.S. and foreign environmental protection laws;
(25) our ability to successfully manage our working capital and
inventory balances; (26) 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; (27)
any impairment on our tangible or intangible long lived assets,
including goodwill associated with the N&B merger and the
acquisition of Frutarom; (28) our ability to protect our
intellectual property rights; (29) the impact of the outcome of
legal claims, regulatory investigations and litigation; (30)
changes in market conditions or governmental regulations relating
to our pension and postretirement obligations; (31) 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; (32) the impact of the United Kingdom’s
departure from the European Union; (33) the impact of the phase out
of the London Interbank Offered Rate (LIBOR) on interest expense;
and (34) risks associated with our CEO transition, including the
impact of 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; and (iii) net debt to 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 excludes depreciation and amortization
expense, interest expense, other income, net, restructuring and
other charges and certain non-recurring items such as acquisition
related costs, gains on sale of assets, impairment of goodwill,
impairment of long lived assets, shareholder activism related
costs, business divestiture costs, employee separation 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.
Net debt to credit adjusted EBITDA is the leverage ratio defined
as net debt (which is debt for borrowed money less cash and cash
equivalents) divided by the trailing 12-month EBITDA.
These non-GAAP measures are intended to provide additional
information regarding our underlying operating results and to allow
for comparable year over year performance. Such information is
supplemental to information presented in accordance with GAAP and
is not intended to represent a press release 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 Comparable Currency
Neutral Sales Adjusted Operating EBITDA, Comparable Currency
Neutral Adjusted Operating EBITDA and Net Debt To Credit Adjusted
EBITDA under “Financial Outlook” 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 assets, shareholder activism
related costs, business divestiture costs, 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.
© 2022 by International Flavors & Fragrances Inc. IFF is a
Registered Trademark. All Rights Reserved.
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Investor.Relations@iff.com
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