iff international flavors and fragrances sept 2013 investor slide deck powerpoint ppt pdf
TRANSCRIPT
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7/29/2019 IFF International Flavors and Fragrances Sept 2013 Investor Slide Deck Powerpoint PPT PDF
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September 4, 2013
Kevin BerrymanEVP & Chief Financ ial Off icer
BarclaysBack-to-School
Conference
Doug ToughChai rman & C EO
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Forward Looking Statements
Before we begin, we would like to remind everyone that during todayspresentation, we will be making forward-looking statements about theCompany's performance . These statements are based on how we seethings toda y and ac tual events or results may differ materially from thosereflected in our forward-looking statements. Forward-looking statements canbe identified by words such as believes, estimates, expec ts, or similarreferences to the future, and include statements we may make regardingthe Companys future financ ial performance, business prospects, andoperating strategies.
There are many fac tors that can result in ac tual performance differing fromprojections and forward-looking statements. These fac tors are set forth in our2012 Annua l Report on Form 10-K filed with the SEC on February 26, 2013.
Today's presentation will include non-GAAP financial measures, whichexclude those items that we believe affec t compa rability. Rec onc iliation of
these non-GAAP financial mea sures to their respective GAAP measures areavailable on our website at www.iff.com.
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$2.9B in Revenue (TTM)
Split 51% Fragrance; 49% Flavors
More than 75% revenue outside US
Over 5,800 employees
32 countries
49 sales offices
22 regional creative centers
Business Profile (as of 2Q13)
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Global Flavors and Fragrances Industry
Characteristics
~$18 billion global industry*
Market growth of 2% to 3%
Market remains fragmented outside top p layers
IFF has an approximate 16% share**
Defensive/stable industry
Based on FY 2012** Source: The Freedonia Group, Inc. 2011ExcludesEssential Oilsa nd Natural Extracts
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Global Fragrance Compound MarketGlobal Flavors Market Breakdown
Source: IAL Consultants & Internal Estimates *2011Source: IAL Consultants & Internal Estimates *2011
Growing 3-5% CAGR
Source: IAL Consultants & Internal Estimate s *2011Source: IAL Consultants & Internal Estimate s *2011
Total Fragrance CompoundMarket Estimated at $6 Billion*
Growing 2-3% Per Year
Total Flavors MarketEstimated at $9.6 Billion*
Fine
Fragrance
27%
Fabric
Care
25%
Beauty
Care17%
Home
Care
16%
Personal
Wash
15%
Beverage
35%
Savory
33%
Sweet
21%
Dairy
8%
Other
3%
Global F&F Compound Marketsby Category
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Investment Profile
Partner with leading global consumercompanies
Diversified product portfolio and stronginnovation pipeline
Geographica lly diversified with 49% of businessin emerging markets (as of 2Q13)
Strong financial performance and cash flowgeneration
Backward integration ensures sustainablesupply of raw materials
Experienced management team & focusedstrategic growth plan
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Long-Term Growth Strategy
LeverageGeographicReach
StrengthenInnovationPlatform
MaximizePortfolio
Emerging markets aregrowing 2-3x rate ofdeveloped markets
Over 49% of o ur salesare to emerging markets
Expertise in adaptingflavors to local tastes
Spend 8% or aboveon R&D
Research is becominggreater percentageof R&D
Drive innovation intothe portfolio
Econo mic Profit is usedfor disciplined decisionmaking
Single-instance globa lenterprise system
Enhanced marginsand operating profit
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42.0%
44.0%
46.0%
48.0%
50.0%
52.0%
54.0%
56.0%
58.0%
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013
Nearly 50% of Sales to Emerging Markets
Deve loped Emerg in g
Emerging Market Presence is Building
56% FY
44% FY
54% FY
46% FY
53% FY
47% FY
51% Q2
49% Q2
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Research Platforms
1FlavorModulation
FlavorNaturals2
FlavorDeliverySystems3
HighImpact4
5FragranceMolecules
FragranceNaturals6
FragranceDeliverySystems7
ProcessResearch8
Malodor9
Modeling10
10 Research Platformsaddress consumer need states
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65%
20%
15%
EP Positive EP Break-even EP Negative
79%
15%
6%
EP Posi tive EP Break-even EP Negative
Maximize Portfolio Improved Economic Profit
94% of Portfolio is now EP neutral or Positive
2012 Portfolio Value Breakdown2010 Portfolio Value Breakdown
% Capital Employed % Capital Employed
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Innovation at IFF
Kevin BerrymanEVP and Chief Financial Officer
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Long-Term Financial Targets
LeverageGeographicReach
StrengthenInnovationPlatform
MaximizePortfolio
Local CurrencySales Growth
Adjusted OperatingProfit Growth
AdjustedEPS Growth
4-6% 7-9% 10+%
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Sec ond Quarter 2013Financial Results
* LFL, or like-for-like, isa non-G AAP metric that excludes the exit of low-margin sales activities,please see ourGAA P to Non-GAAP Reconciliation at IFF.com.
**Adjusted Operating Profit, adjusted EPSand LC Salesa re Non-GAAP metrics,please see ourGAA P to Non-GAAP Reconciliation at IFF.com.
LC sales growth +6%; +8% LFL*
Fragrances +8%; C ompounds +10%
Flavors +5%; LFL +8%*
Emerging markets +10% (49% oftotal sales)
Adjusted gross margins +240bps**
Ad justed operating profit +10%**
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1H 2013 Performance Overview
LCsalesgrowthof6%LFL**reflectssuccessofemergingmarketstrategy
7% growthinFlavors
8% growthinFragranceCompounds
Adjustedgrossmarginexpansionof260bpsto43.6%,reflectsfavorable
volume&mix,
reducedinputcosts,andmanufacturingefficiencies
12%growthinadjustedoperatingprofit;12%growthinadjustedEPS
LC SalesGrowth*LC SalesGrowth*
5%5% 12%12%
Adjusted EPSGrowth*
Adjusted EPSGrowth*
Adjusted OperatingProfit Growth*
Adjusted OperatingProfit Growth*
12%12%
* LC Sales, Adjusted Operating Profit and Adjusted EPSare non-GAA P metrics;please see ourGAA P to Non-GAAP Reconciliation at IFF.com.
**LFL, orlike-for-like, isa non-GAA P metric that excludes the exit of low-margin salesac tivities, please see our GAAP to Non-G AAP.Reconciliation at IFF.com.
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Adjusted Gross Margin* Progression
Strategic initiatives, including category mix, innovation,and cost reductions more than offset net price/ cost margin factors
* Includes volume leverage, c ategory mix, including exit of low-margin salesac tivities, and co st savingsinitiatives, net of cost increases.*Adjusted grossmarginsexclude restructuring and otherc hargesa nd operational improvement initiatives
42.1 1.9
3.4 43.6
1H 2010 GrossMargin
Net Price andInput Costs
StrategicInitiatives*
1H 2013 GrossMargin
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Increased Working Capital Efficiency
Core Working Capital as a % of Net Sales
27%
28%
29%
30%
31%
32%
33%
34%
35%
2008 2009 2010 2011 2012 2013 - 2015
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Uses of Cash
Allocation based on principles of Financial Flexibility
CapitalExpenditures
FinancialFlexibility
Acquisition/DevelopmentOpportunities
CashReturned to
Shareholders
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Capital Expenditures
Increased Investments in Emerging Market Capac ity and Technology
3.4%
4.4% 4-5%
~3%
0%
1%
2%
3%
4%
5%
2003 - 2009 2010 - 2012 2013 - 2015 2016 - 2018
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$0.60$0.63
$0.69$0.73
$0.77
$0.88
$0.96$1.00
$1.04
$1.16
$1.30
$1.46
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E
Cash Returned to Shareholders
Increased quarterly
dividend
15% to $0.39 per share
IFFs quarterly dividend has
grown by a C AGR of 13%
over last 3 years
Historica l dividend payout
ratio of 30-35%
Authorized $250 million
share buyback intend to
spend $50 million in 2013
Annual Cash
Dividend Declared
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M&A Ac tivity
Routinely evaluate M&A opportunities
F&F companies participa ting in attrac tive markets
F&F companies operating in geographieswhere we are under- represented
F&F companies with differentiated technology
Evaluate c onsistent with p rinciplesof Economic Profit
Will consider adjacenciesthat bolster long-termgrowth prospects
Augment Our Organic Growth Strategy
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Balance of Year Perspective
ContinuetoexpectLCgrowthinline
withLTtargetsof46%
Marginexpansion,costcontroland
manufacturingefficienciesdriving
operatingprofitgrowth
OurR&Dpipelineshouldprovideus
withlongertermgrowthwhile
providingsustainablecosteffective
rawmaterials
FY2013isexpectedtobeinlinewith
longtermtargets
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51% 49%
Sales Exposure to FX in EmergingMarkets
Emerging MarketsQ2 13 Revenue
Developed Markets
Emerging Markets
USD +Othe r Currencies
Emerging Market Currenc ies
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Summary
Geographically Diversified Company with Steady Growth
Partnered with Leading Global Consumer Companies
Strong Innovation Platforms Focused on Consumer Needs
Strong Financial Performance and Cash Flow
Ability to Deliver Strong Returns Longer-Term
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Questions